<PAGE>
As filed with the Securities and Exchange Commission on April 10, 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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EoExchange, Inc.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Delaware 7375 94-3260942
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
282 2nd Street, Suite 400
San Francisco, CA 94105
(415) 538-8555
(Address, including zip code, and telephone number of Registrant's principal
executive offices)
----------------
Douglas S. Bennett
President and Chief Executive Officer
EoExchange, Inc.
282 2nd Street, Suite 400
San Francisco, CA 94105
(415) 538-8555
(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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<S> <C>
Michael W. Hall Nora L. Gibson
Laura L. Gabriel Lindsay C. Freeman
Patricia L. Bonheyo Jeanine M. Larrea
Lia M. Arnold Jennifer J. Massey
Latham & Watkins Brobeck, Phlegler & Harrison LLP
135 Commonwealth Drive Spear Street Tower
Menlo Park, CA 94025 One Market
(650) 328-4600 San Francisco, CA 94105
(415) 442-0900
</TABLE>
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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 the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of the Form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, 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. [_]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
Title of shares to be Proposed maximum aggregate Amount of
registered offering price(1) registration fee
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<S> <C> <C>
Common Stock, $.01 par
value.................. $69,000,000.00 $18,216.00
</TABLE>
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(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may change. 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 it is not soliciting an offer to buy +
+these securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 10, 2000.
Shares
Common Stock
EoExchange, Inc. is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares.
We have applied for quotation of our common stock on the Nasdaq National Market
under the symbol "EOEX." We anticipate that the initial public offering price
will be between $ and $ per share.
-----------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 5.
-----------------
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public Offering Price............................................... $ $
Underwriting Discounts and Commissions.............................. $ $
Proceeds to EoExchange, Inc......................................... $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
-----------------
Robertson Stephens Chase H&Q
William Blair & Company
The date of this Prospectus is , 2000.
<PAGE>
You should rely on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. We are offering to sell, and seeking offers to buy, shares
of common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of
any sale of our common stock.
Until , 2000 (25 days after commencement of the offering), all dealers
effecting transactions in our common stock, whether or not participating in
this offering, may be required to deliver a prospectus. This delivery
requirement is in addition to the dealers' obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
-------------------------
TABLE OF CONTENTS
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Page
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<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 26
Management............................................................... 42
Related-Party Transactions............................................... 51
Principal Stockholders................................................... 54
Description of Capital Stock............................................. 56
Shares Eligible for Future Sale.......................................... 61
Underwriting............................................................. 62
Legal Matters............................................................ 64
Experts.................................................................. 64
Where You Can Find More Information...................................... 65
Index to Consolidated Financial Statements............................... F-1
</TABLE>
-------------------------
We hold several trademarks and service marks and own the rights to various
Internet domain names. We have applied for federal registration of certain of
these trademarks and service marks, including "EoExchange," "EoCenter,"
"EoEnabled," "EoMonitor," "EoProducer," "Eo" and "Internet Information Exchange
Company." We hold the trademark for "Aeneid." This prospectus contains product
names, trade names, trademarks and servicemarks of other organizations.
i
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus, including "Risk Factors" and the
consolidated financial statements and related notes, carefully before making an
investment decision.
EoExchange
EoExchange enables business-to-business websites by providing an outsourced
industry-specific search, monitor and notification infrastructure. Our services
enable our customers to build traffic, improve customer loyalty and increase
revenues through new commerce opportunities. We combine our proprietary
technologies with our in-house industry expertise to find and deliver relevant
business information to professionals via the Internet. By providing our
outsourced services to a wide range of business-to-business vertical websites,
we are establishing a network of destination websites, thus enabling us to
offer businesses targeted advertising and commerce opportunities.
Our search, monitor and notification solution benefits business professionals
such as managers, engineers and researchers by focusing their Internet searches
only on highly relevant websites within their industries. In contrast, general
business-to-consumer search engines typically conduct less targeted searches
that generate results often lacking the relevance and thoroughness required for
efficient business use. We earn revenues from multiple sources including fees
for service deployment, monthly subscriptions, and network advertising and
sponsorships, and we expect to earn commissions from commerce sales conducted
through our services. In addition, by having access to a large network of
business professionals, we believe that we will establish ourselves as a
trusted source of information and become a leader in the distribution and sale
of premium business information.
In May 1999, we launched our first industry-specific search solution, or
EoCenter, for application in the high-technology industry. Customers of this
EoCenter include Red Herring Communications, CMP Media and EarthWeb. We have
launched additional EoCenters in the finance, healthcare and insurance
industries, and are rapidly developing new EoCenters for a range of industries
such as chemicals, metals, construction and telecommunications. To date, our
services are deployed on more than 50 websites and we have contracted for
approximately 150 additional website deployments. We also have strategic
relationships with Office.com and VerticalNet that extend our ability to
develop our EoCenter services across multiple new industries.
Market Opportunity
Gartner Group estimates that business-to-business electronic commerce will
generate $2.7 trillion in revenues by 2004. As a result, a large number of
industry-specific, business-to-business websites are emerging to link buyers
and sellers in those industries. By 2001, Gartner Group estimates that there
will be 100,000 such websites. As the overall number of industry-focused
websites increases, it will become more difficult for these websites to
differentiate themselves and for business users to quickly and efficiently
access the most relevant information available on these websites. We believe
that search and navigation solutions currently available inadequately serve the
needs of business professionals because they search across the entire Internet
and often return information that is either largely irrelevant or incomplete.
We further believe that the optimal solution for business-to-business vertical
websites is an outsourced search, monitor and notification infrastructure that
delivers only relevant, industry-specific content.
1
<PAGE>
Our Services
We provide businesses with search and navigation services through our
EoCenter research engine and with monitor and notification services through our
EoMonitor personalized tracking service. In addition, our EoExchange network
enables advertisers and merchants to target business professionals within
specific industries.
EoCenter. Our EoCenter research engine allows business professionals to
search the Internet efficiently by targeting their searches on information that
is most relevant to a specific industry. For example, a search performed on our
EoCenter for the high-technology industry will only search relevant industry
sources, such as the websites of hardware and software vendors, trade and
business press and technology organizations. Our EoCenter service retains the
branding, look and feel of our customer's website; however, EoCenter pages are
actually hosted by us on a separate website. This allows our customers to
deliver our value-added services as a natural extension of their websites.
EoMonitor. Our EoMonitor personalized tracking service notifies business
professionals when selected topics of interest are addressed or changed on web
pages or sites that they selected to be monitored. For example, an EoMonitor
user can monitor the websites of a competitor, supplier or customer and can
receive notification of changes or additions to these sites. Changes are
clearly marked and can be delivered to an e-mail account or published to the
Internet.
EoExchange Network. Our EoExchange network is the aggregation of industry
destinations created by providing our EoCenter and EoMonitor services to a
broad range of business-to-business vertical websites. We believe that our
EoExchange network represents a focused advertising, sponsorship and commerce
platform that reaches the leading websites in a particular industry. We believe
that our EoExchange network is valuable to marketers because it enables them to
deliver highly targeted advertisements to business professionals within an
industry.
Our Strategy
Our objective is to be the leading provider of outsourced search, monitor and
notification infrastructure for business-to-business vertical websites. Key
elements of our strategy include:
. building a network of business professionals by partnering with the
leading business-to-business websites;
. extending our leadership in our existing core business-to-business
markets;
. penetrating a wide range of additional business-to-business vertical
markets with our EoCenter and EoMonitor services;
. leveraging our network of business professionals to create a highly
targeted advertising and sponsorship commerce platform;
. maximizing advertising, sponsorship and commerce revenue opportunities
with existing customers; and
. maintaining and strengthening our technology leadership through internal
development and acquisition of complementary technologies.
2
<PAGE>
Our Corporate Information
We were incorporated in California in October 1996, under the name Aeneid
Corporation and reincorporated as EoExchange, Inc., a Delaware corporation, in
March 2000. Our principal executive offices are located at 282 2nd Street,
Suite 400, San Francisco, California 94105, and our telephone number is (415)
538-8555. Our corporate website is located at www.eoexchange.com. Information
contained on our corporate website, our other websites or any other website
referenced elsewhere in this prospectus is not part of this prospectus.
The Offering
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<C> <S>
Common stock offered by EoExchange................. shares
Common stock to be outstanding after the offering.. shares
Use of proceeds.................................... (1) To expand into new vertical website
markets, (2) to significantly increase our
sales and marketing efforts and (3) for
working capital and other general corporate
purposes, including possible strategic
acquisitions and investments. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol............. EOEX
</TABLE>
The shares of common stock to be outstanding after the offering are based on
the number of shares outstanding as of , 2000 and exclude:
. 1,474,162 shares of common stock reserved for issuance under our 1996
stock option plan, all of which are subject to outstanding options;
. 4,047,169 shares of common stock reserved for issuance under our 1999
stock plan, of which 2,774,909 shares are subject to outstanding options;
and
. shares of common stock reserved for issuance under our employee
stock purchase plan.
----------------
Except as otherwise indicated, all of the information in this prospectus:
. reflects the automatic conversion of each outstanding share of preferred
stock into one share of common stock immediately prior to the closing of
this offering; and
. assumes no exercise of the underwriters' over-allotment option.
3
<PAGE>
Summary Consolidated Financial Data
You should read the summary financial data with our consolidated financial
statements and the related notes included elsewhere in this prospectus and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Selected Consolidated Financial Data." Please see note 2 of
the notes to our "Consolidated Financial Statements" for an explanation of the
determination of weighted average shares used in computing per share data.
Pro forma statement of operations data reflects the acquisition of InGenius
Technologies, Inc. as if it had occurred as of January 1, 1999.
<TABLE>
<CAPTION>
Pro Forma
Years Ended December 31, Year Ended
-------------------------- December 31,
1997 1998 1999 1999
------- ------- -------- ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues............................. $ -- $ 49 $ 496 $ 620
Cost of revenues..................... -- 306 1,599 1,732
------- ------- -------- --------
Gross profit (loss).................. -- (257) (1,103) (1,112)
Operating expenses................... 1,149 3,613 10,409 11,588
------- ------- -------- --------
Loss from operations................. (1,149) (3,870) (11,512) (12,700)
Interest income (expense), net....... (32) 19 162 5
------- ------- -------- --------
Net loss............................. (1,181) (3,851) (11,350) (12,695)
------- ------- -------- --------
Imputed dividends and accretion
attributable to preferred stock..... -- -- (21,770) (21,770)
------- ------- -------- --------
Net loss attributable to common
stockholders........................ $(1,181) $(3,851) $(33,120) $(34,465)
======= ======= ======== ========
Net loss per share:
Basic and diluted.................. $ (0.28) $ (0.62) $ (4.27) $ (4.45)
======= ======= ======== ========
Weighted average shares--basic and
diluted........................... 4,214 6,188 7,749 7,749
======= ======= ======== ========
</TABLE>
The following balance sheet data is provided on an actual basis, on a pro
forma basis and on a pro forma as adjusted basis. The pro forma column:
. reflects the issuance of 3,266,910 shares of Series D preferred stock and
a warrant to purchase 69,969 shares of Series D preferred stock in
January 2000; and
. the conversion of all of our outstanding preferred stock, including
3,266,910 shares of Series D preferred stock issued in January 2000.
The pro forma as adjusted column assumes, in addition, the sale of shares of
our common stock at an initial public offering price of $ per share after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses.
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents...................... $ 21,709 $28,315
Working capital................................ 20,495 27,101
Total assets................................... 27,289 33,895
Long-term obligations, less current portion.... 13 13
Preferred stock................................ 58,469 --
Total stockholders' equity (deficit)........... (33,531) 24,938
</TABLE>
4
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. If any of the following risks actually occur, our
business, financial condition or results of operations could be harmed, the
value of our common stock could decline, and you could lose part or all of your
investment.
Risks Related to Our Business
Because we have a limited operating history, our business strategy may not be
successful
We were formed in October 1996 and did not generate revenues under our
current business model until June 1999. As a result, you have limited operating
and consolidated financial data about our company upon which to base an
evaluation of our performance and an investment in our common stock. In
addition, we have limited insight into trends that may emerge and affect our
business. You should consider our prospects in light of the risks, expenses and
difficulties we might encounter due to our early stage of development in a new
and rapidly evolving market. We cannot be certain that our business strategy
will be successful or that we will successfully address these risks.
Because our operating results from quarter to quarter may fluctuate, the price
of our common stock may decline
Our revenues, expenses and operating results have varied significantly in the
past and may vary significantly in the future on a quarterly and annual basis
due to a number of factors, many of which are outside of our control. For
example, our results of operations may be affected by the following:
. our ability to obtain new customers and strategic alliances and the
length of the development cycle of the business-to-business vertical
website market;
. our ability to obtain new advertising and sponsorship contracts, maintain
existing ones and effectively manage our advertising inventory;
. our ability to develop and introduce new technology;
. announcements and new technology introductions by our competitors;
. our ability to attract and retain key personnel;
. costs relating to possible acquisitions and integration of technologies
or businesses;
. marketing expenses and technology infrastructure costs as well as other
costs that we may incur as we expand our operations; and
. our ability to develop new sources of revenue.
As a result, our revenues, expenses and results of operations could vary
significantly in the future, and you should not rely upon period-to-period
comparisons as indications of future performance. If our operating results fall
below the expectations of securities analysts and investors in some future
periods, our stock price will likely decline. In addition, these fluctuations
may make our stock unattractive to investors and may result in a decline in the
price of our stock.
5
<PAGE>
Because we expect to continue to incur net losses, the price of our common
stock may decline and we may not be able to implement our business strategy
We have never achieved profitability and have experienced net operating
losses of approximately $1.2 million, $3.9 million and $11.4 million in 1997,
1998 and 1999, respectively. We expect to incur operating losses for the
foreseeable future. In addition, we expect to continue to incur significant
operating and capital expenses and the rate at which we incur these losses will
likely increase significantly from current levels. We will need to generate
significant revenues to achieve and maintain profitability. Because of our
limited operating history and the early stage of the Internet information
market, historical trends and expected performance are difficult to analyze. If
our revenues grow more slowly than we anticipate, or if operating expenses
exceed our expectations or cannot be adjusted accordingly, our business,
results of operations and financial condition will be harmed.
We depend on a small number of customers for a high percentage of our revenues
and the loss of a significant customer would result in a substantial decline in
our revenues
Our sales are concentrated among a limited number of customers and the loss
of one or more of these customers would cause our revenues to decrease. If we
lost one or more of these customers, or if one or more of these customers
delayed or reduced purchases of our services, our revenues will decrease.
Office.com and The Gale Group accounted for approximately 49% and 35% of our
revenues for the year ended December 31, 1999. These customers may in the
future decide not to purchase our services at all, purchase fewer services than
they did in the past or alter their purchasing patterns. We expect that a small
number of customers will continue to account for a substantial portion of our
revenues for the foreseeable future.
If we fail to successfully establish our new EoExchange name or brand, or if we
incur significant expenses in promoting and maintaining our name or brand, our
business could be harmed
In March 2000, we changed our name from Aeneid to EoExchange to better
represent the diversity of our Internet information services. The importance of
name and brand recognition will increase as more companies provide outsourced
Internet information solutions. If our efforts to build our name and brand
identity do not succeed, our business, financial condition and results of
operations could be seriously harmed. These efforts have required, and will
continue to require, significant expense. We cannot assure you that these
efforts will be successful. Additionally, our new EoExchange name and brand may
cause confusion to current and potential customers, and as a result, we may
lose customers, which would harm our business, financial condition and results
of operations. We cannot assure you that we will be able to enforce rights
related to the EoExchange name, that we will be free to use the name in all
jurisdictions, that there will be no challenges to the use of that name or that
we will not be required to expend significant resources in defending the use of
that name. Even if brand recognition increases, the number of new customers may
not increase. Further, even if the number of new customers increases, the
amount of traffic on our EoCenters and the number of customers may not increase
sufficiently to justify the expenditures. If our brand enhancement strategy is
unsuccessful, these expenses may never be recovered and we may be unable to
increase future revenues.
6
<PAGE>
Because the market in which we operate is highly competitive, we cannot be
certain that our services will be accepted in the marketplace or capture market
share
We compete in markets that are new and rapidly changing, and we expect
competition in our markets to intensify in the future. We believe no single
competitor competes directly with us across the full range of outsourced
services we offer. However, we currently or potentially compete indirectly with
a number of other companies that provide outsourced Internet business services.
These indirect competitors include:
. Internet outsourcing companies such as AltaVista, Ask Jeeves, InfoSpace,
Inktomi and LookSmart;
. content distribution companies such as iSyndicate and Screaming Media;
. information commerce enabling companies such as Qpass;
. advanced Internet search companies such as Autonomy, Infoseek and
NetMind; and
. content aggregation companies such as About.com, Dow Jones, Northern
Light and Reuters.
Many of our indirect competitors, as well as potential new competitors, have
longer operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
This may allow them to devote greater resources than we can to the development
and promotion of their services. These competitors may also engage in more
extensive research and development, adopt more aggressive pricing policies and
make more attractive offers to existing and potential employees, customers,
advertisers and electronic commerce customers. As a result, it is possible that
new direct competitors may emerge and rapidly acquire significant market share.
Our senior managers and other key personnel are critical to our business, and
because there is significant competition for personnel in our industry, we may
not be able to attract and retain qualified personnel
We depend to a significant extent on the continued services of our key
personnel, particularly Mr. Bennett, our president and chief executive officer,
and Mr. Ainsbury, our chief technology officer and vice president. The
employment of all members of our senior management is terminable at will by us
or by them. In addition, we do not maintain key person life insurance for
members of our senior management. The loss of the services of our senior
management or other key employees would likely harm our business.
Our future success depends upon our continuing ability to attract, retain and
motivate highly skilled employees, each of which we may be unable to do in the
future. We have from time to time in the past experienced, and we expect to
continue to experience in the future, difficulty in hiring and retaining highly
skilled employees with appropriate qualifications as a result of our rapid
growth and expansion. In addition, there is significant competition for
qualified employees in the Internet industry. As a result, we are incurring
increased salaries, benefits and recruiting expenses. If we do not succeed in
attracting new personnel or retaining and motivating our current personnel, our
business will be harmed.
7
<PAGE>
Because we have expanded rapidly and expect to expand rapidly in the future, we
may lack the ability to manage this growth in our operations, which would harm
our business
We have experienced and may continue to experience rapid growth. From January
1, 1999 to March 31, 2000, we have grown from 20 to 111 full-time employees. In
addition, many members of our senior management, including Mr. Bennett, our
president, chief executive officer and chairman of the board, have joined us
within the last six months. These key employees may not have been fully
integrated into our company. This growth has placed, and could continue to
place, a significant strain on our managerial, financial and operational
resources. As part of this growth, we will have to implement new operational
and financial systems, procedures and controls. We will also need to train new
employees and maintain close coordination among our content, product
management, development, sales and marketing, and general and administrative
organizations. These processes are time-consuming and expensive, will increase
management responsibility and will divert management attention. If we are
unable to manage our growth effectively, our business could be adversely
affected.
Any acquisitions we make could disrupt our business and harm our financial
condition
In the fourth quarter of 1999, we acquired InGenius Technologies, Inc. We may
acquire other companies in the future. We may not be able to integrate InGenius
Technologies or any future acquisitions with existing operations without
substantial costs, delays or other problems. If we acquire businesses, key
employees of the acquired companies could resign and management's attention
could be diverted from the conduct of our ongoing business. We may not be able
to implement operational improvements in, or exploit potential synergies with,
acquired businesses. Any of these factors could materially and adversely affect
our operating results and financial condition. In addition, businesses we
acquire may not perform as well as we may expect and we could be seriously
harmed by unforeseen liabilities, business conditions or market conditions.
We depend on third party service providers' technologies and should any of
these services become unavailable to us, our business could be harmed
We depend on third party service providers for components of our search and
indexing infrastructure. If we lose our relationships with any of the third
parties who provide us with these services, we may not be able to enter into
commercially reasonable contracts with replacement service providers, if at
all. In such event, our business and operating results could be harmed.
Systems failure or delay may cause interruption and disruption of our services
which would harm our business
The performance of our server and networking hardware and software
infrastructure is critical to our business, reputation and ability to attract
vertical websites to use our EoCenters and the ability of vertical websites to
attract users and advertisers. Fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events could damage these
systems. Computer viruses, electronic break-ins or other similar disruptive
problems could also adversely affect our services. Our business could be
adversely affected if our systems were affected by any of these occurrences.
Our insurance policies may not adequately compensate us for any losses that may
occur due to any failures or interruptions in our systems.
Our systems must accommodate a high volume of traffic and deliver frequently
updated information. Our website and EoCenters have in the past experienced
slow response times,
8
<PAGE>
decreased traffic and minor and infrequent interruptions. While these
occurrences have not had a material impact on our business, if system failures
or slowdowns were sustained or repeated, our revenues and our reputation could
be impaired. In addition, because we depend upon Internet and other online
service providers to provide consumers with access to our website and our
EoCenters, we are limited in our ability to prevent system failures in the
future. Many of these service providers have sustained significant outages
unrelated to our systems in the past and may experience similar failures in the
future, resulting in less traffic on our EoCenters, which could, in turn,
impair our revenues.
We may be unable to project capacity limits on our technology, network hardware
or software or transaction processing systems, and we may be unable to expand
and upgrade our systems to meet increased use which may harm our business
As traffic on our EoCenters continues to increase, we must expand and upgrade
our technology, transaction processing systems and network hardware and
software. We may not be able to accurately project the rate of increase in our
traffic. In addition, we may not be able to expand and upgrade our systems and
network hardware and software capabilities to accommodate increased use of our
service. If we do not appropriately upgrade our systems and network hardware
and software, our business will be harmed.
Risks Related to the Internet
Failure of the Internet to continue to grow would harm our business
Our market is new and rapidly evolving. Our business would be harmed if
Internet usage does not continue to grow. A number of factors may inhibit the
continued growth of Internet and commercial online services into a viable
commercial marketplace, including:
. inadequate network infrastructure;
. lack of availability of cost-effective, high-speed service;
. security and privacy concerns; and
. inconsistent quality of services.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth and its performance and
reliability may decline. In addition, websites have experienced interruptions
in their service as a result of outages and other delays occurring throughout
the Internet network infrastructure. If these outages or delays frequently
occur in the future, Internet usage could grow more slowly or decline. If
Internet usage grows slowly or declines, our revenues may also grow slowly or
decline.
Rapid technological change could render our services obsolete or require us to
make significant capital expenditures in order to remain competitive
Our market is characterized by rapidly changing technologies, frequent new
product and service introductions and evolving industry standards. The recent
growth of the Internet and intense competition in our industry exacerbate these
market characteristics. To achieve our goals, we need to effectively integrate
the software programs and tools required to enhance and improve service
offerings and manage our business. Our future success will depend on our
ability to adapt to rapidly changing technologies by continually improving the
performance features and reliability of our services. We may experience
difficulties that could delay or prevent the successful development,
9
<PAGE>
introduction or marketing of new services. In addition, these new services must
meet the requirements of our current and prospective users and must achieve
significant market acceptance. We could also incur substantial costs if we need
to modify our services or infrastructures to adapt to these changes.
Specifically, we are currently significantly upgrading our EoCenter
infrastructure and our upgrade may be unsuccessful, expensive and time-
consuming.
Some of our technology is still in development. For instance, our technology
for performing data collection, interpretation, and analysis currently may have
difficulty processing documents from websites. When this technology presents
these documents, a user may experience document formatting problems. User
dissatisfaction of this type could cause us to lose customers, and that, in
turn, could cause us to lose revenue.
Our business would be seriously harmed if the Internet advertising market
develops more slowly than we expect
We anticipate that a significant amount of our revenues for the foreseeable
future will come from Internet advertising. Because the Internet advertising
market is new and rapidly evolving, we cannot yet gauge the effectiveness of
Internet advertising as compared to traditional advertising media. Advertisers
that have traditionally relied upon other advertising media may be reluctant to
advertise on the Internet. These businesses may find Internet advertising to be
less effective than traditional advertising media for promoting their products
and services. Many potential advertising and electronic commerce customers have
little or no experience using the Internet for advertising purposes.
Consequently, they may allocate only limited portions of their advertising
budgets to Internet advertising. If the Internet advertising market develops
more slowly than we expect, we may be unsuccessful in increasing our
advertising revenues, which will harm our business.
Internet security concerns could hinder the growth and development of
electronic commerce and could harm our business
The need to securely transmit confidential information over the Internet has
been a significant barrier to electronic commerce and communications over the
Internet. Anyone who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our
operations. We may incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by any breaches. To the
extent that our activities or the activities of third party contractors involve
the storage and transmission of proprietary or personal information, security
breaches could damage our reputation and expose us to a risk of loss or
litigation and possible liability. This liability may include claims for
unauthorized purchases with credit card information, impersonation or other
similar fraud claims. Our security measures may not prevent security breaches
and any failure to prevent security breaches may seriously harm our business,
financial condition and results of operation. We rely on encryption and
authentication technology to provide the security and authentication necessary
for secure transmission of confidential information. Advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments may result in a compromise or breach of the algorithms we use to
protect customer transaction data. If our security were compromised, it could
seriously harm our reputation, as well as our business, financial condition and
results of operation.
We may be liable for information retrieved from the Internet
We may be subject to legal claims relating to the content we make available
to our users, or the downloading and distribution of content. Providers of
Internet services have been sued in the past,
10
<PAGE>
sometimes successfully, based on the content of material. If our content is
improperly used or if we supply incorrect information, it could result in
unexpected legal liability. Our business could be materially adversely affected
due to the cost of investigating and defending these claims, even if these
claims do not result in material liability. Implementing measures to reduce our
exposure to this liability may require us to spend substantial resources and
limit the attractiveness of our service to users. Although we carry commercial
property and commercial general liability insurance, our insurance may not
cover potential claims of this type or may not be adequate to indemnify us for
all liability that may be imposed.
Government regulation and legal uncertainty may make it more expensive for us
to conduct business on the Internet
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future that address issues such as indexing and summarizing data located
on the Internet, retrieving information deeply embedded in websites, user
privacy, pricing and the characteristics and quality of products and services.
For example, Internet access and sales across the Internet may be subject to
additional taxation by federal, state and local governments, thereby
discouraging purchases over the Internet and adversely affecting the market for
our services. Additionally, current and future legislation or regulations
regarding online privacy and the collection and use of personal identification
information could impair our ability to provide our services to our customers.
United States legislators in the past have introduced a number of bills aimed
at regulating the use of personal data over the Internet and similar bills may
be considered in the future. In addition, the Federal Trade Commission and the
Department of Commerce recently held hearings regarding user profiling and
online privacy, and the European Union recently adopted a directive addressing
data privacy that may result in limitations on the collection and use of
information that will impact Internet users. These regulations may prevent us
from collecting demographic and personal information from members and providing
our customers with consumer and market data, which could result in the loss of
potential revenues.
Risks Related to Our Intellectual Property
If we fail to protect our proprietary rights adequately, we could lose these
rights and our business could be harmed
We rely or may in the future rely on a combination of patent, trademark,
trade secret and copyright law and contractual restrictions to protect the
proprietary aspects of our technology. These legal protections afford only
limited protection for our intellectual property. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy
aspects of our sales formats or to obtain and use information that we regard as
proprietary.
We cannot be certain that patents will issue from any of our pending or
future patent applications or that any issued patent will be sufficient to
protect our technology. We may also be unable to secure trademark registrations
for names used by us, including domain names, currently or in the future. It is
also possible that our competitors or others will adopt service names similar
to ours, thus impeding our ability to build brand identity and possibly leading
to customer confusion. Customer confusion related to our trademarks, or our
failure to obtain trademark registration, would negatively affect our business.
Finally, we may in the future provide our services internationally, and the
laws of many countries do not protect our proprietary rights to as great an
extent as do the laws of the United States. Our means of protecting our
proprietary rights may not be adequate, and our competitors could independently
develop similar technology.
11
<PAGE>
Asserting, defending and maintaining our intellectual property rights could be
difficult and costly and failure to do so may diminish our ability to compete
effectively and may harm our operating results
We may need to pursue lawsuits or legal action in the future to enforce our
intellectual property rights, to protect our trade secrets and domain names and
determine the validity and scope of the proprietary rights of others. If third
parties prepare and file applications for trademarks used or registered by us,
we may oppose those applications and be required to participate in proceedings
to determine priority of rights to the trademark. Similarly, competitors may
have filed applications for patents, may have received patents and may obtain
additional patents and proprietary rights relating to products or technology
that blocks or competes with ours. We may have to participate in interference
proceedings to determine the priority of invention and the right to a patent
for the technology. Litigation and interference proceedings, even if they are
successful, are expensive to pursue and time-consuming, and we could use a
substantial amount of our limited financial resources in either case.
We may face intellectual property infringement claims that may be costly to
resolve
Although we do not believe that our services infringe on any proprietary
rights of others, we cannot assure you that others will not assert claims
against us in the future or that these claims will not be successful. We could
incur substantial costs and diversion of management resources to defend
ourselves from any claims relating to proprietary rights. These costs and
diversions could harm our business. In addition, we are obligated under some
agreements to indemnify other parties as a result of claims that we infringe on
the proprietary rights of others. If we are required to indemnify parties under
these agreements, our business could be harmed.
We face risks associated with domain names
We currently hold the Internet domain names eoexchange.com, eocenter.com,
eomonitor.com and eoenabled.com. Domain names generally are regulated by
Internet regulatory bodies. The regulation of domain names in the United States
and in foreign countries may change. Regulatory bodies could establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, we may not
acquire or maintain these domain names in all of the countries in which we
conduct business.
The relationship between regulations governing domain names and laws
protecting trademarks and similar proprietary rights is unclear. Therefore, we
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our trademarks and other
proprietary rights. Also, there are risks that third parties could prevent us
from continuing to use one or more of our domain names.
Laws defining Internet-related intellectual property rights are currently
unsettled and may change in a way that could harm our business
The growth and development of the Internet has raised new issues relating to
intellectual property rights of parties who conduct business on the Internet.
These issues include the following:
. the risk of infringing on patented Internet-based technologies and
business processes, despite good faith efforts to avoid these
infringements and the resulting inability to continue the use of
infringing technologies or processes;
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<PAGE>
. the potential difficulty in obtaining and enforcing patent rights on
Internet-related technologies and processes;
. the authority necessary to republish information available from websites
and other portals on the Internet;
. the right to collect, use, exploit or disseminate personal information
and data concerning users;
. the authority of parties to activate Internet browser functions that
cause the content on one party's website to be superimposed on the
content of another without the other party's consent;
. the extent of protection of intellectual property rights in foreign
jurisdictions; and
. the authority to link or hyperlink to a third party's website or
particular elements of the website without specific authorization from
the third party.
The laws applicable to these and other issues are developing and unsettled.
Future laws and legal precedents defining the rights and obligations of parties
regarding Internet-related intellectual property rights may impact how we
conduct our business and could harm our business.
Risks Relating to This Offering
We may need to raise additional capital in the future, and if we are unable to
secure additional funds on terms acceptable to us, we may be unable to execute
our business plan effectively
Various elements of our business and growth strategies, including our plans
to broaden existing services, introduce new services and invest in
infrastructure, will require additional capital. If adequate funds are not
available on acceptable terms or at all, we may not be able to take advantage
of market opportunities, develop or enhance new services, pursue acquisitions
that would complement our existing service offerings or enhance our technical
capabilities, execute our business plan or otherwise respond to competitive
pressures. If we raise additional equity capital, it would have a dilutive
effect for our existing stockholders, including purchasers of common stock in
this offering.
Our management may not use the proceeds of this offering to effectively
increase our results of operations or our market value
Our management will have considerable discretion in the application of the
net proceeds of this offering and may apply the net proceeds in ways which may
not increase our revenues, improve our operating results or increase our market
value. You will not have the opportunity, as part of your investment decision,
to assess whether the proceeds are being used appropriately.
Because there has been no prior market for our common stock, our stock price
may decline after this offering
Prior to this offering, you could not buy or sell our common stock on a
public market. We are applying to list the common stock for trading on the
Nasdaq National Market. We do not know whether investor interest in us will
lead to the development of a trading market or, if a trading market develops,
how active that market will be. Active trading markets generally result in
lower price volatility and more efficient execution of buy and sell orders for
investors. The initial public
13
<PAGE>
offering price will be determined by negotiations between us and the
representatives of the underwriters and may not be related to the price at
which the common stock will trade upon completion of this offering.
Because the Nasdaq Stock Market is likely to experience extreme price and
volume fluctuations, the price of our common stock may decline even if our
business is doing well
Stock prices and trading volumes for many Internet-related companies,
particularly companies quoted on the Nasdaq National Market, fluctuate widely
for a number of reasons, including some reasons which may be unrelated to their
businesses or results of operations. This market volatility, as well as general
domestic or international economic, political and market conditions, could
cause the price of our common stock to decline without regard to our operating
performance. These fluctuations or declines may be exaggerated if the trading
volume of our common stock is low. The price at which our common stock will
trade will depend on many factors, including:
. our historical and anticipated quarterly and annual operating results;
. variations between our actual results and analyst and investor
expectations;
. announcements by us or others and developments affecting our business;
and
. investor perceptions of us and comparable public companies.
Some of these factors are beyond our control. Volatility in our stock price
may prevent you from selling our stock at a favorable price at any given time
or knowing the appropriate time to sell our stock. Moreover, if our stock price
drops, it is possible that you may never be able to sell our stock at a
favorable price.
Because of likely fluctuations in the price of our stock, we, or our officers
or directors, may be named in a securities class action lawsuit, which could
distract management and result in substantial costs
In the past, securities class action lawsuits have often been brought against
companies and their officers or directors following periods of volatility in
the market price of their securities. We, or our officers or directors, may be
named in similar lawsuits in the future. These lawsuits could result in
substantial costs and could divert management's attention and resources from
our operations. This would have a negative impact on our financial condition
and results of operations.
A substantial number of our shares of common stock are eligible for future
sale, and the sale of these shares may depress our stock price, even if our
business is doing well
Sales of a large number of shares of common stock in our market after this
offering, or the perception that sales may occur, could cause the market price
of our common stock to decline. Those sales also might make it more difficult
for us to sell equity-related securities in the future at a time and price that
we deem appropriate.
Because the book value per share of our stock is less than the initial public
offering price, new investors will experience immediate dilution
We expect the initial public offering price to be substantially higher than
the net tangible book value per share of the common stock. Therefore, you will
incur immediate and substantial net tangible book value dilution. You may incur
additional dilution if holders of stock options, whether currently outstanding
or subsequently granted, exercise their options or if warrantholders exercise
their warrants to purchase common stock.
14
<PAGE>
Because our officers, directors and principal stockholders may have the ability
to control stockholder votes, the premium over market price that an acquiror
might otherwise pay may be reduced and any merger or takeover may be delayed
Our executive officers, directors and five percent or greater stockholders
together will beneficially own % of the common stock after completion of
this offering, or % if the over-allotment option is exercised in full. As a
result, these stockholders may be able to determine the composition of our
board of directors, may retain the voting power to approve all matters
requiring stockholder approval and will continue to have significant influence
over our affairs. This concentration of ownership could have the effect of
delaying or preventing a change in our control or otherwise discouraging a
potential acquirer from attempting to obtain control of us, that, in turn,
could have a material and adverse effect on the market price of the common
stock or prevent our stockholders from realizing a premium over the market
prices for their shares of common stock.
Provisions of our charter documents and Delaware law could prevent or delay a
change in our control and may reduce the market price of our common stock
Certain provisions of our certificate of incorporation and bylaws that will
be in effect after completion of this offering and Delaware law could make it
more difficult for a third party to acquire control of us, even if a change in
control would be beneficial to stockholders.
This prospectus contains forward-looking statements that involve risks and
uncertainties which might not occur
Some of the matters discussed under the captions "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this prospectus include
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events, including, among
other things:
. implementing our business strategy;
. obtaining and expanding market acceptance of our services;
. meeting our requirements under our agreements with our customers; and
. competition in our market.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "would," "could," "potential," "continue,"
"expects," "anticipates," "intends," "plans," "believes," "estimates,"
"predicts," "potential" or the negative of these terms and similar expressions.
These statements are based on our current beliefs, expectations and assumptions
and are subject to a number of risks and uncertainties. Actual results and
events may vary significantly from those discussed in the forward-looking
statements. A description of some of the risks that could cause our results to
vary can be found throughout this "Risk Factors" section and elsewhere in this
prospectus. These forward-looking statements are made as of the date of this
prospectus. In light of these assumptions, risks and uncertainties, the
forward-looking events discussed in this prospectus might not occur.
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<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of common stock in this
offering will be approximately $ , or $ if the underwriters exercise their
over-allotment option in full, based upon an assumed offering price per share
of $ and after deducting estimated underwriting discounts and commissions and
estimated offering expenses.
We plan to use the net proceeds (1) to expand into new vertical website
markets, (2) to significantly increase our sales and marketing efforts and (3)
for working capital and other general corporate purposes, including investments
and possible strategic acquisitions of companies or technologies that
complement our business. We may use a portion of the net proceeds for other
purposes.
Prior to the application of the net proceeds from the offering as described
above, we intend to invest the net proceeds from the offering in marketable,
investment-grade securities. The foregoing discussion represents our best
estimate of our allocation of the net proceeds from the sale of the shares
based on our current plans.
DIVIDEND POLICY
We have never paid any dividends and do not anticipate declaring or paying
cash dividends in the foreseeable future. We intend to retain future earnings,
if any, to provide funds for the operation and expansion of our business. Any
determination to declare or pay cash dividends will be at the discretion of our
board of directors.
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<PAGE>
CAPITALIZATION
The following table provides our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis to reflect the conversion of all of our outstanding
preferred stock including 3,266,910 shares of Series D preferred stock
issued in January 2000; and
. on a pro forma as adjusted basis to reflect the sale in this offering of
shares of our common stock at an initial public offering price of $
per share, and after deducting the underwriting discounts and commissions
and estimated offering expenses.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(In thousands)
<S> <C> <C> <C>
Capital lease obligations.................... $ 24 $ 24
Preferred stock, $0.01 par value; 30,800,000
shares authorized,
shares issued and outstanding:
Actual: 25,121,333 shares
Pro forma: 0 shares
Pro forma as adjusted: 0 shares............ 58,469 --
Stockholders' equity (deficit):
Common stock, $0.01 par value; 51,500,000
shares authorized,
shares issued and outstanding:
Actual: 10,063,374 shares
Pro forma: 38,451,617 shares
Pro forma as adjusted: shares......... 101 385
Additional paid-in capital................. (11,506) 46,679
Notes receivable from stockholders......... (1,461) (1,461)
Deferred stock-based compensation.......... (4,215) (4,215)
Accumulated deficit........................ (16,450) (16,450)
-------- -------- ---
Total stockholders' equity (deficit)..... (33,531) 24,938
-------- -------- ---
Total capitalization................... $ 24,962 $ 24,962 $
======== ======== ===
</TABLE>
This table excludes the following shares:
. 3,987,367 shares of common stock issuable upon exercise of outstanding
options issued to our employees, directors and consultants under our 1996
stock option plan and 1999 stock plan; and
. 784,968 shares reserved for issuance under our 1996 stock option plan and
1999 stock plan.
17
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $28.9 million, or $0.75 per share of common stock. Pro forma net
tangible book value per share represents the amount of our total tangible
assets reduced by the amount of our total liabilities and divided by the total
number of shares of common stock outstanding, assuming the conversion of all of
our outstanding shares of preferred stock into shares of common stock,
including 3,266,910 shares of Series D preferred stock issued in January 2000.
After giving effect to the sale of shares of common stock in this
offering at the initial public offering price of $ per share and receipt of
the estimated net proceeds therefrom, our pro forma net tangible book value as
of December 31, 1999 would have been approximately $ million or $ per
share. This represents an immediate increase in pro forma net tangible book
value of $ per share to existing stockholders and an immediate dilution of
$ per share to the new investors, as illustrated by the following table:
<TABLE>
<S> <C> <C>
Initial public offering price per share......................... $
Pro forma net tangible book value per share at December 31,
1999......................................................... $0.75
Pro forma increase attributable to new investors..............
-----
Pro forma net tangible book value per share after this
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 the number of shares of common stock purchased from us,
the aggregate consideration paid to us and the average price per share paid by
existing stockholders and new investors purchasing shares of common stock in
this offering, after giving effect to the conversion of all of our preferred
stock into common stock.
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration
-------------- -------------- Average
Number Percent Amount Percent Price Per Share
------ ------- ------ ------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... % $ % $
---- ---- ----- ---- -----
New investors..................
---- ---- ----- ---- -----
Total....................... 100% $ 100%
==== ==== ===== ====
</TABLE>
The foregoing discussion and tables assume no sale of shares of common stock,
including shares held by an existing stockholder, or under the underwriters'
over-allotment option. The information presented regarding existing
stockholders excludes as of December 31, 1999, 3,987,367 shares subject to
outstanding options under our 1996 stock option plan and 1999 stock plan and a
warrant to purchase 25,862 shares of Series A preferred stock and warrants to
purchase 427,070 shares of Series D preferred stock at a weighted average
exercise price of $ per share. If all of these options and warrants had been
exercised as of December 31, 1999, pro forma net tangible book value per share
after this offering would be $ and total dilution per share to new investors
would be $ .
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data with our
consolidated financial statements and the related notes included elsewhere in
this prospectus and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The data for the three years ended
December 31, 1997, 1998 and 1999 have been derived from the consolidated
financial statements that have been audited by PricewaterhouseCoopers LLP,
independent accountants, which are included elsewhere in this prospectus.
Please see note 2 of the notes to our "Consolidated Financial Statements" for
an explanation of the determination of weighted average shares in computing per
share data.
<TABLE>
<CAPTION>
Pro Forma
Year Ended December 31, Year Ended
-------------------------- December 31,
1997 1998 1999 1999
------- ------- -------- ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues............................. $ -- $ 49 $ 496 $ 620
Cost of revenues..................... -- 306 1,599 1,732
------- ------- -------- --------
Gross profit (loss)................ -- (257) (1,103) (1,112)
Operating expenses:
Product development................ 536 1,466 1,964 2,081
Sales and marketing................ 214 1,158 3,263 3,339
General and administrative......... 389 888 1,715 1,797
Depreciation and amortization...... 10 101 415 1,195
Stock-based compensation........... -- -- 3,052 3,176
------- ------- -------- --------
Total operating expenses......... 1,149 3,613 10,409 11,588
------- ------- -------- --------
Loss from operations................. (1,149) (3,870) (11,512) (12,700)
Interest income (expense), net....... (32) 19 162 5
------- ------- -------- --------
Net loss........................... $(1,181) $(3,851) $(11,350) $(12,695)
======= ======= ======== ========
Imputed dividends and accretion
attributable to preferred stock..... -- -- (21,770) (21,770)
------- ------- -------- --------
Net loss attributable to common
stockholders........................ $(1,181) $(3,851) $(33,120) $(34,465)
======= ======= ======== ========
Net loss per share:
Basic and diluted.................. $ (0.28) $ (0.62) $ (4.27) $ (4.45)
======= ======= ======== ========
Weighted average shares--basic and
diluted........................... 4,214 6,188 7,749 7,749
======= ======= ======== ========
Pro forma net loss per share:
Basic and diluted.................. $ (1.66)
========
Weighted average shares--basic and
diluted........................... 19,924
========
</TABLE>
Pro forma statement of operations data reflects the acquisition of InGenius
Technologies, Inc., as if it had occurred as of January 1, 1999. Please see
"Unaudited Pro Forma Combined Financial Information" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
------- --------
(In thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................................... $ 2,980 $ 21,709
Working capital.............................................. 1,944 20,495
Total assets................................................. 3,841 27,289
Long-term portion of capital lease obligations............... 6 13
Preferred stock.............................................. 7,068 58,469
Total stockholders' deficit.................................. (4,645) (33,531)
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis contains forward-looking statements.
These statements are based on our current beliefs, expectations and assumptions
and are subject to a number of risks and uncertainties. Actual results and
events may vary significantly from those discussed here. The following
discussion and analysis should also be read with our consolidated financial
statements and the related notes appearing elsewhere in this prospectus.
Overview
EoExchange enables business-to-business websites by providing an outsourced
industry-specific search, monitor and notification infrastructure. Our services
enable our customers to build traffic, improve customer loyalty and increase
revenues through new commerce opportunities. We combine our proprietary
technologies with our in-house industry expertise to find and deliver relevant
business information to professionals via the Internet. By providing our
outsourced services to a wide range of business-to-business vertical websites,
we are establishing a network of destination websites, thus enabling us to
offer businesses targeted advertising and commerce opportunities.
EoExchange was formed under the name Aeneid Corporation in October 1996. We
changed our name to EoExchange, Inc. in March 2000. During the period from our
inception in October 1996 through December 1998, we were primarily engaged in
the development of our technology for searching and retrieving information from
the Internet. In May 1999, we launched our first industry-specific search
solution, or EoCenter, for application in the high-technology industry.
Customers of this EoCenter include Red Herring Communications, CMP Media and
EarthWeb. We have launched additional EoCenters in the finance, healthcare and
insurance industries and are rapidly developing new EoCenters for a range of
industries such as fiber optics, telecommunications, construction, chemicals,
metals and business education. To date, our services are deployed on more than
50 websites and we have contracted for approximately 150 additional website
deployments.
We derive substantially all of our revenues from deployment fees and from
fees for providing Internet search and retrieval services. From our inception
in October 1996 through May 1999, our revenue model was based on generating
fees on a per-transaction basis. In June 1999, we changed our revenue model to
one in which we also derive our revenues from deployment fees, advertising and
commissions from referrals.
Deployment fees and fees charged for maintenance services are recognized as
revenue ratably over the term of the relevant contract, which is typically one
to three years. Service revenues are recognized when the service is provided.
Advertising revenues are recognized when the advertisements are delivered.
Referral commissions are recognized when referrals occur. Fees received in
advance of revenue recognition are included in the balance sheet as deferred
revenue.
We launched our EoCenter service in May 1999 and have generated limited
revenues from the service to date. We have incurred significant costs to
develop our technology and services and to recruit and train personnel for our
development, operations, sales, marketing and administration departments. As a
result, we have incurred substantial losses and negative cash flows from
operations in every fiscal period since our inception. We expect operating
losses and negative cash flows to continue for the foreseeable future. We
anticipate our net losses will increase significantly from current levels
because we expect to incur additional costs and expenses related to our
expanded service offerings for additional industries. We believe that our
success depends on rapidly increasing
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our customer base in multiple industries, improving the functionality of our
EoCenter services, and increasing the distribution of advertisements and
information commerce through our network of EoCenter and EoMonitor customers.
Acquisition
In the fourth quarter of 1999, we acquired InGenius Technologies, Inc. for
approximately $2.7 million in cash. In this transaction, we acquired technology
for monitoring web pages on the Internet and notifying users regarding changes,
additions and deletions made to those pages. We have continued to sell the
service developed by InGenius, which we call EoMonitor, on a monthly
subscription basis and have begun to integrate the technology into our EoCenter
service.
Stock-Based Compensation
As of December 31, 1999, we recorded aggregate deferred compensation expenses
totaling approximately $7.5 million relating to the grant of stock options to
our employees, directors and consultants. These expenses represent the
difference between the exercise price of options to purchase our common stock
and the deemed fair value of this common stock on the date of the grant of
these options, as determined for financial reporting purposes. This expense is
being amortized over the vesting period of the applicable stock option, which
is typically four years.
Stock-based compensation expenses were $3.1 million in 1999. We expect
amortization of additional stock-based compensation expenses of $2.7 million in
2000, $1.2 million in 2001, $495,000 in 2002 and $110,000 in 2003. Future
amortization figures could be larger than these estimates, depending upon
future increases in personnel. There were no stock-based compensation charges
in the years ended December 31, 1997 and 1998.
Beneficial Conversion
In the fourth quarter of 1999, we issued 11.9 million shares of Series D
preferred stock. All shares were issued at $2.14 per share. Due to a deemed
increase in the fair value of our common stock into which the preferred stock
is convertible, in the fourth quarter of 1999, we have recorded a dividend of
approximately $8.0 million representing the difference between the cash
proceeds and the fair market value of the common stock into which the preferred
stock is convertible.
Preferred Stock Accretion
Our preferred stock is redeemable at the higher of the original issuance
price or the fair market value as determined by the board of directors at or
any time after April 2003. Accordingly, we have valued the redeemable
convertible preferred stock at its fair value at the end of each period
presented, with the periodic differences recorded as preferred stock accretion.
We have recorded preferred stock accretion of approximately $13.8 million for
the year ended December 31, 1999 based on $2.14 per share being the estimated
fair market values of shares of this stock at December 31, 1999.
Annual Results of Operations
Revenues. For the period from our inception in October 1996 through the
second quarter of 1999, we derived substantially all of our revenues from
service fees for our Internet search and retrieval services and, to a lesser
extent, from deployment fees. In the second half of 1999, we began distribution
of our EoCenter service for websites. To date, we have received nominal
revenues from our EoCenter service.
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Currently, we have several revenue streams, which are comprised of the
following:
. service fees for access to our search service;
. fees for deployment and customization of our services;
. monthly subscriptions to our EoMonitor service; and
. advertising revenues from the sale of online banner ads and sponsorships.
In the future, we expect to generate revenues from referral commissions. As
part of strategic relationships, we may also generate future revenues from the
sale of our EoCenter taxonomies. We cannot assure you that we will be able to
generate revenues from referral commissions or the sale of our taxonomies.
Revenues increased 912% to $496,000 for the year ended December 31, 1999 from
$49,000 for the year ended December 31, 1998. The increase resulted primarily
from our deployment of services on Office.com's website in June 1999, revenues
generated by our ongoing relationship with The Gale Group and commencement of
our EoMonitor service following our acquisition of InGenius Technologies, Inc.
in the fourth quarter of 1999. Revenues for the year ended December 31, 1998
resulted solely from our relationship with The Gale Group that commenced in the
fourth quarter of 1998. We generated no revenues for the year ended December
31, 1997.
Cost of Revenues. Cost of revenues includes fees paid to our third party
search service provider, direct labor associated with the maintenance and
implementation of the EoCenter service, technology license fees and fees paid
to third parties for hosting of our data centers. Cost of revenues increased
423% to $1.6 million for the year ended December 31, 1999 from $306,000 for the
year ended December 31, 1998. This increase consists of a growth in direct
labor of $800,000 and an increase of $500,000 in the cost of our third party
search service provider. There were no costs of revenues for the year ended
December 31, 1997.
Product Development. Product development expenses include personnel and
related costs for the design, development and implementation of our EoCenter
service and for the integration of third party software and products. Product
development expenses increased 34% to $2.0 million for the year ended December
31, 1999 from $1.5 million for the year ended December 31, 1998. The increase
reflects the 44% increase in our development staff during 1999, offset by the
capitalization of $446,000 of costs related to the development of internal use
software during 1999. Product development expenses increased to $1.5 million
for the year ended December 31, 1998 from $536,000 for the year ended December
31, 1997 due to a 125% increase in our product development staff during 1998.
Sales and Marketing. Sales and marketing expenses include salaries,
commissions and associated costs of employment and facilities for our sales and
marketing staff. Included in sales and marketing are those personnel
responsible for sales of our EoCenter service, advertising sales, and creation
of our public relations and advertising campaigns. Sales and marketing expenses
also include the costs of advertising, public relations and attendance at
industry trade shows. Sales and marketing expenses increased 182% to $3.3
million for the year ended December 31, 1999 from $1.2 million for the year
ended December 31, 1998. The increase consists of an $800,000 increase in
salaries and associated costs, an $800,000 increase in advertising expense, and
a $500,000 increase in other marketing activities such as public relations and
trade show attendance. Sales and marketing expenses increased from $214,000 for
the year ended December 31, 1997 to $1.2 million for the year ended December
31, 1998. The increase reflects the 200% increase in sales and marketing staff
that occurred during 1998.
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General and Administrative. General and administrative expenses include
personnel and related overhead costs for our executive, administrative,
finance and human resources functions, as well as legal and accounting fees.
General and administrative expenses increased 93% to $1.7 million for the year
ended December 31, 1999 from $888,000 for the year ended December 31, 1998.
The increase consists of a $500,000 increase in salaries and associated costs
and a $400,000 increase in professional fees, partially offset by a nominal
decrease in other administrative expenses. General and administrative expenses
increased to $888,000 for the year ended December 31, 1998 from $389,000 for
the year ended December 31, 1997. The increase reflects the increase in
personnel costs and facilities and overhead costs associated with our growth
and the relocation to our current facility.
Other Income (Expense). Net other income of $162,000 for the year ended
December 31, 1999, was primarily comprised of interest income of $214,000 and
interest expense of $52,000. Interest income was earned on cash balances in
low risk institutional investment funds. The interest expense for the year
ended December 31, 1999 represents interest accrued on notes payable. We
recorded net interest income of $19,000 for the year ended December 31, 1998
and net interest expense of $32,000 for the year ended December 31, 1997.
Depreciation and Amortization. Depreciation and amortization expense
includes the depreciation of computer hardware and software, office furniture
and equipment, and leasehold improvements, and the amortization of acquired
technology. Fixed assets are depreciated on a straight-line basis over their
useful live, generally three years. Acquired technology is amortized over a
useful life of three years. Depreciation and amortization expense for the year
ended December 31, 1999 included depreciation of fixed assets of $258,000 and
amortization of acquired technology of $157,000. The amortization of acquired
technology represents two months of amortization of the intangible assets
recorded as part of the acquisition of InGenius Technologies. For the years
ended December 31, 1998 and 1997, amortization and depreciation expense
consisted of depreciation of fixed assets.
Quarterly Results of Operations
The following table provides the unaudited quarterly condensed consolidated
statements of operations data for each of the four quarters ended December 31,
1999. We believe this information reflects all adjustments, consisting only of
normal recurring adjustments that are necessary for a fair presentation of
this information for the quarters presented. These results are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------
June
March 31, 30, September 30, December 31,
1999 1999 1999 1999
--------- ------- ------------- ------------
(In thousands)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues......................... $ 25 $ 73 $ 171 $ 227
Cost of revenues................. 188 333 410 668
------- ------- ------- -------
Gross profit................... (163) (260) (239) (441)
Operating expenses excluding
amortization of
deferred stock-based
compensation.................... 1,050 1,350 1,767 3,190
Amortization of stock-based
compensation.................... 46 352 185 2,469
------- ------- ------- -------
Total operating expenses....... 1,096 1,702 1,952 5,659
------- ------- ------- -------
Loss from operations............. $(1,259) $(1,962) $(2,191) $(6,100)
======= ======= ======= =======
</TABLE>
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The increase in revenues over the four quarters above was primarily due to
the deployment of service to Office.com in June and revenues from our EoMonitor
service following our acquisition of InGenius Technologies, Inc. in the fourth
quarter of 1999. The increase in cost of revenues over the four quarters was
primarily due to an increase in the costs of our third party search provider
and an increase in the direct labor associated with the maintenance and
implementation of our EoCenter service. The increase in operating expenses was
due primarily to increased personnel costs and increased sales and marketing
expenses.
Liquidity and Capital Resources
Since our inception in October 1996, we have funded our cash requirements
primarily through net cash proceeds from private placements of equity
securities. In the second and third quarters of 1998, we sold Series A
preferred stock for net proceeds of $7.0 million. In February 1999, we sold
Series B preferred stock for net proceeds of $2.8 million. In August 1999, we
sold Series C preferred stock for net proceeds of $4.5 million. During the
fourth quarter of 1999, we sold Series D preferred stock for net proceeds of
$23.2 million.
As of December 31, 1999, total cash invested since our inception was $38
million, and we had cash and cash equivalents of $21.7 million.
Net cash used in operating activities totaled $1.0 million for the year ended
December 31, 1997, $3.7 million for the year ended December 31, 1998, and $6.8
million for the year ended December 31, 1999. Net cash used in operations for
1997 and 1998 resulted primarily from net losses. Net cash used for operations
in 1999 resulted from operations and increases in accounts receivable and
prepaid expenses, partially offset by the inclusion of non-cash charges for
stock based compensation in net income and increases in accounts payable and
deferred revenues.
Net cash used in investing activities of $81,000 for the year ended December
31, 1997, and $429,000 for the year ended December 31, 1998, were for the
purchase of computer hardware and software and office furniture and equipment.
Net cash used in investing activities totaled $4.4 million for the year ended
December 31, 1999 and included payments of $2.7 million for the acquisition of
InGenius Technologies, the purchase of $727,000 of computer hardware and
software and office furniture and equipment and a $500,000 loan to an officer.
Net cash provided by financing activities was $1.0 million in the year ended
December 31, 1997, and consists primarily of proceeds from the issuance of
convertible promissory notes and the sale of common stock. Net cash provided by
financing activities was $7.1 million in the year ended December 31, 1998, and
consists primarily of proceeds from the issuance of preferred stock, proceeds
from the issuance of promissory notes, proceeds from the sale of common stock
and borrowings on our line of credit. Net cash provided by financing activities
was $29.8 million in the year ended December 31, 1999 and consists primarily of
proceeds from the issuance of preferred stock, proceeds from the sale of common
stock and net of repayments on our line of credit.
We currently anticipate that our available cash resources, combined with the
proceeds of this offering, will be sufficient to meet our anticipated working
capital and capital expenditure requirements through December 2001. We may need
to raise additional funds, however, to fund more rapid expansion, to develop
new or enhance existing products or services, to respond to competition or to
acquire complementary businesses or technologies. If adequate funds are not
available on acceptable terms, our business, results of operations and
financial condition could be materially adversely affected.
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Market Risk
We do not currently use derivative financial instruments. We generally place
our marketable security investments in high credit quality instruments,
primarily U.S. government obligations and corporate obligations with
contractual maturities of 90 days or less. We do not expect any material loss
from our marketable security investments and therefore believe that our
potential interest rate exposure is not material.
Year 2000 Readiness Disclosure
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. In order to distinguish
21st century dates from 20th century dates, the date code field needs to be
expanded to four digits. The use of software and computer systems that are not
year 2000 compliant could result in system failures or miscalculations
resulting in disruptions of operations, including a temporary inability to
process transactions, send invoices, or engage in normal business activities.
Although the transition from 1999 to 2000 has passed, and we are not aware of
any year 2000 problems with our services, we or third parties with whom we do
business may experience year 2000 problems in the future. If we were unable to
provide all or some of our services as a result, our revenues would decline.
Recent Accounting Pronouncements
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging activities. We do not
currently hold any derivative instruments and do not engage in hedging
activities. We expect the adoption of SFAS No. 133 will not have a material
impact on its financial position, results of operations or cash flow. We will
be required to adopt SFAS No. 133 for the year ending December 31, 2001.
In December 1999, the SEC staff released SAB No. 101, "Revenue Recognition in
Financial Statements." SAB 101 provides interpretive guidance on the
recognition, presentation, and disclosure of revenue in the financial
statements. SAB 101 must be applied to the financial statements no later than
the second quarter of 2000. We do not believe that the adoption of SAB 101 will
have a material affect on our financial results.
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BUSINESS
Overview
EoExchange enables business-to-business websites by providing an outsourced
industry-specific search, monitor and notification infrastructure. Our services
enable our customers to build traffic, improve website loyalty and increase
revenues through new commerce opportunities. We combine our proprietary
technologies with in-house industry expertise to find and deliver relevant
business information to professionals via the Internet. By providing our
outsourced services to a wide range of business-to-business vertical websites,
we are establishing a network of destination websites, thus enabling us to
offer businesses' targeted advertising and commerce opportunities.
Users of business-to-business vertical websites are generally business
professionals, such as managers, engineers, clinicians and researchers, who
seek relevant, timely and specific industry information. Our search, monitor
and notification solution benefits the business professional by focusing
Internet searches only on relevant websites within a selected industry. In
contrast, business-to-consumer search engines typically conduct less targeted
searches that generate results often lacking required relevance and
thoroughness. Through our targeted outsourced solution, we provide business
professionals access to relevant business information available on the
Internet. In addition, by having access to a large network of business
professionals, we believe that we will establish ourselves as a trusted source
of information and become a leader in the distribution and sale of premium
business information.
In May 1999, we launched our first industry-specific search solution, or
EoCenter, for application in the high-technology industry. Customers of this
EoCenter include Red Herring Communications, CMP Media and EarthWeb. We have
launched additional EoCenters in finance, healthcare and insurance industries,
and are rapidly developing new EoCenters for a range of industries such as
chemicals, metals, construction and telecommunications. We have developed
proprietary software tools that aid in the rapid development and deployment of
new industry-specific EoCenters.
Industry Background
Growth of Business-to-Business Electronic Commerce. The Internet has become
an important medium for communicating, finding information and purchasing
products and services. While many of the early uses of the Internet were
directed primarily at consumers, commerce and communications between businesses
over the Internet have emerged as a key driver of Internet growth. According to
Forrester Research, as of February 2000, almost half of all U.S. companies
purchase some of their goods and services over the Internet, and 93% of U.S.
companies expect to by 2002. Gartner Group estimates that electronic commerce
transactions conducted between businesses commonly referred to as business-to-
business electronic commerce, will generate $403 billion in revenues in 2000
and will generate $2.7 trillion by 2004. To address this opportunity, a large
number of industry-specific, business-to-business websites are emerging to link
buyers and sellers, offer market-specific information and provide a neutral,
trusted business environment. Gartner Group estimated there were 10,000 such
vertical industry-focused websites in 1999 and forecasts that there will be
100,000 of these websites in 2001.
As the number of vertical, industry-focused websites and the number of total
websites increases, it will become more difficult for business-to-business
websites to differentiate themselves. To
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succeed, an industry-specific, business-to-business website must become a
primary destination for business professionals in an industry. We believe the
key elements for websites to attract and retain these professionals will be the
amount and quality of industry-specific content they provide and their ability
to establish themselves as trusted, neutral sources of information.
Importance of Relevant Business Information. The highly competitive nature of
global business today has driven businesses to turn increasingly to industry,
financial and market research firms for reports and strategic counsel regarding
their market and purchase decisions. According to Veronis Suhler and
Associates, more than $52 billion will be spent on business information in
2002. In addition, access to free, industry-specific information online is
proliferating. As a result, businesses are increasingly turning to the Internet
as a primary source for research, financial, market and other industry-related
data. Currently, most Internet search engines are designed to conduct general
searches across the full breadth of the Internet. According to a study
conducted by NEC Research Institute and Inktomi Corporation, over one billion
Internet pages existed as of January 2000. Because broad Internet searches draw
results from the vast amount of information available on the Internet, we
believe they often return information that is either irrelevant or too general
to be of any use to business professionals.
We believe that the optimal solution for business-to-business vertical
websites is a search, monitor and notification infrastructure that delivers
relevant industry-specific content via a typical search engine or directory
service. However, business-to-business vertical websites often lack personnel
with the technical expertise and the time necessary to develop such a solution
internally. In addition, time to market is critical in the current competitive
landscape of the Internet. The diversion of management focus away from
executing core business strategies can be detrimental to the success of a
business-to-business vertical website. As a result of the resources and
technical expertise required to create in-house solutions, we believe business-
to-business websites need an outsourced search, monitor and notification
solution that:
. is easily and rapidly integrated;
. delivers industry-relevant content from across the Internet;
. increases duration of visits and encourages repeat visits;
. uses familiar search engine and directory interfaces; and
. creates additional revenue opportunities.
Our EoEnabled Solution
Our EoEnabled services include our EoCenter research engine and our EoMonitor
personalized
tracking service. Each industry-specific EoCenter research engine aggregates a
catalog of relevant industry websites and documents identified by our in-house
industry experts using our proprietary advanced search technologies to provide
more relevant information to the user. Our EoMonitor technology allows a user
to track and be notified of changes to any web page presented through an
EoCenter and other user-selected pages available on the Internet.
We believe that business-to-business vertical websites must provide
comprehensive access to relevant business information in order to attract and
retain industry professionals. We believe that our outsourced EoEnabled
services can be a key component in enabling a business-to-business website to
become an online destination of choice for business professionals in a
particular industry. Our
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EoEnabled services are designed to provide these business-to-business vertical
websites with the following key benefits:
. comprehensive coverage of industry information through a single vendor
relationship;
. time-to-market advantages of a turnkey solution;
. cost-effective, outsourced search and monitor tools;
. access to leading search, monitor and notification technology;
. improved user retention and repeat usage; and
. additional revenue opportunities relating to targeted advertising and
commerce.
EoExchange Services
We provide an outsourced industry-specific search, monitor and notification
infrastructure to business-to-business websites. Our EoEnabled services include
our EoCenter research engine and our EoMonitor personalized tracking service.
The key to our proprietary solution is industry-specific catalogs. These
catalogs identify the sources of information for a given industry and certain
key metadata, which is information about the information, that direct which
information sources we search and monitor across the Internet. We combine these
catalogs with retrieval technologies so the information can be automatically
retrieved and displayed. To a user, our EoEnabled services appear as pages
within a business-to-business website where a professional can go to search for
and monitor industry-specific information. However, these areas are actually on
a different website, hosted by us, that retain our customer's branding, look
and feel, as demonstrated in Figure 1.
Figure 1. A.B. Watley EoCenter Implementation
Demonstrates the Transition from A.B. Watley Homepage to A.B. Watley-Branded
EoCenter
[GRAPHIC APPEARS HERE]
[The picture depicts how a user on the A.B. Watley homepage enters into the
A.B. Watley-branded EoCenter using the research tab on A.B. Watley's site
navigation bar.]
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Our custom, scalable solution utilizes a standardized template that
identifies and displays the appropriate graphical characteristics of the
website from which the user accesses our EoEnabled services. Presentation of
customer logos, color schemes, fonts and other aesthetic attributes of
customers' websites are maintained while users access our services. This
scalable template technology allows our customers to provide our value-added
services as an extension of their websites and allows for a single template to
support multiple customers. For example, a single EoEnabled service, such as
our EoCenter for companies in the high-technology industry, may have dozens of
different appearances, each customized to reflect the branding of a particular
customer's website, as demonstrated in Figure 2 below.
Figure 2. EoCenters Branded to Appear as Natural Extensions of Customer
Websites
[GRAPHIC APPEARS HERE]
[The picture depicts how the same EoCenter template for the high-technology
industry supports two different customers. An Earth Web Inc. branding template
and Red Herring branding template allow the EoCenter to appear as natural
extensions of customer sites.]
For each industry-specific EoCenter, we have developed and maintain a
proprietary catalog of relevant websites and data. Depending upon the industry,
the number of websites in a catalog may range from 500 to more than 3,000. In
addition to the high-technology, finance, healthcare and insurance markets that
we currently serve, we have developed 12 industry-specific catalogs in
association with our relationship with VerticalNet. We are also currently
developing catalogs for each of VerticalNet's trade communities now numbering
more than 50 industries.
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EoCenter
We believe that professionals generally demand higher quality search services
than consumers. EoCenters are designed to meet the high standards of
professionals by coupling our in-house industry expertise with high quality
database search tools designed to overcome the challenges of finding relevant
information on the Internet. Rather than search the entire Internet for
information, EoCenters only search information that is relevant to the
industry. For example, in our EoCenter for the high-technology industry, a
search will only search industry-relevant sources, such as the websites of
hardware and software vendors, trade and business press and technology
organizations.
In addition to identifying websites to search, our industry experts identify
frequently referenced documents, such as specific product reviews, Securities
and Exchange Commission filings and patent filings. Our industry experts then
create custom reports that are designed to meet the needs of specific
professionals within a given industry, such as a product analysis report
designed to assist an information technology manager in making an informed
purchasing decision. Each report includes a collection of documents and
searches selected to provide aggregated information on a specific topic.
Through our information collection tools, our industry experts deliver to the
business professional extensive, organized information designed to dramatically
reduce the amount of time normally required to collect the information from
multiple sources.
EoMonitor
We complement our search services with monitor and notification technologies
to provide an integrated solution for business professionals' information
needs. Professionals who require business information to make decisions often
want the ability to monitor Internet pages and to be notified when topics of
interest are addressed or updated. EoMonitor meets this need by monitoring
specified websites and notifying the user about relevant changes. Through use
of our EoMonitor service, business-to-business destinations can offer their
visitors the ability to monitor user-selected Internet pages or websites,
whether they belong to a competitor, supplier, customer, news source or even
their own firm. Examples of pages that can be monitored include pages
containing publication of product releases and specifications from suppliers
and competitor websites, industry event listings and new Securities and
Exchange Commission filings.
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Our proprietary technology maintains a history of monitored pages and can
identify differences between original and updated pages. In addition to basic
monitoring, EoMonitor provides scoring and highlighting to show history of the
changes made to the monitored page. Scoring differentiates the degree of
changes for pages being monitored providing an overview of the magnitude of a
page's modifications. Our EoMonitor highlights actual changes graphically and
extracts relevant information, eliminating the user's need to visit and review
every monitored page, as illustrated in figure 3 below. Users can organize
monitored pages by name, folder, date, or score allowing for quick and easy
browsing of changes. Changes may be delivered to an account by e-mail or
published to the Internet. Deleted text is identified, along with new or
changed text.
Figure 3. Demonstration of EoMonitor Features
[GRAPHIC APPEARS HERE]
[The picture depicts EoMonitor features by displaying how users can select a
page to be monitored by clicking on the "Monitor Changes on This Page" icon,
how they are notified and ultimately how they view the page changes.]
EoExchange Network
By deploying our EoEnabled services on many business-to-business vertical
websites, we create our EoExchange network, which is an aggregation of industry
destinations with broad reach to business professionals. We believe our
EoExchange network represents a multi-channel advertising, sponsorship and
commerce platform in which each channel reaches leading websites in a
particular industry. For example, our high-technology channel includes websites
from CMP Media and EarthWeb, and our finance channel includes websites from AB
Watley and Forbes.com Inc. among others. Each EoCenter link placed on a
customer's website allows us to reach the website's target audience. In order
to identify an even more targeted audience, we further segment the channels
into sub-groups of websites. For example, PlanetIT, Datamation and TelecomWeb
are all targeted to reach the information technology professional. We intend to
make these groups of websites available to advertisers, sponsors and commerce
customers. The focused nature of EoCenter's search and content architecture
allows marketers to develop targeted campaigns to increase response rates and
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transactions. We believe that this network will enable us to offer targeted
advertising and electronic commerce opportunities to businesses that strive to
build brand awareness and sell products or services to businesses.
We believe that the combination of highly targeted visitor demographics and
the ability to serve industry-specific search results creates a commerce
platform well-suited for the sale of business information. We analyze user
searches and behavior to serve the most relevant pay-per-view documents and
abstracts. Visitors are presented with relevant research and analysis reports
that cover industry and technology trends and events that aid professionals who
require business information to make decisions. Each EoCenter reserves a
prominently located portion of the page to merchandise content and services.
This portion of our EoCenter can display the title, publisher, price and date
of a purchasable document. We attempt to maximize the relevance of purchasable
information or services offered by using a variety of methods to determine the
appropriate listing of documents and services presented to a user. These
methods include interpreting visitor entered keywords and matching premium
documents to relevant reports and content sets. For example, a person searching
our EoCenter for the high-technology industry for "Application Service
Provider" would be presented a report titled "Application Service Provider
Leadership Study: Building, Managing, and Growing an ASP Business," which could
then be purchased via credit card over the Internet, as demonstrated in Figure
4 below.
Figure 4. Demonstration of Information Commerce Transaction
[GRAPHIC APPEARS HERE]
[The picture depicts how a user would conduct an information commerce
transaction within our EoCenter.]
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Strategy
Our goal is to be the leading provider of outsourced search, monitor and
notification infrastructure for business websites. By establishing our network
of business professionals, we believe we will be well positioned to be a leader
in the distribution and sale of business information and services. To achieve
our objectives, our business strategy includes the following key components:
Build a Network of Business Professionals by Partnering with the Leading
Business-to-Business Websites. A key element of our success is our ability to
reach a large base of professional users within specific industries. We plan to
access this base of users by building relationships with leading business-to-
business vertical websites across a wide range of industries with turnkey
search, monitor and notification services. In order to reach our targeted
customer base of business-to-business vertical websites, we intend to
significantly increase our sales, marketing and client services efforts. We
believe that increased marketing and trade advertising will generate greater
awareness that our services enable business-to-business vertical websites to
become preferred industry destinations in a shorter period of time.
Extend Leadership in Our Existing Core Vertical Markets. We believe that we
have established a leading position as an outsourced provider of search,
monitor and notification services in the high-technology, finance and
healthcare industries for business-to-business destination websites. We
initially focused on these industries because of the rapid growth of
destination websites serving these markets. As these core vertical markets
continue to expand and fraction into more focused vertical segments, we plan to
deploy additional sales, marketing and development resources to strengthen our
positions in these business-to-business markets.
Penetrate a Wide Range of Additional Business-to-Business Vertical
Markets. Our goal is to establish an early presence in emerging business-to-
business vertical marketplaces. We are developing EoCenters for the chemicals,
metals, construction, telecommunications, fiber optics and business education
industries. We target customers who operate multiple websites in multiple
industries. For example, under our strategic relationship with VerticalNet, we
have developed 12 EoCenters across multiple industries and expect to develop
and deploy more than 50 additional EoCenters in a wide variety of industries.
In addition, strategic partners provide us industry and information expertise
that helps us to develop new EoCenters.
Leverage Our EoExchange Network to Create a Highly Targeted Advertising
Sponsorship and Commerce Platform. Our EoExchange network, which is an
aggregation of industry destinations, serves as a commerce channel for premium
information providers and advertisers to reach professionals in particular
industries. We leverage this network of business professionals to create a
highly targeted advertising, sponsorship and commerce platform. Our sales team
then secures licenses from leading information providers and aggregators to
distribute their content across our EoExchange network. This results in a
greater inventory of premium information that increase our opportunities for
additional information commerce.
Maximize Revenue Opportunities with Existing Customers. Once an EoCenter is
integrated with a customer's website, our client services team develops design
proposals for ideal placement of links to our EoCenter. The team also provides
the customer with tools to easily deploy these links. Prominent link placement,
including linked keywords in headlines and editorials, provides opportunities
for additional traffic to each EoCenter. This traffic broadens the reach of the
EoCenter within each vertical website, creating opportunities for increased
advertisement, sponsorship and commerce revenues.
33
<PAGE>
Maintain and Extend Our Technology Leadership. We believe that our technology
is superior to other search engine technologies in providing refined search for
business professionals. Our information retrieval technologies must continually
be enhanced to keep pace with the significant challenges posed by the growth of
the Internet. To meet this challenge, we spent approximately $1.5 million in
1998 and approximately $2.0 million in 1999 to enhance our service offerings.
We intend to further strengthen our technology through increased development
and the acquisition of complementary technologies.
Customers
Our customers operate business-to-business websites in industries such as
high-technology, finance and healthcare. In addition, we intend to extend our
access to the chemicals, metals, construction, telecommunications, fiber optics
and business education industries and the small-to-medium business market
segment.
The following is a representative list of our customers:
<TABLE>
<CAPTION>
<S> <C> <C>
1stVenture.com, Inc. Forbes.com Inc. Online, Inc.
A.B. Watley Group, Inc. Gale Group Corporate Division Pensiononline.com
AdvisorTeam.com, Inc. Hoover's, Inc. Phillips International, Inc.
Asera, Inc. Imagine Media, Inc. Red Herring Communications, Inc.
B2B E-Commerce InfoSoft, Inc. Smart Online, Inc.
International, Inc. Inprise Corporation Thomson Financial Media
Bloor Research Interworks Computer Products Upside Media
CMP Media Inc. IT News Vault.com Inc.
Constructors, Inc. MetalShopper Venture Capital Online
EarthWeb Inc. Midnight-trader.com VerticalNet, Inc.
Ejigsaw.com, Inc. National Hotel Executive Webforia, Inc.
EverythingOffice, Inc. Office.com Inc. WetFeet.com, Inc.
www.yellowpages.com, Inc.
</TABLE>
Our sales are concentrated among a limited number of customers. Office.com
and The Gale Group account for approximately 49% and 35% of our revenues for
the year ended December 31, 1999, respectively.
34
<PAGE>
Our customers operate one or more of the following industry-specific websites
for which we have developed an EoCenter and/or EoMonitor, some of which have
not yet been deployed:
<TABLE>
<C> <S>
High-Tech.................. bloor-interarctive.com, borland.com, byte.com,
cabletoday.com, circuitassembly.com, codeguru.com,
crossnodes.com, csdmag.com, datamation.com,
design-reuse.com, developer.com, dice.com,
discussions.earthweb.com, earthweb.com,
ebnonline.com, econstructors.com, edtn.com,
eetimes.com, ejigsaw.com, erphub.com, gamelan.com,
gocertify.com, hdi-online, htmlgoodies.com,
iwcp.com, informationweek.com, infosoft.net,
internetwk.com, intranetjournal.com,
it-analysis.com, it-director.com, itknowledge.com,
it-news.com, it-seek.com, jars.com,
javascripts.com, line56.com, nwc.com,
onlineinc.com, opensourceit.com, pcdmag.com,
pcfab.com, pcnalert.com, planetanalog.com,
planetit.com, redherring.com, semibiznews.com,
supportsource.com, sysopt.com, techcrawler.com,
techweb.com, telecomweb.com, upsidetoday.com,
webforia.com, webtools.com, wetfeet.com and
winmag.com
Finance.................... 1stventure.com, abwatley.com, americanbanker.com,
bankinfo.com, nationalmortgagenews.com,
forbesfinder.com, hoovers.com, midnight-
trader.com, nvst.com, pensiononline.com,
thebankingchannel.com and vcapital.com
Health Care................ medcareers.com
Small-to-Medium Business .. everythingoffice.com, hotelexecutive.com,
office.com and yellowpages.com
VerticalNet Properties..... chemicalonline.com, fiberopticsonline.com,
pharmaceuticalonline.com, pollutiononline.com and
safetyonline.com
</TABLE>
Sales and Business Development
Our sales and business development strategy is to build a large network of
customers through our direct sales force and to penetrate various market
segments through multiple indirect distribution channels. Our team consists of
22 people organized into four groups. The largest group is our direct sales
force that consists of channel and sales managers organized into industry-
focused teams. Our regional sales people manage corporate sales of our
EoMonitor service to Fortune 500 companies. Commerce sales, including sales of
advertisement and sponsorship inventory and information commerce listing and
placement inventory, are also managed regionally. Our sales force develops
sales presentations, demonstrates our services and manages the complete sales
cycle. After a customer agreement is complete, our client services group
assists the customer in the design, implementation and ongoing management of
our services.
Our business development team is responsible for identifying new industries
and strategic customers to grow the EoExchange network and aggregate user
traffic. Its responsibilities include managing our advertisement and
sponsorship inventory and securing content redistribution relationships with
leading information distributors and providers. We have identified four primary
business development opportunities. First, we intend to target strategic
customers that have significant presence in several industries or operate
multiple websites within a single industry. We believe we can benefit from
reduced engineering and product costs of customization by applying the custom
EoCenters to all of a customer's websites. Second, we plan to target
established customers
35
<PAGE>
with one primary website whose traffic exceeds one million page views per
month. Collaboration with our customers during design and implementation
ensures a greater number and increased prominence of links to EoEnabled
services. Third, we believe relationships with systems integration companies
will lead to the development of an indirect sales channel and the incorporation
of EoEnabled services at website inception. Finally, we believe corporate
Intranet applications of EoEnabled services, such as competitive analysis and
corporate intelligence, will continue to emerge.
Marketing
To support our sales and business development efforts, we employ a variety of
tactics to drive traffic to our customers' websites, increase usage of our
EoEnabled services and attract additional customers. These include print and
online advertising, public relations and customer promotions. We also
extensively use co-op marketing platforms, a co-branding strategy in which our
customers pay us to subsidize part of the marketing cost for inclusion in the
campaign. This strategy increases our brand awareness by associating us with
our leading customers.
Our print advertising campaigns are designed to increase brand awareness and
to drive traffic to our customers. We reach our target market of business-to-
business destination website owners by running print advertisements in widely
distributed industry publications such as the Industry Standard, Forbes ASAP
and Red Herring. The majority of our online advertising and other customer
promotions programs are designed to generate traffic to our EoEnabled services
deployed on our customers' websites. We use online tactics including the
placement of banner advertisements on websites targeted to our end-user,
customer email newsletters and the placement of EoCenter search boxes on
websites outside our EoExchange network.
We also utilize a variety of public relations programs. We regularly issue
press releases highlighting our customers. We pursue editorial and speaking
opportunities to promote our EoEnabled services. Sponsorships and presentations
at industry trade shows and conferences, such as Industry Standard's iB2B and
eHealthcare World, allow our sales and business development teams to develop
relationships with potential business-to-business website customers.
Client Services
We believe that proactive customer service and support is critical to the
long term success of our EoEnabled services. Our client services group is
responsible for all account management, product implementation and service
functions after the sales and business development teams have completed a
customer agreement. Our client services team consists of 15 people whose
responsibilities include reducing overall deployment time, developing strong
relationships to ensure client satisfaction, leveraging customer relationships
to enhance the number and location of links to EoEnabled websites, and
facilitating and collecting customer feedback. We believe focused and dedicated
customer service will result in a greater number and more prominent placement
of links which will drive more user sessions and page views, ultimately leading
to increased revenues.
Technology
Over the past three years we have developed proprietary technologies designed
to satisfy the information research demands of the business professional. The
goal of these technologies is to combine in-house industry expertise with
software technologies to produce precise industry-specific search solutions.
These technologies are designed using a scalable template technology, allowing
rapid deployment of new EoCenters and minimizing their development time.
Supporting each
36
<PAGE>
EoCenter is our aggregation platform, which is the technology core of the
system that provides all cataloging, searching and monitoring functions. We
began development of our aggregation platform in 1996 and continue to enhance
it to meet the demands of the business professional.
Catalog Tools. We have invested heavily in building productivity tools that
enable our industry experts to handle large volumes of information and help
them monitor and classify relevant information sources. A subset of tools is
also offered to industry experts from our larger customers' websites allowing
them to manage certain aspects of the catalog that underlies our EoCenter.
Figure 5 shows a model of how we and our customers use the cataloging tools.
Figure 5. EoExchange/Customer Editor Tools
[GRAPHIC APPEARS HERE]
[The picture depicts the model of how we and our customers' staff use
cataloging tools.]
37
<PAGE>
A browser-based catalog editor allows our industry experts and key customers
to modify the taxonomy of the catalog as well as add or delete individual
entries. A domain analyzer uses link analysis to crawl the Internet and
identify websites that are likely to be of relevance to an industry or
profession, which provides the cataloger with a methodical way to find relevant
information. A website profiler is then used to analyze large websites and
provide information on how to calibrate the crawlers. A script editor and a
form analyzer identify how to collect specific pages and aid with the
construction of the industry reports. Additionally, there is a comprehensive
catalog editor which allows for the management of all aspects of the catalog
including indexers, commonly called crawlers, taxonomies, scripts, reports,
inputs and data dictionaries.
Search Sub-System. Our search sub-system delivers the industry-specific
search results, and the technology manages indexing, tagging and querying
cycle. The search process involves the collection of pages, the indexing and
tagging of these pages and then serving lists of pages that most closely match
a user's search request, known as a query. While many search companies endeavor
to find and index all the information available on the Internet, our EoCenter
technology is focused on eliminating irrelevant pages and ensuring that only
industry-relevant and trusted information is included. By concentrating on
industry-relevant information sources, our technology updates the industry-
specific catalogues weekly and the most active information sources daily.
Document Collection Engine. Our document collection engine is designed to
access specific websites and retrieve frequently referenced, industry
documents. The engine is able to collect pages that cannot be book marked, such
as pages that require forms to be completed. The core technology behind the
industry reports service of our EoCenter enables the simple process of
collecting multiple documents.
Change Monitoring Sub-System. Our change monitoring sub-system is responsible
for handling all of our EoMonitor services. At the core of the sub-system is a
central database of all pages that are being monitored across our EoExchange
network. Each entry in the database contains the most recent version of the
page along with a detailed history of prior changes to the page. Each page is
regularly checked, and if it has been modified, the database is updated with
the change details. This sub-system is also responsible for the email
notifications sent to users when they have requested notification upon change.
Customer Publication Engine. Our EoEnabled services utilize a template
technology that allows one EoCenter to look like each of our individual
customers' websites by displaying their logo and using their fonts, color
schemes and styles. In many cases, the users believe they are on our customer's
website when, in fact, they are using our EoCenter. The publication engine
combines cosmetic layout instructions with the core delivery engine in real
time. Using our scalable architecture, customers can utilize our EoCenter with
their websites' branding, look and feel.
Activity Profiling. Our aggregation platform maintains records of user
activity. The activity statistics provide our customers with detailed
information regarding the interests of their customers and provide
opportunities for highly targeted marketing.
Modular Architecture. Our aggregation platform is built on a multi-tiered
modular design that allows existing components to be upgraded and new
components to be added with minimal ramifications on other parts of the system.
In addition, we strive to utilize the best available technologies from other
vendors. This flexible architecture allows us to add and remove technologies to
best service the needs of the EoExchange customers.
38
<PAGE>
Our EoCenter Operations
The operations and engineering teams collaborate at every stage of the design
and delivery of the aggregation platform. Operational redundancy is achieved by
hosting our servers at multiple commercial co-hosting facilities and by
designing server clusters in arrays with no single point of failure. Our
servers are hosted in multiple locations including at an Exodus Communications
data center in California and at a Voyager.net co-location facility in
Michigan. These facilities have multiple Internet backbone connections with
physical security supplied via human monitored alarms and keycard access
systems. External email and paging notifications are sent to network engineers
if any production servers do not respond to monitoring software within five
minutes.
Our aggregation platform and EoCenter servers run on Intel-based multi-
processor HP NetServers running a mixture of Windows NT and LINUX operating
systems. At each facility, our servers are configured in redundant arrays, with
traffic being routed between servers for enhanced performance and fail-over
capability. Multiple systems can fail without impairing overall functionality.
We use F5 Network's Big/ip product to distribute incoming requests to the most
available server. As load and demand increase, additional servers are simply
added, and the load balancer immediately begins directing traffic to the new
servers. Additional server capacity is always available to handle surges in
traffic without performance delays. All server systems are configured with
Windows 2000, Active Directory and Distributed File System. Data is stored on a
highly available, redundant, and scalable Windows 2000 Advanced Server Cluster
Solution running SQL 7 database.
Security begins at our external routers at Exodus and is pervasive throughout
our network design. Our security firewalls block traffic not destined to
specific ports opened to our software applications. F5 Network's Big/ip devices
hide all IP addresses to our web servers, preventing external access to our web
servers. Finally, service level agreements with Exodus Communications ensure
response to external network intrusion attempts within 15 minutes of detection.
39
<PAGE>
Competition
We compete in markets that are new and rapidly changing, and we expect
competition in our markets to intensify in the future. We compete on the basis
of several factors, including relevance of results, performance, scalability,
price and ease of use of our online search, monitor and notification services.
We believe no single competitor competes directly with us with respect to the
full range of outsourced services we offer to business-to-business websites.
However, we currently or potentially compete indirectly with a number of other
companies that provide outsourced Internet business services. These indirect
competitors include Internet outsourcing, content distribution, advanced web
search, information commerce enabling and content aggregation companies, as
illustrated in the following table.
<TABLE>
<CAPTION>
Category Focus Example Companies
-------- ----- -----------------
<S> <C> <C>
Internet Outsourcing Outsource Internet navigation, Alta Vista, Ask
Internet portal or website Jeeves, InfoSpace,
enhancement content Inktomi and LookSmart
Content Distribution Enable websites to deploy a package iSyndicate and
of Internet content aggregated from Screaming Media
external sources
Information Commerce Enable digital transactions to be Qpass
Enabling made online
Advanced Internet Search Provide information retrieval and Autonomy, Infoseek
monitor technology that can be used and NetMind
to build customized services
Content Aggregation Combine proprietary and external About.com, Dow Jones,
content from disparate sources, Northern Light and
including content publishers, Reuters
specialized search engines and non-
syndicating Internet directories
</TABLE>
Intellectual Property
We rely on a combination of patent, trade secret, copyright and trademark
laws and contractual restrictions to establish and protect proprietary rights
in our products, services, know-how and information.
We have one allowed patent application covering an information platform for
performing data collection, interpretation and analysis, together with related
method and apparatus claims. We cannot assure you that this patent, if issued,
will be upheld as valid if its validity is challenged by any of our competitors
or other third parties, or that any patents will issue from future patent
applications.
We also hold several trademarks and service marks and own the rights to
various Internet domain names. We have applied for federal registration of
certain of these trademarks and service marks, including "EoExchange,"
"EoCenter," "EoEnabled," "EoMonitor," "EoProducer," "Eo" and "Internet
Information Exchange Company." We hold the trademark for "Aeneid."
Employees
As of March 31, 2000, we had 111 full-time employees, including 61 primarily
involved in the production of our EoCenter and EoMonitor services, 43 in our
sales and marketing department and seven in our general and administrative
department. None of our employees is represented by a labor union, we have
never experienced a work stoppage and we believe that relations with our
employees are good.
40
<PAGE>
Facilities
Our principal executive and administrative offices are located at 282 2nd
Street, Suite 400, San Francisco, California 94105, where we lease
approximately 13,000 square feet. We have signed a lease for an additional
2,000 square feet at that location as of June 1, 2000. We also lease
2,000 square feet of office space in Kalamazoo, Michigan, 1,725 square feet of
office space in Indianapolis, Indiana and 3,000 square feet of office space in
New York, New York.
Legal Proceedings
There are no legal proceedings pending or threatened against us. We have not
initiated any legal actions against third parties.
41
<PAGE>
MANAGEMENT
Executive Officers, Directors and Key Employees
Our executive officers, directors and key employees, and their ages as of
March 31, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Douglas S. Bennett.............. 41 President, Chief Executive Officer and
Chairman of the Board of Directors
Vice President and Chief Technology
Robert D. Ainsbury.............. 44 Officer
Wilfredo M. Tejada.............. 34 Vice President of Marketing
Vice President of Sales and Business
Richard L. Templeton............ 52 Development
Mark H. Elder................... 35 Vice President of Finance, Treasurer and
Assistant Secretary
Robert G. Allison............... 43 Director
Marc A. Butlein................. 61 Director
Scott N. Flanders............... 43 Director
Daniel Putterman................ 32 Director
Dag A. Tellefsen................ 57 Director
</TABLE>
Douglas S. Bennett has been our president and chief executive officer since
October 18, 1999 and has been our chairman of the board of directors since
March 2000. Mr. Bennett has served as a director since October 1999. From
November 1998 to October 1999, Mr. Bennett served as president of Macmillan
USA. From June 1996 to October 1998, he served as president, Macmillan Digital
Publishing and from January 1995 through October 1998, he served as senior vice
president of Simon & Schuster's interactive distribution services. From July
1992 to June 1996, Mr. Bennett held several senior-level positions with Simon
and Schuster. Mr. Bennett also serves on the boards of Telstreet.com, an
Internet wireless retailer, and Snaz.com, an electronic commerce facilitator.
Robert D. Ainsbury, co-founder of EoExchange, has served as our vice
president and chief technology officer since March 1999. From June 1997 to
March 1999, Mr. Ainsbury served as our vice president of research and
development. From October 1996 to May 1997, Mr. Ainsbury was vice president of
engineering for NetManage, He served as vice president of research and
development at Maximum Information from January 1995 to June 1996. Mr. Ainsbury
has more than 20 years of experience in the software business and has developed
information systems for Mobil Oil Corporation, Conoco, Inc. and First National
Bank of Chicago, among others.
Wilfredo M. Tejada, co-founder of EoExchange, has served as our vice
president of marketing since October 1996. From April 1995 to October 1996, Mr.
Tejada served as vice president of marketing for NetManage, an Intranet
applications company. From January 1994 to April 1995, Mr. Tejada served as
vice president of product marketing for Novell Incorporated and directed its
product and channel marketing and overall strategic communications.
Richard L. Templeton has served as our vice president of sales and business
development since July 1999. From June 1997 to July 1999, Mr. Templeton served
as vice president of sales and partner marketing for Prodigy. From May 1994 to
May 1997, Mr. Templeton served as senior vice president of marketing
information for Reuters.
Mark H. Elder has served as our vice president of finance since February 2000
and as our treasurer since October 1999. He has also served as our assistant
secretary since May 1999.
42
<PAGE>
Mr. Elder served as our director of finance from May 1998 until January 2000.
From October 1990 through May 1998, Mr. Elder worked for Montgomery Financial
Management as a financial consultant to emerging enterprises. During 1997, Mr.
Elder served as chief financial officer of New Media Corporation, a
manufacturer of PCMCIA products.
Robert G. Allison has served as a director since April 1998. Mr. Allison has
been a limited partner of Edgewater Private Equity Fund Management, L.P., the
general partner of Edgewater Private Equity Fund II, L.P., since March 1997.
Mr. Allison also served as executive vice president, chief operating officer
and director of Aurora Electronics Group from November 1993 to May 1996. Mr.
Allison also served as a director to Advanced Photonix Inc from 1996 through
1999. Mr. Allison holds an undergraduate degree in economics from California
State University.
Marc A. Butlein has served as a director since February 1998. Mr. Butlein has
also been the chairman of MAS Communications since April 1999 and the chairman
of PPI Network since December 1999. He was appointed to the board of be-
there.com in January 2000, and has served as a director of Medscape since
December 1997. From January 1989 to May 1998, Mr. Butlein was the chairman of
META Group where he served on the board until May 1999. Mr. Butlein received an
undergraduate degree from the University of Connecticut and pursued doctoral
studies in political science at the Maxwell School at Syracuse University.
Scott N. Flanders has served as a director since March 2000. Mr. Flanders has
served as the chairman and chief executive officer of Columbia House since
November 1999. In 1998, Mr. Flanders co-founded Telstreet.com. From 1994 until
1998, Mr. Flanders served as president of Macmillan Publishing, a computer and
reference publisher. Mr. Flanders holds an undergraduate degree in economics
from the University of Colorado, received a J.D. from Indiana University and is
a certified public accountant.
Daniel Putterman, co-founder of EoExchange, has served as a director since
March 1997. He also served as our president and chief executive officer from
March 1997 through October 1999 and our chairman of the board of directors from
March 1997 until March 2000. Mr. Putterman is the president and chief executive
officer of ChannelDot Networks, Inc. In October 1994, Mr. Putterman founded
Maximum Information, a company that developed an enterprise Internet management
platform.
Dag A. Tellefsen has served as a director since July 1997. He is the founding
partner of Vision Capital L.P., a venture capital firm started in 1996. In
1982, Mr. Tellefsen was the founding partner of Glenwood Management L.P., the
predecessor to Vision Capital L.P. Mr. Tellefsen currently serves on the boards
of directors of Iwerks Entertainment, KLA-Tencor, Metorex International, Oy and
Altitun AB. Mr. Tellefsen received an undergraduate degree in engineering from
Princeton University and a M.B.A. from Stanford University.
Board Composition
Our bylaws currently authorize six directors. Our certificate of
incorporation provides that the board will be divided into three classes, Class
I, Class II and Class III, on or prior to the date that we first provide notice
of an annual stockholders meeting following this offering. Class I directors,
initially , hold office initially for a term expiring at the
annual meeting of stockholders in 2001. Class II directors, initially
, hold office initially for a term expiring at the annual meeting
of stockholders in 2002. Class III directors, initially , hold
office initially for a term expiring at the annual
43
<PAGE>
meeting of stockholders in 2003. After these initial periods, each class will
serve a staggered three year term. Any additional directorships resulting from
an increase in the number of directors will be distributed among the three
classes, so that, as nearly as possible, each class will consist of one-third
of the directors. This staggered classification of the board of directors may
have the effect of delaying or preventing changes in control or management.
There are no family relationships among any of our directors, officers or key
employees.
Mr. Allison's board seat was designated pursuant to right received in
connection with Edgewater's participation in our Series A preferred stock
financing. Mr. Tellefsen is Vision Capital's designee on our board of directors
pursuant to a 1997 financing.
Board Committees
Our board of directors has a compensation committee and an audit committee.
Our audit committee consists of Messrs. Allison, Butlein and Flanders, all of
whom are outside directors. The audit committee monitors the integrity of our
financial reporting process and systems of internal controls, monitors the
independence and performance of our outside auditor and internal audit function
and reviews our consolidated financial statements.
Our compensation committee consists of Messrs. Allison and Tellefsen, each of
whom are outside directors. The compensation committee makes recommendations to
the board of directors regarding matters of compensation of our officers and
administers our equity incentive plans.
Compensation Committee Interlocks and Insider Participation
We had no compensation committee as of December 31, 1999. All of our
directors participated in deliberations of the board of directors concerning
executive officer compensation. None of the members of the compensation
committee of the board serves or has served as one of our officers or
employees. None of our executive officers served during the last fiscal year or
currently serves as a member of the board or compensation committee of any
entity which has one or more executive officers serving as a member of our
board or compensation committee. Messrs. Allison and Tellefsen are affiliated
with Edgewater Funds, Vision Capital L.P. and Vision Extension L.P.,
respectively, which are holders of our preferred stock. See "Related-Party
Transactions."
Director Compensation
We do not currently pay any cash compensation to our directors for their
services as members of the board of directors, although we reimburse them for
reasonable expenses in connection with attending our board and committee
meeting. We do not provide compensation for committee participation or special
assignments of the board of directors.
Jack Russo, a former director from November 1996 until September 1999,
received a right to purchase 10,000 shares of our common stock under the 1999
stock plan, valued at $1.25 per share, in consideration for services previously
rendered by Mr. Russo as director.
Our non-employee directors receive option grants under our 1999 stock plan,
as described under "--1999 Stock Plan."
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<PAGE>
Executive Compensation
The following table provides information concerning compensation of our chief
executive officer and the top four other highly compensated executive officers
who were serving as executive officers as of December 31, 1999. Mr. Bennett
joined us during the 1999 fiscal year and therefore his annual compensation
does not reflect his full base salary of $275,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation Long-Term Compensation
----------------- ----------------------------------
Restricted Shares
Name And Principal Stock Underlying All Other
Position Salary Bonus Awards Options Compensation
- ------------------ -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Douglas S. Bennett....... $ 56,085 $123,542 1,765,051 -- $10,920.62
President, Chief
Executive Officer and
Director
Robert D. Ainsbury....... $175,000 $ 35,000 -- -- --
Vice President and Chief
Technology Officer
Wilfredo M. Tejada....... $150,000 $ 30,000 -- -- --
Vice President of
Marketing
Mark H. Elder............ $117,424 $ 15,548 -- 60,000 --
Vice President of
Finance, Treasurer and
Assistant Secretary
Daniel Putterman......... $181,854 -- -- -- --
Chairman of the Board of
Directors
</TABLE>
Mr. Bennett's other compensation consists of a signing bonus and
reimbursement of costs of temporary housing, travel and relocation. Effective
March 2000, Mr. Bennett also became our chairman of the board of directors.
Option Grants and Exercises
The following table provides information concerning grants of options to
purchase our common stock made during the fiscal year ended December 31, 1999
to the officers named in the summary compensation table.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percentage of Annual Rates of Stock
Total Options Price Appreciation
Granted to Exercise or for Option Term
Options Employees in Base Price Expiration ---------------------
Name Granted Fiscal Year per share Date 5% 10%
- ---- ------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Douglas S. Bennett...... -- -- -- -- -- --
Robert D. Ainsbury...... -- -- -- -- -- --
Wilfredo M. Tejada...... -- -- -- -- -- --
Mark H. Elder........... 60,000 3% $0.80 8/16/2009
Daniel Putterman........ -- -- -- -- -- --
</TABLE>
The table above is based on options to purchase an aggregate of 2,024,051
shares of common stock granted by us in the year ended December 31, 1999 to our
employees and consultants. Potential gains are net of exercise price, but
before taxes associated with exercise. These amounts represent
45
<PAGE>
certain assumed annual rates of compounded appreciation only, based on the
Securities and Exchange Commission rules. Actual gains if any, on stock option
exercises are dependent on the future performance of the common stock, overall
market conditions and the option-holders' continued employment through the
vesting period. The amounts reflected in this table may not necessarily be
achieved.
Aggregate Option Exercises and Fiscal Year-End Values
The following table provides information concerning exercises of options to
purchase our common stock in the fiscal year ended December 31, 1999, and
unexercised options held at December 31, 1999, by officers named in the summary
compensation table.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options Held at In-The-Money Options at
December 31, 1999 December 31, 1999
Shares Value ------------------------- -------------------------
Acquired on Realized Exercisable Unexercisable Exercisable Unexercisable
Name Exercise ($) (#) (#) ($) ($)
- ---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas S. Bennett...... -- -- -- -- -- --
Robert D. Ainsbury...... -- -- 109,375 140,625 125,781.25 161,718.75
Wilfredo M. Tejada...... 65,000 74,750.00 364,687 195,313 419,390.05 224,609.95
Mark H. Elder........... -- -- 42,395 102,605 42,629.25 82,120.75
Daniel Putterman........ -- -- 109,375 140,625 125,781.25 161,718.75
</TABLE>
The value of the unexercised in-the-money options at December 31, 1999 is
based on fair market value of $1.25 at December 31, 1999, as determined by the
board of directors, and is net of the exercise price of such options.
Employment Agreements with Executive Officers
On October 18, 1999, we entered into an agreement for the at-will employment
of Douglas S. Bennett as our president and chief executive officer. The
agreement provides that Mr. Bennett is entitled to an annual salary of $275,000
through December 31, 2000 plus a target bonus of no less than $125,000 per
year, with a pro-rata guarantee for 1999 at the rate of $2,403 per week. The
agreement also provides for the reimbursement of Mr. Bennett for his travel and
relocation expenses. The agreement also provides that upon a sale of all or
substantially all of our assets, or our merger or consolidation which
constitutes a change of control, he will receive his target bonus and any
remaining amount on the $500,000 forgivable portion of the $700,000 loan will
be fully forgiven. We have also agreed to loan Mr. Bennett $700,000 toward the
purchase of his new primary residence. $500,000 of the loan and accrued
interest will be subject to forgiveness at the rate of 1/5 per year, with the
first 1/5 forgiven on and as of January 1, 2001 and each year thereafter. If
Mr. Bennett's employment is terminated by us for any reason other than for
cause, or in the event of a constructive termination, death or disability, he
will be entitled to receive his base salary for a period of one year.
Furthermore, Mr. Bennett will have the option to enter into a consulting
agreement with us for a period of one year.
On January 1, 1999, we entered into an at-will employment agreement with
Robert D. Ainsbury. The agreement provides that Mr. Ainsbury is entitled to an
annual salary of $175,000, plus a discretionary bonus of up to 20% of his base
salary. If we terminate Mr. Ainsbury's employment for any reason other than for
cause, or in the event of a constructive termination, death or disability, he
will be entitled to receive his base salary for a period of one year. The
agreement also provides that
46
<PAGE>
any successor to us will assume our obligations under the agreement. As of
February 1, 2000, Mr. Ainsbury's annual salary was increased to $200,000.
On January 1, 1999, we entered into an at-will employment agreement with
founder Willie M. Tejada. The agreement provides that Mr. Tejada is entitled to
an annual salary of $150,000, plus a discretionary bonus of up to 20% of his
base salary. If we terminate Mr. Tejada's employment for any reason other than
for cause, or in the event of a constructive termination, death or disability,
he will be entitled to receive his base salary for a period of one year. The
agreement also provides that any successor to us will assume our obligations
under the agreement. As of February 1, 2000, Mr. Tejada's annual salary was
increased to $175,000.
On October 6, 1999, we entered into an at-will employment agreement with
Daniel Putterman. The employment agreement provided for Mr. Putterman's
employment as our president, chief executive officer and chairman of the board
of directors until our hiring of a new president or chief executive officer. As
president, chief executive officer and chairman of our board of directors,
Mr. Putterman was entitled to an annual salary of $175,000 and an annual cash
bonus of up to twenty percent of his base salary and severance benefits of 120%
of his salary in the event of his termination without cause or constructive
termination. Pursuant to the terms of his employment agreement, his employment
with us terminated at the hiring of Mr. Bennett and he became a consultant for
us as of October 22, 1999. Pursuant to the consulting provisions of his
employment agreement, Mr. Putterman has agreed to provide, at our request,
eight hours per week of consulting services to us for a twelve month period
commencing on October 22, 1999 in exchange for payments of $4,000 each month
and additional payments of $150 per hour for each additional hour of consulting
services he provides. Mr. Putterman continues to serve as our chairman of the
board of directors.
1996 Stock Option Plan
Our 1996 stock option plan was adopted by the board of directors and approved
by the stockholders on December 15, 1996. The 1996 plan provides for grants to
our employees of incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, and for grants of nonstatutory
stock options and stock purchase rights to our employees and consultants,
including non-employee directors. We have discontinued use of our 1996 plan for
new grants.
Not including the shares that were returned to our pool of authorized and
unreserved shares when we determined to discontinue use of the 1996 plan, we
reserved a total of 2,759,699 shares of common stock for issuance under the
1996 plan. As of March 31, 2000, of those reserved shares, options to purchase
1,474,162 shares of common stock were outstanding under the 1996 plan and
1,285,537 shares had been issued upon exercise of previously granted options.
We have not granted any stock purchase rights under the 1996 plan.
The 1996 plan must be administered by our board of directors or a committee
of our board of directors. As of April 2000, the 1996 plan is administered by
our compensation committee. The administrator's powers include the ability to
determine the terms of the awards granted, including the exercise or purchase
price, the times when options or stock purchase rights may be exercised, any
vesting acceleration and any restrictions or limitations. The administrator
also has the power to select the individuals to whom awards will be granted.
The option exercise price of incentive stock options may not be less than 100%
of the fair market value of our common stock on the date of grant. The
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<PAGE>
option exercise price of nonstatutory stock options may not be less than 85% of
the fair market value of our common stock on the date the option is granted. In
the case of an incentive stock option granted to a person who at the time of
the grant owns stock representing more than 10% of the total combined voting
power of all classes of our stock, the option exercise price for each share
covered by the option may not be less than 110% of the fair market value of a
share of our common stock on the date of grant of the option. The administrator
determines the term of an option in the specific option agreement; provided,
however, the term may not be longer than ten years. Furthermore, the maximum
term for an option granted to an optionee is five years, if at the time of the
grant the optionee owns more than 10% of the total combined voting power of all
classes of our stock. No option may be exercised by any person after its term
expires.
The 1996 plan provides that in the event of a merger or consolidation in
which we are not the surviving corporation, the sale of all or substantially
all of our assets or any other transaction which qualifies as a "corporate
transaction" under Section 425(a) of the Internal Revenue Code wherein our
stockholders give up all or substantially all of their equity interest in us,
the vesting of all options then outstanding under the 1996 plan will be
accelerated.
1999 Stock Plan
Our 1999 stock plan was initially adopted by the board of directors and
approved by the stockholders in February 26, 1999. A total of 6,290,300 shares
of common stock have been reserved for issuance under the 1999 plan. The 1999
plan provides for grants to our employees of incentive stock options and for
grants of nonstatutory stock options and stock purchase rights to our employees
and consultants, including non-employee directors. The 1999 plan must be
administered by our board of directors or a committee of our board of
directors. As of April 2000, the 1999 plan is administered by our compensation
committee.
The option exercise price of incentive stock options may not be less than
100% of the fair market value of our common stock on the date of grant. The
option exercise price of nonstatutory stock options may not be less than 85% of
the fair market value of our common stock on the date the option is granted. In
the case of an incentive stock option granted to a person who at the time of
the grant owns stock representing more than 10% of the total combined voting
power of all classes of our stock, the option exercise price for each share
covered by the option may not be less than 110% of the fair market value of a
share of our common stock on the date of grant of the option. The term of an
option is determined by the administrator in the specific option agreement;
provided, however, the term may not be longer than ten years. Furthermore, the
maximum term for an option granted to an optionee is five years if at the time
of the grant the optionee owns more than 10% of the total combined voting power
of all classes of our stock. No option may be exercised by any person after its
term expires.
In the event of a sale of all or substantially all of our assets, or our
merger, consolidation or other capital reorganization, each option and stock
purchase right under the 1999 plan must be assumed or an equivalent option
substituted by the successor corporation unless the successor corporation does
not so agree. In that case, the options and rights will terminate upon the
consummation of the merger or sale of assets; provided, however, that in the
event of a transaction described above that is also a change of control, an
additional 25% of the shares underlying each outstanding option or stock
purchase right will vest and become exercisable upon the consummation of a
change of control. Some of the stock option agreements under our 1999 plan
provide that 100% of the shares underlying their outstanding options will vest
and become exercisable upon a change of
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<PAGE>
control. The 1999 plan defines change of control to mean a sale of all or
substantially all of our assets, or our merger or consolidation with or into
another corporation, other than a merger or consolidation in which the holders
of more than 50% of the shares of our capital stock outstanding immediately
prior to the transaction continue to hold (either by the voting securities
remaining outstanding or by their being converted into voting securities of the
surviving entity) more than 50% of the total voting power represented by our
voting securities, or the voting securities of the surviving entity,
outstanding immediately after the transaction.
On , 2000, our board of directors amended and restated our 1999 plan.
This amendment and restatement was approved by our stockholders on ,
2000. We have reserved a total of shares of common stock for issuance
under our 1999 plan. However, during the term of the plan, on each anniversary
of the date of , 2000, and each anniversary thereafter, the shares of
common stock authorized for issuance under the plan shall be increased by .
As of March 31, 2000, options to purchase 2,774,909 shares of common stock were
outstanding under the 1999 plan and we had issued 2,100,029 shares of common
stock under the 1999 plan and 143,102 shares of common stock upon exercise of
previously granted options.
As amended, the 1999 plan provides that each director who is not our employee
will receive automatic grants of stock options under the plan. At each
subsequent annual stockholder meeting after this offering at which they are re-
elected, each director who is not our employee will receive options to purchase
12,000 shares of our common stock which vest over three years, at the rate of
1/8th of the shares subject to the options on each quarterly anniversary of the
date of grant, commencing with the beginning of the ninth quarterly anniversary
of the date of grant. Each automatic grant will have an exercise price per
share equal to the fair market value per share of our common stock on the grant
date and will have a term of ten years, subject to earlier termination
following the optionee's cessation of board service.
Employee Stock Purchase Plan
Our employee stock purchase plan was adopted by the board of directors in
, 2000 and approved by the stockholders in , 2000. A total of
shares of common stock have been reserved for issuance under the plan. As of
the date of this prospectus, no shares have been issued under the plan. The
employee stock purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, contains consecutive six-month offering periods. The
offering periods generally start on May 1 and November 1 of each year, except
for the first offering period, which will commence on the effective date of
this offering and will end on , 2000.
Employees are eligible to participate if they are customarily employed by us
or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, no employee may be granted a right
to purchase stock under the purchase plan (1) to the extent that, immediately
after the grant of the right to purchase stock, the employee would own, or be
treated as owning, stock possessing 5% or more of the total combined voting
power or value of all classes of our capital stock or (2) to the extent that
his or her rights to purchase stock under all of our employee stock purchase
plans accrues at a rate which exceed $25,000 worth of stock for each calendar
year. The amended plan permits participants to purchase common stock through
payroll deductions of up to 15% of the participant's base compensation. Base
compensation is defined as the participant's gross base compensation. The
maximum number of shares a participant may purchase with respect to a single
offering period is shares.
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<PAGE>
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each offering period. The price of stock
purchased under the amended plan is 85% of the lesser of the fair market value
of the common stock at the beginning of the offering period or at the end of
the offering period. Participants may end their participation at any time other
than the final ten days of an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination
of employment with us.
Rights to purchase stock granted under the purchase plan are not transferable
by a participant other than by will, the laws of descent and distribution, or
as otherwise provided under the purchase plan. The purchase plan provides that,
in the event of our merger with or into another corporation or a sale of
substantially all of our assets, each outstanding right to purchase stock may
be assumed or substituted for by the successor corporation.
The board of directors has the authority to amend or terminate our employee
stock purchase plan. However, no such action by the board of directors may
adversely affect any outstanding rights to purchase stock under the purchase
plan, except that the board of directors may terminate an offering period on
any exercise date if the board of directors determines that the termination of
the purchase plan is in the best interests of us and our stockholders.
Notwithstanding anything to the contrary, the board of directors may in its
sole discretion amend the purchase plan to the extent necessary and desirable
to avoid unfavorable financial accounting consequences.
Limitation on Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Our bylaws provide that we shall
indemnify each of its directors and officers against expenses, including
attorneys' fees, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding, arising by reason of the
fact that such person is or was our director or officer or serving as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise at our request. We have also entered into agreements to
indemnify our directors and executive officers.
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<PAGE>
RELATED-PARTY TRANSACTIONS
Since January 1, 1999, there has not been, nor is there currently proposed,
any transaction or series of transactions to which we were or are to be a part
in which the amount involved, exceeded or will exceed $60,000 and in which any
director, executive officer, holder of more than 5% of our common stock or any
member of the immediate family of any of the foregoing persons had or will have
a direct or indirect material interest other than compensation agreements and
other arrangements, which are described where required in "Management" and the
transactions described below. We believe each of the transactions described
below was negotiated at arms-length and were on terms as favorable as those
obtained from disinterested third parties.
Preferred Stock
We issued an aggregate of 8,124,538 shares of Series A preferred stock in
private placements in April through August 1998 at a price of $0.87 per share.
Of those shares, we issued an aggregate of 2,147,530 shares in April 1998,
pursuant to the conversion of a portion of the outstanding principal of
convertible subordinated promissory notes which we issued on various dates from
July 1997 through April 1998. The purchasers of our Series A preferred stock
included, among others, the following holders of 5% or more of our stock,
directors, and entities associated with directors:
<TABLE>
<CAPTION>
Shares of
Series A
Purchaser Preferred Stock
--------- ---------------
<S> <C>
Bluestem Capital Partners II, L.P. .......................... 712,117
Marc A. Butlein.............................................. 46,455
Edgewater Private Equity Fund II, L.P. ...................... 3,467,061
Vision Capital L.P. ......................................... 1,261,680
</TABLE>
Mr. Allison, one of our directors, is a limited partner of Edgewater Private
Equity Fund Management, L.P., the general partner of Edgewater Private Equity
Fund II, L.P. Mr. Tellefsen, one of our directors, is a partner of Vision
Trans-Atlantic Limited, which is the general partner of Vision Partners L.P.,
which is the general partner of Vision Capital L.P. and Vision Extension L.P.
In April 1998, we issued an aggregate of 2,964,890 shares of common stock
pursuant to the conversion of an aggregate of $296,489.00 in convertible
subordinated promissory notes, which we issued on various dates from July 1997
through April 1998. The purchasers of our common stock included, among others,
the following holders of 5% or more of our stock, directors and entities
associated with directors:
<TABLE>
<CAPTION>
Shares of
Purchaser Common Stock
--------- ------------
<S> <C>
Marc A. Butlein................................................. 100,000
Edgewater Private Equity Fund II, L.P. ......................... 200,000
Vision Capital L.P. ............................................ 750,000
</TABLE>
In March 1999, we sold an aggregate of 2,194,666 shares of Series B preferred
stock at a price of $1.284 per share. The purchasers of our preferred stock
included, among others, the following holders of 5% or more of our stock and
entities associated with directors:
<TABLE>
<CAPTION>
Shares of
Series B
Purchaser Preferred Stock
--------- ---------------
<S> <C>
Bluestem Capital Partners II, L.P. .......................... 584,113
Edgewater Private Equity Fund II, L.P. ...................... 83,525
Vision Capital L.P. ......................................... 351,102
</TABLE>
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<PAGE>
In September 1999, we sold an aggregate of 2,898,706 shares of Series C
preferred stock at a price of $1.58 per share. The purchasers of our preferred
stock included, among others, the following holders of 5% or more of our common
stock and entities associated with directors:
<TABLE>
<CAPTION>
Shares of
Series C
Purchaser Preferred Stock
--------- ---------------
<S> <C>
Bluestem Capital Partners II, L.P. .......................... 749,683
Vision Capital L.P. ......................................... 249,458
</TABLE>
In October 1999, November 1999, December 1999 and January 2000, we sold an
aggregate of 15,170,333 shares of Series D preferred stock at a price of $2.14
per share. The purchasers of our preferred stock included, among others, the
following holders of 5% or more of our stock, directors, and entities
associated with directors:
<TABLE>
<CAPTION>
Shares of
Series D
Purchaser Preferred Stock
--------- ---------------
<S> <C>
Scott N. Flanders.......................................... 186,915
Seligman Communications and Information Fund, Inc. ........ 467,290
Seligman Investment Opportunities (Master) Fund-NTV
Portfolio................................................. 532,710
Seligman New Technologies Fund, Inc. ...................... 2,271,028
Vision Capital L.P. ....................................... 281,162
Vision Extension L.P. ..................................... 653,417
</TABLE>
Stock Options and Stock Issuances
From time to time since our inception in 1996, we have granted options to
purchase shares of our common stock, at exercise prices reflecting the fair
market value per share of our common stock on the date of grant as determined
by our board of directors, to the individuals that currently serve as our
executive officers and directors. On December 15, 1996, we granted Mr. Tejada
options to purchase 500,000 shares of common stock at a exercise price of $.10
per share. On August 28, 1997, we granted Mr. Tellefsen options to purchase
10,000 shares of common stock at a exercise price of $.10 per share. On March
27, 1998, we granted Messrs. Putterman, Ainsbury and Tejada options to purchase
250,000, 250,000 and 125,000 shares of common stock, respectively, at exercise
prices of $.10 per share. On May 18, 1998, we granted Mr. Elder options to
purchase 85,000 shares of common stock at an exercise price of $.10 per share.
On February 12, 1998, we granted Mr. Butlein options to purchase 225,000 shares
of common stock at an exercise price of $.10 per share. On August 17, 1999, we
granted Mr. Elder options to purchase 60,000 shares of common stock at an
exercise price of $.80 per share. On March 11, 2000 we granted Messrs. Allison,
Butlein, Tellefsen and Elder options to purchase 24,000, 24,000, 24,000 and
25,000 shares, respectively, of common stock at an exercise price of $2.50 per
share. The options granted to Messrs. Allison, Butlein and Tellefsen are fully
vested.
On November 13, 1996, we entered into stock purchase agreements with Mr.
Putterman and Mr. Ainsbury, pursuant to which we sold each of them 2,000,000
shares of common stock at a purchase price of $.025 per share. We have no
repurchase rights with respect to these shares.
On November 1, 1999, we issued 1,765,051 shares of our common stock at $.80
per share to Mr. Bennett pursuant to the terms of a restricted stock purchase
agreement under our 1999 stock plan. The shares are subject to repurchase by us
at the original purchase price in the event of the voluntary resignation by Mr.
Bennett from his employment or consulting relationship with us or the
termination by us for cause of Mr. Bennett's employment or consulting
relationship. This repurchase
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<PAGE>
right lapses at the rate of 1/48th per month beginning on December 1, 1999.
Certain events will trigger the release of all of the shares from our
repurchase right.
Indemnification Agreements
We have entered into indemnification agreements with each of our directors
and officers. These indemnification agreements require us to indemnify our
directors and officers to the fullest extent permitted by Delaware law. See
"Description of Capital Stock--Limitation on Directors' Liability and
Indemnification."
Loans to Executive Officers
On November 1, 1999, we loaned Mr. Bennett $1,412,040.80 pursuant to the
terms of a five-year promissory note whereby Mr. Bennett promised to pay us the
aggregate principal sum of $1,412,040.80, together with interest on the sum of
the outstanding principal balance, plus accrued but unpaid interest, at a rate
of 6.08% per annum compounded monthly. The promissory note is secured by a
pledge of 1,765,051 shares of our common stock owned by Mr. Bennett pursuant to
the pledge and security agreement.
On January 28, 2000, we loaned Mr. Ainsbury $100,000 pursuant to the terms of
a three-year non-recourse promissory note whereby Mr. Ainsbury promised to pay
us the aggregate principal sum of $100,000, together with interest on the sum
of the outstanding principal balance, plus accrued but unpaid interest, at
5.73% per annum, compounded annually. The promissory note is secured by a
pledge of 63,292 shares of our common stock owned by Mr. Ainsbury pursuant to
the terms of a pledge and security agreement.
On January 28, 2000, we loaned Mr. Tejada $100,000 pursuant to the terms of a
three-year non-recourse promissory note whereby Mr. Tejada promised to pay us
the aggregate principal sum of $100,000, together with interest on the sum of
the outstanding principal balance, plus accrued but unpaid interest, at 5.73%
per annum, compounded annually. The promissory note is secured by a pledge of
63,292 shares of our common stock owned by Mr. Tejada pursuant to the terms of
a pledge and security agreement.
On October 6, 1999, we loaned Mr. Putterman $500,000 pursuant to the terms of
a three-year non-recourse promissory note whereby Mr. Putterman promised to pay
us the aggregate principal sum of $500,000, together with interest on the sum
of the outstanding principal balance, plus accrued but unpaid interest, at a
rate of 5.41% per annum compounded monthly. The promissory note is secured by a
pledge of 316,455 shares of our common stock owned by Mr. Putterman pursuant to
the terms of a pledge and security agreement.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table provides certain information as of March 31, 2000,
regarding the beneficial ownership of our common stock assuming the exercise of
all warrants to purchase preferred stock and the conversion of all outstanding
preferred stock into common stock upon the completion of this offering by:
. each person known by us to own beneficially more than five percent, in
the aggregate, of the outstanding shares of our common stock, assuming
the conversion of all outstanding preferred stock into common stock;
. each of our directors and our executive officers named in the "Summary
Compensation Table" who hold our securities; and
. all executive officers and directors as group.
The address for all executive officers and directors is c/o EoExchange, Inc.,
282 2nd Street, Suite 400, San Francisco, California 94105. Except as indicated
by footnote, we believe that the persons named in the table below, on the
information furnished by them, have sole voting and investment power for all
shares shown as beneficially owned by them.
Percent of beneficial ownership is based upon 39,196,245 shares of common
stock outstanding prior to this offering and shares of common stock outstanding
after this offering and also includes shares issuable upon exercise of
outstanding options that are exercisable within 60 days of March 31, 2000, as
described in the footnotes below. Percentage of ownership is calculated
pursuant to the rules of the Securities and Exchange Commission. In computing
the number of shares beneficially owned by a person and the percent ownership
of that person, shares of common stock subject to options held by that person
that are currently exercisable or will become exercisable within 60 days after
March 31, 2000 are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing percent ownership by any other person.
54
<PAGE>
<TABLE>
<CAPTION>
Percent Ownership
Shares --------------------
Beneficially Before the After the
Name Owned Offering Offering
---- ------------ ---------- ---------
<S> <C> <C> <C>
Edgewater Private Equity Fund II, L.P. (1)... 3,774,568 9.6%
900 North Michigan Avenue, 14th Floor
Chicago, IL 60611
Vision Partners L.P. (2)..................... 3,577,694 9.1%
3000 Sand Hill Road, Bldg. 4, Suite 230
Menlo Park, CA 94025
J. & W. Seligman & Co. Incorporated (3)...... 3,271,028 8.3%
100 Park Avenue, 7th Floor
New York, NY
Bluestem Capital Partners II, L.P. .......... 2,045,913 5.2%
Bluestem Capital Company
122 S. Phillips Ave., Suite 300
Sioux Falls, SD 57014
Daniel Putterman (4)......................... 4,120,416 10.5%
Robert G. Allison (1)........................ 3,774,568 9.6%
Dag A. Tellefsen (2)......................... 3,577,694 9.1%
Robert D. Ainsbury (5)....................... 2,120,416 5.4%
Douglas S. Bennett........................... 1,765,051 4.5%
Wilfredo M. Tejada (6)....................... 494,791 1.3%
Marc A. Butlein (7).......................... 332,173 *
Scott N. Flanders............................ 186,915 *
Mark H. Elder (8)............................ 59,063 *
</TABLE>
- --------
* Less than 1%.
(1) Consists of 3,750,586 shares held by Edgewater Private Equity Fund II, L.P.
and options to purchase 24,000 shares of common stock held by Mr. Allison
and exercisable within 60 days of this offering that he has agreed to
transfer to Edgewater Private Equity Fund II, L.P. upon exercise. Mr.
Allison, a partner of Edgewater Private Equity Fund Management, L.P., the
general partner of Edgewater Private Equity Fund II, L.P., may be deemed to
have voting and investment power over the shares held by Edgewater Private
Equity Fund II, L.P. Mr. Allison disclaims beneficial interest in such
shares, except to the extent of his interest in Edgewater Private Equity
Fund Management, L.P.
(2) Consists of 3,546,819 shares held by Vision Capital L.P. and Vision
Extension L.P. and options to purchase 30,875 shares held by Mr. Tellefsen
and exercisable within 60 days of this offering that he has agreed to
transfer to Vision Capital L.P. upon exercise. Mr. Tellefsen is a partner
of Vision Partners L.P., Vision Trans-Atlantic Limited and Vision Extension
L.P. Vision Trans-Atlantic Limited is the general partner of Vision
Partners L.P., which is the general partner of Vision Capital L.P. and
Vision Extension L.P. Mr. Tellefsen disclaims beneficial interest in such
shares, except to the extent of his interests in Vision Partners L.P.,
Vision Trans-Atlantic Limited and Vision Extension L.P.
(3) Consists of 467,290 shares held by Seligman Communications and Information
Fund, Inc., 532,710 shares held by Seligman Investment Opportunities
(Master) Fund-NTV Portfolio and 2,271,028 shares held by Seligman New
Technologies Fund, Inc. J. & W. Seligman & Co. Incorporated is the
investment manager for Seligman Communications and Information Fund, Inc.,
Seligman Investment Opportunities (Master) Fund-NTV Portfolio and Seligman
New Technologies Fund, Inc., and has the power to vote and dispose of the
shares.
(4) Includes options to purchase 135,416 shares held by Mr. Putterman and
exercisable within 60 days of this offering and 1,985,000 shares owned of
record by Mr. Ainsbury that, pursuant to an irrevocable proxy, Mr.
Putterman has the power to vote. Mr. Ainsbury has retained investment power
with respect to the shares.
(5) Includes options to purchase 135,416 shares held by Mr. Ainsbury and
exercisable within 60 days of this offering.
(6) Includes options to purchase 79,791 shares held by Mr. Tejada and
exercisable within 60 days of this offering.
(7) Includes options to purchase 185,718 shares held by Mr. Butlein and
exercisable within 60 days of this offering.
(8) Consists of options to purchase 59,063 shares held by Mr. Elder and
exercisable within 60 days of this offering.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our authorized capital stock will
consist of shares of common stock and shares of preferred stock. As
of , 2000, there were holders of record of common stock and
holders of record of preferred stock. The common stock and the preferred stock
each have a par value of $0.01 per share. As of March 31, 2000, there were
10,808,002 shares of common stock outstanding and 28,388,243 shares of
preferred stock outstanding, 8,124,538 of which are Series A preferred stock,
2,194,666 of which are Series B preferred stock, 2,898,706 of which are Series
C preferred stock and 15,170,333 of which are Series D preferred stock. As of
March 31, 2000, options to purchase 4,249,071 shares of common stock, a warrant
to purchase 25,862 shares of our Series A preferred stock and warrants to
purchase 427,070 shares of our Series D preferred stock were outstanding.
Concurrently with the completion of this offering, each outstanding share of
our preferred stock will be exchanged for and converted into one share of our
common stock. The following description of rights and preferences assumes this
conversion, including upon the exercise of the outstanding warrants described
above. Upon the closing of this offering, any portion of the warrants to
purchase Series A preferred stock and Series D preferred stock will be
exercisable for the same number of shares of common stock.
The following summary describes the material terms of our capital stock.
However, it does not purport to be complete and is qualified in its entirety by
reference to the actual terms of the capital stock contained in our certificate
of incorporation, bylaws and other agreements referenced below and by the
provisions of applicable Delaware law.
Common Stock
Holders of common stock are entitled to one vote for each share they hold as
prescribed by law. Subject to preferential rights with respect to any
outstanding preferred stock, holders of common stock are entitled to receive
ratably such dividends as may be declared by the board of directors out of
funds legally available therefor. See "Dividend Policy." In the event of our
liquidation, dissolution or winding up, our acquisition by another entity or
sale of all or substantially all of our assets, the holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and liquidation preferences of any outstanding shares of preferred stock.
Holders of common stock have no right to convert their common stock into any
other securities, nor do they have preemptive or other subscription rights. All
outstanding shares of common stock are fully paid and nonassessable. The rights
and preferences of the holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock that we may designate in the future.
Preferred Stock
Upon the completion of this offering, all outstanding shares of Series A, B,
C and D preferred stock will automatically convert on a one-for-one basis into
common stock.
Upon the closing of this offering, we will be authorized to issue
shares of preferred stock, par value $0.01 per share, which may be issued from
time to time in one or more series. Following the closing of this offering, the
board of directors will be authorized to fix or alter from time to time the
designation, powers, preferences and rights granted upon, and the
qualifications, limitations or restrictions of, any wholly unissued series of
preferred stock, which may be greater than the rights of the common stock, and
to establish from time to time the number of shares
56
<PAGE>
constituting any such series. The board of directors will also be authorized to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of the
series then outstanding.
We believe that the board of directors' ability to issue preferred stock on
such a wide variety of terms will enable the preferred stock to be used for
important corporate purposes, such as financing acquisitions or raising
additional capital. However, it is not possible to state the actual effect of
the issuance of any shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the specific rights of the
holders of this preferred stock. The effects might include, among other things:
. restricting dividends on the common stock;
. diluting the voting power of the common stock;
. impairing the liquidation rights of the common stock; or
. delaying or preventing a change in control without further action by the
stockholders.
Registration Rights
Pursuant to the third amended and restated investors' rights agreement dated
October 18, 1999, holders of shares of common stock issued or issuable upon
conversion of Series A preferred stock, Series B preferred stock, Series C
preferred stock, and Series D preferred stock, including upon exercise of the
outstanding warrants to purchase our Series D preferred stock, are entitled to
the registration rights described below with respect to those shares of common
stock. Upon the completion of this offering, all shares of our outstanding
preferred stock will be automatically converted into an equal number of shares
of common stock.
Piggy-Back Registration. If we propose to register any of our or a holder's
common stock under the Securities Act solely for cash, other than a
registration on Form S-4, Form S-8 or any successors thereto, a registration in
which the only stock being registered is common stock issuable upon conversion
of debt securities which are also being registered, or any registration on any
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
registrable securities, such holders are entitled to notice of the proposed
registration and the opportunity to include their registrable securities in the
registration. If the registration involves an underwriting, the underwriters
have the right to limit shares proposed to be included in the registration and
underwriting by 20% of the total number of securities included in the
registration and underwriting, unless such offering is our initial public
offering in which case such holders may be excluded if no other stockholders'
securities are included.
Demand Registration. At any time after the earlier of six months after the
effective date of the first registration statement for a public offering of our
common stock or April 20, 2002, if the holders of a majority of such
registrable securities request that we file a registration statement, we are
required to use our best efforts to cause those shares to be registered,
subject to certain conditions and limitations. Such holders are each entitled
to two such demand registrations. If, in an underwritten public offering, the
underwriters require a limitation on the number of securities to be included in
the registration, then the number of shares of registrable securities that may
be included in the registration and underwriting will be allocated among
holders of registration rights in proportion, as nearly as practicable, to the
respective amounts of registrable securities held by the holders of
registration rights at the time of filing the registration statement.
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<PAGE>
Registration on Form S-3. Such holders have the right to require us to
register all or a portion of their registrable securities on Form S-3 when this
form becomes available to us, provided that;
. the aggregate proceeds of such registration are expected to exceed
$500,000;
. we are not required to effect more than two such registrations in any
twelve-month period;
. we are not required to qualify to do business or to execute a general
consent to service of process in effecting such registration,
qualification or compliance; or
. it is not during the period ending 180 days after the effective date of a
registration statement subject to our obligations described above under
"Piggy-Back Registration."
In addition, if our president provides the rights holders with a certificate
stating that, in the good faith judgment of our board of directors, it would be
seriously detrimental to us and our stockholders for a Form S-3 registration to
be effected at that time, we have the right to defer the filing of the Form S-3
registration statement for a period of up to 120 days after receipt of the
request for registration. We cannot utilize this right more than one time in
any twelve month period.
Termination of Registration Rights. The registration rights terminate as to
any such holder five years following the closing of this offering or such time
as Rule 144 or another similar exemption under the Securities Act is available
for the sale of all of such holder's shares during a three month period without
registration.
Certificate of Incorporation, Bylaws and Statutory Provisions Affecting
Stockholders
Charter Provisions. Our certificate of incorporation and bylaws include the
following provisions that will become effective upon the closing of this
offering and that may have the effect of deterring hostile takeovers or
delaying or preventing changes in control or management:
. that all stockholder actions upon completion of this offering must be
effected at a duly called meeting of holders and not by consent in
writing;
. that special meetings of the stockholders may be called only by the board
of directors, or by the chairman of the board, or by the chief executive
officer or the president or vice president of the corporation;
. that our board of directors can issue up to shares of preferred
stock, as described under "--Preferred Stock" above;
. that there will be three classes of directors, approximately one-third of
whom would be elected each year, thus requiring any potential acquiror to
successfully complete two proxy contests in order to take control of the
board of directors;
. that advance notice must be given regarding the nomination of candidates
for election as directors and the presentation of stockholder proposals;
and
. that vacancies on the board of directors may be filled only by a majority
vote of the directors then in office.
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<PAGE>
Statutory Provisions. We are a Delaware corporation and are subject to
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 time
that the person became an interested stockholder, unless:
. before such time the board of directors of the corporation approved
either the business combination or the transaction in which the person
became an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested person owns at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding shares owned by persons who are
directors and also officers of the corporation and by certain employee
stock plans; or
. at or after such time the business combination is approved by the board
of directors of the corporation and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66-2/3% of the outstanding voting stock of the
corporation that is not owned by the interested stockholder.
A "business combination" generally includes mergers, asset sales and similar
transactions between the corporation and the interested stockholder, and other
transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns 15% or more of the corporation's outstanding voting stock or
who is an affiliate or associate of the corporation and, together with his or
her affiliates and associates, has owned 15% or more of the corporation's
outstanding voting stock within three years.
The provisions of our certificate of incorporation, bylaws and the Delaware
General Corporation Law described above would make more difficult or discourage
a proxy contest or acquisition of control by a holder of a substantial block of
our stock or the removal of the incumbent board of directors. Such provisions
could also have the effect of discouraging an outsider from making a tender
offer or otherwise attempting to obtain control of us, even though such an
attempt might be beneficial to us and our stockholders.
Limitation of Director and Officers Liability. Our certificate of
incorporation limits the liability of our directors and officers, in their
capacity as agents to us to the fullest extent permitted by Delaware law.
Specifically, our directors and officers will not be personally liable for
expenses (including attorneys' fees), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding,
arising by reason that such person is or was an agent of us, except for
liability:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions which involve intentional misconduct or a knowing
violation of law;
. under Section 174 of the Delaware General Corporation Law, which relates
to unlawful payments dividends or unlawful stock repurchases or
redemptions; or
. for any transaction from which the director derived an improper personal
benefit.
Indemnification Arrangements. Our certificate of incorporation provides that
our directors and officers shall be indemnified and provide for the advancement
to them of expenses in connection with actual or threatened proceedings and
claims arising out of their status as directors and officers to the fullest
extent permitted by the Delaware General Corporation Law. We expect to enter
into
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<PAGE>
indemnification agreements with each of our directors and officers that will
provide them with rights to indemnification and expense advancement to the
fullest extent permitted under the Delaware General Corporation Law.
We believe that these provisions are necessary to attract and retain
qualified directors and officers. We have also entered into agreements to
indemnify our directors and officers.
Transfer Agent and Registrar
Upon the closing of this offering, will be the transfer agent and
registrar for the common stock.
Listing
We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol "EOEX."
60
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have shares of common stock
outstanding or shares if the underwriters exercise their over-allotment
option in full. The shares sold in the offering or shares if the
underwriters exercise their over-allotment option in full will be freely
tradable without restriction under the Securities Act, except for any such
shares held at any time by an "affiliate" of EoExchange, as this term is
defined under Rule 144 under the Securities Act.
We issued and sold the remaining 39,196,245 shares in private transactions.
These shares are "restricted securities" as defined in Rule 144 under the
Securities Act and may be publicly sold only if registered under the Securities
Act or sold in accordance with an applicable exemption from registration, such
as Rule 144. In general, under Rule 144, as currently in effect, a person who
has beneficially owned shares for at least one year, including an "affiliate,"
as that term is defined in Rule 144, is entitled to sell, within any three-
month period, a number of "restricted" shares that does not exceed the greater
of one percent of the then outstanding shares of common stock or the average
weekly trading volume during the four calendar weeks preceding the sale. Sales
under Rule 144 are subject to manner of sale limitations, notice requirements
and the availability of current public information about us. Rule 144(k)
provides that a person who is not deemed an "affiliate" and who has
beneficially owned shares for at least two years is entitled to sell those
shares at any time under Rule 144 without regard to the limitations described
above. Of the 39,196,245 remaining shares outstanding, affiliates beneficially
own approximately 16.6% of such shares. Of the shares owned by non-affiliates,
230,000 shares have been held by such non-affiliates in excess of two years.
Any employee, officer, director, advisor or consultant (who is a natural
person) of ours who purchased his or her shares pursuant to a written
compensatory plan or contract is entitled to rely on the resale provisions of
Rule 701, which permits non-affiliates to sell their Rule 701 shares without
having to comply with the public information, holding period, volume limitation
or notice provisions of Rule 144 and permits affiliates to sell their Rule 701
shares without having to comply with Rule 144's holding period restrictions, in
each case commencing 90 days after we become subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934.
As of March 31, 2000, there were outstanding stock options to purchase an
aggregate of 4,249,071 shares of common stock. Following the offering, we
intend to file one or more registration statements on Form S-8 to register
shares of common stock reserved for issuance under the 1996 stock option plan,
the 1999 Stock Plan and the employee stock purchase plan, thus permitting the
resale of those shares by nonaffiliates in the public market without
restriction, subject to the satisfaction of applicable exercisability periods
and the agreements referred to below.
We, our officers and directors and certain stockholders and optionholders
have agreed subject to certain exceptions, not to sell or otherwise dispose of
any shares of our common stock for a period of 180 days from the date of this
prospectus without the prior written consent of FleetBoston Robertson Stephens
Inc. FleetBoston Robertson Stephens Inc., however, may in its sole discretion,
at any time without notice, release all or any portion of the shares subject to
lock-up agreements. The lock-up agreements by persons other than us cover an
aggregate of shares. Upon expiration of the 180-day lock-up period,
shares will be eligible for sale under Rule 144. additional shares will
be eligible for sale on January 21, 2001.
Prior to this offering, there has been no public market for the common stock.
We are unable to estimate the number of shares that may be sold in the future
by our existing stockholders or the effect, if any, that sales of shares by
such stockholders will have on the market price of the common stock prevailing
from time to time. Sales of substantial amounts of common stock by existing
stockholders could adversely affect prevailing market prices.
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<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Chase Securities Inc. and William Blair &
Company, L.L.C., have severally agreed with us, subject to the terms and
conditions of the underwriting agreement, to purchase from us the number of
shares of common stock set forth below opposite their respective names. The
underwriters are committed to purchase and pay for all shares if any are
purchased.
<TABLE>
<CAPTION>
Number
of
Underwriter Shares
----------- ------
<S> <C>
FleetBoston Robertson Stephens Inc. ..................................
Chase Securities Inc. ................................................
William Blair & Company, L.L.C. ......................................
----
Total...............................................................
====
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price on the
cover page of this prospectus. The underwriters may sell shares to dealers at
that price less a concession of not in excess of $ per share, of which $
may be reallowed to other dealers. After this offering, the public offering
price, concession and reallowance to dealers may be reduced by the
representatives. No such reduction shall change the amount of proceeds to be
received by us as set forth on the cover page of this prospectus. The common
stock is offered by the underwriters or the terms discussed in this prospectus,
subject to receipt and acceptance by them and subject to their right to reject
any order.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
No Public Market. Prior to this offering, there has been no public market for
the common stock. Consequently, the public offering price for the common stock
offered by this prospectus has been determined through negotiations among the
representatives and us. Among the factors considered in such negotiations were
prevailing market conditions, our financial information, market valuations of
other companies that we and the representatives believe to be comparable to us,
estimates of our business potential, and the present state of our development.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock, to cover over-
allotments, if any, at the public offering price less the underwriting discount
set forth on the cover page of this prospectus. If the underwriters exercise
their over-allotment option to purchase any of the additional shares of
common stock, the underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof as the number
of shares to be purchased by each of them bears to the total number of shares
of common stock offered in this offering. If purchased, these additional shares
will be sold by the underwriters on the same terms as those on which the shares
offered hereby are being sold. We will be obligated to sell shares to the
underwriters to the extent the over-allotment option is
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<PAGE>
exercised. The underwriters may exercise the over-allotment option only to
cover over-allotments made in connection with the sale of the shares of common
stock offered in this offering.
The following table summarizes the compensation to be paid to the
underwriters by us:
<TABLE>
<CAPTION>
Total
-----------------------------
Per Without With
Share Over-allotment Over-allotment
----- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
payable by us........................ $ $ $
</TABLE>
Expenses. We estimate expenses payable by us in connection with this
offering, other than the underwriting discounts and commissions referred to
above, will be approximately $ .
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including
liabilities under the Securities Act, and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements. Each of our executive officers and directors and
substantially all of our other stockholders have agreed, during the period of
180 days after the effective date of this prospectus, subject to specified
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of common
stock, or any securities convertible into or exchangeable for shares of common
stock owned as of the date of this prospectus or thereafter acquired directly
by those holders or with respect to which they have the power of disposition,
without the prior written consent of FleetBoston Robertson Stephens Inc.
However, FleetBoston Robertson Stephens Inc. may, in its sole discretion and at
any time or from time to time, without notice, release all or any portion of
the securities subject to lock-up agreements. There are no existing agreements
between the representatives and any of our stockholders who have executed a
lock-up agreement providing consent to the sale of shares prior to the
expiration of the lock-up period.
In addition, we have agreed that during the lock-up period we will not,
without the prior consent of FleetBoston Robertson Stephens Inc., subject to
certain exceptions, consent to the disposition of any shares held by
stockholders subject to lock-up agreements prior to the expiration of the lock-
up period, or issue, sell, contact to sell, or otherwise dispose of, any shares
of common stock, any options or warrants to purchase any shares of common stock
or any securities convertible into, exercisable for or exchangeable for shares
of common stock other than our sale of shares in this offering, the issuance of
our common stock upon the exercise of outstanding options or warrants, and the
issuance of options under existing stock option and incentive plans provided
that those options do not vest prior to the expiration of the lock-up period.
Directed Share Program. The underwriters have reserved up to 7.5% of the
common stock to be issued by us and offered for sale in this offering, at the
initial public offering price, to directors, officers, employees, business
associates and persons otherwise connected to us. The number of shares of
common stock available for sale to the general public will be reduced to the
extent these individuals purchase reserved shares. Any reserved shares which
are not purchased will be offered by the underwriters to the general public on
the same basis as the other shares offered in this offering.
Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Securities Act of 1933, some persons participating in
the offering may engage in transactions,
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<PAGE>
including stabilizing bids, syndicate covering transactions or the imposition
of penalty bids, that may have the effect of stabilizing or maintaining the
market price of the shares of common stock at a level above that which might
otherwise prevail in the open market. A "stabilizing bid" is a bid for or the
purchase of shares of common stock on behalf of the underwriters for the
purpose of fixing or maintaining the price of common stock. A "syndicate
covering transaction" is the bid for or purchase of common stock on behalf of
the common stock. A "syndicate covering transaction" is the bid for or purchase
of common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with the offering. A "penalty bid"
is an arrangement permitting the representatives to reclaim the selling
concession otherwise accruing to an underwriter or syndicate member in
connection with the offering if the common stock originally sold by such
underwriter or syndicate member purchased by the representatives in a syndicate
covering transaction and has therefore not been effectively placed by such
underwriter or syndicate member. The representatives have advised us that such
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the common stock being offered hereby will be passed upon for
us by Latham & Watkins, Menlo Park, California. Certain legal matters will be
passed upon for the underwriters by Brobeck, Phlegler & Harrison LLP, San
Francisco, California. Attorneys of Latham & Watkins beneficially own an
aggregate of 15,823 shares of our stock and a partner of Latham & Watkins
serves as our secretary.
EXPERTS
The consolidated financial statements of EoExchange, Inc. as of December 31,
1998 and 1999, for the years ended December 31, 1997, 1998 and 1999, and the
financial statements of InGenius Technologies, Inc. as of October 22, 1999 and
for the period January 1, 1999 to October 22, 1999, included in this prospectus
have been so included in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act relating to the shares of common
stock offered by this prospectus. This prospectus does not contain all the
information provided in the registration statement, portions of which are
omitted as permitted by the rules and regulations of the Securities and
Exchange Commission. For further information about us and the shares offered by
this prospectus, you should refer to the registration statement, including the
exhibits and schedules filed with the registration statement. Statements made
in this prospectus regarding the contents of any contract or any other document
referred to in this prospectus or in the registration statement are not
necessarily complete, and in each instance reference is made to the copy of the
contract or document filed as an exhibit to the registration statement or other
document, each statement being qualified in all respects by that reference. You
may obtain copies of the registration statement of which this prospectus is a
part, together with the exhibits and schedules, upon payment of the fee
prescribed by the Securities and Exchange Commission, or you may examine these
documents without charge at the office of the Securities and Exchange
Commission.
After the offering is completed, we will be subject to the informational
requirements of the Securities Exchange Act of 1934 and will be required to
file annual and quarterly reports, proxy statements and other information with
the Securities and Exchange Commission. You can inspect and copy reports and
other information filed by us with the Securities and Exchange Commission at
the Securities and Exchange Commission's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may also obtain information on the
operation of the public reference room by calling the Securities and Exchange
Commission at 1-800-SEC-0300. The Securities and Exchange Commission also
maintains an Internet website at http://www.sec.gov that contains reports,
proxy and information statements regarding issuers, including us, that file
electronically with the Securities and Exchange Commission.
65
<PAGE>
EoEXCHANGE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EoEXCHANGE, INC.
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999.............. F-3
Consolidated Statements of Operations for each of the three years in the
period ended December 31, 1999........................................... F-4
Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders' Deficit for each of the three years in the period ended
December 31, 1999........................................................ F-5
Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 1999........................................... F-6
Notes to Consolidated Financial Statements................................ F-7
INGENIUS TECHNOLOGIES, INC.
Report of Independent Accountants......................................... F-22
Balance Sheet as of October 22, 1999...................................... F-23
Statement of Operations................................................... F-24
Statement of Changes in Stockholders' Deficit............................. F-25
Statement of Cash Flows................................................... F-26
Notes to Financial Statements............................................. F-27
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Unaudited Pro Forma Combined Statement of Operations...................... F-32
Notes to Unaudited Pro Forma Combined Statement of Operations............. F-33
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of EoExchange, Inc.
(Formerly Aeneid Corporation)
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, redeemable convertible preferred stock
and stockholders' deficit and cash flows present fairly, in all material
respects, the financial position of EoExchange, Inc. (formerly Aeneid
Corporation) at December 31, 1998 and 1999 and the results of its operations
and its 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
March 31, 2000
San Francisco, California
F-2
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
CONSOLIDATED BALANCE SHEETS
As of December 31, 1998 and 1999
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31, Pro Forma
----------------- December 31,
1998 1999 1999
------- -------- ------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 2,980 $ 21,709
Accounts receivable.......................... -- 325
Prepaid expenses and other current assets.... 376 799
------- --------
Total current assets....................... 3,356 22,833
Note receivable ............................... -- 500
Property and equipment, net.................... 423 1,337
Other assets................................... 62 --
Intangibles, net............................... -- 2,619
------- --------
Total assets............................... $ 3,841 $ 27,289
======= ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Capital lease obligations, current........... $ 8 $ 11
Bank borrowings.............................. 750 --
Accounts payable............................. 47 1,410
Accrued liabilities.......................... 356 498
Deferred revenue............................. 251 419
------- --------
Total current liabilities.................. 1,412 2,338
Capital lease obligations, long-term........... 6 13
------- --------
Total liabilities.......................... 1,418 2,351
------- --------
Redeemable convertible preferred stock: $0.01
par value; 30,800,000 shares authorized;
8,124,538 and 25,121,333 shares issued and
outstanding at December 31, 1998 and 1999..... 7,068 58,469 $ --
------- -------- --------
Stockholders' equity (deficit)
Common Stock: par value $0.01; 51,500,000
shares authorized; 7,551,890 and 10,063,374
shares issued and outstanding at
December 31, 1998 and 1999, 35,184,707
shares (unaudited) pro forma................ 76 101 352
Additional paid-in capital................... 379 (11,506) 46,712
Notes receivable from stockholders........... -- (1,461) (1,461)
Unearned stock-based compensation............ -- (4,215) (4,215)
Accumulated deficit.......................... (5,100) (16,450) (16,450)
------- -------- --------
Total stockholders' equity (deficit)....... (4,645) (33,531) $ 24,938
------- -------- ========
Total liabilities, redeemable convertible
preferred stock and stockholders' equity
(deficit)................................. $ 3,841 $ 27,289
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
For each of the three years in the period ended December 31, 1999
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Revenues................................. $ -- $ 49 $ 496
Cost of revenues......................... -- 306 1,599
---------- ---------- -----------
Gross loss........................... -- (257) (1,103)
---------- ---------- -----------
Operating expenses:
Product development (exclusive of non-
cash compensation expense of $1,023).. 536 1,466 1,964
Sales and marketing (exclusive of non-
cash compensation expense of $1,184).. 214 1,158 3,263
General and administrative (exclusive
of non-cash compensation expense of
$845)................................. 389 888 1,715
Depreciation and amortization.......... 10 101 415
Stock-based compensation............... -- -- 3,052
---------- ---------- -----------
Total operating expenses............. 1,149 3,613 10,409
---------- ---------- -----------
Loss from operations..................... (1,149) (3,870) (11,512)
Interest income.......................... -- 70 214
Interest expense......................... (32) (51) (52)
---------- ---------- -----------
Net loss................................. (1,181) (3,851) (11,350)
Dividend paid to preferred stockholders
in connection with beneficial conversion
feature and accretion to redemption
value of preferred stock................ -- -- (21,770)
---------- ---------- -----------
Net loss attributable to common
stockholders............................ $ (1,181) $ (3,851) $ (33,120)
========== ========== ===========
Basic and diluted net loss per common
share................................... $ (0.28) $ (0.62) $ (4.27)
========== ========== ===========
Shares used in calculating basic and
diluted net loss per common share....... 4,213,562 6,187,626 7,748,963
========== ========== ===========
Proforma basic and diluted net loss per
common share (Note 17) (unaudited)...... $ (1.66)
===========
Shares used in calculating proforma basic
and diluted net loss per common share
(unaudited)............................. 19,924,000
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
For each of the three years in the period ended December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Redeemable
Convertible
Preferred Notes
Stock Common Stock Additional Receivable Unsecured Total
-------------- ------------- paid-in from Stock-based Accumulated Stockholders'
Shares Amount Shares Amount Capital Shareholders Compensation Deficit Deficit
------ ------- ------ ------ ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock.................. -- $ -- 4,230 $ 42 $ 81 $ -- $ -- $ -- $ 123
Net loss................ (1,181) (1,181)
------ ------- ------ ---- --------- ------- ------- -------- --------
Balance at December 31,
1997................... 4,230 42 81 -- -- (1,181) (1,058)
Issuance of common
stock.................. 2,965 30 266 296
Exercise of common stock
options................ 357 4 32 36
Issuance of preferred
stock--Series A........ 8,125 7,000 --
Accretion on preferred
stock--Series A........ 68 (68) (68)
Net loss................ (3,851) (3,851)
------ ------- ------ ---- --------- ------- ------- -------- --------
Balance at December 31,
1998................... 8,125 7,068 7,552 76 379 -- -- (5,100) (4,645)
Exercise of common stock
options................ 327 3 31 34
Deferred stock-based
compensation........... 7,478 (7,478) --
Amortization of deferred
stock-based
compensation........... 3,052 3,052
Stock-based compensation
for services........... 94 1 211 212
Issuance of common stock
in exchange for notes
receivable............. 2,090 21 1,440 (1,461) --
Issuance of preferred
stock--Series B, net of
issuance costs of $8... 2,195 2,809 --
Issuance of preferred
stock--Series C, net of
issuance costs of $54.. 2,899 4,525 --
Issuance of preferred
stock--Series D, net of
issuance costs of
$2,654................. 11,903 22,297 --
Beneficial conversion
feature of preferred
stock--Series D........ --
Accretion of preferred
stock.................. 13,820 (13,820) (13,820)
Dividend imputed on
beneficial conversion
feature................ 7,950 (7,950) (7,950)
Stock options issued in
connection with
acquisition............ --
Warrants issued in
connection with Series
D preferred stock...... 936 936
Net loss................ (11,350) (11,350)
------ ------- ------ ---- --------- ------- ------- -------- --------
Balance at December 31,
1999................... 25,122 $58,469 10,063 $101 $(11,506) $(1,461) $(4,215) $(16,450) $(33,531)
====== ======= ====== ==== ========= ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the three years in the period ended December 31, 1999
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss.......................................... $(1,181) $(3,851) $(11,350)
Adjustments to reconcile net loss to net cash used
in operating activities
Interest expense recognized on converted notes
payable........................................ -- 69 --
Amortization of deferred compensation expense... -- -- 3,264
Depreciation and amortization................... 10 101 415
Changes in assets and liabilities
Accounts receivable........................... -- -- (299)
Prepaid expenses and other current assets..... (12) (364) (423)
Other assets.................................. -- (62) 63
Accounts payable.............................. -- 47 1,275
Accrued liabilities........................... 224 132 132
Deferred revenue.............................. -- 251 168
------- ------- --------
Net cash used in operating activities....... (959) (3,677) (6,755)
------- ------- --------
Cash flows from investing activities
Purchase of property and equipment................ (81) (429) (1,148)
Note Receivable from Officer...................... -- -- (500)
Payment for acquisition, net of cash acquired..... -- -- (2,710)
------- ------- --------
Net cash used in investing activities....... (81) (429) (4,358)
------- ------- --------
Cash flows from financing activities
Proceeds from preferred stock, net................ -- 5,132 30,567
Proceeds from common stock........................ 123 36 34
Payments on capital lease obligations............. (8) (2) (9)
Proceeds from convertible notes payable........... 925 1,170 --
Proceeds from (repayment of) bank borrowings...... -- 750 (750)
------- ------- --------
Net cash provided by financing activities... 1,040 7,086 29,842
------- ------- --------
Net increase in cash and cash equivalents... -- 2,980 18,729
Cash and cash equivalents at beginning of period.. -- -- 2,980
------- ------- --------
Cash and cash equivalents at end of period........ $ -- $ 2,980 $ 21,709
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company
EoExchange, Inc. (the "Company"), formerly Aeneid Corporation, develops and
markets services for finding and monitoring information from the Internet.
Aeneid Corporation was incorporated in California on October 4, 1996. The
Company reincorporated in Delaware under the name of EoExchange, Inc., in March
2000. Expenses incurred during the period from October 4, 1996 (inception)
through December 31, 1996, were $54,000 and are included in the 1997
consolidated statement of operations. The Company earned no revenues in that
period.
The Company was in the development stage until 1999. Although no longer in
the development stage, the Company continues to be subject to the risks and
challenges similar to other companies in a comparable stage of development.
These risks include, but are not limited to, dependence on key individuals,
successful development and marketing of products, the ability to obtain
adequate financing to support growth, and competition.
2. Summary of Significant Accounting Policies
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Basis of presentation
The financial statements include the accounts of the Company and its wholly-
owned subsidiary (InGenius Technologies, Inc.) from October, 1999, the date of
acquisition. All significant intercompany balances and transactions have been
eliminated.
Revenue recognition
Revenues are derived from customer deployment fees, annual maintenance fees,
transaction fees and advertising on the Company's websites. Customer set-up
fees are received for the development and deployment of co-branded versions of
the Company's website. Deployment fees are generally billable upon the
deployment of the co-branded website and are recognized as revenue ratably over
the contract term, generally between one and three years. The costs incurred in
the deployment are generally insignificant. Annual maintenance fees are
received for the on-going maintenance of the customers' co-branded websites and
are recognized as revenue ratably over the life of the maintenance agreement.
Transactions fees are based on the number of search requests that are submitted
by the users of the customers' co-branded websites and are recognized as the
search transactions are provided. Advertising revenues generally are derived
from short-term advertising contracts. The Company uses third parties to place
advertisements. The Company shares the revenue, net of the fees charged by the
third parties, with customers that have co-branded versions of the Company's
website. The Company recognizes its share of the net revenues from the
advertisements when the advertisements have been delivered, and the fees are
fixed, determinable and collectible. All advertising revenues are derived from
cash transactions with third parties.
F-7
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Cash equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Advertising expense
The Company expenses advertising costs as incurred. Advertising expenses for
1998 and 1999 were $7,000 and $797,000, respectively. There were no advertising
costs incurred in 1997.
Fair value of financial instruments
The reported amounts of certain of the Company's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable and
other accrued liabilities approximate fair value due to their short maturities.
Concentration of credit risk
Financial instruments that potentially subject the Company to a concentration
of credit risk consist of cash and cash equivalents and accounts receivable.
The Company limits its exposure to credit loss by placing its cash and cash
equivalents with high credit quality financial institutions.
Property and equipment
Property and equipment and leasehold improvements are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally three to five years, or the lease term of
the respective assets, if shorter.
Intangible assets
Intangible assets consist of the technology acquired from InGenius (see Note
3), which is being amortized from the date of acquisition using the straight-
line method over the expected period of benefit, estimated at three years. The
Company assesses the recoverability of intangibles as well as other long-lived
assets, in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires the Company to review the carrying
value of an asset for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset might not be recoverable. When
such an event occurs, the Company estimates the future undiscounted cash flows
expected to result from the use of the asset and its eventual disposition. If
the expected undiscounted future cash flows are less than the carrying amount
of the asset, an impairment loss is recognized.
Income taxes
Deferred taxes are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. Valuation
allowances are provided if, based upon the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be
realized.
F-8
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Product development
Product development costs and costs incurred in the design, creation, and
maintenance of content, graphics and user interface of the Company's websites
are expensed as incurred in accordance with Statement of Position 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Costs incurred in the development of underlying functionality,
software development tools and infrastructure of the websites are capitalized
and amortized over the useful life of the websites. In 1999 the Company
capitalized $446,000 of such costs.
Stock-based compensation
The Company accounts for stock-based compensation issued to employees using
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and provides pro forma disclosures as required under SFAS
No. 123 "Accounting for Stock-Based Compensation." Under APB No. 25,
compensation expense is based on the difference, if any, on the date of the
grant, between the fair value of the Company's stock and the exercise price of
the option. Stock, stock options and warrants for stock issued to non-employees
are accounted for in accordance with the provisions of SFAS No. 123 and
Emerging Issues Task Force ("EITF") Issue 96-18, "Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services."
Business segments
The Company follows SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information." SFAS No. 131 requires publicly held companies to
report financial and other information about key revenue segments of the entity
for which this information is available and is utilized by the chief operating
decision maker. The Company conducts its business within one business segment
within the United States.
Comprehensive income
The Company follows SFAS No. 130, "Reporting Comprehensive Income," SFAS No.
130 establishes standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements. There was
no difference between the Company's net loss and its comprehensive loss for any
of the periods presented in the accompanying consolidated statements of
operations.
Net loss per common share
Basic net loss per common share is computed by dividing the net loss
attributable to common stockholders for the period by the weighted average
number of common shares outstanding during the period. Diluted net loss per
common share is computed by dividing the net loss attributed to common
stockholders for the period by the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares
composed of common shares issuable upon the exercise of stock options and
warrants and upon conversion of preferred stock, are included in the diluted
net loss per common share calculation to the extent these shares are dilutive.
F-9
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of the numerator and denominator used in the calculation of
basic and diluted net loss per common share follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Numerator
Net loss attributable to common
shareholders.................... $(1,181,000) $(3,851,000) $(33,120,000)
=========== =========== ============
Denominator
Weighted average common shares... 4,213,562 6,187,626 8,061,746
Weighted average unvested common
shares subject to repurchase.... -- -- (312,783)
----------- ----------- ------------
Denominator for basic and diluted
calculation..................... 4,213,562 6,187,626 7,748,963
----------- ----------- ------------
Basic and diluted net loss per
common share.................... $ (.28) $ (.62) $ (4.27)
=========== =========== ============
</TABLE>
The following weighted average common equivalent shares have not been
included in the calculation of diluted earnings per share because they are
anti-dilutive.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998 1999
------- --------- ---------
<S> <C> <C> <C>
Options to purchase common stock............... 582,293 1,718,153 2,028,559
Warrant to purchase convertible preferred
stock......................................... -- 14,880 71,770
------- --------- ---------
582,293 1,733,033 2,100,329
======= ========= =========
</TABLE>
3. Acquisition of InGenius Technologies, Inc.
Effective October 22, 1999, the Company acquired InGenius Technologies Inc.
("InGenius"). The total acquisition cost of $2,774,000 was paid in cash. The
acquisition was accounted for using the purchase method. Accordingly, the
results of operations for InGenius have been included in the Company's
consolidated statement of operations only from the date of acquisition.
The purchase price was allocated to the acquired assets based on fair values
as follows (in thousands):
<TABLE>
<S> <C>
Net liabilities...................................................... $ (2)
Acquired technology.................................................. 2,776
------
Total.............................................................. $2,774
======
</TABLE>
F-10
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following unaudited pro forma consolidated financial information presents
the combined results of operations of the Company and InGenius as if the
acquisition had occurred on January 1, 1999, after giving effect to certain
adjustments, principally amortization of intangibles. This unaudited pro forma
consolidated financial information does not necessarily reflect the results of
operations that would have occurred had the acquisition been completed on
January 1, 1999 (in thousands, except per share amounts).
<TABLE>
<S> <C>
Revenues.......................................................... $ 620
========
Net loss attributable to common stockholders...................... $(34,465)
========
Basic and diluted net loss per common share....................... $ (4.45)
========
</TABLE>
4. Supplemental Noncash Investing And Financing Activity
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------
1997 1998 1999
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Noncash investing activity
Acquisition of property and equipment under capital
leases............................................... $ 24 $ -- $ --
Noncash financing activity
Conversion of notes payable into preferred stock--
Series A............................................. $ -- $1,869 $ --
Conversion of notes payable and accrued interest into
common stock......................................... $ -- $ 296 $ --
Issuance of common stock in exchange for stockholder
notes receivable..................................... $ -- $ -- $1,461
Stock-based compensation relating to employee option
grants............................................... $ -- $ -- $7,478
</TABLE>
F-11
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Balance Sheet Components
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
----- ------
(in
thousands)
<S> <C> <C>
Property and equipment
Computer equipment and software............................... $ 463 $ 987
Furniture and fixtures........................................ 62 214
Leasehold improvements........................................ 9 59
Internally developed software................................. -- 446
----- ------
534 1,706
Less: accumulated depreciation and amortization............... (111) (369)
----- ------
$ 423 $1,337
===== ======
Property and equipment includes $24,000 and $41,000 of computer equipment and
software under capital leases at December 31, 1998 and 1999, respectively.
Accumulated amortization of assets under capital leases totaled $10,000 and
$13,000 at December 31, 1998 and 1999, respectively.
<CAPTION>
December 31,
-------------
1998 1999
----- ------
(in
thousands)
<S> <C> <C>
Prepaid expenses and other current assets
Prepaid advertising........................................... $ -- $ 424
Prepaid software license/search services...................... 336 249
Prepaid expenses and other current assets..................... 40 126
----- ------
$ 376 $ 799
===== ======
<CAPTION>
December 31,
-------------
1998 1999
----- ------
(in
thousands)
<S> <C> <C>
Intangibles
Acquired technology........................................... $ -- $2,776
Less: accumulated amortization................................ (157)
----- ------
$ -- $2,619
===== ======
</TABLE>
<TABLE>
<CAPTION>
December
31,
-----------
1998 1999
----- -----
(in
thousands)
<S> <C> <C>
Accrued liabilities
Compensation and benefits....................................... $ 2 $ 120
Service and support costs....................................... 300 260
Other........................................................... 54 118
----- -----
$356 $ 498
===== =====
</TABLE>
F-12
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Income Taxes
No provision for federal or state income taxes has been recorded for the
years ended December 31, 1996 through December 31, 1999 as the Company incurred
net operating losses, the benefit of which has been offset by a valuation
allowance as described below.
Temporary differences which gave rise to significant portions of deferred tax
assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December
31,
-----------------------
1997 1998 1999
----- ------- -------
<S> <C> <C> <C>
Net operating loss.................................. $ 400 $ 1,601 $ 4,978
Research and development credits.................... -- -- 341
Other............................................... -- -- 253
----- ------- -------
400 1,601 5,572
Valuation allowance................................. (400) (1,601) (5,572)
----- ------- -------
$ -- $ -- $ --
===== ======= =======
</TABLE>
Due to uncertainty of realizing the benefits of the deferred tax assets as
the Company has provided a full valuation allowance against its net deferred
tax assets. The valuation allowance increased by $1,201,000 and $3,971,000
during 1998 and 1999, respectively.
The difference between the Company's effective income tax rate and the
federal statutory rate is as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Statutory tax benefit..................................... $(1,309) $(3,860)
State taxes, net of federal benefit....................... -- (480)
Permanent differences..................................... -- 1,057
Research and development costs............................ -- (175)
Change in valuation allowance............................. 1,201 3,971
Other..................................................... 108 (513)
------- -------
$ -- $ --
======= =======
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $12,488,000 and $12,541,000 for Federal and California purposes,
respectively, available to reduce future taxable income, if any. These
carryforwards expire through 2019 and 2004 for Federal and California purposes,
respectively, if not utilized beforehand.
At December 31, 1999, the Company had research and development credit
carryforwards of approximately $235,000 and $162,000 for Federal and California
income tax purposes, respectively. The research and development credit
carryforwards expire beginning in the year 2018.
F-13
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the stock
ownership of a company. In the event the Company has a change in ownership,
utilization of the carryforwards could be restricted.
7. Borrowings
In June 1998, the Company signed an agreement with a bank for a $750,000
revolving credit line which expired in December 1999. Borrowings under the
credit agreement were at the bank's prime rate, and were collateralized by
substantially all of the Company's assets. All advances under the credit
agreement were repaid by December 4, 1999.
8. Commitments
Leases
The Company leases office space and equipment under non-cancelable operating
and capital leases with various expiration dates through 2003. Rent expense for
the period from October 4, 1996 (Inception) through December 31, 1997, and the
years ended December 31, 1998, and 1999 was $66,000, $88,000, and $250,000,
respectively.
Future minimum lease payments at December 31, 1999 under non-cancelable
operating and capital leases are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
-----------------
Capital Operating
Leases Leases
------- ---------
(in thousands)
<S> <C> <C>
2000....................................................... $14 $304
2001....................................................... 8 298
2002....................................................... 6 298
2003....................................................... -- 99
--- ----
Total minimum lease payments............................... 28 $999
====
Less: amount representing interest......................... 4
---
Present value of capital lease obligations................. 24
Less: current portion...................................... 11
---
Long-term portion of capital lease obligations............. $13
===
</TABLE>
F-14
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Redeemable Convertible Preferred Stock
Redeemable Convertible Preferred Stock at December 31, 1999 consists of the
following:
<TABLE>
<CAPTION>
Proceeds
Shares Net of
---------------------- Liquidation Issuance
Series Authorized Outstanding Amount Costs
------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
A............................ 8,300,000 8,124,538 $ 7,068,000 $ 7,000,000
B............................ 2,500,000 2,194,666 2,818,000 2,809,000
C............................ 3,500,000 2,898,706 4,580,000 4,525,000
D............................ 16,500,000 11,903,423 25,473,000 23,233,000
---------- ---------- ----------- -----------
Total...................... 30,800,000 25,121,333 $39,939,000 $37,567,000
========== ========== =========== ===========
</TABLE>
The holders of Redeemable Convertible Preferred Stock have various rights and
preferences as follows:
Voting
Each share of Redeemable Convertible Preferred Stock has voting rights equal
to an equivalent number of shares of Common Stock into which it is convertible
and votes together as one class with the Common Stock.
Dividends
Holders of Series A, Series B, Series C, and Series D Redeemable Convertible
Preferred Stock are entitled to receive noncumulative dividends at the per
annum rate of $0.087 per share, $0.1284 per share, $0.158 per share, and $0.214
per share, respectively, when and if declared by the Board of Directors. No
dividends on Redeemable Convertible Preferred Stock or common stock have been
declared by the Board through December 31, 1999.
Liquidation
In the event of any liquidation, dissolution or winding up of the Company,
including a merger, acquisition or sale of assets, the holders of Series A,
Series B, Series C, and Series D Redeemable Convertible Preferred Stock are
entitled to receive an amount of $0.87 per share, $1.284 per share, $1.58 per
share, and $2.14 per share, respectively, plus any declared but unpaid
dividends, prior to and in preference to any distribution to the holders of
common stock. Should the Company's legally available assets be insufficient to
satisfy these liquidation preferences, the funds will be distributed ratably
among the Series A, Series B, Series C, and Series D Redeemable Convertible
Preferred stockholders. Upon completion of the distribution to the Redeemable
Convertible Preferred stockholders, any assets remaining in the Company shall
be distributed to the holders of the common stock.
Conversion
Each share of Redeemable Convertible Preferred Stock is convertible into
common stock at the option of the holder, according to a stated conversion
ratio, subject to adjustment for dilution. Each
F-15
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
share of Redeemable Convertible Preferred Stock automatically converts into the
number of shares of common stock into which such shares are convertible at the
then effective conversion ratio upon: (1) the closing of a public offering of
common stock at a per share price of at least $4.00 with gross proceeds of at
least $15,000,000, or (2) the consent of the holders of at least 65% of the
Redeemable Convertible Preferred Stock.
Redemption
Series A, Series B, Series C, and Series D Redeemable Convertible Preferred
Stock is redeemable, at the sole discretion of the individual holders, at any
time beginning in April 2003. The redemption price shall be an amount per share
equal to the higher of (1) $0.87, $1.284, $1.58, and $2.14, respectively, as
adjusted for stock dividends, stock splits, combinations and recapitalizations
or (2) the fair value of each share of Redeemable Convertible Preferred Stock,
as determined in good faith by the Company's Board of Directors.
At December 31, 1999, the Company had sufficient shares of Common Stock
reserved for the conversion of the Redeemable Convertible Preferred Stock.
Preferred Stock Accretion
Shares of Series A, B, C, and D Redeemable Convertible Preferred Stock are
redeemable at the higher of the original issuance price or the fair market
value as determined by the Board of Directors at or any time after April, 2003.
Accordingly, the Company has valued the Redeemable Convertible Preferred Stock
at its fair value at the end of each period presented, with the periodic
differences recorded as preferred stock accretion. The Company recorded
preferred stock accretion of $13,820,000 for the year ended December 31, 1999
based on $2.14 per share being the estimated fair market values of shares of
such stock at December 31, 1999.
Beneficial conversion
The Company issued 5,345,789, 3,810,221 and 2,747,413 shares of Series D
Preferred Stock in October, November and December, 1999, respectively. All
shares were issued at $2.14 per share. In connection with the Company's Initial
Public Offering the fair value of the Company's common stock into which the
preferred stock is convertible in November and December was deemed to be in
excess of the price paid for the preferred shares. Accordingly, the Company has
recorded a dividend of $7,950,000 representing the difference between the cash
proceeds and the deemed fair market value of the common stock into which the
preferred stock is convertible, in accordance with EITF Issue 98-5 "Accounting
for Convertible Securities with Beneficial Conversion Features or Continently
Adjustable Conversion Ratios."
Warrants for convertible preferred stock
In June 1998, the Company granted a fully exercisable warrant to purchase
25,862 shares of Series A Redeemable Convertible Preferred Stock for $0.87 per
share in connection with a line of credit arrangement with a bank. Such
warrants are outstanding at December 31, 1999 and expire in June 2003. Using
the Black-Scholes Model, the Company determined that the fair value of the
warrant was insignificant at the date of grant.
F-16
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In October, November, and December 1999, the Company granted fully
exercisable warrants to purchase 357,101 shares of Series D Redeemable
Convertible Preferred Stock for $2.14 per share in connection with the Series D
placement. The fair value of the warrants, $936,000, was determined by the
Black-Scholes Model applying an expected life of 10 years, a weighted average
risk-free interest rate of 6.11%, an expected dividend yield of zero percent
and a volatility of 50%, and was charged to cost of financing. Such warrants
are outstanding at December 31, 1999 and expire in the fourth quarter of 2009.
10. Common Stock
At December 31, 1999, the Company had reserved shares of common stock for
future issuance as follows:
<TABLE>
<S> <C>
Conversion of preferred stock:
Series A....................................................... 8,300,000
Series B....................................................... 2,500,000
Series C....................................................... 3,500,000
Series D....................................................... 16,500,000
Exercise of options.............................................. 4,772,115
Exercise of warrants............................................. 382,963
----------
35,955,078
==========
</TABLE>
The Company had not declared or paid any cash dividends as of December 31,
1999.
11. Stock Options
Stock Option Plans
Under the Company's 1996 and 1999 Stock Plans (the "Plans"), the Company may
grant stock options to employees and consultants of the Company. Options
granted under the Plans may be either incentive stock options or nonqualified
stock options. Incentive stock options ("ISO") may be granted only to Company
employees (including officers and directors who are also employees).
Nonqualified stock options ("NSO") may be granted to Company employees and
consultants. The Company has reserved 4,772,115 shares of Common Stock for
issuance under the plans.
Options under the Plans may be granted for periods of up to ten years
provided that (i) the exercise price of an ISO shall not be less than 100% and
85% of the estimated fair value of the shares on the date of grant,
respectively, and (ii) the exercise price of an ISO granted to a 10%
shareholder shall not be less than 110% of the estimated fair value of the
shares on the date of grant, respectively. Options granted under the Plans
generally vest ratably over four years. The Company has certain repurchase
rights and rights of first refusal on 1.7 million shares purchased under the
Plans at December 31, 1999.
F-17
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Activity under the Plans is as follows:
<TABLE>
<CAPTION>
Weighted
Shares Shares Average
available for grant under option Exercise Price
------------------- ------------ --------------
<S> <C> <C> <C>
Shares reserved for
issuance.................... 2,000,000 --
Options granted.............. (1,871,045) 1,871,045 $0.10
Options cancelled............ 275,000 (275,000) $0.10
---------- ---------
Balance at December 31, 1997... 403,955 1,596,045 $0.10
---------- ---------
Additional shares reserved... 2,125,000 --
Options granted.............. (1,479,132) 1,479,132 $0.10
Options exercised............ -- (357,000) $0.10
Options cancelled............ 240,477 (240,477) $0.10
---------- ---------
Balance at December 31, 1998... 1,290,300 2,477,700 $0.10
---------- ---------
Additional shares reserved... 3,500,000 --
Options granted.............. (2,024,051) 2,024,051 $0.71
Restricted stock granted
under the Plans............. (2,100,029) --
Options exercised............ -- (327,011) $0.11
Options cancelled............ 118,748 (187,373) $0.36
---------- ---------
Balance at December 31, 1999... 784,968 3,987,367 $0.40
========== =========
</TABLE>
The following table summarizes information with respect to stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Remaining Average Exercisable Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life in Years Price Outstanding Price
--------- ----------- ------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ .10 2,334,209 8 $ .10 1,439,749 $ .10
.30 684,000 9.4 .30 68,750 .30
.80 179,520 9.6 .80 10,357 .80
1.25 789,638 9.8 1.25 52,492 1.25
--------- --------- ---- ----- --------- -----
$.10-1.25 3,987,367 8.75 $ .40 1,571,348 $ .40
========= =========
</TABLE>
Deferred Stock-Based Compensation
In connection with certain employee and non-employee stock option grants
during 1999, the Company recorded deferred stock-based compensation totaling
$7,478,000 which is being amortized over the vesting periods of the related
options, generally four years. Amortization of this stock-based compensation
during 1999 totaled approximately $3,052,000.
The balance of the stock-based compensation recorded through December 31,
1999 will be amortized as follows: $2,661,000 in 2000; $1,160,000 in 2001;
$495,000 in 2002; and $110,000 in 2003.
F-18
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Minimum value disclosures
Had compensation cost for the Company's stock-based compensation plan been
determined based on the minimum value at the grant dates for the awards under a
method prescribed by SFAS No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss to common stockholders
As reported...................... $(1,181,000) $(3,851,000) $(33,120,000)
=========== =========== ============
Pro forma........................ $(1,181,000) $(3,865,000) $(33,145,000)
=========== =========== ============
Basic and diluted net loss per
common share...................... $ (0.28) $ (0.62) $ (4.27)
=========== =========== ============
Basic and diluted net loss per
common share--pro forma........... $ (0.28) $ (0.62) $ (4.28)
=========== =========== ============
</TABLE>
The Company calculated the value of each option on the date of grant using
the minimum value pricing method with the following assumptions: dividend yield
at 0%; weighted average expected option term of five years; risk free interest
rate of 5.5%, 5.7%, and 5.57% for the period from October 4, 1996 (inception)
through December 31, 1997, the year ended December 31, 1998 and the year ended
December 31, 1999, respectively. The weighted average minimum value of options
granted during the period from October 4, 1996 (inception) through December 31,
1997, the year ended December 31, 1998, and the year ended December 31, 1999
was $0.02, $0.03 and $0.49, respectively.
13. 401(k) Plan
Effective January 1, 1998, the Company adopted the Aeneid Corporation 401(k)
Savings and Retirement Plan (the "401(k) Plan") that qualifies as a deferred
salary arrangement under Section 401 of the Internal Revenue Code. Under the
401(k) Plan, participating employees may defer a portion of their pretax
earnings not to exceed $10,000 per year. The Company, at its discretion, may
make contributions for the benefit of eligible employees. The Company has made
no contributions through December 31, 1999.
14. Notes Receivable
In 1999, the Company advanced the Chairman and Founder $500,000
collateralized by shares of common stock of the Company. Interest is 5.41% per
annum, compounded monthly. The note, plus any accrued, but unpaid interest, is
due and payable October 2002.
On April 10, 1999, in connection with the purchase of common stock by an
employee, the Company received a full-recourse promissory note in amount of
$48,747, collateralized by the stock purchased. Interest is 5.28% per annum,
compounded annually. Principal and interest are due and payable on April 30,
2004.
F-19
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On November 1, 1999 in connection with the purchase of common stock by the
Company's chief executive officer, the company received a full-recourse
promissory note in the amount of $1,412,041, with interest at 6.08% per annum,
compounded annually. The note is collateralized by the stock purchased, and the
principal and any accrued but unpaid interest are due and payable on November
1, 2004.
15. Concentrations and Major Customers
In 1999, one customer accounted for 49% of net revenues; one other customer
accounted for 100% of net revenues in 1998 and 35% in 1999.
16. Subsequent Events
In January, 2000 the Company issued 3,266,910 shares of Series D Preferred
Stock at $2.14 per share. A beneficial conversion dividend of approximately
$6.6 million will be recorded in the first quarter of 2000 in connection with
such issuance.
In addition, as part of the preferred stock issuance the Company granted
69,969 warrants to purchase Series D preferred stock for $2.14 per share. The
fair value of the warrants is estimated at $331,000 using the Black-Scholes
Model applying an expected life of 10 years, a weighted average risk free
interest rate of 5.50%, an expected dividend yield of zero percent and a
volatility of 50%. The cost will be charged to cost of financing. The warrants
expire in January 2010.
In April 2000, the Board of Directors authorized the filing of a registration
statement on Form S-1 for an Initial Public Offering ("IPO") of the Company's
common stock.
17. Pro Forma Net Loss Per Common Share and Pro Forma Stockholders' Equity
(Unaudited)
Upon the closing the Company's IPO, the outstanding convertible preferred
stock at December 31, 1999 will be automatically converted into 25,121,333
shares of common stock. The pro forma effect of this conversion has been
presented as a separate column in the Company's consolidated balance sheet, as
if the conversion had occurred at December 31, 1999.
Pro forma basic and diluted net loss per common share for the year ended
December 31,1999 has been computed using the weighted average number of common
shares outstanding, plus the effect of the conversion of preferred stock into
common stock on an as-if converted basis. Common equivalent shares, composed of
common shares issuable upon the exercise of stock options and warrants, are not
included in diluted net common loss per share as such shares are antidilutive.
F-20
<PAGE>
EoEXCHANGE, INC.
(Formerly Aeneid Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of the numerator and denominator used in the calculation of
pro forma basic and diluted net loss per common share follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Net loss, attributable to common stockholders................. $(33,120)
========
Shares used in computing basic and diluted net loss per common
share........................................................ 7,749
Adjusted to reflect the effect of the assumed conversion of
convertible preferred stock from the date of issuance:
Series A convertible preferred stock........................ 8,125
Series B convertible preferred stock........................ 1,750
Series C convertible preferred stock........................ 770
Series D convertible preferred stock........................ 1,530
--------
Weighted averages shares used in computing pro forma basic and
diluted net loss per common share............................ 19,924
========
Pro forma basic and diluted net loss per common share......... $ (1.66)
========
</TABLE>
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of InGenius Technologies, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, changes in stockholders' deficit and cash flows present fairly, in
all material respects, the financial position of InGenius Technologies, Inc. at
October 22, 1999 and the results of its operations and its cash flows for the
period from January 1, 1999 through October 22, 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 audit. We conducted our audit 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 audit provides a reasonable basis
for the opinion expressed above.
As described in Note 9, Aeneid Corporation purchased 100% of the stock of
InGenius Technologies, Inc., effective October 22, 1999.
PricewaterhouseCoopers LLP
March 21, 2000
San Francisco, California
F-22
<PAGE>
INGENIUS TECHNOLOGIES, INC.
BALANCE SHEET
As of October 22, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 64,163
Accounts receivable, net of allowance for doubtful accounts of
$1,573......................................................... 26,134
Prepaid expenses and other current assets ...................... 1,005
-----------
Total current assets.......................................... 91,302
Property and equipment, net....................................... 24,391
-----------
Total assets.................................................. $ 115,693
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities........................ $ 88,040
Accrued payroll................................................. 4,909
Interest payable................................................ 5,833
Capital lease obligations, current.............................. 8,603
Advance from Aeneid Corporation................................. 100,000
Convertible loan payable........................................ 200,000
-----------
Total current liabilities..................................... 407,385
Capital lease obligations, net of current portion................. 10,468
-----------
Total liabilities............................................. 417,853
-----------
Commitments (Note 8)
Stockholders' deficit:
Common stock, $1 par value; 60,000 shares authorized; 53,915
shares issued and outstanding.................................. 53,915
Additional paid-in capital...................................... 692,835
Stock-based compensation........................................ 169,020
Accumulated deficit............................................. (1,217,930)
-----------
Total stockholders' deficit................................... (302,160)
-----------
Total liabilities and stockholders' deficit................... $ 115,693
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
INGENIOUS TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
For the period from January 1, 1999 through October 22, 1999
<TABLE>
<S> <C>
Revenue:
Net revenue....................................................... $ 123,655
Cost of revenue................................................... 119,942
----------
Gross profit.................................................... 3,713
----------
Operating expenses:
Consulting services............................................... 132,242
General and administrative........................................ 253,133
----------
Total operating expenses........................................ 385,375
----------
Loss from operations................................................ (381,662)
Interest expense, net............................................... (156,888)
----------
Net loss............................................................ $(538,550)
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
INGENIUS TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
For the period from January 1, 1999 through October 22, 1999
<TABLE>
<CAPTION>
Common stock Additional
---------------- paid-in Stock-based Accumulated
Shares Par value capital compensation deficit Total
------ --------- ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1998................... 53,915 $53,915 $499,710 $ -- $ (679,380) $(125,755)
Value of options issued
for:
Services.............. 112,680 112,680
Consulting............ 56,340 56,340
Forgiveness of accrued
payroll liability by
shareholders........... -- -- 193,125 -- -- 193,125
Net loss................ -- -- -- -- (538,550) (538,550)
------ ------- -------- -------- ----------- ---------
Balance at October 22,
1999................... 53,915 $53,915 $692,835 $169,020 $(1,217,930) $(302,160)
====== ======= ======== ======== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
INGENIUS TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
For the period from January 1, 1999 through October 22, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................... $(538,550)
Adjustments to reconcile net loss to net cash used in operating
activities:
Allowance for doubtful accounts.................................. 1,573
Options issued................................................... 169,020
Accretion in value of convertible loan........................... 150,000
Depreciation..................................................... 9,030
Changes in assets and liabilities:
Increase in accounts receivable................................ (10,455)
Increase in prepaid expenses and other current assets.......... (157)
Increase in accounts payable and accrued liabilities........... 71,531
Increase in accrued payroll.................................... 54,875
Increase in interest payable................................... 5,833
---------
Net cash used in operating activities........................ (87,300)
---------
Cash flows from financing activities:
Proceeds from issuance of note payable............................. 50,000
Proceeds from deferred advance..................................... 100,000
Payments on capital lease obligations.............................. (823)
---------
Net cash provided by financing activities.................... 149,177
---------
Net increase in cash and cash equivalents.......................... 61,877
Cash and cash equivalents, beginning of period..................... 2,286
---------
Cash and cash equivalents, end of period........................... $ 64,163
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
INGENIUS TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Business
InGenius Technologies, Inc. (the "Company") was incorporated on August 8,
1996 as a Michigan profit corporation. The Company provides change monitoring
services which allow customers to monitor web-sites to identify substantive
changes, and to be notified electronically of such changes.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
or remaining maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The reported amounts of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable and
other accrued liabilities approximate fair value due to their short maturities.
Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying values of convertible loan payable approximate fair
value.
Significant Customers
For the period from January 1, 1999 through October 22, 1999, four customers
accounted for 45.3%, 14.4%, 12.5% and 10.2% of the Company's revenue.
Four of these customers accounted for 38.7%, 19.4%, 19.4% and 13.4% of the
Company's accounts receivable at October 22, 1999.
Property and Equipment
Property and equipment are stated at cost and are depreciated on the
straight-line basis over their estimated useful lives of three years. Property
and equipment held under capital leases, which involve a transfer of ownership,
are amortized over the estimated useful life of the asset of three years, or
the life of the lease, if shorter. Major additions and improvements are
capitalized, while maintenance and repairs that do not improve or extend the
life of the assets are charged to operations. Upon retirement or sale, the cost
of assets disposed of and the related accumulated depreciation are removed from
the accounts and any resulting gain or loss is credited or charged to income.
F-27
<PAGE>
INGENIUS TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Software Development Costs
Costs associated with the development of computer software are expensed prior
to establishment of technological feasibility and capitalized thereafter until
the product is available for general release to customers. No software
development costs were capitalized during the period from January 1, 1999
through October 22, 1999 since costs incurred subsequent to establishment of
technological feasibility were not significant.
Revenue Recognition
Revenue from services is recognized monthly as the service is provided.
Revenue from the set-up of a customer's account is recognized over the
estimated life of the customer relationship.
Accounting for Stock-Based Compensation
Employee stock awards under the Company's compensation plans are accounted
for in accordance with Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), and related interpretations. The
Company provides the disclosure requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), and related interpretations. Stock-based awards to nonemployees are
accounted for under the provisions of SFAS No. 123.
Income Taxes
Deferred taxes are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. Valuation
allowances are provided if, based upon the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be
realized.
3. Balance Sheet
Property and Equipment
<TABLE>
<S> <C>
Computer equipment................................................. $ 46,882
Less--accumulated depreciation..................................... (22,491)
--------
$ 24,391
========
</TABLE>
At October 22, 1999, property and equipment under capital leases consisted of
computer equipment with a cost basis of $20,287. Accumulated amortization of
property and equipment under capital leases totaled $1,856 at October 22, 1999.
4. Convertible Loan
In May 1999, a shareholder loaned the Company $50,000 pending receipt of
permanent funding. The loan is senior to all other indebtedness of the Company,
excluding trade debts, and provides for an interest rate of 7% per annum, with
all interest accumulating until the note is paid or converted. The loan is
convertible, at the option of the holder, into either special convertible
preferred stock or another form of a convertible loan after a subsequent equity
or debt financing of a specified level.
F-28
<PAGE>
INGENIUS TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Upon conversion, the value of the preferred stock or convertible loan becomes
four times the initial loan amount. The loan is immediately convertible, at the
option of the holder, prior to a publicly underwritten equity offering, or upon
a sale of the Company approved by a majority of its shareholders.
As described in Note 9, Aeneid Corporation purchased the Company on October
22, 1999. The investor elected to convert the amount into a convertible loan
with an amount due of $200,000. The increase in the loan value was recorded as
interest expense.
5. Deferred Advance
In June 1999, the Company received a $100,000 nonrefundable deposit from
Aeneid Corporation. The deposit was given in anticipation of the acquisition of
the Company.
6. Stock Options
In June 1999, the Company issued an option to purchase 3,000 shares of the
Company's common stock at $1 per share. For financial reporting purposes, the
fair value of the stock exceeded the exercise price. As a result compensation
expense of $112,680 has been recorded in the period. The options fully vested
at October 22, 1999 as a result of the Company's acquisition by Aeneid
Corporation.
The pro-forma loss under the provisions of SFAS No. 123 is $541,550, using
the following assumptions:
<TABLE>
<S> <C>
Risk free interest rate......................................... 5.09%
Dividend yield.................................................. 0.00%
Weighted average life........................................... 6 months
</TABLE>
In June 1999, the Company issued an option to purchase 3,000 shares of the
Company's common stock for 50% of the estimated fair value per share. The
options, issued in exchange for services provided, were exercisable
immediately. The value of the compensation, $56,340, was charged to expense and
calculated using the Black Scholes Model with the following assumptions: no
dividend yield, a risk free interest rate of 5.09% volatility of 50% and an
expected term of three months.
7. Income Taxes
For the period from January 1, 1999 through October 22, 1999, no provision
for income taxes has been recorded as the Company incurred net operating
losses. Temporary differences that gave rise to significant portions of
deferred tax assets and liabilities are as follows.
<TABLE>
<S> <C>
Net operating loss carryforwards.................................. $ 234,097
Depreciation and amortization..................................... (11,292)
Accrued liabilities............................................... 558
Deferred compensation............................................. 59,921
---------
Net deferred tax assets........................................... 283,284
Deferred tax asset valuation allowance............................ (283,284)
---------
$ --
=========
</TABLE>
F-29
<PAGE>
INGENIUS TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company has provided a valuation allowance for the net deferred tax
assets since realization of any future benefit is not assured at October 22,
1999. The valuation allowance increased $184,742 during the period from January
1, 1999 through October 22, 1999.
The difference between the Company's effective income tax rate and the
federal statutory rate is as follows:
<TABLE>
<S> <C>
Statutory tax benefit............................................... (34.00)%
State taxes, net of federal benefit................................. (1.45)%
Change in valuation allowance....................................... 34.30 %
Other............................................................... 1.15 %
</TABLE>
At October 22, 1999, the Company had net operating loss carryforwards of
approximately $689,000 for federal purposes available to reduce future taxable
income, if any. These carryforwards expire in 2019 if not used beforehand.
Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may result in a limitation on the amount of
net operating loss carryforwards and research and development credit
carryforwards which can be used in future years.
8. Commitments
The Company leases certain computer equipment under three year noncancelable
capital leases.
Future minimum lease payments under capital leases at October 22, 1999 are as
follows:
<TABLE>
<CAPTION>
Capital
Year ending October 22, leases
----------------------- -------
<S> <C>
2000................................................................ $ 8,603
2001................................................................ 8,603
2002................................................................ 6,260
-------
Less: portion representing interest................................. (4,395)
-------
$19,071
=======
</TABLE>
9. Subsequent Event
Effective October 22, 1999, the Company was purchased by Aeneid Corporation
for $2.7 million in cash.
F-30
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Effective October 22, 1999, EoExchange, Inc. (formerly Aeneid Corporation)
(the "Company") acquired 100% of the stock of InGenius Technologies, Inc.
("InGenius"). The transaction was accounted for using the purchase method of
accounting and the results of InGenius were included in the results of the
Company from October 22, 1999, the effective date of the transaction.
The following unaudited Pro Forma Combined Statement of Operations for the
year ended December 31, 1999 gives effect to the acquisition by the Company of
InGenius as if it had occurred on January 1, 1999. The statement has been
derived from the statement of operations of the Company for the year ended
December 31, 1999 and the statement of operations of InGenius for the period
from January 1, 1999 through October 22, 1999, both appearing elsewhere in this
Prospectus. The unaudited pro forma financial data is not necessarily
indicative of the results of operations of the Company, had the transactions
assumed therein occurred at the beginning of the period presented, nor are they
necessarily indicative of the results of operations which may be expected to
occur in the future. The unaudited Pro Forma Combined Statement of Operations
should be read in conjunction with the historical financial statements and
notes thereto of the Company and InGenius included elsewhere in this
Prospectus.
F-31
<PAGE>
EoEXCHANGE, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
EoExchange InGenius For
For the Year the Period From Pro Forma
Ended January 1, 1999 ---------------------
December 31, through Acquisition
1999 October 22, 1999 Adjustments Combined
------------ ---------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues.................. $ 496 $ 124 $ -- $ 620
Cost of revenues.......... 1,599 120 13 1,732
--------- ----- ----- ---------
Gross profit (loss)... (1,103) 4 (13) (1,112)
--------- ----- ----- ---------
Operating expenses
Research and
development............ 1,964 110 7 2,081
Sales and marketing..... 3,263 76 -- 3,339
General and
administrative......... 1,715 67 15 1,797
Depreciation and
amortization........... 415 9 771 1,195
Stock-based
compensation........... 3,052 124 -- 3,176
--------- ----- ----- ---------
Total operating
expenses............. 10,409 386 793 11,588
--------- ----- ----- ---------
Loss from operations.. (11,512) (382) (806) (12,700)
--------- ----- ----- ---------
Interest income........... 214 -- -- 214
Interest expense.......... (52) (157) -- (209)
--------- ----- ----- ---------
Net loss.............. (11,350) (539) (806) (12,695)
Dividend and accretion
attributable to preferred
stockholders............. (21,770) -- -- (21,770)
--------- ----- ----- ---------
Net loss attributable
to common
stockholders......... $ (33,120) $(539) $(806) $ (34,465)
========= ===== ===== =========
Basic and diluted net loss
per common share......... $ (4.27) $ (4.45)
========= =========
Shares used in calculating
basic and diluted net
loss per common share.... 7,748,963 7,748,963
========= =========
</TABLE>
F-32
<PAGE>
EoEXCHANGE, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Note A--Amortization of Intangibles
Reflects additional amortization expense from January 1, 1999 related to the
intangibles acquired in the purchase of InGenius. Acquired technology is being
amortized over a period of three years.
Note B--Additional Compensation Cost
Reflects additional compensation cost from January 1, 1999 related to the
employment agreements signed with two former InGenius founders.
Note C--Allocation of Purchase Price to Intangible Assets
The purchase price of InGenius was allocated to tangible net assets and
identifiable intangible assets. The fair value of tangible assets approximated
their historical book value at October 22, 1999. The identifiable intangible
asset of $2,776,000 was allocated to acquired technology and is being amortized
over an estimated life of three years.
Note D--Unaudited Pro Forma Combined Net Loss Per Share
Pro forma net loss reflects the impact of the adjustments above. Basic and
diluted net loss per common share (pro forma) is computed using EoExchange's
weighted-average number of shares of common stock outstanding.
F-33
<PAGE>
[EOEXCHANGE LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The expenses to be paid by the Registrant in connection with the distribution
of the securities being registered are as set forth in the following table:
<TABLE>
<S> <C>
Securities and Exchange Commission Fee.............................. $18,216
NASD Filing Fee..................................................... 7,400
Nasdaq National Market Listing Fee..................................
*Legal Fees and Expenses............................................
*Accounting Fees and Expenses.......................................
*Printing Expenses..................................................
*Blue Sky Fees and Expenses.........................................
*Registrar and Transfer Agent Fees and Expenses.....................
*Miscellaneous......................................................
-------
*Total............................................................ $ --
=======
</TABLE>
- --------
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation includes a provision that eliminates
the personal liability of its directors to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director.
In addition, as permitted by the Delaware General Corporation Law, the
Registrant's Bylaws provide that:
(1) the Registrant will indemnify each of our directors and officers
against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such
person is or was our agent;
(2) the Registrant will have the power to indemnify each of our employees
and agents (other than directors and officers) against expenses (including
attorneys' fees), judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was our agent;
(3) the Registrant will pay expenses incurred in defending any action or
proceeding for which indemnification is required or permitted by the Bylaws
in advance of final disposition of the action or proceeding upon receipt of
an undertaking by or on behalf of the indemnified party to repay such
amount if ultimately he is not entitled to indemnification; and
(4) the rights conferred in the Bylaws are not exclusive and the
Registrant is authorized to enter into indemnification agreements with its
directors, officers and employees.
We have entered into indemnification agreements with each of our directors
and officers.
The Bylaws permit the Registrant to purchase and maintain director and
officer liability insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
II-1
<PAGE>
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
The Registrant has obtained a policy of directors' and officers' liability
insurance for its directors and officers to insure directors and officers
against the costs of defense, settlement or payment of a judgment under certain
circumstances.
Item 15. Recent Sales of Unregistered Securities
Since April 1, 1997, the Registrant has issued and sold unregistered
securities as follows:
(1) The Registrant issued an aggregate of 3,266,910 shares of Series D
preferred stock in a private placement on January 21, 2000. The
consideration received for such shares was $6,991,187.40.
(2) The Registrant issued a warrant to purchase 69,969 shares of Series D
preferred stock at an aggregate purchase price of $149,733.66 on January
21, 2000.
(3) The Registrant issued an aggregate of 2,747,413 shares of Series D
preferred stock in a private placement on December 23, 1999. The
consideration received for such shares was $5,879,468.82.
(4) The Registrant issued a warrant to purchase 82,422 shares of Series D
preferred stock at an aggregate purchase price of $176,383.08 on December
23, 1999.
(5) The Registrant issued an aggregate of 3,810,221 shares of Series D
preferred stock in a private placement on November 24, 1999. The
consideration received for such shares was $8,153,872.94.
(6) The Registrant issued a warrant to purchase 114,306 shares of Series
D preferred stock at an aggregate purchase price of $244,614.84 on November
24, 1999.
(7) The Registrant issued an aggregate of 5,345,789 shares of Series D
preferred stock in a private placement on October 18, 1999. The
consideration received for such shares was $11,439,988.46.
(8) The Registrant issued a warrant to purchase 160,373 shares of Series
D preferred stock at an aggregate purchase price of $343,198.22 on October
18, 1999.
(9) The Registrant issued an aggregate of 2,898,706 shares of Series C
preferred stock in a private placement in September 17, 1999. The
consideration received for such shares was $4,579,955.48.
(10) The Registrant issued an aggregate of 2,194,666 shares of Series B
preferred stock in a private placement on March 15, 1999. The consideration
received for such shares was $2,817,951.14.
(11) The Registrant issued an aggregate of 287,356 shares of Series A
preferred stock in a private placement on August 21, 1998. The
consideration received for such shares was $249,999.72.
(12) The Registrant issued a warrant to purchase 25,862 shares of our
Series A preferred stock at an aggregate purchase price of $22,499.94 on
June 4, 1998.
II-2
<PAGE>
(13) From April 1997 through February 1998, the Registrant granted stock
options to purchase an aggregate of 2,307,177 shares of common stock to
employees, consultants and directors with exercise prices of $0.10 per
share pursuant to the Registrant's 1996 stock option plan.
(14) The Registrant issued an aggregate of 8,124,538 shares of Series A
preferred stock in private placements in April through August 1998 for an
aggregate consideration of $7,068,348.06. Of those shares, the Registrant
issued an aggregate of 2,147,530 shares in April 1998, pursuant to the
conversion of a portion of the outstanding principal of convertible
subordinated promissory notes which we issued on various dates from July
1997 through April 1998.
(15) In April 1998, the Registrant issued an aggregate of 2,464,890
shares of common stock pursuant to the conversion of an aggregate of
$246,489.00 in convertible subordinated promissory notes, which the
Registrant issued on various dates from July 1997 through April 1998.
(16) From February 1999 through March 2000, the Registrant granted stock
options to purchase an aggregate of 3,047,884 shares of common stock to
employees, consultants and directors with exercise prices ranging from
$0.10 per share to $2.50 per share pursuant to the Registrant's 1999 stock
plan.
(17) In April 1999, the Registrant granted the right to purchase 324,978
shares of common stock to an employee at $0.15 price per share pursuant to
the Registrant's 1999 stock plan, which right was exercised on the same
date. In November 1999, the Registrant granted the right to purchase
1,765,051 shares of common stock to an officer at $0.80 price per share
pursuant to the Registrant's 1999 stock plan, which right was exercised on
the same date. In November 1999, the Registrant granted the right to
purchase 10,000 shares of common stock to a director at $1.25 price per
share pursuant to the Registrant's 1999 stock plan, which right was
exercised on the same date.
(18) In October 1999, the Registrant issued to consultants an aggregate
of 84,444 shares of stock with a value of $.80 price per share.
(19) In October, 1999, the Registrant granted stock options to purchase
an aggregate of 500,000 shares of common stock to employees with exercise
prices of $0.80 per share. These option grants were not made pursuant to
any stock option plan.
The sales and issuances of these securities were exempt from registration
under the Securities Act pursuant to (1) Rule 701 promulgated thereunder on the
basis that these options were offered and sold either pursuant to a written
compensatory benefit plan or pursuant to written contracts relating to
consideration, as provided by Rule 701, or (2) Section 4(2) thereof or
Regulation D promulgated thereunder, on the basis that the transactions did not
involve a public offering.
No underwriters were used in connection with these sales and issuances.
Appropriate legends were affixed to the stock certificates issued in the above
transactions. Similar legends were imposed in connection with any subsequent
sales of any such securities.
II-3
<PAGE>
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1 Second Amended and Restated Certificate of Incorporation of the
Registrant.
*3.2 Bylaws of the Registrant.
*4.1 Form of Specimen Common Stock Certificate.
*5.1 Opinion of Latham & Watkins.
9.1 Voting Agreement among the Registrant and certain of its stockholders,
dated April 20, 1998.
9.2 Voting Agreement among the Registrant and certain of its stockholders,
dated October 6, 1999.
10.1 Form of Indemnification Agreement between the Registrant and its
directors and officers.
*10.2 1996 Stock Option Plan of the Registrant.
*10.3 Employee Stock Purchase Plan of the Registrant.
*10.4 Amended and Restated 1999 Stock Plan of the Registrant.
10.5 Third Amended and Restated Investors' Rights Agreement among the
Registrant and certain of its stockholders, dated October 18, 1999.
10.6 Series D Preferred Stock Placement Agency Agreement between the
Registrant and BancBoston Robertson Stephens Inc., dated October 18,
1999.
10.7 Second Amended and Restated Co-Sale and Management Agreement among the
Registrant and certain of its stockholders, dated September 17, 1999.
10.8 Employment Agreement between the Registrant and Robert Ainsbury, dated
January 1, 1999.
10.9 Employment Agreement between the Registrant and Wilfredo M. Tejada,
dated January 1, 1999.
10.10 Employment Agreement between the Registrant and Daniel Putterman,
dated October 6, 1999.
10.11 Employment Agreement between the Registrant and Douglas S. Bennett, as
amended, dated October 18, 1999.
10.12 Pledge and Security Agreement between the Registrant and Douglas S.
Bennett, dated November 1, 1999.
10.13 Promissory Note from Douglas S. Bennett to the Registrant, dated
November 1, 1999.
10.14 Pledge and Security Agreement between the Registrant and Robert
Ainsbury, dated January 28, 2000.
10.15 Non-Recourse Promissory Note from Robert Ainsbury to the Registrant,
dated January 28, 2000.
10.16 Pledge and Security Agreement between the Registrant and Willie
Tejada, dated January 28, 2000.
10.17 Non-Recourse Promissory Note from Willie Tejada to the Registrant,
dated January 28, 2000.
10.18 Pledge and Security Agreement between the Registrant and Daniel
Putterman, dated October 6, 1999.
10.19 Non-Recourse Promissory Note from Daniel Putterman to the Registrant,
dated October 6, 1999.
10.20 Agreement and Plan of Merger entered into as of October 22, 1999 by
and among the Registrant, Aeneid Merger Sub, Inc., InGenius
Technologies, Inc. and Julie Stock and Gary Stock.
10.21 Amendment No. 1 to Agreement and Plan of Merger entered into as of
October 22, 1999 by and among the Registrant, Aeneid Merger Sub,
Inc., InGenius Technologies, Inc. and Julie Stock and Gary Stock.
*10.22 Lease Agreement between The Ronald and Barbara Kaufman Revocable Trust
and the Registrant, dated February 17, 1997.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
*10.23 Lease Amendment No. 1. between The Ronald and Barbara Kaufman
Revocable Trust and the Registrant, dated April 15, 1998.
*10.24 Lease Amendment No. 2. between The Ronald and Barbara Kaufman
Revocable Trust and the Registrant, dated February 11, 1999.
*10.25 Lease Amendment No. 3. between The Ronald and Barbara Kaufman
Revocable Trust and the Registrant, dated March 18, 1999.
*10.26 Lease Amendment No. 3. (sic) between The Ronald and Barbara Kaufman
Revocable Trust and the Registrant, dated December 5, 1999.
*10.27 Sublease Agreement between Intergraph Corporation and the Registrant,
dated October 26, 1999.
*10.28 Lease Agreement between Wesley C. Vande Streek and Barbara J. Ohs and
InGenius Technologies, Inc., dated October 31, 1996.
*10.29 Lease Agreement between Wesley C. Vande Streek and InGenius
Technologies, Inc., dated January 1, 1998.
*10.30 Lease Agreement by and between New Boston Moat Limited Partnership and
the Registrant, dated March 1, 2000.
21.1 Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Latham & Watkins (included in Exhibit 5.1).
24.1 Powers of Attorney (contained on the signature page of this
Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
Item 17. Undertakings
The undersigned hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-5
<PAGE>
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 Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of San Francisco, state of
California, on April 7, 2000.
EoExchange, Inc.
/s/ Douglas S. Bennett
By: _________________________________
Douglas S. Bennett
President, Chief Executive Officer
and
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint Douglas S. Bennett, Mark H. Elder, and
each of them, with full power of substitution and full power to act without the
other, his true and lawful attorney-in-fact and agent to act for him in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file this Registration Statement, 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 order to effectuate the same as fully, to
all intents and purposes, as they or he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by each of the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ Douglas S. Bennett President, Chief Executive April 7, 2000
______________________________________ Officer, Chairman of the Board
Douglas S. Bennett of Directors (principal
executive officer)
/s/ Mark H. Elder Vice President Finance, April 7, 2000
______________________________________ Treasurer and Assistant
Mark H. Elder Secretary (principal financial
and accounting officer)
/s/ Robert G. Allison Director April 7, 2000
______________________________________
Robert G. Allison
/s/ Mark Butlein Director April 7, 2000
______________________________________
Mark Butlein
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ Scott N. Flanders Director April 7, 2000
______________________________________
Scott N. Flanders
/s/ Daniel Putterman Director April 7, 2000
______________________________________
Daniel Putterman
/s/ Dag A. Tellefsen Director April 7, 2000
______________________________________
Dag A. Tellefsen
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1 Second Amended and Restated Certificate of Incorporation of the
Registrant.
*3.2 Bylaws of the Registrant.
*4.1 Form of Specimen Common Stock Certificate.
*5.1 Opinion of Latham & Watkins.
9.1 Voting Agreement among the Registrant and certain of its stockholders,
dated April 20, 1998.
9.2 Voting Agreement among the Registrant and certain of its stockholders,
dated October 6, 1999.
10.1 Form of Indemnification Agreement between the Registrant and its
directors and officers.
*10.2 1996 Stock Option Plan of the Registrant.
*10.3 Employee Stock Purchase Plan of the Registrant.
*10.4 Amended and Restated 1999 Stock Plan of the Registrant.
10.5 Third Amended and Restated Investors' Rights Agreement among the
Registrant and certain of its stockholders, dated October 18, 1999.
10.6 Series D Preferred Stock Placement Agency Agreement between the
Registrant and BancBoston Robertson Stephens Inc., dated October 18,
1999.
10.7 Second Amended and Restated Co-Sale and Management Agreement among the
Registrant and certain of its stockholders, dated September 17, 1999.
10.8 Employment Agreement between the Registrant and Robert D. Ainsbury,
dated January 1, 1999.
10.9 Employment Agreement between the Registrant and Wilfredo Tejada, dated
January 1, 1999.
10.10 Employment Agreement between the Registrant and Daniel Putterman,
dated October 6, 1999.
10.11 Employment Agreement between the Registrant and Douglas S. Bennett, as
amended, dated October 18, 1999.
10.12 Pledge and Security Agreement between the Registrant and Douglas S.
Bennett, dated November 1, 1999.
10.13 Promissory Note from Douglas S. Bennett to the Registrant, dated
November 1, 1999.
10.14 Pledge and Security Agreement between the Registrant and Robert
Ainsbury, dated January 28, 2000.
10.15 Non-Recourse Promissory Note from Robert Ainsbury to the Registrant,
dated January 28, 2000.
10.16 Pledge and Security Agreement between the Registrant and Willie
Tejada, dated January 28, 2000.
10.17 Non-Recourse Promissory Note from Willie Tejada to the Registrant,
dated January 28, 2000.
10.18 Pledge and Security Agreement between the Registrant and Daniel
Putterman, dated October 6, 1999.
10.19 Non-Recourse Promissory Note from Daniel Putterman to the Registrant,
dated October 6, 1999.
10.20 Agreement and Plan of Merger entered into as of October 22, 1999 by
and among the Registrant, Aeneid Merger Sub, Inc., InGenius
Technologies, Inc. and Julie Stock and Gary Stock.
10.21 Amendment No. 1 to Agreement and Plan of Merger entered into as of
October 22, 1999 by and among the Registrant, Aeneid Merger Sub,
Inc., InGenius Technologies, Inc. and Julie Stock and Gary Stock.
*10.22 Lease Agreement between The Ronald and Barbara Kaufman Revocable Trust
and the Registrant, dated February 17, 1997.
*10.23 Lease Amendment No. 1. between The Ronald and Barbara Kaufman
Revocable Trust and the Registrant, dated April 15, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
*10.24 Lease Amendment No. 2. between The Ronald and Barbara Kaufman
Revocable Trust and the Registrant, dated February 11, 1999.
*10.25 Lease Amendment No. 3. between The Ronald and Barbara Kaufman
Revocable Trust and the Registrant, dated March 18, 1999.
*10.26 Lease Amendment No. 3. (sic) between The Ronald and Barbara Kaufman
Revocable Trust and the Registrant, dated December 5, 1999.
*10.27 Sublease Agreement between Intergraph Corporation and the Registrant,
dated October 26, 1999.
*10.28 Lease Agreement between Wesley C. Vande Streek and Barbara J. Ohs and
InGenius Technologies, Inc., dated October 31, 1996.
*10.29 Lease Agreement between Wesley C. Vande Streek and InGenius
Technologies, Inc., dated January 1, 1998.
*10.30 Lease Agreement by and between New Boston Moat Limited Partnership and
the Registrant, dated March 1, 2000.
21.1 Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Latham & Watkins (included in Exhibit 5.1).
24.1 Powers of Attorney (contained on the signature page of this
Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
<PAGE>
EXHIBIT 9.1
AENEID CORPORATION
VOTING AGREEMENT
----------------
This Voting Agreement (the "Agreement") is made as of the 20th day of
---------
April 1998, by and among Daniel Putterman and Robert Ainsbury (the "Founders"),
--------
Aeneid Corporation, a California corporation (the "Company") and each holder of
shares of Series A Preferred Stock listed on Exhibit A (collectively, the
---------
"Investors" and individually, the "Investor").
--------- --------
RECITALS
--------
The Company and the Investors have entered into a Series A Preferred
Stock Purchase Agreement (the "Purchase Agreement") of even date herewith
------------------
pursuant to which the Company desires to sell to the Investors and the Investors
desire to purchase from the Company shares of the Company's Series A Preferred
Stock. A condition to the Investors' obligations under the Purchase Agreement
is that the Company, the Founders and the Investors enter into this Agreement
for the purpose of setting forth the terms and conditions pursuant to which the
Investors and the Founders shall vote their shares of the Company's voting stock
in favor of certain designees to the Company's Board of Directors. The Company,
the Investors and the Founders each desire to facilitate the voting arrangements
set forth in this Agreement, and the sale and purchase of shares of Series A
Preferred Stock pursuant to the Purchase Agreement, by agreeing to the terms and
conditions set forth below.
AGREEMENT
---------
The parties agree as follows:
1. Election of Directors.
---------------------
1.1 Board Representation.
--------------------
(a) At any meeting of the shareholders of the Company at which
members of the Board of Directors of the Company are to be elected, or whenever
members of the Board of Directors are to be elected by written consent, the
Founders and the Investors agree to vote or act with respect to their shares so
as to elect one (1) member of the Company's Board of Directors designated by
Edgewater Private Equity Fund II, L.P. ("Edgewater") so long as Edgewater owns
---------
at least twenty-five percent (25%) of the number of shares of Preferred Stock
(or Common Stock issued upon conversion thereof) set forth on Exhibit A. Such
---------
director shall initially be Robert Allison.
(b) At any meeting of the shareholders of the Company at which
members of the Board of Directors of the Company are to be elected, or whenever
members of the Board of Directors are to be elected by written consent, the
Founders and the Investors agree to vote or act with respect to their shares
such that a majority of the members of the Board of Directors are not employees
of the Company.
<PAGE>
1.2 Appointment of Director. In the event of the resignation, death,
-----------------------
removal or disqualification of the director selected by Edgewater, Edgewater
shall promptly nominate a new director, and, after written notice of the
nomination has been given by Edgewater to the other parties, each Investor and
Founder shall vote its shares of capital stock of the Company to elect such
nominee to the Board of Directors.
1.3 Removal. Edgewater may remove its designated director and
-------
nominate a new director at any time and from time to time, with or without cause
(subject to the Bylaws of the Company and any requirements of law), in its sole
discretion, and after written notice to each of the parties hereto of the new
nominee, each Investor and Founder shall promptly vote its shares of capital
stock of the Company to elect such nominee to the Board of Directors.
2. Additional Representations and Covenants.
----------------------------------------
2.1 Board Observer Rights. In addition to the rights provided in
---------------------
Section 1, Edgewater, Sparkventures Fund, L.P. and KS Teknoinvest V shall each
have the right to designate one representative to attend the Company's board
meetings as an observer; provided that the Company shall have the right to
exclude such representatives from all or any part of a board meeting if in its
reasonable judgment such exclusion is necessary to preserve the attorney-client
privilege or to protect the Company's trade secrets or similar confidential
information. Observers shall receive notice of meetings at the same time and in
the same manner as the directors. The rights of Sparkventures Fund, L.P. under
this Section 2.1 shall terminate in the event that Sparkventures Fund, L.P.
(together with any affiliated funds) owns less than ten percent (10%) of the
total outstanding number of shares of the Company's Preferred Stock. The rights
of KS Teknoinvest V under this Section 2.1 shall also terminate in the event
that KS Teknoinvest V (together with any affiliated funds) owns less than ten
percent (10%) of the total outstanding number of shares of the Company's
Preferred Stock.
2.2 Reimbursement of Edgewater Director. The person designated by
-----------------------------------
Edgewater under Section 1.1(a) to serve as a director shall be reimbursed by the
Company for reasonable expenses (including travel and accommodation expenses)
incurred by such director in the course of carrying out his or her duties as a
director of the Company. Such reimbursement may be accrued and payment deferred
by the Company until the Company has achieved two consecutive quarters of
profitability.
2.3 Quarterly Board Meetings. The Company shall hold meetings of its
------------------------
board of directors at least once each calendar quarter.
2.5 Compensation Committee. The Company shall establish a three or
----------------------
more member Compensation Committee of the Board of Directors, which committee
shall include the director designated by Edgewater under Section 1.1(a). The
Compensation Committee shall review at least annually the compensation for the
Company's executive officers who receive $100,000 or more in annual cash
compensation.
-2-
<PAGE>
2.6 Legends. Each certificate representing shares of the Company's
-------
capital stock held by Founders or Investors or any assignee of the Founders or
Investors shall bear the following legend:
"THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT BY
AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS OF THE COMPANY (A
COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY), AND BY ACCEPTING
ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST
SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SAID VOTING AGREEMENT."
3. Termination.
-----------
3.1 Termination Events. This Agreement shall terminate upon the
------------------
earliest of:
(a) The liquidation, dissolution or indefinite cessation of the
business operations of the Company;
(b) An underwritten public offering by the Company of shares of
its Common Stock pursuant to a registration statement under the Securities Act
of 1933, as amended, which results in gross proceeds to the Company of at least
$15,000,000 and the public offering price of which is not less than (i) $1.74
per share (appropriately adjusted for any stock split, dividend, combination or
other recapitalization) if such offering is consummated within one year of the
date of this Agreement or (ii) $2.61 per share (appropriately adjusted for any
stock split, dividend, combination or other recapitalization) if such offering
is consummated after the first anniversary of the date of this Agreement; or
(c) The (i) sale, conveyance or other disposition of or
encumbrance (other than encumbrances pursuant to a commercial loan unanimously
approved by the Board of Directors of the Company) of all or substantially all
of the Company's property or business or the Company's merger or consolidation
with any other corporation (other than a wholly-owned subsidiary corporation)
where shareholders of the Company own less than fifty percent (50%) of the
voting power of the surviving entity after such merger or consolidation or (ii)
any other transaction or series of related transactions in which more than fifty
percent (50%) of the voting power of the Company is disposed of, provided that
this Section 3.1(c) shall not apply to a merger effected solely for the purpose
of changing the domicile of the Company.
3.2 Removal of Legend. At any time after the termination of this
-----------------
Agreement in accordance with Section 3.1, any holder of a stock certificate
legended pursuant to Section 2.6 may surrender such certificate to the Company
for removal of the legend, and the Company will duly reissue a new certificate
without the legend.
-3-
<PAGE>
4. Miscellaneous.
-------------
4.1 Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
4.2 Amendments and Waivers. Any term hereof may be amended or waived
----------------------
only with the written consent of the Company, the Founders, and holders of at
least a majority of the Series A Preferred Stock held by the Investors. Any
amendment or waiver effected in accordance with this Section 4.2 shall be
binding upon the Company, the Investors, and the Founders, and each of their
respective successors and assigns.
4.3 Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient on the date of delivery, when
delivered personally or by overnight courier or sent by telegram or fax, or
forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified
at such party's address or fax number as set forth on the signature page or on
Exhibit A hereto, or as subsequently modified by written notice.
- ---------
4.4 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
4.5 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
4.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
4.7 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
[Signature Page Follows]
-4-
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION
----------------------------
(Investor)
By: /s/ Daniel Putterman By: ________________________
---------------------------
Daniel Putterman, President
Name:
-----------------------
(print)
Title:______________________
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
SIGNATURE PAGE TO VOTING AGREEMENT
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION /s/ Marc Butlein
----------------------------
(Investor)
By: /s/ Daniel Putterman By: ________________________
---------------------------
Daniel Putterman, President
Name: Marc Butlein
-----------------------
(print)
Title:______________________
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION James & Sharon Caroll Charitable
Annuity Trust
--------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Ed Quinlan
--------------------------- ------------------------
Daniel Putterman, President
Name: Ed Quinlan
--------------------------
(print)
Title: Trustee
-------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION Robert J. Carroll Charitable
Annuity Trust
--------------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Ed Quinlan
--------------------------- ------------------------------
Daniel Putterman, President
Name: Ed Quinlan
---------------------------------
(print)
Title: Trustee
--------------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION Edgewater Private Equity Fund II LP
-----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ [ILLEGIBLE]
--------------------------- -------------------------------
Daniel Putterman, President
Name: [ILLEGIBLE]
------------------------------
(print)
Title: Partner
-----------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION Fritas AS
-----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Carl Preben Hoegh
--------------------------- --------------------------------
Daniel Putterman, President
Name: Carl Preben Hoegh
------------------------------
(print)
Title: Director
-----------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION Herbert M. Gardner
-----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Herbert M. Gardner
--------------------------- -------------------------------
Daniel Putterman, President
Name: Herbert M. Gardner
-----------------------------
(print)
Title:_____________________________
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION Peter H. Gardner
-----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Peter H. Gardner
--------------------------- -------------------------------
Daniel Putterman, President
Name: Peter H. Gardner
------------------------------
(print)
Title:_____________________________
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION Douglas C. Horner, Jr.
-----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Douglas C. Horner, Jr.
--------------------------- -------------------------------
Daniel Putterman, President
Name: Douglas C. Horner, Jr.
------------------------------
(print)
Title:_____________________________
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION International Communication Enterprises
----------------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Martin Velasco
--------------------------- ------------------------------------
Daniel Putterman, President
Name: Martin Velasco
-----------------------------------
(print)
Title:__________________________________
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION J&G Charitable Remainder Annuity Trust
----------------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Ed Quinlan
--------------------------- ------------------------------------
Daniel Putterman, President
Name: Ed Quinlan
-----------------------------------
(print)
Title: Trustee
---------------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION Philip J. Monego, Sr.
----------------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Philip J. Monego
--------------------------- ------------------------------------
Daniel Putterman, President
Name: P.J. Monego
-----------------------------------
(print)
Title:
----------------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION James & Pamela Sheppard Charitable
Annuity Trust
-------------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Ed Quinlan
--------------------------- ---------------------------------
Daniel Putterman, President
Name: Ed Quinlan
--------------------------------
(print)
Title: Trustee
------------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
BOREL BANK & TRUST CO.
TRUST DEPARTMENT
160 BOVET ROAD
SAN MATEO, CA 94402
AENEID CORPORATION Carol Smith IRA
-------------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Lawrence Russell
--------------------------- ---------------------------------
Daniel Putterman, President
Name: Lawrence Russell
--------------------------------
(print)
Title: Senior Vice President and
Trust Officer
--------------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION Sparkventures Fund L.P.
-------------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Matthew d'Arbeloff
--------------------------- ---------------------------------
Daniel Putterman, President
Name: Matthew d'Arbeloff
--------------------------------
(print)
Title: Managing Member
--------------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION KS Teknoinvest V
-------------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Bjorn Bjora
--------------------------- ---------------------------------
Daniel Putterman, President
Name: Bjorn Bjora
--------------------------------
(print)
Title: Managing Director
--------------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
/s/ Daniel Putterman
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
/s/ Robert Ainsbury
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION Martin Velasco
----------------------------
(Investor)
By: By: /s/ Martin Velasco
--------------------------- -------------------------
Daniel Putterman, President
Name: Martin Velasco
-----------------------
Address: (print)
282 Second Street, Suite 200 Title:______________________
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS:
- -------------------------------
Daniel Putterman
Address: c/o Company address above
Fax Number: (415) 538-8558
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
SIGNATURE PAGE TO VOTING AGREEMENT
<PAGE>
The parties hereto have executed this Voting Agreement as of the date first
written above
COMPANY: INVESTORS:
AENEID CORPORATION K.B. (C.I.) NOMINEES LTD.
----------------------------
(Investor)
By: By:
--------------------------- -------------------------
Daniel Putterman, President
Name:
-----------------------
Address: (print)
282 Second Street, Suite 200 Title:______________________
San Francisco, CA 94105
Fax: (415) 538-8558 FOR K B (C.I.) NOMINEES LTD
FOUNDERS: /s/ [ILLEGIBLE] Director
-----------------------
- ------------------------------- /s/ [ILLEGIBLE] Secretary
Daniel Putterman -----------------------
Address: c/o Company address above
Fax Number: (415) 538-8558
- -------------------------------
Robert Ainsbury
Address: c/o Company address above
Fax Number: (415) 538-8558
SIGNATURE PAGE TO VOTING AGREEMENT
<PAGE>
EXHIBIT A
---------
INVESTORS
---------
Name and Address. Shares
-----------------
- ------------------------------------------- -------------------
Edgewater Private Equity Fund II, L.P. 333,333
Gordon Management
Attn.; James Gordon
418 6th Ave., Suite 1200
Des Moines, IA 50309
KS Teknoinvest V 862,068
Attn.: Mr. Tore Mengshoel
TeknoInvest Management AS
Postboks 556 Sentrum
0105 Oslo
Norway
Sparkventures Fund, L.P. 862,068
20 Dudley Street
Brooklive, MA 02146
Vision, K.B. (C.I.) Nominees Limited as 574,712
nominee for Vision Capital L.P.
Attn. Andy Williams
Kleinwort Benson (Jersey) Fund Managers
Ltd.
P.O. Box 76, Wests Center
St. Helier Jersey JE4 8PQ
Channel Islands
Phillip Monego, Sr. 46,329
NetChannel, Inc.
651 Gateway Blvd., Suite 420
South San Francisco, CA 94080
Name and Address Shares
----------------
- ------------------------------------------- -------------------------
Initial Traunche
- ----------------
Carroll, James and Sharon Carroll 92,875
Charitable Annuity Trust
c/o Hugh Beecher
100 Larkspur Landing Circle, Suite 206
Larkspur, CA 94939
<PAGE>
Carroll, Robert J. Carroll Charitable 92,875
Annuity Trust
c/o Hugh Beecher
100 Larkspur Landing Circle, Suite 206
Larkspur, CA 94939
J & S Charitable Remainder Annuity Trust 92,875
c/o Hugh Beecher
100 Larkspur Landing Circle, Suite 206
Larkspur, CA 94939
Sheppard, James & Pamela Sheppard
Charitable Annuity Trust 92,649
c/o Hugh Beecher
100 Larkspur Landing Circle, Suite 206
Larkspur, CA 94939
Fritas AS 54,533
Attn. Carl Preben Hoegh
Hoegh Invest A/S
Parkveien 55
P.O. Box 2416 Solli
0201 Oslo
Norway
Gardner, Herbert 27,159
Janney Montgomery Scott, Inc.
26 Broadway, 8th Floor
New York, NY 10004
Gardner, Peter H. 27,159
Media Technology Ventures
One First St., Suite 2
Los Altos, CA 94022
Hoegh Invest AS 54,520
Attn. Carl Preben Hoegh
Hoegh Invest A/S
Parkveien 55
P.O. Box 2416 Solli
0201 Oslo
Norway
Horner, Douglas 55,402
2400 Steiner Street
<PAGE>
San Francisco, CA 94115
International Communication Enterprises 107,428
Attn. Martin Velasco
Le Greny
1279 Bogis
Bossey
Switzerland
Smith, Borel Bank & Trust, custodian for 80,325
Carol L. Smith IRA Rollover
160 Bovet Road
San Mateo, CA 94402
Vision, K.B. (C.I.) Nominees Limited as 275,311
nominee for Vision Capital L.P.
Attn. Andy Williams
Kleinwort Benson (Jersey) Fund Managers
Ltd.
P.O. Box 76, Wests Center
St. Helier Jersey JE4 8PQ
Channel Islands
Marc Butlein 46,455
35 Kettle Creek Rd.
Weston, CT 06883
Spark Ventures 233,600
20 Dudley Street
Brooklive, MA 02146
Edgewater Private Equity Fund II, L.P. 92,029
Gordon Management, Attn. James Gordon
418 6th Avenue, Suite 1200
Des Monies, IA 50309
Fritas AS 46,651
Attn. Carl Preben Hoegh
Hoegh Invest A/S
Parkveien 55
P.O. Box 2416 Solli
0201 Oslo
Norway
Hoegh AS 46,563
Attn. Carl Preben Hoegh
<PAGE>
Hoegh Invest A/S
Parkveien 55
P.O. Box 2416 Solli
0201 Oslo
Norway
Herbert Gardner 9,310
Janney Montgomery Scott, Inc.
26 Broadway, 8th Floor
New York, NY 10004
Peter Gardner 9,328
Media Technology Ventures
One First St., Suite 2
Los Altos, CA 94022
Martin Velasco 93,073
Le Greny
1279 Bogis
Bossey
Switzerland
KS TeknoInvest V 234,671
Attn. Mr. Tore Mengshoel
TeknoInvest Management AS
Postboks 556 Sentrum
0105 Oslo
Norway
<PAGE>
Vision, K.B. (C.I.) Nominees Limited as 236,372
nominee for Vision Capital L.P.
Attn. Andy Williams
Kleinwort Benson (Jersey) Fund Managers
Ltd.
P.O. Box 76, Wests Center
St. Helier Jersey JE4 8PQ
Channel Islands
<PAGE>
EXHIBIT 9.2
AENEID CORPORATION
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is made as of the 6/th/ day of
---------
October 1999, by and among Aeneid Corporation, a Delaware corporation (the
"Company"), Bluestem Capital Partners II, L.P. ("Bluestem"), Edgewater Private
Equity Fund II, L.P. ("Edgewater"), Vision Capital L.P. ("Vision", and together
with Bluestem and Edgewater, the "Shareholders") and Daniel Putterman
("Putterman").
AGREEMENT
The parties agree as follows:
1. Election of Putterman as Director. At any meeting of the
---------------------------------
shareholders of the Company at which members of the Board of Directors of the
Company are to be elected, or whenever members of the Board of Directors are to
be elected by written consent, the Shareholders agree to vote or act with
respect to their shares so as to elect Putterman as a member of the Company's
Board of Directors.
2. Legends. Each certificate representing shares of the Company's
-------
capital stock held by the Shareholders or any assignee of the Shareholders shall
bear the following legend:
"THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING
AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN
SHAREHOLDERS OF THE COMPANY (A COPY OF WHICH MAY BE
OBTAINED FROM THE COMPANY), AND BY ACCEPTING ANY
INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH
INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME
BOUND BY ALL THE PROVISIONS OF SAID VOTING AGREEMENT."
3. Termination.
-----------
3.1 Termination Events. This Agreement shall terminate upon the
------------------
latter of:
(a) One year from the date hereof;
(b) An underwritten public offering by the Company of shares of
its Common Stock pursuant to a registration statement under the Securities Act
of 1933, as amended; or
(c) Notice to the Company or the Shareholders that Putterman
does not wish to be reelected to the Company's Board of Directors.
<PAGE>
3.2 Removal of Legend. At any time after the termination of this
-----------------
Agreement in accordance with Section 3.1, any holder of a stock certificate
legended pursuant to Section 2 may surrender such certificate to the Company for
removal of the legend, and the Company will duly reissue a new certificate
without the legend.
4. Miscellaneous.
-------------
4.1 Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
4.2 Amendments and Waivers. Any term hereof may be amended or waived
----------------------
only with the written consent of the Shareholders and Putterman. Any amendment
or waiver effected in accordance with this Section 4.2 shall be binding upon the
Company, the Shareholders and Putterman, and each of their respective successors
and assigns.
4.3 Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient on the date of delivery, when
delivered personally or by overnight courier or sent by telegram or fax, or
forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified
at such party's address or fax number as set forth on the signature page hereto,
or as subsequently modified by written notice.
4.4 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
4.5 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
4.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
4.7 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2
<PAGE>
The parties hereto have executed this Voting Agreement as of the date
first written above.
AENEID CORPORATION
By: /s/ Mark Elder
-----------------------------
Name: Mark Elder
---------------------------
(print)
Title: Director, Finance and Administration
---------------------------
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax Number: (415) 538-8558
BLUESTEM CAPITAL PARTNERS II, L.P.
By: /s/ Steve Kirby
-------------------------------
Name: Steve Kirby
-----------------------------
(print)
Title: President of the General Partner
---------------------------
Address:
122 South Philips Avenue, Suite 300
Sioux Falls, SD 57104
EDGEWATER PRIVATE EQUITY II FUND, L.P.
By: /s/ Robert G. Allison
-----------------------------
Name: Robert G. Allison
----------------------------
(print)
Title: Partner
---------------------------
Address:
900 N. Michigan Avenue
Suite 1400
Chicago, IL
<PAGE>
VISION CAPITAL L.P.
By: /s/ Dag Tellefsen
-----------------------------
Name: Dag Tellefsen
----------------------------
(print)
Title: General Partner
---------------------------
Address:
P.O. Box 76, Wests Center
St. Helier Jersey JE4 8PQ
Channel Islands
/s/ Daniel Putterman
---------------------------------
DANIEL PUTTERMAN
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax Number: (415) 538-8558
<PAGE>
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Agreement is made as of the __________ day of _______________,
______, by and between EoExchange, Inc., a Delaware Corporation ("the Company"),
and the undersigned Director .[Officer] of the Company (the "Indemnitee"), with
reference to the following facts:
The Indemnitee is currently serving as a Director .[Officer] of the
Company and the Company wishes the Indemnitee to continue in such capacity. The
Indemnitee is willing, under certain circumstances, to continue serving as a
Director .[Officer] of the Company.
The Indemnitee has indicated that he does not regard the indemnities
available under the Company's Certificate of Incorporation and Bylaws as
adequate to protect him against the risks associated with his service to the
Company and has noted that the Company's directors' and officers' liability
insurance policy has numerous exclusions and a deductible and thus does not
adequately protect Indemnitee. In this connection the Company and the Indemnitee
now agree they should enter into this Indemnification Agreement in order to
provide greater protection to Indemnitee against such risks of service to the
Company.
Section 145 of the General Corporation Law of the State of Delaware,
under which Law the Company is organized, empowers corporations to indemnify a
person serving as a director, officer, employee or agent of the corporation and
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise, and said Section 145 and the Bylaws of the Company specify
that the indemnification set forth in said Section 145 and in the Bylaws,
respectively, shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
1
<PAGE>
In order to induce the Indemnitee to continue to serve as a Director
.[Officer] of the Company and in consideration of his continued service, the
Company hereby agrees to indemnify the Indemnitee as follows:
1. Indemnity. The Company will indemnify the Indemnitee, his
---------
executors, administrators or assigns, for any Expenses (as defined below)
which the Indemnitee is or becomes legally obligated to pay in connection
with any Proceeding. As used in this Agreement the term "Proceeding" shall
include any threatened, pending or completed claim, action, suit or
proceeding, whether brought by or in the right of the Company or otherwise
and whether of a civil, criminal, administrative or investigative nature,
in which the Indemnitee may be or may have been involved as a party or
otherwise, by reason of the fact that Indemnitee is or was a director or
officer of the Company, by reason of any actual or alleged error or
misstatement or misleading statement made or suffered by the Indemnitee, by
reason of any action taken by him or of any inaction on his part while
acting as such director or officer, or by reason of the fact that he was
serving at the request of the Company as a director, trustee, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise; provided, that in each such case Indemnitee acted in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Company, and, in the case of a
criminal proceeding, in addition had no reasonable cause to believe that
his conduct was unlawful. As used in this Agreement, the term "other
enterprise" shall include (without limitation) employee benefit plans and
administrative committees thereof, and the term "fines" shall include
(without limitations) any excise tax assessed with respect to any employee
benefit plan.
2
<PAGE>
2. Expenses. As used in this Agreement, the term "Expenses" shall
--------
include, without limitation, damages, judgments, fines, penalties,
settlements and costs, attorneys' fees and disbursements and costs of
attachment or similar bonds, investigations, and any expenses of
establishing a right to indemnification under this Agreement.
3. Enforcement. If a claim or request under this Agreement is not
-----------
paid by the Company, or on its behalf, within thirty days after a written
claim or request has been received by the Company, the Indemnitee may at
any time thereafter bring suit against the Company to recover the unpaid
amount of the claim or request and if successful in whole or in part, the
Indemnitee shall be entitled to be paid also the Expenses of prosecuting
such suit. The Company shall have the right to recoup from the Indemnitee
the amount of any item or items of Expenses theretofore paid by the Company
pursuant to this Agreement, to the extent such Expenses are not reasonable
in nature or amounts; provided, however, that the Company shall have the
burden of proving such Expenses to be unreasonable. The burden of proving
that the Indemnitee is not entitled to indemnification for any other reason
shall be upon the Company.
4. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all papers required
and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Company
effectively to bring suit to enforce such rights.
5. Exclusions. The Company shall not be liable under this Agreement
----------
to pay any Expenses in connection with any claim made against the
Indemnitee:
3
<PAGE>
(a) to the extent that payment is actually made to the
Indemnitee under a valid, enforceable and collectible insurance
policy;
(b) to the extent that the Indemnitee is indemnified and
actually paid otherwise than pursuant to this Agreement;
(c) in connection with a judicial action by or in the right of
the Company, in respect of any claim, issue or matter as to which the
Indemnitee shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Company unless and
only to the extent that any court in which such action was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper;
(d) if it is proved by final judgment in a court of law or other
final adjudication to have been based upon or attributable to the
Indemnitee's in fact having gained any personal profit or advantage to
which he was not legally entitled;
(e) for a disgorgement of profits made from the purchase and
sale by the Indemnitee of securities pursuant to Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state statutory law or common law;
(f) brought about or contributed to by the dishonesty of the
Indemnitee seeking payment hereunder; however, notwithstanding the
foregoing, the Indemnitee shall be protected under this Agreement as
to any claims upon
4
<PAGE>
which suit may be brought against him by reason of any alleged
dishonesty on his part, unless a judgment or other final adjudication
thereof adverse to the Indemnitee shall establish that he committed
(i) acts of active and deliberate dishonesty, (ii) with actual
dishonest purpose and intent, (iii) which acts were material to the
cause of action so adjudicated; or
(g) for any judgment, fine or penalty which the Company is
prohibited by applicable law from paying as indemnity or for any other
reason.
6. Indemnification of Expenses of Successful Party. Notwithstanding
-----------------------------------------------
any other provision of this Agreement, to the extent that the Indemnitee
has been successful on the merits or otherwise in defense of any Proceeding
or in defense of any claim, issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against any and all
Expenses incurred in connection therewith.
7. Partial Indemnification. If the Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify the Indemnitee for the portion of such
Expenses to which the Indemnitee is entitled.
8. Advance of Expenses. Expenses incurred by the Indemnitee in
-------------------
connection with any Proceeding, except the amount of any settlement, shall
be paid by the Company in advance upon request of the Indemnitee that the
Company pay such Expenses. The Indemnitee hereby undertakes to repay to the
Company the amount of any Expenses theretofore paid by the Company to the
extent that it is ultimately determined that such Expenses were not
reasonable or that the Indemnitee is not entitled to indemnification.
5
<PAGE>
9. Approval of Expenses. No Expenses for which indemnity shall be
--------------------
sought under this Agreement, other than those in respect of judgments and
verdicts actually rendered, shall be incurred without the prior consent of
the Company, which consent shall not be unreasonably withheld.
10. Notice of Claim. The Indemnitee, as a condition precedent to
---------------
his right to be indemnified under this Agreement, shall give to the Company
notice in writing as soon as practicable of any claim made against him for
which indemnity will or could be sought under this Agreement. Notice to the
Company shall be given at its principal office and shall be directed to the
Corporate Secretary (or such other address as the Company shall designate
in writing to the Indemnitee); notice shall be deemed received if sent by
prepaid mail properly addressed, the date of such notice being the date
postmarked. In addition, the Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be
within the Indemnitee's power.
11. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one instrument.
12. Indemnification Hereunder Not Exclusive. Nothing herein shall
---------------------------------------
be deemed to diminish or otherwise restrict the Indemnitee's right to
indemnification under any provision of the Certificate of Incorporation or
Bylaws of the Company and amendments thereto or under law.
13. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with Delaware law.
14. Saving Clause. Wherever there is conflict between any provision
-------------
of this Agreement and any applicable present or future statute, law or
regulation contrary to
6
<PAGE>
which the Company and the Indemnitee have no legal right to contract, the
latter shall prevail, but in such event the affected provisions of this
Agreement shall be curtailed and restricted only to the extent necessary to
bring them within applicable legal requirements.
15. Coverage. The provisions of this Agreement shall apply with
--------
respect to the Indemnitee's service as a Director .[Officer] of the Company
prior to the date of this Agreement and with respect to all periods of such
service after the date of this Agreement, even though the Indemnitee may
have ceased to be a Director .[Officer] of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and signed as of the day and year first above written.
EOEXCHANGE, INC.
By_____________________________
Name:
Title:
_______________________________
Name:
7
<PAGE>
EXHIBIT 10.5
AENEID CORPORATION
THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
OCTOBER 18, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
1. REGISTRATION RIGHTS........................................................ 2
1.1 Definitions............................................................ 2
1.2 Request for Registration............................................... 3
1.3 Company Registration................................................... 5
1.4 Form S-3 Registration.................................................. 5
1.5 Obligations of the Company............................................. 6
1.6 Furnish Information.................................................... 8
1.7 Expenses of Registration............................................... 8
1.8 Underwriting Requirements.............................................. 9
1.9 Delay of Registration.................................................. 10
1.10 Indemnification........................................................ 10
1.11 Reports Under Securities Exchange Act of 1934.......................... 12
1.12 Assignment of Registration Rights...................................... 13
1.13 Limitations on Subsequent Registration Rights.......................... 13
1.14 "Market Stand-Off" Agreement........................................... 13
1.15 Termination of Registration Rights..................................... 14
2. COVENANTS OF THE COMPANY................................................... 14
2.1 Delivery of Financial Statements....................................... 14
2.2 Inspection............................................................. 15
2.3 Right of First Offer................................................... 15
2.4 Use of Proceeds........................................................ 17
2.5 Reserve for Conversion Shares.......................................... 17
2.6 Employee Confidential Information and Invention Assignment Agreements.. 17
2.7 Compliance with Laws................................................... 17
2.8 Termination of Covenants............................................... 18
3. MISCELLANEOUS.............................................................. 18
3.1 Restrictions On Transferability........................................ 18
3.2 Restrictive Legends.................................................... 18
3.3 Notice of Proposed Transfers........................................... 19
3.4 Successors and Assigns................................................. 19
3.5 Amendments and Waivers................................................. 20
3.6 Notices................................................................ 20
3.7 Severability........................................................... 20
3.8 Governing Law.......................................................... 20
3.9 Counterparts........................................................... 20
3.10 Titles and Subtitles................................................... 21
3.11 Aggregation of Stock................................................... 21
3.12 Termination of Prior Agreement......................................... 21
</TABLE>
<PAGE>
AENEID CORPORATION
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------------------
This Third Amended and Restated Investors' Rights Agreement (the
"Agreement") is made as of October 18, 1999 by and among Aeneid Corporation, a
---------
California corporation (the "Company"), the investors listed on Exhibit A hereto
------- ---------
(the "Existing Investors") and the investors listed on Exhibit B hereto (the
------------------
"Series D Investors"). The Series D Investors, the Existing Investors and any
------------------
additional investors who may be added as parties to this Agreement pursuant to
Section 3.5 are referred to collectively herein as the "Investors."
RECITALS
--------
A. The Company sold and issued to certain of the Investors (the
"Series A Investors") 8,124,538 shares of the Series A Preferred Stock of the
------------------
Company pursuant to that certain Series A Preferred Stock Purchase Agreement
between the Company and the Series A Investors dated as of April 20, 1998 (the
"Series A Purchase Agreement").
---------------------------
B. The Company sold and issued to certain of the Investors (the
"Series B Investors" and, together with the Series A Investors, the "Existing
------------------
Investors") 2,194,666 shares of the Series B Preferred Stock of the Company
pursuant to that certain Series B Preferred Stock Purchase Agreement between the
Company and the Series B Investors dated as of March 19, 1999 (the "Series B
--------
Purchase Agreement").
- ------------------
C. The Company sold and issued to certain of the Investors (the
"Series C Investors" and, together with the Series A Investors and the Series B
------------------
Investors, the "Existing Investors") 2,898,706 shares of the Series C Preferred
Stock of the Company pursuant to that certain Series C Preferred Stock Purchase
Agreement between the Company and the Series C Investors dated as of September
17, 1999 (the "Series C Purchase Agreement").
---------------------------
C. The Company and the Existing Investors entered into a Second
Amended and Restated Investor Rights Agreement (the "Prior Agreement") dated as
---------------
of September 17, 1999.
D. Pursuant to an engagement letter with BancBoston Robertson
Stephens Inc., a Massachusetts corporation ("BRS") dated as of July 30, 1999
---
(the "Engagement Letter"), the Company proposes to sell and issue to BRS a
-----------------
Series D Preferred Stock Warrant to purchase up to 160,373 shares of Series D
Preferred Stock (collectively with any other warrants ("Additional Warrants") to
-------------------
purchase Series D Preferred Stock issued to BRS pursuant to the Engagement
Letter, the "BRS Warrant").
E. The Company and the Series D Investors have entered into a Series
D Preferred Stock Purchase Agreement (the "Series D Purchase Agreement") of even
---------------------------
date herewith pursuant to which the Company desires to sell to the Series D
Investors and the Series D Investors desire to purchase from the Company shares
of the Company's Series D Preferred Stock. A condition to the Series D
Investors' obligations under the Series D Purchase
<PAGE>
Agreement is that the Company, the Existing Investors and the Series D Investors
enter into this Agreement in order to provide the Series D Investors with (i)
certain rights to register shares of the Company's Common Stock issuable upon
conversion of the Preferred Stock held by the Investors, (ii) certain rights to
receive or inspect information pertaining to the Company, (iii) a right of first
offer with respect to certain issuances by the Company of its securities, and
(iv) certain other covenants by the Company. The Company desires to induce the
Series D Investors to purchase shares of Series D Preferred Stock pursuant to
the Series D Purchase Agreement by agreeing to the terms and conditions set
forth herein. The Company and the Existing Investors intend that the Prior
Agreement be terminated and replaced in its entirety by this Agreement. The
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock held by the Investors are referred to
collectively herein as the "Preferred Shares."
AGREEMENT
---------
The parties hereby agree as follows:
1. Registration Rights. The Company and the Investors covenant and agree as
-------------------
follows:
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The terms "register," "registered," and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
--------------
registration statement or document;
(b) The term "Registrable Securities" means (i) the shares of Common
----------------------
Stock issuable or issued upon conversion of the Series A Preferred Stock, (ii)
the shares of Common Stock issuable or issued upon conversion of the Series B
Preferred Stock, (iii) the shares of Common Stock issuable or issued upon
conversion of the Series C Preferred Stock, (iv) the shares of Common Stock
issuable or issued upon conversion of the Series D Preferred Stock, (v) any
other shares of 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 (including but not limited to shares of Common Stock issued upon
a stock split), the shares listed in (i), (ii), (iii) or (iv), (vi) shares of
Common Stock issuable upon conversion of Series A Preferred Stock issuable upon
exercise of that certain warrant dated June 4, 1998 issued to Silicon Valley
Bank, (vii) the shares of Common Stock issued or issuable pursuant to the
conversion of the Warrant Shares issuable pursuant to the BRS Warrant, (viii)
shares of Common Stock issued or issuable upon conversion of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock issued or issuable upon exercise of warrants to purchase Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock issued after the date hereof to financial institutions or
lessors in connection with commercial credit arrangements, equipment financings
or similar transactions approved in each case by the Board of Directors of the
Company, which entities execute a counterpart signature page hereto and agree to
be bound by the terms hereof, and (ix) shares of Common Stock issued or issuable
<PAGE>
upon conversion of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock issued or issuable upon exercise of
warrants to purchase Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock or Series D Preferred Stock issued after the date hereof to
providers of services, products or technologies (or rights thereto) to the
Company, if such issuance is unanimously approved by the Board of Directors of
the Company, which entities execute a counterpart signature page hereto and
agree to be bound by the terms hereof; provided, however, that the foregoing
-------- -------
definition shall exclude in all cases any Registrable Securities sold by a
person in a transaction in which his or her rights under this Agreement are not
assigned. Notwithstanding the foregoing, Common Stock or other securities shall
only be treated as Registrable Securities if and so long as they have not been
(A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof so that all transfer restrictions, and
restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale;
(c) The number of shares of "Registrable Securities then outstanding"
---------------------------------------
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities;
(d) The term "Holder" means any person owning or having the right to
------
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.12 of this Agreement;
(e) The term "Form S-3" means such form under the Securities Act as
--------
in effect on the date hereof or any successor form under the Securities Act;
(f) The term "SEC" means the Securities and Exchange Commission; and
---
(g) The term "Qualified IPO" means an underwritten public offering by
-------------
the Company of shares of its Common Stock pursuant to a registration statement
under the Securities Act, which results in gross proceeds of at least
$15,000,000 and the public offering price of which is not less than $4.00 per
share (appropriately adjusted for any stock split, dividend, combination or
other recapitalization).
(h) The term "Warrant Shares" shall mean the shares of the
--------------
Company's Series D Preferred Stock issuable upon exercise of the BRS
Warrant.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier of (i)
April 20, 2002, or (ii) six (6) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement on Form S-4, S-8 or any successor thereto), a
written request from the Holders of a majority of the Registrable Securities
then outstanding that the Company file a registration statement under the
Securities Act covering the registration of at least forty percent (40%) of the
Registrable Securities then
<PAGE>
outstanding (or a lesser percent if the anticipated aggregate offering price,
net of underwriting discounts and commissions, would exceed $10,000,000), then
the Company shall, within ten (10) days of the receipt thereof, give written
notice of such request to all Holders and shall, subject to the limitations of
subsection 1.2(b), use its best efforts to effect as soon as practicable, and in
any event within 90 days of the receipt of such request, the registration under
the Securities Act of all Registrable Securities which the Holders request to be
registered within fifteen (15) days of the mailing of such notice by the Company
in accordance with Section 3.3.
(b) If the Holders initiating the registration request hereunder
("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 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include his 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
(together with the Company as provided in subsection 1.5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; 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.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
-------- -------
right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
<PAGE>
(ii) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 1.4 below.
1.3 Company Registration. If (but without any obligation to do so) the
--------------------
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders other than the Holders) any of its stock under
the Securities Act in connection with the public offering of such securities
solely for cash (other than a registration on Form S-4, Form S-8 or any
successors thereto, a registration in which the only stock being registered is
Common Stock issuable upon conversion of debt securities which are also being
registered, or any registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within fifteen (15) days after
mailing of such notice by the Company in accordance with Section 3.3, the
Company shall, subject to the provisions of Section 1.8, cause to be registered
under the Securities Act all of the Registrable Securities that each such Holder
has requested to be registered.
1.4 Form S-3 Registration. In case the Company shall receive from any
---------------------
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 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; 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 1.4: (i) if
Form S-3 is not available for such offering by the Holders; (ii) if the Holders
propose to sell Registrable Securities at an aggregate price to the public of
less than $500,000; (iii) if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the
<PAGE>
right to defer the filing of the Form S-3 registration statement for a period of
not more than 120 days after receipt of the request of the Holder or Holders
under this Section 1.4; provided, however, that the Company shall not utilize
-------- -------
this right more than once in any twelve month period; (iv) if the Company has,
within the twelve (12) month period preceding the date of such request, already
effected two registrations on Form S-3 for the Holders pursuant to this Section
1.4; (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; or (vi) during the
period ending one hundred eighty (180) days after the effective date of a
registration statement subject to Section 1.3.
(c) Subject to the foregoing, the Company shall file a 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 1.4 shall not
be counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
1.5 Obligations of the Company. Whenever required under this Section 1 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.
The Company shall not be required to file, cause to become effective or maintain
the effectiveness of any registration statement (other than a registration
statement on Form S-3 pursuant to Section 1.4) that contemplates a distribution
of securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(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 for up to one hundred twenty (120) days.
(c) Furnish to the Holders such numbers 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 its best 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.
<PAGE>
(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 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, such obligation to continue for one hundred twenty (120) days and file
any supplements or amendments as required under Section 1.5(b) to update the
prospectus for such event.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or market on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, 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 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 to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated 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, if any, and to the Holders requesting registration of
Registrable Securities.
(j) To the extent reasonably necessary to effect the registration of
any Registrable Securities, make available for inspection by each seller of
Registrable Securities, any underwriter participating in any distribution
pursuant to such registration statement, and any attorney, accountant or other
agent retained by such seller or underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
<PAGE>
1.6 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 1 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. The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement
if, as a result of the application of the preceding sentence, 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 subsection
1.2(a) or subsection 1.4(b)(2), whichever is applicable.
1.7 Expenses of Registration.
------------------------
(a) Demand Registration. All expenses (other than underwriting
-------------------
discounts and commissions) incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them with the
approval of the Company, which approval shall not be unreasonably withheld,
shall be borne by the Company; provided, however, that the Company shall not be
-------- -------
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2 or unless the
registration request is withdrawn due to a material adverse change in the
Company's financial condition or business which was not known or reasonably
foreseeable by the selling Holders at the time the registration was requested.
(b) Company Registration. All expenses (other than underwriting
--------------------
discounts and commissions) incurred in connection with registrations, filings or
qualifications of Registrable Securities pursuant to Section 1.3 for each
Holder, including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel for the selling Holders selected by them with the approval of the
Company, which approval shall not be unreasonably withheld, shall be borne by
the Company.
(c) Registration on Form S-3. All expenses (other than underwriting
------------------------
discounts and commissions) incurred in connection with a registration requested
pursuant to Section 1.4, including (without limitation) all registration,
filing, qualification, printers' and accounting fees and the reasonable fees and
disbursements of one counsel for the selling Holder or Holders selected by them
with the approval of the Company, which approval shall not be unreasonably
withheld, and counsel for the Company shall be borne by the Company.
<PAGE>
(d) Underwriting Discounts and Commissions. All underwriting
--------------------------------------
discounts and commissions incurred in connection with registrations in
connection with each registration statement under Section 1 shall be borne by
the participating sellers (and the Company, if the Company is a seller) in
proportion to the number of shares sold by each, or as they otherwise may agree.
1.8 Underwriting Requirements. In connection with any offering involving
-------------------------
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 1.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by Holders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters determine in their sole discretion is compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not jeopardize the success
of the offering (the securities so included to be apportioned pro rata among the
selling shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder or in such other proportions
as shall mutually be agreed to by such selling shareholders) but in no event
shall (i) any shares being sold by a Holder exercising a demand registration
right set forth in Section 1.2 be excluded from such offering, (ii) the amount
of securities of the selling Holders included in the offering be reduced below
twenty percent (20%) of the total amount of securities included in such
offering, unless such offering is the initial public offering of the Company's
securities, in which case, except as provided in (i) the selling shareholders
may be excluded if the underwriters make the determination described above and
no other shareholder's securities are included. For purposes of the preceding
parenthetical concerning apportionment, for any selling shareholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and shareholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
-------
shareholder," and any pro rata reduction with respect to such "selling
- -----------
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder," as defined in this sentence.
1.9 Delay of Registration. 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 1.
1.10 Indemnification. In the event any Registrable Securities are included
---------------
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act)
for such Holder and
<PAGE>
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (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"): (i) any untrue statement or alleged untrue 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; and the Company will pay to each such Holder, underwriter
or controlling person, as incurred, 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 subsection 1.10(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 to any Holder,
underwriter or controlling person 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
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons 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 expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
-------- -------
in this subsection 1.10(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, that in no event shall any indemnity under this subsection
--------
1.10(b) exceed the net proceeds from the offering received by such Holder,
except in the case of willful fraud by such Holder.
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
1.10 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 1.10, 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
-------- -------
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, 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 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
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 statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, that in no event shall any contribution by a Holder
--------
under this Subsection 1.10(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
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.
(e) 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 the foregoing provisions, the provisions in the underwriting agreement
shall control; provided, however, that except as expressly provided in the
underwriting agreement, the obligations of the persons selling shares pursuant
to such underwriting agreement to indemnify the underwriters shall not be
considered to conflict with the indemnification obligations between the Company
and the Holders under this Section 1.10.
<PAGE>
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to making
---------------------------------------------
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;
(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;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of at
least 500,000 shares of such securities (as adjusted for any future stock
splits, reclassifications and the like), provided the Company is, within a
--------
reasonable time after such transfer, furnished with 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 provided, further, that
-------- -------
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and
<PAGE>
assignees of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership;
provided that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under Section 1.
1.13 Limitations on Subsequent Registration Rights. From and after the date
---------------------------------------------
of this Agreement, the Company shall not, without the prior written consent of
the Holders of a majority of the outstanding Registrable Securities, enter into
any agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 1.2 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not reduce the amount of the Registrable Securities of the
Holders which is included or (b) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of either of the dates set forth in subsection 1.2(a) or within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 1.2.
1.14 "Market Stand-Off" Agreement. Each Holder hereby agrees that, during
---------------------------
the period of duration (up to, but not exceeding, 180 days for the Company's
initial public offering of securities and 90 days for any underwritten public
offering thereafter) specified by the Company and an underwriter of Common Stock
or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Securities Act, it shall
not, to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any securities of the
Company held by it at any time during such period except Common Stock included
in such registration; provided, however, that:
-------- -------
(a) such agreement shall be applicable only during the two-year
period following the date of the final prospectus distributed pursuant to the
first such registration statement of the Company which covers Common Stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering;
(b) all officers and directors of the Company, all five-percent
securityholders, and all other persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements; and
(c) notwithstanding the foregoing, the Series D Investors shall be
subject to such agreement only up to, but not exceeding, 180 days after the
Company's initial public offering of securities and not with respect to shares
purchased by them in the Company's initial public offering or in the open
market.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares
<PAGE>
or securities of every other person subject to the foregoing restriction) until
the end of such period, and each Holder agrees that, if so requested, such
Holder will execute an agreement in the form provided by the underwriter
containing terms which are essentially consistent with the provisions of this
Section 1.14.
Notwithstanding the foregoing, the obligations described in this
Section 1.14 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a transaction on Form S-4 or
similar forms which may be promulgated in the future.
1.15 Termination of Registration Rights. No Holder shall be entitled to
----------------------------------
exercise any right provided for in this Section 1 after the earlier of (i) five
(5) years following the consummation of a Qualified IPO, or (ii) such time as
Rule 144 or another similar exemption under the Securities Act is available for
the sale of all of such Holder's shares during a three (3)-month period without
registration.
2. Covenants of the Company.
------------------
2.1 Delivery of Financial Statements. The Company shall deliver to each
--------------------------------
Holder of at least 500,000 shares of Registrable Securities:
(a) as soon as practicable, but in any event within one hundred
twenty (120) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
shareholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP"),
----
and audited and certified by an independent public accounting firm of nationally
recognized standing selected by the Company or otherwise reasonably acceptable
to Holders of a majority of the Registrable Securities then outstanding;
(b) within thirty (30) days of the end of each month, an unaudited
income statement and a statement of cash flows and balance sheet for and as of
the end of such month, in reasonable detail;
(c) as soon as practicable, but in any event thirty (30) days prior
to the end of each fiscal year, an operating budget for the next fiscal year
approved by the Company's board of directors;
(d) copies of any materials provided to the Company's board of
directors prior to each meeting of the board; provided, however, that the
-------- -------
Company shall not be obligated pursuant to this subsection (d) to provide any
material which it reasonably considers to be a trade secret or similar
confidential information; and
(e) within five (5) business days of discovery, notification of any
material non-compliance with any material agreement (except if such non-
compliance has been corrected with such five day period).
<PAGE>
2.2 Inspection. The Company shall permit each Holder of at least 500,000
----------
shares of Registrable Securities, at such Holder's expense, to visit and inspect
the Company's properties, to examine its books of account and records and to
discuss the Company's affairs, finances and accounts with its officers, all at
such reasonable times as may be requested by the Investor; provided, however,
-------- -------
that the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
2.3 Right of First Offer. Subject to the terms and conditions specified in
--------------------
this Section 2.3, the Company hereby grants to each Major Investor (as
hereinafter defined) a right of first offer with respect to future sales by the
Company of its Shares (as hereinafter defined). For purposes of this Section
2.3, a "Major Investor" shall mean any person who holds at least 500,000 shares
--------------
of the Preferred Stock (or the Common Stock issued upon conversion thereof)
issued pursuant to the Series A Purchase Agreement, the Series B Purchase
Agreement, the Series C Purchase Agreement or the Series D Purchase Agreement.
For purposes of this Section 2.3, Major Investor includes any general partners
and affiliates of a Major Investor. A Major Investor who chooses to exercise the
right of first offer may designate as purchasers under such right itself or its
partners or affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
------
each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail or overnight
courier ("Notice") to the Major Investors stating (i) its bona fide intention to
------
offer such Shares, (ii) the number of such Shares to be offered, and (iii) the
price and terms, if any, upon which it proposes to offer such Shares.
(b) Within 10 calendar days after delivery of the Notice, each Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Major Investor bears to the total number of shares
of Common Stock then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities).
(c) The Company may, during the 60-day period following the
expiration of the period provided in subsection 2.3(b) hereof, offer the
remaining unsubscribed portion of the Shares to any person or persons at a price
not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 60 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Major Investors in accordance herewith.
<PAGE>
(d) The right of first offer in this paragraph 2.3 shall not be
applicable (i) to the issuance or sale of Common Stock (or options therefor) to
employees, consultants or directors of the Corporation directly or pursuant to a
stock option plan or restricted stock plan approved by the Board of Directors of
the Company, (ii) to the issuance of securities to financial institutions or
lessors in connection with commercial credit arrangements, equipment financings
or similar transactions approved in each case by the Board of Directors of the
Company, (iii) to the issuance of securities in connection with bona fide
acquisitions, mergers or similar transactions, if such issuance is approved
unanimously by the Board of Directors of the Corporation, (iv) to the issuance
of securities to providers of services, products or technologies (or rights
thereto) to the Company, if such issuance is unanimously approved by the Board
of Directors of the Company, (v) to the issuance of Additional Shares (as
defined in the Series D Purchase Agreement) or Additional Warrants, (vi) to the
issuance of shares of Series D Preferred Stock to shareholders of InGenius
Technoogies, Inc., (vii) to the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities, (viii) to the
issuance or sale of the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock or the Series D Preferred Stock, or (ix) to or
after consummation of a Qualified IPO.
(e) To the extent that an Investor hereunder has a right of first
offer pursuant to Section 2.3 of that certain Second Amended and Restated
Investors' Rights Agreement, dated September 17, 1999, such Investor hereby
waives such right of first offer with respect to the issuance and sale of (i)
shares of the Company's Series D Preferred Stock to the Investors pursuant to
the Series D Purchase Agreement and (ii) the BRS Warrant.
2.4 Use of Proceeds. The Company shall use the net proceeds from the sale
---------------
of the Series D Preferred Stock for: expansion of the Company's sales and
marketing efforts, for capital expenditures necessary for the Company's growth
strategy, and for working capital and other general corporate purposes,
including possible acquisitions and investments.
2.5 Reserve for Conversion Shares. The Company shall at all times reserve
-----------------------------
and keep available out of its authorized but unissued shares of Common Stock,
for the purpose of effecting the conversion of the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock and otherwise complying with the terms of this Agreement, such
number of its duly authorized shares of Common Stock as shall be sufficient to
effect the conversion of the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and the Series D Preferred Stock from time
to time outstanding or otherwise to comply with the terms of this Agreement. If
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of the Preferred Shares and the
Warrant Shares or otherwise to comply with the terms of this Agreement, the
Company will forthwith take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes. The Company will obtain any
authorization, consent, approval or other action by or make any filing with any
court or administrative body that may be required under applicable state
securities laws in connection with the issuance of shares of Common Stock upon
conversion of the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock.
<PAGE>
2.6 Employee Confidential Information and Invention Assignment Agreements.
---------------------------------------------------------------------
The Company will require that all future employees, consultants and officers
having access to proprietary information execute Confidential Information and
Invention Assignment Agreements substantially in the form currently used by the
Company and that such form may not be altered in a manner adverse to the Company
without the approval of the Company's President.
2.7 Compliance with Laws. The Company shall comply with all applicable
--------------------
laws, rules, regulations and orders, noncompliance with which could materially
adversely affect its business or condition, financial or otherwise.
2.8 Termination of Covenants.
------------------------
(a) The covenants set forth in Sections 2.1 through Section 2.3 shall
terminate as to each Investor and be of no further force or effect (i) upon the
consummation of a Qualified IPO, or (ii) when the Company shall (A) sell,
convey, or otherwise dispose of or encumber (other than encumbrances pursuant to
a commercial loan unanimously approved by the Board of Directors of the Company)
all or substantially all of its property or business or merge or consolidate
with any other corporation (other than a wholly-owned subsidiary corporation)
where the shareholders of the Company own less than fifty percent (50%) of the
voting power of the surviving entity after such merger or consolidation or (B)
effect any other transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Company is disposed of,
provided that this subsection (ii) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company.
(b) The covenants set forth in Sections 2.1 and 2.2 shall terminate
as to each Holder and be of no further force or effect when the Company first
becomes subject to the periodic reporting requirements of Sections 13 or 15(d)
of the Exchange Act, if this occurs earlier than the events described in Section
2.9(a) above.
3. Miscellaneous.
-------------
3.1 Restrictions On Transferability. The BRS, Warrant , the Preferred
-------------------------------
Shares, the Warrant Shares and any securities into which the Preferred Shares or
the Warrant Shares may be convertible, shall not be transferable except upon the
conditions specified in this Agreement and with the provisions of the Securities
Act. Each Investor will cause any proposed transferee of the Preferred Shares
(or of the securities into which they may be convertible) held by an Investor to
agree to take and hold such securities subject to the provisions and upon the
conditions specified in this Agreement. BRS will cause any proposed transferee
of the BRS Warrant and the Warrant Shares (or of the securities into which they
may be convertible) to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
3.2 Restrictive Legends. Each certificate representing (i) the Shares,
-------------------
(ii) the Warrant Shares, (iii) shares of the Company's Common Stock issued upon
conversion of the Preferred Shares or the Warrant Shares, and (iv) any
securities issued in respect of the Preferred Shares, the Warrant Shares or such
Common Stock, shall (unless otherwise permitted by the provisions of
<PAGE>
Section 3.3 below) be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER CONTAINED IN THAT CERTAIN THIRD AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT DATED AS OF OCTOBER 18,
1999, WHICH RESTRICTIONS ON TRANSFER ARE INCORPORATED HEREIN BY
REFERENCE.
3.3 Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 3.3. Prior to any proposed transfer
of any Restricted Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the holder thereof
shall give written notice to the Company of such holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and shall be accompanied by either
(i) a written opinion of legal counsel who shall be reasonably satisfactory to
the Company addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, (ii) a "no action" letter from the SEC to the effect that the
distribution of such securities without registration will not result in a
recommendation by the staff of the SEC that action be taken with respect
thereto, or (iii) such other showing that may be reasonably satisfactory to
legal counsel to the Company, whereupon the holder of such Restricted Securities
shall be entitled to transfer such Restricted Securities in accordance with the
terms of the notice delivered by the holder to the Company. Each certificate
evidencing the Restricted Securities transferred as above provided shall bear
the appropriate restrictive legends set forth in Section 3.2 above. All
Restricted Securities transferred as above shall continue to be subject to the
provisions of this Section 3.2 in the same manner as before such transfer.
3.4 Successors and Assigns. Except as otherwise provided in this
----------------------
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties (including transferees of any of the BRS Warrant or the Preferred Shares
or the Warrant Shares or any Common Stock issued upon conversion thereof).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights,
<PAGE>
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.5 Amendments and Waivers. Any term of this Agreement may be amended or
----------------------
waived only with the written consent of the Company and the holders of a
majority of the Registrable Securities then outstanding; provided, however, that
this Agreement may be amended with no further action of such holders to add any
New Purchasers under the Series D Purchase Agreement to this Agreement as
additional investors and to add Additional Warrants issued to BRS pursuant to
the engagement Letter; and provided, further, that Section 1.14(c) of this
Agreement may be amended or waived only with the written consent of the holders
of two thirds of the Series D Preferred Stock then outstanding. Upon the
addition of additional investors, each such investor shall be deemed an
"Investor" for all purposes of this Agreement and shares of Series D Preferred
--------
Stock purchased by such additional investors shall be deemed to be "Preferred
---------
Shares" and "Series D Preferred Stock" for all purposes of this Agreement,
- ------ ------------------------
and the shares of Common Stock issuable or issued upon conversion of such
shares shall be deemed to be "Registrable Securities" for all purposes
----------------------
of this Agreement. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Registrable Securities then
outstanding, each future holder of all such Registrable Securities, and the
Company.
3.6 Notices Unless otherwise provided, any notice required or permitted
-------
by this Agreement shall be in writing and shall be deemed sufficient upon
delivery, when delivered personally or by overnight courier or sent by telegram
or fax, or forty-eight (48) hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address or fax number as set forth below or on
Exhibit A hereto or as subsequently modified by written notice.
- ---------
3.7 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
3.8 Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
laws.
3.9 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.
3.10 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
<PAGE>
3.11 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
3.12 Termination of Prior Agreement. The Prior Agreement is hereby
------------------------------
terminated and replaced in its entirety by this Agreement.
[Signatures Follow on Next Page]
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By: /s/ Daniel Putterman
--------------------------------
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:______________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: BLUESTEM CAPITAL PARTNERS
----------------------------
II, L.P.
--------
By: [ILLEGIBLE]
-----------------------------------------
Title: VICE PRESIDENT OF THE GENERAL PARTNER
---------------------------------------
(if Entity)
SERIES D INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: Emmeram von Braunn
-----------------------
By: /s/ Emmeram von Braunn
-------------------------------------
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_______________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: Edgewater Private Equity
--------------------------
By: /s/ Robert Allison
----------------------------------------
Title: Partner
-------------------------------------
(if Entity)
SERIES D INVESTORS:
Name of Investor:_________________________
By:_______________________________________
Title:____________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: FRITAS AS
-----------------------
By: /s/ Carl Preben Hoegh
-------------------------------------
Title: DIRECTOR
----------------------------------
(if Entity)
SERIES D INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: HPI Holding
-----------------------
By: /s/ Denis Gonseth
-------------------------------------
Title: CHAIRMAN
----------------------------------
(if Entity)
SERIES D INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: HOEGH INVEST AS
-----------------------
By: /s/ Carl Preben Hoegh
-------------------------------------
Title: CHAIRMAN
----------------------------------
(if Entity)
SERIES D INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: KS Technoinvest
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: VISION CAPITAL L.P.
-----------------------
By: /s/ Dag Tellefsen
-------------------------------------
Title: PARTNER
----------------------------------
(if Entity)
SERIES D INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: WESTINDIA AB
-----------------------
By: /s/ Henrik Baltscheffsky
-------------------------------------
Title: V.P.
----------------------------------
(if Entity)
SERIES D INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: A-NEID LLC
-----------------------
By: /s/ Joel D Fedder
-------------------------------------
Title: [ILLEGIBLE]
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Banc Boston Robertson
-----------------------
Stephens
---------------------
By: [ILLEGIBLE]
-------------------------------------
Title: Managing Director
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: BENJAMIN BRECHER
-----------------------
By: /s/ Benjamin Brecher
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Chartwell Holdings Ltd
-----------------------
By: [ILLEGIBLE]
-------------------------------------
DIODATA HOLDINGS LTD.
Title: Sole Director
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor: Murdoch and Company
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Attorney
----------------------------------
(if Entity)
SERIES D INVESTORS:
Name of Investor: Decima Corporation
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Director
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: EarthWeb Inc.
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Executive Vice President
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Scott N. Flanders
-----------------------
By: /s/ Scott N. Flanders
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:________________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:__________________________
By:________________________________________
Title:_____________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Friedrich - Wilhelm Goebel
--------------------------
By: /s/ Friedrich - Wilhelm Goebel
----------------------------------------
Title:_____________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Dale R. Haithcock
-----------------------
By: /s/ Dale R. Haithcock
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Scott A. Jones
-----------------------
By: /s/ Scott A. Jones
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Kelso Traders Ltd
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Director
Address: McNamara Chambers
Main Street
Road Town, Tortola
British Virgin Islands
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Daniel S. Laikin
-----------------------
By: /s/ Daniel S. Laikin
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Robert Laikin
-----------------------
By: /s/ Robert Laikin
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Eli Levitin
-----------------------
By: /s/ Eli Levitin
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Levitin Family
-----------------------
Charitable Trust
----------------------
By: /s/ Eli Levitin
-------------------------------------
Title: Trustee
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: MWDI Partnership
-----------------------
By: /s/ Morris Wolfson
-------------------------------------
Title: General Partner
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Carol Miller
-----------------------
By: /s/ Carol Miller
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Dan J. Mitchell
-----------------------
By: /s/ Dan J. Mitchell
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:________________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:__________________________
By:________________________________________
Title:_____________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Newport(BVI) Holdings Ltd
--------------------------
By: /s/ [ILLEGIBLE]
----------------------------------------
DIODATA HOLDINGS LTD.
Title: Sole Director
-------------------------------------
(if Entity)
Clariden Trust Management Ltd
Dreikonigstrasse 8
800 2 Zurich
Switzerland
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:________________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:__________________________
By:________________________________________
Title:_____________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: ORION VENTURE PARTNERS
--------------------------
By: /s/ [ILLEGIBLE]
----------------------------------------
Title: Managing Partner.
-------------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Joseph I. Piazza
-----------------------
By: /s/ Joseph I. Piazza
-------------------------------------
Title: Managing Director
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_______________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_________________________
By:_______________________________________
Title:____________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: RS COINVESTMENT FUND LP
-------------------------
By: /s/ Joseph Piazza
---------------------------------------
Title: Managing Director
------------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: RT PARTNERS, LP
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: MANAGING DIRECTOR OF THE
GENERAL PARTNER
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Salim S. Reshwan
-----------------------
By: /s/ Salim S. Reshwan
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:__________________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:____________________________
By:__________________________________________
Title:_______________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Ruxton Partners (1999-4)
-------------------------
LLP
-----------------------
By: /s/ Alan Edelman
------------------------------------------
Title: Managing Partner
---------------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: SALENIA AB
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: V.P.
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: JACOB SAFIER
-----------------------
By: /s/ Jacob Safier
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Seligman Communications Unit
Information Fund, Inc.
By: J. & W. Seligman & Co.
Incorporated, its
Name of Investor: Investment Adviser
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Managing Director
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Seligman Investment
Opportunities (Master)
Fund - NTV Portfolio
By: J. & W. Seligman & Co.
Incorporated, its
Name of Investor: Investment Adviser
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Managing Director
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Seligman New Technologies
Fund, Inc.
By: J. & W. Seligman & Co.
Incorporated, its
Name of Investor: Investment Adviser
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Managing Director
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Jinnie Simonsen and
-----------------------
John V. Carbone Jr.
---------------------
By: /s/ Jinnie Simonsen
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Stanley W. Smith
-----------------------
By: /s/ Stanley W. Smith
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Ralph & Saul Tawil
-----------------------
By: /s/ Ralph & Saul Tawil
-------------------------------------
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Telecom Capital
-----------------------
Partners III, LP
---------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Manager, Jest Enterprises LLC
----------------------------------
General Partner
--------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: TENNYSON FUND II LLP
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: MANAGING MEMBER
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: U.S.A. FUND, LLP
-----------------------
By: /s/ MARC P. BLUM
-------------------------------------
Title: PRESIDENT, WORLD TOTAL RETURN INC.
----------------------------------
(if Entity) (SOLE GENERAL PARTNER)
TAXPAYER IDENTIFICATION # 52-1799734
/s/ Marc P. Blum
----------------------------------------
SIGNATURE
100 GARRETT BUILDING
233 EAST REDWOOD STREET
BALTIMORE, MARYLAND 21202
410/576-4240
410/685-8981 (FAX)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Lance GA Ullom
-----------------------
By: /s/ Lance Ullom
-------------------------------------
Title: N/A
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: VICTORYFIRE LTD
-----------------------
By: /s/ CLAUDE POMPER
-------------------------------------
Title: PRESIDENT & CEO
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Vision Capital LP
-----------------------
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Vision Extension LP
-----------------------
By:_____________________________________
Title:__________________________________
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Westgate Capital, LLC
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Member
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Winfield Capital Corp.
-----------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: Chief Financial Officer
----------------------------------
(if Entity)
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
AENEID CORPORATION
By:_____________________________________
Daniel Putterman, President
Address:
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
EXISTING INVESTORS:
Name of Investor:_______________________
By:_____________________________________
Title:__________________________________
(if Entity)
SERIES D INVESTORS:
Name of Investor: Winstar Interactive
-----------------------
Ventures I Inc.
---------------------
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: President, Winstar Interactive
----------------------------------
(if Entity) Ventures I Inc.
SIGNATURE PAGE TO AENEID CORPORATION SERIES D PREFERRED STOCK
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT A
EXISTING INVESTORS
<TABLE>
<CAPTION>
Name and Address. Shares
---------------- ------
<S> <C>
Abbott, Steven Series C 15,823
72 Mercury Avenue
Tiburon, CA 94920
Beecher, Hugh Series A 100,000
Fairview Capital
100 Larkspur Landing Circle
Suite 206
Larkspur, CA 94939
Bluestem Capital Partners II, Limited Series A 712,117
Partnership Series B 584,113
Kirby, Steven Series C 749,683
Bluestem Capital Company
122 S. Phillips Ave., Suite 300
Sioux Falls, SD 57014
Borel Bank & Trust, custodian for Carol L. Series A 80,325
Smith IRA Rollover
Trust Department
160 Bovet Road
San Mateo, CA 94402
Attn: Lawrence M. Russell
Brand, Richard Series C 6,330
72 Magnolia Drive
Atherton, CA 94027
Butlein, Marc Series A 46,455
40 Weston Road
Weston, CT 06883
Callander, Clark Series C 6,329
2815 Scott Street
San Francisco, CA 94123
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Edgewater Private Equity Fund Fund II, LP Series A 3,467,061
Robert G. Allison Series B 83,525
The Edgewater Funds
2 Corporate Plaza Drive,
Suite 275
Newport Beach, CA 92660
Eiken Invest 98 AS Series A 57,139
c/o Teknoinvest Management AS attn:
Tore Mengshoel
Postboks 556 Sentrum
N-0105 Oslo, Norway
Fritas AS Series A 101,184
c/o Hoegh Invest AS Series C 15,641
Parkveten 55
PO Box 2416 Solli
0201 0510 Norway
Gardner, Herbert M. Series A 36,469
4 Darley Road
Great Neck, NY 11021
Gardner, Peter H. Series A 36,487
General Partner
Media Technology Ventures
185 Berry Street, Suite 3600
San Francisco, CA 94107
Hall, Michael Series C 15,823
135 Commonwealth Drive
Menlo Park, CA 94025
Hoegh Invest A/S Series A 190,368
Carl Preben Hoegh Series B 63,694
Parkveien 55 Series C 39,288
P.O. Box 2416 Solli
0201 Oslo, Norway
Horner, Douglas Series A 55,402
2400 Steiner Street, #2
San Francisco, CA 941115
</TABLE>
<PAGE>
<TABLE>
<S> <C>
HPI Holdings SA Series A 236,724
Rue Perdtemps 5 Series B 325,531
CH-1260 Nyon
SWITZERLAND
Attn: Denis Gonseth, Chairman
HPI Holding AS Series C 86,962
Rue Perdtemps 5
CH-1260 Nyon
Switzerland
Attn: Denis Gonseth, Chairman
Inouye, Paul Series C 3,165
3750 Scott Street, Apt. 105
San Francisco, CA 94123
International Communication Enterprises Series A 107,428
Attn: Martin Velasco
1279 Bogis-Bossey
Le Greny
Switzerland
James & Pamela Sheppard Charitable Annuity Series A 67,649
Trust
c/o Hugh Beecher
100 Larkspur Landing Circle
Suite 206
Larkspur, CA 94939
J & S Charitable Annuity Trust Series A 67,875
c/o Hugh Beecher
100 Larkspur Landing Circle
Suite 206
Larkspur, CA 94939
James & Sharon Carroll Charitable Annuity Series A 67,875
Trust
c/o Hugh Beecher
100 Larkspur Landing Circle
Suite 206
Larkspur, CA 94939
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Kleinwort Benson Limited Series C 410,684
Attn: Richard Wolf
Dresdner Kleinwort Benson North America
Private Equity & Investment Funds
76 Wall Street
New York, NY 10006
KS Technoinvest V Series A 1,039,600
attn: Tore Mengshoel Series B 202,589
Teknoinvest Management AS
Grev Wedels plass 5
P.O. Box 556, Sentrum
Oslo, Norway 0105
Marakovic, Nino Series C 3,165
1619 North Point
San Francisco, CA 94123
Merfin Capital N.V. Series C 474,683
Joelle de Terjat
c/o Finabel S.A.
254 Route de Lausanne
CH -- 1292 Geneve -- Chambesy
Switzerland
Monego Sr., Phillip Series A 123,278
Technology Perspectives Series B 38,941
85 Fox Bridge Avenue Series C 25,091
Atherton, CA 94027
Murdoch & Company Series A 108,474
c/o Mr. Charles Boulton Series B 311,526
Bermuda Trust Company Limited Compass Point Series C 90,000
9 Bermudiana Road
Hamilton HM11
Bermuda
Rajaratnam, Rengan Series C 120,253
1461 Broadway Street, #305
San Francisco, CA 94109
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Robert J. Carroll Charitable Annuity Trust Series A 67,875
c/o Hugh Beecher
Fairview Capital
100 Larkspur Landing Circle,
Suite 206
Larkspur, CA 94939
Saad Al Rashid, Abdulla Series C 63,275
White Crystals Ltd.
P.O. Box 54308
11514 Riyadh
Saudi Arabia
Velasco, Martin Series A 93,073
Intl. Comm. Enterprises Series C 14,397
1279 Bogis-Bossey
Le Greny
Switzerland
Vision Capital LP Series A 1,261,680
Attn: Dag Tellefsen Series B 351,102
3000 Sand Hill Road Series C 249,458
Building 4, Suite 230
Menlo Park, CA 94025
von Braun, Emmeram Series B 233,645
Groso Strasse 9 Series C 138,412
D82166 Graefeling
Munich, Germany
Westindia AB Series C 63,282
c/o Salenia
Henrik Baltscheffsky
Styrmansgatan 2
Stockholm, Sweden
White Crystals Ltd. Series C 316,455
Investment Advisor
P.O. Box 54308
Riyadh 11514, Saudi Arabia
Attn: Ziad N. Baya'a
</TABLE>
<PAGE>
EXHIBIT B
SERIES D INVESTORS
------------------
First Closing October 18, 1999
Purchaser Name Shares
- ------------------------------------------- ---------------------
Scott Flanders 102,803
Seligman Communications and
Information Fund, Inc. 467,290
Seligman New Technologies Fund, Inc. 2,271,028
Seligman Investment Opportunities
(Master) Fund-NTV Portfolio 532,710
Victoryfire Limited 233,644
Stanley W. Smith 93,457
Telecom Capital Partners, LP 1,000,000
Westgate Capital, LLC 163,551
Winfield Capital Corp. 233,644
Chartwell Holdings Ltd. 116,822
Jinnie Simonsen and John Carbone 23,364
Newport (BVI) Holdings Ltd. 116,822
BancBoston Robertson Stephens Inc. /1/
TOTAL 5,345,789
______________________
/1/ See definition of "Holder" in Section 1.
<PAGE>
SERIES D INVESTORS
------------------
Second Closing November 24, 1999
Purchaser Name Shares
- ------------------------------------------- ---------------------
A-NEID, LLC 1,102,805
Carol Miller 5,000
Dan J. Mitchell 46,728
Earthweb Inc. 116,822
Kelso Traders Limited 46,728
Lance Ullom 50,000
MCP Global Corporation, Inc. 467,289
Orion Venture Partners 116,822
Pogue Capital Mgmt Money Purchase Plan fbo 11,682
Mai Pogue
Ralph & Saul Tawil, JWROS 70,093
Robert J. Laikin 80,000
RT Partners, L.P. 163,551
Ruxton Partners (1999-4) LLP 572,429
Salenia AB 233,637
Tennyson Fund II, LLLP 563,084
U.S.A. Fund, LLLP 163,551
BancBoston Robertson Stephens Inc. /2/
TOTAL 3,810,221
____________________
/2/ See definition of "Holder" in Section 1.
<PAGE>
SERIES D INVESTORS
------------------
Third Closing December 23, 1999
Purchaser Name Shares
- --------------------------------------------------------------------
Joseph P. Briggs 27,100
Diana W. Carlson 10,000
Kenneth W. Carlson 10,000
Rita H. Carlson 32,710
CDC-Valeurs de Croissance 1,402,000
Chana Sasha Foundation 23,364
Kimberly A. Cross And Terry Cross, JRWROS 12,000
Decima Corporation 50,000
Rolf Dienst 100,000
Frederich Wilhelm Goebel 199,990
Albert J. Hlibok 45,000
Margaret M.. Hlibok 11,000
Blair LaCorte 46,682
MW Partnership 35,046
MWDD Partnership 23,364
New Dimensions Trading Limited 70,093
Oktava Management Corporation 50,000
Emmeram von Braun 50,000
WinStar Interactive Ventures I Inc. 467,290
Aaron Wolfson 46,728
Abraham Wolfson 35,046
BancBoston Robertson Stephens Inc. /3/
TOTAL 2,747,413
___________________________
/3/ See definition of "Holder" in Section 1.
<PAGE>
SCHEDULE OF PURCHASERS
Fourth Closing January 21, 2000
Purchaser Name Shares
- ----------------------------------------------- ---------------------
Benjamin Brecher 11,681
Clark Callander 9,345
Chana Sasha Foundation 11,682
Scott N. Flanders 93,458
Frederich Wilhelm Goebel 10
Dale R. Haithcock 23,364
Scott A. Jones 93,457
Daniel S. Laikin 186,915
Robert J. Laikin 80,000
Eli Levitin 11,681
Levitin Family Charitable Trust 11,681
MWDD Partnership 23,363
MWDI Partnership 35,046
New Dimension Trading Limited 46,728
Joseph J. Piazza 46,728
Salim S. Reshwan 11,682
RS Coinvestment Fund L.L.C. 1,553,738
Jacob Safier 46,727
Vision Capital LP 281,162
Vision Extension LP 653,417
Aaron Wolfson 23,364
Abraham Wolfson 11,681
BancBoston Robertson Stephens Inc. /4/
TOTAL 2,331,770
_____________________
/4/ See definition of "Holder" in Section 1.
<PAGE>
EXHIBIT 10.6
AENEID CORPORATION
Series D Preferred Stock
PLACEMENT AGENCY AGREEMENT
--------------------------
October 18, 1999
BANCBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Ladies/Gentlemen:
Aeneid Corporation, a California corporation (the "Company"), proposes to
issue and sell shares of the Company's Series D Preferred Stock, no par value
per share (the "Shares"), to certain investors (collectively, the "Investors")
in a private placement (the "Offering"). The Shares are more fully described in
the Private Placement Memorandum dated October 15, 1999, including all exhibits
and supplements thereto (the "Placement Memorandum"). The Company hereby
confirms as follows its agreements with you.
1. Agreement to Act as Placement Agent. On the basis of the
-----------------------------------
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions of this Agreement and the engagement
letter, dated July 30, 1999 (including the indemnification letter attached
thereto, the "Engagement Letter") between the Company and BancBoston Robertson
Stephens Inc. (the "Placement Agent"), the Placement Agent shall be the
Company's exclusive placement agent, on a reasonable efforts basis, in
connection with the issuance and sale by the Company of the Shares to the
Investors. As compensation for services rendered and provided that the Shares
are sold to Investors pursuant to Purchase Agreements (the "Purchase
Agreements") as described in the Placement Memorandum, on the Closing Date (as
defined below), the Company shall pay to the Placement Agent the fees in
connection with the Offering as set forth in the Engagement Letter.
2. Delivery and Payment. The completion of the purchase and sale of the
--------------------
Shares shall take place on one or more occasions (each, a "Closing") and shall
occur at such places and such times (each, a "Closing Date") as specified by the
Company and the Placement Agent, and of which the Investors will be notified in
advance by the Placement Agent. At each Closing, the Company shall deliver to
each Investor one or more certificates representing the number of Shares set
forth in the Investor's Purchase Agreement, each such certificate to be
registered in the name of the Investor or, if so indicated, in the name of a
nominee designated by the Investor.
<PAGE>
The Company's obligation to issue the Shares to the Investors shall be
subject to the following conditions, any one or more of which may be waived by
the Company: (a) receipt by the Company of a certified or official bank check
or wire transfer of funds in the full amount of the purchase price for the
Shares being purchased; (b) completion of the purchases and sales with other
Investors; and (c) the accuracy of the representations and warranties made by
the Investors and the fulfillment of those undertakings of the Investors to be
fulfilled prior to the Closing.
The Investors' obligations to close the transaction shall be subject to
satisfaction of all of the conditions set forth in Section 6 of this Agreement,
which may be waived by the Investor. The Investors' obligations are expressly
not conditioned on the purchase by any or all of the other Investors of the
Shares that they have agreed to purchase from the Company.
3. Representations, Warranties and Agreements of the Company. The
---------------------------------------------------------
Company represents and warrants to and agrees with the Placement Agent that
(unless otherwise specified below, the following representations and warranties
are made as of the date hereof):
(a) The information contained in the Placement Memorandum, as
amended or supplemented, taken together with and as modified or supplemented by
the Schedule of Exceptions to the Purchase Agreements as amended or supplemented
(the "Schedule of Exceptions"), as of the date of the Placement Memorandum did
not contain, and as of the each Closing Date will not contain, an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of California with
full power and authority (corporate and other) to own, lease and operate its
properties and conduct its business as described in the Placement Memorandum,
and is duly qualified to transact business in each other jurisdiction in which
the conduct of its business or its ownership or leasing of property requires
such qualification and in which the failure to be so qualified would have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
taken as a whole (a "Material Adverse Effect"). No proceeding has been
instituted in any such jurisdiction with respect to the Company to revoke, limit
or curtail, or that seeks to revoke, limit or curtail, such power and authority
or qualification.
(c) As of the date hereof, the Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
Aeneid Merger Sub, Inc. (the "Subsidiary"). The Subsidiary has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with full power and authority
(corporate and other) to own, lease and operate its properties and to conduct
its business as described in the Placement Memorandum, and is duly qualified to
transact business in each other jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such qualification and
in which the failure to be so qualified would have a Material Adverse Effect. No
proceeding has been instituted in any such jurisdiction with respect to the
Subsidiary to revoke, limit or curtail, or that seeks to revoke, limit or
curtail, such power and authority or qualification. All the outstanding shares
of capital stock of, or other form of ownership interest in, the Subsidiary have
been duly authorized and issued and are fully paid and non-assessable and,
except as set forth in the Placement Memorandum, are owned directly or
indirectly by the Company
2.
<PAGE>
free and clear of all liens, encumbrances, security interests or claims. There
are no outstanding options, warrants or other rights calling for the issuance
of, and, except as described in the Placement Memorandum, there are no
commitments or arrangements to issue, any shares of capital stock of the
Subsidiary or any security convertible or exchangeable or exercisable for
capital stock of the Subsidiary, except as disclosed in the Schedule of
Exceptions.
(d) The Company has full legal right, power and authority to enter
into this Agreement, the Engagement Letter and the Purchase Agreements
(collectively, the "Agreements") and perform the transactions contemplated
hereby and thereby. This Agreement and the Engagement Letter have been, and the
Purchase Agreements will be, duly authorized, executed and delivered by the
Company. Each of the Agreements is, or will be, as the case may be, a valid and
binding agreement of the Company, enforceable in accordance with its terms,
except as rights to indemnification hereunder or thereunder may be limited by
applicable law and except as the enforcement hereof or thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles.
(e) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Agreements does not, or
will not, as the case may be, contravene any provision of applicable law or the
certificate of incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or its subsidiaries, or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over the
Company or any subsidiary, and no consent, approval, authorization or order of
or qualification with any governmental body or agency is required for the
performance by the Company of its obligations under the Agreements, except such
as may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(f) As of the date of the Placement Memorandum, the Company has an
authorized, issued and outstanding capitalization as set forth in the Placement
Memorandum under the caption "Capitalization" and that conformed to the
description thereof contained elsewhere in the Placement Memorandum. The Shares
to be sold pursuant to the Purchase Agreements conform in all material respects
to the description in the Placement Memorandum and have been duly and validly
authorized, and when issued and paid for in accordance with the terms of the
Purchase Agreements, will be duly and validly issued, fully paid and non-
assessable. Except as disclosed in the Placement Memorandum or the Schedule of
Exceptions, no preemptive right, right of first refusal granted by the Company
or other similar right exists with respect to the Shares or the issuance and
sale thereof. As of the date of the Placement Memorandum, the outstanding
shares of capital stock of the Company conformed in all material respects to the
description in the Placement Memorandum and have been duly and validly
authorized and issued and are fully paid and non-assessable, have been issued
and sold in compliance with applicable Federal and state securities laws and
were not issued in violation of any preemptive rights, rights of first refusal
granted by the Company or other similar rights. Except as described in the
Placement Memorandum or the Schedule of Exceptions, there are no outstanding
options, warrants or other rights calling for the issuance of, and there are no
commitments or arrangements to issue, any shares of capital stock of the Company
or any security convertible or exchangeable or exercisable for capital stock of
the Company. Except as disclosed in the Placement Memorandum or the Schedule of
Exceptions, there are no shareholders agreements, voting agreements or other
similar agreements with
3.
<PAGE>
respect to the capital stock of the Company to which the Company is a party or,
to the knowledge of the Company, between or among any of the Company's
shareholders.
(g) There is no material legal or governmental proceeding pending
or, to the knowledge of the Company, threatened or contemplated to which the
Company or the Subsidiary is or may be a party or of which the business or
property of the Company or the Subsidiary is or may be subject that is not
disclosed in the Placement Memorandum.
(h) Neither the Company nor its Subsidiary is in violation of its
charter, bylaws, or other organizational document, or in violation of any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company or its
Subsidiary, which violation, individually or in the aggregate, could have a
Material Adverse Effect, or is in default in any material respect in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company or its Subsidiary is a party or by which the Company or its Subsidiary
is bound or by which the properties of the Company or its Subsidiary are bound
or affected, and there exists no condition which, with the passage of time or
otherwise, would constitute a material default under any such document or
instrument or result in the imposition of any material penalty or the
acceleration of any material indebtedness.
(i) Each of the Company and its Subsidiary owns or possesses
sufficient rights to use all material patents, patent rights, trademarks,
copyrights, licenses, inventions, trade secrets, trade names and know-how
(collectively, "Intellectual Property") described or referred to in the
Placement Memorandum as owned or used by it or that are necessary for the
conduct of its business as now conducted or (to the Company's knowledge based on
the current stage of development of the Company's products and subject to the
matters discussed under "Risk Factors" in the Placement Memorandum) as proposed
to be conducted as described in the Placement Memorandum; neither the Company
nor its Subsidiary has received any notice of, or has any knowledge of, any
infringement of or conflict with asserted rights of the Company or its
Subsidiary by others with respect to any Intellectual Property, except as
described in the Placement Memorandum; neither the Company nor its Subsidiary
has received any notice of, or has any knowledge of, any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect; to the knowledge of the Company, none of the
patents owned or licensed by the Company or its Subsidiary are unenforceable or
invalid. Each of the Company and its Subsidiary, as the case may be, has duly
and properly filed or caused to be filed with the United States Patent and
Trademark Office (the "PTO") and applicable foreign and international patent
authorities all patent applications described or referred to in the Placement
Memorandum, and believes it has complied with the PTO's duty of candor and
disclosure for each of the United States patent and patent applications
described or referred to in the Placement Memorandum; the Company is unaware of
any facts which would preclude the grant of a patent from each of the patent
applications described or referred to in the Placement Memorandum; the Company
has no knowledge of any facts which would preclude it or its Subsidiary, as the
case may be, from having clear title to their respective patent applications
referenced in the Placement Memorandum; and neither the Company nor any of its
Subsidiary has terminated or breached or is otherwise in violation of any
agreement covering its Intellectual Property rights. The Company is not aware of
the granting of any patents to third parties or the filing of patent
applications by
4.
<PAGE>
third parties or any other rights of third parties to any of the Intellectual
Property of the Company or its Subsidiary.
(j) PricewaterhouseCoopers LLP, who have certified the audited
financial statements and schedules included in the Placement Memorandum, are
independent public accountants.
(k) The consolidated financial statements of the Company and the
related notes contained in the Placement Memorandum present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company as of the dates indicated, and the results of its operations and
cash flows for the periods therein specified. Such financial statements
(including the related notes) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods therein specified, except as disclosed in the Placement Memorandum.
(l) Except as disclosed in the Placement Memorandum or the
Disclosure Schedule, since the date of the latest audited financial statements
included in the Placement Memorandum, there has not been (i) any material
adverse change in the financial condition or earnings of the Company considered
as one enterprise, (ii) any material adverse event affecting the Company, (iii)
any obligation, direct or contingent, that is material to the Company considered
as one enterprise, incurred by the Company, except obligations incurred in the
ordinary course of business, (iv) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company, or (v) any loss or
damage (whether or not insured) to the physical property of the Company which
has been sustained which has resulted in a Material Adverse Effect.
(m) Except as set forth in the Placement Memorandum, the agreements
to which the Company is a party and which are described in the Placement
Memorandum are valid agreements, enforceable by the Company and its Subsidiary
(as applicable) except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements.
(n) The Company and its Subsidiary have good and marketable title to
all real property and good title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such as are
described in the Placement Memorandum or such as do not materially affect the
value of such property or do not materially interfere with the use made and
proposed to be made of such property by the Company and its Subsidiary. Any real
property, buildings or personal property held under lease by the Company and its
Subsidiary and all rights of use of real property, buildings or personal
property held under contract by the Company and its Subsidiary are held by them
under valid, subsisting and enforceable leases or contracts, as the case may be,
in each case, except as described or contemplated in the Placement Memorandum or
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property by the Company and its Subsidiary.
(o) The Company and its Subsidiary have timely filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown thereon as due, and there is no
5.
<PAGE>
tax deficiency that has been or, to the best of the Company's knowledge, might
be asserted against the Company or its Subsidiary that has resulted, or might
reasonably be expected to result, in a Material Adverse Effect; and all tax
liabilities are adequately provided for on the books of the Company.
(p) The Company and its Subsidiary maintain insurance with insurers
of recognized financial responsibility of the types and in the amounts generally
deemed adequate for their respective businesses and consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, insurance covering real and personal property owned or leased by
the Company or its Subsidiary, against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect; neither the Company nor the Subsidiary
has been refused any insurance coverage sought or applied for; and neither the
Company nor the Subsidiary has reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.
(q) To the best of the Company's knowledge, no labor disturbance by
the employees of the Company or its Subsidiary exists or is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, licensors, collaborators or
subcontractors that might reasonably be expected to result in a Material Adverse
Effect. No collective bargaining agreement exists with any of the Company's
employees and, to the best of the Company's knowledge, no such agreement is
imminent.
(r) Except as described in the Placement Memorandum and subject to
the matters described under "Risk Factors" in the Placement Memorandum, (i) the
Company and its Subsidiary have operated and currently operate their businesses
in conformity with all applicable laws, rules and regulations of each
jurisdiction in which they are conducting business, except where the failure to
be so in compliance would not have a Material Adverse Effect, (ii) the Company
and its Subsidiary have all licenses, certificates, authorizations, approvals,
permits, franchises, orders and consents from all state, federal and other
governmental or regulatory authorities which are necessary to the current
conduct of their businesses, except where the failure to be so in compliance
would not have a Material Adverse Effect, (iii) all of such licenses,
certificates, authorizations, approvals, permits, franchises, orders and
consents are valid and in full force and effect, (iv) the Company and its
Subsidiary have fulfilled and performed, and will fulfill and perform, all of
their obligations with respect to, and are operating in compliance with, all
such licenses, certificates, authorizations, approvals, permits, franchises,
orders and consents and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or result in any
impairment of the rights of the holder thereof, except to the extent that any
such revocation, termination or impairment would not have a Material Adverse
Effect and (v) no such licenses, certificates, authorizations, approvals,
permits, franchises, orders or consents contain any restrictions that have or
could reasonably be expected to have a Material Adverse Effect.
(s) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder. The Company is not, and will not be as a result of consummation of
the Offering, an "investment company" under the 1940 Act.
(t) Neither the Company nor its Subsidiary, nor, to the knowledge of
the Company or the Subsidiary, any agent or other person acting on behalf of the
Company or its Subsidiary, have,
6.
<PAGE>
directly or indirectly, (i) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; (iii) failed to disclose fully any contribution
made by the Company or such Subsidiary or made by any person acting on its
behalf and of which the Company or such Subsidiary is aware in violation of law;
(iv) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (v) made any unlawful bribe, rebate,
payoff, influence, kick-back or other unlawful payment.
(u) The operations of the Company and its Subsidiary with respect to
any real property currently leased, owned or by any means controlled by the
Company or its Subsidiary (the "Real Property") are in compliance with all
federal, state, and local laws, ordinances, rules, and regulations relating to
occupational health and safety and the environment; the Company and its
Subsidiary maintain all licenses, permits and authorizations necessary to
operate under all such laws applicable to the Company and its Subsidiary; and
there is no pending or, to the best knowledge of the Company, threatened, claim,
litigation or any administrative agency proceeding, nor has the Company or the
Subsidiary received any written or oral notice from any governmental entity or
third party, that: (i) alleges a violation of any such laws by the Company or
its Subsidiary; (ii) alleges that the Company or its Subsidiary is a liable
party under the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended, 42 U.S.C. (S) 9601 et seq. ("CERCLA"), or any state
------
superfund law; (iii) alleges possible contamination of the environment by the
Company or its Subsidiary; or (iv) alleges possible contamination of the Real
Property. No property which is owned, leased or occupied by the Company or its
Subsidiary has been designated as a Superfund site pursuant to CERCLA or
otherwise designated as a contaminated site under applicable state or local
law.
(v) The Company and its Subsidiary maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(w) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business and other than in
connection with purchases of the Company's stock) or guarantees of indebtedness
by the Company to or for the benefit of any of the officers or directors of the
Company or any of the members of the families of any of them, except as
disclosed in the Placement Memorandum or the Disclosure Schedule.
(y) The Company has complied with all provisions of Florida Statutes
Section 517.075, and the regulations thereunder, relating to doing business with
the Government of Cuba or with any person or affiliate located in Cuba.
4. Further Agreements of the Company. The Company agrees with the
---------------------------------
Placement Agent that:
7.
<PAGE>
(a) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as the
Placement Agent and the Investors may designate and to continue such
qualifications in effect for so long as may be required for purposes of the
distribution of the Shares, except that the Company shall not be required in
connection therewith or as a condition thereof to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction in which it is not otherwise required to be so qualified or to so
execute a general consent to service of process. In each jurisdiction in which
the Shares shall have been qualified as above provided, the Company will make
and file such statements and reports in each year as are or may be reasonably
required by the laws of such jurisdiction.
(b) The Company will furnish to the Placement Agent, as soon as available,
copies of the Placement Memorandum in such quantities as the Placement Agent may
from time to time reasonably request.
(c) The Company shall comply in all respects with its obligations pursuant
to the Purchase Agreements with the Investors.
(d) The Company will apply the net proceeds from the sale of the Shares in
the manner set forth under the caption "Use of Proceeds" in the Placement
Memorandum.
(e) The Company shall use its best efforts to do and perform all things
required or necessary to be done and performed under the Agreements by the
Company prior to each Closing Date and to satisfy all conditions precedent to
the delivery of the Shares.
(f) Neither the Company nor any of its affiliates will take any action in
connection with the Offering which would cause them not to comply with Rule 506
of Regulation D, and the Company will make a timely filing of Form D pursuant to
the requirements of Rule 503 of Regulation D. The Company shall exercise
reasonable care to assure that the Investors are not underwriters within the
meaning of Section 2(11) of the Act, and shall take all actions required by Rule
502(d) of Regulation D. The Company, in its sole discretion, will not accept a
subscription from an Investor if the Company has reason to believe that material
information supplied by or material representations or warranties made by, such
Investor are not fully accurate. The Company shall reasonably believe,
immediately prior to making any sale, that each Investor (i) is an accredited
investor, and (ii) either alone or with his purchaser representative, has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of a purchase of the Shares and otherwise meets
the suitability standards set forth in the Placement Memorandum. The Company
shall reasonably believe that any purchaser representative satisfies all of the
conditions of rule 501(h) of Regulation D.
(g) The Company shall keep the Placement Memorandum confidential and shall
not distribute it or any other materials related to the transaction contemplated
hereby, or otherwise advertise to or solicit purchasers of Shares, without the
consent of the Placement Agent.
(h) During a period of five (5) years after the final Closing, the Company
will furnish to the Investors and the Placement Agent, as soon as they are
available, (i) quarterly (or as otherwise provided to the Company's other
shareholders) updates on the Company's business, (ii) quarterly (or as otherwise
provided to the Company's other shareholders) balance sheets, income statements,
and
8.
<PAGE>
statements of cash flows and (iii) copies of all filings, reports and other
information (financial or other) provided to the Company's stockholders in
general.
5. Representations of the Placement Agent.
--------------------------------------
(a) The Placement Agent is a member in good standing of the NASD
and it has, and at all times while taking any actions constituting an offer or
sale of the Shares had, all governmental licenses (including both federal and
state broker dealer licenses) required to act as placement agent for the shares.
(b) The Placement Agent has complied with all applicable Federal
and state laws (including, without limitation, Regulation D) and applicable
rules of the NASD in connection with its activities as placement agent for the
Shares.
6. Conditions to Placement Agent's Obligations. The obligations of the
-------------------------------------------
Placement Agent hereunder shall be subject to the accuracy, as of the date
hereof, of the representations and warranties of the Company herein, to the
performance by the Company of its obligations hereunder and to the following
additional conditions (any of which may be waived by the Placement Agent):
(a) On or prior to each Closing Date, the Placement Agent shall
receive, dated as of such date, either a written legal opinion from Latham &
Watkins, counsel to the Company, addressed to the Placement Agent, in form
acceptable to counsel for the Placement Agent or a reliance letter from Latham &
Watkins addressed to the Placement Agent, stating that the Placement Agent may
rely on the opinion of Latham & Watkins to the Investors as if addressed to the
Placement Agent.
(b) On or prior to each Closing Date, the Placement Agent shall
receive a certificate of the Company, dated as of such date, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, in substantially
the form attached hereto as Exhibit A.
---------
7. Expenses. The Company shall reimburse the Placement Agent for its
--------
reasonable out-of-pocket expenses incurred in connection with the Offering,
including without limitation the fees and expenses of legal counsel and travel
expenses, as set forth in the Engagement Letter.
8. Indemnification. The Company agrees to indemnify and hold harmless
---------------
the Placement Agent, its affiliates, and each of their respective affiliates,
directors, officers, agents, advisors, consultants, employees and controlling
persons (as defined in the Securities Act) (each, an "Indemnified Person"), in
accordance with the terms of the Engagement Letter, such indemnification to
include (notwithstanding any provision to the contrary contained in the
Engagement Letter) indemnification from an against any and all losses, claims,
damages, liabilities and expenses whatsoever relating to, arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Placement Memorandum (or any other material used by the Company
or authorized by the Company for use in connection with the Offering), or
relating to or arising out of or based upon the omission or alleged omission to
state in any such document a material fact required to be stated therein or
necessary to make the statements therein not misleading (other than statements
or omission made in reliance upon and in conformity with information furnished
by the Placement Agent in writing to the Company expressly for use therein).
9.
<PAGE>
9. Survival of Certain Provisions. All representations, warranties,
------------------------------
covenants and agreements of the Company and the Placement Agent herein or in
certificates delivered pursuant hereto, and the indemnity agreements contained
in Section 8 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Placement Agent or
any controlling person within the meaning of the Securities Act or the Exchange
Act, or by or on behalf of the Company or any of its officers, directors or
controlling persons within the meaning of the Securities Act or the Exchange
Act, and shall survive the delivery of the Shares to the Investors or
termination of this Agreement.
10. Termination. This Agreement may be terminated by either the Company
-----------
or the Placement Agent in accordance with the terms of the Engagement Letter.
11. Notices. All notices or communications hereunder will be in writing
-------
and will be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter), as follows: If to the Company, to Aeneid
Corporation, 282 2/nd/ Street, Suite 300, San Francisco, California 94105,
Attention: Daniel Putterman, facsimile number (415) 538-8558; with a copy
(which shall not constitute notice) to Latham & Watkins, 505 Montgomery Street,
San Francisco, California 94111, Attention: Laura Gabriel, facsimile number
(415) 395-8095; if to the Placement Agent, to BancBoston Robertson Stephens
Inc., 555 California Street, San Francisco, California 94104, Attention: Clark
Callander, facsimile number (415) 693-3393.
12. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the Placement Agent, the Company, and their respective executors,
administrators and successors. Nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any person or corporation, other than
these parties hereto and their respective executors, administrators and
successors, and the parties subject to indemnification under Section 8 hereof,
any legal or equitable right, remedy or claim in respect of this Agreement or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective executors, administrators and
successors and said parties subject to indemnification, and for the benefit of
no other person or corporation. An Investor in the Offering shall not be deemed
to be a successor to the Company.
13. Entire Agreement. This Agreement and the Engagement Letter embody
----------------
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
14. Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the internal laws of the State of New York without giving
effect to the principles of conflicts of law.
15. Counterparts. This Agreement may be signed in several counterparts,
------------
each of which will constitute an original.
16. Severability. If any term or provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic and legal substance of the agreements
contained herein is not effected in any manner adverse to any party.
10.
<PAGE>
17. Amendment. The Agreement may not be amended except in writing
---------
signed by each party to be bound thereby.
11.
<PAGE>
If the foregoing correctly sets forth the understanding between the Company
and the Placement Agent, please so indicate in the space provided below for that
purpose, whereupon this Agreement shall constitute a binding agreement between
the Company and the Placement Agent.
Very truly yours,
AENEID CORPORATION
By: /s/ Douglas S. Bennett
----------------------------------
Print Name: Douglas S. Bennett
Title: President & CEO
Accepted as of the date first
above written:
BANCBOSTON ROBERTSON STEPHENS INC.
By: /s/ Clark Callander
________________________________
Authorized Signatory
<PAGE>
EXHIBIT A
Form of Officers' Certificate
Each of Douglas Bennett, President and Chief Executive Officer of Aeneid
Corporation (the "Company"), and Mark Elder, Treasurer and Assistant Secretary
of the Company, pursuant to Section 6(b) of the Placement Agency Agreement,
dated October 18, 1999 (the "Placement Agency Agreement"), between the Company
and BancBoston Robertson Stephens Inc. hereby certify that:
(i) Unless a different date is specified therein, the representations and
warranties of the Company in the Placement Agency Agreement are true
and correct as of the date hereof as though made on and as of this
date;
(ii) The Company has performed all obligations and satisfied all
conditions to be performed and satisfied by it pursuant to the
Agreements (as defined in the Placement Agency Agreement) at or prior
to the date hereof; and
(iii) He has examined the Placement Memorandum and the Schedule of
Exceptions to the Purchase Agreement dated October 18, 1999, between
the Company and the investors listed on Exhibit A thereto, as amended
as of the date hereof (the "Schedule of Exceptions") and as of the
date hereof, the Placement Memorandum, taken together with and as
modified or supplemented by the Schedule of Exceptions to the
Purchase Agreement, as amended or supplemented, does not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
<PAGE>
EXHIBIT A
Form of Officers' Certificate
Each of Douglas Bennett, President and Chief Executive Officer of Aeneid
Corporation (the "Company"), and Mark Elder, Treasurer and Assistant Secretary
of the Company, pursuant to Section 6(b) of the Placement Agency Agreement,
dated October 18, 1999 (the "Placement Agency Agreement"), between the Company
and BancBoston Robertson Stephens Inc. hereby certify that:
(i) Unless a different date is specified therein, the representations and
warranties of the Company in the Placement Agency Agreement are true
and correct as of the date hereof as though made on and as of this
date; except that the representation set forth in Section 3(c) is
modified as follows:
(a) As of the date hereof, the Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
InGenius Technologies, Inc. (the "Subsidiary"). The Subsidiary has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with full power and authority
(corporate and other) to own, lease and operate its properties and to conduct
its business as described in the Placement Memorandum, and is duly qualified to
transact business in each other jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such qualification and
in which the failure to be so qualified would have a Material Adverse Effect. No
proceeding has been instituted in any such jurisdiction with respect to the
Subsidiary to revoke, limit or curtail, or that seeks to revoke, limit or
curtail, such power and authority or qualification. All the outstanding shares
of capital stock of, or other form of ownership interest in, the Subsidiary have
been duly authorized and issued and are fully paid and non-assessable and,
except as set forth in the Placement Memorandum, are owned directly or
indirectly by the Company free and clear of all liens, encumbrances, security
interests or claims. There are no outstanding options, warrants or other rights
calling for the issuance of, and, except as described in the Placement
Memorandum, there are no commitments or arrangements to issue, any shares of
capital stock of the Subsidiary or any security convertible or exchangeable or
exercisable for capital stock of the Subsidiary, except as disclosed in the
Schedule of Exceptions.
(ii) The Company has performed all obligations and satisfied all
conditions to be performed and satisfied by it pursuant to the
Agreements (as defined in the Placement Agency Agreement) at or
prior to the date hereof; and
(iii) He has examined the Placement Memorandum and the Schedule of
Exceptions to the Purchase Agreement dated October 18, 1999, between
the Company and the investors listed on Exhibit A thereto, as
amended as of the date hereof (the "Schedule of Exceptions") and as
of the date hereof, the Placement Memorandum, taken together with
and as modified or supplemented by the Schedule of Exceptions to the
Purchase Agreement, as amended or supplemented, does not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
<PAGE>
IN WITNESS WHEREOF, each of Douglas Bennett and Mark Elder has signed his
name on behalf of the Company this 18th day of October, 1999.
______________________________________
Douglas Bennett
President and Chief Executive Officer
______________________________________
Mark Elder
Treasurer
<PAGE>
EXHIBIT 10.7
AENEID CORPORATION
SECOND AMENDED AND RESTATED
----------------------------
CO-SALE AND MANAGEMENT AGREEMENT
--------------------------------
This Second Amended and Restated Co-Sale and Management Agreement (the
"Agreement") is made and entered into as of September 17, 1999 by and among
---------
Daniel Putterman and Robert Ainsbury (the "Founders"), Aeneid Corporation, a
--------
California corporation (the "Company"), Vision Capital L.P. ("Vision"),
------- ------
Edgewater Private Equity Fund II, L.P. ("Edgewater"), the holders of Series A
---------
Preferred Stock and Series B Preferred Stock of the Company listed on Exhibit A
---------
to this Agreement (the "Existing Investors") and the holders of Series C
------------------
Preferred Stock of the Company listed on Exhibit B to this Agreement (the
---------
"Series C Investors"). The Existing Investors and the Series C Investors are
------------------
referred to collectively herein as the "Investors".
RECITALS
--------
A. The Company, the Founders and the Existing Investors are parties to an
Amended and Restated Co-Sale and Management Agreement dated March 19, 1999 (the
"Prior Agreement").
---------------
B. The Company and the Series C Investors have entered into a Series C
Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
------------------
herewith pursuant to which the Company desires to sell to the Series C Investors
and the Series C Investors desire to purchase from the Company shares of the
Company's Series C Preferred Stock. A condition to the Series C Investors'
obligations under the Purchase Agreement is that the Company, the Founders, the
Existing Investors and the Series C Investors enter into this Agreement in order
to provide the Investors the opportunity to participate, upon the terms and
conditions set forth in this Agreement, in subsequent sales by (i) the Founders
of shares of the Company's Common Stock and (ii) Vision and Edgewater of shares
------
of the Company's Common Stock and Preferred Stock. The Company, the Existing
Investors and the Founders desire to induce the Series C Investors to purchase
shares of Series C Preferred Stock pursuant to the Purchase Agreement by
agreeing to the terms and conditions set forth below. The Company, the
Founders, and the Existing Investors intend that the Prior Agreement be
terminated and replaced in its entirety by this Agreement.
AGREEMENT
---------
The parties agree as follows:
1. Covenants of Founders.
---------------------
1.1 Retention of Shares. Each Founder hereby agrees that he will
-------------------
retain ownership of all of the Common Shares (as defined in Section 2.1 below)
owned by him as of the
<PAGE>
date hereof and will not effect any sale or other transfer of such Common
Shares, except as permitted under Section 2.5 hereof and except as approved by
holders of a majority of the Preferred Stock held by the Investors. In the event
such a majority approves a sale or transfer of a Founder's Common Shares, the
provisions of Section 2 below shall apply.
1.2 Devotion of Time to Company. Each Founder hereby agrees that so
---------------------------
long as he remains an employee of the Company, he shall devote 100% of his
working time to the Company and shall not work as an employee or paid consultant
to any other corporation or entity without the unanimous approval of the Board
of Directors of the Company.
2. Sales by Founders, Vision or Edgewater.
--------------------------------------
2.1 Notice of Sales. Subject to Section 1.1 above, should any
---------------
Founder, Vision or Edgewater (or a Permitted Transferee, as defined below)
propose to accept one or more bona fide offers (collectively, a "Purchase
--------
Offer") from any persons to purchase (i) shares of the Company's Common Stock
owned by such Founder, Vision or Edgewater as of the date hereof (the "Common
------
Shares") from such Founder, Vision or Edgewater (other than as set forth in
- ------
Section 2.5 hereof), (ii) shares of the Company's Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock owned by Vision as of the
date hereof or (iii) shares of the Company's Series A Preferred Stock or Series
B Preferred Stock owned by Edgewater as of the date hereof, from Vision or
Edgewater, then such Founder, Vision or Edgewater, as applicable, shall promptly
deliver a notice (the "Notice") to the Company and each Investor stating the
------
terms and conditions of such Purchase Offer including, without limitation, the
number of Shares (as defined below) proposed 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. The Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock so owned as of the
date hereof are collectively referred to herein as the "Preferred Shares" and
----------------
collectively with the Common Shares are referred to herein as the "Shares."
------
2.2 Co-Sale Right. Each Investor shall have the right (the "Co-Sale
------------- -------
Right"), exercisable upon written notice to the Company within fifteen (15)
- -----
business days, to participate in such Founder's, Vision's or Edgewater's sale of
Shares pursuant to the specified terms and conditions of such Purchase Offer.
To the extent an Investor exercises such Co-Sale Right in accordance with the
terms and conditions set forth below, the number of Shares which such Founder,
Vision or Edgewater may sell pursuant to such Purchase Offer shall be
correspondingly reduced. The Co-Sale Right of each Investor shall be subject to
the following terms and conditions:
(a) Calculation of Shares. Each Investor may sell all or any part
---------------------
of that number of shares of Common Stock of the Company issued or issuable upon
conversion of Preferred Stock or Common Stock received in connection with any
stock dividend, stock split or other reclassification thereof (the "Conversion
----------
Shares") equal to the product obtained by multiplying (i) the aggregate number
- ------
of Shares covered by the Purchase Offer by (ii) a fraction, the numerator of
which is the number of Conversion Shares at the time owned by such Investor and
the denominator of which is the sum of (A) the total number of Conversion Shares
at the
-2-
<PAGE>
time owned by all Investors participating in such sale plus (B) the total number
of Shares at the time owned by such Founder, Vision or Edgewater, as applicable,
including shares transferred by such Founder, Vision or Edgewater, as
applicable, to Permitted Transferees (as defined below) in accordance with this
Agreement. The provisions of this Agreement do not confer any Co-Sale Rights
with respect to any shares of Common Stock or other securities held by an
Investor that are not Conversion Shares.
(b) Delivery of Certificates. Each Investor may effect its
------------------------
participation in the sale by delivering to the selling Founder, Vision or
Edgewater, as applicable, for transfer to the prospective purchaser one or more
certificates, properly endorsed for transfer, which represent the Conversion
Shares which such Investor elects to sell.
2.3 Transfer. The stock certificate or certificates which the
--------
Investor delivers to the selling Founder, Vision or Edgewater pursuant to
Section 2.2 shall be delivered by such Founder, Vision or Edgewater to the
prospective purchaser in consummation of the sale pursuant to the terms and
conditions specified in the Notice, and such Founder, Vision or Edgewater shall
promptly thereafter remit to such Investor that portion of the sale proceeds to
which such Investor 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 Conversion Shares from an Investor
exercising its Co-Sale Right hereunder, the selling Founder or Founders, Vision
or Edgewater shall not sell to such prospective purchaser or purchasers any
Shares unless and until, simultaneously with such sale, the selling Founder or
Founders, Vision or Edgewater shall purchase such Conversion Shares from such
Investor for the same consideration and on the same terms and conditions as the
proposed transfer described in the Notice (which terms and conditions shall be
no less favorable than those governing the sale to the purchaser by the Founder
or Founders, Vision or Edgewater, as applicable).
2.4 No Adverse Effect. The exercise or non-exercise of the rights of
-----------------
the Investors hereunder to participate in one or more sales of Shares made by a
Founder, Vision or Edgewater shall not adversely affect their rights to
participate in subsequent sales of Shares by a Founder, Vision or Edgewater.
2.5 Permitted Transactions. The provisions of Sections 1 and 2 of
----------------------
this Agreement shall not pertain or apply to:
(a) Any pledge of the Company's Common Stock made by a Founder,
Vision or Edgewater pursuant to a bona fide loan transaction which creates a
mere security interest;
(b) Any repurchase of Common Stock by the Company;
(c) Any bona fide gift; or
(d) Any transfer to a Founder's ancestors, descendants or spouse
or to a trust for their benefit (and any distributions from such trust).
-3-
<PAGE>
provided, in each case, that the pledgee, transferee or donee (each a
--------
"Permitted Transferee") shall execute a written agreement to be bound by and
--------------------
comply with all provisions of this Agreement applicable to the Founders, Vision
or Edgewater, as applicable.
2.6 Assignment of Rights. The rights of the Investors set forth in
--------------------
this Section 2 may be assigned (but only with all related obligations) only to a
transferee or assignee of at least twenty-five percent (25%) of an Investor's
total Conversion Shares set forth collectively on Exhibit A and Exhibit B (or
--------- ---------
all of such Investor's Conversion Shares if such Investor holds less than
twenty-five percent (25%) of such amount) provided that (a) the Company is,
within a reasonable time after such transfer, furnished with 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 agrees in writing to be bound by the provisions of this Agreement.
3. Transfer Restrictions.
---------------------
3.1 Prohibited Transfers. Any attempt by a Founder, Vision or
--------------------
Edgewater to transfer Shares in violation of Section 2 of this Agreement shall
be void 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 the holders of a majority of the Conversion Shares.
3.2 Legended Certificates. Each certificate representing shares of
---------------------
the Common Stock, the Series A Preferred Stock, Series B Preferred Stock and the
Series C Preferred Stock of the Company now or hereafter owned by the Founders,
Vision or Edgewater or issued to any Permitted Transferee pursuant to Section
2.5 shall bear the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
OF A CERTAIN CO-SALE AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE
CORPORATION AND CERTAIN HOLDERS OF COMMON AND PREFERRED STOCK OF THE
CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE CORPORATION."
4. Termination.
-----------
4.1 Termination Events. This Agreement shall terminate upon the
------------------
earliest to occur of any one of the following events (and shall not apply to any
transfer by a Founder, Vision or Edgewater in connection with any such event):
(a) The liquidation, dissolution or indefinite cessation of the
business operations of the Company;
-4-
<PAGE>
(b) An underwritten public offering by the Company of shares of
its Common Stock pursuant to a registration statement under the Securities Act
of 1933, as amended, which results in gross proceeds to the Company of at least
$15,000,000 and the public offering price of which is not less than $3.16 per
share (appropriately adjusted for any stock split, dividend, combination or
other recapitalization); or
(c) The sale, conveyance or other disposition of or encumbrance
of all or substantially all of the Company's property or business or the
Company's merger into or consolidation with any other corporation (other than a
wholly-owned subsidiary corporation) or any other transaction or series of
related transactions in which more than fifty percent (50%) of the voting power
of the Company is disposed of, provided that this Section 4.1(c) shall not apply
--------
to a merger affected solely for the purpose of changing the domicile of the
Company.
4.2 Removal of Legend. At any time after the termination of this
-----------------
Agreement in accordance with Section 4.1, any holder of a stock certificate
legended pursuant to Section 2.2 may surrender such certificate to the Company
for removal of such legend, and the Company will duly reissue a new certificate
without the legend.
5. Miscellaneous.
-------------
5.1 Successors and Assigns. Except as otherwise provided herein,
----------------------
this Agreement and the rights and obligations of the parties hereunder shall
inure to the benefit of, and be binding upon, the parties' respective
successors, assigns and legal representatives.
5.2 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the Company, holders of at
least a majority of the Preferred Stock held by the Investors, and holders of a
majority of the Founders' shares (or their respective successors and assigns).
Any amendment or waiver effected in accordance with this Section 5.2 shall be
binding upon the Company, the holders of Preferred Stock and any holder of
Founders' Shares, and each of their respective successors and assigns.
5.3 Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient on the date of delivery, when
delivered personally or by overnight courier or sent by telegram or fax, or
forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified
at such party's address or fax number as set forth below on the signature page
or on Exhibit A hereto, or as subsequently modified by written notice.
---------
5.4 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
-5-
<PAGE>
5.5 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
5.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
5.7 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.8 Termination of Prior Agreement. The Prior Agreement is hereby
------------------------------
terminated and replaced in its entirety by this Agreement.
[Signature Page Follows]
-6-
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION _________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman
- --------------------------------- __________________________________
Daniel Putterman (Investor)
Address: c/o Company address above By:_______________________________
Fax Number: (415) 538-8558
Name:_____________________________
/s/ Robert Ainsbury (print)
- ---------------------------------
Robert Ainsbury Title:____________________________
Address: c/o Company address above
Fax Number: (415) 538-8558
-7-
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION Bluestem Capital Partners II, LP
----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Steve Kirby
------------------------------ -------------------------------
Daniel Putterman, President
Name: Steve Kirby
-----------------------------
Address: (print)
282 Second Street, Suite 200 Title: President of the General
San Francisco, CA 94105 ----------------------------
Fax: (415) 538-8558 Partner
----------------------------
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Bluestem Capital Partners II, LP
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Steve Kirby
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Steve Kirby
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: President of the General
Fax Number: (415) 538-8558 ----------------------------
Partner
----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION Fritas AS
----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Carl Preben Hoegh
------------------------------ -------------------------------
Daniel Putterman, President
Name: Carl Preben Hoegh
-----------------------------
Address: (print)
282 Second Street, Suite 200 Title: Director
San Francisco, CA 94105 ----------------------------
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Fritas AS
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Carl Preben Hoegh
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Carl Preben Hoegh
- --------------------------------- -----------------------------
(print)
Robert Ainsbury
Title: Director
Address: c/o Company address above ----------------------------
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION Hoegh Invest AS
----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Carl Preben Hoegh
------------------------------ -------------------------------
Daniel Putterman, President
Name: Carl Preben Hoegh
-----------------------------
Address: (print)
282 Second Street, Suite 200 Title: Chairman
San Francisco, CA 94105 ----------------------------
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Hoegh Invest AS
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Carl Preben Hoegh
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name:_____________________________
- --------------------------------- (print)
Robert Ainsbury
Title:____________________________
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION HPI Holdings SA
----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ [ILLEGIBLE]
------------------------------ -------------------------------
Daniel Putterman, President
Name: D. Gonseth
-----------------------------
Address: (print)
282 Second Street, Suite 200 Title: Chairman
San Francisco, CA 94105 ----------------------------
Fax: (415) 538-8558
By: /s/ [ILLEGIBLE]
-------------------------------
Name: S. Crettex
-----------------------------
(print)
Title: CFO
----------------------------
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman HPI Holding SA
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ [ILLEGIBLE]
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: D. Gonseth
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: Chairman
Fax Number: (415) 538-8558 ----------------------------
By: /s/ [ILLEGIBLE]
-------------------------------
Name: S. Crettex
-----------------------------
(print)
Title: CFO
----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION Philip Monego
----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Philip Monego
------------------------------ -------------------------------
Daniel Putterman, President
Name: Philip Monego
-----------------------------
Address: (print)
282 Second Street, Suite 200 Title:____________________________
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Philip Monego
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Philip Monego
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Philip Monego
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title:____________________________
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION Murdoch & Company
----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ M Fern Inglefeld
------------------------------ -------------------------------
Daniel Putterman, President
Name: M Fern Inglefeld
-----------------------------
Address: (print)
282 Second Street, Suite 200 Title: Authorized Signatory
San Francisco, CA 94105 ----------------------------
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Murdoch & Company
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ M Fern Inglefeld
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: M Fern Inglefeld
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: Authorized Signatory
Fax Number: (415) 538-8558 ----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION Martin Velasco
----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Martin Velasco
------------------------------ -------------------------------
Daniel Putterman, President
Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Martin Velasco
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Martin Velasco
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name:_____________________________
- --------------------------------- (print)
Robert Ainsbury
Title:____________________________
Address: c/o Company address above
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION Vision Capital LP
----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Dag Tellefson
------------------------------ -------------------------------
Daniel Putterman, President
Name: Dag Tellefson
-----------------------------
Address: (print)
282 Second Street, Suite 200 Title: Investment Manager
San Francisco, CA 94105 ----------------------------
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Vision Capital LP
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Dag Tellefson
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Dag Tellefson
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: Investment Manager
Fax Number: (415) 538-8558 ----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION Emmeram von Braun
----------------------------------
(Investor)
By: /s/ Daniel Putterman By: /s/ Emmeram von Braun
------------------------------ -------------------------------
Daniel Putterman, President
Name: Emmeram von Braun
-----------------------------
Address: (print)
282 Second Street, Suite 200 Title:____________________________
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Emmeram von Braun
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Emmeram von Braun
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Emmeram von Braun
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title:____________________________
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Kleinwort Benson Limited
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Richard H. Wolf
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Richard H. Wolf
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: Authorized Person
Fax Number: (415) 538-8558 ----------------------------
By: /s/ [ILLEGIBLE]
-------------------------------
Name:
-----------------------------
(print)
Title: Authorized Person
---------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman
- --------------------------------- __________________________________
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Michael W. Hall
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Michael W. Hall
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: N.A.
Fax Number: (415) 538-8558 ----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Westindia AB
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Henrik Baltscheffsky
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Henrik Baltscheffsky
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: V.P.
Fax Number: (415) 538-8558 ----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman White Crystals Limited.
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Abdulaziz H Aliomaih
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Abdulaziz H Aliomaih
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: Asst. Vice President
Fax Number: (415) 538-8558 ----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman
- --------------------------------- __________________________________
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Abdullah S. Al-Rashid
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Abdullah S. Al-Rashid
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: Businessman
Fax Number: (415) 538-8558 ----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman [ILLEGIBLE]^^
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Rengan Rajaratuam
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Rengan Rajaratuam
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: Senior Associate
Fax Number: (415) 538-8558 ----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Richard A. Brand
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Richard A. Brand
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Richard A. Brand
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title:____________________________
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Clark Callander
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Clark Callander
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Clark Callander
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title:____________________________
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Steven D. Abbott
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Steven D. Abbott
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Steven D. Abbott
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title:____________________________
Fax Number: (415) 538-8558
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Paul Inouye
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Paul Inouye
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Paul T Inouye
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title: Principal
Fax Number: (415) 538-8558 ----------------------------
<PAGE>
The parties hereto have executed this Second Amended and Restated Co-Sale
and Management Agreement as of the date first written above
COMPANY: EXISTING INVESTORS:
AENEID CORPORATION __________________________________
(Investor)
By: /s/ Daniel Putterman By:_______________________________
------------------------------
Daniel Putterman, President Name:_____________________________
(print)
Address:
Title:____________________________
282 Second Street, Suite 200
San Francisco, CA 94105
Fax: (415) 538-8558
FOUNDERS: SERIES C INVESTORS:
/s/ Daniel Putterman Nimo Marakovic
- --------------------------------- ----------------------------------
Daniel Putterman (Investor)
Address: c/o Company address above By: /s/ Nimo Marakovic
Fax Number: (415) 538-8558 -------------------------------
/s/ Robert Ainsbury Name: Nimo Marakovic
- --------------------------------- -----------------------------
Robert Ainsbury (print)
Address: c/o Company address above Title:____________________________
Fax Number: (415) 538-8558
<PAGE>
EDGEWATER PRIVATE EQUITY II FUND, L.P.
By: /s/ Robert G. Allison
-----------------------------
Name: Robert G. Allison
---------------------------
Title: Partner
--------------------------
Address:
900 N. Michigan Ave.
14th Floor
Chicago, IL 60611
VISION CAPITAL L.P.
By: ____________________________
Name: __________________________
(print)
Title: _________________________
Address:
P.O. Box 76, Wests Center
St. Helier Jersey JE4 8PQ
Channel Islands
-8-
<PAGE>
EDGEWATER PRIVATE EQUITY II FUND, L.P.
By:_____________________________
Name:___________________________
Title:__________________________
Address:
900 N. Michigan Ave.
14th Floor
Chicago, IL 60611
VISION CAPITAL L.P.
By: /s/ Dag Tellefsen
-----------------------------
Name: Dag Tellefsen
---------------------------
(print)
Title: Investment Manager
--------------------------
Address:
P.O. Box 76, Wests Center
St. Helier Jersey JE4 8PQ
Channel Islands
-8-
<PAGE>
EXHIBIT 10.8
AENEID CORPORATION
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is effective as of January
---------
1, 1999 by and between Robert Ainsbury ("Employee") and Aeneid Corporation, a
--------
California corporation (the "Company").
-------
RECITALS
The Company and Employee are parties to an Employment Agreement dated
March 1, 1997 (the "Prior Agreement"). The Company and Employee wish to
---------------
terminate the Prior Agreement in its entirety and replace it with the rights and
obligations under this Agreement.
AGREEMENT
The parties hereby agree as follows:
1. Duties.
------
(a) Position. Employee shall be employed as the Company's Chief
--------
Technical Officer and will report to the Company's Chief Executive Officer.
(b) Obligations to the Company. Employee agrees to the best of his
--------------------------
ability and experience that he will at all times loyally and conscientiously
perform all of the duties and obligations required of and from Employee pursuant
to the terms hereof. During the term of Employee's employment relationship with
the Company, Employee further agrees that he will devote all of his business
time and attention to the business of the Company, the Company will be entitled
to all of the benefits and profits arising from or incident to all such work
services and advice, Employee will not render commercial or professional
services of any nature to any person or organization, whether or not for
compensation, without the prior written consent of the Company's Board of
Directors, and Employee will not directly or indirectly engage or participate in
any business that is competitive in any manner with the business of the Company.
Notwithstanding the foregoing, Employee may accept speaking or presentation
engagements in exchange for honoraria, may serve on boards of charitable
organizations, and may own 1% of the outstanding equity securities of a
corporation whose stock is listed on a national stock exchange or the Nasdaq
National Market. Employee will comply with and be bound by the Company's
operating policies, procedures and practices from time to time in effect during
the term of Employee's employment.
2. At-Will Employment. The Company and Employee acknowledge that
------------------
Employee's employment shall be at-will, as defined under applicable law, and
that Employee's employment with the Company may be terminated by either party at
any time for any or no reason. If Employee's employment terminates for any
reason, Employee shall not be entitled to any payments, benefits, damages, award
or compensation other than as provided in this Agreement. The rights and duties
created by this Section 2 may not be
1
<PAGE>
modified in any way except by a written agreement executed by Employee and a
duly authorized officer of the Company.
3. Compensation. For the duties and services to be performed by Employee
------------
hereunder, the Company shall pay Employee, and Employee agrees to accept, the
salary and other benefits described below in this Section 3.
(a) Salary. Employee shall receive a monthly salary of $14,583.33,
------
which is equivalent to $175,000 on an annualized basis. Employee's monthly
salary will be payable pursuant to the Company's normal payroll practices.
Employee's salary shall be reviewed on at least an annual basis by the Company's
Board of Directors.
(b) Bonus. Employee shall be eligible to receive an annual cash
-----
bonus of up to twenty percent (20%) of Employee's base salary. The payment and
amount of such bonus are discretionary and shall be determined by the Board of
Directors or its Compensation Committee in good faith based upon the extent to
which Employee's individual performance objectives and the Company's financial
and nonfinancial objectives are achieved during the applicable bonus period.
(c) Additional Benefits. Employee will be eligible to participate
-------------------
in the Company's employee benefit plans of general application, including
without limitation, those plans covering medical, disability and life insurance
in accordance with the rules established for individual participation in any
such plan and under applicable law. Employee will also receive such other
benefits as the Company generally provides to its other executive officers of
comparable position and experience.
(d) Reimbursement of Expenses. Employee shall be authorized to
-------------------------
incur on behalf and for the benefit of, and shall be reimbursed by, the Company
for reasonable expenses, provided that such expenses are substantiated in
accordance with Company policies.
(e) Vacation. Employee shall be entitled to twenty-one (21) paid
--------
vacation days per year. Vacation days that are not used in one year shall not be
cashed out or carried over to subsequent years.
4. Termination of Employment and Severance Benefits.
------------------------------------------------
(a) Termination of Employment. This Agreement may be terminated at
-------------------------
any time upon the occurrence of any of the following events:
(i) The Company's determination in good faith that it is
terminating Employee for Cause (as defined in Section 5 below) ("Termination for
---------------
Cause");
- -----
(ii) The Company's determination that it is terminating Employee
without Cause, which determination may be made by the Company at any time at the
Company's sole discretion, for any or no reason ("Termination Without Cause");
-------------------------
2
<PAGE>
(iii) The effective date of a written notice sent to the Company
from Employee (or an equivalent oral notification) stating that Employee is
electing to terminate his employment with the Company ("Voluntary Termination");
---------------------
(iv) A change in Employee's status such that a Constructive
Termination (as defined in Section 4(b)(iv) below) has occurred; or
(v) Following Employee's death or Disability (as defined in
Section 6 below).
(b) Severance Benefits. Employee shall be entitled to receive
------------------
severance benefits upon termination of employment only as set forth in this
Section 4(b):
(i) Voluntary Termination. If Employee's employment terminates
---------------------
by Voluntary Termination, then Employee shall not be entitled to receive payment
of any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
(ii) Involuntary Termination. If Employee's employment is
-----------------------
terminated under Section 4(a)(ii) or 4(a)(iv) above (such termination, an
"Involuntary Termination"), Employee will be entitled to receive payment of
-------------------------
severance benefits equal to Employee's regular monthly salary for twelve (12)
months (the "Severance Period"). Such payments shall be made ratably over the
----------------
Severance Period according to the Company's standard payroll schedule and
policies. Health insurance benefits with the same coverage provided to Employee
prior to the termination and in all other respects significantly comparable to
those in place immediately prior to the termination will be provided at the
Company's cost over the Severance Period.
(iii) Termination for Cause. If Employee's employment is
---------------------
terminated for Cause, then Employee shall not be entitled to receive payment of
any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
(iv) Constructive Termination. "Constructive Termination"
------------------------ ------------------------
shall be deemed to occur if: (A)(1) there is a material adverse change in
Employee's duties and responsibilities, causing Employee's position to be of
materially reduced stature or responsibility, (2) there is a reduction of more
than 20% of Employee's base compensation unless in connection with similar
decreases of other similarly situated employees of the Company, or (3) Employee
refuses to relocate to a facility or location more than 50 miles from the
Company's current location; and (B) within the 30-day period immediately
following such material change or reduction Employee elects to terminate his
employment voluntarily.
3
<PAGE>
(v) Termination by Reason of Death or Disability. In the
--------------------------------------------
event that Employee's employment with the Company terminates as a result of
Employee's death or Disability (as defined in Section 6 below), Employee or
Employee's estate or representative will receive all salary and unpaid vacation
accrued as of the date of Employee's death or Disability and any other benefits
payable under the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of death or
Disability and in accordance with applicable law.
5. Definition of Cause. For purposes of this Agreement, "Cause" for
----------------------------------------------------------------
Employee's termination will exist at any time after the happening of one or more
- --------------------------------------------------------------------------------
of the following events:
- ------------------------
(a) Employee's willful misconduct or gross negligence in performance
of his duties hereunder, including Employee's refusal to comply in any material
respect with the legal directives of the Company's Board of Directors so long as
such directives are not inconsistent with the Employee's position and duties,
and such refusal to comply is not remedied within 10 working days after written
notice from the Board of Directors, which written notice shall state that
failure to remedy such conduct may result in Termination for Cause;
(b) Employee's conviction of the commission of (i) a felony or (ii)
any crime or offense involving moral turpitude; or
(c) Employee's breach of any element of this Agreement or the
Company's Proprietary Information Agreement, which breach is not cured within
thirty (30) days following written notice of such breach from the Company.
4
<PAGE>
6. Definition of Disability. For purposes of this Agreement, "Disability"
------------------------
shall mean that Employee has been unable to perform his duties hereunder as the
result of his incapacity due to physical or mental illness, and such inability,
which continues for at least 120 consecutive calendar days or 150 calendar days
during any consecutive twelve-month period, if shorter, after its commencement,
is determined to be total and permanent by a physician selected by the Company
and its insurers and acceptable to Employee or to Employee's legal
representative (with such agreement on acceptability not to be unreasonably
withheld).
7. Confidentiality Agreement. Employee has signed an Employee Proprietary
-------------------------
Information Agreement with the Company (the "Confidentiality Agreement").
Employee hereby represents and warrants to the Company that he has complied with
all obligations under the Confidentiality Agreement and agrees to continue to
abide by the terms of the Confidentiality Agreement and further agrees that the
provisions of the Confidentiality Agreement shall survive any termination of
this Agreement or of Employee's employment relationship with the Company.
8. Noncompetition Covenant. Employee hereby agrees that he shall not,
-----------------------
during the term of his employment pursuant to this Agreement and the Severance
Period, if any, do any of the following without the prior written consent of the
Company's Board of Directors:
(a) Compete. Carry on any business or activity (whether directly or
-------
indirectly, as a partner, stockholder, principal, agent, director, affiliate,
employee or consultant) which is competitive with the business conducted by the
Company (as conducted now or during the term of Employee's employment), nor
engage in any other activities that conflict with Employee's obligations to the
Company.
(b) Solicit Business. Solicit or influence or attempt to influence
----------------
any client, customer or other person either directly or indirectly, to direct
his or its purchase of the Company's products and/or services to any person,
firm, corporation, institution or other entity in competition with the business
of the Company.
(c) Solicit Personnel. During the term of this Agreement and for a
-----------------
period of twelve (12) months after the termination of Employee's employment with
the Company, solicit or influence or attempt to influence any person employed by
the Company to terminate or otherwise cease his employment with the Company or
become an employee of any competitor of the Company.
5
<PAGE>
9. Liability Insurance. The Company shall use reasonable efforts to
-------------------
obtain and maintain Directors' and Officers' Liability insurance, provided such
insurance is available to the Company at commercially reasonable rates as
determined by the Board of Directors.
10. Conflicts. Employee represents that his performance of all the terms
---------
of this Agreement will not breach any other agreement to which Employee is a
party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement.
11. Successors. Any successor to the Company (whether direct or indirect
----------
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agrees 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 of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
12. Miscellaneous Provisions.
(a) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived with the written consent of the parties.
(b) Sole Agreement; Termination of Prior Agreement. This Agreement
----------------------------------------------
(along with the Confidentiality Agreement) constitutes the sole agreement of the
parties and supersedes all oral negotiations and prior writings with respect to
the subject matter hereof. Without limiting the foregoing, the Prior Agreement
is hereby terminated in its entirety. The Confidentiality Agreement shall remain
in full force and effect.
(c) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or 48 hours after being deposited in the U.S. mail as certified
or registered mail with postage prepaid, if such notice is addressed to the
party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(d) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(e) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of
6
<PAGE>
the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
(f) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(g) Arbitration. Any dispute or claim arising out of or in
-----------
connection with this Agreement will be finally settled by binding arbitration in
San Francisco, California in accordance with the rules of the American
Arbitration Association by one arbitrator appointed in accordance with said
rules. The arbitrator shall apply California law, without reference to rules of
conflicts of law or rules of statutory arbitration, to the resolution of any
dispute. Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. Notwithstanding the foregoing, the parties
may apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this paragraph,
without breach of this arbitration provision. This Section 12(g) shall not apply
to the Confidentiality Agreement.
(h) Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
-----------------
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Signature Page Follows]
7
<PAGE>
The parties have executed this Agreement as of the date first written
above.
AENEID CORPORATION
By: /s/ Daniel Putterman
----------------------------------
Title:
-------------------------------
Address: 282 2nd Street
San Francisco, CA 94105
ROBERT AINSBURY
Signature: /s/ Robert Ainsbury
---------------------------
Address:
-----------------------------
8
<PAGE>
EXHIBIT 10.9
AENEID CORPORATION
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is effective as of January 1,
---------
1999 by and between Wilfredo M. Tejada ("Employee") and Aeneid Corporation, a
--------
California corporation (the "Company").
-------
The parties hereby agree as follows:
1. Duties.
------
(a) Position. Employee shall be employed as the Company's Vice
--------
President, Marketing and will report to the Company's Chief Executive Officer.
(b) Obligations to the Company. Employee agrees to the best of his
--------------------------
ability and experience that he will at all times loyally and conscientiously
perform all of the duties and obligations required of and from Employee pursuant
to the terms hereof. During the term of Employee's employment relationship with
the Company, Employee further agrees that he will devote all of his business
time and attention to the business of the Company, the Company will be entitled
to all of the benefits and profits arising from or incident to all such work
services and advice, Employee will not render commercial or professional
services of any nature to any person or organization, whether or not for
compensation, without the prior written consent of the Company's Board of
Directors, and Employee will not directly or indirectly engage or participate in
any business that is competitive in any manner with the business of the Company.
Notwithstanding the foregoing, Employee may accept speaking or presentation
engagements in exchange for honoraria, may serve on boards of charitable
organizations, and may own 1% of the outstanding equity securities of a
corporation whose stock is listed on a national stock exchange or the Nasdaq
National Market. Employee will comply with and be bound by the Company's
operating policies, procedures and practices from time to time in effect during
the term of Employee's employment.
2. At-Will Employment. The Company and Employee acknowledge that
------------------
Employee's employment shall be at-will, as defined under applicable law, and
that Employee's employment with the Company may be terminated by either party at
any time for any or no reason. If Employee's employment terminates for any
reason, Employee shall not be entitled to any payments, benefits, damages, award
or compensation other than as provided in this Agreement. The rights and duties
created by this Section 2 may not be modified in any way except by a written
agreement executed by Employee and a duly authorized officer of the Company.
3. Compensation. For the duties and services to be performed by Employee
------------
hereunder, the Company shall pay Employee, and Employee agrees to accept, the
salary and other benefits described below in this Section 3.
(a) Salary. Employee shall receive a monthly salary of $12,500,
------
which is equivalent to $150,000 on an annualized basis. Employee's monthly
salary will be payable
<PAGE>
pursuant to the Company's normal payroll practices. Employee's salary shall be
reviewed on at least an annual basis by the Company's Board of Directors.
(b) Bonus. Employee shall be eligible to receive an annual cash
-----
bonus of up to twenty percent (20%) of Employee's base salary. The payment and
amount of such bonus are discretionary and shall be determined by the Board of
Directors or its Compensation Committee in good faith based upon the extent to
which Employee's individual performance objectives and the Company's financial
and nonfinancial objectives are achieved during the applicable bonus period.
(c) Additional Benefits. Employee will be eligible to participate in
-------------------
the Company's employee benefit plans of general application, including without
limitation, those plans covering medical, disability and life insurance in
accordance with the rules established for individual participation in any such
plan and under applicable law. Employee will also receive such other benefits as
the Company generally provides to its other executive officers of comparable
position and experience.
(d) Reimbursement of Expenses. Employee shall be authorized to incur
-------------------------
on behalf and for the benefit of, and shall be reimbursed by, the Company for
reasonable expenses, provided that such expenses are substantiated in accordance
with Company policies.
(e) Vacation. Employee shall be entitled to twenty-one (21) paid
--------
vacation days per year. Vacation days that are not used in one year shall not be
cashed out or carried over to subsequent years.
4. Termination of Employment and Severance Benefits.
------------------------------------------------
(a) Termination of Employment. This Agreement may be terminated at
-------------------------
any time upon the occurrence of any of the following events:
(i) The Company's determination in good faith that it is
terminating Employee for Cause (as defined in Section 5 below) ("Termination for
---------------
Cause");
- -----
(ii) The Company's determination that it is terminating Employee
without Cause, which determination may be made by the Company at any time at the
Company's sole discretion, for any or no reason ("Termination Without Cause");
-------------------------
(iii) The effective date of a written notice sent to the Company
from Employee (or an equivalent oral notification) stating that Employee is
electing to terminate his employment with the Company ("Voluntary Termination");
---------------------
(iv) A change in Employee's status such that a Constructive
Termination (as defined in Section 4(b)(iv) below) has occurred; or
(v) Following Employee's death or Disability (as defined in
Section 6 below).
<PAGE>
(b) Severance Benefits. Employee shall be entitled to receive
------------------
severance benefits upon termination of employment only as set forth in this
Section 4(b):
(i) Voluntary Termination. If Employee's employment terminates
---------------------
by Voluntary Termination, then Employee shall not be entitled to receive payment
of any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
(ii) Involuntary Termination. If Employee's employment is
-----------------------
terminated under Section 4(a)(ii) or 4(a)(iv) above (such termination, an
"Involuntary Termination"), Employee will be entitled to receive payment of
-----------------------
severance benefits equal to Employee's regular monthly salary for twelve (12)
months (the "Severance Period"). Such payments shall be made ratably over the
----------------
Severance Period according to the Company's standard payroll schedule and
policies. Health insurance benefits with the same coverage provided to Employee
prior to the termination and in all other respects significantly comparable to
those in place immediately prior to the termination will be provided at the
Company's cost over the Severance Period.
(iii) Termination for Cause. If Employee's employment is
---------------------
terminated for Cause, then Employee shall not be entitled to receive payment of
any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
(iv) Constructive Termination. "Constructive Termination"
------------------------ ------------------------
shall be deemed to occur if: (A)(1) there is a material adverse change in
Employee's duties and responsibilities, causing Employee's position to be of
materially reduced stature or responsibility, (2) there is a reduction of more
than 20% of Employee's base compensation unless in connection with similar
decreases of other similarly situated employees of the Company, or (3) Employee
refuses to relocate to a facility or location more than 50 miles from the
Company's current location; and (B) within the 30-day period immediately
following such material change or reduction Employee elects to terminate his
employment voluntarily.
(v) Termination by Reason of Death or Disability. In the
--------------------------------------------
event that Employee's employment with the Company terminates as a result of
Employee's death or Disability (as defined in Section 6 below), Employee or
Employee's estate or representative will receive all salary and unpaid vacation
accrued as of the date of Employee's death or Disability and any other benefits
payable under the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of death or
Disability and in accordance with applicable law.
5. Definition of Cause. For purposes of this Agreement, "Cause" for
------------------- -----
Employee's termination will exist at any time after the happening of one or more
of the following events:
<PAGE>
(a) Employee's willful misconduct or gross negligence in performance
of his duties hereunder, including Employee's refusal to comply in any material
respect with the legal directives of the Company's Board of Directors so long as
such directives are not inconsistent with the Employee's position and duties,
and such refusal to comply is not remedied within 10 working days after written
notice from the Board of Directors, which written notice shall state that
failure to remedy such conduct may result in Termination for Cause;
(b) Employee's conviction of the commission of (i) a felony or (ii)
any crime or offense involving moral turpitude; or
(c) Employee's breach of any element of this Agreement or the
Company's Proprietary Information Agreement, which breach is not cured within
thirty (30) days following written notice of such breach from the Company.
6. Definition of Disability. For purposes of this Agreement,
------------------------
"Disability" shall mean that Employee has been unable to perform his duties
----------
hereunder as the result of his incapacity due to physical or mental illness, and
such inability, which continues for at least 120 consecutive calendar days or
150 calendar days during any consecutive twelve-month period, if shorter, after
its commencement; is determined to be total and permanent by a physician
selected by the Company and its insurers and acceptable to Employee or to
Employee's legal representative (with such agreement on acceptability not to be
unreasonably withheld).
7. Confidentiality Agreement. Employee has signed an Employee Proprietary
-------------------------
Information Agreement with the Company (the "Confidentiality Agreement").
-------------------------
Employee hereby represents and warrants to the Company that he has complied with
all obligations under the Confidentiality Agreement and agrees to continue to
abide by the terms of the Confidentiality Agreement and further agrees that the
provisions of the Confidentiality Agreement shall survive any termination of
this Agreement or of Employee's employment relationship with the Company.
8. Noncompetition Covenant. Employee hereby agrees that he shall not,
-----------------------
during the term of his employment pursuant to this Agreement and the Severance
Period, if any, do any of the following without the prior written consent of the
Company's Board of Directors:
(a) Compete. Carry on any business or activity (whether directly or
-------
indirectly, as a partner, stockholder, principal, agent, director, affiliate,
employee or consultant) which is competitive with the business conducted by the
Company (as conducted now or during the term of Employee's employment), nor
engage in any other activities that conflict with Employee's obligations to the
Company.
(b) Solicit Business. Solicit or influence or attempt to influence
----------------
any client, customer or other person either directly or indirectly, to direct
his or its purchase of the Company's products and/or services to any person,
firm, corporation, institution or other entity in competition with the business
of the Company.
(c) Solicit Personnel. During the term of this Agreement and for a
-----------------
period of twelve (12) months after the termination of Employee's employment with
the Company, solicit or influence or attempt to influence any person employed by
the Company to terminate or
<PAGE>
otherwise cease his employment with the Company or become an employee of any
competitor of the Company.
9. Liability Insurance. The Company shall use reasonable efforts to
-------------------
obtain and maintain Directors' and Officers' Liability insurance, provided such
insurance is available to the Company at commercially reasonable rates as
determined by the Board of Directors.
10. Conflicts. Employee represents that his performance of all the terms
---------
of this Agreement will not breach any other agreement to which Employee is a
party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement.
11. Successors. Any successor to the Company (whether direct or indirect
----------
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agrees 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 of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
12. Miscellaneous Provisions.
------------------------
(a) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the parties.
(b) Sole Agreement; Termination of Prior Agreement. This Agreement
----------------------------------------------
(along with the Confidentiality Agreement) constitutes the sole agreement of the
parties and supersedes all oral negotiations and prior writings with respect to
the subject matter hereof. Without limiting the foregoing, the Prior Agreement
is hereby terminated in its entirety. The Confidentiality Agreement shall remain
in full force and effect.
(c) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or 48 hours after being deposited in the U.S. mail as certified
or registered mail with postage prepaid, if such notice is addressed to the
party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(d) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(e) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of
<PAGE>
the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
(f) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(g) Arbitration. Any dispute or claim arising out of or in
-----------
connection with this Agreement will be finally settled by binding arbitration in
San Francisco, California in accordance with the rules of the American
Arbitration Association by one arbitrator appointed in accordance with said
rules. The arbitrator shall apply California law, without reference to rules of
conflicts of law or rules of statutory arbitration, to the resolution of any
dispute. Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. Notwithstanding the foregoing, the parties
may apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this paragraph,
without breach of this arbitration provision. This Section 12(g) shall not apply
to the Confidentiality Agreement.
(h) Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
-----------------
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement as of the date first written
above.
AENEID CORPORATION
By: /s/ Daniel Putterman
-----------------------------------------
Title:
--------------------------------------
Address: 282 2nd Street
San Francisco, CA 94105
WILFREDO TEJADA
Signature: /s/ Wilfredo M. Tejada
----------------------------------
Address:
------------------------------------
------------------------------------
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is effective as of October
---------
6, 1999 by and between Daniel Putterman ("Putterman") and Aeneid Corporation, a
---------
California corporation (the "Company").
-------
RECITALS
The Company and Putterman are parties to an Employment Agreement dated
March 1, 1997 (the "Prior Agreement"). The Company and Putterman wish to
---------------
terminate the Prior Agreement in its entirety and replace it with the rights and
obligations under this Agreement.
Putterman is presently employed full time as the President and Chief
Executive Officer of the Company and serves as a director and Chairman of the
Board of Directors of the Company.
AGREEMENT
The parties hereby agree as follows:
1. Duties.
------
(a) Position. Until such time as the Company hires a new
--------
President or Chief Executive Officer, Putterman shall be employed as the
Company's President, Chief Executive Officer and Chairman of the Board of
Directors and will report to the Company's Board of Directors. In the event that
the Company hires a new President or Chief Executive Officer and Putterman does
not elect to treat such hiring as a Constructive Termination of his employment
pursuant to Section 5(a), so long as he is a director of the Company and
continues to be re-elected as Chairman of the Board of Directors pursuant to the
Company's Bylaws, Putterman will, subject to removal by the Board of Directors,
remain a full time employee of the Company and Chairman of the Board of
Directors ("Full Time Chairman").
------------------
(b) Obligations to the Company. Putterman agrees to the best
--------------------------
of his perform all of the duties and obligations required of and from Putterman
pursuant to the terms hereof. During the term of Putterman's employment
relationship with the Company as President, Chief Executive Officer or Full Time
Chairman, Putterman further agrees that he will devote all of his business time
and attention to the business of the Company, the Company will be entitled to
all of the benefits and profits arising from or incident to all such work
services and advice, Putterman will not render commercial or professional
services of any nature to any person or organization, whether or not for
compensation, without the prior written consent of the Company's Board of
Directors, and Putterman will not directly or indirectly engage or participate
in any business that is competitive in any manner with the business of the
Company. Notwithstanding the foregoing, Putterman may accept speaking or
presentation engagements in exchange for honoraria, may serve on boards of
charitable organizations, and may own 1% of the outstanding equity securities of
a
<PAGE>
corporation whose stock is listed on a national stock exchange or the Nasdaq
National Market. Putterman will comply with and be bound by the Company's
operating policies, procedures and practices from time to time in effect during
the term of Putterman's employment.
2. At-Will Employment. The Company and Putterman acknowledge that
------------------
Putterman's employment shall be at-will, as defined under applicable law, and
that Putterman's employment with the Company may be terminated by either party
at any time for any or no reason. If Putterman's employment terminates for any
reason, Putterman shall not be entitled to any payments, benefits, damages,
award or compensation other than as provided in this Agreement. The rights and
duties created by this Section 2 may not be modified in any way except by a
written agreement executed by Putterman and a duly authorized officer of the
Company.
3. Compensation. For the duties and services to be performed by
------------
Putterman hereunder, so long as Putterman is President and Chief Executive
Officer or Full Time Chairman, the Company shall pay Putterman, and Putterman
agrees to accept, the salary and other benefits described below in this Section
3.
(a) Salary. Putterman shall receive a monthly salary of
------
$14,583.33, which is equivalent to $175,000 on an annualized basis. Putterman's
monthly salary will be payable pursuant to the Company's normal payroll
practices. Putterman's salary shall be reviewed on at least an annual basis by
the Company's Board of Directors.
(b) Bonus. Putterman shall be eligible to receive an annual cash
-----
bonus of up to twenty percent (20%) of Putterman's base salary. The payment and
amount of such bonus are discretionary and shall be determined by the Board of
Directors or its Compensation Committee in good faith based upon the extent to
which Putterman's individual performance objectives and the Company's financial
and nonfinancial objectives are achieved during the applicable bonus period.
(c) Additional Benefits. Putterman will be eligible to
-------------------
participate in the Company's employee benefit plans of general application,
including without limitation, those plans covering medical, disability and life
insurance in accordance with the rules established for individual participation
in any such plan and under applicable law. Putterman will also receive such
other benefits as the Company generally provides to its other executive officers
of comparable position and experience.
(d) Reimbursement of Expenses. Putterman shall be authorized to
-------------------------
incur on behalf and for the benefit of, and shall be reimbursed by, the Company
for reasonable expenses, provided that such expenses are substantiated in
accordance with Company policies.
(e) Vacation. Putterman shall accrue paid vacation days on a
--------
pro rata basis at the rate of twenty-one (21) days per year. Unused, accrued
vacation days may be carried over from subsequent years, provided that Putterman
shall not accrue any additional vacation days at any time when the number of his
unused, accrued vacation days equals twenty-one (21).
-2-
<PAGE>
4. Termination of Employment Prior to Hiring of a New President or Chief
---------------------------------------------------------------------
Executive Officer.
-----------------
The following terms and provisions shall apply to termination of
Putterman's employment with the Company prior to the hiring by the Company of a
new President or Chief Executive Officer.
(a) Termination Events. Putterman's employment with the Company
------------------
prior to the hiring by the Company of a new President or Chief Executive Officer
may be terminated at any time upon the occurrence of any of the following
events:
(i) The Company's determination in good faith that it is
terminating Putterman for Cause (as defined in Section 5 below) ("Termination
-----------
for Cause").
- ---------
(ii) The Company's determination that it is terminating
Putterman without Cause, which determination may be made by the Company at any
time at the Company's sole discretion, for any or no reason ("Termination
-----------
Without Cause").
- -------------
(iii) The effective date of a written notice sent to the Company
from Putterman (or an equivalent oral notification) stating that Putterman is
electing to terminate his employment with the Company ("Voluntary Termination").
---------------------
(iv) (A)(1) A material change in Putterman's duties and
responsibilities, causing Putterman's position to be of materially reduced
stature or responsibility, (2) a reduction of more than 20% of Putterman's base
compensation unless in connection with similar decreases of other similarly
situated employees of the Company, or (3) Putterman refuses to relocate to a
facility or location more than 50 miles from the Company's current location; and
(B) within the 30-day period immediately following such material change or
reduction Putterman elects to terminate his employment voluntarily
("Constructive Termination"). The hiring by the Company of a new President or
------------------------
Chief Executive Officer shall constitute a Constructive Termination if Putterman
elects to treat it as such, in which event the provisions of Section 5(a) shall
apply.
(v) Following Putterman's death or Disability (as defined in
Section 6 below).
(b) Post-Te rmination Compensation. Putterman shall be entitled to
-----------------------------
receive only the payments and benefits stated in this Section 4(b) upon
termination of his employment prior to the hiring by the Company of a new
President or Chief Executive Officer:
(i) Voluntary Termination. If Putterman's employment
---------------------
terminates by Voluntary Termination prior to hiring by the Company of a new
President or Chief Executive Officer, then Putterman will receive payment(s) for
all salary and the value of any accrued, unused vacation time as of the date of
such termination.
-3-
<PAGE>
(ii) Termination Without Cause; Constructive Termination. If
---------------------------------------------------
Putterman's employment is terminated under Section 4(a)(ii) or 4(a)(iv) above
prior to the hiring by the Company of a new President or Chief Executive Officer
(such termination, a "Triggering Termination"), Putterman shall (in lieu of any
----------------------
and all severance benefits under any plan or agreement (including this
Agreement) to which Putterman would otherwise be entitled) be entitled to
receive 120% of his salary in effect at the time of such Triggering Termination
(the "Severance Payments"), paid over the twelve (12) month period beginning on
------------------
the effective date of such Triggering Termination. The Severance Payments shall
be made in accordance with the Company's standard payroll schedule and policies.
(iii) Termination for Cause. If Putterman's employment is
---------------------
terminated for Cause prior to the hiring by the Company of a new President or
Chief Executive Officer, then Putterman will receive payment(s) for all salary
and the value of any accrued, unused vacation time as of the date of such
termination.
(iv) Termination by Reason of Death or Disability. In the
--------------------------------------------
event that Putterman's employment with the Company terminates as a result of
Putterman's death or Disability (as defined in Section 7 below) prior to the
hiring by the Company of a new President or Chief Executive Officer, Putterman
or Putterman's estate or representative will receive all salary and unpaid
vacation accrued as of the date of Putterman's death or Disability and any other
benefits payable under the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of death or
Disability and in accordance with applicable law.
5. Termination of Employment After Hiring of a New President or Chief
------------------------------------------------------------------
Executive Officer.
-----------------
(a) Election to Treat Hiring of New President or Chief Executive
------------------------------------------------------------
Officer as Constructive Termination.
------------------------------------
Putterman may, at any time after such hiring, by providing notice to
the Company, elect to treat the hiring by the Company of a new President or
Chief Executive Officer as a Constructive Termination of his employment, in
which case, (i) Putterman's employment as Full Time Chairman shall terminate,
(ii) Putterman shall not be entitled to compensation pursuant to Section 3 and
(iii) the provisions of Section 5(c)(ii) and Section 8 shall apply.
(b) Election Not to Treat Hiring of New President or Chief Executive
----------------------------------------------------------------
Officer as Constructive Termination.
------------------------------------
In the event that the Company hires a new President or Chief Executive
Officer and Putterman does not elect to treat such hiring as a Constructive
Termination of his employment pursuant to Section 5(a), so long as he is a
director of the Company and continues to be re-elected as Chairman of the Board
of Directors pursuant to the Company's Bylaws, Putterman will, subject to
removal by the Board of Directors, remain the Full Time Chairman. Putterman's
employment with the Company as Full Time Chairman may be terminated at any time
upon the occurrence of any of the following events:
-4-
<PAGE>
(i) Termination for Cause (as defined in Section 6 below).
(ii) Termination Without Cause (as defined in Section 4(a)(ii)).
(iii) The effective date of a written notice sent to the Company
from Putterman (or an equivalent oral notification) stating that Putterman is
electing Voluntary Termination (as defined in Section 4(a)(iii)).
(iv) Constructive Termination (as defined in Section 4(a)(iv)).
(v) Following Putterman's death or Disability (as defined in
Section 7 below).
(c) Post-Termination Compensation. Except as stated in Section 8(c)
-----------------------------
below, Putterman shall be entitled to receive only the payments and benefits
stated in this Section 5(c) upon termination of his employment as Full Time
Chairman after the hiring by the Company of a new Chief Executive Officer:
(i) Voluntary Termination. If Putterman's employment as Full
---------------------
Time Chairman after the hiring by the Company of a new Chief Executive Officer
terminates by Voluntary Termination, then Putterman will receive payment(s) for
all salary and the value of any accrued, unused vacation time as of the date of
such termination.
(ii) Termination Without Cause; Constructive Termination. In
---------------------------------------------------
the event of a Termination Without Cause or Constructive Termination of
Putterman's employment as Full Time Chairman after the hiring by the Company of
a new President or Chief Executive Officer, Putterman shall (in lieu of any and
all severance benefits under any plan or agreement (including this Agreement) to
which Putterman would otherwise be entitled) be entitled to receive 120% of his
salary in effect at the time of such termination, paid over the twelve (12)
month period beginning on the effective date of such termination. Such payments
shall be made in accordance with the Company's standard payroll schedule and
policies.
(iii) Termination for Cause. If Putterman's employment as Full
---------------------
Time Chairman after the hiring by the Company of a new Chief Executive Officer
is terminated for Cause, then Putterman will receive payment(s) for all salary
and the value of any accrued, unused vacation time as of the date of such
termination.
(iv) Termination by Reason of Death or Disability. In the
--------------------------------------------
event that Putterman's employment with the Company as Full Time Chairman after
the hiring by the Company of a new Chief Executive Officer terminates as a
result of Putterman's death or Disability (as defined in Section 6 below),
Putterman or Putterman's estate or representative will receive all salary and
unpaid vacation accrued as of the date of Putterman's death or Disability and
any other benefits payable under the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
death or Disability and in accordance with applicable law.
-5-
<PAGE>
6. Definition of Cause. For purposes of this Agreement, "Cause" for
------------------- -----
Putterman's termination will exist at any time after the happening of one or
more of the following events:
(a) Putterman's willful misconduct or gross negligence in performance
of his duties hereunder, including Putterman's refusal to comply in any material
respect with the legal directives of the Company's Board of Directors so long as
such directives are not inconsistent with the Putterman's position and duties,
and such refusal to comply is not remedied within 10 working days after written
notice from the Board of Directors, which written notice shall state that
failure to remedy such conduct may result in Termination for Cause;
(b) Putterman's conviction of the commission of (i) a felony or (ii)
any crime or offense involving moral turpitude; or
(c) Putterman's breach of any element of this Agreement or the
Company's Proprietary Information Agreement, which breach is not cured within
thirty (30) days following written notice of such breach from the Company.
7. Definition of Disability. For purposes of this Agreement,
------------------------
"Disability" shall mean that Putterman has been unable to perform his duties
----------
hereunder as the result of his incapacity due to physical or mental illness, and
such inability, which continues for at least 120 consecutive calendar days or
150 calendar days during any consecutive twelve-month period, if shorter, after
its commencement, is determined to be total and permanent by a physician
selected by the Company and its insurers and acceptable to Putterman or to
Putterman's legal representative (with such agreement on acceptability not to be
unreasonably withheld).
8. Consulting Services. In the event that the Company hires a new
-------------------
President or Chief Executive Officer and Putterman chooses to treat such hiring
as a Constructive Termination pursuant to Section 5(a), effective as of the date
that Putterman provides notice to the Company of such election, Putterman shall
no longer be Full Time Chairman. Under such circumstances, unless there has
been a prior Termination for Cause of Putterman's employment, the Company shall
engage Putterman, and Putterman shall serve, as an independent consultant on the
terms and conditions set forth herein. During the Consultation Period (as
defined below), if he is still a director of the Company and Putterman and the
Company's Board of Directors mutually agree, Putterman may remain Chairman of
the Board of Directors and shall exercise and perform all of the duties of
Chairman of the Board of Directors required by the Company's Bylaws and the
Board of Directors but shall not be a full time employee of the Company.
(a) Consultation Period. The term of the consulting arrangement
-------------------
hereunder (the "Consultation Period") shall be twelve (12) months, commencing on
the first business day following the date that Putterman provides notice to the
Company of his election to treat the hiring of a new President or Chief
Executive Officer as a Constructive Termination, and shall automatically be
extended from month-to-month until terminated by either party in writing.
(b) Duties. During the Consultation Period, Putterman will report
------
to the Company's Board of Directors and will make himself available to provide
consulting services ("Consulting Services") to the Company, as requested by the
Company; provided, however, that
-6-
<PAGE>
Putterman shall not be required to provide more than eight hours of Consulting
Services to the Company per week. The Consulting Services shall be in addition
to Putterman's obligation to attend meetings of the Company's Board of Directors
and otherwise fulfill his duty as a director of the Company. The Consulting
Services shall include making available to the Board of Directors such facts,
information, recommendations, advice and consultation as may be requested from
time-to-time by the Board of Directors and, if requested by the Board of
Directors, participating in investor solicitation activities, including "road
shows" and industry trade shows. Any such participation in investor solicitation
activities and industry trade shows shall be at the expense of the Company. The
Company agrees to provide 48 hours notice to Putterman prior to requiring
Putterman to perform Consulting Services.
(c) Compensation. In exchange for Putterman making himself available
------------
to provide the Consulting Services to the Company, the Company shall pay
Putterman (i) $4,000 each month (the "Base Amount") and (ii) $150 per hour (the
"Additional Amounts") for each additional hour of Consulting Services performed
by Putterman. Putterman shall be solely responsible for the withholding and/or
payment of any federal, state or local income or payroll taxes with respect to
the Base Amount and any Additional Amounts paid to him hereunder and shall
indemnify and hold the Company harmless from all liability related to the tax
treatment of the Base Amount and any Additional Amounts. Notwithstanding the
foregoing, time spent by Putterman attending meetings of the Company's Board of
Directors or otherwise fulfilling his duty as a director of the Company shall
not be counted toward the hours referenced in (i) or (ii) of the first sentence
of this Section 8(c) and Putterman shall not be compensated by the Company for
any such time. Other than payments owed for time worked pursuant to (i) or (ii)
above, and except as provided in Section 5(c)(ii) in the event of a Termination
Without Cause or Constructive Termination of Putterman's employment as Full Time
Chairman after the hiring by the Company of a new President or Chief Executive
Officer, Putterman shall not be entitled to any benefits, damages, awards,
compensation or severance benefits upon termination of Putterman's consulting
arrangement. During the Consultation Period, Putterman will not receive
benefits under the Company's benefit plans. During the Consultation Period,
Putterman will be entitled to the Base Amount in a particular month only if he
actually provides the number of hours of Consulting Services requested by the
Company during such month, not to exceed eight hours per week.
(d) Status. It is the intent of the parties that, during the
------
Consultation Period, Putterman shall be an independent contractor reporting to
the Board of Directors of the Company and shall not be subject to any control or
direction of the Company in the manner in which his consulting services are
performed, the Company being interested only in the end product of such efforts
as Putterman may expend, namely, the making available of such facts,
information, recommendations advice and consultation and the participation in
such investor solicitation activities and industry trade shows as may be
requested from time-to-time by the Board of Directors.
9. Voting Agreement. Concurrent with the signing of this Agreement,
-----------------
Vision Capital L.P., Edgewater Private Equity Fund II, L.P. and Bluestem Capital
Partners II, L.P. (the "Shareholders") have executed a voting agreement (the
"Voting Agreement") pursuant to which
-7-
<PAGE>
they have agreed to continue to elect Putterman as a director of the Company
until the latter of: (i) one year from the date hereof, (ii) the date of the
closing of the Company's initial public offering or (iii) notice to the Company
or the Shareholders that Putterman does not wish to be reelected to the
Company's Board of Directors.
10. Confidentiality Agreement. Putterman has signed an Employee
-------------------------
Proprietary Information Agreement with the Company (the "Confidentiality
---------------
Agreement"). Putterman hereby represents and warrants to the Company that he
- ---------
has complied with all obligations under the Confidentiality Agreement and agrees
to continue to abide by the terms of the Confidentiality Agreement and further
agrees that the provisions of the Confidentiality Agreement shall survive any
termination of this Agreement or of Putterman's employment relationship with the
Company. Putterman and the Company hereby agree that (i) the reference to
"employee" in the first line of paragraph 3 and (ii) the references to
"employment" in sixth and eighth lines of paragraph 5, the first, third and
fifth lines of paragraph 9 and the first line of paragraph 11 of the
Confidentiality Agreement shall include Putterman's consulting relationship with
the Company under Section 8 hereof.
11. Noncompetition Covenant. Putterman hereby agrees that he shall not,
-----------------------
during the period specified, do any of the following without the prior written
consent of the Company's Board of Directors:
(a) Compete. During (i) the term of his employment as President or
-------
Chief Executive Officer and the term of his service as Chairman of the Board of
Directors (as Full Time Chairman or otherwise) and (ii) for twelve (12) months
thereafter or the Consultation Period, whichever is longer, carry on any
business or activity (whether directly or indirectly, as a partner, stockholder,
principal, agent, director, affiliate, employee or consultant) which is
competitive with the business conducted by the Company (as conducted now or
during the term of Putterman's employment), nor engage in any other activities
that conflict with Putterman's obligations to the Company;
(b) Solicit Business. During (i) the term of his employment as
----------------
President or Chief Executive Officer and the term of his service as Chairman of
the Board of Directors (as Full Time Chairman or otherwise) and (ii) for twelve
(12) months thereafter or the Consultation Period, whichever is longer, solicit
or influence or attempt to influence any client, customer or other person either
directly or indirectly, to direct his or its purchase of the Company's products
and/or services to any person, firm, corporation, institution or other entity in
competition with the business of the Company; and
(c) Solicit Personnel. During (i) the term of his employment as
-----------------
President or Chief Executive Officer and the term of his employment as Chairman
of the Board of Directors (as Full Time Chairman or otherwise) and (ii) for
twelve (12) months thereafter or the Consultation Period, whichever is longer,
solicit or influence or attempt to influence any person employed by the Company
to terminate or otherwise cease his employment with the Company or become an
employee of any competitor of the Company.
-8-
<PAGE>
12. Liability Insurance. The Company shall use reasonable efforts to
-------------------
obtain and maintain Directors' and Officers' Liability insurance, provided such
insurance is available to the Company at commercially reasonable rates as
determined by the Board of Directors.
13. Conflicts. Putterman represents that his performance of all the
---------
terms of this Agreement will not breach any other agreement to which Putterman
is a party. Putterman has not, and will not during the term of this Agreement,
enter into any oral or written agreement in conflict with any of the provisions
of this Agreement.
14. No Disparagement. Putterman agrees that neither he nor any person
-----------------
acting by, through, under or in concert with him will make negative or
disparaging remarks to any person or entity about the Company, its business, or
its employees. The Company agrees that, so long as all inquiries are directed to
an executive officer of the Company, the Company will make no negative or
disparaging remarks to any person or entity about Putterman.
15. Successors. Any successor to the Company (whether direct or
----------
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agrees 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 of Putterman's
rights hereunder shall inure to the benefit of, and be enforceable by,
Putterman's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
16. Attorney's Fees. The Company shall pay up to $2,500 of the fees
----------------
and expenses of Putterman's counsel incurred in connection with negotiating this
Agreement and the Voting Agreement.
17. Miscellaneous Provisions.
------------------------
(a) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the parties.
(b) Sole Agreement; Termination of Prior Agreement. This Agreement
----------------------------------------------
(along with the Confidentiality Agreement) constitutes the sole agreement of the
parties and supersedes all oral negotiations and prior writings with respect to
the subject matter hereof. Without limiting the foregoing, the Prior Agreement
is hereby terminated in its entirety. The Confidentiality Agreement shall
remain in full force and effect.
(c) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or 48 hours after being deposited in the U.S. mail as certified
or registered mail with postage prepaid, if such notice is addressed to the
party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
-9-
<PAGE>
(d) Press Releases and Public Statements. In the event that the
-------------------------------------
Company hires a new President or Chief Executive Officer, the Company shall
issue a press release announcing such hiring. The Company shall consult with
Putterman before issuing the above-referenced press release and any other press
release or public statement with respect to Putterman and shall not issue any
such press release or make any such public statement without the prior consent
of Putterman, which shall not be unreasonably withheld; provided, however, that
the Company may, without the prior consent of Putterman, issue such press
release or such public statement as may upon the advice of outside legal counsel
be required by applicable law or the rules and regulations of the Nasdaq
National Market or any stock exchange on which the Company's stock is traded, if
it has used all reasonable efforts to consult with Putterman and its counsel and
allow Putterman and its counsel to comment thereon. Putterman shall consult
with the Company before issuing any press release or written public statement
with respect to the Company and shall not issue any such press release or
written public statement without the prior consent of the Company, which shall
not be unreasonably withheld. Prior to any presentation concerning the Company,
Putterman shall submit to the Company for approval the substance of such
presentation and shall generally follow the submitted material in making his
presentation.
(e) Indemnification. The terms and provisions contained in the
---------------
Indemnity Agreement made and entered into on March 1, 1997 by and between the
Company and Putterman shall be applicable so long as Putterman is providing
Consulting Services to the Company pursuant to Section 8 hereof. Putterman
shall indemnify the Company against any and all expenses (including attorneys'
fees), witness fees, damages, judgments, fines and amounts paid in settlement
and any other amounts that the Company becomes legally obligated to pay because
of any claim or claims made against the Company on account of an assertion made
by Putterman in any press release, written public statement or presentation,
which assertion was made in contravention of the duties set forth in Subsection
(d) of this Section 18.
(f) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(g) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(h) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(i) Arbitration. Any dispute or claim arising out of or related to
-----------
this Agreement, including, but not limited to, any claim under Title VII of the
Civil Rights Act of 1964, the Equal Pay Act, the Fair Labor Standards Act, the
California Fair Employment and
-10-
<PAGE>
Housing Act, the California Labor Code and/or any other local, state or federal
law governing Putterman's employment relationship with the Company, will be
finally settled by binding arbitration in San Francisco, California in
accordance with the Arbitration Rules and Procedures for Employment Disputes of
J.A.M.S. by one arbitrator appointed in accordance with said rules. The
arbitrator shall apply California or federal law, as applicable, without
reference to rules of conflicts of law or rules of statutory arbitration, to the
resolution of any dispute. Judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. Notwithstanding the
foregoing, the parties may apply to any court of competent jurisdiction for
preliminary or interim equitable relief, or to compel arbitration in accordance
with this paragraph, without breach of this arbitration provision. This Section
18(h) shall not apply to the Confidentiality Agreement.
(j) Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
-----------------
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
The parties have executed this Agreement as of the date first written above.
AENEID CORPORATION
By: /s/ Mark Elder
--------------------------------------
Title: Director, Finance and Administration
-----------------------------------
Address: 282 2nd Street
San Francisco, CA 94105
DANIEL PUTTERMAN
Signature: /s/ Daniel Putterman
---------------------
Address: 3230 Jackson St.
------------------------
San Francisco, CA 94118
------------------------
-11-
<PAGE>
EXHIBIT 10.11
[AENEID LETTERHEAD]
October 18, 1999
Douglas S. Bennett
12472 Anchorage Way
Fishers, IN 46038
Re: Amended Terms of Employment
Dear Mr. Bennett:
The following describes, and will govern exclusively, the terms and
conditions of your employment with Aeneid Corporation and amends and replaces in
its entirety the terms and provisions outlined in the previous letter from the
Company regarding the terms of your employment:
Title President and CEO, Member of the Board of Directors
Start Date October 18, 1999 with the understanding that the first day
at the Aeneid office in San Francisco will be October
25/th/, 1999.
Reports To Board of Directors
Base Salary $275,000 per year through December 31/st/, 2000.
Bonus Target at no less than $125,000 per year. Pro-rata guarantee
for the balance of 1999 at the rate of $2,403.00 per week.
Signing Bonus You will be paid a sign-on bonus of $97,500. This bonus will
be paid within five (5) days after your first official day
of employment with the Company.
Equity You will be granted a right to purchase 1,765,051 shares of
common stock (the "Shares") at a purchase price of $.80 per
share pursuant to the terms of the Company's 1999 Stock
Plan. (The Company, as of the closing of its Series C
financing, has approximately 25,000,000 shares outstanding
on a fully diluted basis, including shares that have been
reserved but not issued under the Company's stock plans.
This grant equates to approximately 7% of the Company's
outstanding shares on a fully diluted basis.) You must
accept this offer of stock purchase rights within thirty
(30) days from the date hereof by execution of a restricted
stock purchase
<PAGE>
agreement. The Company will accept a full recourse note from
you, bearing interest at the applicable federal rate,
compounded annually, and payable five (5) years from
execution, for the purchase of the Shares.
Repurchase Right Purchased Shares will be subject to repurchase by the
Company at the original purchase price. Such repurchase
right will lapse at the rate of 1/48/th/ per month, subject
to the provisions below.
a. Termination for Cause: If your service is
---------------------
terminated for "cause" (as defined below) the
company will have the right to repurchase at the
original purchase price all shares then covered by
the repurchase right.
b. Without Cause or Constructive Termination, Death
------------------------------------------------
and Disability: The Company will not have a
--------------
repurchase right with respect to the Shares in the
event your employment is terminated without cause
or by constructive termination, death or
disability.
c. Voluntary Resignation: As of the effective date
---------------------
of your resignation, the Company will have the
right to repurchase at the original purchase price
all shares then subject to the Company's
repurchase rights.
Termination If your employment is terminated by the Company, for any
reason other than for "cause" as described below, or in the
event of "constructive termination", death or disability,
you will be entitled to receive your base salary for a
period of one year ("Severance Period"). Additionally, you
will have the option to enter into a consulting agreement
with the Company for a period of one year. This consulting
agreement will provide minimum payments equal to 50% of your
then current target bonus for a minimum of 32 hours of
service per month. As an example, if your target bonus is
$130,000 per year, the Company will offer you a consulting
agreement for one year totaling $65,000 for 32 hours of
service per month. Sums shall be paid monthly in advance.
Additional hours requested by the Company and accepted by
you, will be paid at the rate of $125.00 per hour. Such
additional hours shall be paid within 10 days of receipt of
an invoice from you after the close of each month. If you
are terminated for cause you will not be entitled to any
additional payments, salary, bonus or benefits, nor will the
Company be obligated to offer you any consulting agreement.
For purposes of this Agreement, "constructive termination"
means diminution of duties, title, reporting relationship,
location change, pay reduction or any other involuntary
change in the material terms or conditions of your
employment. For purposes of this Agreement, "cause" means a
good faith determination by a majority of the Board of
Directors that you have: (a) engaged in acts in violation of
the
<PAGE>
law; (b) breached your fiduciary duty to the Company or
duties of loyalty or care to the Company; or (c)
intentionally and persistently disobeyed the good faith,
lawful, substantive policies or instructions of the Board of
Directors after being given thirty days written notice and
failing to cure such circumstances during such period, or if
such circumstances are not susceptible of cure during such
thirty day period, failing to initiate and diligently pursue
actions reasonably calculated to achieve and cure such
circumstances as soon as reasonably practicable thereafter.
Change of
Control For a period of twelve months following a Change of Control
(as defined in the Company's 1999 Stock Plan), if your
employment is terminated or your responsibilities are
materially diminished by the Company or its successor for
any reason other than for "cause", on and as of the
effective date of such transaction, (a) any and all Shares
which are then subject to the Company's repurchase option
shall be released from such repurchase option and (b) you
will be entitled to receive a severance benefit equal to
twelve months of your base salary and target bonus in affect
at that time (such payment shall be payable in one payment
in full). Under such circumstances, any remaining principal
balance and accrued interest on the $500,000 forgivable
portion of the $700,000 promissory note described below will
be fully forgiven.
Temporary Housing The Company will provide you with temporary housing in the
San Francisco area while you are in the process of your
relocation. Accordingly, the Company will reimburse expenses
incurred by you for such housing and living expenses up to a
maximum of $3,000 per month. It is anticipated that this
assistance will be required for not greater than 9 months
from your start date with the Company. To assist you with
travel back to your home, the Company will agree to provide
you with round trip travel from San Francisco to
Indianapolis every other weekend and to reimburse you for
all reasonable expenses related to this travel. In order to
control the expense of this travel, reservations should be
made 10 days in advance and be coach or economy class. You
may use any tickets for transportation of your family
members to San Francisco for visitation and or house
hunting.
Relocation
Assistance You will be reimbursed for all reasonable expenses
associated with your relocation to the San Francisco area
including (a) all reasonable real estate selling fees and
closing costs of your current home, (b) all reasonable
financing fees and closing costs associated with your new
home, (c) expenses related to the moving of your household
goods from Indianapolis to your permanent home in the San
Francisco area. Additionally, the Company will provide your
family with up to four (4) round trips to the San Francisco
area for the purposes of visitation and location of a
<PAGE>
permanent residence. Such airfare reservations should be
made 10 days in advance and be coach or economy class.
Relocation
Home Loan To assist you with your relocation, the Company will agree
to loan you $700,000 toward the purchase of your new primary
residence in the San Francisco area. The terms and
conditions of this loan are as follows:
a. Amount of loan: $700,000.
b. Term of loan: 5 years.
c. Interest rate at the applicable federal rate,
compounded annually.
d. Security shall be a perfected second trust deed in
the full amount on the related property and any
Company stock held by you.
e. $500,000 of the loan and accrued interest will be
subject to forgiveness at the rate of 1/5 per year,
with the first 1/5 forgiven on and as of January 1,
2001 and each year thereafter (subject to items f
and g below).
f. If your employment is terminated for cause, the
outstanding principal amount of the loan plus
accrued interest will be due within four months of
your termination.
g. Should your employment be terminated for any reason
other than cause, you shall repay any remaining
principal balance of the loan plus the accrued
interest within two years from the effective date
of your termination. The effective date of your
termination, except in the event of termination for
cause and voluntary resignation, shall be defined
as the last date of your Severance Period.
h. You may elect to make payments on the unforgivable
portion of the loan at any time over the term.
Entire
Understanding This letter agreement embodies and constitutes our entire
understanding concerning the terms and conditions of your
employment with the Company and supercedes any and all prior
agreements, oral or written. This agreement may only be
modified or amended by a written instrument executed by both
you and the Company.
<PAGE>
Please acknowledge your acceptance of, and agreement to, these terms
and conditions by executing the signature line below and returning an executed
copy to me.
Sincerely,
AENID CORPORATION
/s/ Mark Elder
-------------------------------
Mark Elder , Name
--------------------
Treasurer , Title
--------------------
Acknowledged, agreed to and accepted:
/s/ Douglas S. Bennett
- -----------------------------
Douglas S. Bennett
<PAGE>
EXHIBIT 10.12
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement (the "Agreement") is entered into
---------
this 1st day of November, 1999 by and between Aeneid Corporation, a California
corporation (the "Company") and Douglas S. Bennett ("Purchaser").
------- ---------
RECITALS
--------
In connection with Purchaser's purchase of certain shares of the
Company's Common Stock (the "Shares") pursuant to a Restricted Stock Purchase
------
Agreement dated November 1, 1999 between Purchaser and the Company, Purchaser is
delivering a promissory note of even date herewith (the "Note") in full or
----
partial payment of the exercise price for the Shares. The company requires that
the Note be secured by a pledge of the Shares on the terms set forth below.
AGREEMENT
---------
In consideration of the Company's acceptance of the Note as full or
partial payment of the exercise price of the Shares, and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The Note shall become payable in full on November 1, 2004.
2. Purchaser shall deliver to the Secretary of the Company, or his
or her designee (hereinafter referred to as the "Pledge Holder"), all
-------------
certificates representing the Shares, together with an Assignment Separate from
Certificate in the form attached to this Agreement as Attachment A executed by
------------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, for
use in transferring all or a portion of the Shares to the Company if, as and
when required pursuant to this Agreement. In addition, if Purchaser is married,
Purchaser's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal,
extension or modification of the Note, Purchaser hereby grants to the Company a
security interest in and pledges with and delivers to the Company Purchaser's
Shares (sometimes referred to herein as the "Collateral").
----------
4. In the event that Purchaser prepays all or a portion of the Note,
in accordance with the provisions thereof, Purchaser intends, unless written
notice to the contrary is delivered to the Pledge Holder, that the Shares
represented by the portion of the Note so repaid, including annual interest
thereon, shall continue to be so held by the Pledge Holder, to serve as
independent collateral for the outstanding portion of the Note.
5. In the event of any foreclosure of the security interest created
by this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the
establishment of a public market for the Shares of the Company, the securities
laws affecting sale of the Shares make a public sale of the Shares commercially
unreasonable. The parties further agree that the repurchasing of such Shares by
the
<PAGE>
Company, or by any person to whom the Company may have assigned its rights
under this Agreement, is commercially reasonable if made at a price determined
by the Board of Directors in its discretion, fairly exercised, representing what
would be the fair market value of the Shares, taking into effect any limitation
on transferability, whether due to the size of the block of shares or the
restrictions of applicable securities laws..
6. In the event of default in payment when due of any indebtedness
under the Note, the Company may elect then, or at any time thereafter, to
exercise all rights available to a secured party under the California Commercial
Code including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy any
remaining indebtedness under Purchaser's Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
7. Upon full payment by Purchaser of all amounts due under the Note,
Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations under this Agreement; provided, however,
-------- -------
that Pledge Holder shall nevertheless retain the Shares as escrow agent if at
the time of full payment by Purchaser said Shares are still subject to a
Repurchase Option in favor of the Company.
8. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without regard to conflicts of laws
principles.
2
<PAGE>
The parties have executed this Pledge and Security Agreement as of the
date first set forth above.
COMPANY:
AENEID CORPORATION
By: /s/ Mark Elder
------------------------------------
Name: Mark Elder
----------------------------------
(print)
Title: Treasurer
--------------------------------
Address:
282 2/nd/ Street, Suite 200
San Francisco, CA 94105
PURCHASER:
DOUGLAS S. BENNETT
/s/ Douglas S. Bennett
---------------------------------------
(Signature)
Address: 12472 Anchorage Way
Fishers, IN 46038
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Borrower") and Aeneid Corporation (the
--------
"Company") dated January 28, 2000 (the "Agreement"), Borrower hereby sells,
------- ---------
assigns and transfers unto the Company _____________________________ (________)
shares of the Common Stock of the Company standing in Borrower's name on the
books of the Company and represented by Certificate No. ___, and hereby
irrevocably appoints _____________________________ to transfer said stock on the
books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS
THERETO.
Dated: ___________________.
Signature:
____________________________________________
Douglas S. Bennett
____________________________________________
Spouse of Douglas S. Bennett (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to transfer shares to
the Company if, as and when required under the Pledge and Security Agreement
without requiring additional signatures on the part of Borrower.
<PAGE>
EXHIBIT 10.13
PROMISSORY NOTE
---------------
$1,412,040.80 San Francisco, California
November 1, 1999
For value received, the undersigned promises to pay Aeneid
Corporation, a California corporation (the "Company"), at its principal office
-------
the principal sum of $1,412,040.80 with interest from the date hereof at a rate
of 6.08% per annum, compounded annually, on the unpaid balance of such principal
sum. Such principal and interest shall be due and payable on November 1, 2004.
Principal and interest are payable in lawful money of the United
States of America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME
WITHOUT PREMIUM OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such
sum as the Court may deem reasonable shall be added hereto as attorneys' fees.
The makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain
shares of Common Stock of the Company and is subject to the terms of a Pledge
and Security Agreement between the undersigned and the Company of even date
herewith.
In the event that any one or more provisions of this Note shall be
held to be illegal, invalid or otherwise unenforceable, the same shall not
affect any other provision of this Note, and the remaining provisions of this
Note shall remain in full force and effect.
This Note shall be governed by, and construed in accordance with, the
laws of the State of California without regard to conflicts of laws principles.
/s/ Douglas S. Bennett
-----------------------------
Douglas S. Bennett
<PAGE>
EXHIBIT 10.14
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (the "Agreement") is entered into
---------
as of January 28, 2000 by and between Aeneid Corporation, a California
corporation (the "Company") and Robert Ainsbury ("Borrower").
------- --------
RECITALS
--------
In connection with a non-recourse promissory note of even date
herewith (the "Note") by Borrower in favor of the Company, the Company requires
----
that the Note be secured by a pledge of 63,292 shares of the Company's Common
Stock owned by the Borrower (the "Shares") on the terms set forth below.
------
AGREEMENT
---------
In consideration of the Company's acceptance of the Note, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Note shall become payable in full on January 28, 2003.
2. Borrower shall deliver to the Secretary of the Company, or his or
her designee (hereinafter referred to as the "Pledge Holder"), all certificates
-------------
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Borrower and
------------
by Borrower's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Borrower is married,
Borrower's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension
or modification of the Note, Borrower hereby grants to the Company a security
interest in and pledges with and delivers to the Company the Shares (sometimes
referred to herein as the "Collateral").
----------
4. In the event that Borrower repays a portion of the Note, in
accordance with the provisions thereof, Borrower intends, unless written notice
to the contrary is delivered to the Pledge Holder, that the Shares represented
by the portion of the Note so repaid, including annual interest thereon, shall
continue to be so held by the Pledge Holder, to serve as independent collateral
for the outstanding portion of the Note.
5. In the event of any foreclosure of the security interest created
by this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the
establishment of a public market for the Shares of the Company, the securities
laws affecting sale of the Shares make a public sale of the Shares commercially
unreasonable. The parties further agree that the repurchasing of such Shares by
the Company, or
<PAGE>
by any person to whom the Company may have assigned its rights under this
Agreement, is commercially reasonable if made at a price determined by the Board
of Directors in its discretion, fairly exercised, representing what would be the
fair market value of the Shares, reduced by any limitation on transferability,
whether due to the size of the block of shares or the restrictions of applicable
securities laws.
6. In the event of default in payment when due of any indebtedness
under the Note, the Company may elect then, or at any time thereafter, to
exercise all rights available to a secured party under the California Commercial
Code, including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy
any remaining indebtedness under Borrower's Note.
(c) Any remaining proceeds shall be delivered to Borrower.
7. Upon full payment by Borrower of all amounts due under the Note,
Pledge Holder shall deliver to Borrower all Shares in Pledge Holder's possession
belonging to Borrower, and Pledge Holder shall thereupon be discharged of all
further obligations under this Agreement.
8. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without regard to conflicts of laws
principles.
-2-
<PAGE>
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
AENEID CORPORATION
By: /s/ Douglas S. Bennett
--------------------------
Name: Douglas S. Bennett
------------------------
(print)
Title: President
-----------------------
Address:
282 2/nd/ Street, Suite 300
San Francisco, CA 94105
BORROWER:
ROBERT AINSBURY
/s/ Robert Ainsbury
-----------------------------
(Signature)
Address:
415 Colon Avenue
-----------------------------
San Francisco CA 94127
-----------------------------
-3-
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Borrower") and Aeneid Corporation (the
--------
"Company") dated January 28, 2000 (the "Agreement"), Borrower hereby sells,
------- ---------
assigns and transfers unto the Company _____________________________ (________)
shares of the Common Stock of the Company standing in Borrower's name on the
books of the Company and represented by Certificate No. ___, and hereby
irrevocably appoints _____________________________ to transfer said stock on the
books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS
THERETO.
Dated: ___________________.
Signature:
__________________________________________
Robert Ainsbury
__________________________________________
Spouse of Robert Ainsbury (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to transfer shares to
the Company if, as and when required under the Pledge and Security Agreement
without requiring additional signatures on the part of Borrower.
<PAGE>
EXHIBIT 10.15
NON-RECOURSE PROMISSORY NOTE
----------------------------
$100,000 San Francisco, California
January 28, 2000
For value received, the undersigned promises to pay Aeneid Corporation, a
California corporation (the "Company"), at its principal office the principal
-------
sum of $100,000, together with interest on the sum of the outstanding principal
balance, plus accrued but unpaid interest, at the rate of 5.73% per annum,
compounded monthly. Such principal and interest shall be due and payable on
January 28, 2003.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT INTEREST
OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest, and notice of nonpayment of this Note.
This Note, which is non-recourse, is secured by a pledge of certain shares
of Common Stock of the Company owned by the undersigned and is subject to the
terms of a Pledge and Security Agreement between the undersigned and the Company
of even date herewith.
THIS NOTE IS NON-RECOURSE TO THE UNDERSIGNED. The Company shall look solely
to any collateral securing this Note for payment of any unpaid amounts due under
this Note, whether or not the value of such collateral is sufficient to
liquidate the entire amount due. The Company shall have no claim against the
undersigned for payment of any amount due under this Note other than to the
extent of the interest of the undersigned in the collateral securing this Note
in accordance with the aforementioned Pledge and Security Agreement.
In the event that any one or more provisions of this Note shall be held to
be illegal, invalid or otherwise unenforceable, the same shall not affect any
other provision of this Note, and the remaining provisions of this Note shall
remain in full force and effect.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California without regard to conflicts of laws principles.
/s/ Robert Ainsbury
------------------------------------
Robert Ainsbury
<PAGE>
EXHIBIT 10.16
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (the "Agreement") is entered into as of
---------
January 28, 2000 by and between Aeneid Corporation, a California corporation
(the "Company") and Willie Tejada ("Borrower").
------- --------
RECITALS
--------
In connection with a non-recourse promissory note of even date herewith
(the "Note") by Borrower in favor of the Company, the Company requires that the
----
Note be secured by a pledge of 63,292 shares of the Company's Common Stock owned
by the Borrower (the "Shares") on the terms set forth below.
------
AGREEMENT
---------
In consideration of the Company's acceptance of the Note, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. The Note shall become payable in full on January 28, 2003.
2. Borrower shall deliver to the Secretary of the Company, or his or
her designee (hereinafter referred to as the "Pledge Holder"), all certificates
-------------
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Borrower and
------------
by Borrower's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Borrower is married,
Borrower's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension
or modification of the Note, Borrower hereby grants to the Company a security
interest in and pledges with and delivers to the Company the Shares (sometimes
referred to herein as the "Collateral").
----------
4. In the event that Borrower repays a portion of the Note, in accordance
with the provisions thereof, Borrower intends, unless written notice to the
contrary is delivered to the Pledge Holder, that the Shares represented by the
portion of the Note so repaid, including annual interest thereon, shall continue
to be so held by the Pledge Holder, to serve as independent collateral for the
outstanding portion of the Note.
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the establishment
of a public market for the Shares of the Company, the securities laws affecting
sale of the Shares make a public sale of the Shares commercially unreasonable.
The parties further agree that the repurchasing of such Shares by the Company,
or
<PAGE>
by any person to whom the Company may have assigned its rights under this
Agreement, is commercially reasonable if made at a price determined by the Board
of Directors in its discretion, fairly exercised, representing what would be the
fair market value of the Shares, reduced by any limitation on transferability,
whether due to the size of the block of shares or the restrictions of applicable
securities laws.
6. In the event of default in payment when due of any indebtedness under
the Note, the Company may elect then, or at any time thereafter, to exercise all
rights available to a secured party under the California Commercial Code,
including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy
any remaining indebtedness under Borrower's Note.
(c) Any remaining proceeds shall be delivered to Borrower.
7. Upon full payment by Borrower of all amounts due under the Note,
Pledge Holder shall deliver to Borrower all Shares in Pledge Holder's possession
belonging to Borrower, and Pledge Holder shall thereupon be discharged of all
further obligations under this Agreement.
8. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California without regard to conflicts of laws
principles.
-2-
<PAGE>
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
AENEID CORPORATION
By: /s/ Douglas S. Bennett
------------------------------
Name: Douglas S. Bennett
-----------------------------
(print)
Title: President
-----------------------------
Address:
282 2/nd/ Street, Suite 300
San Francisco, CA 94105
BORROWER:
WILLIE TEJADA
/s/ Willie Tejada
---------------------------------
(Signature)
Address:
12 Portola Green Cir.
----------------------------------
Portola Valley, CA 94028
-----------------------------------
-3-
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Borrower") and Aeneid Corporation (the
--------
"Company") dated January 28, 2000 (the "Agreement"), Borrower hereby sells,
------- ---------
assigns and transfers unto the Company _____________________________ (________)
shares of the Common Stock of the Company standing in Borrower's name on the
books of the Company and represented by Certificate No. ___, and hereby
irrevocably appoints _____________________________ to transfer said stock on the
books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS
THERETO.
Dated:______________.
Signature:
________________________________________
Willie Tejada
________________________________________
Spouse of Willie Tejada (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to transfer shares to the
Company if, as and when required under the Pledge and Security Agreement without
requiring additional signatures on the part of Borrower.
<PAGE>
EXHIBIT 10.17
NON-RECOURSE PROMISSORY NOTE
----------------------------
$100,000 San Francisco, California
January 28, 2000
For value received, the undersigned promises to pay Aeneid Corporation, a
California corporation (the "Company"), at its principal office the principal
-------
sum of $100,000, together with interest on the sum of the outstanding principal
balance, plus accrued but unpaid interest, at the rate of 5.73% per annum,
compounded monthly. Such principal and interest shall be due and payable on
January 28, 2003.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT
INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest, and notice of nonpayment of this Note.
This Note, which is non-recourse, is secured by a pledge of certain shares
of Common Stock of the Company owned by the undersigned and is subject to the
terms of a Pledge and Security Agreement between the undersigned and the Company
of even date herewith.
THIS NOTE IS NON-RECOURSE TO THE UNDERSIGNED. The Company shall look
solely to any collateral securing this Note for payment of any unpaid amounts
due under this Note, whether or not the value of such collateral is sufficient
to liquidate the entire amount due. The Company shall have no claim against the
undersigned for payment of any amount due under this Note other than to the
extent of the interest of the undersigned in the collateral securing this Note
in accordance with the aforementioned Pledge and Security Agreement.
In the event that any one or more provisions of this Note shall be held to
be illegal, invalid or otherwise unenforceable, the same shall not affect any
other provision of this Note, and the remaining provisions of this Note shall
remain in full force and effect.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California without regard to conflicts of laws principles.
/s/ Willie Tejada
----------------------
Willie Tejada
<PAGE>
EXHIBIT 10.18
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (the "Agreement") is entered into as of
---------
October 6, 1999 by and between Aeneid Corporation, a California corporation (the
"Company") and Daniel Putterman ("Borrower").
------- --------
RECITALS
--------
In connection with a non-recourse promissory note of even date herewith
(the "Note") by Borrower in favor of the Company, the Company requires that the
----
Note be secured by a pledge of 316,455 shares of the Company's Common Stock
owned by the Borrower (the "Shares") on the terms set forth below.
------
AGREEMENT
---------
In consideration of the Company's acceptance of the Note, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. The Note shall become payable in full on October 6, 2002.
2. Borrower shall deliver to the Secretary of the Company, or his or
her designee (hereinafter referred to as the "Pledge Holder"), all certificates
-------------
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Borrower and
------------
by Borrower's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Borrower is married,
Borrower's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension
or modification of the Note, Borrower hereby grants to the Company a security
interest in and pledges with and delivers to the Company the Shares (sometimes
referred to herein as the "Collateral").
----------
4. In the event that Borrower repays a portion of the Note, in accordance
with the provisions thereof, Borrower intends, unless written notice to the
contrary is delivered to the Pledge Holder, that the Shares represented by the
portion of the Note so repaid, including annual interest thereon, shall continue
to be so held by the Pledge Holder, to serve as independent collateral for the
outstanding portion of the Note.
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the establishment
of a public market for the Shares of the Company, the securities laws affecting
sale of the Shares make a public sale of the Shares commercially unreasonable.
The parties further agree that the repurchasing of such Shares by the Company,
or
<PAGE>
by any person to whom the Company may have assigned its rights under this
Agreement, is commercially reasonable if made at a price determined by the Board
of Directors in its discretion, fairly exercised, representing what would be the
fair market value of the Shares, reduced by any limitation on transferability,
whether due to the size of the block of shares or the restrictions of applicable
securities laws.
6. In the event of default in payment when due of any indebtedness under
the Note, the Company may elect then, or at any time thereafter, to exercise all
rights available to a secured party under the California Commercial Code,
including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy
any remaining indebtedness under Borrower's Note.
(c) Any remaining proceeds shall be delivered to Borrower.
7. Upon full payment by Borrower of all amounts due under the Note,
Pledge Holder shall deliver to Borrower all Shares in Pledge Holder's possession
belonging to Borrower, and Pledge Holder shall thereupon be discharged of all
further obligations under this Agreement.
8. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California without regard to conflicts of laws
principles.
-2-
<PAGE>
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
AENEID CORPORATION
By: /s/ Mark Elder
------------------------------------
Name: Mark Elder
----------------------------------
(print)
Title: Director, Finance and Admin.
---------------------------------
Address:
282 2/nd/ Street, Suite 300
San Francisco, CA 94105
BORROWER:
DANIEL PUTTERMAN
/s/ Daniel Putterman
----------------------------------------
(Signature)
Address:
______________________________________
______________________________________
-3-
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Borrower") and Aeneid Corporation (the
--------
"Company") dated ________________, 1999 (the "Agreement"), Borrower hereby
------- ---------
sells, assigns and transfers unto the Company _____________________________
(________) shares of the Common Stock of the Company standing in Borrower's name
on the books of the Company and represented by Certificate No. ___, and hereby
irrevocably appoints _____________________________ to transfer said stock on the
books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS
THERETO.
Dated: _____________.
Signature:
__________________________________________
Daniel Putterman
__________________________________________
Spouse of Daniel Putterman (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to transfer shares to the
Company if, as and when required under the Pledge and Security Agreement without
requiring additional signatures on the part of Borrower.
<PAGE>
EXHIBIT 10.19
NON-RECOURSE PROMISSORY NOTE
----------------------------
$500,000 San Francisco, California
October 6, 1999
For value received, the undersigned promises to pay Aeneid Corporation, a
California corporation (the "Company"), at its principal office the principal
-------
sum of $500,000, together with interest on the sum of the outstanding principal
balance, plus accrued but unpaid interest, at the rate of 5.41% per annum,
compounded monthly. Such principal and interest shall be due and payable on
October __, 2002.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT INTEREST
OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest, and notice of nonpayment of this Note.
This Note, which is non-recourse, is secured by a pledge of certain shares
of Common Stock of the Company owned by the undersigned and is subject to the
terms of a Pledge and Security Agreement between the undersigned and the Company
of even date herewith.
THIS NOTE IS NON-RECOURSE TO THE UNDERSIGNED. The Company shall look solely
to any collateral securing this Note for payment of any unpaid amounts due under
this Note, whether or not the value of such collateral is sufficient to
liquidate the entire amount due. The Company shall have no claim against the
undersigned for payment of any amount due under this Note other than to the
extent of the interest of the undersigned in the collateral securing this Note
in accordance with the aforementioned Pledge and Security Agreement.
In the event that any one or more provisions of this Note shall be held to
be illegal, invalid or otherwise unenforceable, the same shall not affect any
other provision of this Note, and the remaining provisions of this Note shall
remain in full force and effect.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California without regard to conflicts of laws principles.
/s/ David Putterman
---------------------------
Daniel Putterman
<PAGE>
EXHIBIT 10.20
AGREEMENT AND PLAN OF MERGER
by and among
AENEID CORPORATION,
AENEID MERGER SUB, INC.,
INGENIUS TECHNOLOGIES, INC.,
and
JULIE STOCK AND GARY STOCK
Dated October 22, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AGREEMENT AND PLAN OF MERGER............................................. 1
ARTICLE I. DEFINITIONS................................................... 2
1.1 Defined Terms.
1.2 Other Defined Terms............................................ 8
1.3 Interpretation Provisions...................................... 8
ARTICLE II. MERGER....................................................... 9
2.1 Filings........................................................ 9
2.2 Merger......................................................... 9
2.3 Further Assurances............................................. 10
2.4 Prepayment..................................................... 10
ARTICLE III. CONVERSION OF SHARES........................................ 10
3.1 Conversion of Merger Sub Shares................................ 10
3.2 Conversion of InGenius Common Stock............................ 10
3.3 Indemnity Escrow Arrangements.................................. 11
3.4 Surrender of Certificates...................................... 11
3.5 Taking of Necessary Action; Further Action..................... 12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF INGENIUS AND SELLERS....... 12
4.1 Organization of InGenius....................................... 12
4.2 Capitalization of InGenius..................................... 12
4.3 Ownership of Stock............................................. 13
4.4 Authorization.................................................. 13
4.5 Officers and Directors......................................... 14
4.6 Bank Accounts.................................................. 14
4.7 Subsidiaries................................................... 14
4.8 Absence of Certain Changes or Events........................... 14
4.9 Title to Assets................................................ 17
4.10 Sufficiency of Assets.......................................... 17
4.11 Fixtures and Equipment......................................... 17
4.12 Contracts...................................................... 17
4.13 No Conflict or Violation; Consents............................. 19
4.14 Permits........................................................ 19
4.15 Financial Statements; Books and Records........................ 20
4.16 Liabilities.................................................... 20
4.17 Litigation..................................................... 20
4.18 Labor Matters.................................................. 21
4.19 Employee Benefit Plans......................................... 22
4.20 Transactions with Related Parties.............................. 26
4.21 Compliance with Law............................................ 26
4.22 Intellectual Property.......................................... 26
4.23 Software....................................................... 27
4.24 Tax Matters.................................................... 29
4.25 Insurance...................................................... 30
4.26 Accounts Receivable............................................ 31
4.27 Payments....................................................... 31
4.28 Customers and Suppliers........................................ 31
4.29 Environmental Matters.......................................... 31
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.30 Brokers; Transaction Costs........................................ 33
4.31 No Other Agreements to Sell InGenius or the Assets................ 33
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF AENEID......................... 34
5.1 Organization of Aeneid............................................ 34
5.2 Authorization..................................................... 34
5.3 No Conflict or Violation; Consents................................ 34
5.4 Financial Statements.............................................. 34
5.5 No Brokers........................................................ 35
5.6 Litigation........................................................ 35
5.7 Financial Capability.............................................. 35
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF MERGER SUB.................... 35
6.1 Organization of Merger Sub........................................ 35
6.2 Authorization..................................................... 35
6.3 Legal Proceedings................................................. 35
ARTICLE VII. ACTIONS PRIOR TO THE CLOSING................................... 36
7.1 Conduct of Business............................................... 36
7.2 Investigation by Aeneid........................................... 37
7.3 Notification of Certain Matters................................... 38
7.4 Restrictions on Certain Transactions.............................. 38
7.5 Approval of Shareholders.......................................... 39
7.6 Further Assurances................................................ 39
7.7 Satisfaction of Conditions........................................ 39
ARTICLE VIII. CONDITIONS TO OBLIGATIONS OF INGENIUS AND SELLERS............. 39
8.1 Representations, Warranties and Covenants......................... 39
8.2 Consents.......................................................... 40
8.3 No Court Orders................................................... 40
8.4 Closing Documents................................................. 40
8.5 Opinion of Counsel to Aeneid...................................... 40
8.6 Aeneid Material Adverse Change.................................... 40
8.7 Certificates...................................................... 40
ARTICLE IX. CONDITIONS TO OBLIGATIONS OF AENEID AND MERGER SUB.............. 40
9.1 Representations, Warranties and Covenants......................... 41
9.2 InGenius Shareholder Approval..................................... 41
9.3 Approvals......................................................... 41
9.4 No Actions or Court Orders........................................ 41
9.5 Opinion of Counsel................................................ 41
9.6 Employees......................................................... 41
9.7 Certificates...................................................... 41
9.8 Closing Documents................................................. 42
9.9 InGenius Material Adverse Change.................................. 42
9.10 Closing Balance Sheet............................................. 42
9.11 Due Diligence Review.............................................. 42
9.12 Cancellation of Options, Warrants, Convertible Securities, etc.... 42
ARTICLE X. CLOSING.......................................................... 42
10.1 Deliveries by Sellers and InGenius to Aeneid...................... 42
10.2 Deliveries by Aeneid.............................................. 43
ARTICLE XI. ACTIONS BY SELLERS, INGENIUS AND AENEID AFTER THE CLOSING....... 44
11.1 Books and Records; Tax Matters.................................... 44
11.2 Participation in Series D Financing............................... 44
11.3 Employment of the Stocks.......................................... 44
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE XII. INDEMNIFICATION.............................................. 45
12.1 Survival of Representations.................................... 45
12.2 Indemnification................................................ 45
12.3 No Right of Contribution....................................... 48
ARTICLE XIII. MISCELLANEOUS............................................... 48
13.1 Termination.................................................... 48
13.2 License Agreement.............................................. 49
13.3 Assignment; No Third-Party Beneficiaries....................... 49
13.4 Notice......................................................... 49
13.5 Choice of Law.................................................. 50
13.6 Entire Agreement; Amendments and Waivers....................... 51
13.7 Counterparts................................................... 51
13.8 Invalidity..................................................... 51
13.9 Expenses....................................................... 51
13.10 Approval of Sellers............................................ 51
13.11 Approval of Aeneid as Sole Shareholder of Merger Sub........... 51
13.12 Publicity...................................................... 52
13.13 Arbitration.................................................... 52
</TABLE>
<PAGE>
TABLE OF SCHEDULES
Schedule 1.1(a) Financial Statements
Schedule 4.1 Foreign Qualifications
Schedule 4.5 Officers and Directors of Company
Schedule 4.6 Bank Accounts, Safe Deposit Boxes and Authorized Persons
Schedule 4.8 Certain Changes or Events
Schedule 4.9 Title to Assets and Encumbrances
Schedule 4.11 Fixtures and Equipment
Schedule 4.12 Contracts
Schedule 4.13 Consents
Schedule 4.14 Permits
Schedule 4.16 Litigation
Schedule 4.19 Employee Plans
Schedule 4.20 Transactions with Related Parties
Schedule 4.22 Proprietary Rights
Schedule 4.23 Tax Matters
Schedule 4.24 Insurance Policies
Schedule 4.26 Inventory
Schedule 4.29 Five Largest Customers and Suppliers
<PAGE>
TABLE OF EXHIBITS
Exhibit A Form of Certificate of Merger
Exhibit B Form of Non-Compete Agreement
Exhibit C Indemnity Escrow Agreement
Exhibit D Employment Agreements
Exhibit E Form of VRS&H Legal Opinion
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered into
as of October 22, 1999 by and among (i) Aeneid Corporation, a California
corporation ("Aeneid"), (ii) Aeneid Merger Sub, Inc., a Michigan corporation and
a wholly-owned subsidiary of Aeneid ("Merger Sub"), (iii) InGenius Technologies,
Inc., a Michigan corporation ("InGenius"), and (iv) Julie Stock and Gary Stock,
each an individual and a shareholder of InGenius (together, "Sellers")
RECITALS
--------
A. Aeneid owns 100% of the issued and outstanding shares of capital
stock of Merger Sub.
B. Sellers collectively own an aggregate of 48,000 shares of common
stock of InGenius ("InGenius Common Stock").
C. The Boards of Directors of Merger Sub and InGenius deem it
advisable and in the best interests of their respective shareholders for Merger
Sub to merge with and into InGenius pursuant to this Agreement and the
Certificate of Merger (as defined).
D. In the Merger (as defined), InGenius will be the surviving
corporation, the shares of InGenius will be converted into the right to receive
cash in accordance with the terms hereof, and the shares of Merger Sub shall be
converted into shares of Surviving Corporation (as defined).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
<PAGE>
ARTICLE I. DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have
-------------
the following meanings:
"Aeneid Articles of Incorporation" means the Third Amended and
Restated Articles of Incorporation of Aeneid.
"Aeneid Material Adverse Effect" or "Aeneid Material Adverse Change"
means any effect or change which individually or when taken together with all
other such effects or changes has, or is reasonably likely to have, a material
adverse effect on the condition (financial or other), business, results of
operations, human resource or technology prospects, assets, liabilities or
operations of Aeneid.
"Affiliate" of a Person means any other Person which directly or
indirectly controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Ancillary Agreements" means the Non-Compete Agreements, Employment
Agreements, Indemnity Escrow Agreement, and other agreements, certificates and
documents required hereunder to consummate the Closing.
"Assets" means all of InGenius' right, title and interest in and to
the properties, assets and rights of any kind, whether tangible or intangible,
real or personal, including all of InGenius' right, title and interest in the
following:
(a) all Contract Rights;
(b) all Fixtures and Equipment;
(c) all Inventory;
(d) all Books and Records;
(e) all Proprietary Rights;
(f) all Permits;
(g) all return and other rights under or pursuant to
all warranties, representations and guarantees made by service providers,
suppliers and other third parties in connection with the Assets or services
furnished to InGenius;
(h) all cash, accounts receivable, deposits and prepaid
expenses; and
(i) all goodwill.
<PAGE>
"Balance Sheet" means the balance sheet of InGenius as of the Balance
Sheet Date.
"Balance Sheet Date" means September 30, 1999.
"Books and Records" means (a) all product, business and marketing
plans, sales and promotional literature and artwork relating to the Assets or
the Business, (b) all books, records, lists, ledgers, financial data, files,
reports, product and design manuals, plans, drawings, technical manuals and
operating records of every kind relating to the Assets or the Business
(including records and lists of customers, distributors, suppliers and
personnel) and (c) all telephone and fax numbers used in the Business, in each
case whether maintained as hard copy or stored in computer memory and whether
owned by InGenius or its Affiliates.
"Business" means the business of InGenius as conducted on the date
hereof.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in the City of
San Francisco are authorized or required by law, regulation or executive order
to close.
"California GCL" means the General Corporation Law of the State of
California, as in effect from time to time.
"Certificate of Merger" means the Certificate of Merger substantially
in the form of Exhibit A attached hereto.
---------
"Closing" means the consummation of the transactions contemplated by
this Agreement on the Closing Date.
"Closing Balance Sheet" means the balance sheet of InGenius within
three days of the Closing Date.
"Closing Date" means the fifteenth day after the date hereof or such
other date as the parties shall mutually agree.
"Closing Place" means such location agreed upon by the parties or, in
the absence of such an agreement, the offices of Varnum Riddering Schmidt &
Howlett LLP in Grand Rapids, Michigan.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consents" means any and all licenses, permits, franchises, approvals,
authorizations, consents or waivers from third parties (including governmental
authorities and parties to the Contracts) that are (i) required for the
consummation of the transactions contemplated by this Agreement or (ii)
necessary or desirable in order that InGenius can conduct the Business after the
Effective Time in the same manner as before the Effective Time.
"Contract Rights" means all rights and obligations under the
Contracts.
"Contracts" means all agreements, contracts, leases, purchase orders,
undertakings, covenants not to compete, employment agreements, confidentiality
agreements, licenses, instruments,
<PAGE>
indentures, deeds of trust, obligations and commitments to which InGenius is a
party or by which InGenius or any Assets are bound are affected, whether written
or oral.
"Court Order" means any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.
"Default" means (a) a breach of, violation of or default under any
Contract, (b) the occurrence of an event that with the passage of time or the
giving of notice or both would constitute a breach of, violation of or default
under any Contract, or (c) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a right of
termination, renegotiation or acceleration under any Contract.
"Effective Time" means the time when the Merger shall become
effective, which shall be 5:00 p.m., California time, on the Closing Date, or
such other date and time as the parties may agree in writing.
"Employees" means all persons employed by InGenius.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, conditional sales agreement, encumbrance or other similar
right of any third parties, whether voluntarily incurred or arising by operation
of law, and includes any agreement to give any of the foregoing in the future,
and any contingent sale or other title retention agreement or lease in the
nature thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Facilities" means the offices, facilities and administration
buildings, and all other real property and related facilities which are owned or
leased by InGenius.
"Financial Statements" means the unaudited balance sheets and related
statements of income for InGenius for the 12-month periods ended December 31,
1998 and 1997, and the unaudited balance sheet and related unaudited statements
of income for InGenius for the nine-month period ended on the Balance Sheet
Date, all of which are attached as Schedule 1.1(a).
"Fixtures and Equipment" means all of the furniture, fixtures,
furnishings, office equipment, development tools and equipment, database tapes,
patterns, dies, computers and software (including any source or object codes
therefor or documentation relating thereto and computer aided design equipment
and software), and other tangible personal used in or necessary to the Business,
wherever located and including any such Fixtures and Equipment in the possession
of any of its respective suppliers or other vendors.
"Indemnity Escrow Amount" means $1,000,000 to be deposited into the
Escrow Account pursuant to Section 3.3.
"InGenius Common Stock" means the common stock, par value $1.00 per
share, of InGenius.
"InGenius Material Adverse Effect" or "InGenius Material Adverse
Change" means any effect or change which individually or when taken together
with all other such effects or changes has, or
<PAGE>
is reasonably likely to have, a material adverse effect on the condition
(financial or otherwise), Business, results of operations, human resource or
technology prospects, assets, liabilities or operations of InGenius.
"InGenius Options" means options to purchase InGenius Common Stock
granted by InGenius prior to the Closing Date as described on Schedule 4.2.
"Inventory" means all of the merchandise owned and intended for resale
and all raw materials, work in process, finished goods, wrapping, supply and
packaging items and similar items, whether or not located on the premises, on
consignment to a third party, or in transit or storage.
"Letter of Intent" means the Letter of Intent dated September 20, 1999
between Aeneid and Julie and Gary Stock.
"Liabilities" mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"Merger" means the merger of Merger Sub into InGenius in accordance
with this Agreement and the Certificate of Merger.
"Michigan BCA" means the Michigan Business Corporation Act of the
State of Michigan, as in effect from time to time.
"Net Asset Value" means the difference between the total assets and
the total liabilities of InGenius.
"Non-Compete Agreement" means the Non-Competition Agreement to be
entered into between Aeneid and each of Julie Stock and Gary Stock substantially
in the form of Exhibit B hereof.
---------
"Permits" mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary for the conduct
or operation of the Business or ownership of the Assets.
"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority.
"Proprietary Rights" means all (a) U.S. and foreign patents, patent
applications, patent disclosures and improvements thereto, including petty
patents and utility models and applications therefor, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate names
and the goodwill associated therewith and registrations and applications for
registration thereof, (c) U.S. and foreign copyrights and registrations and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration thereof, (e) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, research and development information, software, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information), (f) other
proprietary rights, (g) copies and
<PAGE>
tangible embodiments thereof (in whatever form or medium) and (h) licenses
granting any rights with respect to any of the foregoing used in or necessary
for the conduct of the Business.
"Regulations" means any laws, statutes, ordinances, regulations,
rules, notice requirements, court decisions, agency guidelines, principles of
law and orders of any foreign, federal, state or local government and any other
governmental department or agency, including Environmental Laws, energy, motor
vehicle safety, public utility, zoning, building and health codes, occupational
safety and health and laws respecting employment practices, employee
documentation, terms and conditions of employment and wages and hours.
"Related Party" means any Seller, any of the officers and directors of
InGenius, any Affiliate of InGenius or any Affiliate or immediate family member
of a Seller or the respective officers and directors of any such Affiliate, or
any Person in which any of InGenius, any Seller or any Affiliate of any such
Person or any immediate family member of a Seller has any direct or material
indirect interest.
"Representative" means any officer, director, principal, attorney,
agent, employee or other representative of any Person.
"Schedule" means the disclosure schedule of either InGenius or Aeneid.
"Shareholders" means the holders of InGenius' Common Stock immediately
before the Effective Time.
"Shareholder Representative" means Julie Stock or any replacement
thereof selected in accordance with the Indemnity Escrow Agreement.
"Surviving Corporation" means InGenius after the Effective Time.
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, any documents with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
"Taxes" mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, service, license, net worth, payroll, franchise and transfer
and recording, imposed by the Internal Revenue Service or any taxing authority
(whether domestic or foreign, including any federal, state, county, local or
foreign government or any subdivision or taxing agency thereof (including a U.S.
possession)), including the Michigan Single Business Tax, whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest whether paid or received, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments.
"To the best knowledge" or "knowledge" of a party (or similar phrases)
means to the extent of matters which are actually known by such party
1.2 Other Defined Terms. The following terms shall have the
-------------------
meanings defined for such terms in the Sections set forth below:
<PAGE>
Term Section
---- -------
Action 4.17
Aeneid Preamble
Aeneid's Closing Certificate 8.1
Agreement Preamble
Benefit Arrangement 4.19(a)
Damage Threshold 12.2(e)
Damages 12.2(a)
Employee Plans 4.19(a)
Environmental Conditions 4.29(a)
Environmental Laws 4.29(a)
ERISA Affiliate 4.19(a)
Hazardous Substance 4.30(a)
Escrow Account 3.4
Indemnity Escrow Amount 3.2
InGenius Preamble
InGenius Common Stock Recitals
InGenius' Closing Certificate 9.1
Initial Payment 3.2(a)
Merger Sub Preamble
Multiemployer Plan 4.20(a)
PBGC 4.20(a)
Pension Plan 4.19(a)
Release 4.29(a)
Sellers Preamble
Shareholders' Meeting 7.5
Surviving Corporation 2.2(a)
Welfare Plan 4.19(a)
1.3 Interpretation Provisions.
-------------------------
(a) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement, and article, section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The term "or" is disjunctive but
not necessarily exclusive. The terms "include" and "including" are not limiting
and mean "including without limitation."
(b) References to agreements and other documents shall be
deemed to include all subsequent amendments and other modifications thereto.
<PAGE>
(c) References to statutes shall include all regulations
promulgated thereunder and references to statutes or regulations shall be
construed as including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation.
(d) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(e) The language used in this Agreement shall be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against either party.
(f) The schedules and exhibits to this Agreement are a
material part hereof and shall be treated as if fully incorporated into the body
of the Agreement.
ARTICLE II.
MERGER
2.1 Filings. Subject to the provisions hereof, on or
-------
immediately following the Closing Date, Aeneid, Merger Sub and InGenius shall
cause the Certificate of Merger to be filed with the Michigan Department of
Consumer and Industry Services--Corporations, Securities & Land Development
Bureau in accordance with the Michigan BCA.
2.2 Merger. At the Effective Time, subject to the terms and
------
conditions set forth in this Agreement and the Certificate of Merger and in
accordance with the Michigan BCA:
(a) Merger Sub shall merge with and into InGenius, the
separate corporate existence of Merger Sub shall thereupon cease, and InGenius
shall continue as the surviving corporation ("Surviving Corporation") with all
of the rights, privileges, powers and franchises of InGenius and Merger Sub;
(b) the Articles of Incorporation and Bylaws of Merger
Sub as in effect immediately prior to the Effective Time shall continue as the
Articles of Incorporation and Bylaws of Surviving Corporation (subject always to
the rights of Surviving Corporation to amend its Articles of Incorporation after
the Effective Time in accordance with applicable law);
(c) the directors and officers of Merger Sub
immediately prior to the Effective Time shall serve as the directors and
officers of the Surviving Corporation, until their respective successors and
assigns are duly elected or appointed and qualified; and
(d) each share of InGenius Common Stock outstanding
immediately prior to the Effective Time shall be canceled and converted as
provided in Article III hereof.
<PAGE>
2.3 Further Assurances. InGenius agrees that if, at any
------------------
time after the Effective Time, Surviving Corporation shall consider or be
advised that any further deeds, assignments, or assurances are necessary or
desirable to vest, perfect, or confirm in Surviving Corporation title to any
property or rights of InGenius, Sellers shall execute and deliver all such
proper deeds, assignments, and assurances and do all other things necessary or
desirable to vest, perfect or confirm title to such property or rights in
Surviving Corporation and otherwise to carry out the purpose of this Agreement,
in the name of InGenius or otherwise.
2.4 Prepayment. Upon the execution of this Agreement,
----------
Aeneid shall prepay to InGenius $200,000 (the "Prepayment") (which prepayment
shall be credited to the amounts payable under Section 3.2 hereof). Sellers
shall refund the Prepayment to Aeneid promptly upon written request of Aeneid in
the event that the Merger shall not have occurred by November 15, 1999 for any
reason other than the termination of this Agreement by Sellers pursuant to
Section 13.1(a)(iii) hereof.
ARTICLE III.
CONVERSION OF SHARES
3.1 Conversion of Merger Sub Shares. At the Effective Time,
-------------------------------
each issued and outstanding share of capital stock of Merger Sub shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and become one fully paid and non-assessable share of the
common stock of the Surviving Corporation.
3.2 Conversion of InGenius Common Stock. At the Effective
-----------------------------------
Time, each share of InGenius Common Stock issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and extinguished and
converted into the right to receive, subject to the terms hereof, an amount in
cash equal to the quotient of $2,193,978 divided by the total number of shares
of InGenius Common Stock issued and outstanding immediately prior to the
Effective Time. At the Closing, and immediately prior to the Effective Time,
InGenius shall pay to Mr. Terry Cross the Prepayment Amount, and Aeneid shall
pay to Mr. Cross the sum of $6,022, together, in full satisfaction of the
convertible note of Aeneid held by Mr. Cross. All other InGenius stock options
and convertible debt will be converted to shares of InGenius Common Stock at or
prior to the effective time.
3.3 Indemnity Escrow Arrangements. On the Closing Date, the
-----------------------------
Indemnity Escrow Amount ($1,000,000) shall be deducted from the cash payable to
Sellers (Gary Stock and Julie Stock) pursuant to Section 3.2 of this Agreement
and deposited into an escrow account (the "Escrow Account") to secure the
indemnification obligations of the Sellers as set forth in Article XII. The
Escrow Account shall be subject to the terms of the Indemnity Escrow Agreement
by and among Aeneid, the Shareholder Representative, as representative of the
Sellers and Comerica Bank (or such other bank that shall be mutually acceptable
to InGenius and Aeneid), as escrow agent, substantially in the form of Exhibit C
---------
hereto.
3.4 Surrender of Certificates.
-------------------------
(a) Surrender of Certificates. As soon as
-------------------------
practicable after the Effective Time, each person holding a certificate or
certificates representing shares of InGenius Common Stock issued and outstanding
immediately prior to the Effective Time, shall surrender
<PAGE>
such certificate(s) to Surviving Corporation. In the event that any such holder
no longer has in his or her possession any such certificate(s), such holder
shall, in lieu of surrendering such certificate(s), deliver to Surviving
Corporation an affidavit of that fact whereupon Aeneid may, in its sole
discretion, require the holder of such lost certificate(s) to deliver a bond in
such sum as Aeneid may reasonably direct as indemnity against any claim that may
be made against Aeneid or any of its Affiliates with respect to the certificate.
Thereupon, each such holder shall be entitled to receive in exchange therefor
cash consideration in the amount and in the manner described in Section 3.2 and
Surviving Corporation shall pay and Aeneid shall cause Surviving Corporation to
pay such amount promptly to the holder.
(b) Certificate Not Surrendered by Holders of Shares of
---------------------------------------------------
InGenius Common Stock. Each certificate which immediately prior to the
- ---------------------
Effective Time evidenced shares of InGenius Common Stock shall, from and after
the Effective Time until such certificate is surrendered to Surviving
Corporation or its transfer agent, be cancelled and extinguished and shall only
evidence the right to receive the consideration per share described in Section
3.2(a). No interest shall be payable upon any cash consideration.
(c) No Transfers After the Effective Time. After the
-------------------------------------
Effective Time, there shall be no transfers of any shares of InGenius Common
Stock on the stock transfer books of the Surviving Corporation. If, after the
Effective Time, certificates formerly representing shares of InGenius Common
Stock are presented to Surviving Corporation, they shall be canceled and
exchanged for the consideration per share provided for by Section 3.2(a).
3.5 Taking of Necessary Action; Further Action. Each of Aeneid,
------------------------------------------
Merger Sub, InGenius and Sellers shall take all such reasonable lawful action as
may be necessary or appropriate in order to effect the Merger in accordance with
this Agreement as promptly as practicable.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF INGENIUS AND SELLERS
InGenius and each of the Sellers jointly and severally make the
following representations and warranties to Aeneid and Merger Sub, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct and all of which have been and will be relied
upon by Aeneid and Merger Sub in entering into this Agreement and consummating
the Merger.
4.1 Organization of InGenius. InGenius is a corporation duly
------------------------
organized, validly existing and in good standing under the laws of the State of
Michigan. InGenius has full corporate power and authority to conduct the
Business as it is presently being conducted and to own or lease, as applicable,
the Assets. InGenius is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
necessary under applicable law as a result of the conduct of the Business or the
ownership of its properties, except where the failure to be so qualified would
not have an InGenius Material Adverse Effect. Each jurisdiction in which
InGenius is qualified to do business as a foreign corporation is set forth in
Schedule 4.1.
<PAGE>
4.2 Capitalization of InGenius.
--------------------------
(a) As of the date of this Agreement, there are 60,000
shares of InGenius Common Stock authorized under its Articles of Incorporation,
as amended, 53,915 of which are issued and outstanding. InGenius has no other
stock authorized, issued or outstanding.
(b) Except as set forth in Schedule 4.2, there are no
outstanding options, warrants, convertible securities or rights of any kind to
purchase or otherwise acquire any shares of capital stock or other securities of
InGenius. Except for the aggregate of 6,000 shares of InGenius Common Stock
reserved for issuance upon the exercise of InGenius Options granted or available
for grant, no other shares of capital stock of InGenius are reserved for
issuance. Schedule 4.2 is a complete and accurate list of all such outstanding
options, warrants, convertible securities or other rights and the vesting
schedules and exercise prices with respect thereto. InGenius has no stock option
or other equity incentive plan, except for the options and convertible note
identified on Schedule 4.2.
(c) All outstanding shares of InGenius Common Stock are,
and any shares of InGenius Common Stock issued upon exercise of any InGenius
Option will be, validly issued, fully paid and non-assessable and not subject to
any preemptive rights created by statute, InGenius' Articles of Incorporation,
as amended, or Bylaws or any Contract. The shares of InGenius Common Stock and
InGenius Options have been or will be issued in compliance with all federal and
state corporate and securities laws.
(d) Except pursuant to this Agreement, there is outstanding
no vote, plan or pending proposal for any redemption of stock of InGenius or
merger or consolidation of InGenius with or into any other entity.
(e) The Company is not an "issuing public corporation"
within the meaning of Section 793(1) of the Michigan Business Corporation Act
(MBCA) (450.1793).
(f) The requirements of Section 780 of the MBCA do not
apply to the Merger, this Agreement, or any of the transactions contemplated
hereby, because the Company has fewer than 100 beneficial owners of its stock
within the meaning of Section 784(1) of the MBCA, and because the Board of
Directors of the Company has adopted a resolution approving the Merger, this
Agreement and the transactions contemplated hereby (see Section 782 of the
MBCA).
4.3 Ownership of Stock. On the Closing Date, each Seller will
------------------
own all of the shares of InGenius Common Stock issued in his name and set forth
opposite his name on Schedule 4.3 hereto, free and clear of any Encumbrances and
subject to no restriction with respect to the voting or transfer thereof.
4.4 Authorization.
-------------
(a) InGenius has all necessary power and authority to enter
into this Agreement, the Certificate of Merger and the Ancillary Agreements to
which it is a party
<PAGE>
and has taken all action necessary to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement, the Certificate of Merger and the
Ancillary Agreements by InGenius, and the performance by InGenius of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of InGenius, subject to approval by the shareholders of InGenius. Upon
such approval of the requisite number of shares of InGenius Common Stock
entitled to vote thereon in accordance with the Michigan BCA and InGenius'
Articles of Incorporation, as amended, this Agreement will have been duly
executed and delivered by InGenius and will be a legal, valid and binding
obligation of InGenius, enforceable against InGenius in accordance with its
terms, except that enforceability may be limited by the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors. The Certificate of Merger will have been, as
of the Effective Time, duly and validly executed by InGenius, and will be a
legal, valid and binding obligation of InGenius, enforceable against InGenius in
accordance with its terms, except that enforceability may be limited by the
effect of bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors.
(b) Each Seller has all necessary power and authority to enter
into this Agreement and any Ancillary Agreements to which it is a party and has
taken all action necessary to consummate the transactions contemplated hereby
and thereby and to perform its obligations hereunder and thereunder. This
Agreement has been duly executed by each Seller and this Agreement is, and upon
execution and delivery, the Ancillary Agreements to which any Seller is a party,
will be, a legal, valid and binding obligation of such Person, enforceable
against such Person in accordance with its terms, except that enforceability may
be limited by the effect of bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights of creditors.
(c) The Sellers own such number of shares of Common Stock of
InGenius as are required to approve the Merger pursuant to InGenius's Articles
of Incorporation and Bylaws, each as amended, and the Michigan BCA.
4.5 Officers and Directors. Schedule 4.5 contains a list of all
----------------------
of the officers and directors of InGenius.
4.6 Bank Accounts. Schedule 4.6 contains a list of all InGenius'
-------------
bank accounts, safe deposit boxes, and related powers of attorney, and persons
authorized to draw thereon or have access thereto. InGenius has no outstanding
powers of attorney except as contemplated above.
4.7 Subsidiaries. InGenius does not own or hold any equity
------------
interest of any kind in any Person.
4.8 Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 4.8, since the Balance Sheet Date there has not been any:
(a) InGenius Material Adverse Change;
<PAGE>
(b) failure to operate the Business in the ordinary course or failure
to preserve for the Surviving Corporation the continued services of the
Employees and independent contractors and the goodwill of suppliers, customers
and others having business relations with InGenius or its Representatives;
(c) increase in the rate of compensation payable or to become payable
to any officer, Employee or Representative of InGenius, including the making of
any loan to, or the payment, grant or accrual of any bonus, incentive
compensation, service award or other similar benefit to, any such Person, or the
addition to, modification of, or contribution to any Employee Plan other than
the extension of coverage under such plan to others who became eligible after
the Balance Sheet Date;
(d) any payment, loan or advance of any amount to or in respect of,
or the sale, transfer or lease of any properties or Assets to, or entering into
of any Contract with, any Related Party, except (i) reasonable directors' fees,
and (ii) compensation to Employees at the rates disclosed pursuant to Section
4.18(d);
(e) sale, assignment, license, transfer or encumbrance of any Assets
tangible or intangible, singly or in the aggregate, other than sales of products
and services and licenses in the ordinary course of business and consistent with
past practice;
(f) new Contracts, or extensions, modifications, terminations or
renewals thereof, except for Contracts entered into, modified or terminated in
the ordinary course of business and consistent with past practice (except for
the conversion of outstanding options and convertible notes to common stock);
(g) actual or threatened termination of any material customer account
or group of accounts or actual or threatened material reduction in purchases or
royalties payable by any such customer or the occurrence of any event that is
likely to result in any such termination or reduction;
(h) disposition or lapsing of any of InGenius' Proprietary Rights, in
whole or in part or, any disclosure of any trade secret, process or know-how to
any Person not an Employee;
(i) material change in accounting methods or practices by InGenius;
(j) revaluation by InGenius of any of the Assets, including writing
off notes or accounts receivable other than for which adequate reserves have
been established;
(k) material damage, destruction or loss (whether or not covered by
insurance);
<PAGE>
(l) declaration, setting aside or payment of dividends or
distributions in respect of any stock of InGenius or any redemption, purchase or
other acquisition of any of InGenius' equity securities;
(m) issuance or reservation for issuance by InGenius of any shares of
stock or other equity securities or obligations or securities convertible into
or exchangeable for shares of stock or other equity securities;
(n) commitment by InGenius or by any of its officers on its behalf to
issue or reserve for issuance, any shares of stock or other equity securities or
obligations or securities convertible into or exchangeable for shares of stock
or other equity securities;
(o) increase, decrease or reclassification of InGenius' capital
stock;
(p) amendment of InGenius' Articles of Incorporation or Bylaws;
(q) capital expenditure or execution of any lease or any incurring of
liability therefor by InGenius, involving payments in excess of $10,000 in the
aggregate;
(r) failure to pay any material obligation of InGenius;
(s) cancellation of any indebtedness or waiver of any rights of
substantial value to InGenius, except in the ordinary course of business and
consistent with past practice;
(t) indebtedness incurred by InGenius for borrowed money or any
commitment to borrow money entered into by InGenius, or any loans made or agreed
to be made by InGenius;
(u) liability incurred by InGenius except in the ordinary course of
business and consistent with past practice, or any increase or change in any
assumptions underlying or methods of calculating any bad debt, contingency or
other reserves;
(v) payment, discharge or satisfaction of any Liabilities of InGenius
other than the payment, discharge or satisfaction (i) in the ordinary course of
business and consistent with past practice of Liabilities reflected or reserved
against in the Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date and (ii)
of other Liabilities of InGenius involving $10,000 or less in the aggregate;
(w) acquisition by InGenius of any equity interest in any other
Person; or
<PAGE>
(x) agreement by InGenius to do any of the foregoing.
4.9 Title to Assets. InGenius has good and marketable fee simple
---------------
title to all of its material Assets except as set forth on Schedule 4.9. Except
as set forth on Schedule 4.9, none of the Assets are subject to any
Encumbrances.
4.10 Sufficiency of Assets. The Assets constitute all of the
---------------------
assets, rights and properties, tangible or intangible, real or personal, which
are used in or required for the operation of the Business as it is presently
conducted.
4.11 Fixtures and Equipment. Schedule 4.11 contains accurate
----------------------
lists and summary descriptions of all Fixtures and Equipment where the value of
an individual item exceeds $5,000 or where an aggregate of similar items exceeds
$10,000. All tangible assets and properties which are part of the Assets are in
good operating condition and repair, normal wear and tear excepted, and are
usable in the ordinary course of business.
4.12 Contracts.
---------
(a) Disclosure. Schedule 4.12 sets forth a complete and accurate
----------
list of all of InGenius' material Contracts in each of the following categories:
(i) Contracts not made in the ordinary course of business;
(ii) Manufacturing or joint development agreements;
(iii) License agreements or royalty agreements, whether
InGenius is the licensor or licensee thereunder;
(iv) Confidentiality and non-disclosure agreements (whether
InGenius is the beneficiary or the obligated party thereunder);
(v) Customer orders or sales contracts under which the
customer is to make a payment after the date hereof of $10,000 or more;
(vi) Original equipment manufacturer agreements or distributor
agreements;
(vii) Research agreements;
(viii) Output or requirement agreements;
(ix) Contracts involving future expenditures or Liabilities,
actual or potential, in excess of $10,000 after the date hereof or
otherwise material to the Business or the Assets;
(x) Contracts or commitments relating to commission
arrangements with others;
<PAGE>
(xi) Employment contracts, consulting contracts and severance
agreements, including Contracts (A) to employ or terminate executive
officers or other personnel and other contracts with present or former
officers or directors of InGenius or (B) that will result in the payment
by, or the creation of any Liability to pay on behalf of Aeneid or InGenius
any severance, termination, "golden parachute," or other similar payments
to any present or former personnel following termination of employment or
otherwise as a result of the consummation of the transactions contemplated
by this Agreement;
(xii) Indemnification agreements;
(xiii) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation to pay money, whether InGenius shall
be the borrower, lender or guarantor thereunder (excluding credit provided
by InGenius in the ordinary course of business to purchasers of its
products and obligations to pay vendors in the ordinary course of business
and consistent with past practice);
(xiv) Contracts containing covenants limiting the freedom of
InGenius or any officer, director, Employee or Affiliate of InGenius, to
engage in any line of business or compete with any Person that relates
directly or indirectly to the Business;
(xv) Any Contract with the federal, state or local government
or any agency or department thereof;
(xvi) Any Contract with a Related Party:
(xvii) Leases of real or personal property; and
(xviii) Any other material Contract.
True, correct and complete copies of all of the Contracts listed on Schedule
4.12, including all amendments and supplements thereto, have been made available
to Aeneid.
(b) Absence of Defaults. All of the Contracts are valid, binding and
-------------------
enforceable in accordance with their terms with no existing (or to the knowledge
of InGenius and Sellers, threatened) Default or dispute. InGenius has fulfilled,
or taken all action necessary to enable it to fulfill when due, all of its
material obligations under each of such Contracts. To the knowledge of InGenius
and Sellers, all parties to such Contracts have complied in all material
respects with the provisions thereof, no party is in Default thereunder and no
notice of any claim of Default has been given to InGenius or Sellers. InGenius
and Sellers have no reason to believe that the products and services called for
by any unfinished Contract cannot be supplied in accordance with the terms of
such Contract, including time specifications, and has no reason to believe that
any unfinished Contract will, upon performance
<PAGE>
by InGenius, result in a loss to InGenius. Except as set forth on Schedule 4.13
(List of Consents), no consent of any third party is required for the assignment
of any Contract to Aeneid.
4.13 No Conflict or Violation; Consents. None of the execution,
----------------------------------
delivery or performance of this Agreement, the Certificate of Merger or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by InGenius or Sellers with any of the provisions hereof
or thereof, will (a) violate or conflict with any provision of its respective
governing documents, (b) violate, conflict with, or result in a breach of or
constitute a default (with or without notice or passage of time) under, or
result in the termination of, or accelerate the performance required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice under, or result in the creation of any Encumbrance upon any of its
respective assets under, any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other arrangement to which
InGenius or any Seller is a party or by which InGenius or any Seller is bound or
to which any of its respective assets are subject, (c) violate any applicable
Regulation or Court Order or (d) impose any Encumbrance on any Assets or the
Business. Except for (i) the approval of the shareholders of InGenius as
required by the Michigan BCA, (ii) the filing of the Certificate of Merger and
(iii) those set forth on Schedule 4.13, no notices to, declaration, filing or
registration with, approvals or consents of, or assignments by, any Persons
(including any federal, state or local governmental or administrative
authorities) are necessary to be made or obtained by InGenius or Sellers in
connection with the execution, delivery or performance of this Agreement and the
consummation of the Merger.
4.14 Permits. To the best knowledge of Sellers, Schedule 4.14
-------
sets forth a complete list of all Permits held by InGenius. InGenius has, and at
all times has had, all Permits required under any applicable Regulation in its
operation of the Business or in its ownership of the Assets, and owns or
possesses such Permits free and clear of all Encumbrances. InGenius is not in
default, nor has InGenius or any Seller received any notice of any claim of
default, with respect to any such Permit. Except as otherwise governed by law,
all such Permits are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees and except as set forth on
Schedule 4.14, will not be adversely affected by the completion of the
transactions contemplated by this Agreement, the Certificate of Merger or the
Ancillary Agreements.
4.15 Financial Statements; Books and Records. Except as set forth
---------------------------------------
on Schedule 4.15
(a) The Financial Statements are complete, are in accordance with the
Books and Records, fairly present the Assets, Liabilities and financial
condition and results of operations indicated thereby in all material respects.
(b) The Books and Records, in reasonable detail, accurately and
fairly reflect the activities of InGenius and the Business in all material
respects and have been provided to Aeneid for its inspection.
(c) InGenius has not engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank accounts or
funds which have been and are reflected in the normally maintained Books and
Records of InGenius.
<PAGE>
(d) The stock records and minute books of InGenius heretofore made
available to Aeneid fully reflect all minutes of meetings, resolutions and other
material actions and proceedings of its shareholders and board of directors and
all committees thereof, all issuances, transfers and redemptions of InGenius'
capital stock and contain true, correct and complete copies of InGenius'
Articles of Incorporation, as amended, and Bylaws and all amendments thereto
through the date hereof.
4.16 Liabilities. Except as set forth on Schedule 4.16, InGenius
-----------
has no Liabilities or obligations (absolute, accrued, contingent or otherwise)
except (i) liabilities which are reflected and properly reserved against in the
Financial Statements, (ii) liabilities incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date, and
(iii) liabilities arising under the Contracts (other than obligations which are
required to be reflected on a balance sheet prepared in accordance with GAAP)
set forth on Schedule 4.12 and which have arisen or been incurred in the
ordinary course of business. For the purposes of this Section 4.16, Liabilities
shall not include Liabilities related to Proprietary Rights which are addressed
in Sections 4.22 and 4.23 hereof.
4.17 Litigation. Except as set forth on Schedule 4.17, there is
----------
no action, order, writ, injunction, judgment or decree outstanding or claim,
suit, litigation, proceeding, investigation or dispute (collectively, "Actions")
pending or, to the knowledge of InGenius and Sellers, threatened or anticipated
(i) against, relating to or affecting InGenius, any of the Assets or any of its
officers and directors as such, (ii) which seek to enjoin or obtain damages in
respect of the transactions contemplated hereby or by the Ancillary Agreements
or (iii) with respect to which there is a reasonable likelihood of a
determination which would prevent InGenius or Sellers from consummating the
transactions contemplated hereby and by the Ancillary Agreements. None of the
Actions, if adversely determined against Sellers, InGenius, its directors or
officers, or any other Person could reasonably be expected to result in a loss
to InGenius, individually or in the aggregate, in excess of $10,000. To the
knowledge of InGenius and Sellers, there is no basis for any Action, which if
adversely determined against Sellers, InGenius, its directors or officers, or
any other Person could reasonably be expected to result in a loss to InGenius,
individually or in the aggregate, in excess of $10,000. Except as specified in
Schedule 4.17, there are presently no outstanding judgments, decrees or orders
of any court or any governmental or administrative agency against or affecting
InGenius, it Business or any of the Assets. Schedule 4.17 contains a complete
and accurate description of all Actions to which InGenius has been a party or
which related to any of the Assets or InGenius' officers or directors as such,
or any such Actions which were settled prior to the institution of formal
proceedings, other than Actions brought by InGenius for collection of monies
owed in the ordinary course of business.
<PAGE>
4.18 Labor Matters. Except as set forth on Schedule 4.18:
-------------
(a) InGenius is not a party to any labor agreement with
respect to its Employees (which term shall include any part-time workers for
purposes of this Section 4.18), with any labor organization, group or
association and has not experienced any attempt by organized labor or its
representatives to make InGenius conform to demands of organized labor relating
to its Employees or to enter into a binding agreement with organized labor that
would cover the Employees of InGenius. There is no unfair labor practice charge
or complaint against InGenius pending before the National Labor Relations Board
or any other governmental agency arising out of InGenius' activities, and
InGenius and Sellers have no knowledge of any facts or information which would
give rise thereto; there is no labor strike or labor disturbance pending or
threatened against InGenius nor is any grievance currently being asserted
against it; and InGenius has not experienced a work stoppage or other labor
difficulty. There are no material controversies pending or, to the best
knowledge of InGenius and Sellers, threatened between InGenius and any of its
Employees, and InGenius and Sellers are not aware of any facts which could
reasonably result in any such controversy.
(b) InGenius is in material compliance with all applicable
Regulations respecting employment practices, terms and conditions of employment,
wages and hours, equal employment opportunity, and the payment of social
security and similar taxes, and is not engaged in any unfair labor practice.
InGenius is not liable for any claims for past due wages or any penalties for
failure to comply with any of the foregoing.
(c) InGenius has not entered into any severance or similar
arrangement in respect of any present or former Employee that will result in any
obligation (absolute or contingent) of Aeneid or InGenius to make any payment to
any present or former Employee following termination of employment. Neither the
execution and delivery of this Agreement, the Certificate of Merger or the
Ancillary Agreements nor the consummation of the transactions contemplated
hereby or thereby will result in the acceleration of the vesting of
exercisability of any InGenius Options or in the acceleration or vesting of any
other rights of any Person to benefits under any Employee Plans.
(d) Schedule 4.18(d) contains a complete and accurate list
of all current employees of InGenius, including their title, salary, years of
service with InGenius and the date and amount of their last salary increase.
4.19 Employee Benefit Plans.
----------------------
(a) Definitions. The following terms, when used in this
-----------
Section 4.19, shall have the following meanings. Any of these terms may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference.
(i) "Benefit Arrangement" means any employment,
consulting, severance or other similar contract, arrangement or policy and
each plan, arrangement (written or oral), program, agreement or commitment
providing for insurance coverage (including any self-insured arrangements),
workers' compensation,
<PAGE>
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits, life, health, disability or accident benefits
(including any "voluntary employees' beneficiary association" as defined in
Section 501(c)(9) of the Code providing for the same or other benefits) or
for deferred compensation, profit-sharing bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which
(A) is not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is
entered into, maintained, contributed to or required to be contributed to,
as the case may be, by InGenius or an ERISA Affiliate or under which
InGenius or any ERISA Affiliate may incur any liability, and (C) covers any
employee or former employee of InGenius or any ERISA Affiliate (with
respect to their relationship with such entities).
(ii) "Employee Plans" means all Benefit Arrangements,
Multiemployer Plans, Pension Plans and Welfare Plans.
(iii) "ERISA Affiliate" means any entity which is (or at
any relevant time was) a member of a "controlled group of corporations"
with or under "common control" with InGenius, as defined in Section 414(b)
or (c) of the Code.
(iv) "Multiemployer Plan" means any "multiemployer
plan," as defined in Section 4001(a)(3) of ERISA, (A) which InGenius, or
any ERISA Affiliate maintains, administers, contributes to or is required
to contribute to, or, after September 25, 1980, maintained, administered,
contributed to or was required to contribute to, or under which InGenius or
any ERISA Affiliate may incur any liability and (B) which covers any
employee or former employee InGenius or any ERISA Affiliate (with respect
to their relationship with such entities).
(v) "PBGC" means the Pension Benefit Guaranty
Corporation.
(vi) "Pension Plan" means any "employee pension benefit
plan" as defined in Section 3(2) of ERISA (other than a Multiemployer Plan)
(A) which InGenius or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or, within the five years
prior to the Closing Date, maintained, administered, contributed to or was
required to contribute to, or under which InGenius or any ERISA Affiliate
may incur any liability and (B) which covers any employee or former
employee of InGenius or any ERISA Affiliate (with respect to their
relationship with such entities).
(vii) "Subsidiary" means (A) any corporation in an
unbroken chain of corporations beginning with InGenius, if each of the
corporations other than the last corporation in the unbroken chain then
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain; (B) any
partnership in which InGenius is a general partner; or (iii) any
partnership in which InGenius possesses a 50% or greater interest in the
total capital or total income of such partnership.
<PAGE>
(viii) "Welfare Plan" means any "employee welfare benefit
plan" as defined in Section 3(1) of ERISA, (A) which InGenius or any ERISA
Affiliate maintains, administers, contributes to or is required to
contribute to, or under which InGenius or any ERISA Affiliate may incur any
liability and (B) which covers any employee or former employee of InGenius
or any ERISA Affiliate (with respect to their relationship with such
entities).
(b) Disclosure; Delivery of Copies of Relevant Documents
----------------------------------------------------
and Other Information. Schedule 4.19 contains a complete list of Employee
Plans which cover or have covered employees of InGenius or a Subsidiary (with
respect to their relationship with such entities). True and complete copies of
each of the following documents have been delivered by InGenius: (i) each
Welfare Plan and Pension Plan (and, if applicable, related trust agreements) and
all amendments thereto, all written interpretations thereof and written
descriptions thereof which have been distributed to the employees of InGenius or
its Subsidiaries and all annuity contracts or other funding instruments, (ii)
each Benefit Arrangement including written interpretations thereof and written
descriptions thereof which have been distributed to InGenius' employees
(including descriptions of the number and level of employees covered thereby)
and a complete description of any such Benefit Arrangement which is not in
writing, (iii) the most recent determination letter issued by the Internal
Revenue Service with respect to each Pension Plan, (iv) for the three most
recent plan years, Annual Reports on Form 5500 Series required to be filed with
any governmental agency for each Pension Plan, (v) a description of complete
age, salary, service and related data as of the last day of the last plan year
for employees and former employees of InGenius and each Subsidiary, and (vi) a
description setting forth the amount of any Liability of InGenius as of the
Closing Date for payments more than 30 days past due with respect to each
Welfare Plan.
(c) Representations.
---------------
(i) Pension Plans. No Pension Plan is subject to the
-------------
minimum funding requirements of ERISA or the Code. Each Pension Plan, each
related trust agreement, annuity contract or other funding instrument is
qualified and tax-exempt under the provisions of Code Section 401(a) (or
403(a), as appropriate) and 501(a) and has been so qualified during the
period from its adoption to date.
(ii) Multiemployer Plans. Neither InGenius nor any
-------------------
ERISA Affiliate contributes to, or within the past six years has been
obligated to, contribute to any Multiemployer Plan.
(iii) Welfare Plans. None of InGenius, any ERISA
-------------
Affiliate or any Welfare Plan has any present or future obligation to make
any payment to or with respect to any present or former employee of
InGenius or any ERISA Affiliate pursuant to any retiree medical benefit
plan, or other retiree Welfare Plan, and no condition exists which would
prevent InGenius from amending or terminating any such benefit plan or
Welfare Plan.
<PAGE>
(iv) Compliance with Law. Each Welfare Plan, Pension
-------------------
Plan and each related trust agreement, annuity contract or other funding
instrument is qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a) and has been so
qualified during the period from its adoption to date. Each Welfare Plan
which is a "group health plan," as defined in Section 607(1) of ERISA, has
been operated in compliance with provisions of Part 6 of Title I of ERISA
and Sections 162(k) and 4980B of the Code at all times.
(v) Benefit Arrangements. Each Benefit Arrangement
--------------------
which covers or has covered employees or former employees of InGenius or a
Subsidiary (with respect to their relationship with such entities) has been
maintained in material compliance with its terms and with the requirements
prescribed by any and all Regulations which are applicable to such Benefit
Arrangement, including the Code. Except as set forth in Schedule 4.19, and
except as provided by law, the employment of all persons presently employed
or retained by InGenius or a Subsidiary is terminable at will, at any time
and without advance notice.
(vi) Unrelated Business Taxable Income. No Employee
---------------------------------
Plan (or trust or other funding vehicle pursuant thereto) is subject to any
Tax under Code Section 511.
(vii) Deductibility of Payments. There is no Contract or
-------------------------
bonus plan, covering any employee or former employee of InGenius or a
Subsidiary (with respect to their relationship with such entities) that,
individually or collectively, provides for the payment by InGenius of any
amount (i) that is not deductible under Section 162(a)(1) or 404 of the
Code or (ii) that is an "excess parachute payment" pursuant to Section 280G
of the Code.
(viii) Fiduciary Duties and Prohibited Transactions.
--------------------------------------------
Neither InGenius nor any plan fiduciary of any Welfare Plan or Pension Plan
which covers or has covered employees or former employees of InGenius or
any ERISA Affiliate, has engaged in any transaction in violation of
Sections 404 or 406 of ERISA or any "prohibited transaction," as defined in
Section 4975(c)(1) of the Code, for which no exemption exists under Section
408 of ERISA or Section 4975(c)(2) or (d) of the Code.
(ix) No Amendments. Neither InGenius nor any ERISA
-------------
Affiliate has any announced plan or legally binding commitment to create
any additional Employee Plans or to amend or modify any existing Employee
Plan.
(x) Certain Contracts. None of the Employee Plans
-----------------
holds any interest in any annuity contract, guaranteed investment contract
or any other investment contract which is issued by an insurance company
which is the subject of bankruptcy, receivership or conservatorship
proceedings.
(xi) No Acceleration of Rights or Benefits. Neither the
-------------------------------------
execution and delivery of this Agreement, the Certificate of Merger or the
Ancillary
<PAGE>
Agreements nor the consummation of the transactions contemplated hereby or
thereby will result in the acceleration or creation of any rights of any
person to benefits under any of the Employee Plans, including but not
limited to the acceleration of the exercisability of any stock options, the
acceleration of the vesting of any restricted stock, the acceleration of
the accrual or vesting of any benefits under any Pension Plan or the
creation of rights under any severance, parachute or change of central
agreement.
(xii) No Other Material Liability. No event has
---------------------------
occurred in connection with which InGenius or any ERISA Affiliate or any
Employee Plan, directly or indirectly, could be subject to any material
liability (i) under any Regulation or governmental order relating to any
Employee Plans or (ii) pursuant to any obligation of InGenius or any
Subsidiary to indemnify any Person against liability incurred under, any
such Regulation or order as they relate to the Employee Plans.
4.20 Transactions with Related Parties. Except for compensation
---------------------------------
arrangements in the ordinary course of business, as disclosed on Schedule 4.20
or for amounts less than $10,000, no Related Party has (a) borrowed or loaned
money or other property to InGenius which has not been repaid or returned, (b)
any contractual or other claims, express or implied, of any kind whatsoever
against InGenius or (c) had any interest in any property used by InGenius.
4.21 Compliance with Law. InGenius has conducted the Business in
-------------------
material compliance with all applicable Regulations and Court Orders. Neither
InGenius nor any Seller has received any notice to the effect that, or has
otherwise been advised that, InGenius is not in compliance with any Regulations
or Court Orders, and InGenius and Sellers are not aware of any existing
circumstances that are likely to result in any material violation of any of the
foregoing.
4.22 Intellectual Property. General. Schedule 4.22 sets forth
--------------------- --------
with respect to the Proprietary Rights: (i) for each patent and patent
application, including petty patents and utility models and applications
therefor, as applicable, the number, normal expiration date, title and priority
information for each country in which such patent has been issued, or, the
application number, date of filing, title and priority information for each
country, (ii) for each trademark, tradename or service mark, whether or not
registered, the date first used, the application serial number or registration
number, the class of goods covered, the nature of the goods or services, the
countries in which the names or mark is used and the expiration date for each
country in which a trademark has been registered, (iii) for each copyright for
which registration has been sought, whether or not registered, the date of
creation and first publication of the work, the number and date of registration
for each country in which a copyright application has been registered, (iv) for
each mask work, whether or not registered, the date of first commercial
exploitation and if registered, the registration number and date of registration
and (v) all such Proprietary Rights in the form of licenses. True and correct
copies of all Proprietary Rights (including all pending applications and
application related documents and materials) owned, controlled or used by or on
behalf of InGenius or in which InGenius has any interest whatsoever have been
provided or made available to Aeneid.
(b) Adequacy. To the best knowledge of the Sellers, and
--------
except as set forth in Schedule 4.22 (b), InGenius' Proprietary Rights are all
those necessary for
<PAGE>
the normal conduct of the Business as presently conducted and as presently
contemplated, including the design, manufacture and sale of all products
currently under development, planned for development or in production.
(c) Royalties and Licenses. To the best knowledge of the
----------------------
Sellers, InGenius has no obligation to compensate any Person for the use of any
of its Proprietary Rights nor has InGenius granted to any Person any license,
option or other rights to use in any manner any of its Proprietary Rights,
whether requiring the payment of royalties or not, except as set forth in
Schedule 4.22.
(d) Ownership. To the best of Sellers' knowledge,
---------
InGenius owns or has a valid right to use its Proprietary Rights, and such
Proprietary Rights will not cease to be valid rights of InGenius by reason of
the execution, delivery and performance of this Agreement, the Certificate of
Merger or the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby.
(e) Absence of Claims. Except as set forth in Schedule
-----------------
4.22, neither InGenius nor any Seller has received any notice of (A) alleged
invalidity with respect to any of InGenius' Proprietary Rights or (B) alleged
infringement of any rights of others due to any activity by InGenius. To the
knowledge of InGenius and Sellers, InGenius' use of its Proprietary Rights in
its past, current and planned products do not and would not infringe upon or
otherwise violate the valid rights of any third party anywhere in the world. No
other Person (i) has notified InGenius or Sellers that it is claiming any
ownership of or right to use any of InGenius' Proprietary Rights or (ii) to the
best knowledge of InGenius and Sellers, is infringing upon any such Proprietary
Rights in any way.
(f) Protection of Proprietary Rights. Schedule 4.22
--------------------------------
describes the steps InGenius has taken to protect its interest in its
Proprietary Rights.
4.23 Software. To the best of Sellers' knowledge, and except as
--------
set forth on Schedule 4.23:
(a) Schedule 4.23 sets forth a list of all computer
software used by InGenius in InGenius' products (the "Computer Software").
Except for Computer Software which is exclusively licensed to InGenius pursuant
to licenses identified in Schedule 4.23, InGenius exclusively owns all rights to
the Computer Software, and no royalties are required for the Surviving
Corporation to continue to exclusively own and use the Computer Software.
Licenses for Computer Software identified in Schedule 4.23 are fully
transferable to the Surviving Corporation at no additional cost to Parent,
Purchaser or the Surviving Corporation.
(b) Except for Computer Software licensed to InGenius
pursuant to licenses identified in Schedule 4.23, all of the Computer Software
was either written by a regular employee of InGenius or ownership has been
exclusively assigned to InGenius.
(c) InGenius has exclusive control over the source codes
for all of the
<PAGE>
Computer Software, and no third party has copies of the source codes for any of
the Computer Software. All employees of InGenius, and all consultants, vendors,
customers and others having at any time had access to any of the source codes
for the Computer Software have signed confidentiality agreements which prevent
their use of or disclosure of such source codes other than for the business of
InGenius and its successors.
(d) None of the former or current members of management or
key personnel of InGenius, including all former and current employees, agents,
consultants and contractors who have contributed to or participated in the
conception and development of the Computer Software has threatened or asserted
in writing any claims against InGenius in connection with the involvement of
such persons in the conception and development of any of the Computer Software.
(e) No licenses or rights have been granted to distribute
the source code of, or to use source code to create Derivative Works (as
hereinafter defined) from the Computer Software. As used herein, "Derivative
Work" shall mean a work which is based upon one or more preexisting works, such
as a revision, enhancement, modification, abridgment, condensation, expansion or
any other form in which such preexisting works may be recast, transformed or
adapted, and which, if prepared without authorization of the owner of the
copyright in such preexisting work, would constitute a copyright infringement.
For purposes hereof, a Derivative Work shall also include any compilation that
incorporates such a preexisting work as well as translations from one human
language to another and from one type of code to another.
(f) The source codes for all Computer Software have been
placed in back-up files that are securely stored in a location other than the
Facility or Facilities where such Computer Software is used. All databases used
in the business of InGenius are periodically (at least once every month) backed-
up and such backed-up materials are moved to and securely stored at locations
other than the Facility or Facilities where such databases are stored. All
Computer Software that InGenius has marketed or currently markets to any of its
customers will, if the appropriate operating medium is provided, function in
accordance with the specifications therefor, as set forth in InGenius' written
materials describing the Computer Software.
(g) All software, other than the Computer Software,
installed on computers owned or leased by, or otherwise used by InGenius in its
business are covered by valid licenses from the software owner or publisher. No
unlicensed copy of software used by InGenius in its business has been deleted
from any such computer without replacement with a validly licensed copy.
4.24 Tax Matters.
-----------
(a) Filing of Tax Returns. InGenius has timely filed with
---------------------
the appropriate taxing authorities all Tax Returns in respect of Taxes required
to be filed. The Tax Returns filed are complete and accurate in all material
respects. Except as specified in Schedule 4.24, InGenius has not requested any
extension of time within which to file Tax Returns in respect of any Taxes.
<PAGE>
InGenius has delivered to Aeneid complete and accurate copies of their
respective federal, state and local Tax Returns for the years ended December 31,
1998 and 1997.
(b) Payment of Taxes. All Taxes in respect of periods
----------------
beginning before the Closing Date have been timely paid or an adequate reserve
has been established therefor, as set forth in Schedule 4.24 or the Financial
Statements, and InGenius has no material Liability for Taxes in excess of the
amounts so paid or reserves so established. All Taxes that InGenius is required
by law to withhold or collect have been duly withheld or collected and have been
timely paid over to the appropriate governmental authorities to the extent due
and payable.
(c) Audits, Investigations or Claims. No deficiencies for
--------------------------------
Taxes of InGenius have been claimed, proposed or assessed by any taxing or other
governmental authority. Except as specified in Schedule 4.24, there are no
pending or, to the knowledge of InGenius and Sellers, threatened audits,
assessments or other Actions for or relating to any Liability in respect of
Taxes of InGenius, and there are no matters under discussion with any
governmental authorities with respect to Taxes that are likely to result in an
additional Liability for Taxes. Audits of federal, state and local Tax Returns
by the relevant taxing authorities have been completed for the periods set forth
on Schedule 4.24 and, except as set forth in such Schedule, neither InGenius nor
any Seller has been notified that any taxing authority intends to audit a Tax
Return for any other period. No extension of a statute of limitations relating
to Taxes is in effect with respect to InGenius.
(d) Lien. There are no Encumbrances for Taxes (other than
----
for current Taxes not yet due and payable) on the Assets.
(e) Tax Elections. All elections with respect to Taxes
-------------
affecting InGenius as of the date hereof are set forth on InGenius' latest Tax
Returns. InGenius (i) has not made nor will make a deemed dividend election
under Reg. (S) 1.1502-32(f)(2) or a consent dividend election under Section 565
of the Code; (ii) has not consented at any time under Section 341(f)(1) of the
Code to have the provisions of Section 341(f)(2) of the Code apply to any
disposition of the Assets; (iii) has not agreed, nor is required, to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise; (iv) has not made an election, nor is required, to treat
any Asset as owned by another Person pursuant to the provisions of Section
168(f) of the Code or as tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the Code; and (v) has not made any
of the foregoing elections or is required to apply any of the foregoing rules
under any comparable state or local Tax provision.
(f) Prior Affiliated Groups. InGenius has never been a
-----------------------
member of an affiliated group of corporations within the meaning of Section 1504
of the Code.
(g) Tax Sharing Agreements. There are no Tax-sharing
----------------------
agreements or similar arrangements (including indemnity arrangements) with
respect to or involving InGenius, and, after the Closing Date, InGenius shall
not be bound by any such Tax-sharing agreements or similar arrangements (entered
into prior to the Closing) or have any Liability thereunder for amounts due in
respect of periods prior to or after the Closing Date.
(h) Partnerships. InGenius is not subject to any joint
------------
venture, partnership, or other arrangement or contract which is treated as a
partnership for federal income tax purposes. InGenius is not a successor to any
other Person by way of merger, reorganization or similar transaction.
<PAGE>
(i) Foreign Person. For purposes of withholding under
--------------
Section 1445 of the Code, neither InGenius nor any Seller is a "foreign person"
as defined in Section 1445(f)(3) of the Code.
(j) No Withholding. The transaction contemplated herein is
--------------
not subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
4.25 Insurance. Schedule 4.25 contains a complete and accurate
---------
list of all policies or binders of insurance (showing as to each policy or
binder the carrier, policy number, coverage limits, expiration dates, annual
premiums, a general description of the type of coverage provided and any pending
claims thereunder) of which InGenius is the owner, insured or beneficiary. All
of such policies are sufficient for (i) compliance with all material Regulations
and all of the Contracts, (ii) covering all reasonably foreseeable damage to and
liabilities or contingencies relating to InGenius' conduct of the Business and
(iii) providing replacement cost insurance coverage for all Fixtures and
Equipment and all leasehold improvements. InGenius is not in default under any
of such policies or binders, and it has not failed to give any notice or to
present any claim under any such policy or binder in a due and timely fashion.
There are no facts known to InGenius or Sellers upon which an insurer might be
justified in reducing or denying coverage or increasing premiums on existing
policies or binders. There are no outstanding unpaid claims under any such
policies or binders. Such policies and binders are in full force and effect on
the date hereof and shall be kept in full force and effect by InGenius through
the Effective Time.
4.26 Accounts Receivable. The accounts and notes receivable
-------------------
reflected in the Balance Sheet, and all accounts receivable arising since the
Balance Sheet Date, represent bona fide claims against debtors for sales,
services performed or other charges arising on or before the date of recording
thereof, and all the goods delivered and services performed which gave rise to
said accounts were delivered or performed in accordance with the applicable
orders, Contracts or customer requirements. To the knowledge of InGenius and
Sellers, all such receivables are fully collectible in the ordinary course of
business within three months except to the extent of an amount not in excess of
the reserve for doubtful accounts reflected on the Balance Sheet and additions
to such reserves as reflected on the Books and Records of InGenius.
4.27 Payments. Neither InGenius nor any of its Representatives
--------
acting on its behalf have, directly or indirectly, paid or delivered any fee,
commission or other sum of money or property, however characterized, to any
finder, agent, government official or other party, in the U.S. or any other
country which either InGenius or any Seller knows or has reason to believe to
have been illegal under any federal, state or local laws of the U.S. or any
other country having jurisdiction. Neither InGenius nor any of its
Representatives acting on its behalf, have accepted or received any unlawful
contributions, payments, gifts or expenditures. InGenius has not participated,
directly or indirectly, in any boycotts or other similar practices affecting any
of its actual or potential customers and has at all times done business in an
open and ethical manner.
4.28 Customers and Suppliers. Schedule 4.28 sets forth a complete
-----------------------
and accurate list of the names and addresses of (i) the five customers who
purchased from InGenius the greatest dollar volume of products during its last
fiscal year, showing the approximate total sales in dollars to each such
customer during such fiscal year; and (ii) suppliers with sales to InGenius
greater than $5,000 during the last fiscal year, showing the approximate total
purchases in dollars by InGenius from each such supplier during such fiscal
year. Since the Balance Sheet Date, there has been no adverse
<PAGE>
change in any material respect in the business relationship of InGenius with any
customer or supplier named on Schedule 4.28. Neither InGenius nor any Seller has
received any written communication from any customer or supplier named on
Schedule 4.28 of any intention to return, terminate or materially reduce
purchases from or supplies to InGenius.
4.29 Environmental Matters.
---------------------
(a) Definitions. The following terms, when used in this
-----------
Section 4.29, shall have the following meanings:
(i) "InGenius" for purposes of this Section 4.29
--------
includes (A) all Affiliates of InGenius, (B) all partnerships, joint
ventures and other entities or organizations in which InGenius was at any
time or is a partner, joint venturer, member or participant and (C) all
predecessor or former corporations, partnerships, joint ventures,
organizations, businesses or other entities, whether in existence as of the
date hereof or at any time prior to the date hereof, the assets or
obligations of which have been acquired or assumed by InGenius or to which
InGenius has succeeded.
(ii) "Release" means and includes any spilling,
-------
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment or the
workplace of any Hazardous Substance, and otherwise as defined in any
Environmental Law.
(iii) "Hazardous Substance" means any pollutants,
-------------------
contaminants, chemicals, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical or chemical compound
or hazardous substance, material or waste, whether solid, liquid or gas,
including any quantity of asbestos in any form, urea formaldehyde, PCB's,
radon gas, crude oil or any fraction thereof, all forms of natural gas,
petroleum products or by-products or derivatives, radioactive substance,
waste waters, sludges, slag and any other substance, material or waste that
is subject to regulation, control or remediation under any Environmental
Laws.
(iv) "Environmental Laws" mean all Regulations which
------------------
regulate or relate to the protection or clean-up of the environment, the
use, treatment, storage, transportation, generation, manufacture,
processing, distribution, handling or disposal of, or emission, discharge
or other release or threatened release of, Hazardous Substances or
otherwise dangerous substances, wastes, pollution or materials (whether
gas, liquid or solid), the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural
resources, or the health and safety of persons or property, including
protection of the health and safety of employees. Environmental Laws
include the Federal Water Pollution Control Act, Resource Conservation &
Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act,
Occupational Safety and Health Act, Toxic Substances Control Act, Clean Air
Act, Comprehensive Environmental Response, Compensation and Liability Act,
Hazardous Materials Transportation Act and all analogous or related
federal, state or local law.
<PAGE>
(v) "Environmental Conditions" mean the introduction into the
------------------------
environment of any pollution, including any contaminant, irritant or
pollutant or other Hazardous Substance (whether or not such pollution
constituted at the time thereof a violation of any Environmental Law as a
result of any Release of any kind whatsoever of any Hazardous Substance) as
a result of which InGenius has or may become liable to any Person or by
reason of which any of the Assets may suffer or be subjected to any
Encumbrance.
(b) Notice of Violation. Neither InGenius nor any Seller has
-------------------
received any notice of alleged, actual or potential responsibility for, or any
inquiry or investigation regarding, (i) any Release or threatened Release by
InGenius of any Hazardous Substance at any location or (ii) an alleged violation
of or non-compliance by InGenius with the conditions of any Permit required
under any Environmental Law or the provisions of any Environmental Law. InGenius
and Sellers have not received any notice of any other claim, demand or Action by
any Person alleging any actual or threatened injury or damage to any Person,
property, natural resource or the environment arising from or relating to any
Release or threatened Release by InGenius of any Hazardous Substances.
(c) Environmental Conditions. To the knowledge of Sellers, there
------------------------
are no present or past Environmental Conditions in any way relating to InGenius,
the Business or the Assets.
(d) Notices, Warnings and Records. To the knowledge of Sellers,
-----------------------------
InGenius has given all notices and warnings, made all reports, and has kept and
maintained all records required by and in compliance with all Environmental
Laws.
4.30 Brokers; Transaction Costs. Neither InGenius nor any Seller has
--------------------------
entered into and will not enter into any contract, agreement, arrangement or
understanding with any Person which will result in the obligation of Aeneid or
InGenius to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby. Neither InGenius nor
Aeneid shall be liable for any costs or expenses pertaining to any finder's
fees, brokerage commission or similar payment incurred by or on behalf of
InGenius or any Seller as a result of the consummation of the transactions
contemplated hereby. It is expressly understood that neither Worden Group nor
Peter Farner are brokers and neither are entitled to any fees or commissions in
connection with this Agreement or the Merger.
4.31 No Other Agreements to Sell InGenius or the Assets. Neither
--------------------------------------------------
InGenius nor any Seller has any legal obligation, absolute or contingent, to any
other Person to sell all or substantially all of the Assets or to sell any
capital stock of InGenius or to effect any merger, consolidation or other
reorganization of InGenius or to enter into any agreement with respect thereto.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF AENEID
Aeneid represents and warrants to InGenius and Sellers as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true and correct:
<PAGE>
5.1 Organization of Aeneid. Aeneid is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of California.
Aeneid has full corporate power and authority to conduct its business as
presently conducted by it and to own and lease its properties and assets. Aeneid
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of its properties owned or
leased or the nature of its activities make such qualification necessary, except
where the failure to be so qualified or in good standing would not have an
Aeneid Material Adverse Effect.
5.2 Authorization. Aeneid has all requisite corporate power and
-------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and the Ancillary Agreements, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement has been duly executed and delivered by Aeneid and
is, and upon execution and delivery, the Ancillary Agreements will be, legal,
valid and binding obligations of Aeneid, enforceable against Aeneid in
accordance with their terms, except that enforceability may be limited by the
effect of bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors.
5.3 No Conflict or Violation; Consents. None of the execution, delivery
----------------------------------
or performance of this Agreement or any Ancillary Agreement, the consummation of
the transactions contemplated hereby or thereby, nor compliance by Aeneid with
any of the provisions hereof or thereof, will (a) violate or conflict with any
provision of the Aeneid Articles of Incorporation or Bylaws of Aeneid, (b)
violate, conflict with, or result in a breach of or constitute a default (with
or without notice or passage of time) under, or result in the termination of, or
accelerate the performance required by, or result in a right to terminate,
accelerate, modify or cancel under, or require a notice under, or result in the
creation of any Encumbrance upon any of Aeneid's assets under, any material
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, security
interest or other arrangement to which Aeneid is a party or by which it is bound
or to which any of its assets are subject or (c) violate any Regulation or Court
Order.
5.4 Financial Statements. The balance sheet and income statements of
--------------------
Aeneid for the period ended August 30, 1999, fairly present the assets,
liabilities, financial condition and results of operations indicated thereby in
all material respects.
5.5 No Brokers. Neither Aeneid nor any of its officers, directors,
----------
employees, shareholders or Affiliates has employed or made any agreement with
any broker, finder or similar agent or any Person which will result in the
obligation of any Seller to pay any finder's fee, brokerage fees or commission
or similar payment in connection with the transactions contemplated hereby.
5.6 Litigation. There are no Actions pending, or to Aeneid's
----------
knowledge, threatened or anticipated against, related to or affecting Aeneid
seeking to delay, limit or enjoin the transactions contemplated by this
Agreement.
5.7 Financial Capability. Aeneid has access to immediately available
--------------------
funds sufficient to consummate the transactions contemplated by this Agreement.
<PAGE>
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub represents and warrants to InGenius and Sellers as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true and correct:
6.1 Organization of Merger Sub. Merger Sub is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Michigan. Merger Sub has not conducted any business. Aeneid owns all of the
outstanding capital stock of Merger Sub, free and clear of all liens, charges,
pledges and other encumbrances.
6.2 Authorization. Merger sub has all requisite corporate power and
-------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and the Certificate of Merger, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement has been duly executed and delivered by Merger Sub
and is, and upon execution and delivery, the Certificate of Merger will be, as
of the Effective Time, legal, valid and binding obligations of Merger Sub,
enforceable against Merger Sub in accordance with their terms, except that
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors.
6.3 Legal Proceedings. There are no Actions pending, or to Merger
-----------------
Sub's knowledge, threatened or anticipated against, related to or affecting
Merger Sub seeking to delay, limit or enjoin the transactions contemplated by
this Agreement.
ARTICLE VII.
ACTIONS PRIOR TO THE CLOSING
Aeneid, Merger Sub, InGenius and Sellers covenant as follows for the period
from the date hereof through the Effective Time:
7.1 Conduct of Business. Except as contemplated by this Agreement or
-------------------
as consented to by Aeneid in writing, from the date hereof through the Effective
Time, InGenius shall, and each Seller shall cause InGenius (i) to operate the
Business in the ordinary course of business and in accordance with past practice
and (ii) to not take any action inconsistent with this Agreement, the
Certificate of Merger, the Ancillary Agreements or the consummation of the
Merger. Without limiting the generality of the foregoing, from the date hereof
through the Effective Time, InGenius shall not and no Seller shall permit
InGenius to, except as specifically contemplated by this Agreement or as
consented to by Aeneid in writing:
(a) incur any indebtedness for borrowed money, or assume, guarantee,
endorse (other than endorsements for deposit or collection in the ordinary
course of business), or otherwise become responsible for obligations of any
other Person;
(b) issue or commit to issue any shares of its capital stock or any
other securities or any securities convertible into shares of its capital stock
or any other
<PAGE>
securities, including options and warrants therefor (other than shares of
InGenius Common Stock issued upon the exercise of InGenius Options);
(c) declare, pay or incur any obligation to pay any dividend on its
capital stock or declare, make or incur any obligation to make any distribution
or redemption with respect to capital stock;
(d) make any change to its Articles of Incorporation or Bylaws;
(e) mortgage, pledge or otherwise encumber any Assets or sell,
transfer, license or otherwise dispose of any Assets except for sales of
products and services and standard customer non-exclusive licenses, in each case
in the ordinary course of business and consistent with past practice;
(f) cancel, release or assign any indebtedness owed to it or any
claims or rights held by it, except in the ordinary course of business and
consistent with past practice;
(g) make any payments using its corporate funds for any purpose other
than in the ordinary course of business.
(h) declare or pay any cash or stock dividend or make any
distribution to its shareholders.
(i) make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfer or otherwise,
or by the purchase of any property or assets of any other Person, except capital
expenditures in the ordinary course of business consistent with past practice;
(j) terminate any material Contract or make any change in any
material Contract;
(k) enter into or modify any employment Contract, (ii) pay or agree
to pay any compensation to or for any Employee, officer or director of InGenius
other than in the ordinary course of business and consistent with past practice,
(iii) pay or agree to pay any bonus, incentive compensation, service award or
other like benefit or (iv) enter into or modify any other Employee Plan, except
as contemplated hereby;
(l) enter into or modify any Contract with a Related Party;
(m) enter into any Contract unless the same is terminable by InGenius
on no more than 30 days' written notice without penalty or payment and is
entered into in the ordinary course of business consistent with past practice;
(n) make any change in any method of accounting or accounting
practice;
<PAGE>
(o) fail to pursue the development and introduction of new products
and technology advances in connection with the Business on a basis consistent
with past practice;
(p) fail to use its commercially reasonable efforts to (i) retain the
Employees and any independent contractors providing services to InGenius, (ii)
maintain the Business so that such Employees and independent contractors will
remain available to InGenius and Aeneid on and after the Closing Date, (iii)
maintain existing relationships with suppliers and customers and others having
business dealings with InGenius and (iv) otherwise preserve the goodwill of the
Business so that such relationships and goodwill will be preserved on and after
the Closing Date; or
(q) do any other act which would cause any representation or warranty
of InGenius or any Seller in this Agreement to be or become untrue in any
material respect.
7.2 Investigation by Aeneid. From the date hereof through the
-----------------------
Effective Time, InGenius shall afford the Representatives of Aeneid and its
Affiliates complete access at all reasonable times upon reasonable notice to the
Business and the Assets and Liabilities for the purpose of inspecting the same,
and to InGenius' officers, Employees and Representatives, properties, Books and
Records and Contracts, and shall furnish Aeneid and its Representatives all
financial, operating and other data and information (including InGenius'
Proprietary Rights) as Aeneid or its Affiliates, through their respective
Representatives, may reasonably request. The provisions of the Confidentiality
Agreement will remain in effect pursuant to its terms notwithstanding the
execution of this letter (subject to Section 13.13 hereof). Notwithstanding the
foregoing, InGenius shall not be required to send its source code off of its
premises prior to the closing.
7.3 Notification of Certain Matters. Each party shall give prompt
-------------------------------
notice to the other of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect and (ii) any material failure of such party to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that such disclosure shall not be
-------- -------
deemed to cure any breach of a representation, warranty, covenant or
agreement or to satisfy any condition. Sellers and InGenius shall promptly
notify Aeneid of any Default, the threat or commencement of any Action, or any
development that occurs before the Closing that could reasonably be expected to
result in an InGenius Material Adverse Effect, and Aeneid shall promptly notify
InGenius of any threat or commencement of any Action, or any development that
occurs before the Closing that could reasonably be expected to delay, limit or
enjoin the transactions contemplated by this Agreement.
7.4 Restrictions on Certain Transactions. In the Sellers nor any
------------------------------------
director, officer, shareholder or agent of InGenius will, directly or
indirectly, solicit, initiate, entertain or encourage any proposals, inquiries
or offers from any third party relating to any licensing transaction relating to
InGenius' technology or relating to any acquisition or purchase of all or (other
than in the ordinary course of business) a material amount of the assets of or
any interest in, InGenius or any merger, consolidation, dissolution or business
combination of InGenius, nor will InGenius or any of its directors, officers,
shareholders or agents participate in any discussions regarding, or furnish to
any person any information with respect to, any such transaction. If the Merger
is not consummated by
<PAGE>
November 30, 1999, which date may be extended by mutual agreement of Aeneid and
InGenius, the No-Shop Fee (as defined in the Letter of Intent) will be either,
in Aeneid's sole discretion, (i) credited as a payment by Aeneid pursuant to the
License Agreement or (ii) converted into the greater of (a) 667 shares of
InGenius' common stock, subject to anti-dilution adjustment, or (b) the number
of shares of InGenius' common stock having a fair market value at such time
equal to the No-Shop Fee.
7.5 Approval of Shareholders. The Sellers shall vote all of the shares
------------------------
of InGenius Common Stock which they own or control in favor of the adoption of
this Agreement and the Merger under the Michigan BCA. InGenius shall, within
fifteen (15) days after the execution of this Agreement, obtain the approval of
the shareholders of InGenius in accordance with the Michigan BCA. InGenius'
board of directors shall recommend such approval to its shareholders.
7.6 Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, the parties agree, in each case both before and after the
Effective Time, (i) to use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, the Certificate of Merger and the Ancillary Agreements, (ii) to
execute any documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder and thereunder, and (iii) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the parties agree
to use their respective best efforts (A) to obtain any necessary Consents
(provided, however, that no amendment or modification shall be made to any
-------- -------
Contract to obtain such Consent without Aeneid's consent), (B) to obtain all
necessary Permits, (C) to give all notices to, and make all registrations and
filings with third parties, including submissions of information requested by
governmental authorities, and (D) to fulfill all conditions to this Agreement.
7.7 Satisfaction of Conditions. Aeneid, Merger Sub and InGenius each
--------------------------
shall use its best efforts to satisfy the conditions set forth in Articles VIII
and IX hereof.
ARTICLE VIII.
CONDITIONS TO OBLIGATIONS OF INGENIUS AND SELLERS
The obligations of InGenius and Sellers to consummate the Merger and the
other transactions contemplated by this Agreement are subject, in the discretion
of InGenius and Sellers, to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
8.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Aeneid and Merger Sub contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Aeneid and Merger Sub shall have performed in all material respects all
agreements and covenants required hereby to be performed by them prior to or at
the Closing Date. There shall be delivered to Sellers a certificate (signed by a
Senior Vice President or more senior officer of Aeneid) to the foregoing effect
("Aeneid's Closing Certificate").
8.2 Consents. All consents, approvals and waivers from governmental
--------
authorities necessary for the valid consummation of the Merger shall have been
obtained, all approvals required under any Regulations to carry out the
transactions contemplated by this Agreement, the
<PAGE>
Certificate of Merger and the Ancillary Agreements shall have been obtained and
the parties shall have complied with all Regulations applicable to the
transactions contemplated hereby and thereby.
8.3 No Court Orders. There shall not be any Regulation or Court Order
---------------
that makes the transactions contemplated hereby, by the Certificate of Merger or
by the Ancillary Agreements illegal or otherwise prohibited.
8.4 Closing Documents. Sellers shall have received from Aeneid and
-----------------
Merger Sub the documents and other items to be delivered by Aeneid and Merger
Sub pursuant to Section 10.2 of this Agreement.
8.5 Opinion of Counsel to Aeneid. Aeneid shall have delivered to
----------------------------
InGenius an opinion of Heller, Ehrman, White & McAuliffe, counsel to Aeneid,
dated as of the Closing Date in form and substance reasonably acceptable to
InGenius.
8.6 Aeneid Material Adverse Change. There shall not have been any
------------------------------
Aeneid Material Adverse Change.
8.7 Certificates. Aeneid shall furnish InGenius with a certificate of
------------
Aeneid attaching a copy of (a) Aeneid's and Merger Sub's board resolutions
authorizing the transactions contemplated hereby, (b) the Articles of
Incorporation of Aeneid and of Merger Sub, as amended, certified by the
California Secretary of State and the Michigan Department of Corporations,
respectively, (c) the Bylaws of Aeneid, and (d) Aeneid's Stock Option Plan.
8.8 InGenius Shareholder Approval. This agreement, the Merger and the
-----------------------------
transactions contemplated hereby shall have been approved by the requisite
percentage of the shareholders of InGenius.
ARTICLE IX.
CONDITIONS TO OBLIGATIONS OF AENEID AND MERGER SUB
The obligations of Aeneid and Merger Sub to consummate the Merger and the
other transactions contemplated by this Agreement are subject, in the discretion
of Aeneid and Merger Sub, to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
9.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of each Seller and InGenius contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and each
Seller and InGenius shall have performed in all material respects all agreements
and covenants required hereby to be performed prior to or at the Closing Date.
There shall be delivered to Aeneid a certificate (signed by the President of
InGenius) to the foregoing effect ("InGenius' Closing Certificate").
9.2 InGenius Shareholder Approval. This agreement, the Merger and the
-----------------------------
transactions contemplated hereby shall have been approved by the requisite
percentage of the shareholders of InGenius.
<PAGE>
9.3 Approvals. All Consents from governmental authorities and other
---------
parties necessary to the consummation of the transactions contemplated hereby
and by the Certificate of Merger and the Ancillary Agreements and for the
operation of the Business after the Closing (including all required third party
consents under the Contracts, as listed on Schedule 4.13) shall have been
obtained. Aeneid shall be satisfied that all approvals required under any
Regulations to carry out the transactions contemplated by this Agreement, the
Certificate of Merger and the Ancillary Agreements shall have been obtained and
that the parties shall have complied with all Regulations applicable to the
transactions contemplated hereby and thereby.
9.4 No Actions or Court Orders. No Action by any court, governmental
--------------------------
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby or by
the Certificate of Merger or the Ancillary Agreements and which could reasonably
be expected to damage Aeneid, the Assets or the Business materially if the
transactions contemplated hereby or thereby are consummated, including any
material adverse effect on the right or ability of Aeneid to own or operate
InGenius after the Closing.
9.5 Opinion of Counsel. Sellers and InGenius shall have delivered to
------------------
Aeneid an opinion of Varnum, Riddering, Schmidt & Howlett, LLP (or such other
counsel approved by Aeneid), counsel to Sellers and InGenius, dated as of the
Closing Date, substantially in the form of Exhibit E hereto.
9.6 Employees. Julie and Gary Stock shall sign offers of employment
---------
with Aeneid in the form attached as Exhibit D hereto.
9.7 Certificates. InGenius shall furnish Aeneid with a certificate
------------
from the Secretary of InGenius attaching a copy of (a) InGenius' board
resolutions authorizing the transactions contemplated hereby, (b) a document
evidencing that the requisite shareholder approval specified in Section 9.2 has
been obtained, (c) the Articles of Incorporation of InGenius, as amended,
certified by the Michigan Department of Consumer and Industry Services--
Corporations, Securities & Land Development Bureau and (d) the Bylaws of
InGenius.
9.8 Closing Documents. Aeneid shall have received from Sellers and
-----------------
InGenius the documents and other items described in Section 10.1 and such other
documents and items as Aeneid may reasonably require.
9.9 InGenius Material Adverse Change. There shall not have been any
--------------------------------
InGenius Material Adverse Change.
9.10 Closing Balance Sheet. InGenius shall furnish to Aeneid the
---------------------
Closing Balance Sheet which shall show a Net Asset Value of at least -$300,000
(negative $300,00). The Closing Balance Sheet shall be certified by the
President and Chief Financial Officer of InGenius.
9.11 Due Diligence Review. Aeneid shall have completed its due
--------------------
diligence of InGenius, including, without limitation, due diligence of InGenius'
Proprietary Rights, and Aeneid shall be satisfied, in its sole discretion, on
the basis of such review that Aeneid should proceed with the transactions
contemplated hereby. Such review shall have no effect whatsoever on the
liability of InGenius or any Seller to Aeneid under this Agreement or otherwise
for breach of any representations, warranties or covenants of InGenius and
Sellers hereunder.
<PAGE>
9.12 Cancellation of Options, Warrants, Convertible Securities, etc.
--------------------------------------------------------------
Aeneid shall have received from InGenius documentation evidencing the
cancellation of all outstanding options, warrants, convertible securities or
rights of any kind to purchase or otherwise acquire shares of capital stock or
other securities of InGenius, including but not limited to evidence of the
repayement in accordance with Section 3.2 hereof or conversion of the
convertible note held by Terry Cross.
ARTICLE X.
CLOSING
On the Closing Date at the Closing Place:
10.1 Deliveries by Sellers and InGenius to Aeneid. Each Seller and
--------------------------------------------
InGenius shall deliver (or cause to be delivered) to Aeneid or Merger Sub, as
applicable:
(a) certificates representing the shares of InGenius Common Stock set
forth next to each Seller's name on the signature page hereof;
(b) the Ancillary Agreements to which it is a party;
(c) a certificate of corporate good standing issued by the Michigan
Department of Corporations for InGenius, dated not more than five days prior to
the Closing Date;
(d) InGenius' Closing Certificate referenced in Section 9.1, the
Secretary's certificate referenced in Section 9.7 and the Closing Balance Sheet
referenced in Section 9.10;
(e) the opinion of counsel to Sellers and InGenius described in
Section 9.5;
(f) the written resignations of all officers and directors of
InGenius;
(g) a Form W-9;
(h) evidence of the cancellation of all outstanding options,
warrants, convertible securities or rights of any kind to purchase or otherwise
acquire shares of capital stock or other securities of InGenius as referenced in
Section 9.12; and
(i) copies of all Consents.
10.2 Deliveries by Aeneid. Aeneid shall deliver to holders of InGenius
--------------------
Common Stock immediately prior to the Effective Time or InGenius, as applicable:
<PAGE>
(a) that portion of the consideration payable pursuant to
Section 3.2 hereof for which Aeneid is notified that share certificates will
delivered at the Closing;
(b) Aeneid's Closing Certificate;
(c) the Ancillary Agreements to which Aeneid is a party;
(d) good standing certificates for Aeneid and Merger Sub;
(e) Aeneid's closing certificates referenced in Sections 8.1 and
8.7.
ARTICLE XI.
ACTIONS BY SELLERS, INGENIUS AND AENEID AFTER THE CLOSING
11.1 Books and Records; Tax Matters.
------------------------------
(a) Sellers, InGenius, Aeneid and Merger Sub agree that so long
as any books, records and files relating to the Business, Assets or operations
of InGenius, to the extent that they pertain to the operations of InGenius prior
to the Closing Date, remain in existence and available, each party (at its
expense) shall, upon prior notice, have the right to inspect and to make copies
of the same at any time during business hours for any proper purpose.
(b) Aeneid covenants and agrees that in the event it or InGenius
receives any notice or inquiry from the Internal Revenue Service with respect to
the characterization of any payments made under this Agreement, the Certificate
of Merger or any Ancillary Agreement, Aeneid will give prompt written notice to
Sellers concerning such notice or inquiry. Aeneid agrees to report the
consideration delivered under this Agreement in a manner consistent with the
terms hereof.
11.2 Participation in Series D Financing. Aeneid agrees that
-----------------------------------
InGenius' stockholders who at the time of purchase are accredited investors may
purchase up to $1,000,000 worth of Aeneid's Series D Preferred Stock at the most
recent sale price for the Series D Preferred Stock. This Series D Preferred
Stock will be allocated among the shareholders of InGenius in proportion to
their ownership percentage of InGenius Common Stock. The offer and sale of the
Series D Preferred Stock to InGenius' stockholders will be made only after
satisfaction, in the judgment of Aeneid and its counsel, of all applicable state
and federal securities laws.
11.3 Employment of the Stocks. Aeneid will offer at will employment to
------------------------
Gary and Julie Stock at the level of Director or Vice President, under the
following terms:
(a) The Stocks will receive base compensation and benefits
consistent with current Directors and Vice Presidents of Aeneid, including
reimbursement of relocation expenses.
<PAGE>
(b) The Stocks will each be granted options to purchase 500,000
shares of Aeneid's common stock (the "Aeneid Options"), pursuant to the terms
and conditions of Aeneid's 1999 Stock Plan, at an exercise price per share equal
to the fair market value of Aeneid's common stock on the date the Options are
granted which is agreed to be $0.80 per share. 250,000 of the Aeneid Options
shall be terminable by Aeneid to secure the indemnification obligations set
forth in Section 12.2. One-half of the Options will vest immediately and one
twenty-fourth of the original number of Options will vest each month thereafter;
provided, however, that, in the event that the optionee is terminated by Aeneid
without cause, such optionee's Options will vest immediately and will be
exercisable for three months thereafter. "Cause" shall be defined to mean:
(i) gross negligence or willful misconduct in the
performance of the employee's duties;
(ii) the employee's failure to substantially perform the
employee's duties with Aeneid (other than a failure resulting from the
employee's incapacity due to physical or mental illness) after a written
demand for substantial performance is delivered to the employee by the
board of directors of Aeneid;
(iii) fraud or other conduct against the material best
interests of Aeneid; or
(iv) a conviction of a felony.
ARTICLE XII.
INDEMNIFICATION
12.1 Survival of Representations. All statements contained in this
---------------------------
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of a party pursuant to this Agreement or in connection
with the transactions contemplated hereby shall be deemed to be representations
and warranties by such party hereunder. The representations and warranties of
Sellers contained herein shall survive the Closing Date for a period of (and
claims based upon or arising out of such representations and warranties may be
asserted at any time before the date which shall be) one (1) year after the
Closing Date. No investigation made by any of the parties hereto shall in any
way limit the representations and warranties of the parties. On the Closing Date
all representations and warranties contained in this Agreement and made by any
Seller and InGenius shall expire as to InGenius and thereafter will be deemed to
have been made exclusively by Sellers. The termination of the representations
and warranties provided herein shall not affect the rights of a party in respect
of any claim made by such party in a writing received by the other party prior
to the expiration of the applicable survival period provided herein.
12.2 Indemnification.
---------------
(a) General. The Sellers shall jointly and severally indemnify,
-------
save and hold harmless Aeneid and its Affiliates and its and their respective
Representatives from and against any and all costs, losses (including diminution
in value), Taxes, Liabilities,
<PAGE>
obligations, damages, lawsuits, deficiencies, claims, demands, and expenses
(whether or not arising out of third-party claims), including interest,
penalties, costs of mitigation, losses in connection with any Environmental Law
(including any clean-up or remedial action), damages to the environment,
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing, in each case after taking into account any insurance
proceeds received by the indemnified Person and related tax benefits (herein,
"Damages"), incurred by Aeneid or its affiliates or by the Surviving Corporation
in connection with, arising out of, resulting from or incident to: (i) any
breach of any representation or warranty or the inaccuracy of any representation
or warranty, made by any Seller in this Agreement; and (ii) any breach of any
covenant or agreement made by any Seller in this Agreement. The indemnity
obligations of Sellers in this Section 12.2 be limited to the cash in the Escrow
Account and one-half (1/2) of the Aeneid Options issued to the Sellers pursuant
to Section 11.3.
The term "Damages" is not limited to matters asserted by third parties
against an indemnified Person, but includes Damages incurred or sustained by the
indemnified Person in the absence of third party claims. Payments by an
indemnified Person of amounts for which it is indemnified hereunder shall not be
a condition precedent to recovery.
(b) Procedure for Claims between Parties. If a claim for Damages
------------------------------------
is to be made by a party entitled to indemnification hereunder, the party
claiming such indemnification shall give written notice to the indemnifying
Person as soon as practicable after the indemnified Person becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 12.2. Any failure to submit any
such notice of claim to the indemnifying Person(s) shall not relieve such
Person(s) of any liability hereunder, except to the extent such Person(s) is
actually prejudiced by such failure. The indemnifying Person(s) shall be deemed
to have accepted the notice of claim and to have agreed to pay the Damages at
issue if such Person(s) does not send a notice of disagreement to the
indemnified Person within 30 calendar days after receiving the notice of claim.
In the case of a disputed claim, the parties shall use best efforts to resolve
the matter internally on an expeditious basis and in any event within 45
calendar days after the notice is received by the indemnifying Person(s).
(c) Defense of Third-Party Claims. If any lawsuit or enforcement
-----------------------------
action is filed against any indemnified Person, written notice thereof shall be
given to the indemnifying Person(s) as promptly as practicable (and in any event
within 15 calendar days after the service of the citation or summons). The
failure of any indemnified Person to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent that the
indemnifying Person(s) demonstrate they were actually prejudiced by such
failure. After such notice, if the indemnifying Person(s) shall acknowledge in
writing to the indemnified Person that the indemnifying Person(s) shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit or action, then the indemnifying Person(s) shall be entitled, if its so
elects at its own cost, risk and expense, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
their own choice to handle and defend the same unless the named parties to such
action or proceeding include both an indemnifying Person and the indemnified
Person and the indemnified Person has been advised in writing by counsel that
there may be one or more legal defenses available to such indemnified Person
that are different from or additional to those available to the indemnifying
Person(s), in which event the indemnified Person shall be entitled, at the
indemnifying Person(s)'s cost, risk and expense, to separate counsel of its own
choosing, and (iii) to compromise or settle such claim, which compromise or
settlement shall be made only with the written consent of the
<PAGE>
indemnified Person, such consent not to be unreasonably withheld. The
indemnified Person shall cooperate in all reasonable respects with the
indemnifying Person(s) and its attorneys in the investigation, trial and defense
of such lawsuit or action and any appeal arising therefrom; provided, however,
-------- -------
that the indemnified Person may, at its own cost, participate in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The parties shall cooperate with each other in any
notifications to insurers. If the indemnifying Person fails to assume the
defense of such claim within 15 calendar days after receipt of the notice of
claim, the indemnified Person against which such claim has been asserted will
(upon delivering notice to such effect to the indemnifying Person) have the
right to undertake, at the indemnifying Person's cost, risk and expense, the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying Person; provided, however, that such claim shall
-------- -------
not be compromised or settled without the written consent of the indemnifying
Person, which consent shall not be unreasonably withheld. If the indemnified
Person assumes the defense of the claim, the indemnified Person will keep the
indemnifying Person reasonably informed of the progress of any such defense,
compromise or settlement. The indemnifying Person shall be liable for any
settlement of any action effected pursuant to and in accordance with this
Section 12.2 and for any final judgment (subject to any right of appeal), and
the indemnifying Persons agree to indemnify and hold harmless an indemnified
Person from and against any Damages by reason of such settlement or judgment.
(d) Brokers and Finders. Pursuant to the provisions of this
-------------------
Section 12.2, Aeneid, on the one hand, and Sellers, on the other, shall
indemnify, hold harmless and defend the other from the payment of any and all
brokers' and finders' expenses, commissions, fees or other forms of compensation
which may be due or payable from or by the indemnifying Person, or may have been
earned by any third party acting on behalf of the indemnifying Person in
connection with the negotiation and execution hereof and the consummation of the
transactions contemplated hereby.
(e) Aeneid's Right of Offset. Anything in this Agreement to the
------------------------
contrary notwithstanding, Aeneid shall withhold and set off against the payments
made pursuant to Section 3.2 any amount as to which Sellers are obligated to pay
pursuant to any provision of this Section 12.2.
(f) Monetary Limits on Indemnification. Sellers shall not be
----------------------------------
obligated to indemnify for Damages unless and until the aggregate amount of
indemnification so asserted exceeds $100,000, and thereafter Aeneid shall be
entitled to indemnity for all additional Damages. The indemnification liability
of Sellers' shall be offset dollar for dollar by (i) any insurance proceeds
received by Aeneid or InGenius after the Closing in respect to any item of
indemnifiable Damages, and (ii) any other recovery made by Aeneid from any third
party on account of any indemnifiable damages involved.
12.3 No Right of Contribution. After the Closing, InGenius shall have
------------------------
no liability to indemnify Aeneid or any Seller on account of the breach of any
representation or warranty or the nonfulfillment of any covenant or agreement of
any Seller; and no Seller shall have any right of contribution against InGenius
(unless such claim for contribution relates to a Liability of InGenius existing
at or arising after the Closing Date and the existence of such Liability does
not breach any of Seller's representations and warranties contained herein).
<PAGE>
ARTICLE XIII.
MISCELLANEOUS
13.1 Termination.
-----------
(a) This Agreement and the Certificate of Merger may also be
terminated and the Merger abandoned at any time prior to the Effective Time as
follows:
(i) By mutual written consent of Aeneid and InGenius and
Sellers;
(ii) By Aeneid if there is a material breach of any
representation or warranty set forth in Article IV or any covenant or
agreement to be complied with or performed by InGenius and any Seller
pursuant to the terms of this Agreement which is not cured within ten (10)
days of written notice of breach; or
(iii) By Sellers if there is a material breach of any
representation or warranty set forth in Article V or Article VI hereof or
of any covenant or agreement to be complied with or performed by Aeneid or
Merger Sub pursuant to the terms of this Agreement.
(b) In the event of termination of this Agreement:
(i) The provisions of the Confidentiality Agreement shall
continue in full force and effect; and
(ii) No party hereto shall have any liability to any
other party to this Agreement, except for any willful breach of, or knowing
misrepresentation made in, this Agreement occurring prior to the proper
termination of this Agreement.
13.2 License Agreement. If the Merger is not consummated, InGenius and
-----------------
Aeneid shall enter into a three year license agreement (the "License Agreement")
pursuant to which InGenius will grant Aeneid a license to use its software. The
License Agreement will contain terms acceptable to InGenius and Aeneid,
including a pricing and reward system at least as favorable to Aeneid as to
other licensees that InGenius has contracted with based on similar volume, terms
and conditions.
13.3 Assignment; No Third-Party Beneficiaries. Neither this Agreement
----------------------------------------
nor any of the rights or obligations hereunder may be assigned by InGenius or
any Seller without the prior written consent of Aeneid, or by Aeneid or Merger
Sub without the prior written consent of InGenius and Sellers. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Nothing
herein expressed or implied shall give or be construed to give to any Person,
other than the parties hereto and such successors and assigns and the Persons
indemnified pursuant to Section 12.2 hereof, any legal or equitable rights
hereunder.
<PAGE>
13.4 Notice. All notices, requests, demands and other communications
------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy; the day after it is sent, if sent
for next day delivery to a domestic address by recognized overnight delivery
service (e.g., Federal Express); and upon receipt, if sent by certified or
----
registered mail, return receipt requested, as follows:
If to Aeneid, Merger Sub, or, if after the Closing, to InGenius:
Aeneid Corporation
282 2/nd/ Street, Suite 300
San Francisco, CA 94105
Attention: Chief Executive Officer
With a copy to:
Heller Ehrman White and McAuliffe
525 University Avenue
Palo Alto, CA 94301
Attention: Richard A. Peers
If to InGenius prior to Closing:
InGenius Technologies, Inc.
3506 Lovers Lane, Suite 2
Kalamazoo, MI 49001
Telecopy: (616) 381-4823
Attention: Julie Stock
If to a Seller, to the address of such Seller as set forth on the
signature page hereto.
In case of each of the foregoing, with a copy to:
Varnum, Riddering, Schmidt & Howlett LLP
350 East Michigan Ave., Suite 500
Kalamazoo, MI 49007
Telecopy: (616) 382-2382
Attention: Alfred L. Schubkegel, Jr., Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
13.5 Choice of Law. This Agreement shall be construed, interpreted and
-------------
the rights of the parties determined in accordance with the laws of the State of
California except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or
<PAGE>
the subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
13.6 Entire Agreement; Amendments and Waivers. This Agreement,
----------------------------------------
together with all exhibits and schedules hereto, the Certificate of Merger, the
Ancillary Agreements, and the Confidentiality Agreement (which the parties agree
shall terminate on the Closing Date), constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
13.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.8 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
13.9 Expenses. Except as otherwise provided in this Agreement,
--------
Aeneid, Merger Sub, InGenius and Sellers will each be liable for their own
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, Sellers agree that they shall be jointly and
severally liable for all attorney's fees of InGenius in excess of $50,000
incurred prior to or on the Closing Date and related to the transactions
contemplated by this Agreement. Accordingly, within 30 calendar days after the
delivery to Sellers of invoices for any amounts due by InGenius in excess of
$50,000, Sellers shall reimburse InGenius for such invoiced amounts or directly
remit payment to the applicable vendor. Such payment obligation is independent
of the indemnification obligations contained herein.
13.10 Approval of Sellers. By their execution and delivery of this
-------------------
Agreement, the undersigned Sellers consent to, approve and adopt this Agreement,
the Certificate of Merger and the Merger and agree to take all other actions
necessary or required to consummate the transactions contemplated hereby and
thereby, including voting to approve this Agreement, the Certificate of Merger
and the Merger, and refraining from making any disposition of, or encumbering,
their respective shares of InGenius Common Stock prior to the Closing.
13.11 Approval of Aeneid as Sole Shareholder of Merger Sub. By its
----------------------------------------------------
execution and delivery of this Agreement, Aeneid as the sole shareholder of
Merger Sub, consents to, approves, and adopts this Agreement, the Certificate of
Merger and the Merger.
13.12 Publicity. Except as required by law or on advice of counsel, no
---------
party hereto shall issue any press release or make any public statement
regarding the transactions contemplated hereby without the prior written
approval of the other parties, and the parties hereto shall issue a mutually
acceptable press release as soon as practicable after the date hereof.
Notwithstanding anything to the contrary in this Section, Aeneid may provide
copies of, and disclose the terms provisions of,
<PAGE>
the letter of intent among Aeneid and Julie and Gary Stock dated September 20,
1999, this Agreement and the Ancillary Agreements to its lawyers, accountants,
financial advisors, shareholders and potential investors and may describe such
terms and provisions in any disclosure schedule, private placement memorandum or
other document relating to the issuance of securities by Aeneid.
13.13 Arbitration. Any dispute, controversy, or claim ("Dispute")
-----------
between the parties of any kind or nature whatsoever, arising under or related
to this Agreement whether arising under contract, tort or otherwise, which is
not resolved by good faith negotiation shall be submitted to and settled by
binding arbitration under the Commercial Arbitration Rules of the American
Arbitration Association. Any arbitration award shall be binding and enforceable
against the parties hereto and judgment may be entered thereon in any court of
competent jurisdiction. The arbitration will take place in San Francisco,
California, unless the parties mutually agree otherwise.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
AENEID CORPORATION,
a California corporation
By: /s/ Daniel Putterman
____________________________________
Name:
Its:
AENEID MERGER SUB, INC.,
a Michigan corporation
By: /s/ Illegible
____________________________________
Name:
Its:
INGENIUS TECHNOLOGIES, INC.,
a Michigan corporation
By: /s/ Julie Stock
____________________________________
Name: Julie Stock
Its: President and Chief Executive Officer
/s/ Julie Stock
_______________________________________
JULIE STOCK,
an individual
/s/ Gary Stock
_______________________________________
GARY STOCK,
an individual
<PAGE>
EXHIBIT 10.21
Amendment No. 1 to
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 to Agreement and Plan of Merger (this
"Amendment") is entered into as of October 22, 1999 by and among (i) Aeneid
Corporation, a California corporation ("Aeneid"), (ii) Aeneid Merger Sub, Inc.,
a Michigan corporation and a wholly-owned subsidiary of Aeneid ("Merger Sub"),
(iii) InGenius Technologies, Inc., a Michigan corporation ("InGenius"), and (iv)
Julie Stock and Gary Stock, each an individual and a shareholder of InGenius
(together, "Sellers").
RECITALS
--------
A. The parties hereto have entered into that certain Agreement and
Plan of Merger dated as of October 22, 1999 (the "Merger Agreement").
Capitalized terms used herein but not defined shall have the meanings given to
them in the Merger Agreement.
B. That the parties hereto desire amend, waive or modify certain
provisions of the Merger Agreement in connection with the Closing.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree that Section 11.3 is hereby amended
to read in its entirety as follows:
11.3 Employment of the Stocks. Aeneid will offer at will employment
------------------------
to Gary and Julie Stock at the level of Director or Vice President, under the
following terms:
(a) The Stocks will receive base compensation and benefits
consistent with current Directors and Vice Presidents of Aeneid, including
reimbursement of relocation expenses.
(b) The Stocks will each be granted options to purchase 500,000
shares of Aeneid's common stock in the form of the Stock Option Agreements
attached hereto as Exhibit F (the "Aeneid Options").
---------
<PAGE>
(c) At the time either Seller exercises an Option at an exercise
price of $1.25 per share, Aeneid shall pay to such Seller a one-time cash bonus
of $0.45 per share so exercised.
(d) To the extent the shares issuable under the Options (the
"Shares"), or the resale of such shares, are not registered with the SEC at the
same time and on the same terms as the other options granted under Aeneid's 1999
Stock Plan, Aeneid shall use reasonable commercial efforts to register (to the
extent permitted under the Securities Act) with the Securities and Exchange
Commission the Shares, or the resale of such shares, such that Julie and Gary
Stock shall have materially the same rights to resell the Shares as other
employees of the Company who are issued options under Aeneid's 1999 Stock Plan.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or
caused this Amendment to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
AENEID CORPORATION,
a California corporation
By: /s/ Doug Bennett
__________________________
Name:
Its:
AENEID MERGER SUB, INC.,
a Michigan corporation
By: /s/ Illegible
__________________________
Name:
Its:
INGENIUS TECHNOLOGIES, INC.,
a Michigan corporation
By: /s/ Julie Stock
__________________________
Name: Julie Stock
Its: President and Chief Executive Officer
/s/ Julie Stock
_____________________________
JULIE STOCK,
an individual
/s/ Gary Stock
____________________________
GARY STOCK,
an individual
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of Organization
Name of Subsidiary and Type of Entity
- ------------------ ----------------------------
InGenius Technologies, Inc. Michigan Corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated March 31, 2000 relating to the consolidated financial
statements of EoExchange, Inc., which appears in such Registration Statement.
We also consent to the references to us under the headings "Experts" and
"Selected Financial Data" in such Registration Statement.
We also consent to the use in this Registration Statement on Form S-1 of our
report dated March 21, 2000 relating to the financial statements of InGenius
Technologies, Inc., which appears in such Registration Statement.
PricewaterhouseCoopers LLP
San Francisco, California
April 6, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EOEXCHANGE,
INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 21,709
<SECURITIES> 0
<RECEIVABLES> 325
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,833
<PP&E> 0
<DEPRECIATION> 526<F1>
<TOTAL-ASSETS> 27,289
<CURRENT-LIABILITIES> 2,338
<BONDS> 0
0
58,469
<COMMON> 101
<OTHER-SE> 33,430
<TOTAL-LIABILITY-AND-EQUITY> 27,289
<SALES> 0
<TOTAL-REVENUES> 496
<CGS> 1,599
<TOTAL-COSTS> 1,599
<OTHER-EXPENSES> 10,409
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> (11,350)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,350)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,350)
<EPS-BASIC> (4.27)
<EPS-DILUTED> (4.27)
<FN>
<F1>INCLUDES ACCUMULATED AMORTIZATION ON INTANGIBLES
</FN>
</TABLE>
