<PAGE>
As filed with the Securities and Exchange Commission on April 5, 2000
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
OPEN PORT TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Illinois (before 7372 36-3874234
reincorporation) (Primary Standard (I.R.S. Employer
Delaware (after Industrial Identification Number)
reincorporation) Classification Code Number)
(State or other jurisdiction
of
incorporation or
organization)
676 North St. Clair Street, Suite 900
Chicago, Illinois 60611
(312) 867-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
Randy S. Storch
Chairman, President and Chief Executive Officer
Open Port Technology, Inc.
676 North St. Clair Street, Suite 900
Chicago, Illinois 60611
(312) 867-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
----------------
Mark L. Gordon, Esq. Linda Chaplik Harris, Esq. Erin Karzmer, Esq.
Janet Smerling LeVee, Mark L. Dosier, Esq. Testa, Hurwitz &
Esq. Sonnenschein Nath & Rosenthal Thibeault, LLP
Gordon & Glickson LLC 8000 Sears Tower 125 High Street
444 N. Michigan Avenue Chicago, Illinois 60606 Boston, Massachusetts
Chicago, Illinois 60611 (312) 876-8000 02110
(312) 321-1700 (617) 248-7000
----------------
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, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is to be a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
registration statement of the earlier effective registration statement for the
same offering. [_]
If this Form is a post-effective amendment pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act
registration statement number if the earlier effective registration statement
for the same offering. [_]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of each class of Proposed maximum Amount of
Securities to be registered aggregate offering price (1) registration fee
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.001 par value.................. $80,500,000 $21,252
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
----------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This Prospectus is not an +
+offer to sell these securities, and it is not soliciting an offer to buy +
+these securities, in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated April 5, 2000
[OPEN PORT(R) TECHNOLOGY LOGO]
- --------------------------------------------------------------------------------
Shares
Common Stock
- --------------------------------------------------------------------------------
This is the initial public offering of Open Port Technology, Inc. and we are
offering shares of our common stock. We anticipate that the initial
public offering price will be between $ and $ per share. We have
applied to list our common stock on the Nasdaq National Market under the
symbol "OPRT."
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Open Port
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
Certain stockholders have granted the underwriters the right to purchase up
to additional shares to cover over-allotments. We will not receive
any proceeds from the sale of these shares in the event the over-allotment
option is exercised.
Deutsche Banc Alex. Brown
Robertson Stephens
Dain Rauscher Wessels
The date of this prospectus is , 2000
<PAGE>
[Inside Front Cover]
[Over the graphical depiction are the words, "IP LaunchPad-- bringing new
enhanced messaging services to your networks" and the sentence "IP LaunchPad
links your existing IP network to the PSTN and wireless networks so that you
can offer enhanced IP services that take advantage of the millions of PSTN and
wireless devices (fax machines, telephones, voicemail systems, mobile/wireless
phones and pagers) around the world."
Graphical representation of a cloud containing the words "IP LaunchPad"
appears in the center of a circle. The upper left quadrant contains the words
"SERVICE PROVIDER NETWORK." A graphical representation of a second cloud,
connected to the center cloud by a line, contains the acronym "PSTN" and
appears in the lower left quadrant. At the lower left perimeter of this cloud
are the words, with arrows leading to and from the cloud, "VOICEMAIL," "FAX"
and "PHONE" next to a graphical depiction of those devices. A graphical
representation of a third cloud, connected to the center cloud by a line,
contains the word "WIRELESS" and appears in the lower right quadrant. At the
lower right perimeter of this cloud are the words, with jagged lines leading to
the cloud, "MOBILE," "PAGER," "PDA" and "VOICEMAIL" each next to a graphical
depiction of those devices. A graphical representation of a fourth cloud,
connected to the center cloud by a line, contains the acronym "IP" and appears
in the upper right quadrant. At the upper right perimeter of this cloud are the
words, with arrows leading to and from the cloud, "WEB," "EMAIL" and "CLIENT"
each next to a graphical depiction of those devices.]
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all the information that you should
consider before investing in our common stock. You should carefully read the
entire prospectus, including "Risk Factors" and the financial statements,
before making an investment decision.
Open Port Technology, Inc.
We design, develop and distribute IP LaunchPad, a carrier-class software
platform that enables our customers to deliver enhanced communication services
over networks based on the Internet Protocol, or IP. Our customers are service
providers, including long distance telecommunication providers, regional Bell
operating companies, competitive local exchange carriers, public telephone and
telegraph companies, and Internet service providers. IP LaunchPad provides
software connections between IP networks and the public switched telephone
network, or PSTN, and wireless networks. These connections allow our customers
to offer enhanced IP services that connect to PSTN and wireless devices such as
fax machines, telephones, voicemail systems, cellular phones and pagers. The
types of enhanced IP services that we enable or intend to enable include
services such as delivering email messages to fax machines, voicemail messages
to email systems, and news alerts to mobile phones.
Our solution enables enhanced IP services to be deployed with the
accountability, tracking and reliability of services delivered over the PSTN,
while taking advantage of the more efficient use of bandwidth, increased
functionality, flexibility and reduced costs offered by IP networks. In
addition to bridging IP networks, the PSTN and wireless networks, our IP
LaunchPad solution addresses other key challenges limiting deployment of
enhanced IP services today.
. We integrate IP LaunchPad into a service provider's network
infrastructure. As a result, we and other application developers can
create applications that integrate with our platform rather than
directly with each service provider's environment. This one-time
integration makes it easier for service providers to offer their
subscribers new enhanced IP services.
. Our solution enables service providers to track and monitor the delivery
of enhanced IP services, allowing them to offer their subscribers a
variety of service level guarantees.
. Our solution enables subscribers to provide self-care through a web
browser interface. For example, a subscriber can sign up for a new
service, adjust user preferences and track the progress of sent
messages. This reduces the service provider's support costs.
. Our solution enables wholesale distribution of enhanced IP services,
such that each new service launched on IP LaunchPad can also be
distributed in a wholesale manner by one service provider to another.
Our objective is to become the leading provider of software that enables
service providers to deliver enhanced IP services. To achieve our objective, we
intend to license IP LaunchPad to service providers that can deploy our
solution over extensive networks. We believe that by achieving widespread
deployment early in the evolution of enhanced IP services, our solution can
become the preferred software for enhanced IP service delivery. We intend to
target these service providers by expanding our direct sales force and by
developing new and existing strategic relationships with technology leaders
such as Cisco Systems and Sun Microsystems. We also intend to extend our
technology leadership by investing significant resources in technology and
product development, and to introduce new enhanced IP services applications
incrementally, as market demand develops. Further, we expect to invest in our
professional service capabilities to enhance our customer relationships and
revenue opportunities.
Our executive offices are located in Chicago, Illinois, and we have regional
offices in San Francisco, California, Denver, Colorado, the Netherlands,
Belgium and France. As of March 31, 2000, we had 114 full-time employees, and
had entered into license agreements with 17 customers, including Bell Atlantic
Data Solutions Group, Inc., Cable and Wireless Japan Ltd., Interpath
Communications, Inc., Qwest Communications Corporation and Tele Danmark A/S.
3
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by Open Port....... shares
Common stock to be outstanding
after this offering.................... shares
Use of proceeds......................... To repay existing indebtedness and
fund the growth and expansion of our
business, and for working capital and
other general corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.. OPRT
</TABLE>
The number of shares to be outstanding upon completion of this offering is
based on shares outstanding as of the date of this prospectus. This number
excludes:
. 7,721,561 shares of common stock issuable upon the exercise of
outstanding stock options under our 1995 Incentive Stock Option Plan and
our 1995 Non-Employee Stock Option Plan at a weighted average exercise
price of $1.31 per share;
. 1,559,272 shares of common stock issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $1.17 per
share; and
. an aggregate of 9,962,325 shares of common stock available for future
grants under our 2000 Equity Incentive Plan, our 2000 Outside Directors
Stock Option Plan and our 2000 Employee Stock Purchase Plan. In
addition, each of these plans contains provisions which increase the
number of shares available for grants in future periods. See
"Management-Employee Benefit Plans."
----------------
We were incorporated in Illinois in January 1993 and will reincorporate in
Delaware upon the closing of this offering. Our principal executive office is
located at 676 North St. Clair Street, Suite 900, Chicago, Illinois 60611, and
our telephone number at that office is (312) 867-5000. Our Web site is located
at www.openport.com. Information contained on our Web site is not part of this
prospectus.
Open Port is a registered trademark in the United States, and Open Port
Technology, Open Port AFD, Open Port Harmony, Open Port Harmony and Design, and
the "Swoop Logo Design" are registered trademarks of Open Port. All other brand
names or trademarks appearing in this prospectus are the property of their
respective holders.
----------------
Unless otherwise indicated, the information contained in this prospectus
assumes:
. all outstanding shares of preferred stock will convert into an aggregate
of 44,195,831 shares of common stock upon the closing of this offering;
. we will reincorporate in Delaware upon the closing of this offering,
which will result in, among other things, our adoption of a new
certificate of incorporation and by-laws; and
. the underwriters will not exercise their over-allotment option to
purchase additional shares of common stock, and no other person will
exercise any other outstanding option or warrant.
4
<PAGE>
Summary Consolidated Financial Data
The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with the audited consolidated financial statements, including the notes
thereto, and other financial information appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Software products........... $ 1,218 $ 892 $ 5,048 $ 3,241 $ 907
Maintenance and professional
services................... 65 517 1,266 1,600 1,443
Hardware products........... 642 867 835 506 --
------- ------- -------- -------- --------
Total revenues............ 1,925 2,276 7,149 5,347 2,350
------- ------- -------- -------- --------
Costs and expenses:
Software products........... 52 131 135 579 667
Maintenance and professional
services................... 70 1,683 2,389 2,707 2,182
Hardware products........... 378 521 430 331 --
Sales and marketing......... 702 3,171 3,889 4,695 6,359
General and administrative.. 1,219 1,872 2,787 2,802 3,294
Research and development.... 642 2,588 3,457 3,358 4,361
------- ------- -------- -------- --------
Total costs and expenses.. 3,063 9,966 13,087 14,472 16,863
Operating loss................ (1,138) (7,690) (5,938) (9,125) (14,513)
Net loss...................... (1,138) (7,609) (6,090) (9,455) (15,860)
Net loss applicable to common
stockholders................. $(1,205) $(8,184) $ (7,320) $(11,271) $(20,714)
Basic and diluted net loss per
share (1).................... $ (0.10) $ (0.68) $ (0.61) $ (0.93) $ (1.64)
======= ======= ======== ======== ========
Shares used in calculation of
basic and diluted net loss
per share (1)................ 12,000 12,000 12,000 12,112 12,637
======= ======= ======== ======== ========
Pro forma basic and diluted
net loss per share (1)....... $ (0.41)
========
Shares used in calculation of
pro forma basic and diluted
net loss per share (1)....... 39,123
========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------
As
Actual Pro Forma (2) Adjusted (3)
-------- ------------- -----------
(unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit)................. $(10,647) $17,353 $
Total assets.............................. 4,705 25,705
Total liabilities......................... 16,702 9,702
Redeemable convertible preferred stock.... 35,542 --
Stockholders' equity (deficit)............ (47,539) 16,003
</TABLE>
- -------
(1) See note 1 of the Open Port consolidated financial statements for an
explanation of the methods used to determine the number of shares used in
computing net loss per share data.
(2) The pro forma amounts reflect the issuance of Series E preferred stock in
January 2000 for proceeds of approximately $25.0 million, the conversion of
$3.0 million of notes payable into shares of Series E preferred stock, the
repayment of $4.0 million of notes payable with proceeds received and the
conversion of all outstanding shares of preferred stock into common stock
upon the closing of this offering.
(3) Adjusted to reflect the pro forma adjustments and the sale of the
shares of common stock offered hereby at an assumed initial public offering
price of $ per share and the application of net proceeds by Open Port,
after deducting underwriting discounts and commissions and estimated
offering expenses.
5
<PAGE>
RISK FACTORS
You should carefully consider the following risks and other information in
this prospectus before you decide to buy our common stock. An investment in our
common stock involves a high degree of risk. Our business, operating results or
financial condition may suffer if any of the following risks is actually
realized. Additional risks and uncertainties not currently known to us may also
adversely affect our business, operating results or financial condition. If any
of these risks or uncertainties is realized, the trading price of our common
stock could decline.
Risks Related to our Business
Our future success depends on the growth of IP network infrastructure.
Our future success depends heavily on IP networks being accepted and widely
used for commerce. If IP network commerce does not continue to grow or grows
more slowly than expected, our business, operating results and financial
condition would be materially adversely affected. Consumers and businesses may
reject IP networks as a viable commercial medium for a number of reasons,
including potentially inadequate network infrastructure, security concerns,
slow development of enabling technologies or insufficient commercial support.
The current IP network infrastructure may not be able to support the demands of
an increasing number of users or the bandwidth requirements of users. In
addition, the effectiveness of IP networks may decline due to delays in the
development or adoption of new standards and protocols designed to support
increased levels of activity and due to increased government regulation. Even
if the required infrastructure, standards, protocols or complementary products
or services necessary to support increasing commercial use of IP networks are
developed, we may incur substantial expenses adapting our solution to changing
or emerging technology.
Acceptance of our products in a new and rapidly changing market is uncertain
and risky.
Since the market for enhanced IP services is new and rapidly changing,
demand and market acceptance for our products are subject to a high level of
uncertainty and risk. Several factors have deterred businesses and consumers
from using enhanced IP services, including security concerns, inconsistent
service quality, increasing IP network traffic and incompatible software
products. The acceptance of enhanced IP services requires a broad acceptance of
new methods of conducting business and exchanging information. Businesses that
already have invested substantial resources in other messaging methods may be
reluctant to adopt a new strategy that may limit or compete with their existing
efforts. In addition, the continued growth in Internet traffic may result in
slower response times which may adversely affect the use and acceptance of
enhanced IP services. The development of enhanced IP services also depends
largely on resolving issues associated with the quality and reliability of
message delivery over IP networks. If the market for reliable enhanced IP
services fails to develop or develops more slowly than expected, it could have
a material adverse effect on our business, operating results and financial
condition.
We depend on commercial acceptance of enhanced IP services.
We currently derive substantially all of our revenues from software that
permits service providers to offer enhanced IP services. As a result, we depend
upon the ability of service providers to establish viable businesses based on
offering enhanced IP services to their subscribers. Our success and the success
of these businesses rely on the commercial acceptance of enhanced IP services
by subscribers. We first delivered IP LaunchPad in September 1999 and to date,
only a limited number of customers have licensed IP LaunchPad.
6
<PAGE>
While enhanced IP services provide features and functions that are not
available over the PSTN, we cannot be certain that subscribers will find
enhanced IP services attractive. If subscriber demand for enhanced IP services
does not develop or develops more slowly than anticipated, it would have a
material adverse effect on our business, operating results and financial
condition.
Our sales growth strategy depends on our service provider customers' ability to
market to their subscribers.
We have limited marketing resources and depend upon the marketing efforts of
our service provider customers to establish a market with their subscribers for
enhanced IP services based on our solution. If subscribers demand enhanced IP
services, we expect service providers to license more products and applications
to support the increased traffic and functionality. Accordingly, our results
will depend in significant part on the efforts and success of our service
provider customers to deploy enhanced IP services based on our software.
Because we have a limited operating history in our current business, we are
facing new risks and uncertainties, which makes evaluating our prospects
difficult.
Although we began operating in January 1993, the increasing popularity and
use of IP networks and the Internet have occurred only recently and, as a
result, the focus of our business changed significantly. We did not begin to
deliver our IP LaunchPad platform until September 1999. As a result, the
operating history of our business in its current form is limited and we are
facing new risks and challenges. You should evaluate our prospects in light of
the risks and uncertainties encountered by companies in the early stages of
development, particularly companies in new and rapidly evolving markets. These
risks include:
. unpredictability of operating results and future revenues;
. unproven market acceptance of our products;
. customer concentration;
. dependence on IP networks, service providers, strategic relationships
and our IP LaunchPad solution;
. increased competition; and
. general economic and market conditions.
We may not be successful in addressing any or all of these risks. Our failure
to address these risks could have a material adverse effect on our business,
operating results and financial condition.
Our future revenues and profits substantially depend on the success of IP
LaunchPad.
Our future revenues and profits substantially depend on the commercial
success of IP LaunchPad. Our sales growth strategy is to target service
providers early in the evolution of enhanced IP services. We cannot be certain
that service providers will choose to offer enhanced IP services over their IP
networks, but even if they do offer such services, the growth of such services
will be fueled by subscribers' demands. Even if enhanced IP services are
adopted by subscribers and service providers, IP LaunchPad may not be accepted
on a timely basis or at all. Failure of IP LaunchPad to achieve market
acceptance for these or any other reasons could have a material adverse effect
on our business, operating results and financial condition.
7
<PAGE>
We may not be able to achieve or sustain growth in our business if service
providers do not purchase additional applications.
Even if our IP LaunchPad and our IP LaunchPad Fax Suite, the first enhanced
IP services application offered as part of our solution, achieve market
acceptance, we cannot be certain that service providers will purchase
additional applications from us to support increased functionality, such as
voice messaging services. If subscriber demand for IP LaunchPad and IP
LaunchPad Fax Suite does not develop or develops more slowly than anticipated,
our ability to increase revenues from licensing additional applications to
support increased functionality will be limited and could have a material
adverse effect on our business, operating results and financial condition.
If we are unable to introduce new products successfully, our business prospects
will be impaired.
The successful implementation of our business model depends on our ability
to introduce certain new products and to introduce these new products on
schedule. We recently entered into an agreement with a service provider to
begin trials of certain applications included in our IP LaunchPad Voicemail
Suite. We also are currently developing and intend to introduce the other
applications included in our IP LaunchPad Voicemail Suite as well as our IP
LaunchPad Wireless Data Suite. We cannot assure you that we will be able to
introduce these products or our other products under development on schedule,
or at all. In addition, early releases of software often contain errors or
defects. We cannot assure you that, despite our extensive testing, errors will
not be found in our new product releases before or after commercial release,
which could result in product re-development costs and loss of, or delay in,
market acceptance. A failure by us to introduce planned products or to
introduce such products on schedule could have a material adverse effect on our
business prospects.
Our customer base is highly concentrated. The loss of one or more of our
significant customers could cause our business to suffer.
Our customer base is highly concentrated. Our top five customers accounted
for 52% of our revenues for the year ended December 31, 1999. One of our
customers accounted for 25% of our revenues for the fiscal year ended December
31, 1999. We do not expect this customer to account for more than 10% of our
revenues for the fiscal year ended December 31, 2000. However, other customers
may account for more than 10% of our revenues in the future and we expect that
a small number of our customers will continue to account for a substantial
portion of our revenues.
In addition, companies in the Internet service and telecommunications
industries have been consolidating, resulting in a limited number of service
providers controlling an increasing portion of IP network traffic. Therefore,
we believe that our revenues will be largely dependent upon product acceptance
by a small number of service providers. If our products and services are not
widely deployed, or if we were to lose any one major customer due to
consolidation or otherwise, our business, operating results and financial
condition could be materially adversely affected. Our ability to increase our
revenues in the future will also depend in part upon our ability to make sales
to new service provider customers. In the event that such sales do not occur,
or if one or more of our service provider customers elects to purchase and
market competing technologies or products, it could have a material adverse
effect on our business, operating results and financial condition.
We typically enter into perpetual license agreements with each of our
service provider customers. We seek to enter into agreements substantially on
the terms set forth in our form of software license agreement, but individual
customer contracts are negotiated and may
8
<PAGE>
include provisions which vary materially from our standard agreement. Our
customer agreements generally do not obligate our customers to license software
or purchase services or maintenance support from us in the future. As a result,
our customer contracts do not provide any assurance of future revenues.
The market in which we compete is highly competitive.
Our IP LaunchPad product line currently competes with other companies
offering software to enable enhanced IP services. We compete directly with a
number of private companies in the fax-over-IP market. Several organizations
offer components that compete with certain components of our solutions and may
become increasingly competitive with us in the future. Our industry is
intensely competitive, rapidly evolving and subject to rapid technological
change. We expect competition to intensify in the future. Many companies that
offer products or services that compete with one or more of our products or
services have greater financial, technical, product development, marketing and
other resources than we have. These organizations may be better known and may
have more customers than we have. We may be unable to compete successfully
against these organizations.
As our product and service offerings evolve and the markets in which we
compete develop, we may in the future face competition from several other types
of organizations, including:
. manufacturers of network hardware and infrastructure devices, that
currently concentrate on communications between devices such as
telephones and fax machines;
. traditional manufacturers of telephony equipment, some of which recently
began manufacturing telephony equipment for IP networks;
. traditional providers of corporate voice, fax and email systems; and
. companies that currently, or may in the future, provide IP messaging
applications individually or through alliances.
In addition, we expect that major software companies and others specializing
in the telephony industry may offer products or services that are competitive
with components of our solutions. We expect our competitors to continue to
improve the performance of their current products and introduce new products or
new technologies. Certain of our current and future competitors may have
greater brand name recognition that could give them an advantage over us in
gaining market share. Successful new product introductions or enhancements by
current or future competitors could reduce the sales or market acceptance of
our products and services, perpetuate intense price competition or make our
products obsolete.
We believe a critical component to success in this market is the ability to
provide a platform solution that enables service provider customers to readily
add enhanced IP applications on an ongoing basis. We also compete on the basis
of product features, particularly the types of enhanced IP services which may
be delivered, product quality and value, deployment expertise and customer
service. To be competitive, we must continue to invest significant resources in
research and development, sales and marketing and customer support. We cannot
be sure that we will have sufficient resources to make these investments or
that we will be able to make the technological advances necessary to be
competitive. Increased competition may result in price reductions, reduced
gross margins and loss of market share. Our failure to compete successfully
against current or future competitors could seriously harm our business,
operating results and financial condition.
9
<PAGE>
We experience long sales and deployment cycles causing us to incur expenditures
prior to recognizing related revenues.
We typically experience long sales and deployment cycles. The sales cycle
varies between customers and generally ranges from one to six months. Because
the licensing of our products generally involves a significant capital
expenditure by the customer, our sales process is subject to lengthy approval
processes and delays. We often devote significant time and resources to a
prospective customer, including costs associated with site visits, product
demonstrations and trials and feasibility studies, without any assurance that
the prospective customer will decide to license our products. We cannot be
certain that the sales cycle for our products will not lengthen in the future.
The deployment cycle also generally varies by customer from one to three
months. The time required to deploy our solution varies significantly depending
on a number of factors, including the needs and skill set of the customer, the
size of the deployment, the complexity of the customer's network environment,
the quantity and degree of hardware configuration necessary to deploy our
solution, the procurement of hardware and PSTN access, and the customer's
installation schedule. During the deployment phase, we continue to devote
significant time and resources to the customer to install and test the products
and train the customer. Our software is generally subject to acceptance testing
once a license agreement has been entered into, and we cannot assure you that
these tests will be successful or that our customers will be obligated to pay
for software under these agreements.
The emerging and evolving nature of the enhanced IP services market may
cause prospective customers to delay their purchase decisions as they evaluate
new technologies and develop and implement new systems. The sales and
deployment process generally becomes more complex as the order size increases,
which may lead to potential delays in receipt of these orders. As a result, our
long and unpredictable sales cycle contributes to the uncertainty of our future
operating results.
We depend on foreign revenue sources which are subject to risks.
We derived approximately 20% of our net revenues from customers outside of
the United States for the year ended December 31, 1999. We expect this
percentage to increase in 2000, as one component of our growth strategy is to
expand our international presence by expanding our direct sales force in Europe
and Asia. Our international business operations are and will be subject to a
number of risks, including:
. difficulties in managing foreign operations, enforcing agreements and
collecting receivables through foreign legal systems;
. burdens of complying with a wide variety of foreign laws, particularly
with respect to intellectual property and license requirements;
. import or export licensing and product certification requirements and
restrictions;
. tariffs, duties, price controls or other restrictions on foreign
currencies or trade barriers imposed by foreign countries;
. potential adverse tax consequences, including restrictions on
repatriation of earnings;
. fluctuations in currency exchange rates;
. impact of recessions in economies outside the United States;
. longer payment cycles;
. fluctuations in the value of foreign currencies; and
. unexpected regulatory, economic or political changes in foreign markets.
10
<PAGE>
The relationship between non-dollar denominated revenues and dollar
denominated expenses may subject us to significant foreign exchange risks. We
cannot be certain that these factors will not have a material adverse effect on
our business, operating results and financial condition.
Export regulations, either in their current form or as may be subsequently
enacted, may limit our ability to distribute our software outside the United
States. The unlawful export of our software could also harm our business.
Although we take precautions against unlawful export of our software, the
global nature of the Internet makes if difficult to effectively control the
distribution of software.
We currently have offices in Belgium, France, the Netherlands and the United
States. We intend to expand the scope of our international operations, which
will require us to enhance our communications infrastructure and may include
the establishment of additional overseas operations. If we are unable to expand
our international operations effectively and quickly, we may be unable to
successfully market, sell, deliver and support our products internationally.
Our revenue growth depends on expanding our direct sales force.
In 1999, we licensed substantially all of our products through our direct
sales force. As of March 31, 2000, we had 16 direct sales representatives. Our
future success depends on increasing the size and scope of our direct sales
force. There is intense competition for personnel, and we cannot guarantee that
we will be able to attract, assimilate or retain additional qualified sales
personnel on a timely basis. Failure to add additional sales representatives
would have a material adverse effect on our business, operating results and
financial condition.
We must establish and maintain strategic relationships in order to successfully
expand our business.
To be successful, we must establish and maintain strategic relationships
with leaders in a number of telephony and Internet industry segments. This is
critical to our success because we believe that these relationships will enable
us to:
. extend the reach of our products and services to a larger number of
service providers;
. develop and deploy new products;
. further enhance the Open Port brand; and
. generate additional revenues.
Entering into strategic relationships is complicated because some of our
current and future strategic allies may decide to compete with us in some or
all of our markets. In addition, we may not be able to establish relationships
with key participants in the telephony industry if we have relationships with
their competitors. Moreover, some potential strategic allies have resisted, and
may continue to resist, working with us until our products and services have
achieved widespread market acceptance. Our agreements with our strategic allies
typically are subject to termination on short notice.
Once we have established strategic relationships, we will depend on our
allies' ability to generate increased acceptance and use of our products and
services. To date, we have established only a limited number of strategic
relationships, and many of these relationships are in the early stages of
development. We have limited experience in establishing and maintaining
strategic relationships with telephony and Internet industry participants. If
we lose any of these strategic relationships or fail to establish additional
relationships, or if our
11
<PAGE>
strategic relationships fail to benefit us as expected, we may not be able to
execute our business plan, and our business will suffer.
Because we have a history of losses and may continue to incur significant
expenses, we cannot be certain that we will achieve profitability.
We incurred net losses of $9.5 million for the year ended December 31, 1998
and $15.9 million for the year ended December 31, 1999. As of December 31,
1999, we had an accumulated deficit of $48.7 million. Our losses resulted from
the significant costs we incurred to develop our products and services and our
limited revenues to date. Because we expect to incur increased product
development, sales and marketing, and administrative expenses as we execute our
business strategy, we will need to generate significant revenues to achieve and
maintain profitability. We expect to continue to incur substantial operating
losses for the foreseeable future. Our operating losses may continue to
increase as we invest in the growth of our business and the implementation of
our business strategy. We cannot be certain that we will achieve profitability.
If we do achieve profitability, we cannot be certain that we can sustain or
increase profitability on a quarterly or annual basis in the future. If we fail
to achieve profitability within the time frame expected by our investors, the
market price of our common stock will be adversely affected.
Our failure to meet significant capital requirements may seriously harm our
business and results of operations.
Our capital requirements in connection with our sales and marketing and
product development activities have been and will continue to be significant.
Our future capital requirements will depend on many factors, some of which are
not within our control. We may need to raise additional funds in the future in
order to fund more rapid expansion, to develop newer or enhanced products, or
to respond to competitive pressures. If additional funds are raised through the
issuance of equity or convertible debt securities, the percentage ownership of
our stockholders will be reduced, stockholders may experience additional
dilution and such securities may have rights, preferences or privileges senior
to those of the holders of our common stock. We cannot assure you that
additional financing will be available on terms favorable to us, or at all.
Technological change could seriously harm our business.
Our future growth depends on our successful and timely introduction of new
products and services in a market that is new and rapidly evolving. The IP
network and enhanced IP services markets are characterized by rapid
technological change, frequent new product introductions embodying new
technologies, changes in customer demands and evolving industry standards that
could render our existing products obsolete and unmarketable. As a result, our
future operating results will depend upon our ability to address the
increasingly sophisticated and varied needs of our customers by developing and
introducing new products and enhancements to our existing software on a cost-
effective and timely basis that keep pace with technological developments and
emerging industry standards. We cannot be certain that we will be successful in
developing and marketing new products and enhancements to our software that
respond to technological change, evolving industry standards or customer needs,
that we will not experience difficulties that could delay or prevent the
successful development, introduction and sale of such products and enhancements
or that such products and enhancements will adequately meet the requirements of
the marketplace and achieve any significant degree of market acceptance. We
have in the past experienced delays in the release dates of new products and
enhancements. Any material delay in the release dates of future products or
enhancements or any failure of such future products or enhancements to achieve
12
<PAGE>
market acceptance when released could have a material adverse effect on our
business, operating results and financial condition. In addition, we cannot be
certain that the introduction or announcement of new product offerings by us or
our competitors will not cause customers to defer or forego purchases of
current versions of our software, which could have a material adverse effect on
our business, operating results and financial condition.
Governmental regulation of IP networks may seriously harm our business.
There are currently few laws and regulations directly applicable to access
to, or commerce over, IP networks. Due to the increasing popularity and use of
IP networks, several legislative and regulatory proposals are under
consideration by federal, state, local and foreign governmental organizations.
It is possible that a number of laws and regulations may be adopted with
respect to IP networks, covering issues such as content, privacy, pricing,
encryption standards, consumer protection, electronic commerce, taxation,
copyright infringement and other intellectual property issues. In addition,
while the Federal Communications Commission does not currently regulate service
providers which do not otherwise qualify as "telecommunications providers"
under the terms of the Telecommunications Act of 1996, the FCC recently stated
its intention to consider whether to regulate voice and fax telephony services
provided over IP networks as "telecommunications." We cannot assure you that
current or new government laws and regulations, or the application of existing
telecommunications and other laws and regulations will not expose us or our
customers to significant liabilities, significantly decrease the use of IP
networks or otherwise cause a material adverse effect on our business,
operating results or financial condition.
We have a limited ability to protect our intellectual property rights, and
others could infringe on or misappropriate our proprietary rights and
information.
Our success and ability to compete are substantially dependent upon our
internally developed technology. While we rely on patent, copyright, trade
secret and trademark law to protect our technology, we believe that factors
such as the technological and creative skills of our personnel, new product
developments, frequent product enhancements and reliable product maintenance
are essential to establishing and maintaining a technology leadership position.
We cannot assure you that our competitors will not develop technologies that
are similar or superior to our technology. We generally enter into agreements
regarding confidentiality and ownership of intellectual property with our
employees, consultants and strategic allies, and generally control access to
and distribution of our software, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use our
products or technology. We have in the past and may in the future alert parties
of potential infringement claims. To date we have not commenced or defended any
litigation relating to the validity of our proprietary rights. Policing
unauthorized use of our products is difficult, and there can be no assurance
that the steps taken by us will prevent misappropriation or infringement of our
technology, particularly in foreign countries where the laws may not protect
our proprietary rights as fully as the laws of the United States. The failure
to protect our intellectual property in a meaningful manner could have a
material adverse effect on our business, operating results and financial
condition. Substantial litigation regarding intellectual property rights exists
and is increasing in the software industry, and we expect that software
products may be increasingly subject to third-party infringement claims as the
number of competitors in our industry segments grows and the functionality of
products in different industry segments overlaps. Litigation may be necessary
in the future to enforce our intellectual property rights, to protect our trade
secrets, or to determine the validity and scope of the proprietary rights of
others.
13
<PAGE>
Our products may infringe the intellectual property rights of others.
We cannot be certain that third parties will not claim that our technology
infringes their rights in products or enhancements to those products. We also
cannot be certain that third parties will not claim that our names or the logos
associated with our products or services infringe their trademark rights. Any
such claims, with or without merit, could be time-consuming to defend, result
in costly litigation, divert management's attention and resources, cause
product shipment delays, require us to change our names or logos, or require us
to develop non-infringing technology or enter into royalty or licensing
agreements to provide non-infringing technology to our customers. A successful
claim of infringement against us could result in a judgment awarding
substantial damages, as well as injunctive or other equitable relief that could
effectively block our ability to provide products or services. In addition, we
cannot assure you that royalty or licensing agreements for any intellectual
property of third parties that might be required for our products or services
will be available on commercially reasonable terms, or at all.
Defects in our products could seriously harm our business.
Products as complex as those we offer frequently contain undetected defects
or failures that may occur at any point in the product's life. Despite testing
by us and our customers, defects or failures may occur in existing or new
products. These problems could result in lost or delayed market acceptance,
lost or delayed revenues, lost market share, diversion of development
resources, injury to our reputation or increased service and warranty costs,
any of which could have a material adverse effect on our business, operating
results and financial condition.
Our reliance on third-party software may result in product defects or delays.
We rely on certain technology that is licensed from certain third parties.
There can be no assurance that the third-party software technology will
continue to be available to us on commercially reasonable terms or at all. The
loss or inability to maintain any of these software licenses could result in
delays or reductions in product shipments until equivalent software could be
identified and licensed or compiled, which could materially adversely affect
our business, operating results and financial condition. Additionally, we
depend on these third parties to deliver reliable products, support these
products, enhance their current products, develop new products on a timely and
cost-effective basis, and respond to emerging industry standards and other
technological changes. The failure of these third parties to meet these
criteria could seriously harm our business, financial condition and results of
operations.
To remain competitive and expand our growth, we need to manage our growth and
expansion effectively.
We are currently experiencing a period of significant expansion. Our
historical growth has placed a significant strain on our managerial,
operational, financial and other resources. We have grown from 74 employees as
of December 31, 1997 to 114 employees as of March 31, 2000. We are required to
manage multiple relationships with various customers, strategic partners,
technology licensors, vendors and other third parties. Managing these
relationships will become more challenging in the event of future growth or an
increase in the number of third party relationships. In addition, we cannot
assure you that our systems, procedures or controls will be adequate to support
our operations or that our management will be able to manage any growth
effectively. To effectively manage our growth, we must continue to improve our
operational, financial and management information systems and to expand, train
and manage our employee base. If we are not able to do so, it could have a
material adverse effect on our business, operating results and financial
condition.
14
<PAGE>
We depend on key personnel to successfully operate our business.
Our future success depends to a significant extent on the performance of our
senior management team and other key employees, many of whom have worked
together for only a short period of time. In addition, because of the technical
nature of our business, our success will also depend on our ability to attract,
integrate, motivate and retain additional highly skilled technical, sales and
marketing personnel. Competition for senior management and technical, sales and
marketing personnel in technology-based businesses is intense. We cannot assure
you that we will be able to retain our senior management team and other key
employees. We do not intend to maintain key-person insurance on any of our
employees following completion of this offering. The loss of any member of our
senior management team or other key employees or our failure to attract,
integrate, motivate and retain additional key employees could have a material
adverse effect on our business, operating results and financial condition.
If we are unable to identify and successfully integrate acquisitions, our
ability to expand our product and service offerings and our customer base may
be limited.
We may seek to acquire complementary businesses or technologies.
Acquisitions involve numerous risks, including difficulties in the assimilation
of the operations, services, products and personnel of the acquired company,
the diversion of management's attention from other business concerns, entry
into markets in which we have little or no direct prior experience and the
potential loss of key employees of the acquired company. The successful
implementation of an acquisition strategy depends on our ability to identify
suitable acquisition candidates, acquire companies on acceptable terms and
integrate their operations and technology successfully with our own. We are
unable to predict whether or when any prospective acquisition candidate will
become available or the likelihood that any acquisition will be completed.
Moreover, in pursuing acquisition opportunities, we may compete for acquisition
targets with other companies with similar growth strategies which may be larger
and have greater financial and other resources than we have. Competition among
potential acquirors could result in increased prices for acquisition targets.
Future acquisitions may result in potentially dilutive issuances of equity
securities, the incurrence of additional debt, the assumption of known and
unknown liabilities, the writeoff of software development costs and the
amortization of expenses related to goodwill and other intangible assets, all
of which could have a material adverse effect on our business, financial
condition, operating results and prospects.
Risks Related to this Offering and our Stock
Because our common stock price is likely to be highly volatile, the market
price of our common stock could drop unexpectedly.
Prior to this offering, there has been no public market for our common
stock. We cannot guarantee that an active trading market will develop or be
sustained or that the market price of our common stock will not decline. Even
if an active trading market develops, the market price of our common stock is
likely to be highly volatile and could fluctuate significantly in response to
various factors, including:
. actual or anticipated variations in our quarterly operating results;
. announcements of technological innovations or new services or products
by us or our competitors;
15
<PAGE>
. timeliness of our introductions of new products;
. changes in financial estimates by securities analysts;
. conditions and trends in the enhanced IP service, wireless service,
Internet, e-commerce and telecommunications markets;
. announcements by us or our competitors of significant acquisitions,
strategic alliances or joint ventures; and
. changes in general market conditions and in the market valuations of
other telecommunications and Internet companies.
Many of these factors are beyond our control. In addition, the stock
markets, especially the Nasdaq National Market, have experienced extreme price
and volume fluctuations that have affected the market prices of equity
securities of many technology companies, and Internet-related companies in
particular. These fluctuations have often been unrelated or disproportionate to
operating performance. The trading prices of many technology companies' stocks
are at or near historical highs. We cannot assure you that these high trading
prices will be sustained. These broad market factors may materially affect the
trading price of our common stock. General economic, political and market
conditions like recessions and interest rate fluctuations may also have an
adverse effect on the market price of our common stock. In the past, following
periods of volatility in the market price for a company's securities,
stockholders have often initiated securities class action litigation. Any
securities class action litigation could result in substantial costs and the
diversion of management's attention and resources.
Our quarterly results are likely to be volatile.
Our limited operating history and the emerging nature of our marketplace
make prediction of future revenues difficult. We believe that our ability to
accurately forecast revenues from sales of our software is also limited because
of the lengthy sales cycle involved in selling our software and the
unpredictability of our customers' service deployment plans. This makes it
difficult to predict the quarter in which sales will occur. Our expense levels
are based, in part, on our expectations regarding future revenues, and our
expenses are generally fixed, particularly in the short term. We may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Any significant shortfall of revenues in relation to our
expectations could negatively affect our quarterly operating results.
Our operating results have varied on a quarterly basis during our limited
operating history and are likely to fluctuate significantly in the future. Our
operating results may be below the expectations of our investors as a result of
a variety of factors, many of which are outside our control. Factors that may
affect our quarterly operating results include:
. fluctuating demand for our products and services;
. size and timing of sales of our products and services;
. our customers' budget constraints and services deployment plans;
. changes in the growth rate of IP network usage;
. market acceptance of enhanced IP services in general and the IP
LaunchPad solution in particular;
. unexpected delays in new product introductions;
. our ability to control costs;
. success in expanding our direct sales force;
16
<PAGE>
. our ability to anticipate and adapt to rapidly changing technology;
. introduction of new products and services by us or our competitors;
. changes in our pricing policies or those of our competitors; and
. general economic conditions and specific economic conditions in the
Internet and related industries.
Any one of these factors could cause our revenues and operating results to vary
significantly in the future. Accordingly, we believe that quarter-to-quarter
comparisons of our operating results are not necessarily meaningful. Investors
should not rely on the results of one quarter as an indication of our future
performance.
Because we will have broad discretion in using the net proceeds of this
offering, we may not use the proceeds to the satisfaction of investors.
Our management will have broad discretion over the allocation of the net
proceeds from this offering as well as over the timing of their expenditure
without stockholder approval. We intend to use the net proceeds from this
offering for the repayment of indebtedness, the growth and expansion of our
business, working capital and other general corporate purposes, including
possible acquisitions of complementary technologies or businesses. We have not
yet determined the amount of net proceeds to be used specifically for each of
the foregoing purposes. It is likely, however, that our spending patterns will
change following this offering. As a result, you will be relying upon
management's judgment with only limited information about our specific
intentions for the use of the net proceeds of this offering. Our failure to
apply these proceeds effectively could cause our business to suffer.
We may have substantial sales of our common stock after this offering.
After this offering, we will have shares of common stock
outstanding. Sales of a substantial number of our shares of common stock in the
public market following this offering or the expectation of such sales could
cause the market price of our common stock to decline. All the shares sold in
this offering will be freely tradable. The remaining shares of common stock
outstanding after this offering will be available for sale in the public market
as follows:
<TABLE>
<CAPTION>
Date of Availability for Sale Number of Shares
----------------------------- ----------------
<S> <C>
, 2000 (180 days after the date of this prospectus)..... 39,607,894
At various times thereafter upon registration under the
Securities Act or the expiration of one-year holding
periods................................................... 17,436,746
</TABLE>
Of these shares, 16,856,361 shares are subject to a limitation on the number
of shares that can be sold in any three-month period. Deutsche Bank Securities
Inc. may, in its sole discretion and at any time without notice, release all or
any portion of the shares subject to lock-up agreements. After this offering,
the holders of approximately 51,595,831 shares of common stock and the holders
of warrants to purchase approximately 1,431,964 shares of common stock will be
entitled to registration rights with respect to these shares until the holders
may sell the shares under Rule 144(k) of the Securities Act. These include
three demand registration rights we granted to the holders of our Series E
preferred stock, which will convert into 17,436,746 shares of common stock upon
completion of this offering, which may first be exercised 120 days after this
offering. We expect such registration rights to be exercised, which would
require us to use our best commercial efforts to cause a registration statement
under the
17
<PAGE>
Securities Act to become effective on the 181st day after the effectiveness of
this registration statement and to keep such registration statement effective
for 180 days. We also intend to file a registration statement after
consummation of this offering to register all shares of common stock that we
may issue under our employee benefit plans. After these registration statements
are effective, these shares will be eligible for resale in the public market
without restriction. For more information, see "Shares Eligible for Future
Sale."
We are subject to anti-takeover provisions which could affect the price of our
common stock.
We will be a Delaware corporation upon completion of this offering. Certain
provisions of Delaware law and of our certificate of incorporation and by-laws
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire control of us. For
example, our certificate of incorporation and by-laws will provide for a
classified board of directors, will limit who may call special meetings of
stockholders, and will allow us to issue preferred stock with rights senior to
those of the common stock without any further vote or action by the
stockholders. In addition, we will be subject to the anti-takeover provisions
of Section 203 of the Delaware General Corporation Law, which could have the
effect of delaying, deterring or preventing a change in control of us. These
provisions could deprive our stockholders of an opportunity to receive a
premium for their common stock as part of a sale of our company or may
otherwise discourage a potential acquiror from attempting to obtain control
from us, which in turn could have a material adverse effect on the market price
of our common stock.
Because our early investors paid substantially less than the initial public
offering price when they purchased their shares, new investors will incur
immediate and substantial dilution in their investment.
Investors purchasing shares in this offering will incur immediate and
substantial dilution in net tangible book value per share because the price
that investors pay will be substantially greater than the net tangible book
value per share of the shares acquired. This dilution is due in large part to
the fact that our earlier investors paid substantially less than the initial
public offering price when they purchased their shares. In addition, there will
be options and warrants for the purchase of approximately 9,280,833 shares of
common stock outstanding upon completion of this offering. To the extent such
options and warrants are exercised in the future, there will be further
dilution to new investors.
Our existing stockholders will have significant voting control over matters
requiring stockholder approval.
On completion of this offering, our executive officers, directors, and their
affiliates will beneficially own, in the aggregate, approximately % of our
outstanding common stock and our existing stockholders will beneficially own,
in the aggregate, approximately % of our outstanding common stock. As a
result, these stockholders will be able to exercise significant control over
all matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions, which may have the effect
of delaying or preventing a third party from acquiring control over us.
We do not intend to pay dividends.
We have never declared or paid cash dividends on our common stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future.
18
<PAGE>
FORWARD LOOKING STATEMENTS
Many of the statements included in this prospectus contain forward-looking
statements and information relating to our company. We generally identify
forward-looking statements by the use of terminology such as "may," "will,"
"could," "should," "potential," "continue," "expect," "intend," "plan,"
"estimate," "anticipate," "believe," or similar phrases or the negatives of
such terms. We base these statements on our beliefs as well as assumptions we
made using information currently available to us. Such statements are subject
to risks, uncertainties and assumptions, including those identified in the
foregoing "Risk Factors," as well as other matters not yet known to us or not
currently considered material by us. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. Given these risks and uncertainties, prospective investors are
cautioned not to place undue reliance on such forward-looking statements.
Forward-looking statements do not guarantee future performance. Recognize these
statements for what they are and do not rely on them as facts. We undertake no
obligation to update or revise any of the forward-looking statements to reflect
new events or circumstances after the date of this prospectus.
USE OF PROCEEDS
We estimate that we will receive approximately $ million in net proceeds
from this offering based on an assumed initial public offering price of $
per share and after deducting the underwriting discounts and commissions and
estimated expenses payable by us. We will not receive any proceeds from the
sale of shares of common stock by the selling stockholders in the event the
underwriters' over-allotment option is exercised.
We expect to use $5.0 million of the net proceeds from this offering to
repay the outstanding balance under our credit facility with CID Mezzanine,
which accrues interest at a rate of 11% annually and is due in July 2001. See
"Certain Transactions--CID Loan and Warrant." We intend to use the balance of
the net proceeds from this offering to fund the growth and expansion of our
business, and for working capital and other general corporate purposes,
including possible acquisitions of complementary technologies or businesses.
However, as of the date of this prospectus, we have no commitment or agreement
relating to any material acquisition or investment. We have not yet determined
the amount of net proceeds to be used specifically for any of the foregoing
purposes except the repayment of indebtedness. Accordingly, management will
have significant flexibility in applying the net proceeds of this offering.
Pending their use, we intend to invest the net proceeds of this offering in
short-term, investment-grade interest-bearing instruments.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future. Any determination in the future to
pay dividends will depend upon our financial condition, capital requirements,
results of operations and other factors deemed relevant by our board of
directors, including any contractual or statutory restrictions on our ability
to pay dividends.
19
<PAGE>
CAPITALIZATION
The following table shows our capitalization as of December 31, 1999 on an
actual, pro forma and pro forma as adjusted basis. The "actual" column reflects
our capitalization as of December 31, 1999 on an historical basis, without any
adjustments to reflect subsequent or anticipated events.
The "pro forma" column reflects our capitalization as of December 31, 1999
with adjustments to reflect our reincorporation in Delaware upon the closing of
this offering, which will result in, among other things, the adoption of a new
certificate of incorporation that provides for authorized capital stock of
million shares of common stock and million shares of undesignated preferred
stock, the issuance of Series E preferred stock in January 2000 for proceeds of
approximately $25.0 million, the conversion of $3.0 million of notes payable
into shares of Series E preferred stock, the repayment of $4.0 million of notes
payable with the proceeds received from the sale of Series E preferred stock
and the conversion of all outstanding shares of preferred stock into common
stock upon the closing of this offering.
The "pro forma as adjusted" column reflects our capitalization as of
December 31, 1999 with the preceding "pro forma" adjustments and adjustments
for the receipt of the estimated net proceeds from our sale of the
shares of our common stock in this offering at an assumed initial public
offering price of $ per share and the application of the net proceeds
therefrom. See "Use of Proceeds."
None of the columns shown below reflects:
. the 3,454,188 shares of common stock issuable as of December 31, 1999
upon the exercise of outstanding stock options under our 1995 Incentive
Stock Option Plan and our 1995 Non-Employee Stock Option Plan at a
weighted average exercise price of $1.30 per share;
. the 619,831 shares of common stock issuable as of December 31, 1999 upon
the exercise of outstanding warrants at a weighted average exercise
price of $0.51 per share; and
. an aggregate of 1,161,688 shares of common stock available as of
December 31, 1999 for future grants under our 1995 Stock Option Plans.
See "Management-Employee Benefit Plans."
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------
Pro Pro Forma
Actual Forma As Adjusted
-------- -------- -----------
(in thousands, except share
and per share data)
<S> <C> <C> <C>
Long-term obligations, less current portion.... $ 4,928 $ 4,928 $
Redeemable convertible preferred stock at
redemption value, par value $.001 per share;
19,925,356 shares authorized, 19,160,293
shares issued and outstanding, actual; no
shares authorized, issued and outstanding, pro
forma and pro forma as adjusted............... 35,542 -- --
Stockholders' deficit:
Common stock, par value $.001 per share;
48,950,441 shares authorized, 12,816,819
shares issued and outstanding, actual;
71,000,000 shares authorized, 57,012,650
shares issued and outstanding, pro forma;
shares authorized, shares
issued and outstanding, pro forma as
adjusted.................................... 13 57
Preferred stock, undesignated par value; no
shares authorized, issued and outstanding,
actual; shares authorized, no shares
issued and outstanding, pro forma and pro
forma as adjusted........................... -- -- --
Additional paid-in capital................... 1,332 64,830
Stock purchase notes receivable.............. (126) (126) (126)
Accumulated other comprehensive loss......... (54) (54) (54)
Accumulated deficit.......................... (48,704) (48,704)
-------- -------- -------
Total stockholders' equity (deficit)......... (47,539) 16,003
-------- -------- -------
Total capitalization........................ $ (7,069) $ 20,931 $
======== ======== =======
</TABLE>
20
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $16.0 million or $0.28 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, after giving effect to
the issuance of our Series E preferred stock in January 2000, divided by the
number of shares of common stock outstanding after giving effect to the
automatic conversion of all outstanding shares of preferred stock upon the
closing of this offering. Dilution in net tangible book value per share
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering and the net tangible book value per
share of common stock immediately after the closing of this offering. After
giving effect to the sale of the shares of common stock offered by us at
an assumed initial public offering price of $ per share, and after
deducting the underwriting discount and estimated offering expenses payable by
us, our pro forma net tangible book value at December 31, 1999 would have been
approximately $ million or $ per share of common stock. 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 new
investors in the common stock. The following table illustrates this dilution on
a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $
Pro forma net tangible book value per share before the
offering...................................................... $0.28
Increase per share 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
after giving effect to the issuance of our Series E preferred stock in January
2000 and this offering, the difference between existing stockholders and new
investors with respect to the number of shares of common stock purchased, the
total consideration paid and the average price per share paid to us for those
shares. The table assumes that the initial public offering price will be $
per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 57,012,650 % $55,642,416 % $0.98
New investors..............
---------- ----- ----------- -----
Total.................... 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
The outstanding share information shown in the table above excludes:
. 3,454,188 shares of common stock issuable as of December 31, 1999 upon
the exercise of outstanding stock options under our 1995 Incentive Stock
Option Plan and our 1995 Non-Employee Stock Option Plan at a weighted
average exercise price of $1.30 per share;
. an aggregate of 619,831 shares of common stock issuable as of December
31, 1999 upon the exercise of outstanding warrants at a weighted average
exercise price of $0.51 per share; and
. an aggregate of 1,161,688 shares of common stock available as of
December 31, 1999 for future grants under our 1995 Stock Option Plans.
See "Management-Employee Benefit Plans."
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data set forth below as of
December 31, 1998 and 1999 and for each of the three years in the period ended
December 31, 1999 are derived from the audited consolidated financial
statements which are included elsewhere in this prospectus. The selected
consolidated financial data as of December 31, 1995, 1996 and 1997 and for each
of the two years in the period ended December 31, 1996 are derived from audited
consolidated financial statements not included in this prospectus. You should
read the selected consolidated financial data shown below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and related notes included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Software products............ $ 1,218 $ 892 $ 5,048 $ 3,241 $ 907
Maintenance and professional
services.................... 65 517 1,266 1,600 1,443
Hardware products............ 642 867 835 506 --
------- ------- ------- -------- --------
Total revenues............. 1,925 2,276 7,149 5,347 2,350
------- ------- ------- -------- --------
Costs and expenses:
Software products............ 52 131 135 579 667
Maintenance and professional
services.................... 70 1,683 2,389 2,707 2,182
Hardware products............ 378 521 430 331 --
Sales and marketing.......... 702 3,171 3,889 4,695 6,359
General and administrative... 1,219 1,872 2,787 2,802 3,294
Research and development..... 642 2,588 3,457 3,358 4,361
------- ------- ------- -------- --------
Total costs and expenses... 3,063 9,966 13,087 14,472 16,863
Operating loss................. (1,138) (7,690) (5,938) (9,125) (14,513)
Net interest and other income.. -- (81) (103) (310) (1,322)
Net loss....................... (1,138) (7,609) (6,090) (9,455) (15,860)
Net loss applicable to common
stockholders.................. $(1,205) $(8,184) $(7,320) $(11,271) $(20,714)
Basic and diluted net loss per
share (1)..................... $ (0.10) $ (0.68) $ (0.61) $ (0.93) $ (1.64)
======= ======= ======= ======== ========
Shares used in calculation of
basic and diluted net loss per
share (1)..................... 12,000 12,000 12,000 12,112 12,637
======= ======= ======= ======== ========
Pro forma basic and diluted net
loss per share (1)............ $ (0.41)
========
Shares used in calculation of
pro forma basic and diluted
net loss per share (1)........ 39,123
========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (at period
end):
Working capital.................. $ 211 $(1,441) $ 213 $ 133 $(10,647)
Total assets..................... 2,998 7,281 8,257 5,644 4,705
Total liabilities................ 1,989 7,109 5,798 5,484 16,702
Redeemable convertible preferred
stock........................... 2,067 9,392 19,022 27,727 35,542
Stockholders' deficit............ (1,058) (9,220) (16,563) (27,567) (47,539)
</TABLE>
- --------
(1) See note 1 to the Open Port consolidated financial statements for an
explanation of the methods used to determine the number of shares used in
computing net loss per share data.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results
of operations should be read together with the financial statements and the
related notes included in another part of this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties.
Overview
We design, develop and distribute IP LaunchPad, a carrier-class software
platform that enables our customers to deliver enhanced communication services
over networks based on the Internet Protocol, or IP. Our customers are service
providers, including long distance telecommunication providers, regional Bell
operating companies, competitive local exchange carriers, public telephone and
telegraph companies, and Internet service providers. IP LaunchPad provides
software connections between IP networks and the public switched telephone
network, or PSTN, and wireless networks. These connections allow our customers
to offer enhanced IP services that connect to PSTN and wireless devices such as
fax machines, telephones, voicemail systems, cellular phones and pagers. The
types of enhanced IP services that we enable or intend to enable include
services such as delivering email messages to fax machines, voicemail messages
to email systems, and news alerts to mobile phones. As of March 31, 2000, we
had entered into license agreements with 17 customers including Bell Atlantic
Data Solutions Group, Inc., Cable and Wireless Japan Ltd., Interpath
Communications, Inc., Qwest Communications Corporation and Tele Danmark A/S.
During the period from our inception on January 27, 1993 through December
31, 1994, we had very limited revenues and our operating activities related
primarily to the development of the initial versions of our software. During
1995 and 1996, we generated revenues primarily from licensing software to
large, multinational corporate enterprises to enable those enterprises to send
faxes across their internal local and wide-area networks, and from related
installation, training and other services. Also in 1996, recognizing the
growing importance of the service provider market, we focused our efforts on
developing and marketing software that enables enhanced IP services to be
provided by service providers. During 1997, we increased our revenues from the
licensing of software to corporate enterprises and began generating revenues
related to the licensing of Harmony NSP, the predecessor of IP LaunchPad, to
service providers. Research and development expenses for Harmony NSP peaked
during 1997.
In 1998, we began to develop our IP LaunchPad platform to better address the
needs of the service provider marketplace. During 1998, our revenues from the
licensing of Harmony fax server products declined as we de-emphasized that
product line and began to market the benefits of IP LaunchPad. During this
period, we also incurred substantial costs for the development of IP LaunchPad.
In September 1999, we announced that we would no longer support our Harmony fax
server and Harmony NSP product lines effective June 30, 2000. We are attempting
to transition customers who purchased our Harmony NSP product to our IP
LaunchPad solution. We began commercial deliveries of IP LaunchPad in September
1999.
Our top five customers totaled 52% of our total revenues in 1999. One
customer accounted for 25% of our revenues for the fiscal year ended December
31, 1999. We do not expect this customer to account for more than 10% of our
revenues for the fiscal year ended December 31, 2000. However, other customers
may account for more than 10% of our revenues in the future and we expect that
a small number of our customers will continue to account for a substantial
portion of our revenues.
23
<PAGE>
We derived approximately 20% of our net revenues from customers outside of
the United States for the year ended December 31, 1999. We expect this
percentage to increase in 2000, as one component of our growth strategy is to
increase our international presence by expanding our direct sales force in
Europe and Asia.
We expect to derive substantially all of our revenues from the licensing of
our IP LaunchPad and related software products and from fees earned on related
maintenance and professional services. We believe that our future operating
results will depend largely on our ability to license our IP LaunchPad software
to service providers and to continue to develop and release applications that
leverage its capabilities. We intend to significantly increase our investment
in research and development, sales and marketing and customer support. We also
expect our software product costs to increase as a result of research and
development expenditures on our voice and wireless product suites in 2000. We
expect to continue to incur substantial operating losses for the foreseeable
future as we execute our business strategy. We have incurred significant losses
since our inception, and as of December 31, 1999, had an accumulated deficit of
approximately $48.7 million.
In a given period, overall operating profits are primarily impacted by the
size of individual software license sales, the mix of maintenance and other
services sold, the relative mix of revenues from software products versus
maintenance and other services and our level of research and development
expenditures. We typically realize higher profit margins on sales of software
licenses as compared to sales of maintenance and professional services.
Our limited operating history and the emerging nature of our marketplace
make predicting our future revenues difficult. We believe that forecasting
revenues from sales of our software will be difficult because of the lengthy
sales cycle involved in selling our software and the unpredictability of our
customers' service deployment plans. Our expense levels are based, in part, on
our expectations regarding future revenues, and our expenses are generally
fixed, particularly in the short term. We may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. Any
significant shortfall of revenues in relation to our expectations could cause
significant declines in our quarterly operating results.
We had 114 full-time employees as of March 31, 2000 and intend to hire
additional employees in the future. Hiring additional employees places
significant demands on our management and operational resources. To manage this
growth and increased demand, we must be able to hire, train, manage and retain
our employees.
Options were granted during early 2000 at exercise prices which were the
best estimate as to the fair value of the underlying common stock on the date
of grant. Subsequent to the grant date, management concluded that for these
grants the estimates may not have fully reflected the impact of changing
business conditions. Future earnings will incur a charge associated with the
difference between the exercise price and the deemed fair market value
amortized over the four year vesting period.
24
<PAGE>
Results of Operations
The following table sets forth for the periods indicated certain items from
our consolidated financial statements expressed as a percentage of total
revenues.
<TABLE>
<CAPTION>
As a Percentage of Total
Revenues
--------------------------------
Fiscal Year Ended
December 31,
--------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Software products......................... 63% 39% 71% 61% 39%
Maintenance and professional services..... 3 23 18 30 61
Hardware products......................... 34 38 11 9 --
--- ---- --- ---- ----
Total revenues.......................... 100 100 100 100 100
--- ---- --- ---- ----
Costs and expenses:
Software products......................... 3 6 2 11 28
Maintenance and professional services..... 4 74 34 51 93
Hardware products......................... 20 23 6 6 --
Sales and marketing....................... 36 139 54 88 271
General and administrative................ 63 82 39 52 140
Research and development.................. 33 114 48 63 186
--- ---- --- ---- ----
Total costs and expenses................ 159 438 183 271 718
Operating loss.............................. (59) (338) (83) (171) (618)
Net interest and other income............... -- 4 (1) (6) (56)
Net loss.................................... (59)% (334)% (85)% (177)% (675)%
=== ==== === ==== ====
</TABLE>
Year ended December 31, 1999 Compared to Year ended December 31, 1998
Revenues
Software Products. Our software products revenues decreased by $2.3 million
or 72% from $3.2 million in 1998 to $900,000 in 1999. This decrease was
attributable to the discontinuance of our Harmony NSP and Harmony Fax Server
products and our decision to focus solely on the development of our IP
LaunchPad solution during the first half of 1999. This decrease was partially
offset by $540,000 of revenue related to the settlement of a software license
dispute. Total shipments of IP LaunchPad in 1999 aggregated $338,000, of which
$268,000 was deferred into 2000.
Maintenance and Professional Services. Our maintenance and professional
services revenues decreased by $157,000 or 10% from $1.6 million in 1998 to
$1.4 million in 1999. This decrease was also attributable to the discontinuance
of our Harmony NSP and Harmony Fax Server products, which resulted in a
decrease in the number of customers purchasing maintenance and professional
services on these product lines.
Hardware Products. Our hardware products revenues decreased by 100% from
$506,000 in 1998 to $0 in 1999. This decrease was attributable to our decision
during 1998 to no longer sell and support hardware products.
Operating Expenses
Software Products. Software product costs are comprised of amortization of
capitalized software development costs and royalties relating to technology
licensed from third-party vendors that has been incorporated into our software
products. Our costs of software products increased by $88,000 or 15% from
$579,000 in 1998 to $667,000 in 1999. This increase was due to an increase in
amortization of capitalized software development costs relating to the
development of our IP LaunchPad platform.
25
<PAGE>
Maintenance and Professional Services. Costs relating to maintenance and
professional services primarily include personnel and other expenses incurred
to provide those services. Our costs of maintenance and professional services
decreased by $525,000 or 19% from $2.7 million in 1998 to $2.2 million in 1999.
This decrease relates to our decision to discontinue supporting our Harmony
products.
Hardware Products. Our cost of hardware products decreased by 100% from
$331,000 in 1998 to $0 in 1999. This decrease was due to our decision to no
longer include hardware products as part of our solution.
Sales and Marketing. Sales and marketing expenses consist primarily of costs
relating to personnel including commissions, marketing programs, travel and
entertainment and the maintenance of sales offices. Our costs of sales and
marketing increased by $1.7 million or 35% from $4.7 million in 1998 to $6.4
million in 1999. The increase in these costs was attributable to our decision
to grow our direct sales force worldwide as well as an increase in our
marketing initiatives associated with the introduction of IP LaunchPad to
increase our name and product recognition in the marketplace.
General and Administrative. General and administrative expenses primarily
consist of executive and administrative personnel costs, professional fees,
facilities rent, depreciation and general office expenses. Our general and
administrative costs increased by $492,000 or 18% from $2.8 million in 1998 to
$3.3 million in 1999. This increase was primarily attributable to an increase
in our allowance for doubtful accounts.
Research and Development. Research and development expenses consist
primarily of personnel costs, consulting services and other expenses incurred
in the development and enhancement of our software products. We expense most of
our research and development costs as they are incurred, although we do
capitalize certain software development costs. Our research and development
costs increased by $1.0 million or 30% from $3.4 million in 1998 to $4.4
million in 1999. This increase was attributable to the continuing increase in
personnel costs and consulting services related to the further development of
our IP LaunchPad product and related applications.
Net Interest and Other Income
Net interest and other income is primarily comprised of interest due on
outstanding notes payable and capital lease obligations, as well as the
amortization of the estimated fair value of warrants granted in connection with
the issuance of notes payable and capital lease arrangements over the term of
the respective borrowing arrangements, offset by interest earned on our
outstanding cash balance. Total interest and warrant amortization expense
aggregated $1.4 million in 1999 compared to $336,000 in 1998. The increase was
primarily attributable to additional capital lease borrowings and the issuance
of additional notes payable and related warrants between June 1998 and December
1999 and, to a lesser extent, a general decrease in our cash position from 1998
to 1999.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues
Software Products. Our software products revenues decreased by $1.8 million
or 36% from $5.0 million in 1997 to $3.2 million in 1998. This decrease was
primarily attributable to a decrease in revenues relating to our Harmony fax
server product. Sales efforts relating to the Harmony fax server product
decreased substantially during 1998 as we shifted our focus away from legacy
customers toward the service provider market.
26
<PAGE>
Maintenance and Professional Services. Our maintenance and professional
services revenues increased by $334,000 or 26% from $1.3 million in 1997 to
$1.6 million in 1998. The increase in revenues was due to an increase in the
number of Harmony NSP customers who purchased maintenance.
Hardware Products. Our hardware products revenues decreased by $329,000 or
39% from $835,000 in 1997 to $506,000 in 1998. The decrease was due to our
decision in the second half of 1998 to not include hardware products as part of
our solution.
Operating Expenses
Software Products. Our costs of software products increased by $444,000 or
329% from $135,000 in 1997 to $579,000 in 1998. This increase was due to an
increase in amortization of capitalized software development costs relating to
updated versions of existing software products as well as increased royalties
on third-party technologies integrated into newer versions of our software
products.
Maintenance and Professional Services. Our maintenance and professional
services costs increased by $318,000 or 13% from $2.4 million in 1997 to $2.7
million in 1998. The increase was due to an increase in staffing to support
both our enterprise and service provider customers.
Hardware Products. Our costs of hardware products decreased by $99,000 or
23% from $430,000 in 1997 to $331,000 in 1998. The decrease was due to our
decision in the second half of 1998 not to include hardware products as part of
our solution.
Sales and Marketing. Our sales and marketing costs increased by $806,000 or
21% from $3.9 million in 1997 to $4.7 million in 1998. The increase in these
costs was attributable to an increase in the size of our direct sales force and
an increase in our marketing initiatives to increase our name recognition in
the marketplace in the second half of 1998.
General and Administrative. Our general and administrative costs were
approximately $2.8 million for each of the years ended December 31, 1997 and
1998. Increased legal fees relating to debt financings and contract
administration in 1998 was offset by a decrease in personnel expenses from 1997
to 1998.
Research and Development. Our research and development costs decreased by
$99,000 or 3% from approximately $3.5 million in 1997 to $3.4 million in 1998.
The slight decrease was attributable to a reduction of third-party consultant
costs of $700,000, partially offset by increased personnel costs of $585,000.
Net Interest and Other Income
Total interest and warrant amortization expense aggregated $336,000 in 1998
compared to $182,000 in 1997. The increase was due to additional capital lease
borrowings and the issuance of additional notes payable and related warrants
between June 1998 and September 1998.
Quarterly Results of Operations
The following table sets forth certain unaudited quarterly statements of
operations data for each of the eight quarters ended December 31, 1999. This
information has been derived from our unaudited consolidated financial
statements which, in management's opinion, have been prepared on a basis
consistent with the audited consolidated financial statements, and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information for the quarters presented. You should
read this information in conjunction with our audited financial statements and
the notes thereto included elsewhere in
27
<PAGE>
this prospectus. The operating results for any quarter are not necessarily
indicative of the operating results for a full year or for any future period
and there can be no assurance that any trend reflected in such results will
continue in the future.
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------------------
Dec. Dec.
March 31, June 30, Sept. 30, 31, March 31, June 30, Sept. 30, 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- ------- --------- -------- --------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software products..... $1,735 $ 1,125 $ 174 $ 207 $ 26 $ 185 $ 68 $ 628
Maintenance and
professional
services............. 378 493 340 389 359 343 344 397
Hardware products..... 115 353 38 -- -- -- -- --
------ ------- ------- ------- ------- ------- ------- -------
Total revenues....... 2,228 1,971 552 596 385 528 412 1,025
------ ------- ------- ------- ------- ------- ------- -------
Costs and Expenses:
Software products..... 47 51 174 307 129 95 98 345
Maintenance and
professional
services............. 600 647 702 758 502 497 493 690
Hardware products..... 77 210 22 22 -- -- -- --
Sales and marketing... 777 917 1,454 1,547 1,512 1,795 1,759 1,293
General and
administrative....... 602 685 882 633 682 788 985 839
Research and
development.......... 649 929 826 954 1,064 854 1,165 1,278
Total costs and
expenses............ 2,752 3,439 4,060 4,221 3,889 4,029 4,500 4,445
------ ------- ------- ------- ------- ------- ------- -------
Operating loss........ $ (524) $(1,468) $(3,508) $(3,625) $(3,504) $(3,501) $(4,088) $(3,420)
====== ======= ======= ======= ======= ======= ======= =======
</TABLE>
Liquidity and Capital Resources
At March 31, 2000, our principal source of liquidity was approximately $14.3
million in cash and cash equivalents. Our principal sources of funds since
inception have been private sales of preferred stock, the issuance of debt, and
capital lease facilities.
Net proceeds from sales of preferred stock from our inception through March
31, 2000 totaled approximately $53.0 million, including sales of approximately
$7.0 million in 1998, $3.0 million in 1999 and $28.0 million (including $3.0
million of notes payable converted into preferred stock) in January 2000. We
have used these capital resources to fund operating losses, working capital,
capital expenditures, and the retirement of debt.
In May 1999, we entered into a term loan arrangement, which allowed for
borrowings of up to $3.0 million for working capital needs. We amended this
arrangement in August 1999 to increase the borrowing capacity to $4.0 million.
As of December 31, 1999, $4.0 million was outstanding under this term loan. In
January 2000, we repaid the $4.0 million outstanding under this loan.
In addition, in September 1998, we entered into a mezzanine debt facility
that allowed for borrowings of up to $3.0 million for working capital needs. In
April 1999, we amended this mezzanine debt facility to increase the borrowing
capacity to $5.0 million for working capital needs, which amount was
outstanding as of December 31, 1999. We intend to repay the outstanding balance
under this mezzanine debt facility with a portion of the net proceeds from this
offering.
As of December 31, 1999, we had $3.0 million of indebtedness outstanding
under a bridge facility. These bridge notes were converted into preferred stock
in connection with our issuance of $28.0 million of Series E preferred stock in
January 2000.
28
<PAGE>
Net cash used in operating activities was $2.9 million, $10.7 million and
$10.7 million in 1997, 1998, and 1999, respectively. Net cash used in operating
activities in each of these periods was primarily due to net losses, and was
partially offset by a decrease in accounts receivable in 1997. Net cash used in
investing activities was $759,000, $1.0 million and $1.7 million in 1997, 1998
and 1999, respectively. Net cash used in investing activities in all such
periods was primarily related to purchases of property and equipment and
capitalization of additional software development costs. Net cash provided by
financing activities was $7.0 million, $8.8 million and $12.0 million in 1997,
1998, and 1999, respectively. Net cash provided by financing activities in all
such periods resulted primarily from the issuance of preferred stock and notes
payable.
We maintain allowances for uncollectible accounts to reflect our accounts
receivable balances at net realized value. The adequacy of the allowance is
determined by periodic reviews of individual customer accounts. The allowances
for uncollectible accounts at December 31, 1998 and December 31, 1999, were $0
and $319,000, respectively.
As of December 31, 1999, we had an accumulated deficit of $48.7 million and
available net operating loss carryforwards totaling $39.0 million, which expire
between 2010 and 2018. See note 7 to our consolidated financial statements
included elsewhere in this prospectus. Our ability to use these operating loss
carryforwards to offset future taxable income depends on a variety of factors,
including possible limitations on usage under Internal Revenue Code Section
382. Section 382 imposes an annual limitation on the future utilization of
operating loss carryforwards due to changes in ownership resulting from the
issuance of common shares, stock options, warrants and preferred shares.
We believe that the net proceeds from this offering, together with our
current cash, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. However, we
may need to raise additional funds in future periods through public or private
financings, or other arrangements. We cannot assure you that such additional
financings, if needed, will be available on attractive terms, if at all. The
failure to raise additional capital could have a material adverse effect on our
business, operating results and financial condition. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
our then-current stockholders would be reduced. Furthermore, such equity
securities might have rights, preferences or privileges senior to those of our
common and preferred stock.
Quantitative and Qualitative Disclosures About Market Risk
We believe that our exposure to market risks for changes in interest and
currency rates is not significant. Our investments generally are limited to
highly liquid instruments with maturities of three months or less. All of our
transactions with international customers and suppliers are denominated in U.S.
dollars. Substantially all of our interest-bearing debt will be paid off with
the net proceeds of this offering.
Recently Issued Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and hedging activities and
requires recognition of all derivatives as assets or liabilities in the
statement of financial position and measurement of those instruments at fair
value. The statement, as amended, is effective for fiscal years beginning after
June 15, 2000. Since we do not have any derivative instruments or hedging
activities, we do not expect SFAS No. 133 to have a material effect on our
financial results.
29
<PAGE>
BUSINESS
We design, develop and distribute IP LaunchPad, a carrier-class software
platform that enables enhanced communication services to be deployed over
networks based on the Internet Protocol, or IP. The types of enhanced IP
services that we enable or intend to enable include services such as delivering
email messages to fax machines, voicemail messages to email systems, and news
alerts to mobile phones. Our solution enables these enhanced IP services to be
deployed with the accountability, tracking and reliability of services
delivered over the public switched telephone network, or PSTN, while taking
advantage of the more efficient use of bandwidth, increased functionality,
flexibility and reduced costs offered by IP networks. In addition, IP LaunchPad
provides software interfaces between IP networks and the PSTN and wireless
networks, which enable service providers to offer enhanced IP services that
connect to PSTN and wireless devices such as fax machines, telephones,
voicemail systems, mobile phones and pagers. Our customers are service
providers including long distance telecommunication providers, regional Bell
operating companies, competitive local exchange carriers, public telephone and
telegraph companies, and Internet service providers. To date we have entered
into license agreements with 17 customers, including Bell Atlantic Data
Solutions Group, Inc., Cable and Wireless Japan Ltd., Interpath Communications,
Inc., Qwest Communications Corporation and Tele Danmark A/S.
We designed IP LaunchPad to provide an IP-based messaging infrastructure
that supports various types of enhanced IP services. The IP LaunchPad platform
facilitates message broadcasting, bridges incompatible messaging systems, and
enables service providers to offer different levels of service to subscribers
based upon their priority. We also develop and provide enhanced IP services
applications such as IP LaunchPad Fax Suite, which we commercially released in
the third quarter of 1999. In addition, we currently offer IP LaunchPad
Software Development Kit/Application Programmers Interface, which can be used
by service providers or third parties to develop their own custom applications.
We recently entered into an agreement with a service provider to begin trials
of certain applications included in our IP LaunchPad Voicemail Suite. Also, we
currently are developing and intend to introduce additional applications to be
included in our IP LaunchPad Voicemail Suite as well as our IP LaunchPad
Wireless Data Suite.
Industry Overview
Due to deregulation, industry consolidation and the advent of new
technologies, including the Internet, the market for communications has grown
and the number of service providers has increased. As the number of service
providers has increased, competition among them has intensified, and their
profit margins generally have been reduced. To differentiate themselves,
service providers have attempted to compete on factors other than price.
Traditionally, service providers delivered basic PSTN and wireless network-
based services such as dial-tone and call waiting. Recently, a new class of
service providers began to offer basic IP network-based services such as dial-
up Internet access and web site hosting. We believe service providers will
increasingly compete based on the types of enhanced services they offer to
their subscribers. These enhanced services are designed to enable people to
receive and deliver voicemail, email and wireless data conveniently using a
variety of devices. For example, a business person could specify that email
messages be converted and delivered as voicemail to his or her mobile phone,
providing convenience and increased responsiveness to his or her customers.
These enhanced services offer service providers the opportunity to gain new
subscribers, retain existing subscribers and increase revenue per subscriber.
30
<PAGE>
The PSTN, wireless and IP networks can each be used to provide enhanced
services. Links among these networks offer the potential to enable more and
increasingly sophisticated enhanced IP services. Historically, attempts to
provide enhanced services that work across each of these networks have proven
difficult and have not been commercially successful. Instead, service providers
have generally been limited to delivering enhanced services such as voicemail
within each network, subject to the advantages and disadvantages of each
network.
The PSTN has the largest deployed network infrastructure in the world, and
its advantages and disadvantages are well known. The PSTN is a circuit-switched
network that, for each communication, reserves a dedicated circuit with fixed
bandwidth that remains allocated during the entire communication. Maintaining a
dedicated circuit allows for short, predictable transmission delays, high
quality and reliability. However, since the PSTN dedicates a fixed amount of
bandwidth to each communication, it uses bandwidth inefficiently, making it
less well suited to data intensive communication. Another advantage of the PSTN
is its extensive management and control facilities that permit traditional
telecommunications companies to determine whether a communication has reached
its destination and provide the ability to track, account and bill for
individual subscribers. However, the PSTN comprises thousands of switching
points, often called central offices, or COs, each of which must usually be
upgraded before a new service can be offered across the network. As a result,
it is time-consuming and costly to deploy new communication services. Also,
because the PSTN is highly regulated, it is costly for long distance
communications.
Wireless networks are growing rapidly and can be deployed by service
providers with significantly less investment than the PSTN. Wireless networks
offer users the advantages of increased flexibility and convenience due to the
mobility of wireless devices. However, wireless devices currently are not
capable of displaying large amounts of data and the cost of transmitting
wireless communications is generally higher and the quality and reliability
generally are lower than comparable transmissions over the PSTN. Further,
wireless networks comprise many base stations, each of which must usually be
upgraded before a new service can be offered.
IP networks are packet-switched networks that divide a communication into
discrete packets for transmission. The multiple packets that make up a single
communication move independently of each other and may take different routes
through IP networks before being reassembled at the destination. Each
communication uses only the bandwidth necessary to send its packets and as a
result, IP networks use bandwidth more efficiently than the PSTN and wireless
networks.
IP networks also enable flexible management and provisioning of services.
While IP networks also contain many switching points, new services can be
installed at one location in the core of an IP network and made immediately
available to all subscribers. This is significantly less expensive and time-
consuming than in the PSTN and wireless networks, where the new service has to
be deployed in each CO or wireless base station. IP networks also allow
subscribers to minimize long distance charges by transporting traffic across
unregulated IP backbones instead of the regulated PSTN or wireless networks.
However, IP networks also have limitations. The discrete packets of an IP
network have to be reordered and reassembled, for example, causing
unpredictable delays in transmissions. To date, IP networks have also lacked
the quality, reliability, tracking, and accountability associated with
traditional PSTN services, such as voice and fax.
Because IP networks carry large amounts of data efficiently and have other
transmission advantages over the PSTN and wireless networks, we believe service
providers will choose to deliver enhanced services using the IP network as a
backbone. However, because PSTN and wireless devices are familiar and simple to
use, and users have come to rely upon the phone
31
<PAGE>
numbers attached to them, we also believe service providers will want to
deliver these enhanced services to and from the IP network to subscribers who
use the PSTN and wireless networks. Therefore, service providers must be able
to deliver these enhanced IP services to the millions of subscribers who use
PSTN and wireless devices such as telephones, wireless phones, fax machines,
pagers and wireless personal data assistants, or PDAs.
In order to commercially deliver enhanced IP services to all network
subscribers, we believe that service providers must address the following key
issues:
. Eliminate Barriers between Networks. For the foreseeable future, we
believe traditional PSTN and wireless network devices will provide one
of the primary means for subscribers to take advantage of enhanced IP
services. To date, commercial acceptance of enhanced IP services has
been restrained because subscribers do not want to change or add to
their existing email addresses and PSTN and wireless phone numbers.
Accordingly, service providers planning to offer enhanced IP services
must have the ability to bridge these networks, enabling users to retain
their existing email addresses and phone numbers while still enjoying
the benefits of IP networks.
. Enable New Services Quickly. Service providers must deploy services
quickly to increase their revenues, retain customers and build their
competitive position. When adding a new service to a service provider's
network, the application must be integrated with existing billing, user
provisioning and network management systems, as well as the network
hardware communications infrastructure. In addition, service providers
often desire to customize applications and differentiate their services
from those offered by their competitors. As a result, deploying new
applications on a service provider's network can be time consuming and
expensive.
. Provide Tiered Service Level Offerings for IP Communications. We believe
many subscribers are willing to compensate the service provider for an
"elite" level of service, for example, rather than "basic" service.
However, today there are no mechanisms in an IP network that allow
service level agreements, or SLAs, for enhanced IP services. To provide
these different levels of service, a service provider must have the
capability to create SLAs for its subscribers, and then have a system
that ensures the services are being delivered according to the SLAs.
. Enable Subscriber Self-Care. Subscriber care activities for enhanced IP
services include provisioning a new service, adjusting preferences and
providing message delivery status. If these subscriber care activities
are performed by service providers, it will be at a significant cost. To
minimize the costs associated with subscriber care and increase
subscriber satisfaction and loyalty, service providers need a mechanism
that enables subscribers to perform these activities for themselves.
. Support Service Wholesaling Capabilities. Today many service providers
wholesale basic IP services over their networks to other service
providers that then brand the service as their own and market it to
their subscribers. As a typical example in use today, one service
provider may have an extensive network infrastructure, including
thousands of dial-up Internet access lines. Another service provider,
who may own some network components, can resell the access lines of the
former service provider, using its own brand name to offer dial-up
Internet access to its subscribers. To take advantage of this powerful
distribution model, enhanced IP services must be designed to allow
wholesaling from one service provider to another.
We believe that service providers are seeking software solutions to help
them address these key issues and to deliver enhanced IP services, enabling
them to increase their revenues by gaining new subscribers, retaining existing
subscribers and increasing their revenue per subscriber.
32
<PAGE>
The Open Port Solution
We have designed and developed IP LaunchPad, a carrier-class software
platform that enables enhanced IP services to be deployed over IP networks with
connections to the PSTN and wireless networks. Our solution allows service
providers to deliver enhanced IP services to their subscribers with the
accountability, tracking and reliability of PSTN systems while taking advantage
of the more efficient use of bandwidth, increased functionality, flexibility
and reduced costs offered by IP networks. Our customers can use our solution to
create and realize new revenue opportunities by offering messaging services
across a combination of the PSTN, IP and wireless networks that previously
could be offered only over each network individually. In addition, our
customers can use our solution to offer enhanced IP services that are not
currently possible on the PSTN and traditional wireless networks.
Our comprehensive messaging solution allows service providers to offer
enhanced IP services by providing an interface between IP networks and
traditional PSTN and wireless devices, and by addressing the five key
challenges limiting deployment of those services today:
. IP LaunchPad Bridges Dissimilar Networks and Messaging Systems. Our
solution provides connections enabling traditional PSTN and wireless
devices to use an enhanced IP services infrastructure. For example, a
voicemail user can specify that messages be forwarded to email. The
creator of financial reports can submit the list of recipients to IP
LaunchPad, which is designed to enable delivery of the message to some
of those recipients via fax, to others via voicemail, to others in their
home email system, and to still others via wireless phones capable of
displaying that information. Additionally, existing voicemail systems,
departmental fax servers, and corporate-wide email servers can be
connected as if they were IP devices.
. IP LaunchPad Enables New Services Quickly. We integrate with a service
provider's billing, user provisioning, network management and network
hardware communications infrastructure. As a result, developers of
applications that provide enhanced IP services can create applications
that will integrate with our platform rather than directly with each
service provider's environment. Since service providers only need to
integrate with our solution rather than with each application
separately, they can more quickly and easily offer their subscribers new
enhanced services, which are created by Open Port and third party
application developers. The flexibility of our software suites, combined
with application programmer interfaces, or APIs, also enables service
providers to customize the applications and differentiate their services
from those offered by competitors.
. IP LaunchPad Allows Service Providers to Offer Tiered Service Contracts
for Enhanced IP Services. Our solution allows service providers to
guarantee, track and monitor the delivery of enhanced IP services,
enabling them to conform to SLAs with each subscriber. In addition,
service providers can offer their subscribers a variety of premium
service levels based on the subscriber's needs. For example, a
subscriber distributing information, such as financial reports, may
offer the reports to high-priority subscribers first.
. IP LaunchPad Allows Service Providers to Enable Subscriber Self-
Care. Our solution allows subscribers to provide subscriber care
activities for themselves through a web browser interface, without
involving the service provider's personnel. Additionally, each new
service launched on IP LaunchPad can have subscriber care controls
contained in a web browser interface. For example, a subscriber can sign
up for a new enhanced service, quickly adjust user preferences and track
the progress of sent messages using a web browser interface.
33
<PAGE>
. IP LaunchPad Enables Service Providers to Reach Subscribers through
Wholesale Distribution. Our solution enables wholesale distribution of
enhanced IP services, such that each new service launched on IP
LaunchPad can also be distributed in a wholesale manner by one service
provider to another. For example, larger service providers have the
opportunity to realize additional revenues by wholesaling enhanced
services to service providers who do not own a network infrastructure.
Strategy
Our objective is to become the leading provider of software that enables
service providers to deliver enhanced IP services. Key elements of our strategy
include:
. Targeting our Service Provider Networks. We believe that by delivering
our solution to service providers early in the evolution of enhanced IP
services, we achieve a number of strategic advantages. These advantages
include being the first enhanced communications solution offered by
service providers. By becoming the enabling infrastructure technology
most widely used in service providers' systems for enhanced IP services,
we believe that we will be well-positioned to offer new applications
that leverage the capabilities of the IP LaunchPad platform.
. Leveraging our Direct Sales Model. We intend to aggressively target the
service provider market through our direct sales force. We plan to
expand our direct sales force in the European and Asian markets.
Further, we plan to continue to leverage our relationships with global
service providers that wholesale their network services. We believe that
these customers will sell services enabled by our software solutions to
their service provider customers, including Internet service providers,
regional Bell operating companies, competitive local exchange carriers
and local service providers.
. Introducing our Enhanced IP Services Applications Incrementally. We
believe we can more easily achieve acceptance of the IP LaunchPad
platform by offering enhanced IP services applications incrementally,
rather than by offering multiple applications for services not yet in
demand by service providers or their subscribers. Fax-related services
are the first type of enhanced IP services enabled by our solution. As
enhanced IP services and the IP LaunchPad platform achieve greater
market acceptance, we intend to incrementally introduce more advanced
applications and functionality. In line with this strategy, we are
currently developing and intend to introduce a suite of voice messaging
services as well as a suite of services directed to wireless data
devices.
. Extending our Technology Leadership. We intend to continue to invest
significant resources in technology and product development. We also
intend to ensure that the Open Port solution can serve as a platform for
third-party applications. We plan to support a wide variety of IP
messaging types and enhanced services by further enhancing our platform
and developing new messaging applications.
. Leveraging our Strategic Relationships with Technology Leaders. In order
to facilitate the acceptance of our solution and enhance our marketing
and distribution efforts, we have established strategic relationships
with certain technology industry leaders such as Ascend (now a
subsidiary of Lucent), Cisco, Microsoft, Optus, Sun Microsystems and
3Com. Through these relationships, we have accelerated the market
acceptance of our products by integrating our technology with our
strategic allies' products and by forming joint marketing arrangements.
We intend to further develop and expand our strategic relationships.
. Enhancing our Solutions with Professional Services. We have developed
internal expertise that enhances the value of our solutions and
strengthens our customer relationships through customer support. Our
customer support personnel work with
34
<PAGE>
our customers to identify their optimal solutions, provide expert
consultation on system development and deployment, manage the
implementation of the solutions, and design customized training plans.
We intend to further invest in our professional service capabilities in
order to enhance our customer relationships and revenue opportunities.
Products
We design, develop and distribute IP LaunchPad, a carrier-class software
platform that enables enhanced IP services. We offer or are developing software
applications designed to enable a wide variety of enhanced IP services that
fall into three broad categories: fax services, voice messaging services and
wireless data services. All of our enhanced IP services applications are
enabled by the IP LaunchPad platform's core capabilities.
We currently offer IP LaunchPad Fax Suite, which we commercially released in
the third quarter of 1999. IP LaunchPad Fax Suite supports fax-related enhanced
IP services. We also currently offer IP LaunchPad Software Development
Kit/Application Programmers Interface, which can be used by service providers
or third parties to develop their own custom applications. We recently entered
into an agreement with a service provider to begin trials of certain
applications included in our IP LaunchPad Voicemail Suite. Also, we are
currently developing and intend to introduce additional applications for our IP
LaunchPad Voicemail Suite, and our IP LaunchPad Wireless Data Suite. A service
provider can offer any of the services enabled by our solutions separately or
together as bundled services, and can provide the services directly to
subscribers, or as a wholesale offering that can be resold to other service
providers.
Core Capabilities of the IP LaunchPad Platform
. Least Cost Routing. Our patented least cost routing technology allows
the service provider to establish the optimal path that a message should
follow to get to the intended recipient. The correct route is determined
based on the type of message (such as voice, fax, or email), the time of
day, network availability, rate structures, and other parameters. Once
this information is entered, IP LaunchPad will automatically route any
message type through an IP network, the PSTN or a wireless network to
its intended recipient. This capability is designed to enable service
providers to optimize message delivery costs.
. Message Tracking. Our technology enhances the quality and reliability of
message transmission over IP networks and among IP networks, the PSTN
and wireless networks. When a message is created by a subscriber, it is
routed by IP LaunchPad to the recipient using our least cost routing
technology. If a message cannot be delivered on the first attempt, our
software will continue to attempt delivery. The sender can track the
current progress of the message on an ongoing basis. All message
activity is automatically logged and reporting is available to the
subscriber showing message delivery history. Tracking is critical when
the sender wants some guarantee of message delivery, including active
feedback from the recipient. This functionality is important for
individual messages, but even more so for large broadcasts that may go
to hundreds or thousands of recipients.
. Scalability, High Availability, and Redundancy. IP LaunchPad can be
installed across a few servers initially, and as the service provider's
business grows, additional servers can be added to the system to
increase the service capacity. This architecture can reduce the service
provider's initial investment and its cost of system expansion. Our
product achieves high availability to subscribers in two ways. We run
our software on Sun Microsystems SPARC servers, which provide their own
hardware redundancy and
35
<PAGE>
high availability. We enhance this by allowing the service provider to
configure software fail-over and load balancing to keep the system
running if a piece of the equipment fails, and to distribute the
workload during peak times. This combination of hardware and software
makes the overall system solution highly scalable, available and
redundant.
. Network Independence. Each service provider's network comprises
different vendors' remote access server, or RAS, hardware, and their
billing, customer provisioning and network management systems, which
form a complex and unique environment. IP LaunchPad neutralizes the
unique aspects of the service provider's network environment, so that
applications can quickly interface with the service provider's network
without having to develop custom interfaces for each service provider.
The service provider benefits by having a simpler and less expensive
implementation, and can leverage its existing investment in RAS devices,
billing, provisioning and network management systems. The service
provider's capital costs associated with deploying our product are
limited to our software and the servers on which our software resides.
We leverage the service provider's existing infrastructure, enhancing
the service provider's return on its existing investment in equipment
and support systems.
. Service Level Offerings and Enforcement. IP LaunchPad allows service
providers to build policies, assign policies to users, and then ensure
that applications running on IP LaunchPad adhere to those policies. This
enables service providers to offer higher levels of service to some
subscribers than to others, and to commit to SLAs with their
subscribers, which often is a requirement for rolling out a commercial
grade service.
. Multiple Language Support. Our products support all major languages. The
global economy combined with the reach of the Internet have enabled
businesses to market services outside their traditional borders. IP
LaunchPad allows service providers to offer enhanced IP services to any
market in the world in the local language of the respective market--all
from one system. Multiple language support also facilitates peering
relationships between service providers in different parts of the world.
In a peering relationship, service providers deliver each other's
traffic and offer services to one another's subscribers. For example, a
service provider in the United States can offer virtual United States
phone numbers to subscribers of its peers in South American countries.
The value in this increases greatly if the South American subscribers
can retrieve their messages using Spanish or Portuguese user interfaces.
36
<PAGE>
Enhanced IP Service Application Suites. The following is an overview of our
current and anticipated enhanced IP service application suites and software
solutions that leverage the core capabilities of our IP LaunchPad platform.
IP LaunchPad Fax Suite
<TABLE>
<CAPTION>
Application Description Status
----------- ----------- ------
<C> <S> <C>
Broadcast Fax........ A subscriber may create a Currently available
broadcast fax that is sent to
multiple recipients.
Email-to-Fax......... A subscriber may use his/her Currently available
existing email system to send a
fax to a fax machine in the same
way that he/she sends a message
to an email user.
Fax-to-Email......... Faxes sent to a subscriber's fax Currently available
number are automatically routed
to the subscriber as an email
message.
Web-to-Fax........... A subscriber can send faxes and Currently available
view received faxes with a
standard web browser.
Fax Mailbox.......... Faxes sent to a subscriber's fax Currently available
number are automatically routed
to the subscriber's IP LaunchPad
mailbox, and can then be
retrieved via a web browser.
Never Busy Fax....... Faxes sent to a subscriber's fax Currently available
machine are stored by IP
LaunchPad if the fax machine is
busy and resent when the fax
machine is available.
Fax Machine.......... All faxes sent from a Currently available
Redirection subscriber's fax machine are
routed through IP LaunchPad for
access to broadcasting functions
or for lower cost delivery across
an IP network.
IP LaunchPad Software Development Kit / Application Programmers Interface
<CAPTION>
Application Description Status
----------- ----------- ------
<C> <S> <C>
Business Process..... Third-party messaging software Currently available
Integration and service provider back office
administrative systems can be
linked to IP LaunchPad across an
IP network.
Custom Messaging..... Messaging software developers can Currently available
Applications interface their custom
applications with IP LaunchPad-
enabled service providers.
User Provisioning.... Developers and system integrators Currently available
can integrate third-party user
provisioning systems with IP
LaunchPad to avoid duplicate data
entry.
</TABLE>
37
<PAGE>
IP LaunchPad Voicemail Suite
<TABLE>
<CAPTION>
Application Description Status
----------- ----------- ------
<C> <S> <C>
Voicemail-to-Email... A subscriber may forward to an email In test stage
account some or all of the voice
messages that come into his/her
existing legacy voice mailbox.
Enterprise-to-Mobile. This service auto-forwards messages In development
Voicemail from a subscriber's enterprise voice
mailbox to the subscriber's
mobile/wireless voice mailbox.
Send/Forward......... A subscriber on one voicemail system In development
Voicemail to Another may send a voice message to a
Subscriber recipient on a different voicemail
system, or directly to the recipient
via a home, work or mobile phone.
Voicemail.. Broadcast A subscriber may create a voice In development
message within his/her existing
voicemail account and send it to a
browser-managed list of recipients.
Recipients may be on disparate
voicemail systems.
Email-to-Voicemail... A subscriber can use his/her existing In development
Delivery email system to send a voice or text
message that will be translated into a
synthetic voice message and sent to
his/her home, work or mobile/wireless
voicemail system.
IP LaunchPad Wireless Data Suite
<CAPTION>
Application Description Status
----------- ----------- ------
<C> <S> <C>
WAP/SMS.............. Message receipt, message delivery In development
Notification confirmation and data availability
notifications can be made through
wireless application protocol (WAP) or
small message system (SMS)
communication.
Email-to-WAP/SMS..... Email subscribers can direct short In development
messages to a wireless device.
WAP/SMS-to-Email..... Senders of WAP/SMS messages can direct In development
short messages to a wireless device.
Message Push and..... IP LaunchPad can pass parts of a In development
Response message to a wireless device along
with a pointer for rapid retrieval of
the complete message content.
Information Push..... Data content providers can target In development
wireless data messages such as news
alerts to individuals, pre-defined
groups, or by matches to pre-recorded
recipients' preferences.
Information Push..... Information pushed to wireless devices In development
Tracking may include pointers for responses and
follow-up.
</TABLE>
We price initial system deployment of our software solution based on a
variety of factors, including the number of ports our customers will need to
support their projected traffic levels, the number of subscribers provisioned
in the system, gateways to external voicemail, fax and other systems, and
recurring maintenance. Our customers deploy an initial system configuration
with prices generally ranging from $50,000 to $1.0 million. The service
provider can then purchase additional port licenses and subscriber licenses as
the demand for its service grows. We invoice our customers annually for
software maintenance which currently is calculated as a percentage of the list
price of all of our installed software.
38
<PAGE>
Technology
IP Network Overview. Our technology comprises a software platform that is
deployed within a service provider's existing network infrastructure to route,
track, deliver and control the flow of messaging traffic across IP networks. An
IP network comprises an array of transmission lines that connect servers and
other devices to create a network. Information is transmitted by routers which
use the destination addresses of the packets of information passing through
them to determine on which routes to send them. Access to an IP network is
obtained through a direct line into the network or through a RAS. Each RAS has
ports through which subscribers can establish dial-up connections to the IP
network. RASs are located throughout IP networks at geographically dispersed
points of presence, or PoPs, which are often the functional edges of IP
networks.
The Software Architecture. Our solution enhances the quality and reliability
of message transmission over IP networks. Our architecture centralizes IP
messaging intelligence by placing management and control functions at hub
locations in IP networks rather than at PoPs. Centralization of IP messaging
intelligence at the hub of IP networks is fundamental to least cost routing
decisions and facilitates expansions in system functionality and processing
capacity. Complementary to this centralized structure, the IP LaunchPad
platform is a modular architecture which allows the service provider
flexibility in creating those new functions and offering scalability from the
processing needs of the smallest service provider to those of the largest. Our
software modules are designed to operate as independent components in order to
promote system stability and availability. Additional traffic can be handled by
adding additional modules without affecting any other module's performance.
Additional features and enhancements can be implemented by adding different
modules without affecting the overall system flow.
How a Message is Processed by Our Technology. Our technology enables parties
to communicate through any combination of telephony or network-connected
devices, including fax machines, telephones, voicemail systems, wireless
devices, stand-alone PCs with modems, servers and PC workstations that are
directly connected to the IP network. Our technology processes messages in the
following manner:
To collect messages for delivery:
. The sender, or some automated process such as an invoice-creation system
or data content mining application, generates a message using a PSTN, IP
or wireless device, such as voice, fax, email, application server, or
video mail.
. If the originating device is on an IP network directly connected to an
Open Port-enabled IP network, the message flows through the service
provider's direct connection router into an IP LaunchPad hub location
(typically, a network operations center).
. If the sender is on a network which is not directly connected to an Open
Port-enabled IP network, the message is converted to an IP message
format using an Open Port-enabled IP LaunchPad Connector. The specific
processes used depends upon whether the message is sent in analog or
digital format.
. IP LaunchPad software determines user privileges and authenticates and
updates user account information for the sender.
. Information needed for billing, tracking and controlling message
delivery is stored or transmitted, as applicable, to service provider
network administration systems.
39
<PAGE>
To deliver the message, IP LaunchPad then:
. Identifies the type of message being sent, assigns specific attributes
to the message and designates the delivery requirement, such as
immediate or deferred delivery, to be applied.
. Determines whether the intended recipient of the message has a mailbox
on the IP network. If so, the message is delivered. If the intended
recipient of the message does not have a mailbox on the IP network, our
least cost routing technology is used to determine the lowest cost
method for delivering the message at the particular time and date.
. Queues this message with others contending for limited resources, if
applicable. IP LaunchPad applies SLA policies to determine whether this
message should be moved to the top of the queue, or possibly delivered
in sequence (after higher-priority messages have been delivered).
. Continuously collects and updates network status information such as
bandwidth and port availability for our least cost routing algorithm.
. Delivers the message either to a destination on the IP network or to an
off network device through an Open Port-enabled RAS and a dial-out
through either a PSTN or wireless connection.
When the message transmission is complete:
. The associated tracking information is sent back to the network
operations center which pairs the send request with the receipt
confirmation.
. This tracking information is immediately delivered to the service
provider's network administration systems that have been linked to our
software.
Using the tracking information:
. End-users can determine in real-time the current status of messages
which have been delivered or are in process of delivery.
. Settlement issues between service providers who contract with one
another for delivery services are resolved.
. Message senders and content providers can be assured of delivery, or
create detailed or summary management reports indicating recipients'
responses to messages sent.
Professional Services
We offer a comprehensive line of professional services to help our customers
offer enhanced IP services to their subscribers. As of March 31, 2000, our
professional services staff consisted of 26 employees. We provide three phases
of service support: management consulting, service development and
implementation, and full-scale production support.
Management Consulting. In the first phase, we help customers define an
enhanced IP services solution by providing some or all of the following:
. establishing the business definition and business case;
. determining market definition and selecting target market segments;
. defining details of the hardware and software to be distributed;
. defining the business processes that are required to manage and support
the service offering;
40
<PAGE>
. determining a high level marketing and sales plan; and
. establishing the acceptance criteria and plan for the service to go into
production.
Concurrently, we begin planning for service deployment which may include:
. developing detailed deployment schedules and budgets;
. determining outsourcing needs and establishing contracts with identified
partners;
. monitoring the project schedules and deliverables and taking corrective
actions to meet established delivery goals; and
. establishing executive and technical review teams and conducting regular
review meetings for information exchange and processing and system buy-
in.
Service Development and Implementation. In the second phase, we develop the
enhanced IP services solutions with our customers and implement the solutions
in internal trials and initial deployment, prior to full-scale production. We
have gained international systems implementation knowledge and experience by
deploying hardware and software at customer sites worldwide. Our systems
implementation services include:
. establishing requirements for the hardware and software deployment
needed for the successful implementation of the desired services;
. scheduling the deployment based on the availability of the required
facilities, telephony, hardware and software;
. installing software at the deployment sites; and
. training the customer to perform installations.
Production Support. In the final phase, as the services solution is rolled
out by our customer, we continue to provide management consulting, training,
implementation, and customer support services as needed. Also, on an ongoing
basis after the roll out, for a maintenance fee our customers receive support
and software upgrades.
Customers
We currently target sales of IP LaunchPad to service providers as our
principal customers. As of March 31, 2000, the following customers had entered
into license agreements to deploy our solution in their networks:
. AT&T Unisource Communications . Interpath Communications, Inc.
Service v.o.f. . LEC Unwired, LLC
. Bell Atlantic Data Solutions . LTS S.p.A.
Group, Inc. . MCI WorldCom Network Services,
. Cable & Wireless HKT CSL Limited Inc.
(Hong Kong Telephone) . Pacific Internet Limited
. Cable & Wireless Japan Ltd. . QQ Interactive, Inc.
. Cable & Wireless Optus . Qwest Communications
. Cable & Wireless U.K. Corporation
. China Telecom-Guandong PTA . Taiwan Telecommunication
. Ics.IP S.p.A. Network Services Co., Ltd.
. Tele Danmark A/S
In December 1999 we entered into a master license agreement with Cable &
Wireless Ltd., which has approximately 70 operating units. This agreement
provides the terms and conditions under which Cable & Wireless operating units
may elect to license our software solutions. As of March 31, 2000, five Cable &
Wireless operating units had entered into license agreements for our software.
41
<PAGE>
Strategic Relationships
In order to facilitate the acceptance of our solutions and enhance our
marketing and distribution efforts, we have established strategic relationships
with certain technology industry leaders such as Ascend (now a subsidiary of
Lucent), Cisco, Microsoft, Optus, Sun Microsystems and 3Com. These
relationships have accelerated the market acceptance of our products through
technology integration into our allies' products and/or joint marketing
arrangements.
. Ascend. Starting in 1997, we jointly developed software with Ascend,
which was acquired by Lucent in 1999. In 1998, we entered into a non-
exclusive worldwide strategic alliance agreement with Ascend which makes
it simpler for Ascend's customers to use our solution.
. Cisco. We are a member of Cisco's New World Ecosystem Program, a
community of technology partners. In 1999, we announced an alliance to
bring certain IP LaunchPad fax solutions to Cisco's AS5X00 product
family. We engage in joint marketing activities and receive sales
referrals from Cisco.
. iReady. In January 1999, we entered into a strategic alliance to provide
iReady with our protocols that enable fax transmissions over the
Internet. iReady's Internet Tuner module, enhanced with these these
protocols, allows multi-function peripherals and fax machines to send
and receive faxes over the Internet.
. Kanbay. In 1999, we entered into a global integrator agreement with
Kanbay under which they will provide integration and customization
services for IP LaunchPad, either by subcontracting with us or by
contracting directly with the end user. In addition, Kanbay will promote
IP LaunchPad to their service provider customers.
. Microsoft. In 1998, we entered into a development and license agreement.
Under the agreement, we licensed to Microsoft perpetual rights to
certain of our proprietary technologies, including our patented least
cost routing technology, subject to certain field of use restrictions.
For a minimum period of three years, Microsoft will integrate and
distribute the software that is developed under this agreement with
certain Microsoft server products. Microsoft also purchased shares of
our preferred stock.
. Optus. In 1998, we entered into a worldwide development and license
agreement with Optus under which Optus granted us a license to certain
fax technology, and we granted Optus a license to our Internet gateway
software, which allows Optus products to communicate with Open Port-
enabled service providers.
. Sun Microsystems. In 1999, we became a Sun strategic developer and a
founding member of Sun's SunTone Architecture Council. We also have a
marketing alliance that combines IP LaunchPad with the Sun-Netscape
Alliance messaging server software. We engage in joint marketing with,
and receive sales referrals from, Sun.
. 3Com. In 1998, we entered into a non-exclusive worldwide strategic
alliance and referral agreement with 3Com. Under this agreement, we
participate in joint product development and co-marketing activities.
We intend to selectively pursue additional strategic alliances and
relationships in the future.
42
<PAGE>
Sales and Marketing
We rely on our direct sales force to make sales to service providers. As of
March 31, 2000, we had 16 direct sales professionals on our staff. A sales
director in Chicago manages Latin America, Canada and the midwest and eastern
portions of the United States. A sales director in our San Francisco office
manages the western United States and Asian region business, and a sales
director in our Paris office manages Europe, Africa and the Middle East. All of
these sales directors report to our Senior Vice President of Sales and
Marketing. We plan to expand our domestic and international sales opportunities
by increasing the size of our sales force and through reseller/distribution
alliances.
The sales process is divided into three phases: business definition, due
diligence and contract, and service deployment.
. Business Definition. Our sales personnel review the prospective
customer's business and network infrastructure before presenting a
formal proposal. Following the proposal, we perform a series of
technical reviews, analyzing the prospective customer's network and
objectives, combined with a marketing implementation review. We work
closely with the prospective customer in defining our solutions.
. Due Diligence and Contract. We install our software on the prospective
customer's network on a limited scale. Once testing of this limited
installation is successfully completed, we negotiate with our customers
and sign a contract. Our customer's decision to license our software is
usually enterprise-wide, involving approval by numerous members of the
customer's management team, and thus several months often elapse between
initial contact and final contract signing.
. Service Deployment. Our professional services organization works with
the customer to install and test the software in their network. We train
the customer's support services personnel in the operation and
management of the installed software as a billable service. Service
deployment typically takes two to three months depending on the
customer's requirements and is implemented in a phased approach tailored
to such requirements. A global account manager, who is on site at the
customer's headquarters, maintains an understanding of the customer
deployment to better service the needs of the customer and thereby
increase sales to the customer.
As of March 31, 2000, 11 of our employees were responsible for a variety of
marketing activities, including product management, market research, sales
collateral development, web design and implementation, public relations,
channel partnerships, trade shows and conferences. Continued revenue growth
depends, in part, on our ability to retain and maintain sales and marketing
personnel as well as our ability to expand and maintain our strategic business
relationships with resellers, distributors and other third parties that are
crucial in our sales process.
Research and Development
We believe that our future success depends in large part on our ability to
enhance our current product family and introduce new products that enable a
wide range of enhanced IP services to service providers. As of March 31, 2000,
our product development organization consisted of 41 full-time employees. We
also utilize contract technical professionals on an as-needed basis.
Our product development organization is responsible for product design,
development and testing, as well as user documentation. This group is
responsible for integrating our
43
<PAGE>
software with various third-party components. In addition, our advanced
technologies group investigates ways to expand the usability of our IP
LaunchPad platform software, including researching possible future unified
messaging applications and enhancements to our wireless data product suite.
Competition
Our industry is intensely competitive, rapidly evolving and subject to rapid
technological change. We expect competition to intensify in the future. Many
companies that offer products or services that compete with one or more of our
products or services have greater financial, technical, product development,
marketing and other resources than we have. These organizations may be better
known and may have more customers than we have. We may be unable to compete
successfully against these organizations.
We currently compete with other companies offering software to enable
enhanced IP services. We compete directly with a number of private companies in
the fax-over-IP market. We believe a critical component to success in this
market is the ability to provide a flexible, complete platform solution which
enables service provider customers to readily add enhanced IP applications on
an ongoing basis. We believe that there are no competitors in our market that
currently offer a comprehensive solution with the functionality, features, and
value proposition for service providers comparable to ours. However, several
organizations offer components that compete with certain components of our
solutions and may become increasingly competitive with us in the future. We
believe that the main competitive factors in our market are product features,
particularly the types of enhanced services which may be delivered, product
quality and value, deployment expertise and customer service, and relationships
with service providers and their network system equipment vendors.
As our product and service offerings evolve and the markets in which we
compete develop, we may in the future face competition from several other types
of organizations, including:
. manufacturers of network hardware and infrastructure devices, that
currently concentrate on communications between devices such as
telephones and fax machines;
. traditional manufacturers of telephony equipment, some of which recently
began manufacturing telephony equipment for IP networks;
. traditional providers of corporate voice, fax and email systems; and
. companies that currently, or may in the future, provide IP messaging
applications individually or through alliances.
In addition, we expect that major software companies and others specializing
in the telephony or messaging industries may offer products or services that
are competitive with components of our solutions. While many of these types of
organizations are potential competitors, we believe opportunities exist to
establish strategic relationships, alliances or agreements with some of them.
We have entered into strategic agreements with some of these types of
organizations, and intend to selectively pursue other opportunities in the
future.
Intellectual Property
We rely primarily on a combination of patents, copyrights, trademarks, trade
secret laws, restrictions on disclosure and other methods to protect our
intellectual property and trade secrets. We also enter into confidentiality
agreements with our employees and consultants, and generally control access to
and distribution of our documentation and other proprietary information.
44
<PAGE>
Although we have not secured registration of all of our marks, we pursue the
registration of certain of our trademarks and service marks in the United
States and in other countries. In addition to our existing registered
trademarks set forth elsewhere in this prospectus, we have applications for the
words-only marks "IP LaunchPad" and "IP LaunchPad Fax Suite" pending with the
United States Patent and Trademark Office and for "IP LaunchPad" pending in the
European Community and Japan. We have entered into an agreement with Sequent
Computer Systems, Inc. in Europe in which we agreed that we will not use the
"Open Port" mark in connection with software for migrating application software
from a mainframe environment to an open system environment or related services,
and Sequent agreed not to object to or challenge our use or registration of the
"Open Port" mark in Europe in connection with messaging software for networks
or related services. Also, in 1995, we entered into an agreement with Relay
Technology, Inc. in which we agreed not to use the mark "Open Port," "Open Port
Harmony," or any similarly confusing mark in connection with computer software
for transferring data between standard query language databases. Relay
Technology agreed not to use the mark "Relay/Open Port" or any similarly
confusing mark in connection with computer software and hardware for providing
electronic messaging, video messaging, voice messaging, image messaging, or fax
transmission functions to computer users.
We own four issued patents and three pending United States patent
applications, each relating to aspects of our business. One of our four issued
United States patents is generally directed to the use of a re-router device to
provide alternative paths for digitally-encoded messages when the initial
attempt to deliver the fax or other message is unsuccessful. The second and
third of our United States patents are generally directed to a least cost
method of routing messages. In one application, this least cost routing option
produces different results depending on a variety of factors, including the
time-of-day and day-of-week for delivery, the message sender's request for a
particular level of service, the conditions of the network delivery sites as
well as bandwidth to those sites, the location of sending and receiving devices
and whether or not the message is being delivered to one or many devices. The
fourth of our United States patents is generally directed to forwarding
received messages to online end-users capable of processing the contents of
those messages. In one application, end-users are agents working for a customer
service center, and our system forwards messages pertaining to specific types
of customer service problems to the agent most ready and capable of handling
each specific type of problem. We have granted licenses under our patents to
certain third parties, including Microsoft Corporation. See "--Strategic
Relationships."
Employees
As of March 31, 2000, we had 114 full-time employees. Of the total, 31 were
employed in sales, marketing and business development, 41 in research and
development, 26 in professional services, and 16 in finance, information
systems and administration. Our future performance depends, in significant
part, upon our ability to attract new personnel and retain existing personnel
in key areas including engineering, technical support and sales. Competition
for this personnel is intense, and we cannot be sure that we will be successful
in attracting or retaining the personnel in the future. We have never had a
work stoppage, and no employees are represented under collective bargaining
agreements. We consider our relations with our employees to be good.
Facilities
Our principal executive offices currently are located at 676 North St. Clair
Street, Suite 900, Chicago, Illinois 60611. Our lease on these premises covers
24,531 square feet and expires February 28, 2002. We also lease regional sales
office facilities in: San Francisco, California; Denver, Colorado; Rotterdam,
Netherlands; Diegem, Belgium; and Paris, France.
45
<PAGE>
We believe that, except as described below with respect to our Chicago
facility, our facilities generally are adequate for our current needs and that
additional suitable space will be available as needed on commercially
reasonable terms. Our Chicago facility does not have adequate available space
to accommodate our recent and anticipated growth, and we are currently in the
process of leasing additional space on a short-term basis to meet our expected
requirements for the near term. We expect to identify and lease a new facility
in Chicago within the next several months to replace our existing facility,
which we would attempt to sublet for the remainder of its lease term. While the
market for commercial real estate in downtown Chicago is competitive, we
believe that suitable space will be available at market rates.
Legal Proceedings
We are not a party to any litigation or other legal proceedings that we
believe would have a material adverse effect on our business or financial
condition.
46
<PAGE>
MANAGEMENT
The following table sets forth certain information concerning our executive
officers, directors and certain other key employees:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<C> <C> <S>
Executive Officers and Directors:
Randy S. Storch.................. 41 Chairman of the Board, President and
Chief Executive Officer
Cheryl E. Mayberry............... 44 Senior Vice President/General Manager of
Sales and Marketing
Omprasad S. Nandyal.............. 34 Chief Technical Officer, Secretary and
Director
Michael B. Clauer................ 43 Vice President and Chief Financial
Officer
Peter J. Barris(1)............... 47 Director
Thomas J. Crotty(1).............. 41 Director
Royce J. Holland................. 50 Director
Donald R. Hollis(2).............. 64 Director
John E. Major(2)................. 54 Director
Joseph A. Piscopo(2)............. 55 Director
Other Key Employees:
Antonio Dutra.................... 48 Vice President of Strategy
Michael Flockenhaus.............. 37 Vice President of Engineering
Joseph M. Fuller................. 34 Vice President of Finance and
Administration
Alvon D. Ramp.................... 52 Vice President of Client Services
James B. Tucker.................. 44 Vice President of Global Business
Development
Martin T. Wegner................. 33 Vice President and Chief Scientist
</TABLE>
- --------
(1) Member of the compensation committee
(2) Member of the audit committee
Executive Officers
Randy S. Storch, a co-founder of Open Port, has served as Chairman of the
Board, President and Chief Executive Officer since our inception in January
1993. Prior to founding Open Port, Mr. Storch was a consultant to Tandem
Computers as a subject matter expert in the area of messaging from October 1992
to December 1993 and served as general manager of Ameritech Corporation's
enhanced messaging services group from March 1991 to October 1992. In 1985, he
founded and was chief executive officer of Airplan Travel Systems until 1987.
Upon the sale of Airplan Travel Systems to Texas Air in June 1987, Mr. Storch
served as a corporate vice president of Texas Air and was responsible for
running the Airplan division and directing the strategy for the company through
February 1991.
Cheryl E. Mayberry has served as Senior Vice President/General Manager of
Sales and Marketing since November 1997. Ms. Mayberry is responsible for
directing and implementing all sales and marketing strategies. From September
1992 to July 1997, Ms. Mayberry served as vice president of sales for U.S.
Robotics, where she established and managed their network systems division.
From 1977 to 1992, she was employed at IBM in various sales and marketing
management positions. Ms. Mayberry also serves as chairman of the board of
BrownAngels.com, an early stage e-commerce company.
Omprasad S. Nandyal, a co-founder of Open Port, has served as Chief
Technical Officer and as a director since January 1995. Mr. Nandyal was
responsible, in conjunction with Chief Scientist Martin Wegner, for the
original design of our messaging architecture. He now
47
<PAGE>
oversees the overall direction of our products. Between April 1990 and January
1995, Mr. Nandyal was a co-owner and principal of Frontline Software
Technology, a maker of corporate network fax server software which was
purchased by Open Port in January 1995.
Michael B. Clauer has served as Vice President and Chief Financial Officer
since April 2000. He previously served in various management capacities, most
recently as executive vice president and chief financial officer, for Budget
Group, Inc., a company engaged in the business of renting cars and trucks, from
November 1997 to February 2000. From April 1996 to November 1997, he served as
senior director of finance, strategy and planning for the North America
national franchise business units of the Pepsi-Cola Company, and from September
1994 to April 1996, he was the senior director field finance for Pepsico
International Restaurants, Inc.
Outside Directors
Peter J. Barris has served as a director of Open Port since March 1997. He
has been a general partner of New Enterprise Associates, a venture capital
firm, since 1993. He specializes in investments in information technology
companies. Before joining NEA, Mr. Barris was president and chief operating
officer of Legent Corporation, a systems software manufacturer, and senior vice
president and general manager of the systems software division at UCCEL. Mr.
Barris also serves as a director of CareerBuilder Inc., a provider of
recruitment products and services, and Mobius Management Systems, Inc., a
provider of software products.
Thomas J. Crotty has served as a director of Open Port since March 2000. He
has been a general partner of Battery Ventures, a venture capital partnership
focused on investments in communications, software and Internet/e-commerce
companies, since 1989. Mr. Crotty served as an observer at our board meetings
from June 1998 to February 2000. Prior to joining Battery Ventures, he worked
at Abacus Ventures, a partnership specializing in communications investments.
Mr. Crotty also serves as a director of Witness Systems, Inc., a software
provider.
Royce J. Holland has served as a director of Open Port since February 1997.
He is chairman and chief executive officer and co-founder of Allegiance
Telecom, Inc., a competitive local exchange carrier headquartered in Dallas,
Texas that was formed in 1997. Previously, Mr. Holland was president and one of
several co-founders of MFS Communications Company, Inc., a competitive local
exchange carrier with operations in 52 metropolitan areas in North America,
Europe and Asia, from January 1992 to December 1996. Mr. Holland also serves as
a director of Choice One Communications, Inc., an integrated communications
provider of broadband data and voice telecommunications services, and CSG
Systems International, Inc., a provider of customer care and billing solutions
to the communications industry.
Donald R. Hollis has served as a director of Open Port since December 1996.
He is president of DRH Strategic Consulting, Inc., which assists clients in
developing strategies for leveraging technology and quality practices to
improve payments related transaction processing products as well as in finding
appropriate acquisitions. From 1981 to 1996 he was an executive vice president
of First Chicago Corporation responsible for its technology leadership and its
commercial transaction processing businesses. Mr. Hollis serves on the
executive committee of the Illinois Institute of Technology's board of trustees
and the IIT research institute board of governors. Mr. Hollis also serves as a
director of Deluxe Corporation.
John E. Major has served as a director of Open Port since March 2000. He has
served as chief executive officer of the Wireless Internet Solutions Group, a
consulting and investment strategy business focused on the convergence of the
wireless and Internet industries. Mr. Major served as the chairman and chief
executive officer of Wireless Knowledge, a Qualcomm and Microsoft joint venture
which provides Internet based solutions for wireless
48
<PAGE>
access to corporate information, from November 1998 to November 1999. Prior to
that, Mr. Major served as an executive vice president of Qualcomm and as
president of its wireless infrastructure division. Prior to joining Qualcomm in
1997, Mr. Major served as senior vice president and staff chief technical
officer at Motorola, Inc., a manufacturer of telecommunications equipment, and
as senior vice president and general manager for Motorola's worldwide systems
group. Mr. Major currently serves on the board of directors of Lennox
International Inc., a provider of climate control solutions, Littlefuse, Inc.,
a manufacturer of fuses, and Verilink Corporation, a manufacturer of network
access devices.
Joseph A. Piscopo has served as a director of Open Port since December 1995.
He is a private investor in software and technology firms. He was chairman of
Software Artistry, Inc., an Indianapolis software firm, from 1992 to 1998, when
it was acquired by IBM. He founded Pansophic Systems, a systems software
company in Lisle, Illinois and served as chairman and chief executive officer
of the company from 1969 to 1987.
Key Employees
Antonio Dutra, a co-founder of Open Port, has served as Vice President of
Strategy since 1993. Mr. Dutra has an extensive background in communications
services, hardware and software. Prior to founding Open Port, from 1985 to 1993
Mr. Dutra was an independent consultant with a practice focused on email
applications, electronic data interchange and fax networking. From 1981 to 1985
Mr. Dutra was a technical manager for CompuServe Inc.
Michael Flockenhaus has served as the Vice President of Engineering since
August 1999. Mr. Flockenhaus joined Open Port in November 1998 as Director of
Engineering. From October 1997 to October 1998, Mr. Flockenhaus was vice
president of research and development of Cruise Technologies, a developer of
wireless thin client technology for the health care industry. From March 1988
to October 1997, Mr. Flockenhaus held several senior management positions at
U.S. Robotics, serving most recently as director of modem and telco interface
development.
Joseph M. Fuller has served as Vice President of Finance and Administration
since October 1999. Mr. Fuller joined Open Port in January 1996 as Director of
Finance and Administration and Controller. From 1994 to 1995, Mr. Fuller was
vice president of operations for Crown Mortgage Company, one of the largest
privately-owned mortgage companies in Illinois.
Alvon D. Ramp has served as Vice President of Client Services since January
1996. From December 1993 to January 1996, he was employed at May & Speh, Inc.,
a computer services outsourcing and direct marketing systems company, where he
served as a strategic account consultant, managing relationships with direct
marketing accounts.
James B. Tucker has served as Vice President of Global Business Development
since January 2000. From 1994 to 1999, Mr. Tucker served as director of
strategic sales initiatives for U.S. Robotics and its successor, 3Com
Corporation, where he managed relationships with telecommunications carriers
and network service providers. From 1976 to 1994, Mr. Tucker was employed at
IBM in various sales and marketing management positions.
Martin T. Wegner, a co-founder of Open Port, has served since January 1995
as Chief Scientist in our advanced technologies group, which is our principal
research and development organization for applications in the area of IP
messaging. Working with our Chief Technical Officer, Mr. Nandyal, Mr. Wegner
helped develop the original design of Open Port's messaging architecture.
Between April 1990 and January 1995, Mr. Wegner was a co-owner and principal of
Frontline Software Technology, a maker of corporate network fax server software
which was purchased by Open Port in January 1995.
49
<PAGE>
Board of Directors
Our business is managed under the direction of our board of directors.
Following this offering, the board of directors will be composed of three
classes, with each class as nearly equal in number as possible. Upon the
expiration of the term of each class of directors, directors comprising that
class will be elected for a three-year term at the annual meeting of
stockholders in the year in which their term expires. Messrs. Holland and
Piscopo will serve in the class with a term that expires on the date of the
annual meeting of stockholders to be held in 2001. Messrs. Barris, Crotty and
Hollis will serve in the class with a term that expires on the date of the
annual meeting of stockholders to be held in 2002. Messrs. Major, Nandyal and
Storch will serve in the class with a term that expires on the date of the
annual meeting of stockholders to be held in 2003. All officers serve at the
discretion of the board of directors. There are no family relationships among
any of our directors or executive officers.
Committees of the Board of Directors
Our board of directors has established two committees: a compensation
committee and an audit committee. Each such committee has two or more members,
who serve at the discretion of the board of directors.
Our compensation committee will consist of Messrs. Barris and Crotty upon
completion of this offering. The compensation committee reviews, acts on and
reports to the board of directors with respect to various compensation and
employee benefit matters. This includes overseeing and making recommendations
with respect to the salaries, bonuses, and other compensation paid to our
officers and key employees, including the terms and conditions of their
employment, and administering all stock option and other benefit plans (except
that with respect to participation by persons who are not officers, such stock
option and other benefit plans may also be administered by the board of
directors or a committee which includes our chairman of the board unless
otherwise specified in the applicable plan documents) affecting officers' and
key employees' direct and indirect remuneration.
Our audit committee currently consists of Messrs. Hollis, Major and Piscopo.
The audit committee reviews, acts on and reports to the board of directors with
respect to various auditing and accounting matters, including: reviewing the
adequacy of our system of internal accounting controls; reviewing the results
of the independent auditors' annual audit, including any significant
adjustments, management judgements and estimates, new accounting policies and
disagreements with management; reviewing the scope and results of our internal
auditing procedures; reviewing our audited financial statements and discussing
them with management; reviewing the audit reports submitted by the independent
auditors; reviewing disclosures by independent auditors concerning
relationships with our company and the performance of our independent auditors
and annually recommending independent auditors; adopting and annually assessing
our committee charter, and preparing such reports or statements as may be
required by Nasdaq or the securities laws.
Compensation of Directors
We have agreed to pay each director who is not one of our employees a fee of
$1,500 for each meeting of the board of directors that they attend after
completion of this offering. Such persons will also receive stock option grants
pursuant to our 2000 Outside Directors Stock Option Plan. See "--Employee
Benefit Plans--2000 Outside Directors Stock Option Plan." Messrs. Barris,
Crotty, Holland, Hollis, Major and Piscopo are currently eligible to receive
such meeting fees and stock option grants. All directors are reimbursed for
out-of-pocket expenses incurred in connection with attendance at meetings of
the board of directors and meetings of committees of the board of directors.
Mr. Hollis received options to purchase 25,000 shares of common stock at an
exercise price of $0.30 per share on January 1, 1997 pursuant to our 1995 Non-
Employee Stock Option Plan.
50
<PAGE>
Executive Compensation
The following table sets forth information for the year ended December 31,
1999, regarding the compensation of our Chief Executive Officer and each of our
other executive officers whose salary and bonus for the year ended December 31,
1999 were in excess of $100,000. No options or stock appreciation rights were
granted to any of the named executive officers in 1999. We use the term "named
executive officers" to refer collectively to these individuals later in this
prospectus.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------------ ------------
Securities
Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Options (#) Compensation
- --------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Randy S. Storch............... 1999 $190,000 -- -- --
Chairman of the Board,
President and Chief
Executive Officer
Cheryl E. Mayberry............ 1999 125,000 -- -- --
Senior Vice
President/General Manager of
Sales and Marketing
Omprasad S. Nandyal........... 1999 125,400 -- -- --
Chief Technical Officer and
Secretary
</TABLE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table provides information about options held as of December
31, 1999 and option exercises during 1999 by the named executive officers. The
value of unexercised in-the-money options at fiscal year end is calculated
using the difference between the option exercise price and the fair market
value at December 31, 1999, which has been deemed to be $1.50 per share,
multiplied by the number of shares underlying the option. An option is in-the-
money if the fair market value of the common stock subject to the option is
greater than the exercise price. Based on the assumed initial public offering
price of $ per share, the value of unexercised in-the-money options
following the completion of this offering is expected to significantly exceed
the value of these options at fiscal year end.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised in-the-
Underlying Unexercised Money Options at
Options at Fiscal Year End (#) Fiscal Year End ($)
------------------------------ --------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------ --------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Randy S. Storch......... -- -- 100,000 100,000 $ 120,000 $ 120,000
Cheryl E. Mayberry...... -- -- 190,523 337,078 228,628 404,494
Omprasad S. Nandyal..... -- -- 50,000 50,000 60,000 60,000
</TABLE>
In addition, in March 2000, we granted options to acquire 928,452, 250,000,
and 350,000 shares, respectively, to Mr. Storch, Ms. Mayberry and Mr. Nandyal.
These options have an exercise price of $1.50 per share and generally vest over
four years.
51
<PAGE>
Compensation Committee Interlocks And Insider Participation
Our compensation committee will consist of Messrs. Barris and Crotty upon
completion of this offering. During the fiscal year ended December 31, 1999,
the compensation committee was comprised of Mr. Storch and two former
directors, John C. Aplin and James E. Crawford. Neither of Messrs. Aplin or
Crawford serves, or has at any time served, as an officer or employee of Open
Port or any of its subsidiaries. Mr. Storch also serves as our Chairman of the
Board, President and Chief Executive Officer. None of our executive officers
has served as a member of the compensation committee, or other committee
serving an equivalent function, of any other entity, one of whose executive
officers served as a member of our compensation committee.
Employment Agreements
Messrs. Storch and Nandyal each have entered into an employment agreement
with us, dated August 1, 1995, which provides, among other things, for certain
salary and bonus payments. The agreement provides that Messrs. Nandyal and
Storch will receive 12 months and 18 months severance, respectively, if their
employment is terminated without "cause" (defined as having been convicted of a
crime, engaged in habitual substance abuse, engaged in professional misconduct
or failed to perform duties or obligations to us). The agreements provide that
Messrs. Nandyal and Storch will each receive six months and nine months
severance, respectively, if employment is terminated for "cause" on account of
a failure to perform duties or obligations to us. In addition, each of the
employees has agreed not to solicit our employees or customers for a period of
one year following the termination of employment. The agreement also contains
nondisclosure provisions.
Ms. Mayberry entered into an employment agreement with us dated October 31,
1997, which provides, among other things, for certain salary and bonus
payments. In addition, she has agreed not to solicit employees or customers for
a period of one year following the termination of employment. The agreement
also contains nondisclosure provisions.
We are currently negotiating with each of Messrs. Storch and Nandyal and Ms.
Mayberry with respect to amended and restated employment agreements. We expect
that such agreements will be completed prior to completion of this offering. We
also plan to enter into employment agreements with Mr. Clauer, our Vice
President and Chief Financial Officer, and certain key employees prior to
completion of this offering.
Employee Benefit Plans
2000 Equity Incentive Plan
In April 2000, our board of directors approved our 2000 Equity Incentive
Plan, subject to the approval of our stockholders. We have authorized an
aggregate limit on shares of common stock for issuance under this plan and the
2000 Outside Directors Stock Option Plan. The limit is 7,000,000 shares, plus
the number of shares (9,732,695) that are authorized for issuance under our
1995 Incentive Stock Option Plan and our 1995 Non-Employee Stock Option Plan,
minus the number of shares (8,570,370 as of the date of this prospectus)
subject to outstanding or exercised options under the 2000 Equity Incentive
Plan, the 2000 Outside Directors Stock Option Plan, the 1995 Incentive Stock
Option Plan and the 1995 Non-Employee Stock Option Plan. The number of
authorized shares will automatically increase each May 1, beginning on May 1,
2001 and ending on the May 1 preceding the date on which the plan is
terminated, by 5% of the number of our then outstanding shares of common stock,
or by 5,000,000 shares, whichever is less. The plan also includes limits on the
number of shares which may be subject to awards granted to any person in a
calendar year.
52
<PAGE>
The plan is for the benefit of all employees, directors, officers,
consultants, suppliers, contractors and certain other providers of service to
us. The plan will become effective upon approval by our stockholders. No
options or other awards will be granted under this plan prior to effectiveness
of this registration statement.
The plan may be administered by our compensation committee or any other
committee approved by the board of directors, provided that all awards to
officers and directors must be approved by the compensation committee. The
committee will have the power, subject to the terms of the plan, to interpret
the plan and may prescribe, amend and rescind rules and make all other
determinations necessary or desirable for the administration of the plan
including: determining when, to whom and what type and amounts of awards should
be granted, accelerating the exercisability of awards, accelerating or waiving
terms and conditions of awards, extending the time awards may be exercised, and
in certain circumstances rescinding any exercise, payment or delivery of shares
and requiring the repayment from the grantee of any gain realized or payment
received as a result of the exercise, payment or delivery so rescinded.
We may issue two types of stock options under the plan: incentive stock
options, or ISOs, which are intended to qualify under Section 422 of the
Internal Revenue Code and non-qualified stock options. The options have a 10-
year term. The exercise price of each ISO granted under the plan must be at
least equal to the fair market value of a share of common stock on the date the
option is granted and if the employee owns more than 10% of our stock, at least
110% of the fair market value of the underlying stock on the date of grant. The
exercise price for non-qualified stock options will be determined by the
committee on the date of grant. The option exercise price may be paid in cash
or, if permitted by the committee, in stock (including restricted stock) or by
a "cashless exercise" through a broker. An option or other award becomes
exercisable at the time or times determined by the committee.
Incentive stock options are not transferable. To the extent permitted in the
award agreement, awards other than ISOs may be transferred to certain family
members, family trusts, family partnerships or similar entities.
Stock appreciation rights, or SARs, may be granted under the plan either
alone or in conjunction with all or part of any stock option granted under the
plan. A SAR granted under the plan entitles its holder to receive, at the time
of exercise, an amount per SAR equal to the excess of the fair market value at
the date of exercise of a share of common stock over a specified price fixed by
the committee.
Restricted stock, performance shares, performance units, deferred shares,
bonus shares, reload options and cash-based awards may also be granted under
the plan. The committee will determine the purchase price, performance period
and performance goals, if any, with respect to any grant of restricted stock,
performance shares, performance units, deferred shares, bonus shares or cash-
based awards.
Except as otherwise determined by the committee:
. If an employee is terminated for cause (as defined in the plan), all
unvested or unexercised awards will terminate and be forfeited and, in
the case of restricted stock, we will refund to the employee the amount,
if any, paid to purchase the stock.
. In the event of death or disability of an employee, any restricted stock
and deferred shares will become vested; any option, ISO or SAR will vest
immediately and may be exercised by the grantee's personal
representative, beneficiary or by the individual receiving such option,
ISO or SAR by will or by descent; and any performance shares,
performance units or cash-based awards will be paid on a pro rata basis.
53
<PAGE>
. If an employee terminates for any other reason, any restricted stock or
deferred shares to the extent forfeitable will be forfeited, subject to
the refund to the employee of the amount, if any, paid to purchase
restricted stock, the then-exercisable portion of any unexercised option
or SAR may be exercised for three months and any unexercised performance
shares, performance units or cash-based awards will terminate
immediately.
Upon a change of control as defined in the plan, restricted stock and
deferred shares may immediately become vested. Options, ISOs and SARs may also
vest upon a change of control, if not already vested, to the extent specified
in the plan or applicable award or employment agreements. All performance
shares, performance units and cash-based awards will be paid out on a pro rata
basis to the extent specified in the plan or applicable award or employment
agreements.
The committee may amend, suspend or terminate the plan at any time. Further,
no action may be taken that adversely affects any rights under outstanding
awards without the holder's consent. The plan will terminate on the 10th
anniversary of its effective date unless it is terminated earlier by our board
of directors.
2000 Outside Directors Stock Option Plan
In April 2000, our board of directors approved the 2000 Outside Directors
Stock Option Plan, subject to the approval of our stockholders. The plan will
become effective upon approval by our stockholders. No options or other awards
will be granted under this plan prior to effectiveness of this registration
statement. We have authorized an aggregate limit on shares of common stock for
issuance under this plan and the 2000 Equity Incentive Plan. See "--Employee
Benefit Plans--2000 Equity Incentive Plan."
The 2000 Outside Directors Stock Option Plan provides for the grant of stock
options to eligible directors. An eligible director is any director who is not
(at the time of grant) an employee of the company. Each eligible director will
receive on the date this offering is completed, on the date of the 2001 annual
meeting, and every annual meeting thereafter, an automatic grant of an option
to purchase 10,000 shares, provided in case of grants after completion of this
offering that the eligible director is either elected to serve at such annual
meeting, or continues to serve through the date of such meeting as a previously
elected director in a class whose term does not expire at such annual meeting.
Each eligible director elected to the board between annual meeting grant dates
will receive on the date of election an automatic annual grant of an option to
purchase a reduced number of shares proportional to the time remaining until
the next regular automatic grant date.
The exercise price for the options granted upon the closing of this offering
will be the initial public offering price, and the exercise price for all other
options granted under the plan will be the fair market value of our common
stock on the date of grant. All options become vested and exercisable in three
equal annual installments on the first three anniversaries of the grant date or
the date preceding the related scheduled annual meeting of stockholders, if
earlier. Each option has a ten-year term, but will terminate 90 days after a
grantee ceases to be a director (180 days if he or she ceases to be a director
because of disability or death). Options vest and become exercisable for 180
days if the grantee ceases to be a director due to disability or death. In
addition, all options become vested and exercisable upon a change of control as
defined in the plan.
The exercise price may be paid in cash, or if permitted by the board by
turning in currently owned shares, or by "cashless exercise" through a broker.
Options are not transferable during the grantee's lifetime except to certain
family members, family trusts, family partnerships or similar entities.
54
<PAGE>
The plan is administered by our board of directors. Our board may amend or
terminate the plan at any time. Further, no action may be taken that adversely
affects any rights under outstanding awards without the holder's consent. The
plan will terminate on the 10th anniversary of its effective date unless it is
terminated earlier by our board of directors.
1995 Stock Option Plans
In October 1995, our board of directors and stockholders adopted our 1995
Incentive Stock Option Plan and our 1995 Non-Employee Stock Option Plan. The
plans have since been amended from time to time. The Incentive Plan provides
for the grant of options, which may be ISOs, to employees. The Non-Employee
Plan provides for the grant of non-qualified stock options to members of our
board, consultants, suppliers, contractors and certain other providers of
services to us. We have reserved an aggregate of 9,732,695 shares of our common
stock for issuance pursuant to awards under these stock option plans. If an
option terminates or expires without having been exercised in full, the shares
subject to such option continue to be available under our stock option plans.
Options granted under these stock option plans generally expire ten years after
the date of grant.
As of the date of this prospectus, options to purchase an aggregate of
7,581,561 shares of common stock were outstanding to employees under the
Incentive Plan and options to purchase an aggregate of 140,000 shares of common
stock were outstanding under the Non-Employee Plan. No further options will be
granted under these plans after completion of this offering. However, the
number of shares of our common stock reserved under these plans before the
offering that are not committed by outstanding or exercised options will be
available for grant under our 2000 Equity Incentive Plan and the 2000 Outside
Directors Stock Option Plan.
The 1995 stock option plans are administered by one or more committees
designated by the board, which has the authority to determine who receives
options and the number of shares that may be purchased. All options are granted
at an exercise price determined by our board equal to or greater than the fair
market value of the underlying stock on the date of grant. Our board may amend
or terminate the plan at any time. However, any amendment which increases the
number of shares reserved under the plans or materially changes the persons
eligible for awards is subject to the approval of our stockholders.
Options under the Incentive Plan become vested and exercisable as follows
unless otherwise provided in the applicable award agreement: 25% on the first
anniversary of the date of grant and monthly thereafter for a 36-month period.
Options under the Non-Employee plan become vested and exercisable in three
equal annual installments unless otherwise provided in the applicable option
agreement. Upon a change of control as defined in the plan, options under the
Incentive Plan will vest, if not already vested, unless otherwise provided by
the committee, to the extent they would have been vested if they had been
granted three years prior to the change of control, and options under the Non-
Employee Plan become fully vested and exercisable.
Except as otherwise provided in the option agreement, upon termination of
employment (for options under the Incentive Plan) or service (for options under
the Non-Employee Plan), the nonvested portion of an option terminates, and the
vested portion must be exercised if at all within 30 days following termination
of employment or within three months following termination of service. Options
are not transferable during the grantee's lifetime, except that options under
the Non-Employee Plan, and options under the Incentive Plan if the option
agreement so provides, may be transferred to certain family members, family
trusts, family partnerships or similar entities. The exercise price may be paid
in cash or, if permitted by the committee, by turning in currently owned shares
or by "cashless exercise" through a broker.
55
<PAGE>
Employee Stock Purchase Plan
In April 2000, our board approved our 2000 Employee Stock Purchase Plan,
subject to the approval of our stockholders. The plan will become effective
upon approval by our stockholders. No options or other awards will be granted
under this plan prior to effectiveness of this registration statement. We have
authorized a total of 1,800,000 shares of common stock for issuance under the
plan. The number of authorized shares automatically increases each May 1,
beginning on May 1, 2001 and ending on the May 1 preceding the date on which
the plan is terminated, by 1% of our then outstanding shares of common stock or
by 1,000,000 shares, whichever is less. Our compensation committee will
administer the plan. The first enrollment period under the plan will begin on
the first day of the first calendar quarter that begins at least 30 days after
this offering becomes effective, or such other date designated by the
committee.
Employees generally will be eligible to participate in the plan if they are
employed for at least six months as of the beginning of the applicable offering
period and they are customarily employed by us, or any of our subsidiaries that
we designate, for more than 20 hours per week and more than five months in a
calendar year. Employees are not eligible to participate in the plan if they
hold 5% or more of our outstanding stock, or would become 5% stockholders as a
result of their participation in this plan, or are non-U.S. employees barred
from participation by the laws of their own country, or are members of a
collective bargaining unit.
Under the plan, eligible employees will be able to acquire shares of our
common stock through payroll deductions. Eligible employees may elect payroll
deductions between 1% and 10% of their cash compensation, or a dollar amount,
up to $15,000 (or such higher or lower amount determined by the committee) for
the enrollment period, and are subject to maximum purchase limitations.
Participation in this plan will end automatically upon termination of
employment for any reason. Each enrollment period under the plan will be six
months or such other period (not longer than 27 months) as the committee may
designate. A new enrollment period will begin on the semiannual anniversary of
the commencement of the prior enrollment period or on such other date as the
committee designates. The purchase price for common stock under the plan will
be 85% of the fair market value of our common stock on the first day of the
applicable enrollment period or on the date of purchase, whichever is less.
The plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code. The plan will terminate on the day
prior to the 10th anniversary of the approval of the plan by our board of
directors unless it is terminated earlier by the board. The board may amend or
terminate the plan at any time.
401(k) Plan
We have adopted a 401(k) retirement savings plan. This plan is available to
all employees other than nonresident aliens with no U.S. source income.
Beginning on the first day of the quarter following date of hire, an employee
may contribute, on a pretax basis, 1% to 15% of the employee's compensation
from us, subject to certain limitations under the Internal Revenue Code. In our
discretion, we may match the employee's contributions at such rate as we
determine or make other contributions on behalf of the employees. Contributions
are allocated to each employee's individual account and are, at the employee's
election, invested in one, all, or some combination of the mutual funds offered
under the plan. Employee contributions are fully vested and non-forfeitable.
Employer contributions vest over a six-year period.
56
<PAGE>
CERTAIN TRANSACTIONS
Our policy is that all transactions between Open Port and its executive
officers, directors and principal stockholders occurring outside the ordinary
course of business be on terms no less favorable than could be obtained from
unaffiliated third parties or be subject to the approval of our disinterested
directors.
Series D Preferred Stock. In April 1999, we sold an aggregate of 935,454
shares of Series D convertible preferred stock at a cash purchase price of
$3.207 per share to 11 investors. All outstanding shares of Series D preferred
stock will automatically convert into an aggregate of 1,863,355 shares of
common stock upon completion of this offering. The following 5% beneficial
owners of Open Port common stock purchased shares of Series D preferred stock
convertible upon completion of this offering into the number of shares of
common stock indicated:
<TABLE>
<CAPTION>
Number of Series D
Name Conversion Shares
---- ------------------
<S> <C>
Battery Ventures III, L.P................ 377,904
Frontenac VI Limited Partnership......... 485,396
New Enterprise Associates VII, Limited
Partnership............................. 413,044
</TABLE>
Mr. Crotty, one of our directors, is a general partner of Battery Ventures, the
general partner of Battery Ventures III, L.P. James Crawford, a former
director, is a general partner of Frontenac Company, the general partner of
Frontenac VI Limited Partnership. Mr. Barris, one of our directors, is the
general partner of: (a) NEA Partners VII, Limited Partnership, the general
partner of New Enterprise Associates VII, Limited Partnership; (b) NEA General
Partners, L.P., the general partner of NEA Presidents' Fund, L.P.; and (c) NEA
Ventures 1997, L.P.
Series E Preferred Stock. In January 2000, we sold an aggregate of
17,436,746 shares of our Series E convertible participating preferred stock.
15,527,950 of such shares were sold at a cash purchase price of $1.61 per share
to 26 investors and 1,908,796 of such shares were issued to ten investors
pursuant to the conversion, at a conversion price of $1.61 per share, of
principal and interest of the subordinated convertible promissory notes
described below which were issued in September 1999. The Series E preferred
stock will automatically convert into common stock on a share-for-share basis
upon completion of this offering. The following investors affiliated with 5%
beneficial owners of Open Port purchased shares of Series E preferred stock
convertible upon completion of this offering into the number of shares of
common stock indicated:
<TABLE>
<CAPTION>
Number of Series E
Name Conversion Shares
---- ------------------
<S> <C>
Battery Ventures III, L.P................ 504,947
Brookside Capital Partners Fund, L.P..... 6,211,180
CID Equity Capital V, L.P................ 265,944
CID Mezzanine Capital, L.P............... 180,850
Frontenac VI Limited Partnership......... 408,817
NEA Ventures 1997, L.P................... 348,508
WPG Raytheon Networking Fund, L.P........ 1,065,308
WPG Institutional Software Fund, L.P..... 722,981
WPG Raytheon Software Fund, L.P.......... 511,957
WPG Networking Fund, L.P................. 430,013
WPG Software Fund, L.P................... 317,857
WPG Institutional Networking Fund, L.P... 48,157
</TABLE>
57
<PAGE>
Mr. Crotty, one of our directors, is a general partner of Battery Ventures,
the general partner of Battery Ventures III, L.P. James Crawford, a former
director, is a general partner of Frontenac Company, the general partner of
Frontenac VI Limited Partnership. Mr. Barris, one of our directors, is the
general partner of NEA Ventures 1997, L.P. In addition, Raj Mehra, the general
partner of WPG Raytheon Software Fund, L.P., WPG Software Fund, L.P., WPG
Institutional Software Fund, L.P., WPG Raytheon Networking Fund, L.P., WPG
Networking Fund, L.P. and WPG Institutional Networking Fund, L.P., purchased
shares of Series E preferred stock which will convert into 9,317 shares of
common stock upon completion of this offering.
Bridge Financing. In September 1999, we entered into a subordinated
convertible promissory note purchase agreement with certain of our existing
investors, including Battery Ventures III, L.P. and NEA Ventures 1997, L.P.,
whereby we authorized the issuance of subordinated convertible promissory notes
in the original aggregate principal amount of up to $3.0 million. Interest
accrued on the outstanding amounts at a rate of 1% above the prime rate of
interest. We issued $3.0 million aggregate principal amount of these notes in
three installments between September 1999 and November 1999. All of the notes
issued in connection with this facility were converted to Series E preferred
stock in connection with the Series E preferred stock financing.
Voting and Co-Sale Agreement. In July 1995, in connection with our Series A
preferred stock financing, Open Port, the holder of the Series A preferred
stock and the holders of the then outstanding common stock, entered into a
voting and co-sale agreement, which was subsequently amended and restated in
connection with our Series B preferred stock financing in March 1996, April
1996 and March 1997, our Series C preferred stock financing in June 1998, our
Series D preferred stock financing and our Series E preferred stock financing.
As of the completion of the Series E preferred stock financing, the parties to
the voting and co-sale agreement included Open Port, each of the holders of our
existing preferred stock and the following founding stockholders: Messrs.
Storch, Nandyal, Dutra and Wegner and Gordon Kapes, as well as certain
stockholders affiliated with certain of these founding stockholders. The voting
and co-sale agreement will terminate upon completion of this offering.
Registration Rights Agreement. In July 1995, in connection with the Series A
preferred stock financing, we and the holder of Series A preferred stock,
entered into a registration rights agreement, which was subsequently amended
and restated in connection with each of the Series B preferred stock financing,
the Series C preferred stock financing, the Series D preferred stock financing
and the Series E preferred stock financing, at which time each holder of
existing preferred stock became a party to that agreement. Pursuant to the
registration rights agreement, each holder of existing preferred stock and each
of our founding stockholders have certain registration rights with respect to
their shares of common stock including common stock to be issued upon
conversion of our preferred stock.
CID Loan and Warrant. In June 1998, we entered into a note and warrant
purchase agreement with CID Mezzanine Capital, L.P., which was later amended in
December 1998, February 1999, and April 1999. This agreement authorized us to
issue up to an aggregate of $5.0 million in principal amount of our 11%
subordinated notes to CID Mezzanine. As of December 31, 1999, we had issued all
$5.0 million in subordinated notes under this facility. The proceeds of these
loans have been used for working capital and other general corporate purposes.
In connection with the issuance of these subordinated notes, in June 1998 we
granted CID Mezzanine warrants to purchase up to 370,310 shares of Series C
preferred stock at an exercise price of $0.01 per share. All outstanding
subordinated notes are due and payable on July 1, 2001. We also entered into a
security agreement with CID Mezzanine which granted a security interest in all
of our assets, and agreed that upon exercise of the warrants, CID would become
a party to the voting and co-sale agreement and the registration rights
agreement between us and various investors. CID Mezzanine is an affiliate of
CID Equity Capital III, L.P. and CID Equity Capital V, L.P. We intend to repay
the outstanding balance under this mezzanine debt facility with a portion of
the net proceeds from this offering. See "Use of Proceeds."
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
our common stock, as of March 31, 2000, by:
. each person known to us to own beneficially more than 5% of our
outstanding common stock;
. each of our directors;
. each of our executive officers named in the summary compensation table;
and
. all of our directors and executive officers as a group.
The beneficial ownership of our common stock set forth in this table is
determined in accordance with the rules of the Securities and Exchange
Commission. As of March 31, 2000, we had 57,044,640 shares of common stock
outstanding, assuming conversion of all of our outstanding preferred stock. In
computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to options
or warrants held by that person that are currently exercisable or will become
exercisable within 60 days after March 31, 2000 are considered outstanding,
while these shares are not considered outstanding for purposes of computing
percentage ownership of any other person. Unless otherwise indicated in the
footnotes below, the persons and entities named in the table have sole voting
and investment power as to all shares beneficially owned, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
Percent of
Shares Beneficially Owned(1) Ownership
---------------------------- -----------------
Warrants
Common and Before After
Name of Beneficial Owner Stock Options Total Offering Offering
- ------------------------ --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
CID Equity Capital III, L.P. 6,163,088 392,175 6,555,263 11.5% %
(2)...........................
One American Sq., Suite 2850
Indianapolis, IN 46282
Frontenac VI Limited 6,219,947 -- 6,219,947 10.9
Partnership...................
135 South LaSalle, Suite 3800
Chicago, IL 60603
Brookside Capital Partners 6,211,180 -- 6,211,180 10.9
Fund, L.P.....................
2 Copley Place
Boston, MA 02116
New Enterprise Associates VII,
Limited Partnership (3)....... 5,295,589 -- 5,295,589 9.3
11911 Freedom Drive
Reston, VA 20190
Battery Ventures III, L.P...... 5,027,237 -- 5,027,237 8.8
20 William Street, Suite 200
Wellesley, MA 02181
WPG Software Fund, L.P. (4).... 3,105,590 -- 3,105,590 5.4
One New York Plaza
New York, NY 10004
Randy S. Storch (5)............ 1,850,000 116,666 1,966,666 3.4
Cheryl E. Mayberry............. 425,866 263,800 689,666 1.2
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Percent of
Shares Beneficially Owned(1) Ownership
------------------------------ -----------------
Warrants
Common and Before After
Name of Beneficial Owner Stock Options Total Offering Offering
- ------------------------ ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Omprasad S. Nandyal (6)...... 1,850,000 58,333 1,908,333 3.3
Michael B. Clauer............ -- -- -- --
Peter J. Barris (7).......... 5,295,589 -- 5,295,589 9.3
Thomas J. Crotty (8)......... 5,027,237 -- 5,027,237 8.8
Royce J. Holland............. 70,232 -- 70,232 *
Donald R. Hollis (9)......... 539,513 20,833 560,346 1.0
John E. Major................ -- -- -- --
Joseph A. Piscopo............ 1,130,131 -- 1,130,131 2.0
All directors and executive
officers as a group (10
persons).................... 16,188,568 459,632 16,648,200 29.2% %
</TABLE>
- --------
* Represents beneficial ownership of less than one percent of the outstanding
common stock.
(1) This tables assumes that all of our outstanding shares of preferred stock
will be converted into common stock, that the voting and co-sale agreement
between our existing preferred stockholders and our founding stockholders
will be terminated upon completion of this offering and that the proxies
granted to Mr. Storch by certain employees will be terminated upon
completion of this offering. See "Certain Transactions-Voting and Co-sale
Agreement."
(2) Includes 885,216 shares held by CID Equity Capital V, L.P., an affiliate
of CID Equity Capital III, L.P, and 180,850 shares held and 370,310 shares
subject to warrants held by CID Mezzanine Capital, L.P., an affiliate of
CID Equity Capital III, L.P.
(3) Includes 102,202 shares held by NEA Presidents' Fund, L.P., and 354,700
shares held by NEA Ventures 1997, L.P., affiliates of New Enterprise
Associates VII, Limited Partnership.
(4) Includes 722,981 shares held by WPG Institutional Software Fund, L.P.,
511,957 shares held by WPG Raytheon Software Fund, L.P., 48,157 shares
held by WPG Institutional Networking Fund, L.P., 430,013 shares held by
WPG Networking Fund, L.P., 1,065,308 shares held by WPG Raytheon
Networking Fund, L.P. and 9,317 shares held by Raj Mehra, affiliates of
WPG Software Fund, L.P and of each other.
(5) Includes 75,000 shares held in the name of Mark L. Gordon, trustee of the
Deborah S. Storch Generation-Skipping Trust of 1998 and 75,000 shares held
in the name of Mark L. Gordon, trustee of the Randy S. Storch Generation-
Skipping Trust of 1998. Mr. Storch disclaims beneficial ownership of these
shares.
(6) Includes 50,000 shares held in the name of Srinath Nandyal, trustee of the
Omprasad Srinath Nandyal Generation-Skipping Trust of 1998, and 50,000
shares held in the name of Srinath Nandyal, trustee of the Shubha Omprasad
Nandyal Generation-Skipping Trust of 1998. Mr. Nandyal disclaims
beneficial ownership of these shares.
(7) Mr. Barris shares voting and dispositive power over such shares in his
capacity as a general partner of: (a) NEA Partners VII, Limited
Partnership, the general partner of New Enterprise Associates VII, Limited
Partnership; (b) NEA General Partners, L.P., the general partner of NEA
Presidents' Fund, L.P.; and (c) NEA Ventures 1997, L.P. Mr. Barris does
not directly own any shares of our common stock.
(8) Mr. Crotty shares voting and dispositive power over such shares in his
capacity as a general partner of Battery Ventures, the general partner of
Battery Ventures III, L.P. Mr. Crotty does not directly own any shares of
our common stock.
(9) Includes 320,062 shares held in the name of the Hollis Family Limited
Partnership #1 f/k/a Hollis Family Limited Partnership.
60
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our certificate of incorporation will
provide that our authorized capital stock consists of million shares of
common stock, $0.001 par value, and million shares of preferred stock,
$0.001 par value. As of March 31, 2000, there were 12,848,809 shares of common
stock outstanding, which were held of record by approximately 78 stockholders.
An additional 44,195,831 shares of common stock will be issued to approximately
48 stockholders upon the closing of this offering as the result of mandatory
conversion of our outstanding preferred stock. Upon closing of this offering,
there will be no shares of preferred stock outstanding.
Common Stock
Holders of common stock will be entitled to one vote for each share held on
all matters subject to a vote of stockholders, subject to the rights of holders
of any outstanding preferred stock, and will not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock entitled to
vote in any election of directors may elect all of the directors standing for
election, subject to the rights of holders of any outstanding preferred stock.
Holders of common stock will be entitled to receive ratably any dividends that
the board of directors may declare out of funds legally available therefor,
subject to any preferential dividend rights of outstanding preferred stock.
Upon the liquidation, dissolution or winding up of Open Port, the holders of
common stock will be entitled to receive ratably the net assets of Open Port
available after the payment of all debts and other liabilities and subject to
the prior rights of holders of any outstanding preferred stock. Holders of
common stock will have no preemptive, subscription, redemption or conversion
rights. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
nonassessable and the shares of common stock to be issued on completion of this
offering will be fully paid and nonassessable.
Preferred Stock
Under our certificate of incorporation, we will be authorized to issue
million shares of preferred stock, which may be issued from time to time in one
or more series upon authorization by the board of directors. The board of
directors, without further approval of the stockholders, will be authorized to
fix the number of shares constituting any series, as well as the dividend,
conversion, voting and redemption rights and terms, as well as liquidation
preferences and any other rights, preferences, privileges and restrictions
applicable to each series of preferred stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could also adversely affect the voting power and dividend
and liquidation rights of the holders of common stock. The issuance of
preferred stock could also, under some circumstances, have the effect of making
it more difficult for a third party to acquire, or discouraging a third party
from acquiring, a majority of our outstanding voting stock or otherwise
adversely affect the market price of our common stock. It is not possible to
state the actual effect of the issuance of any shares of preferred stock on the
rights of holders of common stock until the board of directors determines the
specific rights of that series of preferred stock.
Registration Rights of Stockholders
Following this offering, holders of an aggregate of 51,595,831 shares of our
outstanding common stock and holders of warrants to purchase 1,431,964 shares
of our common stock will be entitled to rights with respect to registration of
these shares of common stock under the Securities Act. Subject to limitations
provided in the agreement and those in lock-up
61
<PAGE>
agreements that these stockholders have signed relating to this offering, these
stockholders have the right, beginning six months after completion of this
offering, in certain circumstances to require us to register their shares of
common stock under the Securities Act. We have granted up to four company-paid
demand registration rights to the holders of our outstanding preferred stock,
each such demand right being exercisable by any such holder or holders owning
not less than 5% of the common stock issuable upon conversion of the Series E
preferred stock or 7.6% of the common stock issuable upon conversion of any
other series of preferred stock. With respect to any demand registration,
including those described in the next paragraph, we are not required to, but
may, include shares held by other holders of preferred stock in such
registration statement.
In addition, we have granted up to three other demand registration rights to
the purchasers of Series E preferred stock as a group (provided that the
holders of Series E preferred stock may not demand more than four
registrations, including registrations that were demanded by the holders of
Series E preferred stock pursuant to the registration rights described in the
preceding paragraph). These demand registration rights are exercisable by any
stockholder holding not less than 5% of the common stock issuable upon
conversion of the Series E preferred stock. These demand rights may first be
exercised 120 days after this offering, requiring us to use our best commercial
efforts to cause a registration statement to become effective on the 181st day
after the effectiveness of this registration statement and to keep such
registration statement effective for 180 days. Any such demand registration
will be underwritten only if requested by the holders of a majority of the
common stock issuable upon conversion of the Series E preferred stock included
in such registration. The holders of Series E preferred stock have agreed that
they will not offer or sell securities pursuant to a registration statement
without giving us 10 days' notice.
If we propose to register our securities under the Securities Act after this
offering, these stockholders and the holder of warrants to purchase up to
1,431,964 shares of our common stock will be entitled to notice of the
registration and to include their shares in the registration, provided that the
underwriters of the proposed offering will have the right to limit the number
of shares included in the registration. We must pay for all expenses in
connection with these registrations, other than any underwriters' discounts and
commissions.
Options and Warrants
As of the date of this prospectus, options to purchase an aggregate of
1,162,325 shares of common stock may be granted under the 1995 Stock Option
Plan. There are 7,721,561 options outstanding under the plan at a weighted
average exercise price of $1.31 per share, of which 1,554,803 will be
exercisable upon the completion of this offering.
As of the date of this prospectus, 1,559,272 shares of common stock were
issuable upon the exercise of outstanding warrants with a weighted average
exercise price of $1.17 per share. Upon the closing of this offering, we will
have outstanding warrants as follows:
<TABLE>
<CAPTION>
Exercise Price
Holder Number of Shares Per Share Expiration Date
- ------ ---------------- -------------- ----------------
<S> <C> <C> <C>
Comdisco, Inc................ 73,737 $ 0.81 November 7, 2005
Comdisco, Inc................ 53,571 1.12 August 15, 2006
Third Coast Venture
Lease Partners I, L.P....... 20,919 2.03 June 22, 2008
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
Exercise Price
Holder Number of Shares Per Share Expiration Date
- ------ ---------------- -------------- ---------------------
<S> <C> <C> <C>
CID Mezzanine Capital,
L.P.................... 392,175 .01 The third anniversary
of the date the loan
is repaid. See "Use
of Proceeds."
Silicon Valley Bank..... 79,428 2.03 January 28, 2004
Deutsche Bank Securities
Inc.................... 939,441 1.61 October 22, 2004
</TABLE>
Indemnification and Limitation of Liability
Upon the closing of this offering, our certificate of incorporation will
provide that no director of Open Port shall have any personal liability to Open
Port or its stockholders for breach of fiduciary duty as a director, except for
liability:
. for breach of the director's duty of loyalty to Open Port or its
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. for payment of dividends or stock purchases or redemptions by the
corporation in violation of Section 174 of the Delaware General
Corporation Law; or
. for any transaction from which the director derived an improper personal
benefit.
As a result of this provision, Open Port and our stockholders may be unable
to obtain monetary damages from a director for certain breaches of his or her
fiduciary duty. This provision does not, however, eliminate the directors'
fiduciary responsibilities and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Delaware law. The provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
Upon the closing of this offering, our by-laws will provide for the
indemnification of our directors and officers to the fullest extent authorized
by the Delaware General Corporation Law. Such indemnification may include, if
we so decide, the right of the indemnified party to be paid expenses in advance
of any proceeding for which indemnification may be had, provided that the
payment of these expenses incurred by a director or officer in advance of the
final disposition of a proceeding may be made only upon delivery to us of an
undertaking by or on behalf of the director or officer to repay all amounts
paid in advance if it is ultimately determined that the director or officer is
not entitled to be indemnified. In addition, our certificate of incorporation
provides that our employees and other agents, may be indemnified in accordance
with the Delaware General Corporation Law to the extent determined by our board
of directors in its sole discretion.
Anti-Takeover Effects of Certain Provisions of Delaware Law and our Certificate
of Incorporation and By-laws
Some provisions of Delaware law, our certificate of incorporation and by-
laws may be deemed to have an anti-takeover effect and may delay or prevent a
tender offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.
63
<PAGE>
Section 203 of Delaware General Corporation Law
Section 203 of the Delaware General Corporation Law prohibits certain
transactions between a Delaware corporation and an "interested stockholder,"
which is defined as a person who, together with any affiliates or associates,
beneficially owns, directly or indirectly, 15% or more of the outstanding
voting shares of a Delaware corporation. This provision prohibits certain
business combinations between an interested stockholder and a corporation for a
period of three years after the date the interested stockholder becomes an
interested stockholder, unless:
. the business combination is approved by the corporation's board of
directors prior to the date the interested stockholder becomes an
interested stockholder;
. the interested stockholder acquired at least 85% of the voting stock of
the corporation (other than stock held by directors who are also
officers or by certain employee stock plans) in the transaction in which
it becomes an interested stockholder; or
. the business combination is approved by a majority of the board of
directors and by the affirmative vote of 66 2/3% of the outstanding
voting stock that is not owned by the interested stockholder.
For this purpose, business combinations include mergers, consolidations,
sales or other dispositions of assets having an aggregate value in excess of
10% of the consolidated assets of the corporation, and certain transactions
that would increase the interested stockholder's proportionate share ownership
in the corporation.
Classified Board of Directors
Our board of directors will be divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
board of directors is elected each year. These provisions, when coupled with
the provision of our certificate of incorporation authorizing the board of
directors to fill vacant directorships or increase the size of the board of
directors, may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies created by such removal with its own nominees.
Number of Directors; Removal; Vacancies
Our by-laws will provide that we have at least three directors, with the
exact number fixed by the board of directors. Vacancies on the board of
directors may be filled only by the affirmative vote of the remaining directors
then in office. Our certificate of incorporation will provide that directors
may be removed only for cause and only by the holders of at least 80% of the
outstanding shares of stock entitled to vote generally in the election of
directors, voting together as a single class.
Special Meetings of Stockholders; Limitations on Stockholder Action By Written
Consent
Our certificate of incorporation will provide that special meetings of our
stockholders may be called only by a majority of the board of directors, the
chairman of the board or the chief executive officer. In addition, the
certificate of incorporation will provide that, following the closing of this
offering, our stockholders may only take actions at a duly called annual or
special meeting of stockholders and may not take action by written consent
unless the action to be effected by written consent of stockholders and the
taking of such action by such written consent have expressly been approved in
advance by the board of directors.
64
<PAGE>
Advance Notice Requirements for Stockholder Proposals and Nomination of
Directors
Our by-laws will provide that stockholders seeking to bring business before
an annual meeting of stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders, must provide timely notice in
writing. To be timely, a stockholder's notice must be delivered to or mailed
and received at our principal executive offices not less than 90 days nor more
than 120 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders. However, in the event that the annual meeting is
called for a date that is not within 30 days before or after such anniversary
date, notice by the stockholder in order to be timely must be received not
later than the close of business on the tenth day following the date on which
notice of the date of the annual meeting was mailed to stockholders or made
public, whichever first occurs. Our by-laws also specify requirements as to the
form and content of a stockholder's notice.
Consideration of Constituencies with respect to Acquisitions
Our certificate of incorporation will provide that in determining whether an
acquisition proposal is in the best interests of Open Port and its
stockholders, our board of directors may, to the extent permitted by law,
consider all factors it deems relevant, including the effects of the
acquisition upon employees, suppliers, customers and the communities in which
we are located.
Amendments; Supermajority Vote Requirements
The Delaware General Corporation Law provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or by-laws, unless either a
corporation's certificate of incorporation or by-laws require a greater
percentage. Our certificate of incorporation and by-laws will impose
supermajority vote requirements in connection with the amendment of provisions
of our certificate of incorporation and by-laws, including those provisions
relating to the classified board of directors, action by written consent and
the ability of stockholders to call special meetings.
Ability to Adopt Stockholder Rights Plan
The board of directors may in the future resolve to issue shares of
preferred stock or rights to acquire such shares to implement a stockholder
rights plan. A stockholder rights plan typically creates voting or other
impediments that would discourage persons seeking to gain control of Open Port
by means of a merger, tender offer, proxy contest or otherwise if the board of
directors determines that such change in control is not in the best interests
of our stockholders.
Transfer Agent
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company, New York, New York.
Listing
We have applied to list our shares of common stock on the Nasdaq National
Market under the symbol "OPRT."
65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Following this offering, we will have shares of common stock
outstanding. All the shares we sell in this offering will be freely tradable
without restriction or further registration under the Securities Act, except
that any shares purchased by our affiliates, as that term is defined in Rule
144, may generally only be sold in compliance with the limitations of Rule 144
described below.
The remaining 57,044,640 shares of common stock outstanding following this
offering will be "restricted securities" as the term is defined under Rule 144.
We issued and sold these restricted securities in private transactions in
reliance on exemptions from registration under the Securities Act. Restricted
securities may be sold in the public market only if they are registered or if
they qualify for an exemption under Rule 144 or Rule 701 under the Securities
Act, as summarized below.
Taking into account the lock-up agreements described below and assuming
Deutsche Bank Securities Inc. does not release stockholders from these
agreements, the following shares will be eligible for sale in the public market
at the following times:
. on the date of this prospectus, shares (including the
shares sold in this offering) will be immediately available for sale in
the public market;
. 180 days after the date of this prospectus, approximately 39,607,894
shares will be eligible for sale, 16,856,361 of which will be subject to
volume, manner of sale and other limitations under Rule 144; and
. the remaining 17,436,746 shares may be eligible for sale as early as the
181st day after the date of this prospectus if the holders of these
shares exercise the demand registration rights described below;
otherwise such shares will be eligible for sale under Rule 144 from to
time upon the expiration of various one-year holding periods.
Lock-up Agreements. We have agreed with the underwriters that we will not,
without the prior written consent of Deutsche Bank Securities Inc., issue any
additional shares of common stock or securities convertible into, exercisable
for or exchangeable for shares of common stock for a period of 180 days after
the date of this prospectus, except that we may grant options to purchase
shares of common stock under our employee benefit plans, and issue shares of
common stock upon the exercise of outstanding options and warrants.
Our officers, directors and other stockholders have agreed that they will
not, without the prior written consent of Deutsche Bank Securities Inc., offer,
sell, pledge or otherwise dispose of any shares of our common stock or any
securities convertible into or exercisable or exchangeable for, or any rights
to acquire or purchase, any of our common stock, or publicly announce an
intention to effect any of these transactions, for a period of 180 days after
the date of this prospectus.
Rule 701. Shares issuable upon exercise of options we granted prior to the
date of this prospectus will also be available for sale in the public market
pursuant to Rule 701 under the Securities Act, subject to certain Rule 144
limitations and to the lock-up agreements. Rule 701 permits resales of these
shares beginning 90 days after the date of this prospectus by persons other
than affiliates.
66
<PAGE>
Rule 144. In general, under Rule 144, a stockholder who owns restricted
shares that have been outstanding for at least one year is entitled to sell,
within any three-month period, a number of these restricted shares that does
not exceed the greater of:
. one percent of the then outstanding shares of common stock, or
approximately shares immediately after this offering; or
. the average weekly trading volume in the common stock on the Nasdaq
Stock Market during the four calendar weeks preceding the sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements.
Persons deemed to be our affiliates must always sell pursuant to Rule 144,
even after expiration of the 144(k) holding period described below. In other
words, our affiliates must comply with the restrictions and requirements of
Rule 144, other than the one-year holding period requirement, to sell shares of
common stock which are not restricted securities.
Rule 144(k). Under Rule 144(k), a stockholder who is not currently, and who
has not been for at least three months before the sale, an affiliate of ours
and who owns restricted shares that have been outstanding for at least two
years may resell these restricted shares without compliance with the above
requirements. The one- and two-year holding periods described above do not
begin to run until the full purchase price is paid by the person acquiring the
restricted shares from us or an affiliate of ours.
Employee Benefit Plans. As of the date of this prospectus, we have granted
options to purchase 7,721,561 shares of common stock pursuant to our stock
option plans. We intend to file, after the effective date of this offering, one
or more registration statements on Form S-8 to register the shares of common
stock reserved for issuance under our stock option plans. The registration
statement on Form S-8 will become effective automatically upon filing. Shares
issued under our 1995 Stock Option Plan, after the filing of a registration
statement on Form S-8 may be sold in the open market, subject, in the case of
some holders, to the Rule 144 limitations applicable to affiliates, the lock-up
agreements and vesting restrictions imposed by us.
Registration Rights. In addition, following this offering, the holders of
51,595,831 shares of outstanding common stock and the holders of warrants to
purchase 1,431,964 shares of common stock will, under some circumstances, have
rights to require us to register their shares for future sale. These include
the demand registration rights we granted to the holders of our Series E
preferred stock, which will convert into 17,436,746 shares of common stock upon
completion of this offering. We expect these registration rights to be
exercised. If exercised, these rights would require us to use our best
commercial efforts to cause a registration statement under the Securities Act,
to become effective on the 181st day, after the effectiveness of this
registration statement and to keep such registration statement effective for
180 days. Registration of these shares would result in these shares becoming
freely tradable without restriction under the Securities Act provided the
shares are not purchased by any of our affiliates. See "Description of Capital
Stock--Registration Rights of Stockholders."
67
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank
Securities Inc., FleetBoston Robertson Stephens Inc., and Dain Rauscher
Incorporated, have severally agreed to purchase from us the following
respective number of shares of common stock at the initial public offering
price less the underwriting discounts and commissions set forth on the cover
page of this prospectus:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
- ----------- ---------
<S> <C>
Deutsche Bank Securities Inc..........................................
FleetBoston Robertson Stephens Inc....................................
Dain Rauscher Incorporated............................................
---
Total...............................................................
===
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all of
the shares of common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the initial public offering price set forth on the cover page of this
prospectus and to certain dealers at that price less a concession not in excess
of $ per share. The underwriters may allow, and these dealers may re-
allow, a concession of not more than $ per share to other dealers. After
the initial public offering, the offering price and other selling terms may be
changed by the representatives of the underwriters.
Certain stockholders have granted to the underwriters an option, exercisable
not later than 30 days after the date of this prospectus, to purchase up to
shares of common stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. The underwriters may exercise this option only to cover over-
allotments made in connection with the sale of the common stock offered in this
offering. To the extent that the underwriters exercise this option, each of the
underwriters will become obligated, subject to conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number of shares of common stock to be purchased by it in the above table bears
to the total number of shares of common stock offered in this offering. The
selling stockholders will be obligated, pursuant to this option, to sell these
additional shares of common stock to the underwriters to the extent the option
is exercised. If any additional shares of common stock are purchased, the
underwriters will offer the additional shares on the same terms as those on
which the shares are being offered.
The underwriting fee is equal to the initial public offering price per share
of common stock less the amount paid by the underwriters to us per share of
common stock. We and the selling stockholders have agreed to pay the
underwriters the following fees, assuming either no exercise or full exercise
by the underwriters of the underwriters' over-allotment option:
<TABLE>
<CAPTION>
Total Fees
---------------------------------------------------------
Without Exercise Of With Full Exercise Of
Fee Per Share Over-Allotment Option Over-Allotment Option
------------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by Open Port.. $ $ $
Fees paid by the selling
stockholders........... $ $ $
</TABLE>
68
<PAGE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ . The selling stockholders will pay a pro rata share of
this amount based on the percentage of the number of shares sold in connection
with the over-allotment option, if any, to the total number of shares sold in
this offering.
We and the selling stockholders have agreed to indemnify the underwriters
against certain specified liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters may be required
to make in respect of any of these liabilities.
Each of our officers and directors, certain stockholders and certain holders
of options and warrants to purchase our stock, has agreed not to offer, sell,
sell short, contract to sell, transfer, hypothecate, pledge or otherwise
dispose of, or enter into any transaction that is designed to, or could be
expected to, result in the disposition of any shares of our common stock or
other securities convertible into or exchangeable or exercisable for shares of
our common stock or derivatives of our common stock for a period of 180 days
after the effective date of the registration statement of which this prospectus
is a part, directly or indirectly, without the prior written consent of
Deutsche Bank Securities Inc. This consent may be given at any time without
public notice. We have entered into a similar agreement with the
representatives of the underwriters.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these over-
allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares for our directors, officers,
employees, vendors, customers and other third parties. The number of shares of
our common stock available for sale to the general public will be reduced to
the extent these reserved shares are purchased. Any reserved shares that are
not purchased by these persons will be offered by the underwriters to the
general public on the same basis as the other shares in this offering.
In January 2000, we sold shares of our Series E preferred stock in a private
placement at a price of $1.61 per share. Each of the shares of Series E
preferred stock is convertible at the option of the holder into one share of
our common stock. In conjunction with this private placement, Deutsche Bank
Securities Inc. received a warrant dated as of October 22, 1999 to purchase
939,441 shares of common stock at an exercise price of $1.61 per share. The
exercise price per share under the warrant issued to Deutsche Bank Securities
Inc. is the same price per share paid by the investors in the private
placement. In addition, persons affiliated with Deutsche Bank Securities Inc.
purchased Series E preferred stock on the same terms as the other investors in
the private placement. Deutsche Bank Securities Inc. is deemed the beneficial
owner of 45,900 of shares of Series E preferred stock.
69
<PAGE>
Pricing of this Offering
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock
will be determined by negotiation among us and the representatives of the
underwriters. Among the primary factors to be considered in determining the
public offering price are:
. prevailing market conditions;
. our results of operations in recent periods;
. the present stage of our development;
. the market capitalization and stage of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and
. estimates of our business potential.
The estimated initial public offering price range set forth on the cover of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for Open
Port by Sonnenschein Nath & Rosenthal, Chicago, Illinois. Certain legal matters
with respect to this offering will be passed upon for Open Port by Gordon &
Glickson LLC, Chicago, Illinois. Gordon & Glickson LLC owns 65,050 shares of
our common stock. Certain legal matters with respect to this offering will be
passed upon for the underwriters by Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts.
EXPERTS
The financial statements of Open Port as of December 31, 1998 and 1999 and
for each of the three years in the period ended December 31, 1999 included in
this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits, schedules and any amendments with
respect to the common stock we are offering hereby. This prospectus is a part
of the registration statement and includes all of the information which we
believe is material to you in considering whether to make an investment in our
common stock. We refer you to the registration statement for additional
information about us, our common stock and this offering, including the full
texts of the exhibits, some of which have been summarized in this prospectus.
Statements contained in this prospectus as to the contents of any contract or
any other document referred to are not necessarily complete. With respect to
each such contract or other document filed as a part of the Registration
Statement, reference is made to the exhibit for a more complete description of
the matters involved, and each such statement shall be deemed qualified in its
entirety by such reference. The registration statement is available for
inspection and copying at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. The public may obtain information about the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In
addition, the SEC maintains an Internet site that makes available the
registration statement. The address of the SEC's Internet site is www.sec.gov.
As a result of this offering, Open Port will be required to file reports and
other information with the SEC pursuant to the informational requirements of
the Securities Exchange Act of 1934.
REPORTS TO STOCKHOLDERS
We intend to distribute to our stockholders annual reports containing
audited financial statements and will make available copies of quarterly
reports for the first three quarters of each fiscal year containing unaudited
interim financial information.
70
<PAGE>
OPEN PORT TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999.............. F-3
Consolidated Statements of Operations for the Years Ended December 31,
1997, 1998 and 1999...................................................... F-4
Consolidated Statements of Redeemable Convertible Preferred Stock,
Stockholders' Deficit and Comprehensive Loss for the Years Ended December
31, 1997, 1998 and 1999.................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Open Port Technology, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of redeemable convertible preferred
stock, stockholders' deficit and comprehensive loss and of cash flows present
fairly, in all material respects, the financial position of Open Port
Technology, Inc. and its subsidiaries at December 31, 1998 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with 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
Chicago, Illinois
April 4, 2000,
F-2
<PAGE>
OPEN PORT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31
-------------------------------
1999
1998 1999 Pro forma
-------- -------- -----------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................... $ 706 $ 277 $ 277
Accounts receivable, net..................... 1,563 482 482
Prepaid expenses and other current assets.... 649 368 368
-------- -------- --------
Total current assets........................ 2,918 1,127 1,127
Property and equipment, net................... 2,122 2,016 2,016
Software development costs, net............... 465 1,238 1,238
Other assets, net............................. 139 324 324
-------- -------- --------
$ 5,644 $ 4,705 $ 4,705
======== ======== ========
Liabilities, Redeemable Convertible Preferred
Stock and Stockholders' Deficit
Current liabilities:
Accounts payable............................. $ 948 $ 1,610 $ 1,610
Accrued expenses and other current
liabilities................................. 779 1,626 1,626
Notes payable--current....................... -- 7,000 7,000
Current portion of capital lease
obligations................................. 558 429 429
Deferred revenue............................. 500 1,109 1,109
-------- -------- --------
Total current liabilities................... 2,785 11,774 11,774
Notes payable.................................. 2,320 4,481 4,481
Capital lease obligations...................... 379 447 447
-------- -------- --------
Total liabilities........................... 5,484 16,702 16,702
-------- -------- --------
Commitments and contingencies (Note 8)
Redeemable convertible preferred stock, at
redemption value, $0.001 par value, no shares
authorized or outstanding--pro forma:
Series A preferred stock, authorized, issued
and outstanding--1,228,917 shares............ 2,547 2,707 --
Series B preferred stock, authorized, issued
and outstanding--13,526,786 shares........... 17,847 21,778 --
Series C preferred stock, authorized--
4,009,199 shares; issued and outstanding--
3,469,136 shares............................. 7,333 7,895 --
Series D preferred stock, authorized--
1,160,454 shares; issued and outstanding--
935,454 shares............................... -- 3,162 --
-------- -------- --------
Total redeemable convertible preferred
stock...................................... 27,727 35,542 --
-------- -------- --------
Stockholders' deficit:
Common Stock, $0.001 par value: authorized--
48,950,441 shares; issued and outstanding--
12,275,109 and 12,816,819 shares; and
39,575,904 shares pro forma.................. 12 13 40
Additional paid-in capital.................... 478 1,332 36,847
Stock purchase notes receivable............... (53) (126) (126)
Accumulated deficit........................... (27,990) (48,704) (48,704)
Accumulated other comprehensive loss.......... (14) (54) (54)
-------- -------- --------
Total stockholders' deficit................. (27,567) (47,539) (11,997)
-------- -------- --------
$ 5,644 $ 4,705 $ 4,705
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
OPEN PORT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Software products......................... $ 5,048 $ 3,241 $ 907
Maintenance and professional services..... 1,266 1,600 1,443
Hardware products......................... 835 506 --
---------- ---------- ----------
Total revenues.......................... 7,149 5,347 2,350
---------- ---------- ----------
Costs and expenses:
Software products......................... 135 579 667
Maintenance and professional services..... 2,389 2,707 2,182
Hardware products......................... 430 331 --
Sales and marketing....................... 3,889 4,695 6,359
General and administrative................ 2,787 2,802 3,294
Research and development.................. 3,457 3,358 4,361
---------- ---------- ----------
Total costs and expenses................ 13,087 14,472 16,863
---------- ---------- ----------
Operating loss............................. (5,938) (9,125) (14,513)
Other income (expense):
Interest income........................... 79 83 34
Interest expense.......................... (182) (336) (1,356)
Other expense, net........................ -- (57) --
---------- ---------- ----------
Total other income (expense)............ (103) (310) (1,322)
---------- ---------- ----------
Loss before income taxes................... (6,041) (9,435) (15,835)
Provision for income taxes (Note 7)........ 49 20 25
---------- ---------- ----------
Net loss................................ (6,090) (9,455) (15,860)
Accretion and dividends on redeemable
convertible preferred stock............... (1,230) (1,816) (4,854)
---------- ---------- ----------
Net loss applicable to common
stockholders.............................. $ (7,320) $ (11,271) $ (20,714)
========== ========== ==========
Basic and diluted net loss per share....... $ (0.61) $ (0.93) $ (1.64)
========== ========== ==========
Shares used in calculation of basic and
diluted net loss per share................ 12,000,000 12,111,660 12,636,757
========== ========== ==========
Pro forma basic and diluted net loss per
share (unaudited)......................... $(0.41)
==========
Shares used in calculation of pro forma
basic and diluted net loss per share
(unaudited)............................... 39,123,031
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
OPEN PORT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK, STOCKHOLDERS' DEFICIT AND COMPREHENSIVE LOSS
(in thousands, except share data)
<TABLE>
<CAPTION>
Redeemable Redeemable Redeemable Redeemable
Convertible Convertible Convertible Convertible
Preferred Stock-- Preferred Stock-- Preferred Stock-- Preferred Stock--
Series A Series B Series C Series D Common Stock
------------------ ------------------- ------------------ ------------------ --------------------
Number Carrying Number Carrying Number Carrying Number Carrying Number Carrying Treasury
of Shares Value of Shares Value of Shares Value of Shares Value of Shares Value Stock
--------- -------- ---------- -------- --------- -------- --------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January
1, 1997......... 1,228,917 $2,227 6,026,786 $ 7,165 -- $ -- -- $ -- 12,000,000 $12 $--
Issuance of
redeemable
convertible
preferred
stock........... -- -- 7,500,000 8,400 -- -- -- -- -- -- --
Cumulative
preferred
dividends....... -- 160 -- 1,070 -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment...... -- -- -- -- -- -- -- -- -- -- --
--------- ------ ---------- ------- --------- ------ ------- ------ ---------- --- ----
Balance,
December 31,
1997............ 1,228,917 2,387 13,526,786 16,635 -- -- -- -- 12,000,000 12 --
Issuance of
redeemable
convertible
preferred stock,
net of issuance
costs of $136... -- -- -- -- 3,469,136 7,025 -- -- -- -- --
Issuance of
common stock.... -- -- -- -- -- -- -- -- 275,109 -- --
Issuance of
warrants........ -- -- -- -- -- -- -- -- -- -- --
Cumulative
preferred
dividends....... -- 160 -- 1,212 -- 308 -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- -- --
Cumulative
translation
adjustment...... -- -- -- -- -- -- -- -- -- -- --
--------- ------ ---------- ------- --------- ------ ------- ------ ---------- --- ----
Balance,
December 31,
1998............ 1,228,917 2,547 13,526,786 17,847 3,469,136 7,333 -- -- 12,275,109 12 --
Issuance of
redeemable
convertible
preferred
stock........... -- -- -- -- -- -- 935,454 3,000 -- -- --
Issuance of
common stock.... -- -- -- -- -- -- -- -- 549,147 1 --
Purchase of
treasury stock.. (7,437) -- --
Issuance of
warrants........ -- -- -- -- -- -- -- -- -- -- --
Accretion and
cumulative
preferred
dividends....... -- 160 -- 3,931 -- 562 -- 162 -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- -- --
Cumulative
transition
adjustment...... -- -- -- -- -- -- -- -- -- -- --
--------- ------ ---------- ------- --------- ------ ------- ------ ---------- --- ----
Balance,
December 31,
1999............ 1,228,917 $2,707 13,526,786 $21,778 3,469,136 $7,895 935,454 $3,162 12,816,819 $13 $--
========= ====== ========== ======= ========= ====== ======= ====== ========== === ====
<CAPTION>
Stock Other Total
Additional Purchase Accumu- Compre- Stock- Compre-
Paid-In Notes lated hensive holders' hensive
Capital Receivable Deficit Loss Deficit Loss
---------- ---------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, January
1, 1997......... $ 167 $ -- $ (9,399) $ -- $ (9,220)
Issuance of
redeemable
convertible
preferred
stock........... -- -- -- -- --
Cumulative
preferred
dividends....... -- -- (1,230) -- (1,230)
Net loss........ -- -- (6,090) -- (6,090) $ (6,090)
Cumulative
translation
adjustment...... -- -- -- (23) (23) (23)
---------- ---------- --------- ------- --------- ---------
Balance,
December 31,
1997............ 167 -- (16,719) (23) (16,563) $ (6,113)
=========
Issuance of
redeemable
convertible
preferred stock,
net of issuance
costs of $136... -- -- (136) -- (136)
Issuance of
common stock.... 82 (53) -- -- 29
Issuance of
warrants........ 229 -- -- -- 229
Cumulative
preferred
dividends....... -- -- (1,680) -- (1,680)
Net loss........ -- -- (9,455) -- (9,455) $ (9,455)
Cumulative
translation
adjustment...... -- -- -- 9 9 9
---------- ---------- --------- ------- --------- ---------
Balance,
December 31,
1998............ 478 (53) (27,990) (14) (27,567) $ (9,446)
=========
Issuance of
redeemable
convertible
preferred
stock........... -- -- (39) -- (39)
Issuance of
common stock.... 178 (73) -- -- 106
Purchase of
treasury stock.. (2) -- -- -- (2)
Issuance of
warrants........ 678 -- -- -- 678
Accretion and
cumulative
preferred
dividends....... -- -- (4,815) -- (4,815)
Net loss........ -- -- (15,860) -- (15,860) $(15,860)
Cumulative
transition
adjustment...... -- -- -- (40) (40) (40)
---------- ---------- --------- ------- --------- ---------
Balance,
December 31,
1999............ $1,332 $(126) $(48,704) $ (54) $(47,539) $(15,900)
========== ========== ========= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
OPEN PORT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(6,090) $ (9,455) $(15,860)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization of property and
equipment....................................... 767 1,046 1,196
Amortization of software development costs and
other assets.................................... 139 288 347
Amortization of debt discount.................... -- 44 350
Provision for doubtful accounts.................. -- -- 319
Changes in assets and liabilities:
Accounts receivable............................. 2,291 (741) 762
Prepaid expenses and other assets............... 416 568 281
Other assets.................................... (46) (46) (193)
Accounts payable................................ (644) 218 662
Accrued expenses and other current
liabilities.................................... 164 (531) 847
Deferred revenue................................ 111 (2,042) 609
------- -------- --------
Net cash used in operating activities.......... (2,892) (10,651) (10,680)
------- -------- --------
Cash flows from investing activities:
Additions to property and equipment.............. (524) (623) (551)
Additions to software development costs.......... (235) (339) (1,112)
------- -------- --------
Net cash used in investing activities.......... (759) (962) (1,663)
------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of notes payable.......... -- 2,500 13,500
Payment of notes payable......................... (950) -- (4,000)
Payments of capital lease obligations............ (477) (655) (612)
Proceeds from sale of common stock............... -- 29 105
Proceeds from sale of redeemable convertible
preferred stock, net of issuance costs.......... 8,400 6,889 2,961
------- -------- --------
Net cash provided by financing activities...... 6,973 8,763 11,954
------- -------- --------
Effect of foreign currency exchange rate
fluctuations on cash............................. (18) 9 (40)
------- -------- --------
Net increase (decrease) in cash................... 3,304 (2,841) (429)
Cash and cash equivalents at beginning of year.... 243 3,547 706
------- -------- --------
Cash and cash equivalents at end of year.......... $ 3,547 $ 706 $ 277
======= ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest........................... $ 182 $ 266 $ 604
Cash paid for income taxes....................... 1 -- 2
Supplemental disclosure of non-cash investing and
financing activities:
Property and equipment acquired under capital
leases.......................................... $ 510 $ 379 $ 548
Estimated fair value of warrants recorded as debt
discount........................................ -- 229 678
Issuance of 175,866 and 244,230 shares of common
stock in exchange for stock purchase notes
receivable...................................... -- 53 73
Accretion and dividends on redeemable convertible
preferred stock................................. 1,230 1,816 4,854
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.Operations and Significant Accounting Policies
Nature of Operations
Open Port Technology, Inc. (the "Company") which was formed in 1993,
designs, develops and distributes software products that enable enhanced
communication services to be deployed over Internet Protocol ("IP") based
networks ("enhanced IP services"). The Company's products enable enhanced
IP services to be deployed with the accountability, tracking and
reliability of services delivered over the public switched telephone
network, while taking advantage of the more efficient use of bandwidth,
increased functionality, flexibility and reduced costs offered by IP
networks. The Company's headquarters are located in Chicago, Illinois, and
the Company maintains sales offices in the United States and Europe. The
Company sells to customers worldwide.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Foreign Currency Translation
The functional currencies for all of the Company's foreign subsidiaries are
their local currencies. The foreign subsidiaries' balance sheets are
translated at the year end rates of exchange and their results of
operations are translated at weighted average rates of exchange for the
year.
Translation adjustments resulting from this process are recorded as a
separate component of stockholders' deficit and will be included in the
determination of net income (loss) only upon sale or liquidation of the
subsidiaries, which is not contemplated at this time. Foreign exchange
transaction losses were not significant for any period presented.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of 90 days or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments, which are
comprised of accounts receivable, accounts payable, capital lease
obligations, and notes payable, approximates their estimated fair value
based upon market prices for the same or similar types of financial
instruments.
Concentration of Credit Risk and Significant Customers
Financial instruments which potentially expose the Company to
concentrations of credit risk are primarily comprised of accounts
receivable. Management believes its credit policies are prudent and reflect
normal industry terms and business risk. The Company
F-7
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
does not anticipate non-performance by the counterparties and, accordingly,
does not require collateral.
At December 31, 1998, 50% of the Company's accounts receivable were due
from two customers. At December 31, 1999, 81% of the Company's accounts
receivable were due from two customers.
During 1997, seven customers accounted for 94% of the Company's revenues.
During 1998, four customers accounted for 76% of the Company's revenues.
One customer accounted for 25% of the Company's revenues in 1999.
Sales totaling $2,688,000, or 38% of total 1997 revenue, $439,000, or 8% of
total 1998 revenue and $194,000 or 8% of total 1999 revenue, were made to
customers in Europe. Sales totaling $276,000, or 12% of total 1999 revenue,
were made to customers in Asia.
Revenue Recognition
The Company recognizes revenues in accordance with American Institute of
Certified Public Accountant ("AICPA") Statement of Position ("SOP") 97-2,
"Software Revenue Recognition," as amended. The Company's revenues are
derived from licenses for its software as well as software maintenance and
support, training and consulting services. Software product revenues are
recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the license fee is fixed and determinable and the collection of
the fee is probable. Fees from software products sold together with
professional services are recognized upon delivery provided that the above
criteria have been met and payment of the software product license fee is
not dependent upon the performance of the services. In instances where
customer acceptance criteria are included in software product license
agreements, revenue is not recognized until the customer acceptance
provision has been satisfied.
Revenues from professional services, other than as described above, are
recognized when the services are performed. Revenue derived from software
maintenance arrangements is recognized ratably over the period the services
are provided, typically one year. Revenue related to an initial warranty
period is unbundled from the initial license fee and is recognized ratably
over the term of the warranty period.
Revenue from hardware products is recognized when the products have been
delivered and collection is probable.
The allowance for doubtful accounts was $0 and $319,000 at December 31,
1998 and 1999, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based upon estimated useful lives ranging from
three to seven years. Maintenance and repair charges are expensed as
incurred.
F-8
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Software Development Costs and Research and Development
Capitalization of software development costs begins upon the establishment
of technological feasibility and ends upon general release of the final
product. The establishment of technological feasibility and the ongoing
assessment of recoverability of capitalized software development costs
require considerable judgment by management with respect to certain
external factors including, but not limited to, anticipated future
revenues, estimated economic life and changes in software and hardware
technologies. Amortization of capitalized software development costs begins
upon general release of the final product and is provided on a product-by-
product basis at the greater of the amount computed using (a) the ratio of
current revenues for a product to the total of current and anticipated
future revenues or (b) the straight-line method over the remaining economic
life of the product, generally 3 years. Research and development costs,
which principally relate to the design and development of proprietary
software prior to the establishment of technological feasibility, are
expensed as incurred.
Capitalized software development costs as of December 31, 1998 and 1999
(net of accumulated amortization of $527,000 and $430,000, respectively)
aggregated $465,000 and $1,238,000, respectively. Amortization of
capitalized software costs totaled $282,000 and $338,000 during 1998 and
1999, respectively, and is recorded in cost of software products. Fully
amortized assets of $435,000 were written-off in 1999.
Accounting for Stock-based Compensation
The Company accounts for stock-based awards to employees using the
intrinsic value method as prescribed by Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Compensation expense is recorded for options issued to
employees in fixed amounts which have exercise prices below the estimated
fair value of the Company's common stock at the date of grant. The Company
has adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," through
disclosure only (Note 6).
Pro Forma Balance Sheet (unaudited)
The unaudited pro forma balance sheet as of December 31, 1999 presents the
conversion of the outstanding shares of Series A, B, C and D preferred
stock into 26,759,085 shares of common stock upon the completion of the
Company's initial public offering.
Net Loss Per Share
Basic and diluted net loss per share applicable to common stockholders is
computed by dividing the net loss applicable to common stockholders for the
period by the weighted average number of common shares outstanding for the
period. The calculation of diluted net loss per share excludes the number
of shares of common stock issuable upon exercise of employee stock options
and warrants, and the shares of common stock issuable upon the conversion
of convertible preferred stock as the effect would be antidilutive.
Potential common shares consist of the incremental common shares issuable
upon the conversion of the redeemable convertible preferred stock (using
the incremental method) and shares
F-9
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
issuable upon the conversion of stock options and warrants (using the
treasury stock method). See Note 9 for the reconciliation of the numerator
and denominator of the basic and diluted EPS computations. Unaudited
proforma basic and diluted net loss per share has been calculated assuming
the conversion of all outstanding shares of preferred stock into shares of
common stock, as if the shares had converted immediately upon their
issuance.
Comprehensive Income
Comprehensive income is comprised of two components, net income and other
comprehensive income. Other comprehensive income was comprised solely of
cumulative foreign currency translation adjustments.
Income Taxes
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
requires the recognition of deferred tax liabilities for the expected
future tax consequences of temporary differences between tax bases and
financial reporting bases of assets and liabilities, using enacted tax
rates in effect for the year in which the differences are expected to be
paid or recovered. Deferred tax assets are reduced by a valuation allowance
to the extent that utilization is not considered more likely than not.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates made by
management regarding the reported amounts of assets and liabilities as well
as the revenues and expenses recognized during the reporting periods.
Actual results could differ from those estimates.
Segment Reporting
The Company operates in one segment, selling software products and related
services. Substantially all product and service revenues through December
31, 1999 have been attributable to the sale of the Company's software
products. Service revenues through December 31, 1999 have been derived
principally from implementation and support of the Company's software
products. The Company's chief operating decision maker evaluates revenue
and profitability performance on an enterprise-wide basis to make operating
and strategic decisions. Therefore, segment information is identical to the
information included in the consolidated balance sheet and consolidated
statement of operations.
Recently Issued Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting
and reporting standards for derivative instruments and hedging activities
and requires recognition of all derivatives as assets or liabilities in the
statement of financial position and measurement of those instruments at
fair value. The statement, as amended, is effective for fiscal years
beginning after June 15, 2000. As the Company does not have any derivative
instruments or hedging activities, SFAS No. 133 is not expected to have a
material effect on its financial results.
F-10
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2.Financial Statement Components
Property and equipment are comprised of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Equipment under capital lease:
Computer equipment............................. $1,722,000 $2,242,000
Computer software.............................. 485,000 513,000
Furniture and fixtures......................... 375,000 375,000
Computer equipment............................... 1,040,000 1,429,000
Furniture, fixtures and improvements............. 912,000 1,065,000
---------- ----------
4,534,000 5,624,000
Less: Accumulated amortization and
depreciation.................................. (2,412,000) (3,608,000)
---------- ----------
$2,122,000 $2,016,000
========== ==========
</TABLE>
Depreciation expense for 1997, 1998 and 1999 was $296,000, $338,000 and
$574,000, respectively. Amortization expense related to property and
equipment acquired under capital lease arrangements was $471,000, $707,000
and $622,000 during 1997, 1998 and 1999, respectively. Accumulated
amortization on property and equipment under capital lease totaled
$861,000, $1,568,000 and $2,190,000 as of December 31, 1997, 1998 and 1999,
respectively. Interest expense relating to capital lease obligations
totaled $156,000, $148,000 and $140,000 during 1997, 1998 and 1999,
respectively.
Other assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1998 1999
-------- --------
<S> <C> <C>
Patent costs........................................... $141,000 $154,000
Security deposits and other............................ 14,000 14,000
Deferred financing costs............................... -- 181,000
-------- --------
155,000 349,000
Less: Accumulated amortization......................... (16,000) (25,000)
-------- --------
$139,000 $324,000
======== ========
</TABLE>
Amortization expense relating to capitalized patent costs totaled $4,000,
$7,000 and $9,000 in 1997, 1998 and 1999, respectively.
Accrued expenses and other current liabilities are comprised of the
following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
-------- ----------
<S> <C> <C>
Accrued compensation.................................. $176,000 $ 296,000
Accrued bonus......................................... -- 743,000
Commissions payable................................... 313,000 222,000
Other accrued expenses and current liabilities........ 290,000 365,000
-------- ----------
$779,000 $1,626,000
======== ==========
</TABLE>
F-11
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3.Credit Facilities and Notes Payable
Revolving Credit Facility
During 1998, the Company changed an existing loan arrangement with a bank
to create a revolving credit facility. As amended, this facility provided
for up to $4,000,000 in borrowings by the Company, except that the maximum
amount available was limited to the Company's borrowing base (defined as
the greater of $1,500,000 or 80% of the Company's eligible accounts
receivable), if lower. The facility also provided for the issuance of up to
$2,500,000 in standby letters of credit on behalf of the Company. All
borrowings made by the Company were collateralized by substantially all of
the Company's assets and were due on August 6, 1999. Interest accrued on
outstanding borrowings at the bank's prime rate (8.5% at December 31, 1998)
and was payable monthly. The Company was subject to certain financial and
non-financial covenants under the facility. As of December 31, 1998, no
borrowings or letters of credit were outstanding under this revolving
credit facility.
In January 1999, the Company amended its revolving credit facility with a
bank to decrease the borrowing facility from $4,000,000 to $3,000,000 and
remove the limitation on the amount available for borrowing relating to the
Company's borrowing base. In connection with this amendment, the due date
for all amounts outstanding was changed to the earlier of April 30, 1999 or
the closing of the Company's Series D preferred stock financing and the
interest rate was increased to the bank's prime rate plus 1.5%. All amounts
available under the amended facility were drawn down during the first
quarter of 1999 and repaid in April 1999, at which time the arrangement
terminated.
In connection with this amendment in January 1999, the Company granted the
lender warrants to purchase 75,000 shares of the Company's Series C
preferred stock at price of $2.025 per share. These warrants can be
exercised at any time before the later of two years from the effective date
of the Company's initial public offering or January 28, 2004. The estimated
fair value of these warrants of $100,000 was recorded as a debt discount
and is amortized to interest expense over the term of the related debt. The
warrants permit the holder, upon an acquisition of the Company, to require
the Company to redeem each warrant for the difference between the warrant
exercise price and the fair value of a share of common stock. The Company
will adjust the warrants to redemption value through accretion and a
charge/credit to interest expense based on the estimated fair value of a
share of common stock at the end of each reporting period.
Mezzanine Credit Facility
In June 1998, the Company entered into a one-year borrowing agreement with
a mezzanine capital company (a related party) under which the lender agreed
to loan up to $3,000,000 to the Company, the proceeds of which were to be
used to finance the acquisition of fixed assets and for working capital
purposes. Each borrowing under the agreement is collateralized by
substantially all of the Company's assets and is due on July 1, 2001 unless
a change of control of the Company occurs, in which case the notes become
payable in full immediately. Interest payments are due on a monthly basis
at an
F-12
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
annual interest rate of 11%. In the event of default, this rate would
increase to 13%. As of December 31, 1998, $2,500,000 was outstanding under
this arrangement. In connection with borrowings made in 1998, the Company
also issued warrants to purchase 111,093 shares of the Company's Series C
preferred stock (Note 6).
In January 1999, the remaining $500,000 available under the pre-existing
borrowing arrangement with the mezzanine capital company (a related party)
was drawn down by the Company. In April 1999, this facility was amended and
the borrowings increased by $2.0 million. The facility has the same terms
and interest rate as before the amendment. As of December 31, 1999,
$5,000,000 was outstanding under this facility. The Company was in non-
compliance with a covenant requiring audited financial statements within 90
days of year-end. A waiver for this non-compliance was received from the
lender.
In connection with the aforementioned borrowing arrangements, the Company
granted the lender warrants to purchase an additional 259,217 shares of the
Company's Series C preferred stock at a price of $0.01 per share during
1999. These warrants can be exercised at any time before the later of July
1, 2001 or the third anniversary of the Company's repayment of the notes in
full. The estimated fair value of these warrants of $578,000 was recorded
as debt discount and is being amortized to interest expense over the
remaining term of the related notes payable.
Issuance of Term Notes Payable
In April 1999 and August 1999, the Company issued term notes payable to a
bank in exchange for cash proceeds totaling $4,000,000. These borrowings,
which are collateralized by substantially all of the Company's assets, are
due on February 1, 2000 (Note 12). Interest on these notes, which accrues
at the bank's prime rate plus 1%, is payable monthly. Upon the occurrence
of non-payment, all outstanding principal under the notes would be callable
at the option of the holder and the interest rate would increase to the
bank's prime rate plus 4% on a prospective basis. As of December 31, 1999,
$4,000,000 was outstanding under this agreement.
Issuance of Subordinated Convertible Promissory Notes
In September 1999, the Company entered into a Subordinated Convertible
Promissory Note Purchase Agreement under which certain existing investors
agreed, at their sole option, to loan the Company up to $3,000,000.
Subsequently, the Company issued subordinated convertible promissory notes
to various stockholders in exchange for gross proceeds totaling $3,000,000.
These borrowings bear interest at prime rate plus 1% and all principal and
accrued interest is due on January 31, 2000. As of December 31, 1999,
$3,000,000 was outstanding under this agreement. In the event that a
subsequent financing takes place prior to that date which results in gross
proceeds to the Company of at least $15,000,000, all principal and accrued
interest will automatically convert into the
F-13
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
securities sold in that financing with the number of securities received
being based upon the offering price at which such securities are sold (Note
12). Subsequent to year-end the $3,000,000 converted to Series E preferred
shares (Note 12).
Notes Payable Maturities
Future payments under the above notes payable obligations are as follows
for the years ended December 31;
<TABLE>
<S> <C>
2000......................................................... $ 7,000,000
2001......................................................... 5,000,000
-----------
Gross minimum payments....................................... 12,000,000
Less: Amounts representing warrants issued
(net of amortization)....................................... 519,000
-----------
Net present value of minimum payments........................ 11,481,000
Less: Current portion........................................ 7,000,000
-----------
$ 4,481,000
===========
</TABLE>
4.Redeemable Convertible Preferred Stock
As of December 31, 1999, the authorized shares of preferred stock were
designated as follows:
<TABLE>
<S> <C>
Series A preferred stock........................................ 1,228,917
Series B preferred stock........................................ 13,526,786
Series C preferred stock........................................ 4,009,199
Series D preferred stock........................................ 1,160,454
----------
19,925,356
==========
</TABLE>
The holders of the Series A, Series B, Series C and Series D redeemable
convertible preferred stock (the "Preferred Stock") are herein referred to
collectively as the "Preferred Stockholders." At December 31, 1999, the
Preferred Stockholders have the following rights and privileges.
Voting Rights
The Preferred Stockholders generally vote together with all other classes
and series of stock as a single class on all matters and are entitled to a
number of votes equal to the number of shares of common stock into which
each share of such stock is convertible.
Conversion Rights
Each share of Series A preferred stock is convertible into two shares of
the Company's common stock, subject to adjustment in the case of any
subsequent dilutive financing, at the discretion of the holder or
automatically at the closing of an initial public offering of the Company's
common stock. Each share of Series B preferred stock is convertible into
1.3871 shares of the Company's common stock, subject to any subsequent
dilutive financing, at the discretion of the holder or automatically at the
closing of an initial public
F-14
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
offering of the Company's common stock. Each share of Series C preferred
stock is convertible into 1.059 shares of the Company's common stock
subject to adjustment in the case of any subsequent dilutive financing, at
the discretion of the holder or automatically at the closing of an initial
public offering of the Company's common stock. Each share of Series D
preferred stock is convertible into 1.9919 shares of the Company's common
stock subject to adjustment in the case of any subsequent dilutive
financing, at the discretion of the holder or automatically at the closing
of an initial public offering of the Company's common stock.
Dividend Rights
Each share of Series A preferred stock is entitled to an 8% cumulative
dividend, which has preference over any dividends on the common stock.
Accrued dividends are payable upon the conversion of the Series A preferred
stock to common stock, unless the conversion is made upon the occurrence of
an initial public offering of the Company's common stock meeting certain
requirements or other defined events. Each share of Series B preferred
stock is entitled to an 8% cumulative dividend, which has preference over
any dividends on the common stock or Series A preferred stock. Accrued
dividends are payable upon the conversion of the Series B preferred stock
to common stock, unless the conversion is made upon the occurrence of
certain events. Each share of Series C preferred stock is entitled to an 8%
cumulative dividend. Accrued dividends are payable upon the conversion of
the Series C preferred stock to common stock, unless the conversion is made
upon the occurrence of certain events. Each share of Series D preferred
stock is entitled to an 8% cumulative dividend. In the event of conversion
upon a qualified public offering or corporate transaction, all accrued and
unpaid dividends on the Series D preferred stock would be payable while
accrued and unpaid dividends on all other series of preferred stock would
not.
Liquidation Preferences
In the event of any liquidation event including the sale or winding up of
the Company, the holders of the Preferred Stock are entitled to receive,
prior and in preference to the common stockholders, the following initial
liquidation amounts:
<TABLE>
<S> <C>
Series A preferred stock................................. $1.62 per share
Series B preferred stock................................. $1.12 per share
Series C preferred stock................................. $2.025 per share
Series D preferred stock................................. $3.207 per share
</TABLE>
If proceeds remain after the initial liquidation amounts are paid in full
to the holders of each class of the Preferred Stock, the Preferred
Stockholders are entitled to receive secondary liquidation payments equal
to all accrued and unpaid dividends. With regard to priority in the payment
of both the initial and secondary liquidation amounts, the Series D is
senior to Series A, Series B, and Series C preferred stock, the Series C
preferred stock is
F-15
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
senior to both Series A and Series B preferred stock, and the Series B
preferred stock is senior to the Series A preferred stock. In the event
that any proceeds remain after payment of all initial and secondary
liquidation amounts to the Preferred Stockholders, all remaining proceeds
will be shared ratably by the holders of all classes of the Company's
capital stock.
Redemption
Each series of Preferred Stock is redeemable at the option of the holder at
any time during the period beginning July 15, 2002 and ending July 15,
2004. In the event of redemption, holders of each series of Preferred Stock
would be entitled to receive the greater of their then-current liquidation
preference or the fair market value of their respective series as
determined at that time. The carrying value of the Company's shares of
preferred stock is adjusted through accretion to their full redemption
value at the end of each reporting period. The option to redeem is
terminated upon an initial public offering of the Company's common stock
meeting certain specified requirements.
5.Stockholders' Deficit
Common Stock
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of the Company's stockholders. Common stockholders are
entitled to receive dividends, if any, as may be declared by the Board of
Directors, subject to any preferential dividend rights of the preferred
stockholders. In April 1999, the Company approved an increase in the number
of authorized shares of its common stock to 48,950,441 shares.
Stock Purchase Notes Receivable
In July 1998, an employee issued a recourse note payable to the Company in
the amount of $53,000 as consideration for the exercise of vested options
to purchase 175,866 shares of the Company's common stock. This note is due
on July 30, 2003 and accrues interest at an annual a rate of 5.75%.
In February, 1999, another employee issued a recourse note payable to the
Company in the amount of $73,000 as consideration for the exercise of
vested options to purchase 244,230 shares of the Company's common stock.
This note is due on February 18, 2004 and accrues interest at an annual
rate of 4.71%.
6.Stock Options and Warrants
Stock Option Plans
In 1995, the Company adopted its 1995 Incentive Stock Option Plan (the
"Employee Plan"). The Employee Plan provides for the issuance of shares of
common stock to key personnel at an option price to be determined by the
Board of Directors, which shall not be less than fair market value at the
date of the grant. The options vest over a four-year period beginning one
year from the date of grant and expire ten years from the date of the
grant.
F-16
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In 1995, the Company adopted the 1995 Non-Employee Stock Option Plan (the
"Non-Employee Plan"). The plan provides for the issuance of stock options
to certain providers of service to the Company, such as members of the
Board of Directors, consultants, suppliers and contractors. The terms of
the plan are substantially similar to the 1995 Incentive Stock Option Plan.
During 1997, the Company granted 25,000 options at an exercise price of
$0.30 per share under the Non-Employee Plan. During 1998, the Company
granted 20,000 options at an exercise price of $3.099 per share under the
Non-Employee Plan. During 1999, the Company did not grant options under the
Non-Employee Plan. The fair value of these options was not significant. No
options expired during 1997, 1998 or 1999 nor were any options exercised or
canceled under the Non-Employee Plan.
The aggregate number of options authorized under both plans as of December
31, 1999 was 5,432,695. At December 31, 1999, 1,161,688 shares were
available for future grant.
During 1997, 1998 and 1999, compensation expense recognized for stock
option grants made by the Company under APB Opinion No. 25 was not
significant. Had compensation cost for these option grants been determined
based on their fair value at the date of grant consistent with the method
prescribed by SFAS No. 123, the Company's net loss applicable to common
stockholders would have been increased to $7,338,000, or $(0.61) per share,
$11,367,000 or $(0.94) per share and $20,922,000 or $(1.66) per share
during 1997, 1998 and 1999, respectively. Because most options vest over
several years and additional option grants are expected to be made in
future periods, the pro forma effects of applying the fair value method of
SFAS No. 123 may be increasingly significant in future years.
Under SFAS No. 123, the fair value of each employee option grant is
estimated on the date of grant using the Black-Scholes option pricing model
to apply the minimum value method with the following weighted average
assumptions used for options granted during the following periods:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Dividend yield..................................... 0.0% 0.0% 0.0%
Risk free interest rate............................ 6.0% 5.0% 5.2%
Volatility......................................... 0.0% 0.0% 0.0%
Expected term...................................... 5 years 5 years 4 years
</TABLE>
F-17
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock option activity during 1997, 1998 and 1999 was as follows:
<TABLE>
<CAPTION>
Outstanding Options
--------------------
Weighted
Average
Number of Exercise
Shares Price
---------- --------
<S> <C> <C>
Outstanding--January 1, 1997......................... 2,459,700 $0.30
Granted (weighted average fair value of $0.08)..... 1,926,567 0.30
Exercised.......................................... -- --
Cancelled.......................................... (1,733,600) 0.30
----------
Outstanding--December 31, 1997....................... 2,652,667 0.30
Granted (weighted average fair value of $0.26)..... 3,148,400 1.18
Exercised.......................................... (275,109) 0.30
Cancelled.......................................... (885,818) 0.39
----------
Outstanding--December 31, 1998....................... 4,640,140 0.88
Granted (weighted average fair value of $0.57)..... 375,100 3.10
Exercised.......................................... (549,147) 0.33
Cancelled.......................................... (1,011,905) 0.57
----------
Outstanding--December 31, 1999....................... 3,454,188 1.30
==========
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- -----------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Exercise Number Life Exercise Number Exercise
Price Outstanding (Years) Price Exercisable Price
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.30 2,194,257 7.3 $0.30 1,030,452 $0.30
2.03 18,000 8.5 2.03 3,145 2.03
2.56 96,625 8.7 2.56 31,622 2.56
3.10 1,145,306 9.2 3.10 112,392 3.10
--------- ---------
$0.30 - $3.10 3,454,188 8.0 1.30 1,177,611 0.63
========= =========
</TABLE>
Warrants
In connection with a master equipment lease agreement entered into in
November 1995 (Note 8), the Company granted the lessor warrants to purchase
73,737 shares of the Company's common stock at a price of $0.81 per share.
These warrants can be exercised at any time before the earlier of November
2000 or an initial public offering of the Company's common stock.
Subsequently, in August 1996, warrants to purchase an additional 53,571
shares of common stock at a price of $1.12 per share were issued to the
same lessor. These warrants can be exercised at any time before the earlier
of August 15, 2006 or five years from the date of an initial public
offering of the Company's stock. The estimated fair value of these
warrants, aggregating $45,000, was recorded as a debt discount and is being
amortized to interest expense over the term of the lease agreement.
F-18
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In connection with a separate master lease agreement entered into in June
1998 (Note 8), the Company granted a different lessor warrants to purchase
9,876 shares of the Company's Series C preferred stock at a price of $2.025
per share which can be exercised at any time before July 1, 2008. In
connection with additional borrowings made under this master lease
agreement in 1999, the Company issued warrants to purchase an additional
9,877 shares of its Series C preferred stock to the lessor in August 1999.
These warrants have the same exercise price as those granted in 1998, but
may be exercised any time before October 1, 2009. The estimated fair value
of these warrants was not significant.
In connection with a debt financing arrangement entered into in June 1998
(Note 3), the Company granted the lender warrants to purchase 111,093
shares of the Company's Series C preferred stock at a price of $0.01 per
share. The warrants can be exercised at any time before the later of July
1, 2001 or the third anniversary of the Company's repayment of the note in
full. The estimated fair value of these warrants of $224,000 was recorded
as a debt discount and is being amortized to interest expense over the term
of the related notes payable.
In conjunction with the Series E preferred stock sale, the Company issued
an investment advisor a warrant for the purchase of 939,441 shares of
common stock. The warrant expires in October 2004 and has an exercise price
of $1.61 per share. The fair value of the warrant will be recorded as
offering costs.
7.Income Taxes
For the years ended December 31, 1997, 1998 and 1999, the Company's income
tax provision is comprised solely of current foreign income taxes.
The components of the Company's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
---------- -----------
<S> <C> <C>
Operating loss carryforwards...................... $9,330,000 $15,716,000
Deferred compensation............................. 70,000 70,000
Depreciation...................................... 92,000 97,000
Bad debt allowance................................ -- 128,000
Vacation accrual.................................. -- 48,000
Other............................................. 9,000 86,000
Capitalized software development costs............ (186,000) (495,000)
---------- -----------
9,315,000 15,650,000
Less: Valuation allowance......................... (9,315,000) (15,650,000)
---------- -----------
$ -- $ --
========== ===========
</TABLE>
F-19
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 35% to losses before income tax expense as a
result of the following:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Computed expected income tax
benefit.......................... $(2,114,000) $(3,303,000) $(5,542,000)
Increase (decrease) in tax benefit
resulting from:
Change in valuation allowance.... 2,395,000 3,749,000 6,335,000
State and local income taxes, net
of federal benefit.............. (302,000) (472,000) (792,000)
Other............................ 70,000 46,000 24,000
----------- ----------- -----------
Income tax expense................ $ 49,000 $ 20,000 $ 25,000
=========== =========== ===========
</TABLE>
Realization of deferred tax assets is contingent upon the generation of
future taxable income. The Company has recorded a full valuation allowance
against its deferred tax asset due to the uncertainty surrounding the
generation of future taxable income created by the limited operating
history and early stage of development of the Company. As a result, no
income tax benefit has been recognized relating to the losses generated
during 1997, 1998 and 1999 or any prior years.
At December 31, 1999, the Company has net operating loss carryforwards for
federal and state income tax purposes of approximately $39.0 million, which
will expire between 2010 and 2018 if not utilized. Under the provisions of
the Internal Revenue Code, certain substantial changes in the Company's
ownership may limit the amount of net operating loss carryforwards which
could be utilized annually to offset future taxable income. The amount of
any such limitation is determined based upon the Company's value prior to
an ownership change.
8.Commitments and Contingencies
Operating Leases
The Company is obligated under various lease agreements relating to its
property and equipment and facilities. In some cases, these obligations
contain renewal options. As of December 31, 1999, future minimum lease
payments for noncancelable operating leases are as follows for the years
ending December 31,:
<TABLE>
<S> <C>
2000............................................................ $ 657,000
2001............................................................ 495,000
2002............................................................ 119,000
2003............................................................ 23,000
----------
$1,294,000
==========
</TABLE>
Rent expense on operating leases totaled $512,000, $616,000 and $802,000
during 1997, 1998 and 1999, respectively.
F-20
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Capital Leases
On November 7, 1995, the Company entered into a master lease agreement with
a financing company for the lease of computer hardware and software used in
its business. Each borrowing under the lease has a three-year term and is
collateralized by the assets purchased. The Company has the right to extend
each individual borrowing for one additional year and has exercised this
right for all individual borrowings with terms expiring through 1999. At
the end of the term of each borrowing, the Company has the option to
purchase the equipment for its then fair value. Equipment obtained pursuant
to these leases is capitalized and is included in property and equipment on
the balance sheet. The Company's ability to borrow under this arrangement
expired during 1998.
On June 22, 1998, the Company entered into a new master lease agreement
with a financing company under which the Company may borrow up to
$1,000,000 for the lease of computer hardware and software used in its
business. The terms of this arrangement are substantially similar to those
of the previous master lease agreement described above except that the
Company's ability to borrow expired on July 1, 1999.
In connection with the aforementioned arrangements, the Company issued
warrants to purchase certain of its equity securities to the respective
lessors (Note 6).
Future payments under noncancelable capital lease agreements are as follows
for the years ended December 31,:
<TABLE>
<S> <C>
2000........................................................... $ 514,000
2001........................................................... 365,000
2002........................................................... 141,000
2003........................................................... --
2004 and thereafter............................................ --
----------
Gross minimum lease payments................................... 1,020,000
Less: Amount representing interest and debt discount........... (144,000)
----------
Net present value of minimum lease payments.................... 876,000
Less: Current portion.......................................... (429,000)
----------
$ 447,000
==========
</TABLE>
Legal Proceedings
From time to time, the Company is subject to legal proceedings and claims
which arise in the normal course of its business. In the opinion of
management, the amount of ultimate liability with respect to such actions
will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
During 1999 the Company agreed to the settlement of a dispute surrounding
software license fees and services with a former customer resulting in the
receipt of $600,000 which has been included in revenues.
9.Earnings Per Share
SFAS 128, "Earnings per Share," requires companies to provide a
reconciliation of the numerator and denominator of the basic and diluted
EPS computations. The calculation
F-21
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
below provides net loss applicable to common stockholders, weighted average
common shares outstanding and the resultant net loss per share for both
basic and diluted EPS for the years ended December 31, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Numerator:
Net loss applicable to common
stockholders................. $(7,320,000) $(11,271,000) $(20,714,000)
=========== ============ ============
Denominator:
Weighted average common
shares....................... 12,000,000 12,111,660 12,636,757
(Denominator for basic
calculation)
Weighted average effect of
dilutive securities:
Convertible preferred
stock...................... -- -- --
Stock options and warrants.. -- -- --
----------- ------------ ------------
Denominator for diluted
calculation.............. 12,000,000 12,111,660 12,636,757
=========== ============ ============
Earnings per share:
Basic.......................... $ (0.61) $ (0.93) $ (1.64)
=========== ============ ============
Diluted........................ $ (0.61) $ (0.93) $ (1.64)
=========== ============ ============
</TABLE>
10.Related Party Transactions
The Company obtains legal services from a stockholder at amounts which
approximate fair value. During 1997, 1998 and 1999, the Company incurred
expenses of $258,000, $397,000 and $329,000, respectively, for services
provided by this firm.
11.Employee Savings Plan
The Company maintains an employee retirement savings plan under Section
401(k) of the Internal Revenue Code (the "401(k) Plan") which covers
substantially all employees. Under the terms of the 401(k) Plan, employees
may contribute a percentage of their salary, up to a maximum of 15%, which
is then invested in one or more of several mutual funds selected by each
employee. The Company did not make any contributions to the 401(k) Plan on
behalf of its employees during 1997, 1998 or 1999.
F-22
<PAGE>
OPEN PORT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Subsequent Events
On January 25, 2000 the Company amended its Articles of Incorporation. As a
result, the Company authorized shares of stock designated as follows:
<TABLE>
<S> <C>
Common stock................................................... 71,000,000
Series A preferred stock....................................... 1,228,917
Series B preferred stock....................................... 13,526,786
Series C preferred stock....................................... 3,934,199
Series D preferred stock....................................... 935,454
Series E preferred stock....................................... 17,662,889
-----------
108,288,245
===========
</TABLE>
In January 2000, the Company issued 17,436,746 shares of its Series E
preferred stock for proceeds of $28,000,000. The proceeds consist of cash
payments totaling $25,000,000 and the conversion of notes payable (Note 3)
in the amount of $3,000,000. A portion of the cash proceeds received was
used to repay the December 31, 1999 notes payable balance of $4,000,000. Of
the total shares issued, 1,597,012 were to related parties. Each share of
Series E preferred stock is convertible into one share of the Company's
common stock. The rights and preferences of the Series E preferred stock
are substantially the same as those of the other series of preferred stock
as outlined in Note 4, except that (i) it has liquidation preference over
all existing series of the preferred stock and (ii) its initial liquidation
value is $1.61 per share.
On January 27, 2000 the Company's Board of Directors amended the 1995
Incentive and Non-Employee Stock Option Plans. The amendment increased the
number of shares available for grant under both plans from 5,432,695 to
8,432,695.
During 2000, the Company granted options to purchase shares of common stock
to employees at a weighted average exercise price of approximately $1.50
per share. Compensation expense related to these stock options representing
the difference between the exercise price and the fair market value of a
share of common stock at the date of grant will be amortized to
compensation expense over the four-year vesting period.
F-23
<PAGE>
You should rely only on the
information contained in this
prospectus. We have not authorized
anyone to provide 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Forward Looking Statements............................................... 19
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 19
Capitalization........................................................... 20
Dilution................................................................. 21
Selected Consolidated Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 30
Management............................................................... 47
Certain Transactions..................................................... 57
Principal Stockholders................................................... 59
Description of Capital Stock............................................. 61
Shares Eligible For Future Sale.......................................... 66
Underwriting............................................................. 68
Legal Matters............................................................ 70
Experts.................................................................. 70
Where You Can Find Additional Information................................ 70
Reports to Stockholders.................................................. 70
Index to Consolidated Financial Statements............................... F-1
</TABLE>
Until , 2000 (25 days after the
date of this prospectus), all
dealers that buy, sell or trade in
these securities, whether or not
participating in this offering, may
be required to deliver a prospectus.
Dealers are also obligated to
deliver a prospectus when acting as
underwriters and with respect to
their unsold allotments or
subscriptions.
[OPEN PORT TECHNOLOGY LOGO]
Shares
Common Stock
Deutsche Banc Alex. Brown
Robertson Stephens
Dain Rauscher Wessels
Prospectus
, 2000
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the expenses (other than underwriting
discounts and commissions) expected to be incurred in connection with this
offering described in this registration statement.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $21,252
NASD Examination Fee................................................ 8,550
Nasdaq National Market Listing Fee.................................. *
Accounting Fees and Expenses........................................ *
Printing and Engraving Expenses..................................... *
Legal Fees and Expenses............................................. *
Blue Sky Fees and Expenses.......................................... *
Miscellaneous....................................................... *
-------
Total............................................................. $ *
=======
</TABLE>
- --------
* To be completed by amendment.
The foregoing items, except for the Securities and Exchange Commission and
NASD fees, are estimated. All expenses will be borne by Open Port.
Item 14. Indemnification of Directors and Officers
As permitted by Section 102 of the Delaware General Corporation Law, the
Certificate of Incorporation of Open Port (filed as Exhibit 3.1 to this
registration statement) eliminates its directors' personal liability to Open
Port or its stockholders for monetary damages for a breach of fiduciary duty as
a director of Open Port, except:
. for any breach of the director's duty of loyalty to Open Port or its
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. for payment of dividends or stock purchases or redemptions by the
corporation in violation of Section 174 of the Delaware General
Corporation Law; or
. for any transaction from which the director derived an improper personal
benefit.
As a result of this provision, Open Port and its stockholders may be unable
to obtain monetary damages from a director for certain breaches of his or her
fiduciary duty to Open Port. This provision does not, however, eliminate the
directors' fiduciary responsibilities and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief
will remain available under Delaware law. The provision also does not affect a
director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
The by-laws of Open Port (filed as Exhibit 3.2 to this registration
statement) provide that Open Port must indemnify its directors and officers to
the fullest extent permitted by the Delaware General Corporation Law and that
it may indemnify its employees and agents in accordance with Delaware law as
determined by Open Port's board of directors in its sole discretion. Under
Section 145 of the Delaware General Corporation Law, a Delaware corporation has
the power to indemnify any person who was or is a party or is threatened to
II-1
<PAGE>
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that the person is or was a director, officer, employee or agent of
the corporation. The corporation may indemnify such a person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with the action,
suit or proceeding if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful, except that, in
the case of an action by or in the right of the corporation, judicial approval
is required for indemnification in respect of any claim, issue or matter as to
which the person was adjudged to be liable to the corporation. To the extent
that a present or former director or officer of a corporation is successful on
the merits or otherwise in the defense of any such action, suit or proceeding,
the corporation must indemnify him or her against the expenses (including
attorney's fees) he or she actually and reasonably incurred. Under Delaware
law, the expenses of an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by a
Delaware corporation in advance of the final disposition of the action, suit or
proceeding after delivery to the corporation of an undertaking by or on behalf
of the director or officer to repay such amounts if it is ultimately determined
that the director or officer is not entitled to be indemnified. Expenses
incurred by former directors and officers or other employees and agents may be
so paid on such terms and conditions, if any, as the corporation deems
appropriate.
The form of Underwriting Agreement (to be filed as Exhibit 1.1 to this
registration statement) provides for indemnification by the underwriters of
Open Port and its officers and directors for certain liabilities arising under
the Securities Act of 1933, as amended, or otherwise.
The indemnification provision in Open Port's Certificate of Incorporation,
by-laws and the Underwriting Agreement may be sufficiently broad to permit
indemnification of Open Port's directors and executive officers for liabilities
arising under the Securities Act of 1933, as amended.
Open Port maintains directors' and officers' liability insurance policies
covering certain liabilities of persons serving as officers and directors and
providing reimbursement to Open Port for its indemnification of such persons.
Item 15. Recent Sales of Unregistered Securities
In the three years preceding the filing of this registration statement, we
issued the following securities (to be adjusted to give effect to a one-for-
reverse stock split) that were not registered under the Securities Act:
In March 1997, we issued an aggregate of 7,500,000 additional shares of
Series B convertible participating preferred stock with a per share purchase
price of $1.12 to 17 accredited investors. Exemption from registration is
claimed pursuant to Section 4(2) of the Securities Act and Regulation D
promulgated thereunder, no public sale having been involved.
In January 1998, we issued a warrant for the purchase of 75,000 shares of
Series C convertible participating preferred stock at a price of $2.025 per
share to Silicon Valley Bank. Exemption from registration is claimed pursuant
to Section 4(2) of the Securities Act and Regulation D promulgated thereunder,
no public sale having been involved.
In June 1998, we issued an aggregate of 3,469,136 shares of Series C
convertible participating preferred stock with a per share purchase price of
$2.025 to four accredited
II-2
<PAGE>
investors. In addition, from June 1998 through May 1999, we issued to CID
Mezzanine Capital, L.P. warrants to purchase up to 370,310 shares of Series C
convertible participating preferred stock with a per share exercise price of
$0.01. Exemption from registration is claimed pursuant to Section 4(2) of the
Securities Act and Regulation D promulgated thereunder, no public sale having
been involved.
In June 1998, we issued a warrant for the purchase of 19,753 shares of
Series C convertible participating preferred stock at a price of $2.025 per
share to Third Coast Venture Lease Partners I, L.P. Exemption from registration
is claimed pursuant to Section 4(2) of the Securities Act and Regulation D
promulgated thereunder, no public sale having been involved.
In June 1998, we entered into a note and warrant purchase agreement with CID
Mezzanine Capital, L.P., which was subsequently amended, under which we
authorized the issuance of up to an aggregate of $5.0 million in principal
amount of our 11% subordinated notes to CID Mezzanine Capital, L.P. As of
September 30, 1999, we had issued all $5.0 million in subordinated notes under
this facility. Exemption from registration is claimed pursuant to Section 4(2)
of the Securities Act and Regulation D promulgated thereunder, no public sale
having been involved.
In April 1999, we issued an aggregate of 935,454 shares of Series D
convertible preferred stock with a per share purchase price of $3.207 to 11
accredited investors. Exemption from registration is claimed pursuant to
Section 4(2) of the Securities Act and Regulation D promulgated thereunder, no
public sale having been involved.
In September 1999, we authorized the issuance of subordinated convertible
promissory notes in the original aggregate principal amount of up to $3.0
million. We issued $3.0 million aggregate principal amount of these notes in
three installments in September 1999, October 1999 and November 1999. All of
the notes issued were converted to Series E convertible participating preferred
stock in January 2000. Exemption from registration is claimed pursuant to
Section 4(2) of the Securities Act and Regulation D promulgated thereunder, no
public sale having been involved.
Pursuant to our October 1999 engagement letter, we issued a warrant for the
purchase of 939,441 shares of common stock at a price of $1.61 per share to
Deutsche Bank Securities Inc. Exemption from registration is claimed pursuant
to Section 4(2) of the Securities Act and Regulation D promulgated thereunder,
no public sale having been involved.
In January 2000, we issued an aggregate of 17,436,746 shares of Series E
convertible participating preferred, 15,527,950 shares of which were sold at a
cash purchase price of $1.61 per share to 26 accredited investors and 1,908,796
shares of which were issued to 10 accredited investors pursuant to the
conversion, at a price of $1.61 per share, of principal and interest of our
subordinated convertible promissory notes issued in September 1999 (see
description above). Exemption from registration is claimed pursuant to Section
4(2) of the Securities Act and Regulation D promulgated thereunder, no public
sale having been involved.
In the three years preceding the filing of this registration statement, we
have granted options to purchase an aggregate of 8,570,370 common shares and
have issued an aggregate of 848,809 common shares to current and former
employees upon exercise of options for an aggregate exercise price of $0.32.
Exemption from registration is claimed pursuant to Rule 701, no public sale
having been involved.
II-3
<PAGE>
Upon the closing of this offering, Open Port Technology, Inc., an Illinois
corporation, will merge with and into its wholly owned subsidiary, Open Port
Technology, Inc., a Delaware corporation. In connection with the merger, Open
Port Technology, Inc. -- Delaware will issue shares of common stock to the
holders of common stock of Open Port Technology, Inc.--Illinois, in exchange
for such holders' shares of Open Port common stock. Exemption from registration
is claimed pursuant to Section 3(a)(9) of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
2.1 Form of Agreement and Plan of Merger between the registrant and Open
Port Technology, Inc., an Illinois corporation
3.1 Form of Certificate of Incorporation of Open Port
3.2 Form of By-Laws of Open Port
4.1* Specimen certificate representing Open Port's common stock
4.2 Form of Warrant between Open Port and Comdisco, Inc.
4.3 Form of Warrant between Open Port and CID Mezzanine Capital, L.P.
4.4 Form of Warrant between Open Port and Silicon Valley Bank
4.5 Form of Warrant between Open Port and Third Coast Venture Lease
Partners I, L.P.
4.6 Form of Warrant between Open Port and Deutsche Bank Securities Inc.
5.1* Opinion of Sonnenschein Nath & Rosenthal
10.1+ 1995 Incentive Stock Option Plan, as amended
10.2+ 1995 Non-Employee Stock Option Plan, as amended
10.3+* 2000 Equity Incentive Plan
10.4+* 2000 Outside Directors Stock Option Plan
10.5+* 2000 Employee Stock Purchase Plan
10.6+* Employment Agreement between Open Port and Randy S. Storch
10.7+* Employment Agreement between Open Port and Cheryl Mayberry
10.8+* Employment Agreement between Open Port and Omprasad S. Nandyal
10.9+* Employment Agreement between Open Port and Michael B. Clauer
10.10 Amended and Restated Registration Rights Agreement among Open Port and
the investors specified therein
10.11 Lease between Open Port and Teachers Insurance and Annuity Association
of America
10.12 First Amendment to Lease betwen Open Port and Teachers Insurance and
Annuity Association of America
10.13 Master Lease Agreement between Open Port and Third Coast Venture Lease
Partners I, L.P.
10.14 Form of Software License Agreement
21.1 Subsidiaries of Open Port
23.1 Consent of PricewaterhouseCoopers, LLP
23.2* Consent of Sonnenschein Nath & Rosenthal (to be included in Exhibit
5.1)
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
+ Indicates compensatory plan or arrangement.
II-4
<PAGE>
(b) Financial Statement Schedules
No schedules have been included for the reason that they are not required or
are not applicable, or the required information is shown in the financial
statements or notes thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act,
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the 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.
(3) It will 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.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be filed on its behalf by the
undersigned, thereunto duly authorized in Chicago, Illinois on April 4, 2000.
Open Port Technology, Inc.
/s/ Randy S. Storch
By: _________________________________
Randy S. Storch,
Chairman of the Board,
President and Chief Executive
Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Open Port Technology, Inc.,
hereby severally constitute and appoint Randy S. Storch, Antonio Dutra and
Joseph M. Fuller, and each of them singly, our true and lawful attorneys, with
full power to them and each of them singly, to sign for us in our names in the
capacities indicated below, all pre-effective and post-effective amendments to
this registration statement, including any filings pursuant to Rule 462(b)
under the Securities Act of 1933, as amended, and generally to do all things in
our names and on our behalf in such capacities to enable Open Port Technology,
Inc. to comply with the provisions of the Securities Act of 1933, as amended,
and all requirements of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 4th day of April, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Randy S. Storch Chairman of the Board, President and Chief
___________________________________________ Executive Officer (principal executive
Randy S. Storch officer)
/s/ Michael B. Clauer Vice President and Chief Financial Officer
___________________________________________ (principal accounting and financial
Michael B. Clauer officer)
/s/ Omprasad S. Nandyal Chief Technical Officer, Secretary and
___________________________________________ Director
Omprasad S. Nandyal
/s/ Peter J. Barris Director
___________________________________________
Peter J. Barris
/s/ Thomas J. Crotty Director
___________________________________________
Thomas J. Crotty
/s/ Royce J. Holland Director
___________________________________________
Royce J. Holland
/s/ Donald R. Hollis Director
___________________________________________
Donald R. Hollis
/s/ John E. Major Director
___________________________________________
John E. Major
/s/ Joseph Piscopo Director
___________________________________________
Joseph Piscopo
</TABLE>
II-6
<PAGE>
Exhibit 2.1
Open Port Technology, Inc.
AGREEMENT AND PLAN OF MERGER
(Pursuant to Section 252 of the
Delaware General Corporation Law)
- --------------------------------------------------------------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Plan of Merger") is made and
entered into as of ________ __, 2000 by and between Open Port Technology, Inc.,
a Delaware corporation (hereinafter referred to as the "Surviving Corporation")
and Open Port Technology, Inc., an Illinois corporation (hereinafter referred to
as the "Merging Corporation"), the holder of one hundred percent (100%) of the
issued and outstanding capital stock of the Surviving Corporation. The Surviving
Corporation and the Merging Corporation are sometimes hereinafter referred to
collectively as the "Constituent Corporations;"
WHEREAS, the respective Boards of Directors of the Merging Corporation and
the Surviving Corporation deem it advisable and in the best interest of each of
their respective Constituent Corporations that the Merging Corporation merge
with and into the Surviving Corporation for the sole purpose of effecting a
change in the state of incorporation of the Merging Corporation from Illinois to
Delaware (the "Reincorporation Merger"), and have approved such Reincorporation
Merger and this Plan of Merger, each by unanimous written consent and in
accordance with the applicable provisions of the General Corporation Law of the
State of Delaware (the "Delaware Act") and the Illinois Business Corporation Act
(the "Illinois Act");
WHEREAS, approval by the respective Stockholders of each of the Constituent
Corporations is required by the Delaware Act and the Illinois Act; and
WHEREAS, the respective Stockholders and Directors of each of the
Constituent Corporations have, by consent, approved their respective Constituent
Corporations' performance under the Plan of Merger, and have approved the form
and substance of the Plan of Merger and authorized its execution and delivery.
NOW THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants and agreements contained in this Plan of
Merger, and other good and valuable consideration, the receipt, adequacy and
sufficiency which are hereby acknowledged, each of the Constituent Corporations
agrees to the following terms and provisions in furtherance of effecting the
Reincorporation Merger more fully discussed herein.
- --------------------------------------------------------------------------------
-1-
<PAGE>
ARTICLE I
THE REINCORPORATION MERGER
1.01 Reincorporation Merger. At the Effective Time (as that term is
-----------------------
defined in Section 1.03 hereof), subject to the terms and conditions of this
Plan of Merger, the Merging Corporation shall be merged into the Surviving
Corporation, with the Surviving Corporation being the survivor, all in
accordance with the applicable provisions of each of the Delaware Act and the
Illinois Act.
1.02 Effects of the Reincorporation Merger. At the Effective Time, the
--------------------------------------
Merging Corporation shall be merged into the Surviving Corporation and the
separate existence of the Merging Corporation shall thereupon cease and the
Surviving Corporation shall possess all the rights, privileges, powers,
immunities, purposes and franchises, both public and private of the Merging
Corporation. The Reincorporation Merger shall in all respects have the effect
provided for in the applicable provisions of each of the Delaware Act and the
Illinois Act, including, without limitation, the following:
(i) All property, real, personal and mixed, and all debts due on whatever
account, including subscriptions to shares, and all other choses in action,
all and every other interest, of or belonging to or due to the Merging
Corporation shall be taken and considered transferred to and vested in the
Surviving Corporation without further act or deed; and the title to any
real estate, or any interest therein, vested in such corporation shall not
revert or be in any way impaired by reason of such Reincorporation Merger;
and
(ii) The Surviving Corporation shall be liable for all the obligations and
liabilities of the Merging Corporation; and any claim existing or action or
proceeding pending by or against the Merging Corporation may be enforced as
if such Reincorporation Merger had not taken place and the Surviving
Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon, or security interests in, the property of any
of the Constituent Corporations shall be impaired by the Reincorporation
Merger.
Prior to, and from and after the Effective Time, the Merging Corporation and the
Surviving Corporation hereby agree to take all such action or actions as shall
be deemed necessary or appropriate in order to duly effectuate the
Reincorporation Merger. In case at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further assignments,
conveyances or assurances in law are necessary or desirable to carry out the
provisions hereof, the proper officers of the Constituent Corporations are
hereby granted the due and proper authority to execute and deliver any and all
proper deeds, assignments, and assurances in law and to do all things necessary
or proper to carry out the provisions of this Plan of Merger.
- --------------------------------------------------------------------------------
-2-
<PAGE>
1.03 Actions to Be Taken to Effect the Reincorporation Merger.
---------------------------------------------------------
Simultaneously with, and contingent upon, the consummation by the Surviving
Corporation of a Qualified Public Offering (as defined in the Merging
Corporation's Amended and Restated Articles of Incorporation), the parties
hereto shall cause to be executed in the manner required by the Delaware Act and
the Illinois Act such documents as shall effect the Reincorporation Merger under
the laws of Delaware and Illinois, and the parties shall cause to be performed
all necessary acts within the State of Delaware and Illinois and elsewhere to
effect the Reincorporation Merger. The Board of Directors and the appropriate
officers of each of the Constituent Corporations have been duly authorized,
empowered and directed to take any and all actions and to make, execute,
deliver, file and record any and all instruments, papers and documents that
shall be or become necessary, proper or convenient, including but not limited to
the respective Certificate of Merger and Articles of Merger in the forms
prescribed and called for under each of the Delaware Act and Illinois Act
(hereinafter sometimes collectively referred to as the "Merger Certificates"),
to carry out or put into effect the Reincorporation Merger or any of the
provisions of this Plan of Merger. The Reincorporation Merger shall be
effective on that date on which the Certificate of Merger is filed in the State
of Delaware and the Articles of Merger is filed in the State of Illinois (the
"Effective Time".)
ARTICLE II
THE SURVIVING CORPORATION
2.01 Certificate of Incorporation. The Amended and Restated Certificate
-----------------------------
of Incorporation of the Surviving Corporation in effect immediately prior to the
Effective Time, shall remain in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until amended as provided therein or
as otherwise provided by law.
2.02 By-Laws. The Amended and Restated By-Laws of the Surviving
--------
Corporation in effect immediately prior to the Effective Time, shall remain in
full force and effect as the By-Laws of the Surviving Corporation until amended
as provided therein.
2.03 Directors. The members of the Board of Directors of the Surviving
----------
Corporation shall be as follows, which Directors are to serve until the next
Annual Meeting of the Stockholders in the year indicated below, or until their
respective successors shall have been duly elected and qualified and which
Directors are to serve on such committees of the Board of Directors as indicated
below:
<TABLE>
<CAPTION>
Committee
Expiration of Appointment, if
Name of Director Term any
----------------------------------------------------------------
<S> <C> <C>
Royce Holland 2001 None
Joseph A. Piscopo 2001 Audit
Donald R. Hollis 2002 Audit
Peter J. Barris 2002 Compensation
Thomas Crotty 2002 Compensation
</TABLE>
- --------------------------------------------------------------------------------
-3-
<PAGE>
<TABLE>
<CAPTION>
Committee
Expiration of Appointment, if
Name of Director Term any
---------------------------------------------------------------
<S> <C> <C>
Randy S. Storch 2003 None
Omprasad S. Nandyal 2003 None
John E. Major 2003 Audit
</TABLE>
2.04 Officers. The officers of the Merging Corporation, as in effect
---------
immediately prior to the Effective Time, shall be the corresponding officers in
the Surviving Corporation and shall remain the officers of the Surviving
Corporation until their respective successors shall have been duly elected and
qualified.
2.05 Corporate Name. The name of the Surviving Corporation is, and after
---------------
the Effective Time, shall continue to be, "Open Port Technology, Inc."
ARTICLE III
CONVERSION AND CANCELLATION OF SHARES
3.01 Effect of Reincorporation Merger on Surviving Corporation Shares.
-----------------------------------------------------------------
As of the Effective Time, each of the issued and outstanding shares of capital
stock of the Surviving Corporation shall be automatically canceled and
extinguished by virtue of the Reincorporation Merger without any action by the
holder thereof, and no cash or securities or other property shall be payable in
respect thereof.
3.02 Effect of Reincorporation Merger on Merging Corporation's Shares.
-----------------------------------------------------------------
Each share of Common Stock, $.001 par value per share of the Merging Corporation
issued and outstanding at the Effective Time shall be converted into and
exchanged for one (1) share of the Common Stock, $.001 par value per share of
the Surviving Corporation, and upon issuance each such share issued as a result
of the Reincorporation Merger shall be deemed duly authorized, validly issued,
fully paid and non-assessable shares of the Surviving Corporation (the
"Conversion Shares").
3.03 Exchange of Certificates for Stockholders of Merging Corporation.
-----------------------------------------------------------------
At any time after the Effective Time, each Stockholder of the Merging
Corporation may present and surrender such holder's outstanding certificate or
certificates to the Surviving Corporation, and such stockholder of the Merging
Corporation shall be entitled, upon presentation and surrender, to receive from
the Surviving Corporation in exchange therefor and without charge, a certificate
or certificates representing the Conversion Shares. Such new certificates shall
bear appropriate legends referencing any and all restrictions on the transfer of
the shares represented thereby, as determined by the Board of Directors of the
Surviving Corporation, in addition to any other legends required by applicable
law or otherwise.
Until so presented and surrendered, each such outstanding certificate held
by a Stockholder of the Merging Corporation prior to the Effective Time of the
Reincorporation
- --------------------------------------------------------------------------------
-4-
<PAGE>
Merger, shall be deemed for all purposes, after the Effective Time, to evidence
such Stockholder's Exchange Shares.
ARTICLE IV
MISCELLANEOUS
4.01 Service of Process. The Surviving Corporation hereby agrees that it
-------------------
may be served with process in the State of Illinois in any proceeding for the
enforcement of any obligation of the Surviving Corporation and hereby
irrevocably appoints the Secretary of State of Illinois as its agent to accept
service of process in any such proceeding and will file with the Secretary of
State of Illinois any documents necessary to effect the foregoing.
The address to which a copy of such process shall be mailed by the
Secretary of State of Illinois is: Open Port Technology, Inc., 676 North St.
Clair, Suite 900, Chicago, Illinois 60611, Attn: Chief Executive Officer, until
the Surviving Corporation shall thereafter designate in writing to the Secretary
of State a different address for such purpose.
4.02 Dissenting Stockholders. The Surviving Corporation hereby agrees to
------------------------
promptly pay to any Stockholders of the Merging Corporation, the amount, if any,
to which such Stockholder shall be entitled under the applicable provisions of
the Illinois Act with respect to the rights of dissenting Stockholders.
4.03 Amendment. Prior to the filing of the Merger Certificates, this
----------
Plan of Merger may be amended, modified or supplemented, as agreed in writing by
the Constituent Corporations, any time before or after approval or adoption of
this Plan of Merger by the respective Boards of Directors of the Constituent
Corporations.
4.04 Termination. Notwithstanding anything contained herein to the
------------
contrary, this Plan of Merger may be terminated and the proposed Reincorporation
Merger may be abandoned by the respective Boards of Directors of the Constituent
Corporations at any time prior to the filing of the Merger Certificates.
[SIGNATURES ON FOLLOWING PAGE]
- --------------------------------------------------------------------------------
-5-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned, pursuant to the authority and
approval duly granted by resolutions approved and adopted by each of the
Constituent Corporations' respective Boards of Directors, and the Stockholders
entitled to vote therein, as applicable, has caused this Agreement and Plan of
Merger to be executed as of ________ __, 2000.
The Merging Corporation: The Surviving Corporation:
Open Port Technology, Inc., Open Port Technology, Inc.,
an Illinois corporation a Delaware corporation
By:____________________________ By:_________________________________
Randy S. Storch, Chief Randy S. Storch, Chief Executive
Executive Officer Officer
- --------------------------------------------------------------------------------
Signature Page
<PAGE>
EXHIBIT 3.1
Open Port Technology, Inc.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
- --------------------------------------------------------------------------------
Open Port Technology, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Open Port Technology, Inc. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on ________.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, as amended (the "DGCL"), this Amended and Restated
Certificate of Incorporation restates and further amends the provisions of the
Certificate of Incorporation of this Corporation. Pursuant to and in accordance
with the provisions of Section 228 of the DGCL, written consent to this Amended
and Restated Certificate of Incorporation has been given in lieu of a vote of
stockholders at a meeting and written notice of such written consent has been
given to all stockholders who have not consented in writing to this Amended and
Restated Certificate of Incorporation.
3. The text of the original Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
Article I.
NAME
Section 1.1 Name. The name of the Corporation is Open Port Technology,
Inc.
- --------------------------------------------------------------------------------
-1-
<PAGE>
Article II.
REGISTERED OFFICE AND REGISTERED AGENT
Section 2.1 Office and Agent. The registered office of the Corporation in
the State of Delaware is located at 1013 Centre Road, in the City of Wilmington,
County of New Castle 19805. The name of its registered agent at that address is
Corporation Service Company.
Article III.
CORPORATE PURPOSE
Section 3.1 Purpose. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the DGCL.
Article IV.
CAPITALIZATION
Section 4.1 Authorized Capital Stock. (a) The Corporation is authorized to
issue two classes of stock designated as "Common Stock" and "Preferred Stock,"
respectively. The total number of shares that the Corporation is authorized to
issue is [_________] shares, of which [________] shares shall be Common Stock,
par value $.001 per share, and [________] shares shall be Preferred Stock, par
value $.001 per share.
Section 4.2 Common Stock. The designations and the powers, preferences and
rights of the Common Stock are as follows:
(a) Voting Rights. Except as set forth herein or as otherwise required by
law, each outstanding share of Common Stock shall be entitled to vote on each
matter on which the stockholders of the Corporation shall be entitled to vote,
including the election of directors, and each holder of Common Stock shall be
entitled to one vote for each share of such stock held by such holder.
(b) Dividends and Distributions. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the Board of Directors of the Corporation (the "Board of Directors")
may cause dividends to be paid to the holders of shares of Common Stock out of
funds legally available for the payment of dividends by declaring an amount per
share as a dividend. When and as dividends or other distributions (including
without limitation any grant or distribution of rights to subscribe for or
purchase shares of capital stock or securities or indebtedness convertible into
capital stock of the Corporation) are declared, whether payable in cash, in
property or in shares of stock of the Corporation (other than in shares of
Common Stock) the holders of Common Stock shall be entitled to share equally,
share for share, in such dividends or other distributions. No dividends or other
distributions shall be declared or paid in shares of Common Stock, or options,
warrants or rights to acquire such stock or securities convertible into or
exchangeable for shares of such stock, except dividends or other distributions
- --------------------------------------------------------------------------------
-2-
<PAGE>
payable to all of the holders of Common Stock ratably according to the number of
shares held by them.
(c) Liquidation. Subject to the prior rights of holders of all classes of
stock outstanding having prior rights with respect to the assets of the
Corporation, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, holders of Common
Stock shall be entitled to share ratably according to the number of shares held
by them, in all assets of the Corporation available for distribution to its
stockholders.
(d) No Preemptive Rights. The holders of shares of Common Stock shall have
no preemptive or preferential rights of subscription to any shares of any class
of capital stock of the Corporation or any securities convertible into or
exchangeable for shares of any class of capital stock of the Corporation.
Section 4.3 Preferred Stock. Shares of Preferred Stock of the Corporation
may be issued from time to time in one or more classes or series, each of which
class or series shall have such distinctive designation or title as shall be
fixed by the affirmative vote of a majority of the Board of Directors prior to
the issuance of any shares thereof. Each such class or series of Preferred Stock
shall have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions, including the dividend
rate, redemption price and liquidation preference, and may be convertible into,
or exchangeable for, at the option of either the holder or the Corporation or
upon the happening of a specified event, shares of any other class or classes or
any other series of the same or any other class or classes of capital stock, or
any debt securities, of the Corporation at such price or prices or at such rate
or rates of exchange and with such adjustments as shall be stated and expressed
in this Certificate of Incorporation or in any amendment hereto or in such
resolution or resolutions providing for the issuance of such class or series of
Preferred Stock as may be adopted from time to time by the affirmative vote of a
majority of the Board of Directors prior to the issuance of any shares thereof
pursuant to the authority hereby expressly vested in it, all in accordance with
the DGCL. The authority of the Board of Directors with respect to each series
shall also include, but not be limited to, the determination of restrictions, if
any, on the issue or reissue of any additional shares of Preferred Stock.
Article V.
INDEMNIFICATION
Section 5.1 Indemnification.
(a) Right to Indemnification. Each person who was or is made a party or
is threatened to be made a party to or is involved in or called as a witness in
any Proceeding (as hereinafter defined) because he or she is or was or had
agreed to become a director, officer or Delegate of this Corporation, shall,
and, at the election of the Corporation as determined by the Board of Directors,
each person who was or is made a party or is threatened to be made a party to or
is involved in or called as a witness in any Proceeding because he or she is or
was an employee or agent of the Corporation may, be indemnified and held
harmless by the Corporation to the fullest
- --------------------------------------------------------------------------------
-3-
<PAGE>
extent permitted under the DGCL, as the same now exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
the DGCL permitted the Corporation to provide prior to such amendment). Such
indemnification shall cover all expenses incurred by any person (an "Indemnified
Person") indemnified pursuant to this Article V (including, but not limited to,
attorneys' fees and other expenses of litigation) and all liabilities and losses
(including, but not limited to, judgments, fines, ERISA or other excise taxes or
penalties and amounts paid or to be paid in settlement) incurred by such person
in connection therewith.
Notwithstanding the foregoing, except with respect to indemnification
specified in Section 5.1(c), the Corporation shall indemnify an Indemnified
Person in connection with a Proceeding (or part thereof) initiated by such
person only if such Proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
For purposes of this Article V:
(i) a "Proceeding" is an action, suit or proceeding, whether civil,
criminal, administrative or investigative, and any appeal
therefrom including, without limitation, any such action, suit,
proceeding or appeal by or in the right of the Corporation;
(ii) a "Delegate" of the Corporation is (A) any employee of the
Corporation or a subsidiary of the Corporation serving as a
director or officer (or in a substantially similar capacity) of
an entity or enterprise (x) in which the Corporation and its
subsidiaries collectively own a 10% or greater equity interest
or (y) the principal function of which is to service or benefit
the Corporation or a subsidiary of the Corporation; (B) any
employee of the Corporation or a subsidiary of the Corporation
serving as a trustee or fiduciary of an employee benefit plan
of the Corporation or any entity or enterprise referred to in
clause (A); and (C) any person acting at the request of the
Board of Directors of the Corporation in any capacity with any
entity or enterprise other than the Corporation; and
(iii) the "Corporation" means Open Port Technology, Inc., a Delaware
corporation, and its successors, but does not include any
constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger within the
meaning of Section 145(h) of the DGCL.
(b) Expenses. Expenses, including attorneys' fees, incurred by a director
or officer of the Corporation indemnified pursuant to Section 5.1(a) in
defending or otherwise being involved in a Proceeding shall be paid by the
Corporation in advance of the final disposition of such Proceeding, including
any appeal therefrom, upon receipt of an undertaking (the "Undertaking") by or
on behalf of such person to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Corporation;
provided that in connection with a Proceeding (or part thereof) initiated by
such person, except a Proceeding authorized by Section 5.1(c), the Corporation
shall pay said expenses in advance of final disposition only if such
- --------------------------------------------------------------------------------
-4-
<PAGE>
Proceeding (or part thereof) was authorized by the Board of Directors. A person
to whom expenses are advanced pursuant hereto shall not be obligated to repay
pursuant to the Undertaking until the final determination of any pending
Proceeding in a court of competent jurisdiction concerning the right of such
person to be indemnified or the obligation of such person to repay pursuant to
the Undertaking. Such expenses, including attorneys' fees, incurred by other
employees and agents of the Corporation may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(c) Protection of Rights. If a claim under Section 5.1(a) is not promptly
paid in full by the Corporation after a written claim has been received by the
Corporation or if expenses pursuant to Section 5.1(b) of this Article have not
been promptly advanced after a written request for such advancement accompanied,
in the case of such request by a director or officer, by the Undertaking has
been received by the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim or the
advancement of expenses. If successful, in whole or in part, in such suit, such
claimant shall also be entitled to be paid the reasonable expense thereof
(including, without limitation, attorneys' fees). It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any Proceeding in advance of its final disposition where
the required Undertaking, if any, has been tendered to the Corporation) that
indemnification of the claimant is prohibited by law, but the burden of proving
such defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination, if required, prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that
indemnification of the claimant is prohibited, shall be a defense to the action
or create a presumption that indemnification of the claimant is prohibited. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in accordance with any
applicable standard of conduct which makes it permissible under the DGCL for the
Corporation to indemnify the claimant.
(d) Miscellaneous.
(i) Non-Exclusivity of Rights. The rights conferred on any person by
this Article V shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, By-law, agreement, vote of stockholders or
disinterested directors or otherwise. The Board of Directors shall have the
authority, by resolution, to provide for such indemnification of employees
or agents of the Corporation or others and for such other indemnification
of directors, officers or Delegates as it shall deem appropriate.
(ii) Insurance, Contracts and Funding. The Corporation may maintain
insurance, at its expense, to protect itself and any director, officer,
Delegate, employee, or agent of the Corporation against any expenses,
liabilities or losses, arising out of such person's status as such, whether
or not the Corporation would have the power to indemnify such person
against such expenses, liabilities or losses under the DGCL. The
Corporation may
- --------------------------------------------------------------------------------
-5-
<PAGE>
enter into contracts with any director, officer or Delegate of the
Corporation in furtherance of the provisions of this Article V and may
create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to ensure the payment
of such amounts as may be necessary to effect the advancing of expenses and
indemnification as provided in this Article V.
(iii) Contractual Nature. The provisions of this Article V shall be
applicable to all Proceedings commenced or continuing after its adoption,
whether such arise out of events, acts or omissions which occurred prior or
subsequent to such adoption, and shall continue as to a person who has
ceased to be a director, officer or Delegate and shall inure to the benefit
of the heirs, executors and administrators of such person. This Article V
shall be deemed to be a contract between the Corporation and each person
who, at any time that this Article V is in effect, serves or agrees to
serve in any capacity which entitles him to indemnification hereafter and
any repeal or other modification of this Article, the adoption of any
provision of the Corporation's Certificate of Incorporation inconsistent
with this Article V or any repeal or modification of the DGCL or any other
applicable law shall not limit any such person's entitlement to the
advancement of expenses or indemnification under this Article V for
Proceedings then existing or later arising out of events, acts or omissions
occurring prior to such repeal or modification or adoption of an
inconsistent provision, including, without limitation, the right to
indemnification for Proceedings commenced after such repeal or modification
or adoption of an inconsistent provision to enforce this Article V with
regard to Proceedings arising out of acts, omissions or events occurring
prior to such repeal or modification or adoption of an inconsistent
provision.
Article VI.
LIABILITY OF A DIRECTOR
Section 6.1 Director Liability. (a) A director of the Corporation shall
not be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived any
improper personal benefit.
(a) If the DGCL is amended hereafter to authorize the further elimination
or limitation of the liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest extent authorized
by the DGCL, as so amended, without further action by either the Board of
Directors or the stockholders of the Corporation.
(b) Neither any amendment nor repeal of this Article VI, nor the adoption
of any provision of the Corporation's Certificate of Incorporation inconsistent
with this Article VI, shall eliminate or reduce the effect of this Article, in
respect of any act or omission occurring, or any action or proceeding accruing
or arising or that, but for this Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
- --------------------------------------------------------------------------------
-6-
<PAGE>
Article VII.
MANAGEMENT OF THE AFFAIRS OF THE CORPORATION
Section 7.1 Management of the Affairs of the Corporation. (a) The business
and affairs of the Corporation shall be managed by the Board of Directors, which
may exercise all the powers of the Corporation and do all such lawful acts and
things that are not conferred upon or reserved to the stockholders by law, by
this Certificate of Incorporation or by the by-laws of the Corporation (the "By-
Laws").
(a) Election of directors of the Corporation need not be by written ballot,
unless required by the By-Laws.
(b) The following provisions are inserted for the limitation and regulation
of the powers of the Corporation and of its directors and stockholders:
(i) Amendment of By-Laws. The By-Laws, or any of them, may be
altered, amended or repealed, or new By-Laws may be made, but only to the
extent any such alteration, amendment, repeal or new By-Law is not
inconsistent with any provision of this Certificate of Incorporation as it
may be amended from time to time, either by a majority of the whole Board
of Directors or by the stockholders of the Corporation upon the affirmative
vote of the holders of at least a 80% of the outstanding capital stock
entitled to vote thereon.
(ii) Board of Directors.
(A) The number of directors which shall constitute the
whole Board of Directors shall be determined in the manner provided in
the By-Laws of the Corporation. The Board of Directors shall be
divided into three classes, as nearly equal in number as the then
total number of directors constituting the entire Board permits, with
the term of office of one class expiring each year. The initial
division of the Board of Directors shall be made by the decision of a
majority of the entire Board of Directors. The initial Class I
directors elected by the stockholders of the Corporation shall hold
office for a term expiring at the 2001 annual meeting of stockholders
and until their successors shall be elected and qualified, subject to
prior death, retirement, resignation or removal; the initial Class II
directors elected by the stockholders of the Corporation shall hold
office for a term expiring at the 2002 annual meeting of stockholders
and until their successors shall be elected and qualified, subject to
prior death, retirement, resignation or removal; and the initial Class
III directors elected by the stockholders of the Corporation shall
hold office for a term expiring at the 2003 annual meeting of
stockholders and until their successors shall be elected and
qualified, subject to prior death, retirement, resignation or removal.
At each such annual meeting of stockholders and at each annual meeting
thereafter, successors to the class of directors whose term expires at
that meeting shall be elected for a term expiring at the third annual
meeting following their election and until their
- --------------------------------------------------------------------------------
-7-
<PAGE>
successors shall be elected and qualified, subject to prior death,
retirement, resignation or removal.
(B) Subject to the rights of the holders of any series of
preferred stock or any other class of capital stock of the Corporation
(other than common stock) then outstanding, any vacancy in the Board
of Directors, arising from death, retirement, resignation, removal, an
increase in the number of directors or any other cause, may be filled
by the Board of Directors (to the extent, but only to the extent, that
such directors would constitute a majority of such remaining
directors), acting by a majority of the remaining directors then in
office, although less than a quorum, or by a sole remaining director,
the stockholders acting at an annual meeting or, if the vacancy is
with respect to a director elected by a voting group, by action of any
other directors elected by such voting group or such voting group.
Each director chosen to fill a vacancy in the Board of Directors
arising from the death, retirement, resignation, removal of a director
shall be elected to complete the term of office of the director who is
being succeeded. In the event of any increase or decrease in the
authorized number of directors, (1) each director then serving as such
shall nevertheless continue as director of the class of which he or
she is a member until the expiration of such director's current term
or his or prior death, retirement, resignation or removal and (2) the
newly created or eliminated directorships resulting from such increase
or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more
than one director more than any other class, and each director so
elected shall hold office for the same term as the other members of
the class to which the director is assigned. No decrease in the number
of directors constituting the whole Board of Directors shall shorten
the term of an incumbent director.
(C) Except as may be provided in a resolution or resolutions
providing for any class or series of Preferred Stock pursuant to
Section 4.3 hereof with respect to any directors elected by the
holders of such class or series, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause
and only by the affirmative vote of the holders of at least 80% of the
voting power of all of the shares of capital stock of the corporation
then entitled to vote generally in the election of directors, voting
together as a single class. The provisions of this subsection shall be
the exclusive method for the removal of directors.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation or the
resolution or resolutions adopted by the Board of Directors pursuant to
Section 4.3 hereof applicable thereto, and such directors so elected shall
not be divided into classes pursuant to this Section 7.1(c) unless
expressly provided by such terms.
- --------------------------------------------------------------------------------
-8-
<PAGE>
(iii) Nomination of Directors. Only persons who are selected and
recommended by the Board of Directors or the committee of the Board of
Directors designated to make nominations, or who are nominated by
stockholders in accordance with the procedures and requirements set forth
in the By-Laws, shall be eligible for election, or qualified to serve, as
directors, except as may be otherwise provided in this Certificate of
Incorporation with respect to the right of holders of Preferred Stock of
the Corporation to nominate and elect a specified number of directors in
certain circumstances.
(iv) Ability of Stockholders to Act by Written Consent. Any action
required or permitted to be taken at any annual or special meeting of
stockholders may be taken only upon the vote of stockholders at an annual
or special meeting duly noticed and called in accordance with the DGCL and
the By-Laws of the Corporation and may not be taken by written consent of
stockholders without a meeting, unless the action to be effected by written
consent of stockholders and the taking of such action by such written
consent have expressly been approved in advance by the Board of Directors
of the Corporation.
(v) Special Meetings of Stockholders. Special meetings of the
stockholders of the Corporation may be called, for any purpose or purposes,
only by (A) the Chairman of the Board of Directors, (B) the Chief Executive
Officer or (C) the Board of Directors pursuant to a resolution adopted by a
majority of the members of the Board of Directors then in office. Special
meetings of the stockholders of the Corporation may not be called by any
other person or persons. Special meetings may be held at any place, within
or without the State of Delaware, as determined by the person or persons
calling such meeting. The only business that may be conducted at such a
meeting, other than procedural matters and matters relating to the conduct
of the meeting, shall be matters relating to the purpose or purposes stated
in the notice of meeting.
(vi) Consideration of Acquisition Proposals. In determining whether an
"Acquisition Proposal" is in the best interests of the Corporation and its
stockholders, the Board of Directors may, to the extent permitted by law,
consider all factors it deems relevant including, without limitation, (a)
the consideration being offered in the Acquisition Proposal, not only in
relation to the then current market price, but also in relation to the then
current value of the Corporation in a freely negotiated transaction and in
relation to the Board of Directors' estimate of the future value of the
Corporation as an independent entity; and (b) such other factors the Board
of Directors determines to be relevant, including among others the social,
legal and economic effects upon employees, suppliers, customers and the
communities in which the Corporation is located, as well as on the long
term business prospects of the Corporation. "Acquisition Proposal" means
any proposal of any person (i) for a tender offer, exchange offer or any
other method of acquiring any equity securities of the Corporation with a
view to acquiring control of the Corporation, (ii) to merge or consolidate
the Corporation with another corporation, or (iii) to purchase or otherwise
acquire all or substantially all of the properties and assets of the
Corporation. This subparagraph (vi) shall not be interpreted to create any
rights on behalf of third persons, such as employees, suppliers, or
customers.
- --------------------------------------------------------------------------------
-9-
<PAGE>
(vii) Certain Business Combinations. The Corporation has elected to be
governed by Section 203 of the DGCL.
Article VIII.
AMENDMENTS
Section 8.1 Amendments. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, except as otherwise provided in Section 5.1(d)(iii) or Section
6.1(c) hereof, in the manner now or hereafter prescribed by the DGCL, and all
rights conferred upon stockholders herein are granted subject to this
reservation; provided, however, that in addition to any vote of the holders of
any class or series of capital stock of the Corporation required by law, this
Certificate of Incorporation or a Certificate of Designation with respect to a
series of Preferred Stock, the affirmative vote of the holders of shares of
voting stock of the Corporation representing at least 80% of the voting power of
all of the then outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to (i) reduce or eliminate the number of
authorized shares of any capital stock set forth in Article IV, (ii) amend,
repeal or adopt any provision inconsistent with Article V or Article VI which
would diminish the rights of Indemnified Persons pursuant to Article V or the
exculpation of directors pursuant to Article VI of this Certificate of
Incorporation or (iii) amend or repeal or adopt any provision inconsistent with
Section 7.1(b) of Article VII or this Article VIII of this Certificate of
Incorporation.
Article IX.
SEVERABILITY
Section 9.1 In the event that any of the provisions of this Certificate of
Incorporation (including any provision within a single article, section,
paragraph or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions are severable
and shall remain enforceable to the full extent permitted by law.
This Amended and Restated Certificate of Incorporation shall become
effective upon its filing with the Secretary of State of the State of Delaware.
[signature page follows]
- --------------------------------------------------------------------------------
-10-
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
of Open Port Technology, Inc. is signed on behalf of the Corporation by its
President and Chief Executive Officer and attested by its Secretary as of the
____ day of _________, 2000.
OPEN PORT TECHNOLOGY, INC.
By: _________________________
Name: Randy S. Storch
Title: President and Chief Executive Officer
ATTEST
By: _____________________
Name:
Title: Secretary
- --------------------------------------------------------------------------------
-11-
<PAGE>
EXHIBIT 3.2
Open Port Technology, Inc.
AMENDED AND RESTATED
BY-LAWS
- --------------------------------------------------------------------------------
Adopted: ______, 2000
<PAGE>
Open Port Technology, Inc.
AMENDED AND RESTATED
BY-LAWS
- --------------------------------------------------------------------------------
ARTICLE I
OFFICES
-------
Section 1. Registered Office in Delaware.
-----------------------------
The registered office of Open Port Technology, Inc. (the "Corporation") in
the State of Delaware is located at 1013 Centre Road, in the City of Wilmington,
County of New Castle 19805. The name of its registered agent at that address is
Corporation Service Company.
Section 2. Other Offices.
-------------
The Corporation may, in addition to its registered office, establish and
maintain such an office or offices, at such place or places within or without
the State of Delaware, as the Corporation's Board of Directors (the "Board") may
deem necessary, desirable or expedient from time to time.
ARTICLE II
STOCKHOLDERS
------------
Section 1. Place of Meetings.
-----------------
Each meeting of the stockholders shall be held at the principal office of
the Corporation or at such other place, within or without the State of Delaware,
as shall be designated by the Board in the notice of meeting.
Section 2. Annual Meeting.
--------------
The annual meeting of the stockholders shall be held pursuant to notice and
at such date and time as shall be designated by the Board in the notice of
meeting for the purpose of electing directors and for the transaction of such
other business as may come before the meeting.
Section 3. Special Meetings.
----------------
Special meetings of the stockholders of the Corporation may be called, for
any purpose or purposes, only by (a) the Chairman of the Board, (b) the Chief
Executive Officer, or (c) the Board pursuant to a resolution adopted by a
majority of the members of the Board then in office. Special meetings of the
stockholders of the Corporation may not be called by any other person or
persons.
- --------------------------------------------------------------------------------
-1-
<PAGE>
Special meetings may be held at any place, within or without the State of
Delaware, as determined by the person or persons calling such meeting. The only
business that may be conducted at such a meeting, other than procedural matters
and matters relating to the conduct of the meeting, shall be matters relating to
the purpose or purposes stated in the notice of meeting.
Section 4. Notice of Meetings.
------------------
The Secretary or an Assistant Secretary, if any, of the Corporation shall
give written notice of every meeting of the stockholders to each stockholder of
record entitled to vote at the meeting. Such notice shall be given not less
than 10 days, nor more than 60 days, prior to the day named for the meeting,
unless a different period of notice is required by law. Such notice shall be
given either by regular mail, overnight courier, telegram or facsimile
transmission, or by any other means comparable to any of the foregoing, to each
stockholder at his address appearing on the books of the Corporation or supplied
by him to the Corporation for the purpose of notice. Such notice shall specify
the place, day and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is held. When a meeting is
adjourned to another date, hour or place in accordance with the Delaware General
Corporation Law, as amended (the "DGCL "), notice need not be given of the
adjourned meeting if the date, hour and place thereof are announced at the
meeting at which the adjournment is taken unless otherwise required by the DGCL.
Section 5. Waiver of Notice.
----------------
A waiver of notice in writing signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
nor the purpose of the meeting need be specified in the waiver of notice of such
meeting. Attendance of the person either in person or by proxy at any meeting
shall constitute a waiver of notice of such meeting, except where such person
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or convened.
Section 6. Record Date.
-----------
In order that the Corporation may determine the stockholders entitled (a)
notice of or to vote at any meeting of stockholders or any adjournments thereof,
(b) receive payment of any dividend or other distribution, or allotment of any
rights, or (c) exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, the Board, in
advance, may fix a date as the record date for any such determination, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board, and which record date shall not be more
than 60 days nor less than 10 days before the date of such meeting, nor more
than 60 days prior to the date of any other action. A determination of the
stockholders of record entitled to notice of or to vote at a meeting of the
stockholders shall apply to any adjournment of the meeting taken pursuant to
Article II, Section 8 hereof; provided, however, that the Board, in its
-------- -------
discretion, may fix a new record date for an adjourned meeting in accordance
with the DGCL and these by-laws of the Corporation ("By-Laws"). If the Board
fixes a record date in accordance with the DGCL and these By-Laws, only
stockholders determined to be stockholders of record on the record date so fixed
shall be entitled to notice of, or to vote at, such meeting and
- --------------------------------------------------------------------------------
-2-
<PAGE>
any adjournment thereof, or to receive payment of such dividend or other
distribution, or allotment of rights, or to exercise such rights in respect of
such change, conversion or exchange of stock, or to participate in any such
other lawful action, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
Section 7. List of Stockholders.
--------------------
At least 10 days before any meetings of the stockholders, the officer or
transfer agent in charge of the stock transfer books of the Corporation shall
prepare and make a complete alphabetical list of the stockholders entitled to
vote at such meeting, which list shall show the address of each stockholder and
the number of shares registered in the name of each stockholder. The list so
prepared shall be maintained at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held, and shall be open
for inspection by any stockholder, for any purpose germane to the meeting,
during ordinary business hours during a period of not less than 10 days prior to
the meeting. The list shall also be produced and kept open at the meeting
(during the entire duration thereof) and, except as otherwise provided by law,
may be inspected by any stockholder or proxy of a stockholder who is present at
such meeting.
Section 8. Quorum.
------
The presence in person or by proxy of the holders of a majority of the
votes represented by issued and outstanding shares of capital stock entitled to
vote at a stockholders' meeting shall constitute a quorum, except that the
presence in person or by proxy of the holders of a majority of the issued and
outstanding shares of each class or series of capital stock which is entitled to
vote as a class or series at a stockholders' meeting shall constitute a quorum
for any vote in which a vote of such class or series is required.
When any meeting is convened, the presiding officer, if directed by the
Board, may adjourn the meeting if (a) no quorum is present for the transaction
of business, or (b) the Board determines that adjournment is necessary or
appropriate to enable the stockholders (1) to consider fully information which
the Board determines has not been made sufficiently or timely available to
stockholders, or (2) otherwise to exercise effectively their voting rights. At
any such adjourned meeting at which there is a quorum, any business may be
transacted that might have been transacted at the meeting originally called.
Section 9. Stockholder Proposals.
---------------------
(a) Annual Meetings of Stockholders. (1) Nomination of persons for
-------------------------------
election to the Board and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (x) pursuant to
the Corporation's notice of meeting, (y) by or at the direction of the Board, or
(z) by any stockholder of the Corporation who was a stockholder of record at the
time of giving of notice provided for in this Article II, Section 9, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this Article II, Section 9.
- --------------------------------------------------------------------------------
-3-
<PAGE>
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (z) of paragraph (a)(1) of
this Article II, Section 9, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must be a proper matter for stockholder action. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices of
the Corporation not later than the close of business on the 90/th/ day nor
earlier than the close of business on the 120/th/ day prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than 30 days before or
after such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 120/th/ day prior to
such annual meeting and not later than the close of business on the later of the
90/th/ day prior to such annual meeting or the 10/th/ day following the day on
which public announcement of the date of such meeting is first made. In no event
shall the public announcement of an adjournment of an annual meeting commence a
new time period for the giving of a stockholder's notice as described above.
Such stockholder's notice shall set forth (x) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (y) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the nomination or proposal is made; and (z) as to the stockholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as they appear on
the Corporation's books, and of such beneficial owner, and (ii) the class and
number of shares of the Corporation which are owned beneficially and of record
by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of
this Article II, Section 9 to the contrary, in the event that the number of
directors to be elected to the Board is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board made by the Corporation at least 100 days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice
required by this Article II, Section 9 shall also be considered timely, but only
with respect to nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10/th/ day following the
day on which such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the Corporation's
notice of meeting (x) by or at the direction of the Board, or (y) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of notice provided for in
- --------------------------------------------------------------------------------
-4-
<PAGE>
this Article II, Section 9, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Article II, Section 9. In
the event the Corporation calls a special meeting of stockholders for the
purpose of electing one or more directors to the Board, any such stockholder may
nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (a)(2) of this Article II, Section 9
shall be delivered to the Secretary at the principal executive offices of the
Corporation not earlier than the close of business on the 120/th/ day prior to
such special meeting and not later than the close of business on the later of
the 90th day prior to such special meeting or the 10/th/ day following the day
on which public announcement is first made of the date of the special meeting
and of the nominees proposed by the Board to be elected at such meeting. In no
event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
(c) General. (1) Only such persons who are nominated in accordance with
-------
the procedures set forth in this Article II, Section 9 shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Article II, Section 9. Except as otherwise
provided by law, the Corporation's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") or these By-Laws, the
presiding officer of the meeting shall have the power and duty to determined
whether a nomination or any business proposed to be brought before the meeting
was made, or proposed, as the case may be, in accordance with the procedures set
forth in this Article II, Section 9 and, if any proposed nomination or business
is not in compliance with this Article II, Section 9, to declare that such
defective proposal or nomination shall be disregarded.
(2) For purposes of this Article II, Section 9, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Article II, Section 9,
a stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Article II, Section 9. Nothing in this Article II, Section 9
shall be deemed to affect any rights of (x) stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act, or (y) the holders of any series of Preferred Stock to elect
directors under specified circumstances.
- --------------------------------------------------------------------------------
-5-
<PAGE>
Section 10. Voting Power.
------------
Unless otherwise provided in a resolution or resolutions providing for any
class or series of preferred stock pursuant to Article IV of the Certificate of
Incorporation, as amended or by the DGCL, every stockholder of record of the
Corporation shall be entitled to vote, in person or by proxy, the shares of
voting stock of every share of each class or series held of record by such
stockholder. In the election of directors, a plurality of the votes cast shall
elect. All other questions shall be decided by the vote of the majority of the
votes represented by issued and outstanding shares of capital stock present in
person or represented by proxy and entitled to vote at any meeting, or if the
voting is by class or series, a majority of the votes of each class or series of
capital stock present in person or represented by proxy and entitled to vote at
any meeting, unless otherwise specially provided by the DGCL or by the
Certificate of Incorporation or these By-Laws. Abstentions shall not be
considered to be votes cast.
Section 11. Proxies.
-------
Every stockholder may vote either in person or by proxy. Every proxy shall
be executed in writing by the stockholder or by his duly authorized attorney-in-
fact and filed with the Secretary of the Corporation. A proxy, unless coupled
with an interest, shall be revocable at will, notwithstanding any other
agreement or any provision in the proxy to the contrary, but the revocation of a
proxy shall not be effective until notice thereof has been given to the
Secretary of the Corporation. No proxy shall be valid after eleven months from
the date of its execution unless a longer time is expressly provided therein,
but in no event shall a proxy, unless coupled with an interest, be voted on
after three years from the date of its execution. A proxy shall not be revoked
by the death or incapacity of the maker unless before the vote is counted or the
authority is exercised, written notice of such death or incapacity is given to
the Secretary of the Corporation.
Section 12. Inspectors.
----------
Elections for directors need not be by ballot, except upon demand made by a
stockholder at the election and before the voting begins. In advance of any
meeting of stockholders, the Board shall appoint inspectors, who need not be
stockholders, to act at such meeting and make a written report thereof. Such
inspectors may include individuals who serve the Corporation in other
capacities, including, without limitation, as officers, employees, agents or
representatives of the Corporation. The number of inspectors shall be one or
three. One or more persons may be designated by the Board as alternate
inspectors to replace any inspector who fails to act. In case any person
appointed as inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment made by the Board in advance of the convening of
the meeting, or at the meeting by the presiding officer. Each inspector, before
discharging his or her duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
his or her ability. The inspectors shall have the duties prescribed by the
DGCL.
Section 13. Presiding Officers and Order of Business.
----------------------------------------
All meetings of stockholders shall be called to order and presided over by
the Chairman of the Board, or in his absence, by the Chief Executive Officer,
President or highest ranking Vice
- --------------------------------------------------------------------------------
-6-
<PAGE>
President, or in the absence of all of them, by the Chief Financial Officer, or
if none of these be present by a chairman designated by the Board. The Secretary
of the Corporation shall act as secretary of the meeting, but in the absence of
the Secretary of the Corporation, the presiding officer may appoint a secretary
of the meeting.
Section 14. Procedural Matters.
------------------
At each meeting of stockholders, the presiding officer shall fix and
announce the date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at the meeting and shall determine
the order of business and all other matters of procedure. Except to the extent
inconsistent with any such rules and regulations as adopted by the Board, the
presiding officer may establish rules, which need not be in writing, to maintain
order for the conduct of the meeting, including, without limitation, restricting
attendance to bona fide stockholders of record and their proxies and other
persons in attendance at the invitation of the presiding officer and making
rules governing speeches and debates. The presiding officer acts in his or her
absolute discretion and his or her rulings are not subject to appeal.
Section 15. Ability of Stockholders to Act by Written Consent.
-------------------------------------------------
Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken only upon the vote of stockholders at an
annual or special meeting duly noticed and called in accordance with the DGCL
and these By-Laws of the Corporation and may not be taken by written consent of
stockholders without a meeting, unless the action to be effected by written
consent of stockholders and the taking of such action by such written consent
have expressly been approved in advance by the Board of Directors of the
Corporation.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. Powers; Qualifications; Number and Term.
---------------------------------------
The business and affairs of the Corporation shall be managed by or under
the direction of the Board. A member of the Board need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The Board
shall consist of eight persons; provided, however, that such number of directors
-------- -------
may from time to time be increased and decreased by a duly adopted resolution of
the Board but shall in no event be reduced to less than three. The Board of
Directors shall be divided into three classes, as nearly equal in number as the
then total number of directors constituting the entire Board permits, with the
term of office of one class expiring each year. The initial division of the
Board of Directors shall be made by the decision of a majority of the entire
Board of Directors. The initial Class I directors elected by the stockholders
of the Corporation shall hold office for a term expiring at the 2001 annual
meeting of stockholders and until their successors shall be elected and
qualified, subject to prior death, retirement, resignation or removal; the
initial Class II directors elected by the stockholders of the Corporation shall
hold office for a term expiring at the 2002 annual meeting of stockholders and
until their successors shall be elected and qualified, subject to prior death,
retirement, resignation or removal; and the initial Class III directors elected
- --------------------------------------------------------------------------------
-7-
<PAGE>
by the stockholders of the Corporation shall hold office for a term expiring at
the 2003 annual meeting of stockholders and until their successors shall be
elected and qualified, subject to prior death, retirement, resignation or
removal. At each such annual meeting of stockholders and at each annual meeting
thereafter, successors to the class of directors whose term expires at that
meeting shall be elected for a term expiring at the third annual meeting
following their election and until their successors shall be elected and
qualified, subject to prior death, retirement, resignation or removal.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of the Certificate of Incorporation or the resolution or resolutions
adopted by the Board pursuant to Section 4.3 of the Certificate of Incorporation
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to this Section unless expressly provided by such terms.
Section 2. Vacancies.
---------
Subject to the rights of the holders of any series of preferred stock or
any other class of capital stock of the Corporation (other than common stock)
then outstanding, any vacancy in the Board arising from death, retirement,
resignation, removal, an increase in the number of directors or any other cause,
may be filled by the Board acting by a majority of the remaining directors then
in office, although less than a quorum, or by a sole remaining director, the
stockholders acting at an annual meeting or, if the vacancy is with respect to a
director elected by a voting group, by action of any other directors elected by
such voting group or such voting group.
Each director chosen to fill a vacancy in the Board arising from the death,
retirement, resignation or removal of a director shall be elected to complete
the term of office of the director who is being succeeded. In the event of any
increase or decrease in the authorized number of directors, (a) each director
then serving as such shall nevertheless continue as director of the class of
which he or she is a member until the expiration of such director's current term
or his or her prior death, retirement, resignation or removal and (b) the newly
created or eliminated directorships resulting from such increase or decrease
shall be apportioned by the Board of Directors among the three classes of
directors so as to ensure that no one class has more than one director more than
any other class, and each director so elected shall hold office for the same
term as the other members of the class to which the director is assigned. No
decrease in the number of directors constituting the whole Board shall shorten
the term of an incumbent director.
Section 3. Removal of Directors.
--------------------
Except as may be provided in a resolution or resolutions providing for any
class or series of preferred stock pursuant to Article IV of the Certificate of
Incorporation with respect to any directors elected by the holders of such class
or series, any director, or the entire Board, may be removed from office at any
time, but only for cause and only by the affirmative vote of the holders of at
least eighty percent (80%) of the voting power of all of the shares of capital
stock of the
- --------------------------------------------------------------------------------
-8-
<PAGE>
Corporation then entitled to vote generally in the election of directors, voting
together as a single class. The provisions of this subsection shall be the
exclusive method for the removal of directors.
Section 4. Nomination of Directors.
-----------------------
Only persons who are selected and recommended by the Board or the committee
of the Board designated to make nominations, or who are nominated by
stockholders in accordance with the procedures set forth in Article II, Section
9, shall be eligible for election, or qualified to serve, as directors, except
as may be otherwise provided in the Certificate of Incorporation with respect to
the right of holders of preferred stock of the Corporation to nominate and elect
a specified number of directors in certain circumstances.
Section 5. Place of Meetings.
-----------------
The Board may hold annual, regular and special meetings, and have an office
or offices, either within or outside the State of Delaware, at such place as the
Board from time to time deems advisable.
Section 6. Annual and Regular Meetings.
---------------------------
The Board shall, without notice, hold an annual meeting immediately after
the annual meeting of the stockholders, or after the last adjournment thereof,
and shall hold other regular meetings at such time and place as it may
determine. No notice to the newly elected directors of such annual meeting
shall be necessary for such meeting to be lawful, provided a quorum is present.
Section 7. Special Meetings.
----------------
The Board shall hold such special meetings as shall be called by the
Chairman of the Board, Chief Executive Officer, President, or Vice President, or
Secretary, or any two directors. Each such meeting shall be held at such time
and place as shall be designated in the notice of meeting.
Section 8. Notice of Meetings.
------------------
Notice of the date, time and place of each meeting, except the annual
meeting, of the Board shall be (a) mailed by regular mail to each director, at
his address appearing on the books of the Corporation or supplied by the
director to the Corporation for the purpose of notice ("designated address"), at
least six days before the meeting; (b) sent by overnight courier to each
director at his designated address at least two days before the meeting (with
delivery scheduled to occur no later than the day before the meeting); or (c)
given orally by telephone or other means, or by telegraph, facsimile or
electronic mail transmission, or by any other means comparable to any of the
foregoing, to each director at his designated address not later than the day
before the day on which such meeting is to be held or on such shorter notice as
the person or persons calling such meeting may deem necessary or appropriate in
the circumstances; provided, however, that if less than five days' notice is
-------- -------
provided and one-third of the directors then in office object in writing prior
to or at the commencement of the meeting, such meeting shall be postponed until
five days after such notice was given pursuant to this sentence (or such shorter
period to which a majority of those who
- --------------------------------------------------------------------------------
-9-
<PAGE>
objected in writing agree), provided that notice of such postponed meeting shall
be given in accordance with this Article III, Section 8. The notice of the
meeting shall state the general purpose of the meeting, but other routine
business may be conducted at the meeting without such matter being stated in the
notice.
Section 9. Waiver of Notice.
----------------
A waiver of written notice in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Attendance of a person at any
meeting shall constitute a waiver of notice of such meeting, except where such
person attends a meeting for the express purpose of objecting to the transaction
of any business because the meeting was not lawfully called or convened, and any
such person so states his purpose in attending such meeting and refrains from
participation in the business of the meeting.
Section 10. Quorum.
------
Except as otherwise provided in the Certificate of Incorporation, these By-
Laws and the DGCL, a majority of the directors in office shall be necessary at
any meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and the affirmative vote of a majority of those
directors present at any such meeting at which a quorum is present shall be
necessary for the passage of any resolution or act of the Board. In the absence
of a quorum for any such meeting, a majority of the directors present thereat
may adjourn such meeting from time to time until a quorum shall be present
thereat. Notice of any adjourned meeting need not be given.
Section 11. Presiding Officer and Order of Business.
---------------------------------------
All meetings of the Board shall be called to order and presided over by the
Chairman of the Board, or in his absence, by a member of the Board selected by
the members present. The Secretary of the Corporation shall act as secretary,
but in the absence of the Secretary of the Corporation, the presiding officer
may appoint a secretary.
Section 12. Action by Board Without Formal Meeting.
--------------------------------------
Unless otherwise restricted by the Certificate of Incorporation or these
By-Laws, any action required or permitted to be taken at any meeting of the
Board, or of any committee thereof, may be taken without a meeting if all
members of the Board or of such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee, as the case may be.
- --------------------------------------------------------------------------------
-10-
<PAGE>
Section 13. Compensation.
------------
Directors, as such, shall receive such compensation and reimbursement for
expenses as the Board may by resolution allow. Directors shall also be entitled
to receive such compensation for services rendered to the Corporation in any
capacity other than as directors, as may be provided from time to time by
resolution of the Board.
Section 14. Resignation.
-----------
Any director, member of a committee, or other officer may resign at any
time by giving written notice to the Board, the Chairman of the Board or
Secretary of the Corporation. Such resignation shall be effective at the time
specified therein, or, if no time be specified, at the time of its receipt by
the Board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective. Resignations not submitted in writing may be
evidenced by a written acknowledgement of receipt thereof signed by the
receiving director or officer of the Corporation or by acknowledgement of
receipt thereof in the minutes of a subsequent stockholders' or directors'
meeting.
Section 15. Telephonic Meetings and Participation.
-------------------------------------
Members of the Board or any committee designated thereby may participate in
any meeting of such Board or committee by means of conference telephone or
similar communications equipment by which all persons participating can hear
each other. Participation in a meeting pursuant to this section shall
constitute presence in person at such meeting.
ARTICLE IV
COMMITTEES
----------
Section 1. Committees Generally.
--------------------
The Board may, by resolutions passed by a majority of the members of the
Board then in office, designate members of the Board to constitute committees
that, except as otherwise provided in Sections 2, 3, 4 and 5 of this Article IV,
in each case, shall consist of such number of directors, and shall have and may
execute such powers, as described in this Article IV, as is permitted by the
DGCL and as specified in the respective resolutions appointing them. Any such
committee may fix its rules of procedure, determine its manner of acting and the
time and place, whether within or without the State of Delaware, of its meetings
and specify what notice thereof, if any, shall be given, unless these By-Laws,
or the Board by resolution, shall provide otherwise. Unless otherwise provided
by the Board or such committee, the quorum, voting and other procedures shall be
the same as those applicable to actions taken by the Board. A majority of the
members of the Board then in office shall have the power to change the
membership of any such committee at any time, to fill vacancies therein and to
discharge any such committee or to remove any member thereof, either with or
without cause, at any time.
- --------------------------------------------------------------------------------
-11-
<PAGE>
Section 2. Audit Committee.
---------------
The Audit Committee shall consist of such number of directors, who shall
not be officers or employees of the Corporation or any of its affiliates, not
less than three, as shall from time to time be determined by the Board. The
Audit Committee shall each year make a recommendation, based on a review of
qualifications, to the Board for the appointment of independent public
accountants to audit the financial statements of the Corporation and to perform
such other duties as the Board may from time to time prescribe. As part of such
review of qualifications, the Audit Committee shall consider management's plans
for engaging the independent public accountants for management advisory services
to determine whether such services could impair the public accountants'
independence. The Audit Committee shall examine and make recommendations to the
Board with respect to the scope of audits conducted by the Corporation's
independent public accountants and internal auditors. The Audit Committee shall
review all recommendations made by the Corporation's independent public
accountants and internal auditors to the Audit Committee or the Board with
respect to the accounting methods and the system of internal control used by the
Corporation, and shall advise the Board with respect thereto. The Audit
Committee shall review reports from the Corporation's independent public
accountants and internal auditors concerning compliance by management with
governmental laws and regulations and with the Corporation's policies relating
to ethics, conflicts of interest and disbursements of funds. The Audit
Committee shall meet with the Corporation's independent public accountants
and/or internal auditors without management present whenever the Audit Committee
shall deem it appropriate.
Section 3. Compensation Committee.
----------------------
The Compensation Committee shall consist of such number of directors, who
shall not be officers or employees of the Corporation or any of its affiliates,
not less than two, as shall from time to time be determined by the Board. The
Compensation Committee shall make recommendations to the Board with respect to
the administration of the salaries, bonuses, and other compensation to be paid
to key employees and officers of the Corporation, including the terms and
conditions of their employment, and shall administer all stock option and other
benefit plans (except with respect to participation by executive officers and
unless otherwise specified in plan documents) affecting key employees' and
officers' direct and indirect remuneration. The Compensation Committee shall
perform such other duties as the Board may from time to time prescribe.
Section 4. Nominating Committee.
--------------------
The Nominating Committee shall consist of such number of directors, not
less than two, as shall from time to time be determined by the Board. The
Nominating Committee shall be responsible for reviewing the qualifications of,
and recommending to the Board, candidates for election to the Board, and shall
perform such other duties as the Board may from time to time prescribe.
- --------------------------------------------------------------------------------
-12-
<PAGE>
ARTICLE V
OFFICERS AND AGENTS
-------------------
Section 1. Officers.
--------
The officers of the Corporation shall be a Chairman of the Board, a Chief
Executive Officer, a President, a Chief Financial Officer and a Secretary, all
of whom shall be elected by the Board. In addition, the Board may elect one or
more Vice Presidents, Assistant Secretaries or Assistant Treasurers, or appoint
such other additional officers and agents as they may deem advisable. Any two
or more offices may be held by the same person except the offices of President
and Secretary. The officers shall be elected each year at the annual meeting of
the Board which shall be held each year pursuant to Article III, Section 6
hereof.
The Board may appoint, or may empower the Chief Executive Officer to
appoint, such other officers as the business of the Corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these By-Laws or as the Board may from time to
time determine.
Section 2. Term.
----
Each officer and each agent shall hold office until his successor is
elected or appointed and qualified or until his death, resignation or removal by
the Board.
Section 3. Authority, Duties and Compensation.
----------------------------------
All elected or appointed officers and agents shall have such authority and
perform such duties as may be provided in these By-Laws or as may be determined
by the Board or the Chairman of the Board. They shall receive such compensation
for their services as may be determined by the Board, or by the Chairman of the
Board with respect to all officers and agents subordinate to him.
Notwithstanding any other provisions of these By-Laws, the Board shall have
power from time to time by resolution to prescribe by what officers or agents
particular documents or instruments or particular classes of documents or
instruments shall be signed, countersigned, endorsed or executed, provided,
--------
however, that any person, firm or corporation shall be entitled to accept and to
- -------
act upon any document or instrument signed, countersigned, endorsed or executed
by officers or agents of the Corporation pursuant to the provisions of these By-
Laws unless prior to receipt of such document or instrument such person, firm or
corporation has been furnished with a certified copy of a resolution of the
Board prescribing a different signature, countersignature, endorsement or
execution.
Section 4. Chairman of the Board.
---------------------
The Chairman of the Board, if such an officer be elected, shall serve as
the Corporation's general manager, and shall have general supervision, direction
and control of the Corporation's business and its officers, and, if present,
preside at meetings of the stockholders and the Board and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board or as may be prescribed by these By-Laws. If there is no Chief Executive
Officer, then the Chairman of the Board shall also be the Chief Executive
Officer of the Corporation and shall
- --------------------------------------------------------------------------------
-13-
<PAGE>
have the powers and duties prescribed in Article V, Section 5 of these By-Laws.
The Chairman of the Board shall report to the Board.
Section 5. Chief Executive Officer.
-----------------------
Subject to such supervisory powers, if any, as may be given by the Board to
the Chairman of the Board, if there be such an officer, the Chief Executive
Officer of the Corporation shall, subject to the control of the Board, have
general supervision, direction, and control of the business and the officers of
the Corporation. In the absence or nonexistence of a Chairman of the Board, the
Chief Executive Officer shall preside at all meetings of the stockholders and at
all meetings of the Board. He shall have the general powers and duties of
management usually vested in the chief executive officer of a corporation, and
shall have such other powers and duties as may be prescribed by the Board or
these By-Laws.
Section 6. President.
---------
The President may assume and perform the duties of the Chief Executive
Officer in the absence or disability of the Chief Executive Officer or whenever
the office of the Chief Executive Officer is vacant. The President of the
Corporation shall exercise and perform such powers and duties as may from time
to time be assigned to him by the Board or as may be prescribed by these By-
Laws. The President shall have authority to execute in the name of the
Corporation bonds, contracts, deeds, leases and other written instruments to be
executed by the Corporation. In the absence or nonexistence of the Chairman of
the Board and Chief Executive Officer, the President shall preside at all
meetings of the stockholders and, in the absence or nonexistence of a Chairman
of the Board and the Chief Executive Officer, at all meetings of the Board and
shall perform such other duties as the Board may from time to time determine.
Section 7. Chief Financial Officer.
-----------------------
The Chief Financial Officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director.
The Chief Financial Officer shall deposit all money and other valuables in
the name and to the credit of the Corporation with such depositaries as may be
designated by the Board. He or she shall disburse the funds of the Corporation
as may be ordered by the Board, shall render to the Chief Executive Officer and
directors, whenever they request it, an account of all of his or her
transactions as Chief Financial Officer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board or these By-Laws.
Section 8. Vice Presidents.
---------------
In the absence or disability of the President, the Vice Presidents, if any,
in order of their rank as fixed by the Board or, if not ranked, a Vice President
designated by the Board, shall
- --------------------------------------------------------------------------------
-14-
<PAGE>
perform all the duties of the President and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board, these By-
Laws, the Chairman of the Board or the Chief Executive Officer.
Section 9. Secretary.
---------
The Secretary shall give or cause to be given all required notices of
meetings of stockholders and of the Board, shall attend such meetings when
practicable, shall record and keep the minutes and all other proceedings
thereof, shall attest such records after every meeting by his signature, shall
safely keep all documents and papers which shall come into his possession and
shall truly keep the books and accounts of the Corporation appertaining to his
office. In the absence or disability of the Secretary, any Assistant Secretary
shall have authority and perform the duties of the Secretary.
Section 10. Resignation and Removal of Officers.
-----------------------------------
Any executive officer of the Corporation may be removed, either for cause
or without cause, by the affirmative vote of a majority of the whole Board.
Other officers and agents may be removed either for cause or without cause by
the Board, the Chairman of the Board or the Chief Executive Officer. Removal of
an executive officer or other officer or agent in accordance herewith shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer may resign at any time by written notice to the Corporation. Unless
otherwise stated in such notice of resignation, the acceptance thereof shall not
be necessary to make it effective; and such resignation shall take effect at the
time specified therein or, in the absence of such specification, it shall take
effect upon the receipt thereof.
Section 11. Vacancies.
---------
Vacancy in any office or position by reason of death, resignation, removal,
disqualification or any other cause shall be filled in the manner provided in
Article V, Section 1 hereof for regular appointment to such office. Unless
earlier removed pursuant to Article V, Section 10, any officer appointed by the
Board to fill any such vacancy shall serve only until such time as the unexpired
term of his predecessor expires unless reappointed by the Board.
ARTICLE VI
INDEMNIFICATION
---------------
Section 1. Right to Indemnification.
------------------------
The Corporation shall indemnify, in accordance with Article V of its
Certificate of Incorporation, its directors, officers, Delegates (as defined in
such Article V), agents and employees.
- --------------------------------------------------------------------------------
-15-
<PAGE>
ARTICLE VII
SHARES OF CAPITAL STOCK
-----------------------
Section 1. Share Certificates.
------------------
Every holder of capital stock in the Corporation shall be entitled to a
certificate or certificates, to be in such form as the Board may from time to
time prescribe, signed by the President or a Vice President and by the Secretary
or Treasurer or an Assistant Secretary or Assistant Treasurer, and where signed
by a transfer agent or an assistant transfer agent by a registrar the signature
of such officers of the Corporation may be facsimile. Each such certificate
shall exhibit the name of the registered holder thereof, the number and class of
shares and the designation of the series, if any, which the certificate
represents and the number of shares represented thereby. The Board may, if it
so determines, direct that certificates for shares of stock of the Corporation
be signed by a transfer agent or registered by a registrar, or both, in which
case such certificates shall not be valid until so signed or registered, or
both. In case any officer of the Corporation who shall have signed, or whose
facsimile signature shall have been used on any certificate for shares of stock
of the Corporation, shall cease to be such officer, whether because of death,
resignation or otherwise, before such certificate shall have been delivered, it
may be delivered by the Corporation as though the person who signed such
certificate or whose facsimile signature shall have been used thereon had not
ceased to be such officer.
Section 2. Transfers of Shares.
-------------------
Transfers of shares of stock of the Corporation shall be made only on the
books of the Corporation by the registered holder thereof or by his attorney
thereunto authorized by an instrument duly executed and witnessed and filed with
the Corporation, and on surrender of the certificate or certificates for such
shares properly endorsed and evidence of the payment of all taxes imposed upon
such transfer. Every certificate surrendered for transfer shall be cancelled
and no new certificate or certificates shall be issued in exchange for any
existing certificate until such existing certificate shall have been so
cancelled.
Section 3. Transfer Agents and Registrars.
------------------------------
The Board may appoint any one or more qualified banks, trust companies or
other corporations organized under any law of any state of the United States or
under the laws of the United States as agent or agents for the Corporation in
the transfer of the stock of the Corporation and likewise may appoint any one or
more qualified banks, trust companies or other corporations as registrar or
registrars of the stock of the Corporation.
Section 4. Lost, Stolen, Destroyed or Mutilated Certificates.
-------------------------------------------------
New certificates for shares of stock may be issued to replace certificates
lost, stolen, destroyed or mutilated upon such terms and conditions, which may
but need not include the giving of a satisfactory bond of indemnity, as the
Board may from time to time determine.
- --------------------------------------------------------------------------------
-16-
<PAGE>
Section 5. Holders of Record.
-----------------
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder and owner in fact thereof and shall not
be bound to recognize any equitable or other claim to or interest in such shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by the laws of the State
of Delaware.
Section 6. Treasury Shares.
---------------
Shares of the Corporation's stock held in its treasury shall not be voted,
directly or indirectly, at any meeting.
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 1. Corporate Seal.
--------------
The Board may provide a suitable seal, containing the name of the
Corporation. The Secretary shall have charge of the seal (if any). Such seal
may be used by causing it or a facsimile or reproduction thereof to be affixed
to or placed upon the document to be sealed. If and when so directed by the
Board of Directors or a committee thereof, duplicates of the seal may be kept
and used by the Treasurer or by the Assistant Secretary or Assistant Treasurer.
Section 2. Fiscal Year.
-----------
The fiscal year of the Corporation shall end on December 31st in each year
or shall begin and end on such other days as shall be fixed by resolution of the
Board.
Section 3. Corporate Records.
-----------------
The Corporation may maintain its corporate books and records at such place
or places within or without the State of Delaware as the Board may deem
necessary, desirable or expedient from time to time.
Section 4. Checks, Drafts and Notes.
------------------------
All checks, drafts and other orders for the payment of money, notes and
other evidences of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, agent or agents of the Corporation and in
such manner as shall be determined, from time to time, by resolution of the
Board.
Section 5. Execution of Proxies.
--------------------
The Chairman of the Board or Chief Executive Officer or, in the absence or
disability of both of them, any Vice President, may authorize, from time to
time, the execution and issuance of
- --------------------------------------------------------------------------------
-17-
<PAGE>
proxies to vote shares of stock or other securities of other corporations held
of record by the Corporation and the execution of consents to action taken or to
be taken by any such corporation. All such proxies and consents, unless
otherwise authorized by the Board, shall be signed in the name of the
Corporation by either the Chairman of the Board, Chief Executive Officer or any
Vice President.
Section 6. Construction.
------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the DGCL shall govern the construction of these
By-Laws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both an entity and a natural person.
Section 7. Severability.
------------
In the event that any of the provisions of these By-Laws (including any
provision within a single article, section, paragraph or sentence) is held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
the remaining provisions are severable and shall remain enforceable to the full
extent permitted by law.
ARTICLE IX
AMENDMENTS
Section 1. Amendments.
----------
The Board shall have power without the assent or vote of the stockholders
to make, alter, amend, change, add to or repeal these By-Laws of the
Corporation. The stockholders shall also have the power to make, alter, amend,
change, add to or repeal the By-Laws of the Corporation; provided, however, that
in addition to any vote of the holders of any class or series of capital stock
of the Corporation required by law or by the Certificate of Incorporation, the
affirmative vote of the holders of at least 80% of the voting power of all of
the then outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
- --------------------------------------------------------------------------------
-18-
<PAGE>
EXHIBIT 4.2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Common Stock of
OPEN PORT TECHNOLOGY, INC.
Dated as of August 15, 1996 (the "Effective Date")
WHEREAS, Open Port Technology, Inc., an Illinois corporation (the
"Company") has entered into a Master Lease Agreement dated as of November 7,
1995, Equipment Schedule No. VL-2, and related Schedules (the "Leases") with
Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Common Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 21,429 fully paid and non-
assessable shares of the Company's Common Stock ("Common Stock") at a purchase
price of $1.12 per share (the "Exercise Price"). The number and purchase price
of such shares are subject to adjustment as provided for in Section 8 hereof.
In the event the Remaining Commitment (as defined in the Leases) is
approved, then the Company hereby grants to the Warrantholder, and the
Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe to and purchase, from the Company, an
additional 92,142 shares of the Company's Common Stock at the Exercise Price
stated above.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Common Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i)
ten (10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is longer.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder in whole or in part (not to exceed four (4) different
exercises), at any time, or from time to time, prior to the expiration of the
term set forth in Section 2 above, by tendering to the Company at its
principal office a notice of exercise in the form attached hereto as Exhibit I
1
<PAGE>
(the "Notice of Exercise"), duly completed and executed. Promptly upon receipt
of the Notice of Exercise and the payment of the purchase price in accordance
with the terms set forth below, and in no event later than twenty-one (21) days
thereafter, the Company shall issue to the Warrantholder a certificate for the
number of shares of Common Stock purchased and shall execute the Notice of
Exercise indicating the number of shares which remain subject to future
purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Common Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Common Stock to be issued to the
Warrantholder.
Y = the number of shares of Common Stock requested to be exercised
under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean with
respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering,
and if the Company's Registration Statement relating to such public
offering has been declared effective by the SEC, then the initial "Price to
Public" specified in the final prospectus with respect to the offering;
(the foregoing shall not be construed as giving the Warrantholder any right
to participate in or require any such initial public offering);
(ii) if this warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall be
deemed to be the average of the closing prices over a twenty-one (21)
day period ending three days before the day the current fair market
value of the securities is being determined; or
(b) if actively traded over-the-counter, the fair market value shall
be deemed to be the average of the closing bid and asked prices quoted
on the NASDAQ system (or similar system) over the twenty-one (21) day
period ending three days before the day the current fair market value
of the securities is being determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Common Stock shall be the highest price per
share which the company could obtain from a willing buyer (not a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its Board of
Directors, unless the Company shall become subject to a merger, acquisition
or other consolidation pursuant to which the
2
<PAGE>
Company is not the surviving party, in which case the fair market value of
Common Stock shall be deemed to be the value received by the holders of the
Company's Common Stock on a common equivalent basis pursuant to such merger
or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights to purchase Common Stock as provided for herein.
(b) Registration or Listing. If any shares of Common Stock required to be
reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before the exercise
of this warrant, the Company will, at its expense and as expeditiously as
possible, use commercially reasonable efforts to cause such shares to be duly
registered, listed or approved for listing on such domestic securities exchange,
as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Common Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
3
<PAGE>
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of Common stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Common Stock purchasable) shall be applicable to
the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Common Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Common Stock (calculated
to the nearest whole share) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon the exercise hereof immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
(e) Right to Purchase Additional Stock. If, the Warrantholder's total
cost of equipment leased pursuant to the Leases exceeds $1,000,000.00,
Warrantholder shall have the right to purchase from the Company, at the Exercise
Price (adjusted as set forth herein), an additional number of shares, which
number shall be determined by (i) multiplying the amount by which the
Warrantholder's total equipment cost exceeds $1,000,000.00 by 6%, and (ii)
dividing the product thereof by the Exercise Price per share referenced above.
(f) Issuance of Shares at Other than Exercise Price. If the Company
should issue shares of its Common Stock at a price per share less than the
Exercise Price in effect immediately prior to such issuance, then the Exercise
Price shall be adjusted by dividing (i) the sum of (A) the total number of
shares of the Company's Common Stock outstanding immediately prior to such
issuance multiplied by the then effective Exercise Price, and (B) the value of
4
<PAGE>
the consideration received by the Company upon such issuance of such shares, by
(ii) the total number shares of the Company's Common Stock outstanding
immediately after such issuance. The Warrantholder shall thereafter be entitled
to purchase, at the Exercise Price resulting form such adjustment, the number of
shares of Common Stock (calculated to the nearest whole share) obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment. For the purposes of this
paragraph (f), the issuance of securities convertible into or exercisable for
the Company's Common Stock shall be deemed the issuance of the number of shares
of the Company's Common Stock into which such securities are convertible or for
which such securities are exercisable, and the consideration received for such
securities shall be deemed to include the minimum aggregate amount payable upon
conversion or exercise of such securities. In the event the right to convert or
exercise such securities expires unexercised, the Exercise Price of shares
issuable upon the exercise hereof shall be readjusted accordingly.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) there shall be any Merger Event; or (iii) there shall be any
voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in connection with each such event, the Company shall send to the
Warrantholder: (A) at least twenty (20) days' prior written notice of the date
on which the books of the Company shall close or a record shall be taken for
such dividend, distribution, subscription rights (specifying the date on which
the holders of Preferred Stock shall be entitled thereto) or for determining
rights to vote in respect of such Merger Event, dissolution, liquidation or
winding up; (B) in the case of any such Merger Event, dissolution, liquidation
or winding up, at least twenty (20) days, prior written notice of the date when
the same shall take place (and specifying the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such Merger Event, dissolution, liquidation or
winding up) . In the case of a public offering, the Company shall give the
Warrantholder at least twenty (20) days written notice prior to the effective
date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Common Stock. The Common Stock issuable upon exercise
of the Warrantholder's rights has been duly and validly reserved and, when
issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever, provided,
5
<PAGE>
however, that the Common Stock issuable pursuant to this Warrant Agreement may
be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Warrantholder true, correct and
complete copies of its Charter and Bylaws, as amended. The issuance of
certificates for shares of Common Stock upon exercise of the Warrant Agreement
shall be made without charge to the Warrantholder for any issuance tax in
respect thereof, or other cost incurred by the Company in connection with such
exercise and the related issuance of shares of common Stock. The Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved and the issuance and delivery of any certificate in a name other than
that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Common Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(C) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the company of its obligations under
this Warrant Agreement, except, if any, for the filing of notices pursuant to
Regulation D under the 1933 Act and Section 4(C) of the State of Illinois
Securities Act of 1953, which filings will be effective by the time required
thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 30,000,000
shares of Common Stock, of which 12,000,000 shares are issued and outstanding,
and (B) 1,228,917 shares of Series A Convertible Participating preferred
stock, of which 1,228,917 shares are issued and outstanding and are currently
convertible into 2,457,834 shares of Common Stock at no additional
consideration, and (C) 6,026,786 shares of Series B Convertible Participating
preferred stock, the conversion value of which stock is dependent on the
Company's 1996 revenue, in accordance with a formula as stated in the articles
of incorporation.
(ii) The Company has reserved 1,606,426 shares of Common Stock for issuance
under its stock option plans, under which 1,537,600 options as of August 20,
1996 are outstanding. There are no other options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the Company's capital stock or
other securities of the Company.
6
<PAGE>
(iii) In accordance with the Company's Articles of Incorporation, all
preferred stockholders have preemptive rights to purchase new issuances of the
Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except for an amended and
restated Registration Rights Agreement dated March 12, 1996 with all preferred
stockholders, the Company is not, pursuant to the terms of any other agreement
currently in existence, under any obligation to register under the 1933 Act any
of its presently outstanding securities or any of its securities which may
hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Common Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the Illinois Securities
Act of 1953, in reliance upon Section 4(C) thereof.
(h) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Common Stock issuable upon the exercise of
the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Common Stock or the Common
Stock issuable upon exercise of the Warrantholder's rights contained herein will
be acquired for investment and not with a view to the sale or distribution of
any part thereof, and the Warrantholder has no present intention of selling or
engaging in any public distribution of the same except pursuant to a
registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Common
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Common Stock or
the Common Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
7
<PAGE>
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Common Stock or Common Stock
issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Common Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Common Stock then outstanding as to which
such restrictions have terminated shall be entitled to receive from the Company,
without expense to such holder, one or more new certificates for the Warrant or
for such shares of Common Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d) of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration
statement covering the securities under the 1933 Act is not in effect when it
desires to sell (i) the rights to purchase Common Stock pursuant to this Warrant
Agreement, or (ii) the Common Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Common Stock or Common stock which might be made by it
in reliance upon Rule 144 under the 1933 Act may be made only in accordance with
the terms and conditions of that Rule.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers, and no such transfer shall be
effected to an entity the Company considers a competitor or to any other entity
which has an affiliate which the Company considers a competitor. The transfer
shall be recorded on the books of the Company upon receipt by the Company of a
notice of transfer in the form attached hereto as Exhibit II (the "Transfer
Notice"), at its principal offices and the payment to the Company of all
transfer taxes and other governmental charges imposed on such transfer. The
Warrantholder considers the foregoing to be a reasonable restraint.
8
<PAGE>
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Leasing Director, cc: Legal Department, (and/or, if by facsimile, (847) 518-5465
and (ii) to the Company at 676 N. St. Clair, Suite 900, Chicago, IL 60611,
(and/or if by facsimile, (312) 867-5100 or at such other address as any such
party may subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision,
9
<PAGE>
which comes closest to the intention of the parties underlying the invalid,
illegal or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company OPEN PORT TECHNOLOGY, INC.
By: /s/ David C. Aniol
------------------------------------
Title: CFO
---------------------------------
Warrantholder: COMDISCO, INC.
By:
------------------------------------
Title:
---------------------------------
10
<PAGE>
Exhibit 4.3
OPEN PORT TECHNOLOGY, INC.
WARRANT TO PURCHASE _______ SHARES OF SERIES C
CONVERTIBLE PARTICIPATING PREFERRED STOCK
-----------------------------------------
This certifies that, for value received, CID Mezzanine Capital, L.P.,
a Delaware limited partnership, with its principal offices at One American
Square, Suite 2850, Box 82074, Indianapolis, Indiana 46282 ("Holder"), is
entitled to subscribe for and purchase, subject to the provisions of this
Warrant, from Open Port Technology, Inc., an Illinois corporation with its
principal offices at 676 North St. Clair, 9th Floor, Chicago, Illinois 60611
("Company"), ____________ shares of the Series C Preferred Stock, par value of
$.001 per share, of the Company ("Warrant Shares") at an exercise price of $.01
per share ("Warrant Price"), subject to adjustment of the number of Warrant
Shares and the Warrant Price among other adjustments as hereinafter provided.
1. Certain Definitions. As used in this Warrant:
-------------------
(a) "Amended and Restated Voting and Co-Sale Agreement" means the
Amended and Restated Voting and Co-Sale Agreement, dated June 19, 1998, by and
among the Company, the Preferred Shareholders, (as that term is defined in the
Purchase Agreement) and Antonio Dutra, Gordon K. Kapes, Omprasad S. Nandyal,
Randy S. Storch, and Martin T. Wegner.
(b) "Common Stock" means the Common Stock, par value of $.001 per
share, of the Company and any capital stock for which the Common Stock may
hereafter be converted or exchanged.
(c) "Note" means the 11% Subordinated Note of the Company in the
principal amount of $______________, dated of even date herewith and payable to
the Holder.
(d) "Purchase Agreement" means the Note and Warrant Purchase
Agreement, dated of even date herewith, by and between the Company and the
Holder.
(e) "Security" or "Securities" means any share of Common Stock, any
security of the Company convertible into or exchangeable for Common Stock, or
any option, right, or warrant to subscribe for or to purchase shares of Common
Stock or any other security of the Company convertible into Common Stock.
(f) "Series C Preferred Stock" means the Company's Series C
Convertible Participating Preferred Stock, par value of $.001 per share, as it
may be constituted from time to time.
2. Term. Subject to the other terms and conditions specified herein,
----
this Warrant is exercisable at any time after the date hereof and before the
later of (a) the third anniversary of the Company's payment in full of the Note
or (b) July 1, 2001 (the later of which shall be referred to as the "Expiration
Date"). On the Expiration Date, this Warrant and all rights and obligations
hereunder shall automatically terminate and shall be of no further force and
effect.
3. Certain Adjustments. The number and type of securities
-------------------
purchasable upon the exercise of this Warrant shall be subject to adjustment
from time to time upon the occurrence of certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
--------------------------
change, or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), the Company, or
the successor or purchasing corporation, as the case may be, shall duly execute
and deliver to the Holder a new warrant (in form and substance reasonably
satisfactory to the Holder), so that the Holder shall have the right to receive,
at a total purchase price not to exceed that payable upon the exercise of this
Warrant, and in lieu of the shares of Series C Preferred Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of capital
stock, other securities, money, and property receivable upon that
reclassification, change, or merger by a holder of the number of shares of
Series C
<PAGE>
Preferred Stock then purchasable under this Warrant; provided, however, that the
-------- -------
reincorporation of the Company under the laws of the State of Delaware or the
merger of the Company into a newly-formed corporation incorporated under
Delaware law shall not trigger the conditions set forth in this Section 3(a).
------------
That new warrant shall provide for adjustments as nearly equivalent as may be
practicable to the adjustments provided for in this Section 3. The provisions of
---------
this subsection (a) shall similarly apply to successive reclassifications,
changes, and mergers.
(b) Subdivision or Combination of Shares. If at any time while this
------------------------------------
Warrant remains outstanding and unexpired, the Company subdivides or combines
its outstanding Series C Preferred Stock, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective. The number of Warrant Shares shall be
adjusted as set forth in paragraph (f) of this Section 3.
---------
(c) Share Dividends. If at any time while this Warrant is outstanding
---------------
and unexpired, the Company pays a dividend with respect to shares of Series C
Preferred Stock payable in shares of Series C Preferred Stock (except any
distribution specifically provided for in the foregoing subparagraphs (a) and
(b)), then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive that dividend, to that price
determined by multiplying the Warrant Price in effect immediately prior to the
date of determination by a fraction, (i) the numerator of which shall be the
total number of shares of Series C Preferred Stock outstanding immediately prior
to the dividend, and (ii) the denominator of which shall be the total number of
shares of Series C Preferred Stock outstanding immediately after the dividend.
The number of Warrant Shares shall be adjusted as set forth in paragraph (f) of
this Section 3.
---------
(d) Issuance Below Warrant Price. If at any time or from time to
----------------------------
time, the Company issues or is deemed to have issued any shares of Series C
Preferred Stock for a consideration per share less than the Warrant Price
without the Holder's written waiver of its rights under this Section 3(d) (which
------------
may be withheld for any reason at all), the Warrant Price shall be reduced
immediately to a price determined in accordance with the next sentence. The new
Warrant Price shall be determined by dividing (i) an amount equal to the sum of
(x) the number of shares of Series C Preferred Stock outstanding immediately
prior to the issuance, sale or deemed issuance or sale multiplied by the Warrant
Price then in effect and (y) the consideration, if any, received by the Company
upon the issuance, sale, or deemed issuance or sales, by (ii) the total number
of shares of Series C Preferred Stock outstanding immediately after the
issuance, sale, or deemed issuance or sale. For purposes of this Section 3(d),
------------
all shares of Series C Preferred Stock issuable upon the exercise of outstanding
options, warrants or the conversion of outstanding convertible securities shall
be deemed to be outstanding. The number of Warrant Shares shall be adjusted as
set forth in paragraph (f) of this Section 3.
---------
For purposes of this Section 3(d), shares of Series C Preferred Stock
------------
are deemed to have been issued or sold when the Company (i) grants, issues, or
sells any rights, options, or warrants to subscribe for or to purchase shares of
Series C Preferred Stock, (ii) grants, issues, or sells any security of the
Company convertible into or exchangeable for shares of Series C Preferred Stock,
(iii) changes the rate at which any convertible security of the Company is
convertible into or exchangeable for shares of Series C Preferred Stock to
provide for a greater number of shares of Series C Preferred Stock upon
conversion, or (iv) increases, by dividend or other distribution payable in (1)
shares of Series C Preferred Stock, (2) rights or options to subscribe for
shares of Series C Preferred Stock or securities convertible into shares of
Series C Preferred Stock, or (3) securities convertible into shares of Series C
Preferred Stock, the number of shares of Series C Preferred Stock that may be
acquired by any person.
(e) Consideration Received.
----------------------
(i) If any Security is issued or sold or deemed to have been
issued or sold pursuant to Section 3(d) for cash, the amount of the
------------
consideration will be deemed to be the amount of cash received by the
Company.
(ii) If any Security is issued or sold or deemed to be issued or
sold pursuant to Section 3(d) for a consideration in whole or in part
------------
in a form other than cash, the amount of the non-cash consideration
will be the fair market value of the item(s) received. Where the
consideration received consists of securities, the fair market value
shall be the aggregate market price of the security as of the date of
receipt, as quoted on a securities exchange, an inter-dealer
<PAGE>
quotation system (NASDAQ), or as reported by the National Quotation
Bureau, Incorporated. If the security is not listed or quoted on any
exchange or other quotation service, the consideration received shall
be determined jointly by the Company and the holders of a majority of
the Warrant Shares then issued and outstanding or issuable and
outstanding upon exercise of the Warrants. If the parties are unable
to reach an agreement within a reasonable period, the Board of
Directors of the Company shall in good faith determine the
consideration received by the Company for the purposes of the Warrants
and this Section 3(e).
------------
(iii) If any Security is issued or deemed to be issued in
connection with any merger, consolidation, or corporate reorganization
to which the Company is a party, the amount of consideration therefor
will be deemed to be the fair value of that portion of the net assets
and business of the other party(ies) involved that is attributable to
the Security(ies), as the case may be. The fair market value of the
consideration shall be determined jointly by the Company and the
holders of a majority of the Warrant Shares then issued and
outstanding and issuable and outstanding upon exercise of the
Warrants. If the parties are unable to reach an agreement within a
reasonable period, the Board of Directors of the Company shall in good
faith determine the fair value of the consideration received by the
Company for the purposes of the Warrants and this Section 3(e).
------------
(iv) If a right, option, or warrant to subscribe for or
purchase any shares of Series C Preferred Stock, or any other security
of the Company convertible into shares of Common Stock is issued or
deemed to be issued in connection with the issue or sale of other
securities of the Company in an integrated transaction in which no
specific consideration is allocated to the option or right, the
consideration for the acquisition of the option or right shall be
deemed to be $0.01.
(f) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price pursuant to this Section 3, the number of Warrant Shares
---------
purchasable hereunder shall be adjusted, to the nearest whole share, to the
product obtained by multiplying the number of Warrant Shares purchasable
immediately prior to the adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately prior to the
adjustment and the denominator of which shall be the Warrant Price immediately
thereafter.
(g) No adjustment in the Warrant Price or the number of Warrant Shares
in accordance with the provisions of this Section 3 need be made in connection
---------
with the issuance of Series C Preferred Stock or additional Warrant Shares as
contemplated by Section 2.2 of the Purchase Agreement.
-----------
Whenever the Warrant Price or the number of Warrant Shares purchasable
hereunder is adjusted pursuant to this Section 3, the Company shall prepare a
---------
certificate signed by its chief financial officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which the adjustment was calculated, and the Warrant Price and the
number of Warrant Shares purchasable hereunder after giving effect to the
adjustment, and shall cause a copy of the certificate to be delivered to the
Holder.
4. Exercise of Warrant. This Warrant may be exercised in whole or
-------------------
part subject to the terms and conditions of this Warrant, by presentation and
surrender of this Warrant, the notice of exercise form attached hereto as
Exhibit A duly completed and executed, and payment of the aggregate Warrant
- ---------
Price then in effect for the Warrant Shares to be acquired to the Company at its
principal office. If the Warrant is tendered in connection with a registered
public offering of the Company's securities, the form attached hereto as Exhibit
-------
A-1 shall be delivered in lieu of Exhibit A. The Company reserves the right to
- --- ---------
change Exhibits A and A-1 and any attachment thereto to the extent deemed
---------- ---
necessary by counsel for the Company to assure that exercise of the Warrant and
issuance of the Warrant Shares will comply with federal, state, or other
securities laws. The Holder shall be deemed to become the holder of record of
the number of Warrant Shares issuable upon exercise (and the Warrant Shares
shall be deemed to have been issued) immediately before the close of business on
the date or dates on which this Warrant is exercised. If this Warrant is
exercised, certificates for the Warrant Shares shall be delivered to the Holder
as soon as possible and in any event within ten days after the exercise. Unless
this Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Warrant Shares with respect to which this Warrant was not
exercised also shall be issued to the holder of this Warrant as soon as possible
and in any event within ten days after the exercise.
<PAGE>
5. Warrant Shares Fully Paid; Reservation of Series C Preferred
------------------------------------------------------------
Stock. All Warrant Shares will, upon issuance and payment therefor, be fully
- -----
paid and nonassessable and free from any and all taxes, liens, and charges with
respect to the issue thereof (other than those incurred by the holder of the
Warrant Shares). At all times, during the term of this Warrant, the Company
shall have authorized and reserved a sufficient number of shares of Series C
Preferred Stock for issuance upon the exercise of this Warrant.
6. Closing of Books. Except as otherwise provided in this Warrant
----------------
and to the extent necessary to assure compliance with federal, state, or other
securities laws, the Company shall not close its books against the issuance of
any Warrant Shares in any manner that materially interferes with the timely
exercise of this Warrant.
7. Fractional Shares. No fractional Warrant Shares shall be issued
-----------------
in connection with any exercise hereunder, and the number of Warrant Shares
available to be acquired under this Warrant shall, if necessary, be rounded up
to the nearest whole number.
8. Notice of Certain Events. The Company shall give at least 30 days
------------------------
prior written notice to the Holder before entering into any agreement with
respect to, or undertaking any action in connection with any consolidation,
merger, reorganization or reclassification of its capital structure, declaration
of any dividend, or distribution of capital to its shareholders, voluntarily or
involuntarily dissolution, liquidation, or winding up of its affairs; provided,
--------
however, that the reincorporation of the Company under Delaware law, or the
- -------
merger of the Company into a newly-formed corporation incorporated under
Delaware law will not trigger the notice requirements under this Section 8.
---------
9. Compliance with Securities Laws; Disposition of Warrant or Warrant
------------------------------------------------------------------
Shares.
- ------
(a) Compliance with Securities Laws. The Holder, by accepting this
-------------------------------
Warrant, represents to the Company that this Warrant and the Warrant Shares to
be issued upon exercise hereof are being acquired for its own account for
investment purposes only and not with a view to distribution or resale, and that
the Holder will not offer, sell, or otherwise dispose of this Warrant or any
Warrant Shares except under circumstances that will not result in a violation of
the Securities Act of 1933, as amended ("Act"), or any state or other securities
laws. Upon exercise of this Warrant, the Holder shall confirm in writing, by
executing the form attached as Schedule 1 to Exhibit A, that the Warrant Shares
---------- ---------
so purchased are being acquired for investment purposes only and not with a view
to distribution or resale. This Warrant, any Warrant subsequently issued to the
Holder, and all certificates representing the Warrant Shares issued hereunder
(unless registered under the Act and any applicable state or other securities
law) shall be stamped or imprinted with a legend in substantially the following
form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE OR OTHER
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, OR ASSIGNED EXCEPT (i) PURSUANT
TO REGISTRATIONS THEREOF UNDER SUCH
LAWS, OR (ii) IF, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO OPEN PORT TECHNOLOGY,
INC. THE PROPOSED TRANSFER MAY BE EFFECTED IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS
WITHOUT SUCH REGISTRATIONS.
In addition, in connection with the issuance of this Warrant, the
Holder specifically represents to the Company by acceptance of this Warrant as
follows:
(i) The Holder has been provided the opportunity to ask
questions and receive answers concerning the Company and the
transaction in which this Warrant is being issued; to obtain any other
information it deems necessary to verify the accuracy of the
information provided to it; and has otherwise acquired information
about the Company sufficient to reach an informed and knowledgeable
decision to acquire this Warrant. The Holder is acquiring this Warrant
for its own account for investment purposes only and not with a view
to, or for resale in connection with, any "distribution" thereof for
purposes of the Act.
<PAGE>
(ii) The Holder understands that this Warrant has not been
registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent as expressed herein. In
this connection, the Holder understands that, in the view of the
Securities and Exchange Commission ("SEC"), the statutory basis for
the federal exemption may be unavailable if the Holder's
representation is predicated solely upon a present intention to hold
the Warrant for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in
the market price of the Warrant, or for a period of one year or any
other fixed period in the future.
(iii) The Holder further understands that this Warrant must be
held indefinitely unless subsequently registered under the Act or
unless an exemption from registration is otherwise available.
Moreover, the Holder understands that, except as provided in the
Amended and Restated Registration Rights Agreement (pursuant to which
the Holder becomes a party upon the exercise of this Warrant) dated of
even date herewith by and among the Company and the other Investors
(as that term is defined in such Registration Rights Agreement), the
Company is under no obligation to register this Warrant or Warrant
Shares.
(iv) The Holder is aware of the provisions of Rule 144
promulgated by the SEC under the Act ("Rule 144"), which, in
substance, permit limited public resale of "restricted securities"
acquired, directly or indirectly, from the issuer thereof (or from an
affiliate of the issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among
other things: certain public information about the issuer must be
available; the resale must occur at least one year after the party has
purchased and paid for the securities to be sold; the sale must be
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market-maker (as that term is defined
under the Securities Exchange Act of 1934, as amended); and the amount
of securities being sold during any three month period must not exceed
the specified limitations stated in Rule 144.
(v) The Holder further understands that at the time it wishes
to sell this Warrant there may be no public market through which it
may make such a sale, and that even if a public market then exists the
Company may not then satisfy the current public information
requirements of Rule 144. In that event, the Holder may be precluded
from selling this Warrant under Rule 144 even if the one-year minimum
holding period has been satisfied.
(vi) The Holder further understands that if all of the
requirements of Rule 144 are not satisfied, registration under the
Act, or compliance with Regulation A promulgated under the Act or some
other exemption from registration under the Act will be required; and
that, notwithstanding the fact that Rule 144 is not the exclusive
means of selling unregistered securities in accordance with the Act,
the Staff of the SEC has expressed its opinion that persons proposing
to offer and/or sell securities acquired through private placement
other than in a registered offering or pursuant to Rule 144 will have
a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that the
sellers and their respective brokers who participate in such
transactions do so at their own risk.
(vii) The Holder understands that the Warrant has not been
registered under any state's or other jurisdiction's securities laws
and may not be offered or sold without compliance with applicable
securities laws, whether through registration of the offer and sale of
the Warrant or in reliance upon one or more exemptions from
registration available under state or other securities laws.
(viii) The Holder is an "accredited investor" as defined in Rule
501 of the SEC and in Indiana Code 23-2-1-1(r). The Holder has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks related to its acquisition
of this Warrant.
<PAGE>
(b) Disposition of Warrant or the Warrant Shares. Subject to Section
-------------------------------------------- -------
9(c), with respect to any offer, sale, or other disposition of this Warrant or
- ----
any of the Warrant Shares before registration of the Warrant Shares, the then
current Holder shall give written notice to the Company prior thereto,
describing briefly the manner of the offer, sale, and/or other disposition and
if requested by the Company a written opinion of Holder's counsel reasonably
satisfactory to the Company, to the effect that the offer, sale, or other
disposition may be effected without registration or qualification of this
Warrant or the Warrant Shares under the Act as then in effect and any federal,
state, or other securities laws then in effect. The opinion of Holder's counsel
shall also state whether under any applicable securities law this Warrant or the
Warrant Shares to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to ensure
compliance with federal, state, or other securities laws. Promptly upon
receiving the written notice and a reasonably satisfactory opinion, if so
requested, the Company shall notify the Holder that the Holder may sell or
otherwise dispose of this Warrant or the Warrant Shares, all in accordance with
the terms of the notice delivered to the Company. If the Company determines
pursuant to this Section 9(b) that the opinion of counsel for the Holder is not
------------
reasonably satisfactory, the Company shall so notify the Holder promptly after
making that determination. Notwithstanding the foregoing, this Warrant or the
Warrant Shares may, as to federal securities laws, be offered, sold, or
otherwise disposed of in accordance with Rule 144 or any successor rule under
the Act, provided that the Holder furnishes the Company with all information the
Company may reasonably request to provide reasonable assurance that the
provisions of Rule 144 or any successor rule have been satisfied. Each
certificate representing this Warrant or the Warrant Shares thus transferred
shall bear a legend as to the applicable restrictions on transferability to
ensure compliance with federal, state, and other securities laws, unless, in the
opinion of counsel for the Holder reasonably satisfactory to the Company, a
legend is not required to ensure compliance with those laws. The Company may
issue stop-transfer instructions to its transfer agent in connection with any
restrictions.
(c) Limitations of Transfer. The Warrant and the Warrant Shares may
-----------------------
not be sold, transferred, assigned, hypothecated or otherwise disposed without
the prior consent of the Company; provided, however, that the Holder may
-------- -------
transfer or assign the Warrant and/or the Warrant Shares, or its interest
therein, to a limited partner or general partner of the Holder in connection
with the liquidation, dissolution, or winding up of the affairs of the Holder.
In addition, the Warrant and the Warrant Shares shall not be transferable except
in compliance with the terms and conditions of the Amended and Restated Voting
and Co-Sale Agreement. No person shall acquire any Warrant Shares upon the
exercise of this Warrant unless and until that person provides the Company with
his or its agreement in writing to be bound by the terms and conditions of the
Amended and Restated Voting and Co-Sale Agreement and to be deemed a "Preferred
Shareholder" thereunder. Each certificate representing the Warrant Shares will
bear a legend as to the existence and applicability of the Amended and Restated
Voting and Co-Sale Agreement.
(d) Certain Exceptions. Notwithstanding the requirements of Section
------------------ -------
9(b), no opinion of counsel for the Holder shall be required in connection with
- ----
any transfer, without any additional consideration, of the Warrant to the
general and/or limited partners of the Holder; provided, however, that in any
-------- -------
such transfer, the transferee shall, at the Company's request, agree in writing
to be bound by the terms of this Warrant as if an original signatory hereto, and
shall for all purposes be deemed the "Holder" hereunder.
10. Representations and Warranties. The Company represents and
------------------------------
warrants to the Holder as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company, enforceable in accordance
with its terms.
(b) The Warrant Shares have been duly authorized and reserved for
issuance by the Company and, when issued and paid for in accordance with the
terms hereof, will be validly issued, fully paid, and nonassessable.
(c) The rights, preferences, privileges, and restrictions granted to
or imposed upon the shares of Series C Preferred Stock and the holders thereof
are as set forth in the Company's Amended and Restated Articles of
Incorporation, and in the Amended and Restated Voting and Co-Sale Agreement.
<PAGE>
(d) The execution and delivery of this Warrant: (i) are not, and the
issuance of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the Company's Amended and
Restated Articles of Incorporation or Bylaws; (ii) do not and will not
contravene any law, governmental rule or regulation, judgment, or order
applicable to the Company assuming the accuracy of all representations and
warranties of Holder herein; (iii) do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract, or other instrument to which the Company is a party or by
which it is bound; and (iv) do not require the consent or approval of, the
giving of notice to, the registration or filing with or the taking of any action
in respect of or by, any federal, state, local, or other government authority or
agency or other person, except for consents which have already been obtained and
except for the filing of notices pursuant to federal, state, or other securities
laws, which filings will be effected by the time required thereby.
11. Amendment and Certain Waivers. This Warrant may be amended or
-----------------------------
modified only by a written agreement by the party against which enforcement is
sought. The Company may take any action prohibited by this Warrant or omit to
perform any act required to be performed by it under this Warrant, if the
Company obtains the written consent of the Holder to the action or omission to
act.
12. Benefit of Parties; Assignability. All of the terms and
---------------------------------
conditions of this Warrant shall be binding upon any corporation succeeding the
Company by merger or consolidation, and all of the Company's obligations
relating to the Warrant Shares shall survive the exercise and termination of
this Warrant, and all of the Company's covenants and agreements shall inure to
the benefit of the Holder's successors and assigns; provided, however, except as
contemplated by Section 9(d) with respect to transfers to partners of the
------------
Holder, this Warrant and the rights of the Holder hereunder shall not be
assignable or transferable by the Holder without the Company's consent.
13. Captions. The captions of the sections of this Warrant are
--------
solely for convenient reference and shall not be deemed to affect the meaning or
interpretation of any provision of this Warrant.
14. Governing Law; Choice of Forum. All questions concerning the
------------------------------
relative rights of the Company and its shareholders shall be governed by the
laws of the State of Illinois. Illinois law shall govern the interpretation,
construction, and enforcement of this Warrant, and all transactions contemplated
hereby, notwithstanding any State's choice of law rules to the contrary.
15. Lost Warrant or Share Certificates. The Company covenants to the
----------------------------------
Holder that, upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant or any share
certificate representing any of the Warrant Shares and, in the case of any such
loss, theft, or destruction, upon receipt of an indemnity agreement reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of the Warrant or share certificate, the Company
shall make and deliver a new Warrant or share certificate, of like tenor, in
lieu of the lost, stolen, destroyed, or mutilated Warrant or share certificate
at Holder's expense.
16. Merger or Consolidation of the Company. The Company will not
--------------------------------------
merge or consolidate with or into any other corporation unless the Note is paid
in full and all Warrant Shares held or that could be acquired by the Holder are
purchased by the successor corporation or buyer; provided, however, that the
-------- -------
Company may take necessary actions in connection with the reincorporation of the
Company under the laws of the State of Delaware.
17. Notices. All notices, requests, demands, or other communications
-------
that are required or may be given pursuant to the terms of this Warrant shall be
in writing and delivery shall be deemed sufficient in all respects and to have
been duly given on the date of service if delivered personally or by facsimile
transmission if receipt is confirmed to the party to whom notice is to be given,
or on the third day after mailing if mailed by first-class mail, return receipt
requested, postage prepaid, and properly addressed to the Holder and the Company
at the addresses set forth in the first paragraph of this Warrant or to any
other address as either party may specify in writing.
<PAGE>
18. Remedies. In case any one or more of the covenants and
--------
agreements in this Warrant is breached, the Holder (in the case of a breach by
the Company) or the Company (in the case of a breach by the Holder) may proceed
to protect and enforce its rights either by suit in equity and/or by action at
law, including, but not limited to, an action for damages as a result of any
breach and/or an action for specific performance of any covenant or agreement in
this Warrant. The Holder shall have the right to recover from the Company, and
the Company shall pay, in addition to any amount due hereunder, all court costs
and reasonable attorneys' fees incurred by the Holder in enforcing its rights
under this Agreement.
19. Survival of Representations, Warranties, and Agreements. All
-------------------------------------------------------
representations and warranties of the Company and the Holder contained herein
shall indefinitely survive the date of this Warrant. All agreements of the
Company and the Holder contained herein shall survive until, by their respective
terms, they are no longer operative.
20. Acceptance. The Holder's receipt of this Warrant (as indicated
----------
below) shall constitute acceptance of and agreement by the Holder to the
foregoing terms and conditions.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized representative as of this ____ day of ____________,
199__.
OPEN PORT TECHNOLOGY, INC.
By:_________________________
Its:________________________
CID MEZZANINE CAPITAL, L.P.
By CID Mezzanine Partners, L.P.,
as General Partner
By:
John C. Aplin, General Partner
<PAGE>
SCHEDULE OF CID MEZZANINE CAPITAL, L.P. WARRANTS
- --------------------------------------------------------------------------------
Number of Shares
No. Date of Warrant Exercise Price Subject to
Purchase
- --------------------------------------------------------------------------------
1. 6/22/98 $0.01 111,093
- --------------------------------------------------------------------------------
2. 12/10/98 $0.01 74,099
- --------------------------------------------------------------------------------
3. 1/5/99 $0.01 36,994
- --------------------------------------------------------------------------------
4. 4/12/99 $0.01 74,062
- --------------------------------------------------------------------------------
5. 5/3/99 $0.01 74,062
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 4.4
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE LAWS, AND MAY NOT BE
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH LAWS PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Open Port Technology, Inc., an Illinois corporation
Number of Shares 150,000 (subject to the provisions set forth below)
Class of Stock: Series C Preferred
Initial Exercise Price: $2.025 per share
Issue Date: January 28, 1999
Expiration Date: The later of either (a) January 28, 2004 or (b) the second
anniversary of the Company's initial purchase offering.
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this Warrant. For purposes of
determining the foregoing, Holder shall be entitled to purchase 50,000 Shares
upon the execution of this Warrant. Notwithstanding the foregoing, in the event
that the outstanding Bridge Loan Advances, as defined in the Second Amended and
Restated Loan and Security Agreement, dated August 17, 1998, by and between
Company and Holder (the "Loan Agreement"), exceed $2,000,000, Holder shall be
entitled to an additional 25,000 Shares; in the event that the Committed Bridge
is not paid in its entirety on or before the Bridge Loan Maturity Date, each as
defined in the Loan Agreement, Holder shall be entitled to an additional 25,000
Shares and; in the event that the Committed Bridge Loan is not paid in its
entirety prior to May 31, 1999, Holder shall be entitled to an additional 50,000
Shares (collectively, the "Additional Shares"). Notwithstanding the foregoing,
such grant of the Additional Shares shall not be construed in any way as Bank's
agreement to (i) waive an Event of Default under the Loan Agreement; (ii)
forbear from exercise its rights and remedies if an Event of Default occurs,
exits or continues under the Loan Agreement; or (iii) extend the Bridge Loan
Maturity Date.
ARTICLE 1. EXERCISE.
--------
1.1. Method of Exercise. Holder may exercise this Warrant by
------------------
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
-1-
<PAGE>
1.2. Conversion Right. In lieu of exercising this Warrant as
----------------
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair value of the Shares shall be
determined pursuant to Section 1.4.
1.3. Intentionally Omitted.
---------------------
1.4. Fair Market Value. If the Shares are traded in a public
-----------------
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstance, such fees and expenses shall be
paid by Holder.
1.5. Delivery of Certificate and New Warrant. Promptly after
---------------------------------------
Holder exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6. Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7. Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.7.1. "Acquisition". For the purpose of this Warrant,
------------
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. Upon the closing of any
---------------------
Acquisition the successor entity shall assume the obligations of this Warrant,
and this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were
-2-
<PAGE>
outstanding on the record date for the Acquisition and subsequent closing. The
Warrant Price shall be adjusted accordingly.
1.7.3 Purchase Right. Notwithstanding the foregoing, at the
--------------
election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1. Stock Dividends, Splits, Etc. If the Company declares or pays
-----------------------
a dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2. Reclassification, Exchange or Substitution. Upon any
------------------------------------------
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property in return for Warrants that
are being replaced. The new Warrant shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article 2 including, without limitation, adjustments to the Warrant Price
and to the number of securities or property issuable upon exercise of the new
Warrant. The provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3. Adjustments for Combinations, Etc. If the outstanding Shares
---------------------------------
are combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased.
2.4. Adjustments for Diluting Issuances. The Warrant Price and the
----------------------------------
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment,
-3-
<PAGE>
from time to time in the manner set forth on Exhibit A in the event of Diluting
Issuances (as defined on Exhibit A).
2.5. No Impairment. The Company shall not, by amendment of its
-------------
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. 'if the
Company takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6. Fractional Shares. No fractional Shares shall be issuable
-----------------
upon exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share as
determined under Section 1.4.
2.7. Certificate as to Adjustments. Upon each adjustment of the
-----------------------------
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1. Representations and Warranties. The Company hereby represents
------------------------------
and warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of
this Warrant is not greater than the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(c) The capitalization table attached hereto is true and
correct.
3.2. Notice of Certain Events. If the Company proposes at any time
------------------------
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or
-4-
<PAGE>
other securities and whether or not a regular cash dividend; (b) to offer for
subscription pro rata to the holders of any class or series of its stock any
additional shares of stock of any class or series or other rights; (c) to effect
any reclassification or recapitalization of common stock; (d) to merge or
consolidate with or into any other corporation, or sell, lease, license, or
convey all or substantially all of its assets, or to liquidate, dissolve or wind
up; or (e) offer holders of registration rights the opportunity to participate
in an underwritten public offering of the company's securities for cash, then,
in connection with each such event, the Company shall give Holder (1) at least
20 days prior written notice of the date on which a record will be taken for
such dividend, distribution, or subscription rights (and specifying the date on
which the holders of common stock will be entitled thereto) or for determining
rights to vote, if any, in respect of the matters referred to in (c) and (d)
above; (2) in the case of the matters referred to in (c) and (d) above at least
20 days prior written notice of the date when the same will take place (and
specifying the date on which the holders of common stock will be entitled to
exchange their common stock for securities or other property deliverable upon
the occurrence of such event); and (3) in the case of the matter referred to in
(e) above, the same notice as is given to the holders of such registration
rights. Holder is not entitled to vote and is not entitled to any rights as a
shareholder of the Company until the Warrant is exercised for Shares.
3.3. Information Rights. So long as the Holder holds this Warrant
------------------
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within one hundred twenty (120) days after the
end of each fiscal year of the Company, the annual audited financial statements
'of the Company certified by independent public accountants of recognized
standing and (c) such other financial statements required under and in
accordance with any loan documents between Holder and the Company (or if there
are no such requirements [or if the subject loan(s) no longer are outstanding]),
then within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements. To the extent Holder already receives information noted herein
pursuant to the Loan Agreement, delivery of the foregoing under the Loan
Agreement is sufficient under this Warrant.
3.4. Registration Under Securities Act of 1933, as amended. The
-----------------------------------------------------
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the registration
rights set forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1. Term: Notice of Expiration. This Warrant is exercisable, in
--------------------------
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above. The Company shall give Holder written notice of Holder's
right to exercise this Warrant in the form attached as Appendix 2 not more than
90 days and not less than 30 days before the Expiration Date. If the notice is
not so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.
4.2. Legends. This Warrant and the Shares (and the securities
-------
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
-5-
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED OR UNDER APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH LAWS PURSUANT TO
RULE 144 -OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
4.3. Compliance with Securities Laws on Transfer. This Warrant and
-------------------------------------------
the Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
4.4. Transfer Procedure. Subject to the provisions of Section 4.3
------------------
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) at any time to Silicon Valley Bancshares
or The Silicon Valley Bank Foundation, or to any affiliate of Holder, or, to any
other transferree by giving the Company notice of the portion of the Warrant
being transferred setting forth the name, address and taxpayer identification
number of the transferee and surrendering this Warrant to the Company for
reissuance to the transferees) (and Holder if applicable). Unless the Company is
filing financial information with the SEC pursuant to the Securities Exchange
Act of 1934, the Company shall have the right to refuse to transfer any portion
of this Warrant to any person who directly competes with the Company.
4.5. Notices. All notices and other communications from the Company
-------
to the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time. All notices to be provided under this Warrant shall be send to the
following address:
Silicon Valley Bank
Attn: Treasury Department HG 250
3003 Tasman Drive
Santa Clara, CA 95054
-6-
<PAGE>
4.6. Waiver. This Warrant and any term hereof may be changed,
------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
4.7. Attorneys Fees. In the event of any dispute between the
--------------
parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable attorneys' fees.
4.8. Governing Law. This Warrant shall be governed by and
-------------
construed in accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law.
"COMPANY"
OPEN PORT TECHNOLOGY, INC.
By: /s/ Randy S. Storch
________________________________________
Name: R. Storch
______________________________________
(Print)
Title: Chairman of the Board, President or
Vice President
By: /s/ David P. Aniol
________________________________________
Name: D.P. Aniol
______________________________________
(Print)
Title: Chief Financial Officer, Secretary,
Assistant Treasurer or Assistant
Secretary
-7-
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase ____ shares of the
Common/preferred Series ___ [Strike one] Stock of sample pursuant to the terms
of the attached Warrant, and tenders herewith payment of the purchase price of
such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
___________________________
(Name)
___________________________
___________________________
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
______________________________
(Signature)
______________________________
(Date)
-8-
<PAGE>
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
________________, ___
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear: _________________________
This is to advise you that the Warrant issued to you described below will
expire on _________________, 19___.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
__________________________________
(Name of Issuer)
By:
__________________________________
Its:
__________________________________
-9-
<PAGE>
EXHIBIT A
---------
Anti-Dilution Provisions
(For Preferred Stock Warrants With Existing Anti-Dilution Protection)
---------------------------------------------------------------------
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Articles (Certificate) of Incorporation
which apply to Diluting Issuances, including with respect to waivers or
amendments thereof, provided, that any amendment or waiver which adversely
affects Holder in a manner different than the other shareholders (other than
differences resulting solely from the class, series or number of Shares held by
Holder) may be effected only with the written consent of Holder.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
-10-
<PAGE>
EXHIBIT B
---------
Registration Rights
-------------------
The Shares (if common stock), or the common stock issuable upon conversion
of the Shares, shall be deemed "registrable securities" or otherwise entitled to
"piggy back" registration rights in accordance with the terms of the following
agreement (the "Agreement") between the Company and its investor(s):
The Amended and Restated Registration Rights Agreement dated
as of June 15, 1998, as amended, between Company and each
Holder of its Preferred Stock.
The Company agrees that no amendments will be made to the Agreement which
would have an adverse impact on Holder's registration rights thereunder without
the consent of Holder. Upon exercise of the Warrant to which this Exhibit B is
attached, Holder shall be deemed to be a party to the Agreement as a "Series C
Investor" thereunder, unless Holder otherwise elects not to become or to cease
being a party thereto.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
-11-
<PAGE>
EXHIBIT 4.5
Neither this warrant nor the shares of stock issuable upon exercise hereof
have been registered under the Securities Act of 1933, as amended (the
"Act") or under the laws of any state. No sale, transfer or other
disposition of this warrant or such shares may be effected without (i) an
effective registration statement under such laws related thereto or (ii)
an opinion of counsel for the holder, or other evidence, reasonably
satisfactory to the Company, that such registration is not required.
OPEN PORT TECHNOLOGY, INC.
PREFERRED STOCK PURCHASE WARRANT
--------------------------------
Date of Issuance: June 22, 1998 Certificate No. PW-1
FOR VALUE RECEIVED, OPEN PORT TECHNOLOGY, INC., an Illinois corporation
(the "Company"), hereby grants to Third Coast Venture Lease Partners I, L.P.
("Third Coast") or its registered assigns (the "Registered Holder") the right to
purchase from the Company 9,876 shares of Warrant Stock at a price per share of
$2.025 (as adjusted from time to time hereunder, the "Exercise Price"). This
Warrant is being issued pursuant to the terms of the Warrant Purchase Agreement,
dated as of June 22, 1998 (the "Purchase Agreement"), between the Company and
Third Coast. Certain capitalized terms used herein are defined in Section 5
hereof. The amount and kind of securities obtainable pursuant to the rights
granted hereunder and the purchase price for such securities are subject to
adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
-------------------
1.A. Exercise Period. The Registered Holder may exercise, in whole or in
---------------
part, the purchase rights represented by this Warrant at any time and from time
to time after the date of issuance hereof to and including the tenth anniversary
of the Commencement Date (as defined in the Equipment Financing) of the last
Schedule under the Equipment Financing with Third Coast (the "Exercise Period").
The Company shall give the Registered Holder written notice of the expiration of
the Exercise Period at least 30 days but not more than 90 days prior to the end
of the Exercise Period. For purposes
<PAGE>
of this Warrant, "Trigger Date" shall mean the date upon which the aggregate
amount of funds provided to the Company by Third Coast under the Equipment
Financing exceeds $500,000.
1.B. Exercise Procedure.
------------------
(i) This Warrant shall be deemed to have been exercised when the Company has
received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph 1C below,
executed by the Person exercising all or part of the purchase rights
represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the Purchaser, an
Assignment or Assignments in the form set forth in Exhibit II hereto
----------
evidencing the assignment of this Warrant to the Purchaser, in which case
the Registered Holder shall have complied with the provisions set forth in
Section 7 hereof; and
(d) either (1) a cashier's check payable to the Company, or a wire
transfer to the account designated by the Company, in an amount equal to
the product of the Exercise Price multiplied by the number of shares of
Warrant Stock being purchased upon such exercise (the "Aggregate Exercise
Price"), (2) the surrender to the Company of debt or equity securities of
the Company having a fair market value (determined by the Board of
Directors in their reasonable good faith judgment) equal to the Aggregate
Exercise Price of the Warrant Stock being purchased upon such exercise
(provided that for purposes of this subparagraph, the fair market value of
any note or other debt security or any preferred stock shall be deemed to
be equal to the aggregate outstanding principal amount or liquidation
value thereof plus all accrued and unpaid interest thereon or accrued or
declared and unpaid dividends thereon) or (3) a written notice to the
Company that the Purchaser is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance a number of
shares of Warrant Stock issuable upon such exercise of the Warrant which
when multiplied by the Market Price of the Warrant Stock (assuming
conversion thereof)is equal to the Aggregate Exercise Price (and such
withheld shares shall no longer be issuable under this Warrant).
-2-
<PAGE>
(ii) Certificates for shares of Warrant Stock purchased upon exercise of this
Warrant shall be delivered by the Company to the Purchaser within five business
days after the date of the Exercise Time. Unless this Warrant has expired or all
of the purchase rights represented hereby have been exercised, the Company shall
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised
and shall, within such five-day period, deliver such new Warrant to the Person
designated for delivery in the Exercise Agreement.
(iii) The Warrant Stock issuable upon the exercise of this Warrant shall be
deemed to have been issued to the Purchaser at the Exercise Time, and the
Purchaser shall be deemed for all purposes to have become the record holder of
such Warrant Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Warrant Stock upon exercise of
this Warrant shall be made without charge to the Registered Holder or the
Purchaser for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Warrant Stock. Each share of Warrant Stock issuable upon exercise of this
Warrant shall, upon payment of the Exercise Price therefor, be fully paid and
nonassessable and free from all liens and charges with respect to the issuance
thereof, excluding taxes based on the income of Purchaser.
(v) Assuming the satisfaction of all conditions for transfer, the Company
shall not close its books against the transfer of this Warrant or of any share
of Warrant Stock issued or issuable upon the exercise of this Warrant in any
manner which interferes with the timely exercise of this Warrant. The Company
shall from time to time take all such action as may be necessary to assure that
the par value per share of the unissued Warrant Stock acquirable upon exercise
of this Warrant is at all times equal to or less than the Exercise Price then in
effect.
(vi) The Company shall reasonably cooperate with any Registered Holder or
Purchaser required to make any governmental filings or obtain any governmental
approvals prior to or in connection with any exercise of this Warrant
(including, without limitation, making any filings required to be made by the
Company), except for registrations under the Act, the Securities Exchange Act of
1934 or under the laws of any state.
(vii) Notwithstanding any other provision hereof, if an exercise of any portion
of this Warrant is to be made in connection with a registered public offering or
the sale of the Company, the
-3-
<PAGE>
exercise of any portion of this Warrant may, at the election of the holder
hereof, be conditioned upon the consummation of the public offering or the sale
of the Company in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Warrant Stock solely for the purpose of
issuance upon the exercise of the Warrant, such number of shares of Warrant
Stock issuable upon the exercise of this Warrant. The Company shall take all
such actions as may be necessary to assure that all such shares of Warrant Stock
may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Warrant Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
The Company shall not take any action which would cause the number of authorized
but unissued shares of Warrant Stock to be less than the number of such shares
required to be reserved hereunder for issuance upon exercise of this Warrant.
1.C. Exercise Agreement. Upon any exercise of this Warrant, the Exercise
------------------
Agreement shall be substantially in the form set forth in Exhibit I hereto,
---------
except that if the shares of Warrant Stock are not to be issued in the name of
the Person in whose name this Warrant is registered, the Exercise Agreement
shall also state the name of the Person to whom the certificates for the shares
of Warrant Stock are to be issued, and if the number of shares of Warrant Stock
to be issued does not include all the shares of Warrant Stock purchasable
hereunder, it shall also state the name of the Person to whom a new Warrant for
the unexercised portion of the rights hereunder is to be delivered. Such
Exercise Agreement shall be dated the actual date of execution thereof.
1.D. Conversion or Redemption of the Preferred Stock. Notwithstanding
-----------------------------------------------
any other provision of this Warrant, if all of the issued and outstanding shares
of the Company's Preferred Stock are (i) converted automatically into shares of
Common Stock pursuant to paragraph 4(b) of the Company's Amended and Restated
Articles of Incorporation (the "Automatic Conversion") or (ii) redeemed by the
Company pursuant to paragraph 5 of the Company's Amended and Restated Articles
of Incorporation (the "Complete Redemption"), this Warrant shall no longer be
exercisable into shares of Preferred Stock but immediately upon the consummation
of the Automatic Conversion or the Complete Redemption shall become exercisable
into a number of shares of Common Stock equal to the number of shares of Common
Stock issuable upon conversion of the shares of Preferred Stock issuable upon
exercise of this Warrant as
-4-
<PAGE>
of the consummation of such event at an Exercise Price equal to the Series C
Conversion Price (as defined under the Company's Amended and Restated Articles
of Incorporation) in effect as of the consummation of such event. Following the
occurrence of the Automatic Conversion or the Complete Redemption, the
provisions of this Warrant shall continue to apply to the Warrant Stock which
shall then be Common Stock. In addition to the foregoing, if the Complete
Redemption has occurred, within 90 days thereafter and prior to any exercise of
this Warrant, the holder of this Warrant may elect to surrender this Warrant to
the Company for an amount payable in cash upon such surrender equal to the
aggregate Fair Market Value (as defined in the Company's Amended and Restated
Articles of Incorporation) of the Preferred Stock issuable upon exercise of this
Warrant as of the Complete Redemption reduced by the aggregate Exercise Price of
this Warrant at such time.
Section 2. Adjustment of Exercise Price and Number of Shares. The Exercise
-------------------------------------------------
Price and the number of shares of Warrant Stock issuable upon exercise of this
Warrant shall be subject to adjustment from time to time as provided in this
Section 2.
2.A. Subdivision or Combination of Warrant Stock. If the Company at
-------------------------------------------
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the Warrant Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately reduced
and the number of shares of Warrant Stock obtainable upon exercise of this
Warrant shall be proportionately increased, and if the Company at any time
combines (by reverse stock split or otherwise) the Warrant Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Warrant Stock obtainable upon exercise of this Warrant shall be proportionately
decreased.
2.B. Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction,
which in each case is effected in such a way that the holders of Warrant Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Warrant Stock is
referred to herein as "Organic Change." Prior to the consummation of any Organic
Change, the Company shall make appropriate provision to insure that the
Registered Holder shall thereafter have the right to acquire and receive, in
lieu of or addition to (as the case may be) the shares of Warrant Stock
immediately theretofore acquirable and receivable upon the exercise of such
holder's Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange
-5-
<PAGE>
for the number of shares of Warrant Stock immediately theretofore acquirable and
receivable upon exercise of such holder's Warrant had such Organic Change not
taken place. In any such case, the Company shall make appropriate provision with
respect to such holders' rights and interests to insure that the provisions of
this Section 2 and Sections 3 and 4 hereof shall thereafter be applicable to
this Warrant. The Company shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof, the successor entity (if other
than the Company) resulting from consolidation or merger or the entity
purchasing such assets assumes by written instrument, the obligation to deliver
to each such holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
2.C. Certain Events. If any event occurs of the type contemplated by
--------------
the provisions of this Section 2 but not expressly provided for by such
provisions, then the Company's board of directors shall make an appropriate
adjustment in the Exercise Price and the number of shares of Warrant Stock
obtainable upon exercise of this Warrant so as to protect the rights of the
holder of this Warrant; provided that no such adjustment shall increase the
Exercise Price or decrease the number of shares of Warrant Stock obtainable as
otherwise determined pursuant to this Section 2.
2.D. Adjustments. No adjustments in the Exercise Price need be made
-----------
if such adjustment would result in a change in the Exercise Price of less than
$0.01. Any adjustment of less than $0.01 which is not made shall be carried
forward and shall be made at the time of and together with any subsequent
adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or
more in the Exercise Price.
2.E. Notices.
-------
(i) Immediately upon any adjustment of the Exercise Price, the Company shall
give written notice thereof to the Registered Holder, setting forth in
reasonable detail, and certifying the calculation of, such adjustment.
(ii) The Company shall give written notice to the Registered Holder at least 20
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the Warrant Stock or the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Warrant Stock or Common Stock or (C) for determining rights to vote with respect
to any Organic Change, dissolution or liquidation.
-6-
<PAGE>
(iii) The Company shall also give written notice to the Registered Holder at
least 20 days prior to the date on which any Organic Change, dissolution or
liquidation shall take place.
Section 3. Definitions. The following terms have meanings set forth below:
-----------
"Common Stock" means, collectively, the Company's Common Stock
------------
and any capital stock of any class of the Company hereafter authorized which is
not limited to a fixed sum or percentage of par or stated value in respect to
the rights of the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding up of the
Company.
"Equipment Financing" has the meaning set forth in the Purchase
-------------------
Agreement.
"Market Price" means with respect to each share of Common Stock:
------------
(i) if the exercise is in connection with an initial public offering, and
if the Company's Registration Statement relating to such public offering
has been declared effective by the SEC, then the initial "Price to Public"
specified in the final prospectus with respect to the offering (the
foregoing shall not be construed as giving the Warrantholder any right to
participate in or require any such initial public offering);
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the Market Price shall be
deemed to be the average of the closing prices over a twenty-one
(21) day period ending three days before the day the current
Market Price of the securities is being determined; or
(b) if actively traded over-the-counter, the Market Price shall be
deemed to be the average of the closing bid and asked prices
quoted on the NASDAQ system (or similar system) over the twenty-
one (21) day period ending three days before the day the current
Market Price of the securities is being determined ;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ
-7-
<PAGE>
System or the over-the-counter market, the current Market Price of Common
Stock shall be the highest price per share which the Company could obtain
from a willing buyer (not a current employee or director) for shares of
Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by its Board of Directors, unless the Company
shall become subject to a merger, acquisition or other consolidation
pursuant to which the Company is not the surviving party, in which case the
Market Price of Common Stock shall be deemed to be the value received by
the holders of the Company's Common Stock on a common equivalent basis
pursuant to such merger or acquisition.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Preferred Stock" means the Company's Series C Convertible
---------------
Participating Preferred Stock, par value $.001 per share.
"Warrant Stock" means the Company's Preferred Stock; provided that if
-------------
there is a change such that the securities issuable upon exercise of the Warrant
are issued by an entity other than the Company or there is a change in the type
or class of securities so issuable, then the term "Warrant Stock" shall mean one
share of the security issuable upon exercise of the Warrant if such security is
issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.
Other capitalized terms used in this Warrant but not defined herein
shall have the meanings set forth in the Purchase Agreement.
Section 4. No Voting Rights; Limitations of Liability. This Warrant shall not
------------------------------------------
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision hereof, in the absence of affirmative action by the
Registered Holder to purchase Warrant Stock, and no enumeration herein of the
rights or privileges of the Registered Holder, shall give rise to any liability
of such holder for the Exercise Price of Warrant Stock acquirable by exercise
hereof or as a stockholder of the Company.
Section 5. Warrant Transferable. Subject to the transfer conditions referred
--------------------
to in the legend endorsed hereon, this Warrant and all rights hereunder are
transferable, in whole or in
-8-
<PAGE>
part, without charge to the Registered Holder, upon surrender of this Warrant
with a properly executed Assignment (in the form of Exhibit II hereto) at the
----------
principal office of the Company.
Section 6. Warrant Exchangeable for Different Denominations. This Warrant is
------------------------------------------------
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued.
Section 7. Replacement. Upon receipt of evidence reasonably satisfactory to
-----------
the Company (a sworn, notarized affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Company, or, in the case of any such mutilation upon surrender of such
certificate, the Company shall (at the Warrantholder's expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 8. Notices. Except as otherwise expressly provided herein, all
-------
notices referred to in this Warrant shall be in writing and shall be delivered
personally, sent by reputable overnight courier service (charges prepaid) or
sent by registered or certified mail, return receipt requested, postage prepaid
and shall be deemed to have been given when so delivered, sent or deposited in
the U. S. Mail (i) to the Company, at its principal executive offices and (ii)
to the Registered Holder of this Warrant, at such holder's address as it appears
in the records of the Company (unless otherwise indicated by any such holder).
Section 9. Amendment and Waiver. Except as otherwise provided herein, the
--------------------
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Registered
Holder.
Section 10. Descriptive Headings; Governing Law. The descriptive headings of
-----------------------------------
the several Sections and paragraphs of this
* * *
-9-
<PAGE>
Warrant are inserted for convenience only and do not constitute a part of this
Warrant. The corporation laws of the State of Illinois shall govern all issues
concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by the internal law of the State of Illinois
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
Illinois.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal and to be
dated the Date of Issuance hereof.
OPEN PORT TECHNOLOGY, INC.
By: ____________________________
Its: ___________________________
-10-
<PAGE>
SCHEDULE OF THIRD COAST VENTURE LEASE PARTNERS 1, L.P. WARRANTS
- --------------------------------------------------------------------------------
Number of Shares
No. Date of Warrant Exercise Price Subject to
Purchase
- --------------------------------------------------------------------------------
1. 6/22/98 $2.03 9,876
- --------------------------------------------------------------------------------
2. 6/22/98 $2.03 9,877
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 4.6
THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FOR NONPUBLIC OFFERINGS
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, THESE SECURITIES MAY NOT
BE RESOLD OR OTHERWISE DISPOSED OF UNLESS, IN THE OPINION OF COUNSEL FOR OR
SATISFACTORY TO THE ISSUER, REGISTRATION UNDER THE APPLICABLE FEDERAL OR STATE
SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION
REQUIREMENTS.
Void after 5:00 p.m. New York Time, on October 22, 2004
WARRANT TO PURCHASE 939,441 SHARES OF COMMON STOCK
OF
OPEN PORT TECHNOLOGY, INC.
This is to certify that, FOR VALUE RECEIVED, Deutsche Bank Securities Inc. or
its registered assigns pursuant to Section (d) hereof ("Holder"), is entitled to
purchase, subject to the provisions of this Warrant, from Open Port Technology,
Inc., an Illinois corporation (the "Company"), 939,441 fully paid, validly
issued and nonassessable shares of Common Stock, par value $.001 per share, of
the Company ("Common Stock"), at the exercise price of $1.61 per share until
October 22, 2004. The number of shares of Common Stock to be received upon the
exercise of this Warrant and the Exercise Price to be paid for each share of
Common Stock may be adjusted from time to time as hereinafter set forth. The
shares of Common Stock deliverable upon such exercise, and as adjusted from time
to time, are hereinafter sometimes referred to as "Warrant Shares," and the
exercise price of a share of Common Stock as adjusted from time to time is
hereinafter sometimes referred to as the "Exercise Price."
(a) EXERCISE OF WARRANT; NOTIFICATION OF EXPIRATION DATE OF WARRANT. The
Warrant may be exercised as to a minimum of 100,000 Warrant Shares (as adjusted
for any stock dividends, combinations, splits, and the like with respect to the
Common Stock) at any time or from time to time, until 5:00 P.M. New York time on
October 22, 2004 (the "Expiration Date"), provided, however, that if such day is
a day on which banking institutions in the State of New York are authorized by
law to close, then on the next succeeding day which shall not be such a day.
The Warrant may be exercised by presentation and surrender hereof to the Company
at its principal office, or at the office of its stock transfer agent, if any,
with the Purchase Form annexed hereto duly executed (with signature guaranteed
if required by the Company or its stock transfer agent) and accompanied by
payment of the Exercise Price for the number of Warrant Shares specified in such
form and any applicable taxes. The Exercise Price for any Warrant Shares
purchased pursuant to the exercise of this Warrant shall be paid in full upon
such exercise in cash or by certified or bank check or pursuant to a cashless
exercise procedure whereby the Warrant Shares issued upon exercise of this
Warrant will be sold by the
<PAGE>
Holder in compliance with all applicable federal and state securities laws, or
pursuant to applicable exemptions therefrom (such compliance or the availability
of such exemptions to be to the reasonable satisfaction of the Company) with
Holder receiving the difference between the Exercise Price and the sale price,
in cash, and the Company receiving the Exercise Price for the Warrant Shares, in
cash, or any combination of the foregoing methods of paying the Exercise Price.
In the alternative, the Warrant may be exchanged for Warrant Shares as described
in Section (l). As soon as practicable after each such exercise of the Warrants,
but not later than seven (7) business days from the date of such exercise, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or the Holder's designee, except in the case of a cashless exercise. If
the Warrant should be exercised in part only, the Company shall, upon surrender
of the Warrant for cancellation, execute and deliver a new Warrant evidencing
the rights of the Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder. In the event of a cash exercise, upon receipt by the
Company of the Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, together with the exercise
price thereof and taxes as aforesaid in cash or certified or bank check and the
investment letter described below, the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder. In order to assure the availability
of an exemption from registration under the federal or applicable state
securities laws, the Company may condition the exercise of the Warrant upon the
Holder delivering to the Company an investment letter in the form as customarily
used by the Company from time to time in connection with the exercise of non-
registered options and warrants which are issued by the Company. It is further
understood that certificates for the Warrant Shares, if any, to be issued upon
exercise of the Warrant may contain a restrictive legend in accordance with
Section (j) hereof.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants. If the Common Stock is or becomes listed on any national
securities exchange or the NASDAQ National Market System, the Company shall also
notify such exchange or the NASDAQ system, as the case may be, of the issuance
of the Warrant Shares as required to maintain the listing of its Common Stock on
such exchange or the NASDAQ system, as the case may be.
(c) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of the Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for
trading on the NASDAQ National Market System, the current market value
shall be the last reported sale
-2-
<PAGE>
price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average closing bid and asked prices
for such day on such exchange or system;
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the
last reported bid and asked prices reported by the National Quotation
Bureau, Inc., on the last business day prior to the date of the
exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. The Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations, but in increments
of not less than 100,000 Warrant Shares (as adjusted for any stock dividends,
combinations, splits, and the like with respect to the Common Stock), entitling
the Holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Subject to Section (j) hereof, the Holder
may transfer or assign the Warrant, in whole or in part and from time to time;
provided that, at all times prior to an IPO, the Holder may only transfer or
assign the Warrant or the Warrant Shares to an affiliate of the Holder. Upon
surrender of this Warrant to the Company at its principal office or at the
office of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed (with signature guaranteed, if required by the Company or
its stock transfer agent) and funds sufficient to pay any transfer tax, the
Company shall, without charge, execute and deliver a new Warrant in the name of
the assignee or assignees named in such instrument of assignment and this
Warrant shall promptly be canceled. This Warrant may be divided by or combined
with other Warrants which carry the same rights upon presentation hereof at the
principal office of the Company or at the office of its stock transfer agent, if
any, together with a written notice specifying the names and denominations in
which new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant my be
divided or exchanged. Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and in the
case of loss, theft or destruction, of reasonable satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new Warrant of like tenor, date and amount. Any such
new Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not the original Warrant shall
be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder
-3-
<PAGE>
are limited to those expressed in the Warrant and are not enforceable against
the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. So long as this Warrant shall be
outstanding, the Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrants shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in
shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares, the Exercise
Price in effect at the time of the record date for such
dividend or distribution, or the effective date of such
subdivision, combination or reclassification shall be
proportionately adjusted as of the effective date of such event
by multiplying such Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common
Stock outstanding immediately following such event and the
numerator of which shall be the number of shares of Common
Stock outstanding immediately prior thereto. For example, if
the Company declares a 2 for 1 stock distribution and the
Exercise Price immediately prior to such event was $1.00 per
share, the adjusted Exercise Price immediately after such event
would be $.50 per share. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) The Exercise Price in effect from time to time shall be also
adjusted to reflect any and all adjustments to the "Series E
Conversion Price" (as defined in the Amended and Restated
Articles of Incorporation of the Company (the "Articles")) as
calculated pursuant to subsection 4(e) of Part A of Paragraph 2
of Article 4 of the Articles. At any such time as all of the
Series E Convertible Participating Preferred Stock of the
Company (the "Series E Preferred Stock") is converted into
Common Stock, no further adjustments pursuant to this
subsection (2) shall be made. Any adjustments pursuant to
subsection (1) immediately preceding shall be taken into
account in making adjustments pursuant to this subsection. By
way of example, if the Series E Conversion Price is reduced to
$1.51, the Exercise Price shall be similarly reduced, but if
the adjustment to the Series E Conversion Price followed a 2
for 1 stock distribution, the resulting Exercise Price would be
$.755 per share.
(3) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to subsection (1) or (2) above,
the number of Warrant Shares purchasable upon exercise of the
Warrant shall simultaneously be adjusted by multiplying the
number of Warrant Shares issuable upon exercise
-4-
<PAGE>
of this Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the Exercise
Price, as adjusted pursuant to subsection (1) or (2), as
appropriate.
(4) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at
least $.05 in such price; provided, however, that any
adjustments which by reason of this subsection (f) (3) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made
hereunder.
(5) Each computation required by this Section (f) for purposes of
determining whether the Exercise Price shall be adjusted, shall
be performed by the Company. Whenever the Exercise Price is
adjusted, as herein provided, the Company shall promptly cause
a notice setting forth the adjusted Exercise Price and adjusted
number of Warrant Shares issuable upon exercise of each Warrant
to be mailed to the Holder, at its address appearing in the
Warrant Register, and shall cause a certified copy thereof to
be mailed to its transfer agent, if any.
(6) All calculations under this Section (f) shall be made to the
nearest cent or to the nearest Warrant Share, as the case may
be.
(7) In the event that at any time, as a result of an adjustment
made pursuant to this Section (f) above, the Holder of this
Warrant thereafter shall become entitled to receive any shares
of the Company, other than Common Stock, thereafter the number
of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in
subsection (a) above.
(8) Irrespective of any adjustments in the Exercise Price or the
number or kind of Warrant Shares purchasable upon exercise of
this Warrant, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of
shares as are stated in the similar Warrants initially issuable
pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and the
manner of computing such adjustment. Each
-5-
<PAGE>
such officer's certificate shall be made available at all reasonable times for
inspection by the Holder or any holder of a Warrant executed and/or delivered
pursuant to Section (a) or Section (d), and the Company shall, forthwith after
each such adjustment, mail, by certified mail, a copy of such certificate to the
Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock, or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any shares of any class or any
other rights, or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder or any holder of a Warrant executed
and/or delivered pursuant to Section (a) or Section (d), at least 15 days prior
to the date specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed action and stating the date on
which (x) a record is to be taken for the purpose of such dividend, distribution
or rights, or (y) such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(i) RECLASSIFICATION OR REORGANIZATION. In case of any
reclassification or capital reorganization of outstanding shares of Common Stock
of the Company, or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with another corporation in which
merger the Company is the continuing corporation and which does not result in
any reclassification or capital reorganization of outstanding shares of Common
Stock of the class issuable upon exercise of this Warrant) or in case of any
sale, lease or conveyance to another corporation of the property of the Company
as an entirety, the Company shall, as a condition precedent to such transaction,
cause effective provisions to be made so that the Holder or any holder of a
Warrant executed and/or delivered pursuant to Section (a) or Section (d) shall
have the right thereafter by exercising the Warrant at any time prior to the
expiration of the Warrant, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such reclassification or
capital reorganization and consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in the Warrant.
The foregoing provisions of this Section (i) shall similarly apply to successive
reclassifications or capital reorganizations of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances. In the event that in
connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for a security of the Company other than Common Stock, any such issue
shall
-6-
<PAGE>
be treated as an issue of Common Stock covered by the provisions of subsection
(1) of Section (f) hereof.
(j) SECURITIES LAW COMPLIANCE
(1) The Holder of the Warrant, by acceptance hereof,
acknowledges that (i) THE WARRANT AND THE WARRANT SHARES
HAVE BEEN, OR WILL BE, AS APPLICABLE, ISSUED PURSUANT TO
EXEMPTIONS FOR NONPUBLIC OFFERINGS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, THESE
SECURITIES MAY NOT BE RESOLD OR OTHERWISE DISPOSED OF
UNLESS, IN THE OPINION OF COUNSEL FOR OR SATISFACTORY TO THE
ISSUER, REGISTRATION UNDER THE APPLICABLE FEDERAL OR STATE
SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH
SUCH REGISTRATION REQUIREMENTS; and (ii) the Warrant and the
Warrant Shares to be issued upon exercise hereof or
conversion thereof are being acquired solely for the
Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not
offer, sell, transfer, assign or otherwise dispose of this
Warrant or any shares of Common Stock to be issued upon
exercise hereof or conversion thereof except under
circumstances that will not result in a violation of the
Securities Act of 1933, as amended (the "Act") or any state
securities laws. Upon exercise or other transfer of the
Warrant, the Holder shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company,
that the shares of Common Stock so purchased or transferred
are being acquired solely for the Holder's own account and
not as a nominee for any other party, for investment, and
not with a view toward distribution or resale.
(2) If appropriate, the Warrant and any Warrants issued upon
exercise or substitution or upon assignment or transfer
pursuant to Section (a) or Section (d), as the case may be,
and all shares of Common Stock issued upon exercise hereof
or conversion thereof shall be stamped or imprinted with
legends setting forth the restrictions on transfer arising
under applicable federal and state securities laws.
(k) REGISTRATION RIGHTS UNDER THE SECURITIES ACT OF 1933
(1) Commencing the date hereof and continuing until the
earlier of (i) sale or disposition of the securities covered
hereunder in accordance with any registration statement
("Registration Statement") filed pursuant to the Securities
Act of 1933, as amended (the "Act"), or (ii) the Holder may
sell or transfer the Warrant or Warrant Shares in accordance
with the requirements of Section (k) (or similar
-7-
<PAGE>
provisions then in effect) of Rule 144 promulgated by the Securities
and Exchange Commission under the Act, the Company shall advise the
Holder of the Warrant or of the Warrant Shares or any then Holder of
Warrants or Warrant Shares (such persons being collectively referred
to herein as "Holders") by written notice (a "Registration Notice") at
least 21 days prior to the filing of any Registration Statement or
post-effective amendment thereto under the Act, covering an
underwritten public offering of equity securities of the Company and
shall register in any such Registration Statement the number of
Warrant Shares that the Holder shall notify the Company within 10 days
of such Holder's receipt of the Registration Notice that it desires to
register and shall include in any such Registration Statement such
information as may be required to permit a public offering of such
Warrant Shares by the Company's underwriter(s). The Company shall
supply prospectuses and other documents as the Holder may reasonably
request in order to facilitate the public sale or other disposition of
the Warrant Shares. The Company shall bear the entire cost and expense
of a registration of securities initiated by it under this Paragraph
(1). The Holder shall, however, bear the fees of its own counsel and
any transfer taxes and underwriting discounts or commissions
applicable to the Warrant Shares sold by it. The Company may include
other securities in any such Registration Statement. The Company shall
do any and all other acts and things which may be reasonably necessary
or desirable to enable the Holder to consummate the public sale or
other disposition of the Warrant Shares, and furnish indemnification
in the manner as set forth in Paragraph (2) (a) of this Section (k),
but shall not be required to qualify as a foreign corporation to
qualify the Warrant Shares for sale under the securities laws of any
state. The Holder shall furnish information and indemnification as set
forth in Paragraph (2) (b) of this Section (k). All Holders whose
securities are included in the public sale must sell their securities
on the same terms and conditions as apply to the securities being
issued and sold by the Company. All decisions as to whether and when
to proceed with any Registration Statement shall be made solely by the
Company, and the Company may delay or terminate any offering.
Notwithstanding the foregoing paragraph, in the event that there
is an underwritten offering of the Company's securities offered
pursuant to said Registration Statement pursuant to the immediately
preceding Paragraph, the underwriter(s) shall have the right to refuse
to permit any Warrant Shares, or to limit the amount of Warrant
Shares, to be sold by the Holder to such underwriter(s) as such
underwriter(s) may determine in its discretion, and the Holder shall
refrain from selling such remainder of its Warrant Shares covered by
such registration statement for the period of 180 days following the
effective date and shall also refrain at any time when notified by the
Company that an amendment or supplement to the prospectus is required.
The Company shall not be obligated to keep any Registration Statement
effective for a total of more than 180 days.
-8-
<PAGE>
(2) (a) Whenever pursuant to this Section (k) a Registration
Statement relating to the Warrant Shares is filed under the Act,
amended or supplemented, the Company will indemnify and hold harmless
each Holder of Warrant Shares covered by such Registration Statement,
amendment or supplement (such Holder being hereinafter called the
"Distributing Holder"), and each person, if any who controls (within
the meaning of the Act) the Distributing Holder, against any losses,
claims, damages or liabilities, joint or several, to which the
Distributing Holder or any such controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in any such Registration Statement or any preliminary
prospectus or final prospectus constituting a part thereof or any
amendment or supplement thereto, or arise out of or are based upon the
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and will reimburse the Distributing Holder and each such controlling
person for any legal or other expenses reasonably incurred by the
Distributing Holder and each controlling person for any legal or other
expenses reasonable incurred by the Distributing Holder or such
controlling person or underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said Registration Statement,
preliminary prospectus, final prospectus or amendment or supplement,
in reliance upon and in conformity with written information furnished
by the Distributing Holder or underwriter for use in the preparation
thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed
said Registration Statement and such amendments and supplements
thereto, each person, if any, who controls the Company (within the
meaning of the Act) and the Company's underwriter(s) and each person,
if any, who controls such underwriter(s) (within the meaning of the
Act) against any losses, claims, damages or liabilities to which the
Company or any such director, officer, underwriter or controlling
person may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon
any untrue or alleged untrue statement of any material fact contained
in said Registration
-9-
<PAGE>
Statement, preliminary prospectus, final prospectus, or amendment or
supplement, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent that
such untrue statement or alleged untrue statement or omission or
alleged omission was made in said Registration Statement, preliminary
prospectus, final prospectus or amendment or supplement, in reliance
upon and in conformity with written information furnished by such
Distributing Holder for use in the preparation thereof; and will
reimburse the Company or underwriter or any such director, officer or
controlling person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss,
claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under this
Paragraph 2 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party, give the indemnifying party notice of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this Paragraph 2.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, the extent
that it may wish, jointly with any other indemnifying party similarly
notified to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Paragraph 2 for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
(e) The Company's agreements with respect to Warrant Shares in this
Section (k) shall continue in effect regardless of the exercise or
surrender of the Warrant.
(l) RIGHT TO CONVERT WARRANT INTO COMMON STOCK.
(1) Right to Convert. The Holder shall have the right to require the
----------------
Company to convert this Warrant provided in this Section (1), into
common stock (the "Net Conversion Right"). Upon exercise of the Net
Conversion Right, the Company shall deliver to the Holder (without
payment by the Holder of any Exercise Price or of any other cash or
consideration) that number of shares of Common Stock equal to the
quotient obtained by dividing (x) the value of this Warrant at the
time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price in effect immediately prior to the exercise
of the Conversion Right from the aggregate fair market value of the
shares of Common Stock issuable upon exercise of this Warrant
immediately prior to the exercise of the Conversion Right) by (y) the
fair market value of one share of Common Stock immediately prior to
the exercise of the Conversion Right.
-10-
<PAGE>
(2) Method of Exercise. The Net Conversion Right may be exercised by
------------------
the Holder by the surrender of this Warrant at the principal office of
the Company together with a written statement specifying that the
Holder thereby intends to exercise the Net Conversion Right.
Certificates for the shares of Common Stock issuable upon exercise of
the Net Conversion Right shall be delivered to the Holder within five
(5) days following the Company's receipt of this Warrant together with
the aforesaid written statement.
(3) Determination of Fair Market Value. For purposes of this Section
----------------------------------
(f), fair market value of a share of Common Stock as of a particular
date (the "Determination Date") shall be determined in accordance with
Section (c) of this Warrant.
(m) AMENDMENTS. Neither the Warrant nor any term hereof may be
changed, waived, discharged or terminated without the prior written consent of
the Holder.
(n) NO IMPAIRMENT. The Company will not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of any
Holder.
(o) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware.
(p) NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, addressed (a) if to the Holder, to Deutsche Bank Securities
Inc., 1 South Street, Baltimore, Maryland 21202, Attention: President, or (b)
if to the Company, to 676 North St. Clair Street, Suite 900, Chicago, Illinois
60611, Attention: Chief Executive Officer, or at such other address as to the
Company shall have furnished to the Holder in writing.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-11-
<PAGE>
IN WITNESS WHEREOF, Open Port Technology, Inc. has caused this Warrant
to be executed by its officer thereunto duly authorized.
Dated: October 22, 1999
OPEN PORT TECHNOLOGY, INC.
By:/s/ Randy S. Storch
____________________________
Name: Randy S. Storch
_________________________
Title: Chief Executive Officer
________________________
<PAGE>
PURCHASE FORM
-------------
Dated _______________, _____
[The undersigned hereby irrevocably elects to exercise its rights
pursuant to this Warrant to the extent of purchasing ______ shares of Common
Stock of Open Port Technology, Inc., and hereby makes payment of $___________,
in cash, in payment of the exercise price thereof.]
The undersigned hereby irrevocably elects to exercise its rights
pursuant to this Warrant to the extent of purchasing _____ shares of Common
Stock and hereby authorizes you to deliver such shares of Common Stock for sale
to ___________, and to retain from the proceeds of such sale $__________, in
cash, in payment of the exercise price thereof and to remit to the undersigned
the balance of such proceeds.
_________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name___________________________________________________________________________
(Please typewrite or print in block letters)
Address________________________________________________________________________
Signature______________________________________________________________________
<PAGE>
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED,____________________________________________________________
hereby sells, assigns and transfers unto
Name___________________________________________________________________________
(Please typewrite or print in block letters)
Address________________________________________________________________________
the right to purchase Common Stock of Open Port Technology, Inc. (the
"Company"), represented by this Warrant to the extent of __________ shares as to
which such right is exercisable and does hereby irrevocably constitute and
appoint _____________________________ as Attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Date ___________, _____
Signature__________________________
<PAGE>
EXHIBIT 10.1
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
1. Purpose
-------
The purpose of the Plan is to benefit the Company and its shareholders by
having the Company offer certain Employees a favorable opportunity to acquire
shares of Stock over a period of years, thereby giving such Employees a
permanent stake in the growth and prosperity of the Company, encouraging such
Employees to continue their service with the Company, and motivating such
Employees to devote their best efforts to the business and profitability of the
Company. The Plan is not intended to qualify as an "employee stock purchase
plan" within the meaning of Code Section 423.
2. Definitions
-----------
As used herein, the following definitions shall apply.
2.1. "Board" shall mean the Board of Directors of the Company, or a
committee appointed by the Board to perform all or some of the Board's duties
under this Plan.
2.2. "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.3. "Company" shall mean Open Port Technology, Inc., an Illinois
corporation.
<PAGE>
2.4. "Date of Grant" shall mean the day and year written in the Option
Agreement relating to such Option. The Date of Grant for an Option granted to
an Employee may be any date on or after the Employee's first day of employment
with the Company even if such date is prior to the effective date of this Plan.
2.5. "Director" shall mean any duly elected and qualified member of the
Board.
2.6. "Disability" shall mean any medically determinable physical or
mental impairment that, in the opinion of the Board, based upon medical reports
and other evidence satisfactory to the Board, can reasonably be expected to
prevent an Employee from performing substantially all of his customary duties of
employment for a continuous period of not less than twelve (12) months.
2.7. "Employee" shall mean any salaried employee of the Company.
2.8. "Exercise Price" shall mean the purchase price for shares of Stock
purchased pursuant to the exercise or partial exercise of an Option.
2.9. "Fair Market Value" shall mean, with respect to the valuation of
any shares of Stock, (i) if the Stock is publicly traded, the closing price of
the Stock on the trading day immediately preceding the business day during which
the shares of Stock are to be valued pursuant hereto, and (ii) if the Stock is
not publicly traded, the fair market value of the shares of Stock as reasonably
determined by the Board consistent with past practice.
2.10. "IPO" shall mean the closing of an initial public offering of the
common stock of the Company registered under the Securities Act.
2
<PAGE>
2.11. "Option" shall mean any right to purchase Stock which has been
granted by the Board pursuant to the Plan.
2.12. "Option Agreement" shall mean an agreement executed by an officer
of the Company and an Employee evidencing the grant of an Option.
2.13. "Option Shares" shall mean the shares of Stock transferred pursuant
to the exercise of an Option.
2.14. "Optionee" shall mean any Employee who receives an Option pursuant
to the Plan.
2.15. "Plan" shall mean the Open Port Technology, Inc. 1995 Incentive
Stock Option Plan.
2.16. "Securities Act" shall mean the Securities Act of 1933, as amended.
2.17. "Stock" shall mean the no par value common stock of the Company.
3. Shares Subject to the Plan
--------------------------
Except as provided in Section 4(a) hereof, the aggregate amount of Stock for
which Options may be granted shall not exceed 803,213 shares less (at the time
of the grant of any Option) all shares subject to any option granted under the
Open Port Technology, Inc. 1995 Non-Employee Stock Option Plan.
3
<PAGE>
Any shares subject to unexercised portions of Options which shall have
terminated, been canceled, or expired may again be made subject to Options. In
addition, shares that have been repurchased by the Company may again be made
subject to Options.
4. Adjustment
----------
4.1. The number of shares subject to the Plan and to Options shall be
adjusted as follows: (i) in the event that the number of shares of outstanding
Stock is changed by reason of a stock dividend, stock split, recapitalization or
combination of shares, the number of shares of Stock subject to the Plan and to
Options shall be proportionately adjusted; or (ii) in the event of any merger,
consolidation or reorganization of the Company with any other corporation or
corporations pursuant to which the holders of shares of Stock surrender shares
of Stock in exchange for other shares of stock or securities, there shall be
substituted for each share of Stock then subject to the Plan and to Options the
number and kind of shares of stock or other securities which the holders of
shares of Stock are entitled to receive for each share of Stock surrendered
pursuant to the transaction and the Exercise Price shall be proportionately
adjusted.
4.2. The number of shares subject to the Plan and Options shall not be
adjusted as a result of the issuance of shares of Stock by the Company (other
than an issuance described in subsection (a) of this Section 4), it being
understood that, upon such an issuance of shares of Stock, holders of Options
and holders of Option Shares will have a corresponding dilution of their
proportionate interests in the Stock.
4
<PAGE>
5. Administration of the Plan
--------------------------
The following provisions shall govern the administration of the Plan:
5.1. The Plan shall be administered by the Board.
5.2. The Board is authorized (but only to the extent not contrary to the
express provisions of the Plan) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan and to the Options, to
determine the form and content of Options (except to the extent the form and
content of the Options are specified herein), and to make such other
determinations and exercise such other powers and authority as may be necessary
or advisable for the administration of the Plan. Each Option granted shall be
evidenced by an Option Agreement in such form as may be determined by the Board.
5.3. A majority of the members of the Board eligible to act shall
constitute a quorum for purposes of acting with respect to the Plan, and the
action of a majority of the members present who are eligible to act at any
meeting at which a quorum is present shall be deemed the action of the Board.
5.4. All decisions, determinations and interpretations of the Board made
in good faith with respect to the Plan and Option Agreements shall be final and
conclusive on all persons affected thereby.
5.5. Neither the Board nor any member thereof shall be liable for any
act, omission, interpretation, construction or determination made in connection
with the Plan in good faith, and the members of the Board shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including counsel fees) arising therefrom to the full extent
permitted by law.
5
<PAGE>
5.6. The aggregate fair market value of the Option Shares (determined as
of the Date of Grant) for which any Employee may be granted an Option or Options
which will first be exercisable in any single calendar year, taking account of
any special vesting provisions provided in an Option Agreement, may not exceed
$100,000.
6. Eligibility
-----------
The Board is authorized to select Employees to receive Options depending on
the availability of shares of Stock for which Options may be granted pursuant to
the terms of the Plan. In the event Options are granted pursuant to the Plan,
the Board is authorized to select the particular Employees who will receive such
Options and the number of shares of Stock under each such Option. In granting
Options, the Board shall take into consideration the contribution an Employee
has made or may make to the success of the Company and such other factors as the
Board shall determine. In no event shall any Employee or his or her legal
representatives, heirs, legatees, distributees or successors have any right to
participate in the Plan except to such extent, if any, as the Board shall
determine. No Options will be granted to any Employee who owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any parent or subsidiary corporation unless the Exercise
Price is at least one hundred ten percent (110%) of the Fair Market Value at the
Date of Grant.
7. Term of the Plan
----------------
The Plan shall continue in effect until terminated pursuant to Section 20
hereof; or until there is no more stock as to which an Option may be granted and
no Options are outstanding; provided, however, that all Options must be granted
within 10 years from the effective date of the Plan.
8. Restrictions on Transfers
-------------------------
8.1. The Options may not be transferred, assigned, pledged or
hypothecated in any way and will not be subject to execution, attachment or
similar process,
6
<PAGE>
except as provided by this Plan and except by will or under the laws of descent
and distribution (subject to the repurchase option described in Section 18
hereof).
8.2. The Option Shares may not be transferred, assigned, pledged or
hypothecated, voluntarily, involuntarily or by operation of law, except as
provided by this Plan and any Option Agreement pertaining to such Options.
8.3. An Option will terminate immediately upon any attempted transfer,
assignment, pledge or hypothecation of such Option in violation of this Section
8, and any attempted transfer, assignment, pledge or hypothecation of any Option
Shares in violation of this Section 8 will be void without further action by the
Company and have no effect.
9. Restrictions on Voting
----------------------
Until the occurrence of an IPO, Option Shares will be voted by the then chief
executive officer of the Company, pursuant to irrevocable proxies in the form
attached hereto as Exhibit B, executed by the Optionee upon the exercise of an
Option.
10. Vesting of Options
------------------
Options are exercisable only upon and after vesting. Except as provided in
Section 11 hereof and except as otherwise may be specifically provided in an
Option Agreement, Options shall vest according to the following schedule:
10.1. as to one-fifth (1/5) of the Option Shares on the first anniversary
of the Date of Grant;
7
<PAGE>
10.2. as to an additional one-fifth (1/5) of the Option Shares on the
second anniversary of the Date of Grant; and
10.3. as to an additional one-fifth (1/5) of the Option Shares on the
third anniversary of the Date of Grant;
10.4. as to an additional one-fifth (1/5) of the Option Shares on the
fourth anniversary of the Date of Grant; and
10.5. as to the remaining one-fifth (1/5) of the Option Shares on the
fifth anniversary of the Date of Grant.
The above vesting schedule assumes the Optionee's continuous employment with
the Company. No Option or part thereof shall vest after the date the Optionee
ceases to be an Employee for any reason, and any unvested portion of an Option
theretofore held by such an Optionee shall terminate as of that date.
11. Special Vesting Provisions
--------------------------
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Board may provide for the Optionee to have the right to exercise the Option as
to all of the Option Stock, including Shares as to which the Option would not
otherwise be exercisable. The Board may notify the Optionee that the Option
shall be fully exercisable and the Option will terminate upon the consummation
of such sale or merger.
8
<PAGE>
12. When Options May Be Exercised
-----------------------------
12.1. Except as provided in subsections (b) and (c) of this Section 12,
a vested Option or the vested portion of an Option, shall be exercised, if at
all, by the Optionee at any time before the tenth anniversary of its Date of
Grant.
12.2. If an Optionee ceases to be an Employee for any reason, such
Optionee's vested Options must be exercised, if at all, not later than thirty
(30) days following the date such Optionee ceases to be an Employee. Any
unvested portion of an Option shall terminate immediately upon the cessation of
employment of the Optionee holding the Option.
12.3. In the event of the occurrence of any of the events described in
Section 11 hereof and the adoption by the Board of a resolution providing for
the exercise of the rights provided to the Board under Section 11 hereof, the
vested Options shall not be exercisable after the occurrence of such event. The
Company shall notify all Optionees of any such impending sale. With respect to
any Optionee that desires to exercise the vested portion of his or her Option
prior to such event, the Company may instead pay such Optionee the excess of the
amount received or to be received for the Option Shares over the amount that
would have been received from such Optionee upon the exercise of the vested
portion of such Option.
12.4. Unless the Optionee desires to forego the benefit of the Option
being considered an incentive stock option under Section 422 of the Code, no
Option or any part thereof may be exercised by the Optionee while there is
outstanding any incentive stock option which was granted by the Company to the
Optionee at an earlier time.
13. Exercise Price
--------------
The Exercise Price shall be $1.62 per share for Options granted on or before
the earlier of (i) the adoption by the Board of a resolution changing the
Exercise Price or (ii) an IPO.
9
<PAGE>
At all times, when established, the Exercise Price shall be equal to or greater
than the Fair Market Value.
14. Exercise of Option
------------------
During the Optionee's lifetime, Options shall be exercisable only by the
Optionee or his legal representative or guardian. Options shall not be
exercisable by the spouse of any Optionee during such Optionee's lifetime,
unless such spouse is acting in his or her capacity as the legal representative
or guardian of the Optionee. In the event of the Optionee's death, the Option
shall be exercisable by the person or entity (including the Optionee's estate)
that has obtained the Optionee's rights under the Option by will or under the
laws of descent and distribution.
Options shall be exercised if at all, by submitting to the Company (a) a
Notice of Exercise in the form attached hereto as Exhibit A, (b) the Irrevocable
Proxy, duly executed, (c) any other written representations, covenants, and
undertakings that the Company may prescribe pursuant to the Shareholders
Agreements or to satisfy securities laws and regulations or other requirements,
and (d) a certified or bank cashier's check payable to the order of the Company
in an amount equal to the full purchase price of the shares to be purchased.
Upon receipt of the Notice of Exercise (subject to Sections 15, 16, and 17 of
this Agreement), the Company shall issue a new certificate or certificates to
the holder of the Option. The certificate or certificates for the shares as to
which the Option shall have been exercised shall be registered in the name of
the holder of the Option and shall be delivered to or upon the written order of
the holder of the Option. The shares shall bear a legend substantially in the
following form:
"THE SHARES SUBJECT TO THIS CERTIFICATE ARE SUBJECT TO
TRANSFER AND VOTING RESTRICTIONS SET FORTH IN THE OPEN PORT
TECHNOLOGY, INC. 1995 INCENTIVE STOCK OPTION PLAN (THE
"PLAN"). COPIES OF THE PLAN ARE ON FILE IN THE OFFICE OF THE
SECRETARY OF THE CORPORATION. BY ACCEPTING THE SHARES OF
STOCK EVIDENCED BY THIS CERTIFICATE, THE HOLDER AGREES TO BE
BOUND BY THE PLAN AS IT MAY BE AMENDED FROM TIME TO TIME."
10
<PAGE>
15. Securities Law Restrictions
---------------------------
The Company shall not be obligated to issue any stock certificates evidencing
a transfer upon exercise of an Option, until, in the opinion of the Company and
its counsel, such transfer and issuance of stock certificates will not involve
any violation of applicable federal and state securities laws, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Stock may then be listed. Acceptance of an Option by an Optionee
shall constitute the Optionee's agreement (binding on any person who succeeds to
the Optionee's rights and obligations under the Option Agreement by reason of
the Optionee's death) that, if the Stock is not publicly traded as of the date
the Option is exercised, any shares of Stock purchased upon the exercise of the
Option shall be acquired for the Optionee's own account and not with a view to
distribution and that each notice of the exercise of any portion of the Option
shall be accompanied by a written representation and covenant signed by the
Optionee, in such form as may be specified by the Company, confirming such
agreement and containing such other provisions as may be prescribed by the
Company. The Company may, at its election, release an Optionee from the
Optionee's agreement to take for the Optionee's own account and not with a view
to distribution of the shares of Stock purchased upon exercise of an Option if,
in the opinion of the Company, such covenant ceases to be necessary for
compliance with the applicable federal and state securities laws (including the
rules and regulations promulgated thereunder) and the requirements of any stock
exchange upon which the Stock may then be listed.
If the shares purchased upon exercise of an Option are not covered by an
effective registration statement under the Securities Act, the Company may place
the following legend (or a legend which is substantially similar to the
following legend) upon, and issue appropriate stock transfer instructions with
respect to, the certificate or certificates representing the shares transferred
upon exercise of the Option:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS
(THE STATE LAWS"), AND SUCH SHARES MAY NOT BE TRANSFERRED
UNLESS (A) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE LAWS COVERING SUCH TRANSFER IS THEN IN
EFFECT; OR (B) AN OPINION OF COUNSEL, SATISFACTORY TO THE
CORPORATION, HAS BEEN FURNISHED STATING THAT SUCH
11
<PAGE>
TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE LAWS."
16. Listing or Registration of Stock
--------------------------------
Each Option is subject to the requirement that, if at any time the Board shall
determine, in its discretion, that the listing, registration or qualification of
the shares of Stock subject to the Option upon any securities exchange or under
any state or federal law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting or exercise of the Option or the issuance or purchase of
shares under the Option, the Option may not be exercised in whole or in part
until such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Board.
The Company shall be under no obligation to effect or obtain any such listing,
registration, qualification, consent or approval if the Board shall determine,
in its discretion, that such action would not be in the best interests of the
Company. The Company shall not be liable for damages due to a delay in the
delivery or issuance of any stock certificates for any reason whatsoever,
including, but not limited to, a delay caused by listing, registration or
qualification of the shares of Stock subject to an Option under any securities
exchange or under any federal or state law, or by the effecting or obtaining of
any consent or approval of any governmental body with respect to the granting or
exercise of the Option or the issue or purchase of shares under the Option.
17. Withholding of Taxes
--------------------
The Board may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the Company is
required by any law or regulation of any governmental authority, whether
federal, state or local, domestic or foreign, to withhold in connection with any
Option, including, but not limited to, the withholding of the issuance of all or
any portion of the shares of Stock subject to the Option until the holder of the
Option reimburses the Company for the amount required to be withheld with
respect to such taxes, canceling any portion of the issuance of the shares of
Stock subject to the Option in an amount sufficient to reimburse the Company for
such amount, deducting from the Optionee's wages an amount sufficient to
reimburse the Company for such amount, or taking any other action reasonably
required to satisfy the withholding obligation of the Company.
12
<PAGE>
18. Repurchase Option
-----------------
The Options and Option Shares are subject to the rights of the Company to
repurchase or acquire the Option Shares upon the occurrence of certain events,
including but not limited to: death or disability of the Optionee; cessation of
employment with the Company for any reason; or a transfer of the Option or
Option Shares, voluntarily, involuntarily or by operation of law. The terms of
this repurchase option with respect to Option Shares shall be set forth in the
Option Agreement pertaining to such Options.
19. Modification of Options
-----------------------
At any time and from time to time the Board may provide for the modification,
extension, or renewal of any outstanding Option, provided that no such
modification, extension or renewal shall impair the Option in any respect
without the consent of the holder of the Option.
20. Amendment and Termination of the Plan
-------------------------------------
The Board may provide for the alteration, suspension or discontinuation of the
Plan, except that no such action may increase the benefits accruing to Employees
under the Plan, increase (other than as provided in Section 4(a) hereof) the
maximum number of shares permitted to be issued upon the exercise of Options, or
materially modify the requirements as to eligibility for participation in the
Plan unless such action is subject to approval by the shareholders of the
Company.
21. Shareholder Rights
------------------
A holder of an Option shall have none of the rights of a shareholder with
respect to the shares of Stock subject to the Option until the transfer of such
shares to him or her has been duly recorded on the stock transfer books of the
Company upon the exercise of the Option.
13
<PAGE>
22. Continued Employment Not Presumed
---------------------------------
Nothing in the Plan or any document describing it nor the grant of an Option
shall give any Optionee the right to continue in employment with the Company or
affect the right of the Company to terminate the employment of any Optionee with
or without cause.
14
<PAGE>
23. Effective Date
--------------
The foregoing Open Port Technology, Inc. 1995 Incentive Stock Option Plan is
hereby adopted by the Company as of October 19, 1995.
Open Port Technology, Inc.
/s/ Randy S. Storch
By: ------------------------------
Randy S. Storch, President
15
<PAGE>
EXHIBIT A
TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
NOTICE OF EXERCISE
(to be executed only upon exercise of the Option)
Reference is made to the Open Port Technology, Inc. 1995 Incentive Stock
Option Agreement, dated as of ___________________ _____, 1995 (the "Option
Agreement"), between Open Port Technology, Inc., an Illinois corporation (the
"Company"), and _____________________________________ (the "Optionee").
Capitalized terms used herein and not otherwise defined have the meanings
assigned to such terms in the Option Agreement.
23.1. The Optionee hereby irrevocably exercises the option for and
purchases _______________ shares of Stock.
23.2. The full purchase price for the shares of Stock being purchased
hereunder, calculated in accordance with the Option Agreement, is
$_______________, and the Optionee is delivering to the Company simultaneously
with the delivery of this Notice of Exercise a certified or bank cashier's check
payable to the order of the Company in such amount.
23.3. The shares of Stock being purchased hereunder are being acquired
for the Optionee's own account and not with a view to distribution thereof in
violation of applicable Federal or state securities laws.
<PAGE>
23.4. The Optionee requests that certificates for the shares of Stock
being purchased hereunder be issued in the name of and delivered to the Optionee
at the following address:
_________________________
_________________________
_________________________
_________________________
2
<PAGE>
Dated as of ____________________ ______________________________
(Signature)
______________________________
(Name)
______________________________
(Signature of Spouse)
______________________________
(Name)
3
<PAGE>
EXHIBIT B
TO
OPEN PORT TECHNOLOGY, INC. (the "Company")
1995 INCENTIVE STOCK OPTION PLAN (the "Plan")
IRREVOCABLE PROXY
The undersigned hereby revokes any previous proxies and irrevocably appoints
Randy S. Storch (the "Proxyholder") and his successor, pursuant to the Plan as
the proxy of the undersigned to attend any and all meetings of the shareholders
of the Company, and any adjournments or postponements of such meetings
(collectively, a "Meeting"), to vote for and in the name, place and stead of the
undersigned at any Meeting all shares of common stock, no par value per share
(the "Stock"), owned by the undersigned on the date of this proxy and any other
shares of Stock hereafter acquired by the undersigned (collectively, the "Proxy
Shares"), to execute written consents to corporate action, and to represent and
otherwise act for the undersigned on any and all matters with the same force and
effect as if the undersigned were personally present at such meeting or were
executing such consent.
This proxy is coupled with an interest and is expressly made irrevocable and
will be effective until the earliest to occur of (i) the consummation of an
initial public offering by the Company that is registered under the Securities
Act of 1933, as amended or (ii) the expiration of ten (10) years from the
execution date hereof. The undersigned acknowledges that monetary damages would
be an inadequate remedy for a breach of the provisions of this proxy and that
(in addition to any other remedy available at law) the obligations of the
undersigned and the rights of the Proxyholder are specifically enforceable.
The undersigned authorizes the Proxyholder to substitute any other person or
entity to act under this proxy, to revoke any such substitution, and to file
this proxy and any substitution or revocation of this proxy with the Secretary
of the Company.
Dated as of ____________________ ______________________________
(Signature)
4
<PAGE>
______________________________
(Name)
______________________________
(Signature of Spouse)
______________________________
(Name)
5
<PAGE>
AMENDMENT NUMBER ONE
TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Incentive Stock Option Plan; as used herein, the term "Plan" shall refer to the
Plan as modified by this Amendment. The terms used herein which are defined in
the Plan shall have the meanings provided for in the Plan, unless otherwise
defined herein. Except as expressly modified hereby, all of the terms and
provisions of the Plan shall continue in full force and effect. A copy of this
Amendment shall be attached to and made a part of the Plan.
2. Amendment to Section 2(g) of the Plan
---------------------------- --------
Section 2(g) of the Plan is hereby amended so as to read in its entirety as
follows:
(g) "Employee" shall mean any salaried employee of the Company or of
any "Parent" or "Subsidiary" of the Company (as such terms are defined in
Section 424 of the Code); any references to employment with the Company,
shall be deemed to include the Company and any Parent or Subsidiary of the
Company, as the context may require.
3. Effective Date
--------------
This Amendment to the Plan is hereby adopted by the Committee as of the 1st
day of February, 1996.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER TWO
TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc.
1995 Incentive Stock Option Plan, as amended by Amendment Number One to the Open
Port Technology, Inc. 1995 Incentive Stock Option Plan dated as of February 1,
1996; as used herein, the term "Plan" shall refer to the Plan as modified by
Amendment Number One and by this Amendment. The terms used herein which are
defined in the Plan shall have the meanings provided for in the Plan, unless
otherwise defined herein. Except as expressly modified hereby, all of the terms
and provisions of the Plan shall continue in full force and effect. A copy of
this Amendment shall be attached to and made a part of the Plan.
2. Amendment to Section 2(q) of the Plan
-------------------------------------
Section 2(q) of the Plan is hereby amended so as to read in its
entirety as follows:
(q) "Stock" shall mean the common stock, par value $.001 per
share, of the Company.
3. Amendment to Section 10 of the Plan
-----------------------------------
Section 10 of the Plan is hereby amended so as to read in its entirety
as follows:
<PAGE>
Options are exercisable only upon and after vesting. Except
as provided in Section 11 hereof and except as otherwise may be
specifically authorized by the Board and provided in an Option
Agreement, Options shall vest according to the following schedule:
(a) as to one-fourth (1/4th) of the Option Shares, on the first
anniversary of the Date of Grant; and
(b) as to an additional one-thirty-sixth (1/36th) of the Option
Shares, on the same calendar month day as the Date of Grant
occurring in each of the thirty-six (36) calendar months
occurring after the first anniversary of the Date of Grant.
The above vesting schedule assumes the Optionee's continuous
employment with the Company. No Option or part thereof shall vest
after the date the Optionee ceases to be an Employee for any reason,
and any unvested portion of an Option theretofore held by such an
Optionee shall terminate as of that date.
4. Effective Date
--------------
This Amendment to the Plan is hereby adopted by the Board as of the
30th day of April, 1996.
Open Port Technology, Inc.
2
<PAGE>
AMENDMENT NUMBER THREE
TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Incentive Stock Option Plan, as amended by Amendment Number One to the Open Port
Technology, Inc. 1995 Incentive Stock Option Plan, dated as of February 1, 1996,
and Amendment Number Two to Open Port Technology, Inc. 1995 Incentive Stock
Option Plan. As used herein, the term "Plan" shall refer to the Open Port
Technology, Inc 1995 Incentive Stock Option Plan as modified by Amendment Number
One, Amendment Number Two, and by this Amendment Number Three. The terms used
herein which are defined in the Plan shall have the meanings provided for in the
Plan, unless otherwise defined herein. Except as expressly modified hereby, all
of the terms and provisions of the Plan shall continue in full force and effect.
A copy of this Amendment Number Three shall be attached to and made a part of
the Plan.
2. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount of
Stock for which Options may be granted shall not exceed 3,682,695 shares
(based on the capitalization of the Company existing as of January 1, 1997)
less (at the time of the grant of any Option) all shares subject to any
option granted under the Option Port Technology, Inc. 1995 Non-Employee
Stock Option Plan, as amended.
3. Effective Date
--------------
<PAGE>
This Amendment Number Three to the Plan is hereby adopted by the Board as
of February 6, 1997 and approved by the shareholders of the Company as of
February 11, 1997.
Open Port Technology, Inc.
2
<PAGE>
AMENDMENT NUMBER FOUR
TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
24. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Incentive Stock Option Plan, as amended by Amendment Number One to the Open Port
Technology, Inc. 1995 Incentive Stock Option Plan, dated as of February 1, 1996,
Amendment Number Two to Open Port Technology, Inc. 1995 Incentive Stock Option
Plan, dated as of April 30, 1996, and Amendment Number Three to Open Port
Technology Stock Option Plan, dated as of February 11, 1997. As used herein,
the term "Plan" shall refer to the Open Port Technology, Inc. 1995 Incentive
Stock Option Plan as modified by Amendment Number One, Amendment Number Two,
Amendment Number Three and by this Amendment Number Four. The terms used herein
which are defined in the Plan shall have the meanings provided for in the Plan,
unless otherwise defined herein. Except as expressly modified hereby, all of
the terms and provisions of the Plan shall continue in full force and effect. A
copy of this Amendment Number Four shall be attached to and made a part of the
Plan.
25. Amendment to Section 2 of the Plan
----------------------------------
Section 2 of the Plan is hereby amended by adding the following new
paragraph (r) at the end thereof:
(r) "Change of Control Event" shall mean, and be deemed to have
occurred: (i) upon the acquisition at any time (excluding any
acquisition in connection with any public offering of equity
securities of the Company pursuant to a registration statement
filed under the Securities Act) by a "person" or "group" (as used
in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (excluding, for this
purpose, the Company or any Subsidiary or any employee benefit
plan of the Company or any Subsidiary) of the beneficial
ownership (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities representing
fifty percent (50%) or more of the combined voting power of the
then-outstanding securities of the Company; or (ii) in the event
that the Board or the shareholders of the Company shall approve a
merger, share exchange (other than a merger or share exchange
with a wholly-owned subsidiary), consolidation, or sale or other
disposition of substantially all of the assets of the Company, as
a
<PAGE>
result of which immediately following such transaction the
shareholders of the Company shall not hold, directly or
indirectly, a majority of the voting power of the then-
outstanding securities of: (A) in the case of a merger or
consolidation, the surviving or resulting corporation; (B) in the
case of a share exchange, the acquiring corporation; or (C) in
the case of a sale or other disposition of substantially all of
the assets, each surviving, resulting or acquiring corporation
which, immediately following the transaction, holds fifty percent
(50%) or more of the assets of the Company.
26. Amendment of Section 11 of the Plan
-----------------------------------
Section 11 of the Plan is hereby amended by adding the following new
paragraph at the end of thereof:
Further, notwithstanding anything to the contrary in Section 10 or
this Section 11, upon the occurrence of a Change of Control Event, with
respect to each Option, if three (3) years has not elapsed since the Date
of Grant, then the vesting of the Option shall be accelerated so that any
portion of the Option that would have vested within three (3) years from
the Date of Grant, shall automatically vest as of the date of the Change of
Control Event. The remaining unvested portion shall continue to vest
according to above schedule (as if three (3) years had elapsed since the
Date of Grant).
27. Amendment of Section 18 of the Plan
------------------------------------
Section 18 of the Plan is hereby amended so as to read in its entirety as
follows:
The Options and the Option Shares are subject to the rights of the
Company to repurchase or acquire the Option Shares upon the occurrence of
certain events, including but not limited to: a transfer of the Option or
Option Shares, voluntarily, involuntarily or by operation of law or
cessation of employment with the Company for any reason, but excluding in
any instance upon the occurrence of a Change of Control Event. The terms
of this repurchase option with respect to Option Shares shall be set forth
in the Option Agreement pertaining to such Options.
28. Effective Date
--------------
This Amendment Number Four to the Plan is hereby adopted by the Board as of
the 20th day of November, 1997.
Open Port Technology, Inc.
2
<PAGE>
AMENDMENT NUMBER FIVE
TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
29. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Incentive Stock Option Plan, as amended by Amendment Number One to the Open Port
Technology, Inc. 1995 Incentive Stock Option Plan, dated as of February 1, 1996,
Amendment Number Two to Open Port Technology, Inc. 1995 Incentive Stock Option
Plan, dated as of April 30, 1996, Amendment Number Three to Open Port Technology
Stock Option Plan, dated as of February 11, 1997, and Amendment Number Four to
Open Port Technology Stock Option Plan, dated as of November 20, 1997. As used
herein, the term "Plan" shall refer to the Open Port Technology, Inc. 1995
Incentive Stock Option Plan as modified by Amendment Number One, Amendment
Number Two, Amendment Number Three, Amendment Number Four, and this Amendment
Number Five. The terms used herein which are defined in the Plan shall have the
meanings provided for in the Plan, unless otherwise defined herein. Except as
expressly modified hereby, all of the terms and provisions of the Plan shall
continue in full force and effect. A copy of this Amendment Number Five shall
be attached to and made a part of the Plan.
30. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount of
Stock for which Options may be granted shall not exceed 4,432,695 shares
(based on the capitalization of the Company existing as of January 1, 1997)
less (at the time of the grant of any Option) all shares subject to any
option granted under the Open Port Technology, Inc. 1995 Non-Employee Stock
Option Plan, as amended.
31. Effective Date
--------------
This Amendment Number Five to the Plan is hereby adopted by the Board as of
the 23rd day of April, 1998 and approved by the Shareholders of the Company as
of June 15, 1998.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER SIX
TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
32. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Incentive Stock Option Plan, as amended by Amendment Number One to the Open Port
Technology, Inc. 1995 Incentive Stock Option Plan, dated as of February 1, 1996,
Amendment Number Two to Open Port Technology, Inc. 1995 Incentive Stock Option
Plan, dated as of April 30, 1996, Amendment Number Three to Open Port Technology
Stock Option Plan, dated as of February 11, 1997, Amendment Number Four to Open
Port Technology Stock Option Plan, dated as of November 20, 1997, and Amendment
Number Five to Open Port Technology Stock Option Plan, dated as of June 15,
1998. As used herein, the term "Plan" shall refer to the Open Port Technology,
Inc. 1995 Incentive Stock Option Plan as modified by the foregoing Amendments
and this Amendment Number Six. The terms used herein which are defined in the
Plan shall have the meanings provided for in the Plan, unless otherwise defined
herein. Except as expressly modified hereby, all of the terms and provisions of
the Plan shall continue in full force and effect. A copy of this Amendment
Number Six shall be attached to and made a part of the Plan.
33. Amendment to Section 14 of the Plan
-----------------------------------
The second paragraph of Section 14 of the Plan is hereby amended so as to
read in its entirety as follows:
Options shall be exercised if at all, by submitting to the Company (a)
a Notice of Exercise in the form attached hereto as Exhibit A, (b) the
Irrevocable Proxy, duly executed, (c) any other written representations,
covenants, and undertakings that the Company may prescribe pursuant to the
Shareholders Agreements or to satisfy securities laws and regulations or
other requirements, and (d) a certified or bank cashier's check payable to
the order of the Company, or any other form of payment determined to be
acceptable by the Board, in its sole discretion, in an amount equal to the
full purchase price of the shares to be purchased.
34. Amendment to Exhibit A to the Plan
----------------------------------
Paragraph (b) of Exhibit A to the Plan is hereby amended so as to read in
its entirety as follows:
(b) The full purchase price for the shares of Stock being purchased
hereunder, calculated in accordance with the Option Agreement, is
$____________, and the Optionee is delivering to the Company simultaneously
<PAGE>
with the delivery of this Notice of Exercise a certified or bank
cashier's check payable to the order of the Company in such amount,
or any other form of payment determined to be acceptable by the
Board, in its sole discretion.
35. Effective Date
--------------
This Amendment Number Six to the Plan is hereby adopted by the Board as of
the 31st day of July, 1998.
Open Port Technology, Inc.
2
<PAGE>
AMENDMENT NUMBER SEVEN TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
36. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Incentive Stock Option Plan (the "Plan"), as amended by Amendment Number One to
the Plan, dated as of February 1, 1996, Amendment Number Two to the Plan, dated
as of April 30, 1996, Amendment Number Three to the Plan, dated as of February
11, 1997, Amendment Number Four to the Plan, dated as of November 20, 1997,
Amendment Number Five to the Plan, dated as of June 15, 1998 and Amendment
Number Six to the Plan, dated as of July 31, 1998. As used herein, the term
"Plan" shall refer to the Open Port Technology, Inc. 1995 Incentive Stock Option
Plan as modified by Amendment Number One, Amendment Number Two, Amendment Number
Three, Amendment Number Four, Amendment Number Five, Amendment Number Six and
this Amendment Number Seven. The terms used herein which are defined in the
Plan shall have the meanings provided for in the Plan, unless otherwise defined
herein. Except as expressly modified hereby, all of the terms and provisions of
the Plan shall continue in full force and effect. A copy of this Amendment
Number Seven shall be attached to and made a part of the Plan.
37. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount
of Stock for which Options may be granted shall not exceed 5,432,695
shares (based on the capitalization of the Company existing as of
January 1, 1997) less (at the time of the grant of any Option) all
shares subject to any option granted under the Open Port Technology,
Inc. 1995 Non-Employee Stock Option Plan, as amended.
38. Effective Date
--------------
This Amendment Number Seven to the Plan is hereby adopted by the Board as
of October 29, 1998 and approved by the Shareholders of the Company as of
February 8, 1999.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER EIGHT TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
39. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Incentive Stock Option Plan (the "Plan"), as amended by Amendment Number One to
the Plan, dated as of February 1, 1996, Amendment Number Two to the Plan, dated
as of April 30, 1996, Amendment Number Three to the Plan, dated as of February
11, 1997, Amendment Number Four to the Plan, dated as of November 20, 1997,
Amendment Number Five to the Plan, dated as of June 15, 1998, Amendment Number
Six to the Plan, dated as of July 31, 1998, and Amendment Number Seven to the
Plan, dated as of February 8, 1999. As used herein, the term "Plan" shall refer
to the Open Port Technology, Inc. 1995 Incentive Stock Option Plan as modified
by Amendment Number One, Amendment Number Two, Amendment Number Three, Amendment
Number Four, Amendment Number Five, Amendment Number Six, Amendment Number Seven
and this Amendment Number Eight. The terms used herein which are defined in the
Plan shall have the meanings provided for in the Plan, unless otherwise defined
herein. Except as expressly modified hereby, all of the terms and provisions of
the Plan shall continue in full force and effect. A copy of this Amendment
Number Eight shall be attached to and made a part of the Plan.
40. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount
of Stock for which Options may be granted shall not exceed 8,432,695
shares (based on the capitalization of the Company existing as of
January 1, 1997) less (at the time of the grant of any Option) all
shares subject to any option granted under the Open Port Technology,
Inc. 1995 Non-Employee Stock Option Plan, as amended.
41. Effective Date
--------------
This Amendment Number Eight to the Plan is hereby adopted by the Board as
of January 27, 2000 and approved by the Shareholders of the Company as of
November, 1999.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER NINE TO
OPEN PORT TECHNOLOGY, INC.
1995 INCENTIVE STOCK OPTION PLAN
42. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Incentive Stock Option Plan (the "Plan"), as amended by Amendment Number One to
the Plan, dated as of February 1, 1996, Amendment Number Two to the Plan, dated
as of April 30, 1996, Amendment Number Three to the Plan, dated as of February
11, 1997, Amendment Number Four to the Plan, dated as of November 20, 1997,
Amendment Number Five to the Plan, dated as of June 15, 1998, Amendment Number
Six to the Plan, dated as of July 31, 1998, Amendment Number Seven to the Plan,
dated as of February 8, 1999 and Amendment Number Eight to the Plan, dated as of
January 27, 2000. As used herein, the term "Plan" shall refer to the Open Port
Technology, Inc. 1995 Incentive Stock Option Plan as modified by Amendment
Number One, Amendment Number Two, Amendment Number Three, Amendment Number Four,
Amendment Number Five, Amendment Number Six, Amendment Number Seven, Amendment
Number Eight and this Amendment Number Nine. The terms used herein which are
defined in the Plan shall have the meanings provided for in the Plan, unless
otherwise defined herein. Except as expressly modified hereby, all of the terms
and provisions of the Plan shall continue in full force and effect. A copy of
this Amendment Number Nine shall be attached to and made a part of the Plan.
43. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount
of Stock for which Options may be granted shall not exceed 9,732,695
shares (based on the capitalization of the Company existing as of
January 1, 1997) less (at the time of the grant of any Option) all
shares subject to any option granted under the Open Port Technology,
Inc. 1995 Non-Employee Stock Option Plan, as amended.
44. Effective Date
--------------
This Amendment Number Nine to the Plan is hereby adopted by the Board as of
March 24, 2000 and approved by the Shareholders of the Company as of March 24,
2000.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER TEN TO
OPEN PORT TECHNOLOGY, INC
1995 INCENTIVE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Incentive Stock Option Plan (the "Plan"), as amended by Amendment Number One to
the Plan, dated as of February 1, 1996, Amendment Number Two to the Plan, dated
as of April 30, 1996, Amendment Number Three to the Plan, dated as of February
11, 1997, Amendment Number Four to the Plan, dated as of November 20, 1997,
Amendment Number Five to the Plan, dated as of June 15, 1998, Amendment Number
Six to the Plan, dated as of July 31, 1998, Amendment Number Seven to the Plan,
dated as of February 8, 1999, Amendment Number Eight to the Plan, dated as of
January 27, 2000, and Amendment Number Nine to the Plan, dated as of March 24,
2000. As used herein, the term "Plan" shall refer to the Open Port Technology,
Inc. 1995 Incentive Stock Option Plan as modified by Amendment Number One,
Amendment Number Two, Amendment Number Three, Amendment Number Four, Amendment
Number Five, Amendment Number Six, Amendment Number Seven, and Amendment Number
Eight and Amendment Number Nine. The terms used herein which are defined in the
Plan shall have the meanings provided for in the Plan, unless otherwise defined
herein. Except as expressly modified hereby, all of the terms and provisions of
the Plan shall continue in full force and effect. A copy of this Amendment
Number Ten shall be attached to and made part of the Plan.
2. Amendments to Section 2 of the Plan
-----------------------------------
Section 2 of the Plan is hereby amended by amending paragraph (l) so as to
read in its entirety as follows:
(l) "Option Agreement" shall mean an agreement executed by an officer
of the Company and an Employee evidencing the grant of an Option, as it may
be amended, modified, extended or renewed from time to time, subject to
Section 19.
Section 2 of the Plan is hereby further amended by amending paragraph (r)
so as to read in its entirety as follows:
(r) "Change of Control Event" means, unless otherwise defined for a
particular Optionee in an Option Agreement or in an employment
agreement between the Company and such Optionee which addresses the
effect of a Change of Control Event (as therein defined) on benefits
hereunder, shall mean, and be deemed to have occurred:
(i) upon the acquisition at any time (excluding any acquisition in
connection with any public offering of equity securities of the
Company pursuant to a registration statement filed under the
Securities Act) by a person or group (as used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of
<PAGE>
1934, as amended (the "Exchange Act"), excluding for this
purpose, the Company or any Subsidiary or any employee benefit
plan of the Company or any Subsidiary) of the beneficial
ownership (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities representing
fifty percent (50%) or more of the combined voting power of the
then-outstanding securities of the Company; except that no Change
of Control shall be deemed to have occurred solely by reason of
such beneficial ownership (A) by a corporation of which fifty
percent (50%) or more of the beneficial ownership is then held,
directly or indirectly, in substantially the same proportions by
the persons who held the beneficial ownership of the Company
immediately before such acquisition, or (B) resulting directly
from an issuance of Stock by the Company to such person; or
(ii) the approval by the Board or the shareholders of the Company of a
merger, share exchange (other than a merger or share exchange
with a wholly-owned subsidiary), consolidation, reorganization,
or similar transaction, or a plan or agreement for the sale or
other disposition of all or substantially all of the consolidated
assets of the Company or a plan of liquidation of the Company, as
a result of which immediately following such transaction the
shareholders of the Company shall not hold, directly or
indirectly, a majority of the voting power of the then-
outstanding securities of the surviving, resulting or acquiring
corporation (or in the case of a sale or other disposition of
assets, of each surviving, resulting or acquiring corporation
which immediately after the transaction holds fifty percent (50%)
of the former assets of the Company).
3. Amendment to Section 7 of the Plan
----------------------------------
Section 7 of the Plan is hereby amended so as to read in its entirety as
follows:
The Plan shall continue in effect until terminated pursuant to Section
20 hereof, or until there is no more Stock as to which an Option may be
granted and no Options are outstanding; provided, however, that all Options
must be granted within 10 years from the effective date of the Plan, and no
Options shall be granted under the Plan after an IPO.
4. Amendments to Section 8 of the Plan
-----------------------------------
Section 8 of the Plan is hereby amended so as to read in its entirety as
follows:
(a) The Options may not be transferred, assigned, pledged or
hypothecated in any way and will not be subject to execution, attachment or
similar process, except as provided by this Plan and except by will or
under the laws of descent and distribution, or pursuant to a domestic
relations order issued by a court of competent jurisdiction, or by
designation of beneficiary pursuant to subsection (c) of this Section 8,
and except as may
2
<PAGE>
be permitted by an Option Agreement in accordance with subsection (d) of
this Section 8, and subject to the repurchase option described in Section
18 hereof.
(b) Prior to an IPO the Option Shares may not be transferred,
assigned, pledged or hypothecated, voluntarily or involuntarily or by
operation of law, except as provided by this Plan and any Option Agreement
pertaining to such Options.
(c) Each Optionee under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be an individual or a trust and who
may be named contingently or successively) to exercise on such
beneficiary's behalf any Options that are outstanding and exercisable after
the death of the Optionee. Each such designation shall revoke all prior
designations by the same Optionee, shall be in a form prescribed by the
Company, and will be effective only when filed by the Optionee in writing
with the Company during the Optionee's lifetime. In the absence of any such
designation, the Option to the extent outstanding and exercisable after the
death of an Optionee may be exercised by his or her executors,
administrators, legatees or distributees of his or her estate as determined
under his or her will or by the laws of descent and distribution. If an
Option is exercised by the executors, administrators, legatees or
distributees of the estate of a deceased Optionee or by the guardian or
legal representative of a Optionee, the Company shall be under no
obligation to issue Stock thereunder unless and until it is satisfied that
the person or persons exercising the Option are the duly appointed
beneficiary or legal representatives of the Optionee or of the deceased
Optionee's estate or the proper legatees or distributees of such estate.
(d) If the Option Agreement so provides and the Optionee consents to
foregoing the benefits of the Option being considered an incentive stock
option under Section 422 of the Code, then notwithstanding subsection (a)
above, an Optionee may transfer an Option in the manner prescribed by the
Board, and subject to such terms and conditions as may be prescribed by the
Board, to any Permissible Transferee (as defined below). For purposes of
this Plan, "Permissible Transferee" means any member of the Immediate
----------------------
Family (as defined below) of the Optionee to whom such Option was granted,
any trust the primary beneficiaries of which consist exclusively of the
Optionee or members of the Optionee's Immediate Family or any corporation,
partnership or similar entity, the owners of which consist exclusively of
the Optionee or members of the Optionee's Immediate Family. For purposes of
this Section, "Immediate Family" means such Optionee's spouse, children,
----------------
nieces, nephews, grandchildren, great grandchildren, stepchildren, parents,
stepparents, grandparents, siblings, half siblings, and the spouses of such
individuals.
(e) An Option will terminate immediately upon any attempted transfer,
assignment, pledge or hypothecation of such Option in violation of this
Section 8, and any attempted transfer, assignment, pledge or hypothecation
of any Option Shares in violation of this Section 8 will be void without
further action by the Company and have no effect.
5. Amendment to Section 11 of the Plan
-----------------------------------
3
<PAGE>
The last paragraph of Section 11 of the Plan is hereby amended so as to
read in its entirety as follows:
Further, notwithstanding anything to the contrary in Section 10 or
this Section 11, but subject to any different provision for a particular
Optionee in an Option Agreement or in an employment agreement between the
Company and such Optionee which addresses the effect of a Change in Control
Event (as therein defined) on benefits hereunder, upon the occurrence of a
Change in Control Event, with respect to each Option, if three (3) years
has not elapsed since the Date of Grant, then the vesting of the Option
shall be accelerated so that any portion of the Option that would have
vested within three (3) years from the Date of Grant shall automatically
vest as of the date of the Change of Control Event. The remaining unvested
portion shall continue to vest according to the above schedule (as if three
(3) years had elapsed since the Date of Grant).
6. Amendments to Section 12 of the Plan
------------------------------------
Section 12(b) of the Plan is hereby amended so as to read in its entirety
as follows:
(b) Unless otherwise provided for a particular Optionee in an Option
Agreement and which may distinguish among reasons for termination of
employment, (i) any unvested portion of an Option shall terminate
immediately upon the cessation of employment for any reason of the Optionee
holding the Option, and (ii) if an Optionee ceases to be an Employee for
any reason, such Optionee's vested Options must be exercised, if at all,
not later than thirty (30) days following the date such Optionee ceases to
be an Employee.
Section 12(d) of the Plan is hereby deleted.
7. Amendment to Section 14 of the Plan
-----------------------------------
Section 14 of the Plan is hereby amended so as to read in its entirety as
follows:
Except to the extent provided in an Option Agreement which permits
transfer of Options pursuant to Section 8(d), during the Optionee's
lifetime Options shall be exercisable only by the Optionee or his legal
representative or guardian. Options shall not be exercisable by the spouse
of any Optionee during such Optionee's lifetime, unless such spouse is
acting in his or her capacity as the legal representative or guardian or a
permissible transferee under such Option Agreement, of the Optionee. In the
event of the Optionee's death, the Option shall be exercisable by the
person or entity (including the Optionee's estate) that has obtained the
Optionee's rights under the Option by designation of beneficiary, by will
or under the laws of descent and distribution, or by such permitted
transfer.
Options shall be exercised, if at all, by submitting to the Company
(a) a Notice of Exercise in the form attached hereto as Exhibit A, (b) if
exercise occurs prior to an IPO, the Irrevocable Proxy, duly executed, (c)
any other written representations, covenants and undertakings that the
Company may prescribe pursuant to any shareholders agreements or
4
<PAGE>
to satisfy securities laws and regulations or other requirements, and (d)
full payment for the Option Stock made by cash, personal check or wire
transfer or, subject to the approval of the Board, any one or more of the
following means:
(i) Shares of Stock that have been held by the Optionee for at
least six months or purchased by the Optionee on the open market
("Mature Shares"), valued at their Fair Market Value on the date of
exercise;
(ii) pursuant to procedures approved by the Board, through the
sale of the Stock acquired on exercise of the Option through a broker-
dealer to whom the Optionee has submitted an irrevocable notice of
exercise and irrevocable instructions to deliver promptly to the
Company the amount of sale or loan proceeds sufficient to pay for such
Stock, together with, if requested by the Company, the amount of
federal, state, local or foreign withholding taxes payable by Optionee
by reason of such exercise.
If Mature Shares are used to pay the Exercise Price, then if requested by
the Secretary or Assistant Secretary of the Company, the Optionee shall
deliver to the Secretary or Assistant Secretary the agreement evidencing
the Option and the Optionee's certificate that such shares have been held
by the Optionee for at least six months or were purchased on the open
market and such certificate shall identify the number of shares of Stock
and the stock certificate or other document or notation which evidences
such stock ownership. The number of Mature Shares being so used and the
number of shares of Stock purchased upon exercise may be evidenced by a
notation on the agreement and the agreement shall be returned to the
Optionee. No fractional shares of Stock (or cash in lieu of fractional
shares) shall be issued upon exercise of an Option and the number of shares
of Stock that may be purchased upon exercise shall be rounded to the
nearest number of whole shares.
Upon receipt of the Notice of Exercise (subject to Sections 15, 16 and
17 of this Plan), the Company shall issue a new certificate of certificates
to the holder of the Option. The certificate or certificates for the shares
as to which the Option shall have been exercised shall be registered in the
name of the holder of the Option and shall be delivered to or upon the
written order of the holder of the Option. If the shares are issued before
an IPO the shares shall bear a legend in substantially the following form:
"THE SHARES SUBJECT TO THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND
VOTING RESTRICTIONS SET FORTH IN THE OPEN PORT TECHNOLOGY, INC. 1995
INCENTIVE STOCK OPTION PLAN (THE "PLAN"). COPIES OF THE PLAN ARE ON
FILE IN THE OFFICE OF THE SECRETARY OF THE CORPORATION. BY ACCEPTING
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE, THE HOLDER AGREES
TO BE BOUND BY THE PLAN AS IT MAY BE AMENDED FROM TIME TO TIME."
Whenever under the Plan, shares are to be delivered upon exercise of
an Option the Company shall be entitled to require (x) that the Optionee
remit an amount in cash, or
5
<PAGE>
if determined by the Board, Mature Shares, sufficient to satisfy all
federal, state, local and foreign tax withholding requirements related
thereto ("Required Withholding"), (y) the withholding of such Required
Withholding from compensation otherwise due to the Optionee or from any
shares due to the Optionee under the Plan or (z) any combination of the
foregoing.
Any Optionee who makes a disposition not described in Section
422(a)(i) of the Code of Option Shares acquired under an incentive stock
option shall remit to the Company an amount sufficient to satisfy all
resulting Required Withholding; provided that, in lieu of or in addition to
the foregoing, the Company shall have the right to withhold such Required
Withholding from compensation otherwise due to the Optionee or from any
shares or other payment due to the Optionee under the Plan.
8. Amendments to Section 18 of the Plan
------------------------------------
Section 18 of the Plan is hereby amended to read in its entirety as
follows:
The Options and the Option Shares are subject to the rights of the
Company to repurchase or acquire the Option Shares upon the occurrence of
certain events, including but not limited to: a transfer of the Option or
Option Shares, voluntarily, involuntarily or by operation of law or
cessation of employment with the Company for any reason, but excluding in
any instance upon the occurrence of a Change of Control Event or after an
IPO. The terms of this repurchase option with respect to the Option Shares
shall be set forth in the Option Agreement pertaining to such Options.
9. Amendments to Section 20 of the Plan
------------------------------------
Section 20 is amended to read as follows:
The Board may provide for the alteration, suspension or
discontinuation of the Plan, except that no such action may increase (other
than as provided in Section 4(a) hereof) the maximum number of shares
permitted to be issued upon the exercise of Options, or materially modify
the requirements as to eligibility for participation in the Plan, unless
such action is subject to approval by the shareholders of the Company.
10. Effective Date
--------------
This Amendment Number Ten to the Plan is hereby adopted by the Board as of
April 3, 2000 subject to approval by the Shareholders of the Company.
Open Port Technology, Inc.
6
<PAGE>
EXHIBIT 10.2
OPEN PORT TECHNOLOGY, INC.
1995 NON-EMPLOYEE STOCK OPTION PLAN
1. Purpose
-------
The purpose of the Plan is to benefit the Company and its shareholders by
having the Company offer certain providers of service to the Company, such as
members of the Board of Directors, consultants, suppliers and contractors, a
favorable opportunity to acquire shares of Stock over a period of years, thereby
giving such parties a permanent stake in the growth and prosperity of the
Company, encouraging such parties to continue their service with the Company,
and motivating such parties to promote the best interests of the Company.
2. Definitions
-----------
As used herein, the following definitions shall apply.
(a) "Board" shall mean the Board of Directors of the Company, or a
committee appointed by the Board to perform all or some of the Board's duties
under this Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Company" shall mean Open Port Technology, Inc., an Illinois
corporation.
(d) "Date of Grant" shall mean the day and year written in the Option
Agreement relating to such Option.
(e) "Director" shall mean any duly elected and qualified member of the
Board.
(f) "Disability" shall mean any medically determinable physical or mental
impairment that, in the opinion of the Board, based upon medical reports and
other evidence satisfactory to the Board, can reasonably be expected to prevent
an individual from performing substantially all of his customary duties for a
continuous period of not less than twelve (12) months.
(g) "Exercise Price" shall mean the purchase price for shares of Stock
purchased pursuant to the exercise or partial exercise of an Option.
(h) "Fair Market Value" shall mean, with respect to the valuation of any
shares of Stock, (i) if the Stock is publicly traded, the closing price of the
Stock on the trading day immediately preceding the business day during which the
shares of Stock are to be valued pursuant hereto, and (ii) if the Stock is not
publicly traded, the fair market value of the shares of Stock as reasonably
determined by the Board consistent with past practice.
(i) "IPO" shall mean the closing of an initial public offering of the
common stock of the Company registered under the Securities Act.
<PAGE>
(j) "Option" shall mean any right to purchase Stock which has been granted
by the Board pursuant to the Plan.
(k) "Option Agreement" shall mean an agreement executed by an officer of
the Company and the Optionee evidencing the grant of an Option.
(l) "Option Shares" shall mean the shares of Stock transferred pursuant to
the exercise of an Option.
(m) "Optionee" shall mean any party who receives an Option pursuant to the
Plan.
(n) "Plan" shall mean the Open Port Technology, Inc. 1995 Non-Employee
Stock Option Plan.
(o) "Securities Act" shall mean the Securities Act of 1933, as amended.
(p) "Stock" shall mean the no par value common stock of the Company.
3. Shares Subject to the Plan
--------------------------
Except as provided in Section 4(a) hereof, the aggregate amount of Stock
for which Options may be granted shall not exceed 803,213 shares less (at the
time of the grant of any Option) all shares subject to any option granted under
the Open Port Technology, Inc. 1995 Incentive Stock Option Plan.
Any shares subject to unexercised portions of Options which shall have
terminated, been canceled, or expired may again be made subject to Options. In
addition, shares that have been repurchased by the Company may again be made
subject to Options.
4. Adjustment
----------
(a) The number of shares subject to the Plan and to Options shall be
adjusted as follows: (i) in the event that the number of shares of outstanding
Stock is changed by reason of a stock dividend, stock split, recapitalization or
combination of shares, the number of shares of Stock subject to the Plan and to
Options shall be proportionately adjusted; or (ii) in the event of any merger,
consolidation or reorganization of the Company with any other corporation or
corporations pursuant to which the holders of shares of Stock surrender shares
of Stock in exchange for other shares of stock or securities, there shall be
substituted for each share of Stock then subject to the Plan and to Options the
number and kind of shares of stock or other securities which the holders of
shares of Stock are entitled to receive for each share of Stock surrendered
pursuant to the transaction and the Exercise Price shall be proportionately
adjusted.
(b) The number of shares subject to the Plan and Options shall not be
adjusted as a result of the issuance of shares of Stock by the Company (other
than an issuance described in
2
<PAGE>
subsection (a) of this Section 4), it being understood that, upon such an
issuance of shares of Stock, holders of Options and holders of Option Shares
will have a corresponding dilution of their proportionate interests in the
Stock.
5. Administration of the Plan
--------------------------
The following provisions shall govern the administration of the Plan:
(a) The Plan shall be administered by the Board.
(b) The Board is authorized (but only to the extent not contrary to the
express provisions of the Plan) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan and to the Options, to
determine the form and content of Options (except to the extent the form and
content of the Options are specified herein), and to make such other
determinations and exercise such other powers and authority as may be necessary
or advisable for the administration of the Plan. Each Option granted shall be
evidenced by an Option Agreement in such form as may be determined by the Board.
(c) A majority of the members of the Board eligible to act shall constitute
a quorum for purposes of acting with respect to the Plan, and the action of a
majority of the members present who are eligible to act at any meeting at which
a quorum is present shall be deemed the action of the Board.
(d) All decisions, determinations and interpretations of the Board made in
good faith with respect to the Plan and Option Agreements shall be final and
conclusive on all persons affected thereby.
(e) Neither the Board nor any member thereof shall be liable for any act,
omission, interpretation, construction or determination made in connection with
the Plan in good faith, and the members of the Board shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including counsel fees) arising therefrom to the full extent
permitted by law.
6. Eligibility
-----------
The Board is authorized to select parties who have rendered or will be
rendering services to the Company, other than as an employee, to receive Options
depending on the availability of shares of Stock for which Options may be
granted pursuant to the terms of the Plan. In the event Options are granted
pursuant to the Plan, the Board is authorized to select the particular
individuals or companies who will receive such Options and the number of shares
of Stock under each such Option. In granting Options, the Board shall take into
consideration the contribution the party has made or may make to the success of
the Company and such other factors as the Board shall determine. In no event
shall any party or his, her or its legal representatives, heirs, legatees,
distributees or successors have any right to participate in the Plan except to
such extent, if any, as the Board shall determine.
3
<PAGE>
7. Term of the Plan
----------------
The Plan shall continue in effect until terminated pursuant to Section 20
hereof; or until there is no more stock as to which an Option may be granted and
no Options are outstanding; provided, however, that all Options must be granted
within 10 years from the effective date of the Plan.
8. Restrictions on Transfers
-------------------------
An Option may not be transferred, assigned, pledged or hypothecated in any
way and will not be subject to execution, attachment or similar process, except
by will or under the laws of descent and distribution or pursuant to a domestic
relations order issued by a court of competent jurisdiction. The Option will
terminate immediately upon any attempted transfer, assignment, pledge or
hypothecation in violation of this Section 8, and any attempted transfer,
assignment, pledge or hypothecation of any Option Shares in violation of this
Section 8 will be void without further action by the Company and shall have no
effect.
9. Restrictions on Voting
----------------------
Until the occurrence of an IPO, Option Shares will be voted by the then
chief executive officer of the Company, pursuant to irrevocable proxies in the
form attached hereto as Exhibit B, executed by the Optionee upon the exercise of
an Option.
10. Vesting of Options
------------------
Options are exercisable only upon and after vesting. Except as provided in
Section 11 hereof or except as otherwise may be specifically authorized by the
Board and provided in an Option Agreement, Options shall vest according to the
following schedule:
(a) as to one-third (1/3) of the Option Shares on the first anniversary
of the Date of Grant;
(b) as to an additional one-third (1/3) of the Option Shares on the second
anniversary of the Date of Grant; and
(c) as to the remaining one-third (1/3) of the Option Shares on the third
anniversary of the Date of Grant.
Unless otherwise provided in the Option Agreement, no Option or part
thereof shall vest after the date the Optionee ceases to provide services for
any reason, and any unvested portion of an Option theretofore held by such an
Optionee shall terminate as of that date.
11. Special Vesting Provisions
--------------------------
4
<PAGE>
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Board may provide for the Optionee to have the right to exercise the Option as
to all of the Option Stock, including Shares as to which the Option would not
otherwise be exercisable. The Board shall notify the Optionee that the Option
shall be fully exercisable and the Option will terminate upon the consummation
of such sale or merger.
12. When Options May Be Exercised
-----------------------------
(a) Except as provided in subsections (b) and (c) of this Section 12, a
vested Option or the vested portion of an Option, may be exercised by the
Optionee at any time before the tenth anniversary of its Date of Grant.
(b) If all of the Stock is sold, as described in Section 11 hereof and the
Board has elected to exercise it rights therein, vested Options shall not be
exercisable after the closing of such sale. The Company shall promptly notify
all Optionees of any such impending sale. With respect to any Optionee that
desires to exercise the vested portion of his, her or its Option prior to such
sale, the Company may instead pay such Optionee the excess of the amount
received or to be received for the subject shares over the amount that would
have been received from such Optionee upon the exercise of the vested portion of
such Option.
(c) In the event of termination of service by the Optionee, the vested
portion of the Optionee's outstanding Options shall be exercisable only to the
extent that they were exercisable on the date of such termination and shall
expire three (3) months after such termination or on their stated expiration
date, whichever occurs first.
13. Exercise Price
--------------
The Exercise Price shall be $1.62 per share for Options granted on or
before the earlier of (i) the adoption by the Board of a resolution changing the
Exercise Price or (ii) an IPO. At all times, when established, the Exercise
Price shall be equal to or greater than the Fair Market Value.
14. Exercise of Option
------------------
During the Optionee's lifetime, Options shall be exercisable only by the
Optionee or his legal representative or guardian. Options shall not be
exercisable by the spouse of any Optionee during such Optionee's lifetime,
unless such spouse is acting in his or her capacity as the legal representative
or guardian of the Optionee. In the event of the Optionee's death, the Option
shall be exercisable by the person or entity (including the Optionee's estate)
that has obtained the Optionee's rights under the Option by will or under the
laws of descent and distribution.
5
<PAGE>
Options shall be exercised if at all, by submitting to the Company (a) a
Notice of Exercise in the form attached hereto as Exhibit A, (b) the Irrevocable
Proxy, duly executed, (c) any other written representations, covenants, and
undertakings that the Company may prescribe pursuant to any shareholders
agreements or to satisfy securities laws and regulations or other requirements,
and (d) a certified or bank cashier's check payable to the order of the Company
in an amount equal to the full purchase price of the shares to be purchased.
Upon receipt of the Notice of Exercise (subject to Sections 15, 16, and 17
of this Agreement), the Company shall issue a new certificate or certificates to
the holder of the Option. The certificate or certificates for the shares as to
which the Option shall have been exercised shall be registered in the name of
the holder of the Option and shall be delivered to or upon the written order of
the holder of the Option. The shares shall bear a legend substantially in the
following form:
"THE SHARES SUBJECT TO THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND VOTING
RESTRICTIONS SET FORTH IN THE OPEN PORT TECHNOLOGY, INC. 1995 NON-EMPLOYEE
STOCK OPTION PLAN (THE "PLAN"). COPIES OF THE PLAN ARE ON FILE IN THE
OFFICE OF THE SECRETARY OF THE CORPORATION. BY ACCEPTING THE SHARES OF
STOCK EVIDENCED BY THIS CERTIFICATE, THE HOLDER AGREES TO BE BOUND BY THE
PLAN AS IT MAY BE AMENDED FROM TIME TO TIME."
15. Securities Law Restrictions
---------------------------
The Company shall not be obligated to issue any stock certificates
evidencing a transfer upon exercise of an Option, until, in the opinion of the
Company and its counsel, such transfer and issuance of stock certificates will
not involve any violation of applicable federal and state securities laws, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Stock may then be listed. Acceptance of an Option by an
Optionee shall constitute the Optionee's agreement (binding on any person who
succeeds to the Optionee's rights and obligations under the Option Agreement by
reason of the Optionee's death) that, if the Stock is not publicly traded as of
the date the Option is exercised, any shares of Stock purchased upon the
exercise of the Option shall be acquired for the Optionee's own account and not
with a view to distribution and that each notice of the exercise of any portion
of the Option shall be accompanied by a written representation and covenant
signed by the Optionee, in such form as may be specified by the Company,
confirming such agreement and containing such other provisions as may be
prescribed by the Company. The Company may, at its election, release an Optionee
from the Optionee's agreement to take for the Optionee's own account and not
with a view to distribution of the shares of Stock purchased upon exercise of an
Option if, in the opinion of the Company, such covenant ceases to be necessary
for compliance with the applicable federal and state securities laws (including
the rules and regulations promulgated thereunder) and the requirements of any
stock exchange upon which the Stock may then be listed.
6
<PAGE>
If the shares purchased upon exercise of an Option are not covered by an
effective registration statement under the Securities Act, the Company may place
the following legend (or a legend which is substantially similar to the
following legend) upon, and issue appropriate stock transfer instructions with
respect to, the certificate or certificates representing the shares transferred
upon exercise of the Option:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS (THE STATE LAWS"), AND SUCH SHARES MAY NOT
BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE LAWS COVERING SUCH TRANSFER IS THEN IN EFFECT; OR (B)
AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, HAS BEEN FURNISHED
STATING THAT SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND APPLICABLE STATE LAWS."
16. Listing or Registration of Stock
--------------------------------
Each Option is subject to the requirement that, if at any time the Board
shall determine, in its discretion, that the listing, registration or
qualification of the shares of Stock subject to the Option upon any securities
exchange or under any state or federal law, or the consent or approval of any
government regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting or exercise of the Option or the issuance or
purchase of shares under the Option, the Option may not be exercised in whole or
in part until such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Board. The Company shall be under no obligation to effect or obtain any such
listing, registration, qualification, consent or approval if the Board shall
determine, in its discretion, that such action would not be in the best
interests of the Company. The Company shall not be liable for damages due to a
delay in the delivery or issuance of any stock certificates for any reason
whatsoever, including, but not limited to, a delay caused by listing,
registration or qualification of the shares of Stock subject to an Option under
any securities exchange or under any federal or state law, or by the effecting
or obtaining of any consent or approval of any governmental body with respect to
the granting or exercise of the Option or the issue or purchase of shares under
the Option.
17. Withholding of Taxes
--------------------
The Board may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the Company is
required by any law or regulation of any governmental authority, whether
federal, state or local, domestic or foreign, to withhold in connection with any
Option, including, but not limited to, the withholding of the issuance of all or
any portion of the shares of Stock subject to the Option until the holder of the
Option reimburses the Company for the amount required to be withheld with
respect to such taxes, canceling any portion of the issuance of the shares of
Stock subject to the Option in an amount sufficient to reimburse the Company for
such amount, deducting from the Optionee's compensation
7
<PAGE>
an amount sufficient to reimburse the Company for such amount, or taking any
other action reasonably required to satisfy the withholding obligation of the
Company.
18. Repurchase Option
-----------------
The Options and Option Shares are subject to the rights of the Company to
repurchase or acquire the Option Shares upon the occurrence of certain events,
including but not limited to: death or disability of the Optionee;; or a
transfer of the Option or Option Shares, voluntarily, involuntarily or by
operation of law. The terms of this repurchase option with respect to Option
Shares shall be set forth in the Option Agreement pertaining to such Options.
19. Modification of Options
-----------------------
At any time and from time to time the Board may provide for the
modification, extension, or renewal of any outstanding Option, provided that no
such modification, extension or renewal shall impair the Option in any respect
without the consent of the holder of the Option.
20. Amendment and Termination of the Plan
-------------------------------------
The Board may provide for the alteration, suspension or discontinuation of
the Plan.
21. Shareholder Rights
------------------
A holder of an Option shall have none of the rights of a shareholder with
respect to the shares of Stock subject to the Option until the transfer of such
shares to him or her has been duly recorded on the stock transfer books of the
Company upon the exercise of the Option.
8
<PAGE>
22. Effective Date
--------------
The foregoing Open Port Technology, Inc. 1995 Non-Employee Stock Option
Plan is hereby adopted by the Company as of October 19, 1995.
Open Port Technology, Inc.
/s/ Randy S. Storch
By: ------------------------------
Randy S. Storch, President
9
<PAGE>
EXHIBIT A
TO
OPEN PORT TECHNOLOGY, INC.
1995 NON-EMPLOYEE STOCK OPTION PLAN
NOTICE OF EXERCISE
(to be executed only upon exercise of the Option)
Reference is made to the Open Port Technology, Inc. 1995 Non-Employee Stock
Option Agreement, dated as of ___________________ _____, 1995 (the "Option
Agreement"), between Open Port Technology, Inc., an Illinois corporation (the
"Company"); _____________________________________ (the "Optionee"). Capitalized
terms used herein and not otherwise defined have the meanings assigned to such
terms in the Option Agreement.
(a) The Optionee hereby irrevocably exercises the option for and purchases
_______________ shares of Stock.
(b) The full purchase price for the shares of Stock being purchased
hereunder, calculated in accordance with the Option Agreement, is
$_______________, and the Optionee is delivering to the Company simultaneously
with the delivery of this Notice of Exercise a certified or bank cashier's check
payable to the order of the Company in such amount.
(c) The shares of Stock being purchased hereunder are being acquired for
the Optionee's own account and not with a view to distribution thereof in
violation of applicable Federal or state securities laws.
(d) The Optionee requests that certificates for the shares of Stock being
purchased hereunder be issued in the name of and delivered to the Optionee at
the following address:
_________________________
_________________________
_________________________
_________________________
<PAGE>
Dated as of ____________________ ______________________________
(Signature)
______________________________
(Name)
______________________________
(Signature of Spouse)
______________________________
(Name)
<PAGE>
EXHIBIT B
TO
OPEN PORT TECHNOLOGY, INC. (the "Company")
1995 NON-EMPLOYEE STOCK OPTION PLAN (the "Plan")
IRREVOCABLE PROXY
The undersigned hereby revokes any previous proxies and irrevocably
appoints Randy S. Storch (the "Proxyholder") and his successor, pursuant to the
Plan as the proxy of the undersigned to attend any and all meetings of the
shareholders of the Company, and any adjournments or postponements of such
meetings (collectively, a "Meeting"), to vote for and in the name, place and
stead of the undersigned at any Meeting all shares of common stock, no par value
per share (the "Stock"), owned by the undersigned on the date of this proxy and
any other shares of Stock hereafter acquired by the undersigned (collectively,
the "Proxy Shares"), to execute written consents to corporate action, and to
represent and otherwise act for the undersigned on any and all matters with the
same force and effect as if the undersigned were personally present at such
meeting or were executing such consent.
This proxy is coupled with an interest and is expressly made irrevocable
and will be effective until the earliest to occur of (i) the consummation of an
initial public offering by the Company that is registered under the Securities
Act of 1933, as amended or (ii) the expiration of ten (10) years from the
execution date hereof. The undersigned acknowledges that monetary damages would
be an inadequate remedy for a breach of the provisions of this proxy and that
(in addition to any other remedy available at law) the obligations of the
undersigned and the rights of the Proxyholder are specifically enforceable.
The undersigned authorizes the Proxyholder to substitute any other person
or entity to act under this proxy, to revoke any such substitution, and to file
this proxy and any substitution or revocation of this proxy with the Secretary
of the Company.
Dated as of ____________________ ______________________________
(Signature)
______________________________
(Name)
______________________________
(Signature of Spouse)
______________________________
(Name)
<PAGE>
AMENDMENT NUMBER ONE
TO
OPEN PORT TECHNOLOGY, INC.
1995 NON-EMPLOYEE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Non-Employee Stock Option Plan; as used herein, the term "Plan" shall refer to
the Plan as modified by this Amendment. The terms used herein which are defined
in the Plan shall have the meanings provided for in the Plan, unless otherwise
defined herein. Except as expressly modified hereby, all of the terms and
provisions of the Plan shall continue in full force and effect. A copy of this
Amendment shall be attached to and made a part of the Plan.
2. Amendment to Section 2(p) of the Plan
-------------------------------------
Section 2(p) of the Plan is hereby amended so as to read in its entirety as
follows:
(p) "Stock" shall mean the common stock, par value $.001 per share,
of the Company.
3. Effective Date
--------------
This Amendment to the Plan is hereby adopted by the Board as of the 30th
day of April, 1996.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER TWO
TO
OPEN PORT TECHNOLOGY, INC.
1995 NON-EMPLOYEE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Non-Employee Stock Option Plan, as amended by Amendment Number One to the Open
Port Technology, Inc. 1995 Incentive Stock Option Plan, dated as of April 30,
1996. As used herein, the term "Plan" shall refer to the Open Port Technology,
Inc 1995 Non-Employee Stock Option Plan, as modified by Amendment Number One and
by this Amendment Number Two. The terms used herein which are defined in the
Plan shall have the meanings provided for in the Plan, unless otherwise defined
herein. Except as expressly modified hereby, all of the terms and provisions of
the Plan shall continue in full force and effect. A copy of this Amendment
Number Two shall be attached to and made a part of the Plan.
2. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount of
Stock for which Options may be granted shall not exceed 3,682,695 shares
(based on the capitalization of the Company existing as of January 1, 1997)
less (at the time of the grant of any Option) all shares subject to any
option granted under the Open Port Technology, Inc. 1995 Incentive Stock
Option Plan, as amended.
3. Effective Date
--------------
This Amendment Number Two to the Plan is hereby adopted by the Board as of
February 6, 1997.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER THREE
TO
OPEN PORT TECHNOLOGY, INC.
1995 NON-EMPLOYEE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Non-Employee Stock Option Plan, as amended by Amendment Number One to the Open
Port Technology, Inc. 1995 Non-Employee Stock Option Plan, dated as of April 30,
1996 and Amendment Number Two to the Open Port Technology, Inc. 1995 Non-
Employee Stock Option Plan, dated as of February 6, 1997. As used herein, the
term "Plan" shall refer to the Open Port Technology, Inc. 1995 Non-Employee
Stock Option Plan, as modified by Amendment Number One, Amendment Number Two,
and this Amendment Number Three. The terms used herein which are defined in the
Plan shall have the meanings provided for in the Plan, unless otherwise defined
herein. Except as expressly modified hereby, all of the terms and provisions of
the Plan shall continue in full force and effect. A copy of this Amendment
Number Three shall be attached to and made a part of the Plan.
2. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount of
Stock for which Options may be granted shall not exceed 4,432,695 shares
(based on the capitalization of the Company existing as of January 1, 1997)
less (at the time of the grant of any Option) all shares subject to any
option granted under the Open Port Technology, Inc. 1995 Incentive Stock
Option Plan, as amended.
3. Effective Date
--------------
This Amendment Number Three to the Plan is hereby adopted by the Board as
of April 23, 1998.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER FOUR TO
OPEN PORT TECHNOLOGY, INC.
1995 NON-EMPLOYEE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Non-Employee Stock Option Plan (the "Plan"), as amended by Amendment Number One
to the Plan, dated as of April 30, 1996, Amendment Number Two to the Plan, dated
as of February 6, 1997 and Amendment Number Three to the Plan, dated as of April
23, 1998. As used herein, the term "Plan" shall refer to the Open Port
Technology, Inc. 1995 Non-Employee Stock Option Plan as modified by Amendment
Number One, Amendment Number Two, Amendment Number Three and this Amendment
Number Four. The terms used herein which are defined in the Plan shall have the
meanings provided for in the Plan, unless otherwise defined herein. Except as
expressly modified hereby, all of the terms and provisions of the Plan shall
continue in full force and effect. A copy of this Amendment Number Four shall be
attached to and made a part of the Plan.
2. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount of Stock
for which Options may be granted shall not exceed 5,432,695 shares (based
on the capitalization of the Company existing as of January 1, 1997) less
(at the time of the grant of any Option) all shares subject to any option
granted under the Open Port Technology, Inc. 1995 Non-Employee Stock Option
Plan, as amended.
3. Effective Date
--------------
This Amendment Number Four to the Plan is hereby adopted by the Board as of
October 29, 1998.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER FIVE TO
OPEN PORT TECHNOLOGY, INC.
1995 NON-EMPLOYEE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Non-Employee Stock Option Plan (the "Plan"), as amended by Amendment Number One
to the Plan, dated as of April 30, 1996, Amendment Number Two to the Plan, dated
as of February 6, 1997, Amendment Number Three to the Plan, dated as of April
23, 1998 and by Amendment Number Four to the Plan, dated as of October 29, 1998.
As used herein, the term "Plan" shall refer to the Open Port Technology, Inc.
1995 Non-Employee Stock Option Plan as modified by Amendment Number One,
Amendment Number Two, Amendment Number Three, Amendment Number Four and this
Amendment Number Five. The terms used herein which are defined in the Plan shall
have the meanings provided for in the Plan, unless otherwise defined herein.
Except as expressly modified hereby, all of the terms and provisions of the Plan
shall continue in full force and effect. A copy of this Amendment Number Five
shall be attached to and made a part of the Plan.
2. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount of Stock
for which Options may be granted shall not exceed 8,432,695 shares (based
on the capitalization of the Company existing as of January 1, 1997) less
(at the time of the grant of any Option) all shares subject to any option
granted under the Open Port Technology, Inc. 1995 Incentive Stock Option
Plan, as amended.
3. Effective Date
--------------
This Amendment Number Five to the Plan is hereby adopted by the Board as of
January 27, 2000.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER SIX TO
OPEN PORT TECHNOLOGY, INC.
1995 NON-EMPLOYEE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Non-Employee Stock Option Plan (the "Plan"), as amended by Amendment Number One
to the Plan, dated as of April 30, 1996, Amendment Number Two to the Plan, dated
as of February 6, 1997, Amendment Number Three to the Plan, dated as of April
23, 1998, by Amendment Number Four to the Plan, dated as of October 29, 1998 and
by Amendment Number Five, dated as of January 27, 2000. As used herein, the term
"Plan" shall refer to the Open Port Technology, Inc. 1995 Non-Employee Stock
Option Plan as modified by Amendment Number One, Amendment Number Two, Amendment
Number Three, Amendment Number Four, Amendment Number Five and this Amendment
Number Six. The terms used herein which are defined in the Plan shall have the
meanings provided for in the Plan, unless otherwise defined herein. Except as
expressly modified hereby, all of the terms and provisions of the Plan shall
continue in full force and effect. A copy of this Amendment Number Six shall be
attached to and made a part of the Plan.
2. Amendment to Section 3 of the Plan
----------------------------------
The first paragraph of Section 3 of the Plan is hereby amended so as to
read in its entirety as follows:
Except as provided in Section 4(a) hereof, the aggregate amount of Stock
for which Options may be granted shall not exceed 9,732,695 shares (based
on the capitalization of the Company existing as of January 1, 1997) less
(at the time of the grant of any Option) all shares subject to any option
granted under the Open Port Technology, Inc. 1995 Incentive Stock Option
Plan, as amended.
3. Effective Date
--------------
This Amendment Number Six to the Plan is hereby adopted by the Board as of
March 24, 2000.
Open Port Technology, Inc.
<PAGE>
AMENDMENT NUMBER SEVEN TO
OPEN PORT TECHNOLOGY, INC
1995 NON-EMPLOYEE STOCK OPTION PLAN
1. Reference to Plan
-----------------
Reference is hereby made to that certain Open Port Technology, Inc. 1995
Non-Employee Stock Option Plan (the "Plan"), as amended by Amendment Number One
to the Plan, dated as of April 30, 1996, Amendment Number Two to the Plan, dated
as of February 6, 1997, Amendment Number Three to the Plan, dated as of April
23, 1998, Amendment Number Four to the Plan, dated as of October 29, 1998,
Amendment Number Five to the Plan, dated as of January 27, 2000, and Amendment
Number Six to the Plan, dated as of March 24, 2000. As used herein, the term
"Plan" shall refer to the Open Port Technology, Inc. 1995 Non-Employee Stock
Option Plan as modified by Amendment Number One, Amendment Number Two, Amendment
Number Three, Amendment Number Four, Amendment Number Five, and Amendment Number
Six. The terms used herein which are defined in the Plan shall have the meanings
provided for in the Plan, unless otherwise defined herein. Except as expressly
modified hereby, all of the terms and provisions of the Plan shall continue in
full force and effect. A copy of this Amendment Number Seven shall be attached
to and made part of the Plan.
2. Amendments to Section 2 of the Plan
-----------------------------------
Section 2 of the Plan is hereby amended by amending paragraph (k) so as to
read in its entirety as follows:
(k) "Option Agreement" shall mean an agreement executed by an officer
of the Company and the Optionee evidencing the grant of an Option, as it
may be amended, modified, extended or renewed from time to time, subject to
Section 19.
Section 2 of the Plan is hereby further amended by adding a new paragraph
(q) so as to read in its entirety as follows:
(q) "Change of Control Event" means, unless otherwise defined for a
particular Optionee in an Option Agreement or in an employment
agreement between the Company and such Optionee which addresses the
effect of a Change of Control (as therein defined) on benefits
hereunder, shall mean, and be deemed to have occurred:
(i) upon the acquisition at any time (excluding any acquisition in
connection with any public offering of equity securities of the
Company pursuant to a registration statement filed under the
Securities Act) by a person or group (as used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), excluding for this purpose, the Company or
any Subsidiary or any employee benefit plan of the Company
<PAGE>
or any Subsidiary) of the beneficial ownership (as defined in
Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities representing fifty percent (50%) or
more of the combined voting power of the then-outstanding
securities of the Company; except that no Change of Control shall
be deemed to have occurred solely by reason of such beneficial
ownership (A) by a corporation of which fifty percent (50%) or
more of the beneficial ownership is then held, directly or
indirectly, in substantially the same proportions by the persons
who held the beneficial ownership of the Company immediately
before such acquisition, or (B) resulting directly from an
issuance of Stock by the Company to such person; or
(ii) the approval by the Board or the shareholders of the Company of a
merger, share exchange (other than a merger or share exchange
with a wholly-owned subsidiary), consolidation, reorganization or
similar transaction, or a plan or agreement for the sale or other
disposition of all or substantially all of the consolidated
assets of the Company or a plan of liquidation of the Company, as
a result of which immediately following such transaction the
shareholders of the Company shall not hold, directly or
indirectly, a majority of the voting power of the
then-outstanding securities of the surviving, resulting or
acquiring corporation (or in the case of a sale or other
disposition of assets, of each surviving, resulting or acquiring
corporation which immediately after the transaction holds fifty
percent (50%) of the former assets of the Company).
3. Amendment to Section 7 of the Plan
----------------------------------
Section 7 of the Plan is hereby amended so as to read in its entirety as
follows:
The Plan shall continue in effect until terminated pursuant to Section
20 hereof, or until there is no more Stock as to which an Option may be
granted and no Options are outstanding; provided, however, that all Options
must be granted within 10 years from the effective date of the Plan, and no
Options shall be granted under the Plan after an IPO.
4. Amendments to Section 8 of the Plan
-----------------------------------
Section 8 of the Plan is hereby amended so as to read in its entirety as
follows:
(a) The Options may not be transferred, assigned, pledged or
hypothecated in any way and will not be subject to execution, attachment or
similar process, except as provided by this Plan and except by will or
under the laws of descent and distribution, or pursuant to a domestic
relations order issued by a court of competent jurisdiction, or by
designation of beneficiary pursuant to subsection (b) of this Section 8, or
as may be permitted by subsection (c) of this Section 8, all subject to the
repurchase option described in Section 18 hereof.
<PAGE>
(b) Each Optionee under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be an individual or a trust and who
may be named contingently or successively) to exercise on such
beneficiary's behalf any Options that are outstanding and exercisable after
the death of the Optionee. Each such designation shall revoke all prior
designations by the same Optionee, shall be in a form prescribed by the
Company, and will be effective only when filed by the Optionee in writing
with the Company during the Optionee's lifetime. In the absence of any such
designation, the Option to the extent outstanding and exercisable after the
death of an Optionee may be exercised by his or her executors,
administrators, legatees or distributees of his or her estate as determined
under his or her will or by the laws of descent and distribution. If an
Option is exercised by the executors, administrators, legatees or
distributees of the estate of a deceased Optionee or by the guardian or
legal representative of a Optionee, the Company shall be under no
obligation to issue Stock thereunder unless and until it is satisfied that
the person or persons exercising the Option are the duly appointed
beneficiary or legal representatives of the Optionee or of the deceased
Optionee's estate or the proper legatees or distributees of such estate.
(c) Notwithstanding subsection (a) above, an Optionee may transfer an
Option in the manner prescribed by the Board, and subject to such terms and
conditions as may be prescribed by the Board, to any Permissible Transferee
(as defined below). For purposes of this Plan, "Permissible Transferee"
means any member of the Immediate Family (as defined below) of the Optionee
to whom such Option was granted, any trust the primary beneficiaries of
which consist exclusively of the Optionee or members of the Optionee's
Immediate Family or any corporation, partnership or similar entity, the
owners of which consist exclusively of the Optionee or members of the
Optionee's Immediate Family. For purposes of this Section, "Immediate
Family" means such Optionee's spouse, children, nieces, nephews,
grandchildren, great grandchildren, stepchildren, parents, stepparents,
grandparents, siblings, half siblings, and the spouses of such individuals.
(d) An Option will terminate immediately upon any attempted transfer,
assignment, pledge or hypothecation of such Option in violation of this
Section 8, and any attempted transfer, assignment, pledge or hypothecation
of any Option Shares in violation of this Section 8 will be void without
further action by the Company and have no effect.
5. Amendment to Section 11 of the Plan
-----------------------------------
Section 11 of the Plan is hereby amended by adding the following new
paragraph at the end thereof:
Further, notwithstanding anything to the contrary in Section 10 or
this Section 11, upon the occurrence of a Change of Control Event, with
respect to each Option, the vesting of the Option shall be accelerated so
that the Options shall be fully exercisable.
6. Amendments to Section 14 of the Plan
------------------------------------
<PAGE>
Section 14 of the Plan is hereby amended so as to read in its entirety as
follows:
Except to the extent provided in Section 8(c), during the Optionee's
lifetime Options shall be exercisable only by the Optionee or his legal
representative or guardian. Options shall not be exercisable by the spouse of
any Optionee during such Optionee's lifetime, unless such spouse is acting in
his or her capacity as the legal representative or guardian or a permissible
transferee under such Option Agreement, of the Optionee. In the event of the
Optionee's death, the Option shall be exercisable by the person or entity
(including the Optionee's estate) that has obtained the Optionee's rights under
the Option by designation of beneficiary, by will or under the laws of descent
and distribution, or by such permitted transfer.
Options shall be exercised, if at all, by submitting to the Company (a) a
Notice of Exercise in the form attached hereto as Exhibit A, (b) if exercise
occurs prior to an IPO, the Irrevocable Proxy, duly executed, (c) any other
written representations, covenants and undertakings that the Company may
prescribe pursuant to any shareholders agreements or to satisfy securities laws
and regulations or other requirements, and (d) full payment for the Option Stock
made by cash, personal check or wire transfer or, subject to the approval of the
Board, any one or more of the following means:
(i) Shares of Stock that have been held by the Optionee for at least
six months or purchased by the Optionee on the open market ("Mature
Shares"), valued at their Fair Market Value on the date of exercise;
(ii) pursuant to procedures approved by the Board, through the sale
of the Stock acquired on exercise of the Option through a broker-dealer to
whom the Optionee has submitted an irrevocable notice of exercise and
irrevocable instructions to deliver promptly to the Company the amount of
sale or loan proceeds sufficient to pay for such Stock, together with, if
requested by the Company, the amount of federal, state, local or foreign
withholding taxes payable by Optionee by reason of such exercise.
If Mature Shares are used to pay the Exercise Price, then if requested by the
Secretary or Assistant Secretary of the Company, the Optionee shall deliver to
the Secretary or Assistant Secretary the agreement evidencing the Option and the
Optionee's certificate that such shares have been held by the Optionee for at
least six months or were purchased on the open market and such certificate shall
identify the number of shares of Stock and the stock certificate or other
document or notation which evidences such stock ownership. The number of Mature
Shares being so used and the number of shares of Stock purchased upon exercise
may be evidenced by a notation on the agreement and the agreement shall be
returned to the Optionee. No fractional shares of Stock (or cash in lieu of
fractional shares) shall be issued upon exercise of an Option and the number of
shares of Stock that may be purchased upon exercise shall be rounded to the
nearest number of whole shares.
<PAGE>
Upon receipt of the Notice of Exercise (subject to Sections 15, 16 and
17 of this Plan), the Company shall issue a new certificate of certificates
to the holder of the Option. The certificate or certificates for the shares
as to which the Option shall have been exercised shall be registered in the
name of the holder of the Option and shall be delivered to or upon the
written order of the holder of the Option. If the shares are issued before
an IPO the shares shall bear a legend in substantially the following form:
"THE SHARES SUBJECT TO THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND
VOTING RESTRICTIONS SET FORTH IN THE OPEN PORT TECHNOLOGY, INC. 1995
INCENTIVE STOCK OPTION PLAN (THE "PLAN"). COPIES OF THE PLAN ARE ON
FILE IN THE OFFICE OF THE SECRETARY OF THE CORPORATION. BY ACCEPTING
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE, THE HOLDER AGREES
TO BE BOUND BY THE PLAN AS IT MAY BE AMENDED FROM TIME TO TIME."
7. Amendments to Section 18 of the Plan
------------------------------------
Section 18 of the Plan is hereby amended so as to read in its entirety as
follows:
The Options and the Option Shares are subject to the rights of the
Company to repurchase or acquire the Option Shares upon the occurrence of
certain events, including but not limited to: death or disability of the
Optionee, or a transfer of the Option or Option Shares, voluntarily,
involuntarily or by operation of law, but excluding in any instance upon
the occurrence of a Change of Control Event or after an IPO. The terms of
this repurchase option with respect to the Option Shares shall be set forth
in the Option Agreement pertaining to such Options.
8. Effective Date
--------------
This Amendment Number Seven to the Plan is hereby adopted by the Board as
of April 3, 2000 subject to approval by the Shareholders of the Company.
Open Port Technology, Inc.
<PAGE>
EXHIBIT 10.10
OPEN PORT TECHNOLOGY, INC.
SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
January 27, 2000
<PAGE>
SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Second Amended and Restated Registration Rights Agreement (this
"Agreement") is entered into as of the 27/th/ day of January, 2000, among Open
Port Technology, Inc., an Illinois corporation (the "Company") and the persons
and entities set forth on Schedule 1 hereto, which includes the investor (the
----------
"Series A Investor") party to the Series A Investment Agreement defined below
and designated as such on Schedule 1, the investors (the "Series B Investors")
----------
party to the Series B Investment Agreement defined below and designated as such
on Schedule 1, the investors (the "Series C Investors") party to the Series C
----------
Investment Agreement defined below and designated as such on Schedule 1, the
----------
investors (the "Series D Investors") party to the Series D Investment Agreement
defined below and designated as such on Schedule 1, and certain new investors
----------
(the "Series E Investors" and, together with the Series A Investor, the Series B
Investors, the Series C Investors and the Series D Investors, collectively, the
"Investors").
RECITALS
A. Pursuant to the terms of an investment agreement (the "Series A
Investment Agreement"), dated as of July 27, 1995, as amended as of March 12,
1996, between the Company and the Series A Investor, the Company sold shares of
Series A Convertible Participating Preferred Stock of the Company, par value
$.001 per share (the "Series A Preferred Stock"), to the Series A Investor.
B. Pursuant to the terms of an investment agreement (the "Series B
Investment Agreement"), dated as of March 12, 1996, as amended as of April 19,
1996, February 6, 1997, March 19, 1997, between the Company and the Series B
Investors, the Company sold shares of Series B Convertible Participating
Preferred Stock of the Company, par value $.001 per share (the "Series B
Preferred Stock"), to the Series B Investors.
C. Pursuant to the terms of an investment agreement (the "Series C
Investment Agreement"), dated as of June 15, 1998, as amended as of February 4,
1999, among the Company, the Series C Investors, the Series A Investor and the
Series B Investors, the Company sold shares of Series C Convertible
Participating Preferred Stock of the Company, par value $.001 per share (the
"Series C Preferred Stock"), to the Series C Investors.
D. Pursuant to the terms of an investment agreement (the "Series D
Investment Agreement"), dated as of April 29, 1999, among the Company, the
Series D Investors, the Series C Investors, the Series B Investors, and the
Series A Investor, the Company sold shares of Series D Convertible Preferred
Stock of the Company, par value, $.001 per share (the "Series D Preferred
Stock"), to the Series D Investors.
E. The Company, the Series A Investor, the Series B Investors, the Series
C Investors and the Series D Investors are parties to that certain Amended and
Restated Registration Rights Agreement, dated as of June 15, 1998, as amended
(the "Existing Registration Rights Agreement").
1
<PAGE>
F. The Series E Investors have agreed to purchase shares of Series E
Preferred Stock (as hereinafter defined) of the Company, pursuant to that
certain Series E Investment Agreement dated as of even date herewith (the
"Series E Investment Agreement") provided that the Company and the Investors
enter into this Agreement to amend and restate the Existing Amended and Restated
Registration Rights Agreement.
G. The Company and the Investors deem it desirable to (i) enter into this
Agreement in order to induce the Series E Investors to purchase the shares of
Series E Preferred Stock pursuant to the Series E Investment Agreement and (ii)
to amend and restate (and supersede and replace) the Existing Amended and
Restated Registration Rights Agreement.
H. The Company, in connection with certain financing arrangements has
issued warrants to acquire shares of Series C Preferred Stock to Third Coast
Venture Lease Partners I, L.P. ("Third Coast"), CID Mezzanine Capital, L.P.
("CIDMC") and Silicon Valley Bank (such warrants being collectively referred to
as the "Existing Warrants") and the Company may in the future enter into
additional financing arrangements pursuant to which the Company will issue
"Additional Warrants" (as that term is defined in Section 3.4 of the Series E
Investment Agreement); upon exercise of such Existing Warrants or such
Additional Warrants by the holder or holders thereof, such holder or holders
shall be deemed an "Investor" for all purposes hereof and Schedule 1 shall be
--------
amended to include such holder or holders designated as such without any action
of the Company or the other Investors.
TERMS AND CONDITIONS
In consideration of the mutual covenants and agreements contained in this
Agreement and the Series E Investment Agreement, and intending to be legally
bound, the parties hereto agree to, and agree to amend and restate (and
supersede and replace), as applicable, the Existing Registration Rights
Agreement as follows:
Section 1. Definitions. As used in this Agreement, the following terms
-----------
have the meanings indicated below or in the referenced sections of this
Agreement:
"Common Stock:" The Company's Common Stock, par value $.001 per share, as
------------
the same may be constituted from time to time.
"Conversion Stock:" The shares of the Common Stock that the Investors have
----------------
the right to acquire, or do acquire, pursuant to conversion of (a) the Series A
Preferred Stock of the Company acquired under the Series A Investment Agreement,
(b) the Series B Preferred Stock of the Company acquired under the Series B
Investment Agreement, (c) the Series C Preferred Stock of the Company acquired
under the Series C Investment Agreement, (d) the Series D Preferred Stock of the
Company acquired under the Series D Investment Agreement, (e) the Series E
Preferred Stock of the Company acquired under the Series E Investment Agreement,
(f) the Series C Preferred Stock of the Company issuable upon the exercise of
the Existing Warrants, (g) the Preferred Stock of the Company issuable upon the
exercise of any Additional
2
<PAGE>
Warrants, (h) any other shares of Preferred Stock or other securities of the
Company issued or acquired pursuant to any future agreement between or among any
of the Investors and the Company or any current shareholder of the Company, (i)
any shares of Preferred Stock issued or payable to the Investors in connection
with any stock dividend, stock split, or recapitalization of the Company, and
(j) any shares of Preferred Stock issued to the Investors in replacement of or
upon partial exercise of any conversion rights applicable to any of the shares
of Preferred Stock described in the preceding clauses.
"Demand Registration:" See Section 3(a) and Section 3(b).
------------------- ------------ ------------
"Exchange Act:" The Securities Exchange Act of 1934, as amended from time
------------
to time.
"Fully Diluted:" Assuming conversion into Common Stock of all shares that
-------------
are convertible into Common Stock and the exercise of all options and warrants
to purchase Common Stock.
"Initial Public Offering:" The first primary offering of Common Stock to
-----------------------
the public by the Company registered pursuant to the Securities Act.
"Majority of the Registrable Securities:" 51% or more of the Registrable
--------------------------------------
Securities being registered unless the text of this Agreement indicates that it
is 51% or more of the Registrable Securities then issued and outstanding.
"Non-Series E Registrable Securities:" All Registrable Securities other
-----------------------------------
than the Series E Registrable Securities.
"Person:" An individual, a partnership, a corporation, a limited liability
------
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, and a government entity or any department, agency,
or political subdivision thereof.
"Piggyback Registration:" See Section 4(a).
---------------------- ------------
"Preferred Stock:" The Series A Preferred Stock, the Series B Preferred
---------------
Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series
E Preferred Stock.
"Public Offering:" A primary offering of Common Stock by the Company
---------------
registered pursuant to the Securities Act.
"Registrable Securities:" The Conversion Stock.
----------------------
"Registration Expenses:" See Section 7.
--------------------- ---------
"Restricted Securities:" The Registrable Securities, subject to the
---------------------
provisions of Section 2(a).
------------
"SEC:" The United States Securities and Exchange Commission.
---
"Securities Act:" The Securities Act of 1933, as amended from time to
--------------
time.
3
<PAGE>
"Series E Preferred Stock:" The Company's Series E Convertible
------------------------
Participating Preferred Stock, par value $.001 per share, as the same may be
constituted from time to time.
"Series E Registrable Securities:" The Conversion Stock relating to the
-------------------------------
Series E Preferred Stock.
"Underwritten registration or underwritten offering:" A registration in
--------------------------------------------------
which securities of the Company are sold pursuant to a firm commitment
underwriting.
Section 2. Securities Subject to this Agreement.
------------------------------------
(a) Registrable Securities. The securities entitled to the
----------------------
benefits of this Agreement are those Registrable Securities that are
Restricted Securities. A Registrable Security ceases to be a Restricted
Security when (i) it is registered under the Securities Act and disposed of
in accordance with the registration statement covering it, or (ii) it is
eligible to be sold or transferred in accordance with the requirements of
Section (k) (or similar provisions then in effect) of Rule 144 promulgated
by the SEC under the Securities Act ("Rule 144").
(b) Holders of Registrable Securities. A Person is deemed to be a
---------------------------------
holder of Registrable Securities whenever that Person owns, directly or
beneficially, or has the right to acquire Registrable Securities,
disregarding any legal restrictions upon the exercise of that right.
Section 3. Demand Registration.
-------------------
(a) Requests for Registration.
-------------------------
(i) At any time after the earlier of: (i) a Public Offering or
(ii) June 15, 2001, any stockholder or stockholders holding in the
aggregate at least 7.6% of the Non-Series E Registrable Securities (a
"Non-Series E Demand Registration") or at least 5% of the Series E
Registrable Securities (a "Series E Demand Registration"), may at any
time demand that the Company register all or part of his, her, or its
Registrable Securities under the Securities Act (Non-Series E Demand
Registrations and Series E Demand Registrations being collectively
referred to as a "Demand Registration") on Forms S-1, S-2, or S-3 (or
similar forms then in effect) promulgated by the SEC under the
Securities Act. Within ten days after receipt of a demand, the Company
will notify in writing all holders of Registrable Securities of the
demand. Any holder who wants to include his, her, or its Registrable
Securities in the Demand Registration must notify the Company within
ten business days of receiving the notice of the Demand Registration.
Except as provided in this Section 3, the Company will include in all
---------
Demand Registrations all Registrable Securities for which the Company
receives timely written demands for inclusion. All demands made
pursuant to this Section 3(a) must specify the number of Registrable
------------
Securities to be registered and the intended method of disposing of
the Registrable Securities.
4
<PAGE>
(ii) Notwithstanding anything to the contrary herein, the holders
of the Series E Registrable Securities shall have a special right to
require up to three demand registrations (the "Series E Special Demand
Registration") after an Initial Public Offering, which may be
exercised by holders of at least 5% of the Series E Registrable
Securities the first of which may be exercised not earlier then 120
days after the Company's Initial Public Offering; provided that this
special right shall expire when the holders of Common Stock issued
upon conversion of the Series E Preferred Stock are free to sell them
under Rule 144(k) or hold less than 1% of the outstanding Common Stock
of the Company. The Company shall use its best commercial efforts to
cause the first such registration statement to become effective on the
181st day after the effectiveness of the registration statement for
the Company's Initial Public Offering, or if later, not later than 60
days after the demand therefore is made. Each such registration
statement shall be on Form S-1 or S-3, if available, and shall remain
effective for 180 days, or if less, until the Common Stock registered
thereunder is sold. The holders of such Common Stock may, but shall
not be required to, sell the Common Stock in an underwritten offering
under this special registration right. Within ten days after receipt
of a demand, the Company will notify in writing all holders of Series
E Registrable Securities of the demand. Any holder who wants to
include his, her, or its Series E Registrable Securities in the Series
E Special Demand Registration must notify the Company within ten
business days of receiving the notice of the Series E Special Demand
Registration. Except as provided in this Section 3, the Company will
---------
include in all Series E Special Demand Registrations all Series E
Registrable Securities for which the Company receives timely written
demands for inclusion. Notwithstanding the foregoing, no Series E
Special Demand Registration shall be underwritten without the consent
of the holders of a majority of the shares of the Series E Preferred
Stock included in such registration.
(b) Form of Registration. The Demand Registration will be on Form
--------------------
S-3 whenever the Company is permitted to use that form, unless the holders
of a Majority of the Registrable Securities or the underwriter reasonably
request registration on an expanded form. The Company will use its best
commercial efforts to qualify for registration on Form S-3.
(c) Registration Expenses. The Company will pay all Registration
---------------------
Expenses for so many Demand Registrations as are demanded under Section
-------
3(a)(i), up to a maximum of four Demand Registrations and for so many
-------
Series E Special Demand Registrations as are demanded under Section
-------
3(a)(ii), up to a maximum of three Series E Special Demand Registrations;
--------
provided, however, that the total of Series E Demand Registrations and
Series E Special Demand Registrations shall not exceed four; and provided,
however, in the case of a Demand Registration, as applicable, not more than
two Non-Series E Demand Registrations shall be on Form S-1, and provided
further that, with respect to a Demand Registration on Form S-1, (i) the
Demand Registration includes at least that number of shares of Conversion
Stock equal to or greater than 5% of the shares of Common Stock then issued
and outstanding, fully diluted, and (ii) holders of at least a majority of
the Conversion Stock have approved the Demand Registration. A
5
<PAGE>
registration initiated as a Demand Registration will count for the purposes
of the first sentence of this Section 3(c) if the registration is withdrawn
------------
for any reason after such registration has been declared effective by the
SEC.
(d) Selection of Underwriters. If a Demand Registration or a Series E
-------------------------
Special Demand Registration is to be underwritten, the holders of a
Majority of the Registrable Securities requested to be included in the
Demand Registration or a Series E Special Demand Registration and the
Company shall mutually select the investment banker(s) and manager(s) that
will administer the offering, and the Company shall enter into a customary
underwriting agreement with those investment banker(s) and manager(s).
(e) Priority on Registrations. If, in connection with a Demand
-------------------------
Registration, the managing underwriters give the Company and the holders of
the Registrable Securities being registered a written opinion that the
number of Registrable Securities requested to be included exceeds the
number of securities that can be sold in the offering without having a
material adverse effect on the price of such Registrable Securities, the
Company will include in the registration only the number of Registrable
Securities that the underwriters believe can be sold. The number of
securities registered shall be allocated pro rata among the holders of
Registrable Securities on the basis of the total number of Registrable
Securities held by each holder requested to be included in the
registration. If a Series E Special Demand Registration is underwritten,
and the managing underwriters give the Company and the holders of the
securities being registered a written opinion that the number of Series E
Registrable Securities requested to be included in such Series E Special
Demand Registration exceeds the number of securities that can be sold in
the offering without having a material adverse effect on the price of such
Series E Registrable Securities, the Company will include in the
registration only the number of Series E Registrable Securities that the
underwriters believe can be sold.
(f) Delay in Filing.
---------------
(i) The Company may delay the filing of the registration
statement in connection with each Demand Registration for a period of
not more than 120 days upon the advice of the investment banker(s) and
manager(s) that will administer the offering that a delay is necessary
or appropriate under the circumstances. The Company may not use this
right to delay more than once with respect to any Demand Registration.
(ii) With respect to Series E Special Demand Registrations made
pursuant to Section 3(a)(ii) above, in the event that (i) the Company
would, in accordance with advice of its outside counsel, be required
to disclose in the prospectus contained in such registration
statements information not otherwise then required by law to be
publicly disclosed; and (ii) in the good faith judgment of the
Company's Board of Directors, in accordance with advice of its outside
counsel and financial advisors, there is reasonable likelihood that
such disclosure, or any other action to be taken in connection with
such prospectus, would materially and adversely affect or interfere
with any financing, acquisition, merger
6
<PAGE>
or similar transaction involving the Company, the filing or continued
effectiveness of the registration statements referred to above may be
delayed by the Company during no more than three non-consecutive
periods each aggregating not more than 30 days in any twelve-month
period, provided that in one circumstance during a twelve-month period
--------
two such 30-day periods may be consecutive; and provided that the
--------
Company shall delay during any such blackout period the filing or
effectiveness of any other registration statement required pursuant to
the registration rights of the holders of any other securities of the
Company.
(g) Limited Piggyback Right on Demand Registrations.
-----------------------------------------------
(i) Whenever the holders of Registrable Securities demand a
Demand Registration or a Series E Special Demand Registration, the
Company may notify in writing the other holders of securities of the
same type as the Registrable Securities or Series E Registrable
Securities, as applicable, that are to be registered not later than
the earlier to occur of (i) the 5th day following the Company's
receipt of notice of exercise of the Demand Registration or a Series E
Special Demand Registration right or (ii) 45 days prior to the
anticipated filing date.
(ii) The Company may include in the Demand Registration or a
Series E Special Demand Registration, as applicable, securities of the
same type and class held by other holders, but only, in the case of
either type of demand registration to be underwritten, to the extent
that the managing underwriters give the Company their written opinion
that the total number or dollar amount of securities requested to be
included can be sold in the offering without having a material adverse
effect on the price of such Registrable Securities or Series E
Registrable Securities, as applicable. If the number or dollar amount
of securities requested to be sold exceeds the amount that in the
opinion of the managing underwriters can be sold in the offering
without having a material adverse effect on the price of such
Registrable Securities or Series E Registrable Securities, as
applicable, the Company will include in the registration: (i) first,
all Registrable Securities or Series E Registrable Securities, as
applicable, and (ii) second, up to the full number or dollar amount of
securities requested to be included in the registration in excess of
the number or dollar amount of Registrable Securities or Series E
Registrable Securities, as applicable to be registered (allocated pro
rata among the holders of the securities in such proportions as the
Company and those holders may agree).
(iii) The holders of securities (including the Company) other
than Registrable Securities to be registered pursuant to this Section
-------
3(g) shall enter into the same agreement with the managing
----
underwriters as do the holders of the Registrable Securities.
(iv) If the Company registers any of its securities on its own
behalf in a Demand Registration or Series E Special Demand
Registration, as applicable (in
7
<PAGE>
accordance with the provisions of this Section 3(g)), that Demand
------------
Registration or Series E Special Demand Registration, as applicable
shall not count for the purpose of determining the number of Demand
Registrations or Series E Special Demand Registration, as applicable
for which the Company is required under Section 3(c) to pay all
------------
Registration Expenses, and the Company shall pay all of the
Registration Expenses of that registration.
(v) If any of the holders of any other securities of the
Company register those securities in a Demand Registration or Series E
Special Demand Registration in accordance with this Section 3(g),
------------
those holders shall pay the fees and expenses of their counsel and
their pro rata share of the Registration Expenses not paid by the
Company for any reason.
(vi) Holders of any other securities of the Company may register
such securities in a Series E Special Demand Registration in
accordance with this Section 3(g), provided that the holders of the
Series E Registrable Securities are not required to participate in an
underwritten public offering, and shall not be subject to any
underwriter cutback with respect to such Series E Special Demand
Registration unless the holders of the Series E Registrable Securities
request that their shares be underwritten.
Section 4. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register
------------------
any of its securities under the Securities Act (except for the registration
of securities to be offered pursuant to an employee benefit plan on Form S-
8, pursuant to a registration made on Form S-4, or any successor forms then
in effect) at any time other than pursuant to a Demand Registration or a
Series E Special Demand Registration and the registration form to be used
may be used for the registration of the Registrable Securities (a
"Piggyback Registration"), it will so notify in writing all holders of
Registrable Securities and all executive officers of the Company who are
also Founders (as defined in the Second Amended and Restated Voting and Co-
Sale Agreement of even date herewith) not later than the earlier to occur
of (i) the 5th day following the Company's receipt of notice of exercise of
other demand registration rights, or (ii) 30 days prior to the anticipated
filing date. The Common Stock owned by such Founders is hereafter referred
to as "Founder Securities." Subject to the provisions of Section 4(c) and
------------
Section 4(d), the Company will include in the Piggyback Registration all
------------
Registrable Securities and Founder Securities with respect to which the
Company has received written requests for inclusion within 15 business days
after the applicable holder's receipt of the Company's notice. The holders
of Registrable Securities and Founder Securities may withdraw all or any
part of the Registrable Securities or the Founder Securities from a
Piggyback Registration at any time before three business days prior to the
effective date of the Piggyback Registration. If a Piggyback Registration
is an underwritten offering effected under Section 4(c), all Persons whose
------------
securities are included in the Piggyback Registration must sell their
securities on the same terms and conditions as apply to the
8
<PAGE>
securities being issued and sold by the Company. If a Piggyback
Registration is an underwritten offering effected under Section 4(d), all
------------
Persons whose securities are included in the Piggyback Registration must
sell their securities on the same terms and conditions as apply to the
securities being sold by the Person(s) initiating the Piggyback
Registration. A registration of Registrable Securities and Founder
Securities pursuant to this Section 4 shall not be counted as a Demand
---------
Registration under Section 3.
---------
(b) Piggyback Expenses. The Company shall pay to the holders of the
------------------
Registrable Securities and the Founder Securities included in a Piggyback
Registration all Registration Expenses of those holders.
(c) Priority on Primary Registrations. If a Piggyback Registration is
---------------------------------
an underwritten primary registration on behalf of the Company and the
managing underwriters give the Company their written opinion that the total
number or dollar amount of securities requested to be included in the
registration exceeds the number or dollar amount of securities that can be
sold, the Company will include the securities in the registration in the
following order of priority: first, all securities the Company proposes to
sell; second, up to the full number or dollar amount of Registrable
Securities requested to be included in the registration (allocated pro rata
among the holders of Registrable Securities on the basis of the dollar
amount or number of Registrable Securities requested to be included);
third, up to the full number or dollar amount of Founder Securities
requested to be included in the registration (allocated pro rata among the
holders of Founder Securities on the basis of the dollar amount or number
of Founder Securities requested to be included); and fourth, any other
securities (provided they are of the same class as the securities sold by
the Company) requested to be included allocated among the holders of the
securities in such proportions as the Company and those holders may agree.
(d) Priority on Secondary Registrations. If a Piggyback Registration
-----------------------------------
is an underwritten secondary registration on behalf of holders of the
Company's securities, and the managing underwriters give the Company their
written opinion that the dollar amount or number of securities requested to
be included in the registration exceeds the dollar amount or number of
securities that can be sold, the Company will include in the registration:
(1) to the extent of 50% of the number or dollar amount of securities other
than Registrable Securities that in the underwriter's opinion can be sold,
the securities requested to be included in the registration, allocated
among the holders of those securities in such proportions as the Company
and those holders may agree, (2) to the extent of the balance, the
Registrable Securities requested to be included, allocated pro rata among
the holders of Registrable Securities on the basis of the dollar amount or
number of securities requested to be included, and (3) to the extent of the
balance, the Founder Securities requested to be included, allocated pro
rata among the holders of Founder Securities on the basis of the dollar
amount or number of securities requested to be included. If after including
all of the Registrable Securities and Founder Securities the underwriters
determine that there are additional securities that can be sold, then
securities other than Registrable Securities and Founder Securities may be
added to the registration.
9
<PAGE>
(e) Selection of Underwriters. If any Piggyback Registration is an
-------------------------
underwritten offering, the Company will select the investment banker(s) and
manager(s) that will administer the offering, as long as the investment
banker(s) and manager(s) are reasonably satisfactory to the holders of a
Majority of the Registrable Securities (including, for purposes of this
Section 4(e) only, the Founder Securities), and shall enter into a
------------
customary underwriting agreement with the investment banker(s) and
manager(s).
(f) Other Registrations. The Company agrees that after filing a
-------------------
registration statement with respect to Registrable Securities and, if
applicable Founder Securities, pursuant to Section 3 or this Section 4 that
--------- ---------
has not been withdrawn or abandoned, the Company will not register any of
its equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act, whether on
its own behalf or at the request of any holder of those securities, until
at least three months has elapsed from the effective date of the previous
registration. This three-month hiatus does not apply to registrations of
securities to be issued in connection with employee benefit plans, to
permit exercise or conversions of previously issued options, warrants, or
other convertible securities, or in connection with a Demand Registration.
Section 5. Holdback Agreements.
-------------------
(a) Restrictions on Public Sale by Securities Holders. Each holder
-------------------------------------------------
of Registrable Securities whose securities are included in a registration
statement agrees not to make any public sale or distribution of equity
securities of the Company (except as part of the underwritten registration
or pursuant to registration on Form S-8 or any successor form), including a
sale pursuant to Rule 144, during the seven days prior to and the 180 days
after the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration unless the managing underwriters agree
otherwise; provided, however, that the holders of Series E Registrable
Securities shall only be subject to the foregoing holdback in respect of
the Initial Public Offering; and provided further, however, that nothing in
this Section 5(a) shall be deemed to in any way limit the rights of the
holders of Series E Registrable Securities under Section 3(a)(ii) hereof.
(b) Restrictions on Public Sale by the Company and Others. The
-----------------------------------------------------
Company agrees not to make any public sale or distribution of its equity
securities, or any securities convertible into or exchangeable or
exercisable for its equity securities, including a sale under Regulation D
of the SEC or under any exemption of the Securities Act (except as part of
the underwritten registration or pursuant to registrations on Form S-8 or
any successor form), during the seven days prior to and the 180 days after
the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration unless the managing underwriters agree
otherwise. The Company also agrees to use its best commercial efforts to
cause each holder of at least 5% (on a fully-diluted basis) of its equity
securities or any securities convertible into or exchangeable or
exercisable for its equity securities (other than Registrable Securities),
purchased from the Company at any time on or after the date of this
Agreement (other than in a registered public offering) to agree not to make
any public sale or distribution of those securities, including a sale
pursuant to Rule 144 (except as part of the underwritten registration, if
permitted), during
10
<PAGE>
the seven days prior to and the 180 days after the effective date of the
registration unless the managing underwriters agree otherwise.
Section 6. Registration Procedures.
-----------------------
(a) Best Commercial Efforts. Whenever the holders of Registrable Securities
-----------------------
request the registration of any Registrable Securities pursuant to this
Agreement, the Company shall use its best commercial efforts to register and to
permit the sale of the Registrable Securities in accordance with the intended
method of disposition. To carry out this obligation, the Company shall as
expeditiously as possible:
(i) prepare and file with the SEC, but in any event no later than 90
days (or such shorter period as required by Section 3(c)(ii) of this
Agreement) after receipt of a request to file a registration statement
(subject to Section 3(f)), a registration statement on the appropriate form
------------
and use its best commercial efforts to cause the registration
statement to become effective. At least three days before filing a
registration statement or prospectus or at least one business day before
filing any amendments or supplements thereto including Registrable
Securities, the Company will furnish to the counsel of the holders of a
Majority of the Registrable Securities being registered copies of all
documents proposed to be filed for that counsel's review and approval,
which approval shall not be unreasonably withheld or delayed;
(ii) notify immediately each seller of Registrable Securities of any
stop order threatened or issued by the SEC and take all actions reasonably
required to prevent the entry of a stop order or if entered to have it
rescinded or otherwise removed;
(iii) prepare and file with the SEC such amendments and supplements to
the registration statement and the corresponding prospectus necessary to
keep the registration statement effective for 90 days (or such longer
period as required by Section 3(c)(ii) of this Agreement) or such shorter
period as may be required to sell all Registrable Securities covered by the
registration statement; and comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by the
registration statement during each period in accordance with the sellers'
intended methods of disposition as set forth in the registration statement;
(iv) furnish to each seller of Registrable Securities a sufficient
number of copies of the registration statement, each amendment and
supplement thereto (in each case including all exhibits), the corresponding
prospectus (including each preliminary prospectus), and such other
documents as a seller may reasonably request to facilitate the disposition
of the seller's Registrable Securities;
(v) use its best commercial efforts to register or qualify the
Registrable Securities under securities or blue sky laws of jurisdictions
in the United States of
11
<PAGE>
America as any seller requests and will do any and all other acts and
things that may be necessary or advisable to enable the seller to
consummate the disposition of the seller's Registrable Securities;
(vi) use its best commercial efforts to cause the Registrable
Securities covered by the registration statement to be registered with or
approved by those governmental agencies or authorities necessary to enable
each seller to consummate the disposition of its Registrable Securities;
(vii) notify each seller of Registrable Securities, at any time when
a prospectus is required to be delivered under the Securities Act, of any
event as a result of which the prospectus or any document incorporated
therein by reference contains an untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein
not misleading, and will prepare a supplement or amendment to the
prospectus or any such document incorporated therein by reference so that
thereafter the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(viii) cause all registered Registrable Securities covered by such
registration to be listed on each securities exchange, if any, on which
similar securities issued by the Company are then listed;
(ix) provide an institutional transfer agent and registrar and a
CUSIP number for all Registrable Securities on or before the effective date
of the registration statement;
(x) enter into such customary agreements (including an underwriting
agreement in customary form) and take all other actions in connection with
those agreements as the holders of the Registrable Securities b eing
registered or the underwriters, if any, reasonably request to expedite or
facilitate the disposition of the Registrable Securities;
(xi) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
the registration statement, and any attorney, accountant, or other agent of
any seller of at least 5% of the securities being sold pursuant to the
Registration Statement or underwriter, all 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 seller, underwriter, attorney, accountant, or
agent in connection with the registration statement; provided that an
appropriate confidentiality agreement is executed by any seller,
underwriter, attorney, accountant or other agent;
(xii) in connection with any underwritten offering, obtain a "cold
comfort" letter from the Company's independent public accountants in
customary
12
<PAGE>
form and covering those matters customarily covered by "cold comfort"
letters as the holders of the Registrable Securities being registered or
the managing underwriters reasonably request (and the letter shall be
addressed to holders of the Registrable Securities);
(xiii) furnish, at the request of any holder of Registrable Securities
being registered an opinion of the counsel representing the Company for the
purposes of the registration, in the form and substance customarily given
to underwriters in an underwritten public offering and satisfactory to the
counsel representing the holders of Registrable Securities being
registered, addressed to the underwriters, if any, and to the holders of
Registrable Securities being registered; and
(xiv) use its best commercial efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as practicable, an earnings statement complying with the
provisions of Section 11(a) of the Securities Act and covering the
-------------
period of at least twelve months, but not more than eighteen months,
beginning with the first month after the effective date of the Registration
Statement .
(b) Distribution of Securities. From time to time, the Company may require
--------------------------
each seller of Registrable Securities subject to the registration to furnish to
the Company information regarding the distribution of the securities subject to
the registration.
(c) Prospectus. Each holder of Registrable Securities agrees by acquisition
----------
of those securities that, upon receipt of any notice from the Company of any
event of the kind described in Section 6(a)(vii), the holder will
-----------------
discontinue disposition of Registrable Securities until the holder receives
copies of the supplemented or amended prospectus contemplated by Section
-------
6(a)(vii). In addition, if the Company requests, the holder will deliver
- ---------
to the Company (at the Company's expense) all copies, other than permanent file
copies then in the holder's possession, of the prospectus covering the
Registrable Securities current at the time of receipt of the notice. If the
Company gives any such notice, the time period mentioned in Section
-------
6(a)(iii) shall be extended by the number of days elapsing between the date
- ---------
of notice and the date that each seller receives the copies of the supplemented
or amended prospectus contemplated by Section 6(a)(iii).
-----------------
(d) Duty to Provide Information. Whenever the holders of Registrable
-------------------------
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, those holders shall notify the Company, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event, which as to any holder of Registrable
Securities is to his or its respective knowledge, as a result of which the
prospectus included in the registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading.
13
<PAGE>
Section 7. Registration Expenses.
---------------------
(a) Defined. All Registration Expenses incident to the Company's
-------
performance of or compliance with this Agreement shall be paid as provided in
this Agreement. The term "Registration Expenses" includes without limitation all
registration filing fees, professional fees, and other expenses of compliance
with federal, state, and other securities laws (including fees and disbursements
of counsel for the underwriters in connection with state or other securities law
qualifications and registrations); printing expenses, messenger, telephone, and
delivery expenses; fees and disbursements of counsel for the Company and for the
sellers of the Registrable Securities (subject to the provisions of Section
-------
7(b)); fees and disbursements of all independent certified public accountants
- ----
(including the expenses of any audit or "cold comfort" letters required by or
incident to performance of the obligations contemplated by this Agreement); fees
and expenses of the underwriters (excluding discounts and commissions but
including liability insurance if the Company so desires or if the underwriters
so require); fees and expenses of any special experts retained by the Company at
the request of the managing underwriters in connection with the registration;
and fees and expenses of other Persons retained by the Company. The term
"Registration Expenses" does not include the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, and the fees and expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed, all of which shall be paid by
the Company under all circumstances.
(b) Legal Fees and Expenses. In connection with each registration for which
-----------------------
the Company is required to pay the Registration Expenses of the holders of
Registrable Securities, the Company will promptly reimburse those holders for
the reasonable fees and disbursements of one law firm, selected by the holders
of a Majority of the Registrable Securities, to serve as counsel to all the
holders.
(c) Expenses Not Covered. To the extent the Company is not required to pay
--------------------
Registration Expenses, each holder of securities included in any registration
will pay those Registration Expenses allocable to the holder's securities so
included, and any Registration Expenses not allocable will be borne by all
sellers in proportion to the number of securities each registers.
Section 8. Indemnification.
---------------
(a) Indemnification by Company. To the full extent permitted by law, the
--------------------------
Company agrees to indemnify each holder of Registrable Securities, its officers
and directors, and each Person who controls the holder (within the meaning of
the Securities Act and the Exchange Act) against all losses, claims, damages,
liabilities, and expenses caused by any untrue or allegedly untrue statement of
material fact contained in any registration statement, prospectus, or
preliminary prospectus or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the
14
<PAGE>
statements therein not misleading, except to the extent the untrue statement or
omission resulted from information that the holder furnished in writing to the
Company expressly for use therein or by the holder's failure to deliver a copy
of the registration statement or prospectus or any amendments or supplements
thereto to any purchaser after the Company has furnished the holder with the
relevant documents. In connection with a firm or best commercial efforts
underwritten offering, to the extent required by the managing underwriters, the
Company will indemnify the underwriters, their officers and directors, and each
Person who controls the underwriters (within the meaning of the Securities Act
and the Exchange Act), to the extent customary in such agreements.
(b) Indemnification by Holders of Securities. In connection with any
----------------------------------------
registration statement, each participating holder of Registrable Securities will
furnish to the Company in writing the information and affidavits that the
Company reasonably requests for use in connection with any registration
statement or prospectus and each holder agrees to indemnify, to the extent
permitted by law, the Company, its directors and officers, and each Person who
controls the Company (within the meaning of the Securities Act and the Exchange
Act) against any losses, claims, damages, liabilities, and expenses resulting
from any untrue or allegedly untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto necessary
to make the statements therein not misleading, but only to the extent that the
untrue statement or omission is contained in or omitted from any information or
affidavit the holder furnished in writing, or resulting from the holder's
failure to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto to any purchaser after the Company has
furnished the holder with the relevant documents; provided, however, that the
liability of each such participating holder of Registrable Securities shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such participating holder under such registration statement bears to the
total public offering price of all securities sold thereunder, but not in any
event to exceed the net proceeds received by such participating holder from the
sale of Registrable Securities covered by such registration statement.
(c) Indemnification Proceedings. Any Person entitled to indemnification
---------------------------
under this Agreement will (i) give prompt notice to the indemnifying party of
any claim with respect to which it seeks indemnification, and (ii) unless in the
indemnified party's reasonable judgment a conflict of interest may exist between
the indemnified and indemnifying parties with respect to the claim, permit the
indemnifying party to assume the defense of the claim with counsel reasonably
satisfactory to the indemnified party. If the indemnifying party does not assume
the defense, the indemnifying party will not be liable for any settlement made
without its consent (but that consent may not be unreasonably withheld). No
indemnifying party will consent to entry of any judgment or will enter into any
settlement that does not include as an unconditional term the claimant's or
plaintiff's release of the indemnified party from all liability concerning the
claim or litigation. An indemnifying party who is not entitled to or elects not
to assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one
15
<PAGE>
counsel for all parties indemnified by the indemnifying party with respect
to the claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between the indemnified party and any other
indemnified party with respect to the claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of
additional counsel.
Section 9. Rule 144 and Rule 144A.
----------------------
(a) Company Obligations. If the Company files a registration statement
-------------------
pursuant to the requirements of the Securities Act or Section 12 of the
Exchange Act, the Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder (or, if the Company is
not required to file such reports, it will make publicly available other
information), and it will take such further action to enable the holder to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act as amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any holder of
Registrable Securities, the Company will deliver to the holder a written
statement as to whether it has complied with Rule 144 or any successor rule
requirements. The Company also covenants that it will provide all such
information and it will take such further action as any holder of
Registrable Securities reasonably may request to enable the holder to sell
Registrable Securities without registration under the Securities Act within
the limitation of Rule 144A under the Securities Act, as amended from time
to time, or any successor rule requirements.
(b) Reliance on Rule 144. If any proposed sale of Registrable Securities
--------------------
may be effected by the holders thereof pursuant to Rule 144(k) without any
adverse effect on the proposed sale, as determined by the holder in its
sole discretion, including without limitation the contemplated sale price
or the quantity of Registrable Securities to be sold, then the holders of
the Registrable Securities covenant to rely upon Rule 144(k) in the sale
thereof in lieu of requesting a Demand Registration; provided, however, the
holders of Registrable Securities shall not be obligated to take any action
so that they are eligible to use or rely upon Rule 144(k) in connection
with any sale or distribution.
Section 10. Participation in Underwritten Registrations. No Person may
-------------------------------------------
participate in any underwritten registration without (a) agreeing to sell
securities on the basis provided in underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements (the holders of the
Registrable Securities in a Demand Registration pursuant to Section 3(d) and the
------------
Company in a piggyback registration pursuant to Section 4(e)), and (b)
------------
completing and executing all questionnaires, powers of attorney, indemnities,
underwriting agreements, and other documents required by the underwriting
arrangements.
Section 11. Miscellaneous.
-------------
(a) Adjustments Affecting Securities. The Company will not take any action, or
--------------------------------
permit any change to occur, with respect to the Registrable Securities that
would affect
16
<PAGE>
adversely the ability of the holders to include those
securities in a registration undertaken pursuant to this Agreement or the
marketability of the Registrable Securities in any registration; provided,
however, that the Company shall be permitted to take such action or permit
such change if (i) the Board of Directors of the Company determines that
the action or change has a legitimate corporate purpose unrelated to the
effect such action or change would have on the ability of the holders of
Preferred Stock to include those securities in a registration undertaken
pursuant to this Agreement or the marketability of the Registrable
Securities in any registration and (ii) such action or change would not
have a material adverse effect on the ability of such holders to include
those securities in a registration undertaken pursuant to this Agreement or
the marketability of the Registrable Securities in any registration.
Nothing in this subsection 11(a) shall permit the Company to amend or
modify Section 3(f)(ii) of this Agreement without the consent of the
holders of a majority of the shares of Series E Preferred Stock.
(b) Amendment. This Agreement may not be amended or modified, and no
---------
provision hereof may be waived, without the written consent of the Company
and the holders of at least a majority of the outstanding Registrable
Securities; provided that with respect the amendment, modification or
waiver of any provision herein relating solely to the special rights
granted to the holders of the Series E Preferred Stock herein, such
amendment, modification or waiver shall require the written consent of the
Company and the holders of at least a majority of the Series E Preferred
Stock or Series E Registrable Securities, as applicable.
(c) Attorneys' Fees. In any legal action or proceeding brought to
---------------
enforce any provision of this Agreement, the prevailing party shall be
entitled to recover all reasonable expenses, charges, court costs, and
attorneys' fees in addition to any other available remedy at law or in
equity.
(d) Benefit of Parties: Assignability. All of the terms and provisions
---------------------------------
of this Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns, including without
limitation all subsequent holders of securities entitled to the benefits of
this Agreement who agree in writing to become bound by the terms of this
Agreement; provided, however, the Company may not delegate its
responsibilities or assign its rights under this Agreement without the
prior written consent of the holders of a Majority of the Registrable
Securities then issued and outstanding .
(e) Cooperation. The parties agree that after execution of this
-----------
Agreement they will from time to time, upon the request of any other party
and without further consideration, execute, acknowledge, and deliver in
proper form any further instruments and take such other action as any other
party may reasonably require to carry out effectively the intent of this
Agreement.
(f) Cumulative Remedies and Survival. The rights and remedies
--------------------------------
specified in this Agreement shall not be exclusive of any other right or
remedy and shall be
17
<PAGE>
cumulative and in addition to every other right or remedy now or hereafter
existing at law or in equity or by statute or otherwise that may be
available to the Investors.
(g) Counterparts. This Agreement may be executed simultaneously 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.
(h) Entire Agreement. This Agreement, the Series A Investment
----------------
Agreement the Series B Investment Agreement, the Series C Investment
Agreement, the Series D Investment Agreement, the Series E Investment
Agreement and the Second Amended and Restated Voting and Co-Sale Agreement
(as defined in the Series E Investment Agreement) contains the entire
understanding of the parties with respect to the subject matter hereof and
thereof. There are no representations, promises, warranties, covenants, or
undertakings other than those expressly set forth or provided for herein or
therein.
(i) Governing Law. Illinois law shall govern the interpretation,
-------------
construction, and enforcement of this Agreement and all transactions and
agreements contemplated hereby, notwithstanding any state's choice of law
rules to the contrary .
(j) Interpretation. The terms and conditions of this Agreement
--------------
represent the results of bargaining and negotiations among the parties,
each of which has been represented by counsel of its own selection, and
none of which has acted under duress or compulsion, whether legal, economic
or otherwise, and represent the results of a combined draftsmanship effort.
Consequently, the terms and conditions hereof shall be interpreted and
construed in accordance with their usual and customary meanings and the
parties hereby expressly waive and disclaim in connection with the
interpretation and construction hereof any rule of law or procedures
requiring otherwise, specifically including but not limited to any rule of
law to the effect that ambiguous or conflicting terms or conditions
contained herein shall be interpreted or construed against the party whose
counsel prepared this Agreement or any earlier draft hereof.
(k) Listing. If the Common Stock is listed for trading on any national
-------
securities exchange, that listing shall include all shares of Conversion
Stock (to the extent permitted by the rules of the exchange).
(l) No Inconsistent Agreements. Except with the prior written consent
--------------------------
of the holders of a Majority of the Registrable Securities then issued and
outstanding, the Company will not enter into any agreement with respect to
its securities that shall grant to any Person registration rights that are
senior to, are in conflict with, or will interfere with the practical
realization of the rights provided under this Agreement.
(m) Notices. All notices, requests, demands, or other communications
-------
that are required or may be given pursuant to the terms of this Agreement
shall be in writing and delivery shall be deemed sufficient in all respects
and to have been duly given on the date of service if delivered personally
or by facsimile transmission if receipt is confirmed to the party to whom
notice is to be given, or on the third day after mailing if mailed by
18
<PAGE>
first-class mail, return receipt requested, postage prepaid, and properly
addressed to the addresses set forth in the Series E Investment Agreement
or to such other addresses as the respective parties hereto shall from time
to time designate to the others in writing.
(n) Specific Performance. Each of the parties agrees that damages for
--------------------
a breach of or default under this Agreement would be inadequate and that in
addition to all other remedies available at law or in equity the parties
and their successors and assigns shall be entitled to specific performance
or injunctive relief, or both, in the event of a breach or a threatened
breach of this Agreement.
(o) Table of Contents and Captions. The Table of Contents and captions
------------------------------
of the sections and subsections of this Agreement are solely for convenient
reference and shall not be deemed to affect the meaning or interpretation
of any provision of this Agreement.
(p) Validity of Provisions. Whenever possible, each provision of this
----------------------
Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law. Should any part of this Agreement for any
reason be declared by any court of competent jurisdiction to be invalid,
that decision shall not affect the validity of the remaining portion, which
shall continue in full force and effect as if this Agreement had been
executed with the invalid portion eliminated, it being the intent of the
parties that they would have executed the remaining portion of the
Agreement without including any part or portion that may for any reason be
declared invalid.
(q) Waiver of Breach. Neither any waiver of any breach of, nor any
----------------
failure to enforce any term or condition of, this Agreement shall operate
as a waiver of any other breach of any term or condition, nor constitute
nor be deemed a waiver or release of any other rights, in law or at equity,
or claims that any party may have against any other party for anything
arising out of, connected with, or based upon this Agreement. No waiver
shall be enforceable against any party hereto unless set forth in a written
instrument or agreement signed by that party. No waiver shall be deemed to
occur as a result of the failure of any party to enforce any term or
condition of this Agreement.
(r) Additional Investor. The Company, in connection with certain
-------------------
financing arrangements has issued warrants to acquire shares of Series C
Preferred Stock to Third Coast Venture Lease Partners I, L.P. ("Third
Coast"), CID Mezzanine Capital, L.P. ("CIDMC") and Silicon Valley Bank
(such warrants being collectively referred to as the "Existing Warrants")
and the Company may in the future enter into additional financing
arrangements pursuant to which the Company will issue "Additional Warrants"
(as that term is defined in Section 3.4 of the Series E Investment
Agreement); upon exercise of such Existing Warrants or such Additional
Warrants by the holder or holders thereof, such holder or holders shall be
deemed an "Investor" for all purposes hereof and Schedule 1 shall be
--------
amended to include such holder or holders designated as such without any
action of the Company or the other Investors.
19
<PAGE>
[END OF AGREEMENT]
[REST OF PAGE INTENTIONALLY LEFT BLANK]
20
<PAGE>
Exhibit 10.11
*********************************
Lease
676 St. Clair
Chicago, Illinois
*********************************
Between
Open Port Technology, Inc.
(Tenant)
and
Teachers Insurance and Annuity Association of America
(Landlord)
<PAGE>
Lease
676 St. Clair
Chicago, Illinois
<TABLE>
<CAPTION>
Page
<S> <C>
DEFINITIONS ................................................................................................... iv
SCHEDULE ...................................................................................................... 1
1. LEASING AGREEMENT.................................................................................... 2
2. RENT ................................................................................................ 2
A. Kinds........................................................................................... 2
B. Payment of Operating Cost Share Rent and Tax Share Rent ........................................ 2
C. Definitions .................................................................................... 4
D. Rules of Interpretation and Computation of Base Rent and Rent Adjustments ...................... 6
3. PREPARATION AND CONDITION OF PREMISES, POSSESSION AND SURRENDER OF PREMISES ......................... 8
4. PROJECT SERVICES .................................................................................... 9
A. Heat and Air Conditioning ...................................................................... 9
B. Elevators ...................................................................................... 10
C. Electricity .................................................................................... 10
D. Water........................................................................................... 10
E. Janitorial Service ............................................................................. 11
F. Window Washing ................................................................................. 11
G. Interruption of Service ........................................................................ 11
5. ALTERATIONS AND REPAIRS ............................................................................. 12
6. USES OF PREMISES .................................................................................... 13
7. BUILDING RULES AND GOVERNMENTAL REGULATIONS ......................................................... 13
8. CLAIMS; INSURANCE; LIABILITY ........................................................................ 13
9. FIRE AND OTHER CASUALTY ............................................................................. 15
10. RIGHTS RESERVED TO THE LANDLORD...................................................................... 16
A. Name............................................................................................ 16
B. Signs........................................................................................... 16
C. Windows......................................................................................... 16
D. Service Contracts............................................................................... 16
E. Keys............................................................................................ 17
F. Access for Repairs, etc......................................................................... 17
G. Occupancy....................................................................................... 17
H. Rights to Conduct Businesses.................................................................... 17
I. Heavy Equipment................................................................................. 17
J. Show Premises................................................................................... 17
K. Close Project................................................................................... 17
L. Substitution of Space........................................................................... 18
M. Use of Lock Box by Landlord..................................................................... 18
N. Repairs and Alterations......................................................................... 19
O. Mail Chutes..................................................................................... 19
P. Other Rights.................................................................................... 19
11. DEFAULT AND LANDLORD'S REMEDIES...................................................................... 19
A. Defaults ....................................................................................... 20
B. Landlord's Remedies ............................................................................ 23
12. HOLDOVER ............................................................................................ 23
13. SUBORDINATION TO MORTGAGES, TRUST DEEDS AND GROUND LEASES ........................................... 23
A. Subordination .................................................................................. 23
B. Termination of Ground Lease or Foreclosure of Mortgage ......................................... 24
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
C. Security Deposit........................................................................ 24
D. Notice and Right to Cure................................................................ 24
14. ASSIGNMENT AND SUBLETTING BY TENANT.......................................................... 25
15. SALE BY LANDLORD............................................................................. 27
16. ESTOPPEL CERTIFICATE......................................................................... 27
17. SECURITY DEPOSIT............................................................................. 27
18. EXCUSE OF LANDLORD'S INABILITY TO PERFORM; LANDLORD'S DEFAULT................................ 28
19. PERSONAL PROPERTY AND TENANT FIXTURES........................................................ 28
20. NOTICES...................................................................................... 28
21. QUIET POSSESSION............................................................................. 29
22. REAL ESTATE BROKER........................................................................... 29
23. CONDEMNATION................................................................................. 29
24. SPRINKLERS................................................................................... 29
25. MISCELLANEOUS................................................................................ 29
A. Covenants Binding on Successors......................................................... 29
B. Date Payments Are Due................................................................... 30
C. Meaning of "Re-entry" and "Landlord".................................................... 30
D. Time Is of the Essence.................................................................. 30
E. No Option............................................................................... 30
F. Severability............................................................................ 30
G. Governing Laws.......................................................................... 30
H. Lease Modification...................................................................... 30
I. No Oral Modification.................................................................... 30
J. Litigation and Arbitration Costs........................................................ 30
K. Captions................................................................................ 30
L. Remedies and Rights May Be Exercised by Landlord In Its Own Name; Authority to
Execute This Lease.................................................................... 30
M. Payments to Affiliates.................................................................. 31
N. Entire Agreement........................................................................ 31
O. Landlord's Title........................................................................ 31
P. Light and Air Rights.................................................................... 31
Q. No Reservation.......................................................................... 31
R. Consents................................................................................ 31
S. Landlord's Agents....................................................................... 31
T. Terms "Landlord" and "Tenant"........................................................... 31
U. Rent Not Based on Income................................................................ 32
V. No Recording by Tenant.................................................................. 32
W. Blue Cross Association, etc............................................................. 32
26. UNRELATED BUSINESS INCOME.................................................................... 32
27. HAZARDOUS MATERIALS.......................................................................... 33
28. EXCULPATORY PROVISIONS....................................................................... 33
</TABLE>
APPENDIX A - PLAN OF THE PREMISES
APPENDIX B - CLEANING SCHEDULE
APPENDIX C - RULES AND REGULATIONS
APPENDIX D - INTENTIONALLY OMITTED
EXHIBIT A TO APPENDIX D - INTENTIONALLY OMITTED
APPENDIX E - MORTGAGES CURRENTLY AFFECTING THE PROJECT
-ii-
<PAGE>
DEFINITIONS
Section in which
Term Term is Defined
---- ----------------
1. Additional Rent 2A(5)
2. Base Rent 2A(l)
3. Base Operating Expenses 2A(2)
4. Base Taxes 2A(3)
5. Building Preamble
6. business hours 4A
7. Commencement Date 1
8. Corporate Base Rate 2E(3)
9. CPI Report 2C(2)
10. Equitable Adjustment 2C(2)
11. Excess Operating Expenses 2A(2)
12. Excess Taxes 2A(3)
13. Fiscal Year 2D(3)
14. Force Majeure 18
15. Ground Lease 2D(2)
16. Holidays 4A
17. Land Preamble
18. Landlord Preamble (see also 25C)
19. mortgage 13B(3)
20. mortgagee 3B(3)
21. new premises 10(L)
22. Operating Cost Share Rent 2A(2)
23. Operating Costs 2D(2)
24. Operating Cost Report 2B(2)
25. Premises Preamble
26. Project Preamble
27. re-enter, re-entry 25C
28. Rent Tax 2D(l)
29. Rental Agents 2A
30. Representations 25N
31. Required Improvements 9B
32. Reconstruction Delays 9C
33. Schedule Preamble
34. Taxes 2D(1)
35. Tax Report 2B(3)
36. Tax Share Rent 2A(3)
37. Tenant Preamble
38. Tenant's Proportionate Share 2(D)(4)
39. Term 1
40. Termination Date 1
41. Work 5A
-iii-
<PAGE>
LEASE
676 ST. CLAIR
CHICAGO, ILLINOIS
THIS INDENTURE (this "Lease") is made as of the ___ day of August, 2995
between TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, a New York
Corporation (the "Landlord") and the tenant named in Item 1 of the Schedule (the
"Tenant"). The term "Project" when used herein refers to the land (the "Land")
and the building (the "Building") currently known as "676 ST. CLAIR" (including,
without limitation, any and all easements adjacent thereto) situated at the
northwest corner of St. Clair and Erie Streets, Chicago, Illinois, together with
the vehicular drives and all other structures and improvements now or hereafter
located on the Land. "Premises" when used herein refers to that part of the
Project leased to Tenant.
The following Schedule (the "Schedule") is an integral part of this Lease.
SCHEDULE
1. Name of Tenant: Open Port Technology, Inc., an Illinois corporation
2. Floor(s) or room(s) of Premises: the entire 9th floor
3. Net Rentable Square Feet: approximately 24,531 square feet
4. Tenant's use of Premises: general office subject to Section 6
5. Base Rent for the first 12 consecutive calendar months of the term:
$441,558.00 ($18.00 per rentable square foot for the first Lease Year)
6. Monthly Installments of Base Rent for the first 12 consecutive calendar
months of the term: $36,796.50
5. Base Rent for the 13th through the 18th calendar months of the term:
$225,194.58 ($18.36 per rentable square foot)
6. Monthly Installments of Base Rent for the 13th through the 18th calendar
months of the term: $37,532.43
7. Tenant's Proportionate Share: 4.4488% (Tenant's Proportionate Share is
based on a total of 551,409 rentable square feet in the Building and a
total of 24,531 rentable square feet in the Premises initially demised
hereunder.)
8. Base Operating Expenses: $3,446,306.25
9. Base Taxes: $3,821,264.37
10. Rent Abatement: N/A
11. Security Deposit: $36,796.50
12. Tenant's address for notices before possession date: c/o Stacey Kruger
Birndorf, Julien Studley, Inc., 1 East Wacker Drive, Suite 3900, Chicago,
Illinois 60601
13. Tenant's Real Estate Broker used for this Lease: Julien Studley, Inc.
(Stacey Kruger Birndorf)
14. Tenant Improvements, if any: None.
15. Date Tenant Plans are due from Tenant including special work, if any: N/A
16. Commencement Date: September 1, 1995 (with a right to occupy on August 19,
1995, provided this Lease has been fully executed)
17. Term/Termination Date: Eighteen (18) calendar months after the Commencement
Date, ending February 28, 1997.
-1-
<PAGE>
1. LEASING AGREEMENT. Landlord leases to Tenant, and Tenant leases
from Landlord, for the term (the "Term") set forth on the Schedule,
commencing on the commencement date (the "Commencement Date") set forth
on the Schedule and ending on the termination date (the "Termination
Date") set forth on the Schedule, unless sooner terminated or extended
as herein provided, the Premises described on the Schedule and outlined
on the plan attached hereto and made a part hereof as Appendix A. The
Premises constitute a portion of the Building located on the Land. As
provisions of said Lease, Landlord and Tenant covenant and agree as
follows:
2. RENT.
A. Kinds. Tenant agrees to pay rent to Landlord's building manager
-----
at the office of the Project located at 676 St. Clair, Chicago, Illinois
60611 or to such other person or at such other place as Landlord from
time to time designates in a written notice to Tenant, with Tenant's
check, or in coin or currency which at the time of payment is legal
tender for the payment of public and private debts in the United States
of America, the aggregate of the following, all of which are rent
reserved under this Lease:
(1) Base Rent to be paid in monthly installments in
---------
advance on or before the first day of each month of the Term of this
Lease in the amount set forth on the Schedule, provided that the
first five monthly installments of Base Rent and the Security
Deposit, totalling $220,779.00, will be paid by the Tenant
concurrently with the execution of this Lease.
(2) Operating Cost Share Rent in an amount equal to the Tenant's
-------------------------
Proportionate Share of the excess (the "Excess Operating Expenses")
of Operating Costs for the applicable fiscal year of the Lease over
Operating Costs set forth on the Schedule ("Base Operating
Expenses"). Operating Cost Share Rent shall be paid monthly in
advance in an estimated amount, as adjusted by Landlord from time to
time. Definitions of Operating Costs, Tenant's Proportionate Share
and the method for billing and payment of Operating Cost Share Rent
are set forth in Sections 2B and 2D.
(3) Tax Share Rent in an amount equal to the Tenant's
--------------
Proportionate Share of the excess (the "Excess Taxes") of Taxes for
the applicable fiscal year of the Lease over the Taxes set forth on
the Schedule ("Base Taxes"). Tax Share Rent shall be paid monthly in
advance in an estimated amount, as adjusted by Landlord from time to
time. Definitions of Taxes, Tenant's Proportionate Share and the
method for billing and payment of Tax Share Rent are set forth in
Sections 2B and 2D.
(4) Additional Rent consisting of all of the sums,
---------------
liabilities, obligations and other amounts (excepting Base Rent,
Operating Cost Share Rent and Tax Share Rent) which Tenant is
required to pay or discharge pursuant to this Lease (including,
without limitation, any amounts which this Lease provides shall be
Tenant's cost or expense), together with interest for late payment
thereon, all as hereafter provided.
B. Payment of Operating Cost Share Rent and Tax Share Rent.
---------------------------------------------------------
-2-
<PAGE>
(1) Payment of Estimated Operating Cost Share Rent and Tax
-------------------------------------------------------
Share Rent. Landlord shall estimate the Operating Costs and Taxes
----------
of the Project from time to time each year. Such estimates may be
revised by Landlord whenever it obtains information relevant to
making such estimates more accurate. Such estimates will generally
(but need not) be issued after the beginning of a fiscal year and
revised upon the determination of the final real estate tax
assessment or final real estate tax rate for the Project.
Within thirty (30) days after notice from Landlord setting forth
(a) an estimate of Operating Costs for a particular fiscal year,
(b) the Base Operating Expenses and (c) the resulting estimate of
Excess Operating Costs for such fiscal year, Tenant shall pay
Landlord an amount equal to one-twelfth (1/12th) of Tenant's
Proportionate Share of such estimated Excess Operating Costs for
such fiscal year, multiplied by the number of months that have
elapsed in such fiscal year to the date of such payment, minus
payments of estimated Operating Cost Share Rent previously paid for
said period. Thereafter on the first day of each month, Tenant
shall pay monthly until a new estimate of Operating Costs is
applicable, one-twelfth (1/12th) of Tenant's Proportionate Share of
the estimated Excess Operating Costs.
Within ten (10) days after notice from Landlord setting forth
(a) an estimate of Taxes for a particular fiscal year, (b) the Base
Taxes and (c) the resulting estimate of Excess Taxes, Tenant shall
pay Landlord an amount equal to one-twelfth (1/12th) of Tenant's
Proportionate Share of such estimated Excess Taxes, multiplied by
the number of months that have elapsed in such fiscal year to the
date of such payment, minus payments of estimated Tax Share Rent
previously paid for said period. Thereafter on the first day of
each month, Tenant shall pay monthly until a new estimate of Taxes
is applicable, one-twelfth (1/12th) of Tenant's Proportionate Share
of the estimated Excess Taxes.
(2) Correction of Operating Cost Share Rent. As soon as
---------------------------------------
reasonably possible after the end of each fiscal year, Landlord
shall deliver to Tenant a report (the "Operating Cost Report")
setting forth (a) the actual Operating Costs for the preceding
fiscal year, (b) the Base Operating Expenses, (c) the amount of
Operating Cost Share Rent due to Landlord for such preceding fiscal
year, and (d) the amount of Operating Expense Share Rent paid by
the Tenant in and allocable to such fiscal year. On or before
thirty (30) days after receipt of such report, Tenant shall pay to
Landlord the amount of Operating Cost Share Rent due for the
preceding fiscal year (or a portion thereof if this Lease was not
in effect for the entire fiscal year) minus any payments made by
Tenant for such fiscal year. If Tenant's estimated payments of
Operating Cost Share Rent exceed the amount due Landlord for the
fiscal year in question, Landlord shall apply any such amount as a
credit against Tenant's other obligations under this Lease, or if
the Term has expired or this Lease has been terminated and Tenant
has no further obligations under this Lease (including any
obligations which survive the expiration or termination of this
Lease), then Landlord shall refund any such amount to Tenant.
-3-
<PAGE>
(3) Correction of Tax Share Rent. At any time during any
----------------------------
fiscal year, when such information becomes available, Landlord
shall deliver to Tenant a report (the "Tax Report") setting forth
(a) the actual Taxes for the preceding fiscal year, (b) the Base
Taxes, (c) the amount of Tax Share Rent due to Landlord for such
preceding fiscal year, and (d) the amount of Tax Share Rent paid by
the Tenant in and allocable to such fiscal year. On or before
twenty (20) days after receipt of such report, Tenant shall pay to
Landlord the amount of Tax Share Rent due for the preceding fiscal
year (or a portion thereof if this Lease was not in effect for the
entire fiscal year) minus any payments made by Tenant for such
fiscal year. If Tenant's estimated payments of Tax Share Rent
exceed the amount due Landlord for the fiscal year in question,
Landlord shall apply any such amount as a credit against Tenant's
other obligations under this Lease, or if the Term has expired or
this Lease has been terminated and Tenant has no further
obligations under this Lease (including any obligations which
survive the expiration or termination of this Lease), then
Landlord shall refund any such amount to Tenant.
C. Definitions:
-----------
(1) Taxes. "Taxes" shall mean any and all federal, state and
-----
local governmental taxes, assessments and charges of any kind or
nature, whether general, special, ordinary or extraordinary, which
Landlord shall pay or become obligated to pay because of or in
connection with the ownership, leasing, renting, management,
control or operation of the Project or of the personal property,
fixtures, machinery, equipment, systems and apparatus located
therein or used in connection therewith. Taxes shall include,
without limitation, real estate taxes, personal property taxes,
sewer rents, water rents, assessments (special or otherwise),
transit taxes, ad valorem taxes and the Illinois Replacement Tax.
Taxes shall also include all fees, costs and expenses (including,
without limitation, legal fees and court costs) paid by Landlord in
connection with protesting or contesting, or seeking a refund or
reduction of, any of the aforesaid Taxes, regardless of whether the
Landlord is ultimately successful. If at any time during the term
hereof, a tax or excise on rents or income or other tax however
described (the "Rent Tax") is levied or assessed by the United
States or the State of Illinois, or any political subdivision
thereof, on account of the rents hereunder or the interest of
Landlord under this Lease, such Rent Tax shall constitute and be
included in Taxes, provided, however, that in no event shall Tenant
be obligated (a) to pay for any year any greater amount as a result
of such Rent Tax than would have been payable by Tenant had the
rentals paid to Landlord under all Project leases (being the
rentals upon which such taxes are imposed) been the sole taxable
income of Landlord for the year in question or (b) to pay or to
reimburse Landlord for any tax of any kind assessed against
Landlord on account of any such Rent Tax having been reimbursed to
Landlord by Tenant or any third party.
For the purpose of determining Taxes for any given fiscal year,
the amount to be included for such fiscal year (a) from special
taxes or assessments payable in installments, shall be the amount
of the installments (and any interest) due and payable during such
fiscal year, (b) from all other Taxes,
-4-
<PAGE>
shall be the amount accrued, assessed or otherwise imposed for such
fiscal year without regard to when any such Taxes are payable, and
(c) from any adjustment (including, without limitation, a refund)
to any Taxes by the taxing authority, when such adjustment has
resulted in a corresponding adjustment payment by or to Landlord,
shall constitute an adjustment to Taxes for the fiscal year during
which such adjustment is made or received by Landlord, as the case
may be.
Taxes shall not include any net income (except Rent Tax as
hereinabove provided), capital, stock, succession, transfer,
franchise, gift, estate or inheritance taxes, unless the same
shall be imposed in lieu of all or any portion of Taxes.
(2) Operating Costs. "Operating Costs" shall mean any
---------------
expenses, costs and disbursements (other than Taxes) of every kind
and nature, paid or incurred by Landlord in connection with the
ownership, leasing, management, maintenance, operation and repair
of all or any part of the Project (adjusted for vacancy as
hereafter provided) and of the personal property, fixtures,
machinery, equipment, systems and apparatus located in the Project
or used in connection therewith. Operating Costs shall not include
(a) costs of alterations of tenant premises; (b) costs of capital
improvements, except for any capital improvements which are
intended to reduce Operating Costs, and any capital improvements
which Landlord is required to make pursuant to, or which Landlord
shall deem necessary to keep the Project in compliance with, all
applicable governmental rules and regulations applicable from time
to time to the Project (the foregoing capital improvements that are
included within Operating Costs are collectively referred to herein
as the "Included Capital Items"), provided that the cost of such
Included Capital Items shall be evenly amortized by Landlord over
the useful life of such Included Capital Item and such amortized
costs are only included in Operating Costs under this Lease for
that portion of the useful life of the Included Capital Item which
falls within the Term; (c) depreciation (except on any Included
Capital Items); (d) interest and principal payments on mortgages or
any rental payments on any ground or other underlying leases
subject to which Landlord holds its interest in the Project
(hereinafter, referred to individually as a "Ground Lease" and
collectively as "Ground Leases"), and other debt costs, if any; (e)
real estate brokers' leasing commissions or compensations; (f) any
cost or expenditure (or portion thereof) for which Landlord is
reimbursed, whether by insurance proceeds or otherwise (Operating
Cost Share Rent and Tax Share Rent provided for in any tenant
leases are not reimbursements); (g) the cost of any kind of
service furnished to any other office tenant of the Project which
Landlord does not make available to Tenant hereunder; (h)
executives' salaries above the grade of building manager; (i) legal
and auditing fees which are for the benefit of Landlord such as
collecting delinquent rents and enforcing tenant leases, preparing
partnership returns and other partnership financial statements, and
audits other than those incurred in connection with the preparation
of statements required pursuant to Section 2B above; and (j) legal
fees, space planner fees, real estate brokers'
-5-
<PAGE>
leasing commissions and advertising expenses incurred with regard
to leasing the Building or portions thereof.
If during all or any portion of any fiscal year the Project is
not fully rented and occupied by tenants, Landlord may elect to
make an appropriate adjustment (an "Equitable Adjustment") of
Operating Costs for such fiscal year, employing sound accounting
and management principles, to determine the Operating Costs that
would have been paid or incurred by Landlord had the Project been
fully rented and occupied for the entire fiscal year, and the
amount so determined shall be deemed to have been the Operating
Costs for such fiscal year. The foregoing process illustrated by
the following hypothetical which assumes (i) the Building has ten
floors; (ii) the Tenant occupies one floor and therefor, Tenant's
Proportionate Share is ten percent (10%); (iii) the other nine
floors are vacant; (iv) the cost of providing a particular service
for Tenant's floor is $1,000. If Tenant were to pay Tenant's
Proportionate Share of the cost of such service for the Building it
would pay $100. Instead, Landlord shall estimate the cost of such
service for the Building if it were one hundred percent (100%)
occupied. If there would be any savings in the variable costs per
floor of providing the service because such service would be
provided for all ten floors, instead of one floor, these should be
taken into account by Landlord in making its estimate. If some
savings would exist, the estimate of the Landlord would be an
amount that is less than the amount obtained by multiplying the
number of floors in the Building by the cost of providing such
service to one floor (10 x $1000); for example, $9,000. The amount
of Landlord's estimate ($9,000) less the actual cost incurred by
the Landlord in providing the service ($1000) would equal the
Equitable Adjustment ($8000). The Equitable Adjustment would be
added to the accrual cost and Tenant would then pay Tenant's
Prorata Share of this amount, that is, Tenant would pay $9,000
times 10%, which equals $900.
If Landlord is not furnishing any particular work or service
(the cost of which if performed by Landlord would constitute an
Operating Cost) to a tenant who has undertaken to perform such work
or service in lieu of the performance thereof by Landlord for all
or any portion of a fiscal year, Operating Costs for such fiscal
year shall be deemed to be increased by an amount equal to the
additional Operating Costs which reasonably would have been
incurred during such fiscal year by Landlord if it had, at its own
expense, furnished such work or service to such tenant.
Notwithstanding anything contained herein to the contrary, the
provisions of this Section 2C(2) with respect to an Equitable
Adjustment of Operating Costs for vacancy, or as a result of the
performance by tenants of certain services, shall apply only to
Operating Costs which are variable and which increase as occupancy
in the Project increases and shall not apply to any Operating Costs
which do not vary with the amount of occupancy in the Project.
(3) Fiscal Year. The term "fiscal year" shall mean any 12
-----------
month period (including, without limitation, the calendar year)
which Landlord may from time to time select as the fiscal year of
the Project, provided that the first fiscal
-6-
<PAGE>
year and the last fiscal year of the Term may contain less than twelve (12)
months.
(4) Tenant's Proportionate Share. "Tenant's Proportionate Share"
----------------------------
shall mean the percentage set forth as Item 7 on the Schedule.
D. Rules of Interpretation and Computation of Base Rent and Rent
-------------------------------------------------------------
Adjustments:
- -----------
(1) If this Lease commences on other than the first day of a month,
the Base Rent, Operating Cost Share Rent and Tax Share Rent for the month
in which this Lease so begins shall be prorated based upon the number of
days of the Term falling within such month. If the Term of this Lease
commences on any day other than the first day of the designated fiscal
year, or if the Term of this Lease ends on any day other than the last day
of the designated fiscal year, any Operating Cost Share Rent and Tax Share
Rent due to Landlord with respect to such fiscal year shall be prorated
based on the number of days in the Term falling within such fiscal year.
(2) All rent shall be paid to Landlord without deduction or offset at
the office of the building manager in the Project, or to such other person
or place as Landlord may from time to time designate in writing. The
Tenant's covenants to pay rent shall be independent of every other covenant
set forth in this Lease.
(3) Any sum due from Tenant to Landlord not paid when due shall bear
interest from the date due until the date paid at the annual rate equal to
the lesser of: (i) the highest lawful rate, or (ii) a rate of interest
equal to the sum of three percent (3%) plus the "Corporate Base Rate" at
the time of such default. The phrase "Corporate Base Rate" means that rate
of interest most recently announced by the First National Bank of Chicago,
or its successor (collectively, the "First") as the corporate base rate,
changing automatically and simultaneously with each announced change by the
First in the Corporate Base Rate, such change to be effective as of and on
the date announced by the First as the effective date for the change in the
Corporate Base Rate. A certificate made by an officer of the First
stating the Corporate Base Rate in effect on a certain day, or Corporate
Base Rates in effect during a certain period, shall, for purposes of this
Lease, be conclusive evidence of the First's Corporate Base Rate or Rates
on said day or during such period. In the event that the First ceases to
use the term Corporate Base Rate in setting a base rate of interest for
commercial loans, then the Corporate Base Rate herein shall be determined
by reference to the rate used by the First as a base rate of interest for
commercial loans as the same shall be designated by the First to the
Landlord. The payment of such interest shall not excuse or cure any default
of Tenant under this Lease.
(4) If Tenant is in default of any of its obligations under this
Lease, Tenant shall not be entitled to any refund of any sum which may
otherwise be due it by application of any provision of this Lease until any
and all of Tenant's defaults under this Lease are cured by Tenant.
-7-
<PAGE>
(5) If changes are made to this Lease or to the Project changing the
number of rentable square feet contained in the Premises or in the Project,
Tenant's Proportionate Share shall be appropriately adjusted and the
computations of rent shall be appropriately adjusted so as to take into
account the different Tenant's Proportionate Share figures applicable
during each portion of the applicable fiscal year.
(6) Landlord shall maintain books and records in accordance with
sound accounting and management practices, reflecting the Operating Costs
and Taxes. In the event of any dispute as to any Operating Cost Share Rent
or Tax Share Rent, Tenant shall have the right to inspect Landlord's
accounting records relative to Operating Costs and Taxes at Landlord's
accounting office upon reasonable prior notice during normal business hours
during the forty-five (45) days following the furnishing by Landlord to
Tenant of either of the Operating Cost Report and the Tax Report. Unless
Tenant shall take written exception to any item in any such report within
said forty-five (45) day period, such report shall be considered as final
and accepted by Tenant. Any payment due to the Landlord as shown on the
Operating Cost Report or the Tax Report, whether or not written exception
is taken thereto, shall be made by the Tenant within thirty (30) days after
the Landlord shall have submitted the Operating Cost Report or the Tax
Report (as the case may be) without prejudice to any such written
exception. If Tenant makes such timely written exception, a certification
as to the proper amount of Operating Cost Share Rent and Tax Share Rent
shall be made by Landlord's independent certified public accountant, which
shall be final and conclusive. Tenant agrees to pay the cost of such
certification unless it is determined that Landlord's original
determination of the aggregate of Taxes and Operating Costs was in error by
more than five percent (5%) of said amounts.
(7) In the event of the termination of this Lease by expiration of
the stated Term or for any other cause or reason whatsoever prior to the
determination of Operating Cost Share Rent, Tax Share Rent or Additional
Rent, Tenant's agreement to pay any such sum shall survive termination of
the Lease and Tenant shall pay any such amount due to Landlord within
thirty (30) days after being billed therefor. Tenant's obligation to pay
Base Rent shall also survive the expiration or termination of this Lease.
In the event of the termination of this Lease by expiration of the stated
Term or for any other cause or reason whatsoever, except the default by
Tenant under any of the terms or provisions of this Lease, prior to the
determination of Operating Cost Share Rent or Tax Share Rent as hereinabove
set forth, Landlord's agreement to refund any excess in the amount of the
estimated payments made by Tenant on account of Operating Cost Share Rent
or Tax Share Rent over the actual amount thereof accruing or payable up to
the time of the termination or expiration shall survive termination of the
Lease and Landlord shall pay the amount due to Tenant within fifteen (15)
days of Landlord's determination of such amount.
(8) No calculation, determination or payment of Operating Cost Share
Rent or Tax Share Rent, by virtue of the operation of the rent adjustment
provisions under this Section
-8-
<PAGE>
2 shall result in the payment by Tenant in any fiscal year during the Term
of less than the Base Rent shown on the Schedule.
(9) If any Operating Cost though paid in one fiscal year, relates to
more than one fiscal year, at the option of the Landlord, such Operating
Cost may be proportionately allocated among such related fiscal years. If
any Operating Cost relates to more than one parcel of property, at the
option of the Landlord, such Operating Cost may be proportionately
allocated among all parcels of property to which it relates.
(10) All payments made with respect to Operating Cost Share Rent or
Tax Share Rent (including any monthly payments made on the basis of
Landlord's estimates thereof) may be commingled and need not be segregated
by the Landlord and may be held and utilized by the Landlord without
payment to the Tenant of interest or any sums for the use of any of said
amounts.
3. PREPARATION AND CONDITION OF PREMISES, POSSESSION AND
SURRENDER OF PREMISES.
A. Landlord is leasing the Premises to Tenant "as is", without any
representations or warranties of any kind (including, without limitation, any
express or implied warranties of merchantability, fitness or habitability) and
without any obligation on the part of the Landlord to alter, remodel, improve,
repair, decorate or clean the Premises or any part thereof.
B. During the term of this Lease, Tenant shall maintain the Premises in
as good condition as when Tenant took possession, or as when completed after
possession in the event that Tenant takes possession prior to the Commencement
Date (loss or damage caused by action of the elements, Acts of God and the
public enemy, ordinary wear and fire and other casualty insured against by
Landlord excepted), failing which Landlord may but need not restore the Premises
to such good condition and Tenant shall pay the cost thereof. At the termination
of this Lease or at the termination of Tenant's right to possession without
termination of this Lease, Tenant shall, subject to Sections 3C and 3D below,
return the Premises to Landlord broom clean and in good condition as described
in the immediately preceding sentence or Landlord may, but need not, restore the
Premises to such good condition (except that Tenant shall be under no obligation
to restore the partitions which are to be torn down by Tenant pursuant to those
certain demolition and construction plans of the Environment Group dated August
16, 1995) and Tenant shall pay the cost thereof.
C. Unless otherwise provided by written agreement, signed by Landlord,
all Work (hereinafter defined), partitions, hardware, light fixtures and other
fixtures (except trade fixtures and movable furniture and equipment belonging to
Tenant) in or upon the Premises, whether placed there by Landlord or Tenant,
shall be surrendered with the Premises at the termination of this Lease, by
lapse of time or otherwise, or at the termination of Tenant's right to
possession without termination of this Lease, and shall become Landlord's
property without compensation to Tenant; provided, however, that if prior to any
such termination of the Lease, or of the right to possession, or within ten (10)
days thereafter,
-9-
<PAGE>
Landlord so directs by written notice, Tenant shall promptly remove any work,
partitions, hardware, light fixtures or other fixtures placed in or upon the
Premises by Tenant and designated in such notice and repair any damage to the
Premises caused by such removal, failing which Landlord may remove the same and
repair the Premises and Tenant shall pay the cost thereof to Landlord upon
demand.
D. Tenant shall also remove its furniture, movable equipment, trade
fixtures and all other items of personal property from the Premises prior to the
end of the Term or any extension thereof, or within thirty (30) days after the
early termination of this Lease for any reason, or of the termination of
Tenant's right of possession; and if Tenant does not remove such property, at
Landlord's election: (i) Tenant shall be conclusively presumed to have conveyed
the same to Landlord under this Lease as a bill of sale without further payment
or credit by Landlord to Tenant, (ii) Tenant shall be conclusively presumed to
have forever abandoned such property, and without accepting title thereto,
Landlord may, at Tenant's expense, remove, store, destroy, discard or otherwise
dispose of all or any part thereof in any manner that Landlord shall choose
without incurring liability to Tenant or to any other person, and Tenant shall
pay to Landlord, upon demand, any and all reasonable expenses incurred in taking
any of such actions. In no event shall Landlord ever become or accept or be
charged with the duties of a bailee (either voluntary or involuntary) of any
personal property; and the failure of Tenant to remove all such property from
the Premises and the Project shall forever bar Tenant from bringing any action
or asserting any liability against Landlord with respect to any such property
which Tenant fails to remove.
E. All obligations of the Tenant hereunder shall survive the expiration
of the Term or sooner termination of this Lease.
F. Tenant's taking possession of the Premises or any portion thereof
shall be conclusive evidence that the Premises or such portion were then in good
order, repair and satisfactory condition. Landlord may authorize Tenant to take
possession of all or any part of the Premises prior to the Commencement Date. If
Tenant does take possession pursuant to such authorization, all of the covenants
and conditions of this Lease shall apply to and shall control such pre-term
occupancy except that Tenant shall not be obligated to pay Base Rent, Operating
Cost Share Rent or Tax Share Rent.
4. PROJECT SERVICES.
So long as Tenant is not in default hereunder, Landlord agrees to furnish
services to the Tenant without charge except for Operating Cost Share Rent,
electricity and as otherwise specifically provided herein, as follows:
A. Heat and Air Conditioning. Landlord shall furnish air conditioning
-------------------------
such that the average temperature condition of the Premises is 76(degrees)F +
2(degrees)F dry bulb with 50% + 5% relative humidity when the outdoor conditions
are not above 91(degrees)F dry bulb, and Landlord shall furnish heat such that
the average temperature condition of the Premises is 67(degrees)F+2(degrees) dry
bulb when the outdoor conditions are not below 5(degrees)F dry bulb. Such heat
and air conditioning shall be provided daily during business hours (8:00 a.m. to
6:00 p.m. Monday through Friday and 8:00 a.m. to 1:00 p.m. Saturday), Sundays
and Holidays (hereinafter defined) excepted. Tenant agrees to keep and
-10-
<PAGE>
cause to be kept closed all windows in the Premises and at all times to
cooperate fully with the Landlord in the operation of the heating and air
conditioning systems and to abide by all reasonable regulations and requirements
which Landlord may prescribe to permit the proper functioning and protection of
the heating and air conditioning systems. Landlord reserves the right to stop
the heating and air conditioning systems when necessary by reason of accident or
emergency or for repairs, alterations, replacements or improvements, which in
the judgment of the Landlord are desirable or necessary, until said repairs,
alterations, replacements or improvements shall have been completed; provided,
however, that Landlord shall cause as little inconvenience or annoyance to
Tenant as is reasonably possible under the circumstances. For purposes of this
Lease "Holidays" shall mean any Legal Holiday as defined in Illinois Compiled
Statutes, Chapter 205, Paragraph 630/17 (formerly I11. Rev. Stat. 1985, Ch. 17,
pars. 2201, 2202), as amended from time to time. Landlord agrees to make any
repairs to the heating and air conditioning systems promptly and with due
diligence.
Whenever heavy concentration of personnel, motors, machines or equipment,
including telephone equipment, used in the Premises adversely affects the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof, including all of the costs relating to the
installation and the cost of operation and maintenance thereof, shall be
Additional Rent hereunder and shall be paid by Tenant to Landlord upon demand.
Landlord shall also furnish heat and air conditioning after business hours,
on the condition that Tenant gives Landlord not less than twenty-four (24)
hours' prior notice of Tenant's needs for such additional heating or air
conditioning, and provided that Tenant pays to Landlord its then current charges
for such additional heating or air conditioning. Such charges will be prorated
by Landlord between requesting user-tenants if more than one tenant requests
such additional heating or air conditioning at the same time and the proration
shall be based on the area of the Project leased to such tenants and their
respective periods of use.
B. Elevators. Landlord shall provide passenger elevator service in common
---------
with the Landlord and the other tenants, daily, during business hours, Sundays
and Holidays excepted. Tenant may request additional freight elevator service
provided that such service shall be at Tenant's sole cost and expense. Freight
elevator service shall at all times be subject to scheduling by the Landlord.
Landlord shall provide limited passenger elevator service at all times (except
in the case of an emergency) during which normal passenger elevator service is
not furnished.
C. Electricity. All the electricity used in the Premises shall be
-----------
supplied by Commonwealth Edison Company or any other electricity company
serving the Project, and such electricity shall be supplied through a separate
meter and be paid for by Tenant, provided that Landlord shall pay for the
electricity required for the operation of the Building's shared heating,
ventilating and air conditioning systems at the times specified in Section 4A
above. The meter shall be installed at the expense of Tenant or the electricity
company. Landlord shall not in any way be liable to Tenant for any loss or
damage or expense Tenant may sustain or incur if either the amount or quality of
electric service is changed or is no longer available or suitable for Tenant's
requirements. Subject
-11-
<PAGE>
to Section 4G, if such service shall be discontinued, such discontinuance shall
not in any way affect this Lease. Tenant covenants and agrees that at all times
its use of electric current shall never exceed the capacity of the existing
feeders to the Building or the risers or the wiring installed thereon when
reviewed in conjunction with the electrical usage of the other tenants in the
Project. Tenant covenants and agrees that it shall make no alterations or
additions to the electric equipment and/or appliances without the prior written
consent of Landlord in each instance. Landlord shall maintain the light fixtures
in the Premises and install any lamps, bulbs, ballasts or starters to be used by
Tenant in the Premises, all at Tenant's sole cost and expense.
Tenant shall pay for all electricity required during janitorial service and
alterations and repairs to the Premises and Tenant shall pay for all electricity
required for the operation of any special air conditioning or ventilating system
for its office machinery or equipment requiring special or extra current.
D. Water. Landlord shall furnish cold water from City of Chicago mains
-----
from regular Building outlets for drinking, lavatory and toilet purposes, drawn
through fixtures installed by Landlord or by Tenant with Landlord's prior
written consent, and hot water for public lavatory purposes from the regular
supply of the Building. Tenant shall pay Landlord at Landlord's actual cost for
water furnished for any other purpose as Additional Rent hereunder. Tenant shall
not waste or permit the waste of water.
E. Janitorial Service. Landlord shall also furnish janitorial and
------------------
cleaning services as set forth in Appendix B, on Monday through Friday, Holidays
excepted. Tenant shall not provide janitorial services in the Premises without
the prior written consent of Landlord and then only at Tenant's sole
responsibility, cost and expense, by contractors or employees at all times
satisfactory to Landlord in its sole discretion.
F. Window Washing. Landlord shall furnish window washing of all exterior
--------------
windows, weather permitting, at intervals to be determined by Landlord, but not
less than three times during each calendar year.
G. Interruption of Service. Landlord does not warrant that any service
-----------------------
will be free from interruption caused by labor controversies, accidents,
inability to obtain fuel, steam, water or supplies, governmental regulations, or
other causes beyond the reasonable control of the Landlord, or repairs,
alterations, replacements or improvements to such systems. No such interruption
of Service shall be deemed an eviction or disturbance of Tenant's use and
possession of the Premises or any part thereof, or render Landlord liable to
Tenant for damages, by abatement of rent or otherwise, or relieve Tenant from
performance of Tenant's obligations under this Lease, except as provided below.
The rent otherwise payable under this Lease shall abate in the manner
described in the last sentence of this paragraph if all of the following
conditions are met: (i) if Landlord ceases to furnish any service in the
Building as a result of a condition which affects only the Building (i.e. which
does not affect office buildings in general in the vicinity of the Building);
and (ii) if Tenant notifies Landlord in writing within one (1) business day
after such cessation; and (iii) if such cessation is not caused by Force
-12-
<PAGE>
Majeure (as defined in Section 18 of this Lease); and (iv) if such cessation has
not arisen as a result of an act or omission of Tenant; and (v) as a result of
such cessation, the Premises (or a material portion thereof) is rendered
untenantable (meaning that Tenant is unable to use such space in the normal
course of its business) and Tenant in fact so ceases to use such space in the
manner used prior to such cessation. As Tenant's sole and exclusive remedy for
such cessation, on the sixth day after all of the foregoing conditions have been
met, the rent payable hereunder shall be equitably abated based upon the
percentage of the space in the Premises so rendered untenantable and not being
so used by Tenant, and such abatement shall continue until the date the Premises
become tenantable again.
Tenant shall make arrangements directly with the telephone company
servicing the Building for such telephone service in the Premises as may be
desired by Tenant. Tenant shall pay the entire cost of all telephone charges,
electricity consumed within the Premises, maintenance of light fixtures and
replacement of lamps, bulbs, tubes, ballasts and starters.
5. ALTERATIONS AND REPAIRS.
A. Tenant shall not make any improvements or alterations in or additions,
changes or installations to the Premises which (i) impact the base structural
components or the heating, air conditioning, ventilation, electrical, plumbing
or mechanical systems (collectively, the "Systems") of the Building or (ii)
impact any other tenant's premises (collectively, the "Systems/Structure Work"),
without submitting plans and specifications therefor to Landlord, and obtaining
Landlord's prior written consent thereto (which consent Landlord may withhold in
its sole discretion). Tenant shall not make any improvements or alterations in
or additions, changes or installations to the Premises which are not deemed
Systems/Structure Work pursuant to this Section 5A, without submitting plans and
specifications therefor to Landlord, and obtaining Landlord's prior written
consent thereto (which consent shall not be unreasonably withheld), if (a) the
cost thereof is in excess of $5,000.00, or (b) such improvements, alterations,
additions, changes or installations are visible from outside the Premises
(collectively, the "Non-Systems Work"). Tenant shall be allowed to make any
improvements or alterations in or additions, changes or installations to the
Premises which are not deemed Systems/Structure Work or Non-Systems Work
pursuant to this Section 5A without Landlord's consent (collectively, the "Non-
Consent Work"), but Tenant shall be obligated to notify Landlord of the nature
and scope of such work and otherwise comply with the provisions of this Section
5, failing which Landlord may deny Tenant's contractors access to the Premises.
For purposes of this Lease, Systems/Structure Work, Non-Systems Work and Non-
Consent Work are sometimes collectively referred to herein as the "Work".
Landlord hereby agrees to inform Tenant of its approval or disapproval of any
such Systems/Structure Work or Non-Systems Work within fifteen (15) days after
receipt of a complete set of plans and specifications therefor. All Work shall
be performed (a) at the sole cost and expense of Tenant by employees of or
contractors employed by Landlord, or with Landlord's written consent given prior
to the letting of the contract, by contractors employed by Tenant under a
written contract previously approved in writing by Landlord, and (b) on such
terms and under such conditions as Landlord, in its sole discretion, shall
determine as will protect the Premises, the
-13-
<PAGE>
Building and the Project from improper contractors' work and against the
imposition of any lien resulting from Work; without limiting the foregoing, if
Landlord consents to any Work, it shall be performed subject to the following
requirements:
(1) If the Work is to be done by Tenant's contractors, Tenant shall
furnish to Landlord prior to commencement thereof, building permits and
certificates of appropriate insurance and bonds satisfactory in all
respects to Landlord. Tenant shall also furnish to Landlord, if Landlord so
requests, security for the payment of all costs to be incurred in
connection with the Work.
(2) Upon completion of any Work, Tenant shall furnish Landlord with
contractors' affidavits and full and final waivers of lien, each conforming
to the applicable Illinois statutory requirements, as-built plans of any
Work and receipted bills covering all labor and materials expended and
used. Insofar as applicable to the work or material for which payment is
requested or notice or lien claim is made, Landlord in its sole discretion
shall make available for partial or final payment or release thereof such
funds as may have been deposited with it by Tenant for the estimated cost
of such Work.
(3) Any Work permitted to be undertaken by Tenant's contractors shall
be performed in such a fashion and by such means as necessary to maintain
peace and harmony among the other contractors serving the Project and the
other tenants and so as not to cause interference with the continuance of
work to be performed or services to be rendered to the Project or the other
tenants.
(4) All Work shall comply with all insurance requirements and with
all applicable laws, ordinances and regulations. All Work shall be
constructed in a good and workmanlike manner, and only good grades
of material shall be used with a quality equal to or better than that used
in the Project.
(5) Tenant shall permit Landlord to supervise all Work within the
Premises. Except for the Work set forth on the construction bid attached
hereto as Appendix F for which no supervisory fee will be charged, Landlord
shall charge a supervisory fee not to exceed (a) ten percent (10%) of the
total cost of the Work, including, without limitation, all labor and
material costs, if Landlord's employees or contractors perform the Work,
and (b) five percent (5%) of the total cost of the Work, including, without
limitation, all labor and material costs, if Tenant's employees or
contractors perform the Work.
B. If Tenant desires telegraphic, telephonic, burglar alarm, computer
installations or signal service (all of which shall be at Tenant's sole cost and
expense), Landlord shall, upon request, direct where and how all connections and
wiring for such service shall be introduced and run. In the absence of any such
directions, Tenant shall make no borings, cutting or install any wires or cable
in or about the Premises.
-14-
<PAGE>
C. Tenant agrees to protect, defend and indemnify Landlord, its agents
(including, without limitation, the building manager) and employees, the
Premises, the Building and the Project from and against any and all liabilities
of every kind and description which may arise out of or be connected in any way
with any Work, whether performed by or under the direction of Landlord and at
the cost of Tenant or performed by Tenant and whether performed in compliance
with this Section 5.
D. Any mechanic's lien filed against the Premises or the Project or any
notice which is received by either Landlord or Tenant or filed for work or
materials furnished or claimed to be furnished and deriving from Work or for
materials or work claimed to have been furnished to Tenant or the Premises shall
be released and discharged of record by Tenant, in either case, within thirty
(30) days after such filing or receipt, whichever is applicable, at Tenant's
expense. If Tenant chooses to contest such claim, notice or lien, Tenant may do
so in place of causing the release and discharge thereof, provided that within
said thirty (30) day period, (i) Tenant provides Landlord with a title indemnity
or bond or other adequate security covering any possible lien or claim that may
arise from the failure to release and discharge such claim, notice or lien; (ii)
Tenant contests such claim, notice or lien in good faith by appropriate
proceedings that operate to stay enforcement thereof; and (iii) Tenant promptly
pays and discharges any final adverse judgment entered in any such proceeding.
If Tenant has not caused the release or discharge or begun appropriate
proceedings to contest such claim, notice or lien, within said thirty (30) days,
Landlord may, but shall not be obligated to, pay the amount necessary to remove
the same without being responsible for making an investigation as to the
validity or accuracy thereof, and the amount so paid, together with all costs
and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, shall be deemed Additional Rent
hereunder, payable upon demand. Tenant has no power or authority to cause or
permit any lien or encumbrance of any kind whatsoever, whether created by act of
Tenant, operation of law or otherwise, to attach to or be placed upon Landlord's
title or interest in the Premises or the Project, and any and all liens and
encumbrances created by Tenant shall attach to Tenant's interest only.
E. Except for ordinary wear and as otherwise provided in this Lease,
Tenant shall, at all times during the Term hereof, at its sole expense, keep all
Tenant's movable and removable fixtures located in or appurtenant to the
Premises in good order, repair and condition, and Tenant shall promptly arrange
with the Landlord to have Landlord (or Landlord's agent) make repairs of all
other damages to the Premises and the replacement or repair of all damaged or
broken glass (including signs thereon), fixtures and appurtenances (including
hardware and heating, cooling, ventilating, electrical, plumbing and other
mechanical facilities in the Premises), with materials equal in quality and
class to the original materials damaged or broken, within any reasonable period
of time specified by Landlord. Landlord may, but shall not be required to do so,
enter the Premises at all reasonable times to make any repairs, alterations,
improvements or additions, as Landlord shall desire or deem necessary for the
safety, protection, preservation or improvement of the Project, or as Landlord
may be required to do by any governmental department or agency, or by the order
or decree of any court or by any other proper authority; provided, however, that
Landlord shall cause as little inconvenience or annoyance to Tenant
-15-
<PAGE>
as is reasonably possible under the circumstances. The cost of all repairs made
by Landlord to the Project which are made necessary as a result of misuse or
neglect by Tenant or Tenant's employees, invitees, servants, contractors or
agents shall be immediately paid as Additional Rent by Tenant to Landlord within
thirty (30) days of being billed for same. The cost of all other repairs and
replacements (except those caused by Tenant's misuse or negligence and those
relating to Tenant's movable and removable fixtures) shall be paid for by the
Landlord and deemed an item of Operating Costs.
6. USES OF PREMISES. The Premises shall be occupied and used by Tenant
only for general office purposes, and for no other purpose; except that if the
zoning classification of the Building so permits (and Tenant hereby acknowledges
that Landlord makes no representation or warranty in this regard) and subject to
the requirements of applicable zoning laws and ordinances, Tenant may also
perform light assembly of computers and computer peripherals. Without limiting
the generality of the foregoing, no use shall be made of the Premises nor acts
done which will increase the existing rate of insurance upon the Project or
cause a cancellation of any insurance policy covering the Project or any part
thereof or require additional insurance coverage. Tenant shall not permit to be
kept, used or sold in or about the Premises any article which may be prohibited
by Landlord's insurance policies.
7. BUILDING RULES AND GOVERNMENTAL REGULATIONS. Tenant shall abide by all
applicable laws or governmental regulations concerning its use of the Premises.
Tenant shall also abide by all uniform reasonable rules and regulations adopted
or to be adopted from time to time by Landlord pertaining to the operation and
management of the Project. If any rules and regulations are contrary to the
terms of the Lease, the terms of this Lease shall prevail. The present rules are
contained in Appendix C. The violation of the Project rules or the laws or
regulations governing Tenant's use of the Premises shall be a default under this
Lease allowing Landlord all remedies for default set forth under Section 11 of
this Lease. Landlord shall not be responsible to Tenant for violation of rules
or regulations or terms of this Lease or any other Lease in the Project by
another tenant, nor shall failure to obey the same by others or lack of
enforcement by Landlord relieve Tenant from its obligations to comply therewith.
8. CLAIMS; INSURANCE; LIABILITY.
A. To the extent permitted by law, Tenant waives all claims it may have
against Landlord, its officers, directors, servants, agents or employees for
damage to person or property sustained by Tenant or by any occupant of the
Premises or the Project, or any other person, occurring in or about the Premises
or the Project, resulting from the Premises or the Project or any part of said
Premises or Project becoming out of repair or resulting from any existing or
future condition, defect, matter or thing in the Premises, the Project or any
part of it, or from equipment or appurtenances therein, or from the action of
the elements, or any accident within or adjacent to the Premises or Project or
resulting directly or indirectly from any act or omission of Landlord or any
occupant of the Premises or Project or any other person while on the Premises or
the Project. If any such damage to the Premises or the Project or any equipment
or appurtenances therein, or to tenants thereof, or their agents, employees,
contractors or invitees, results from any act, omission or negligence of Tenant,
its agents,
-16-
<PAGE>
employees, servants, contractors or invitees, Landlord may, at Landlord's
option, repair such damage and Tenant shall reimburse Landlord within thirty
(30) days of invoice for all costs of such repairs and damages. All property on
the Project or in the Premises belonging to the Tenant, its agents, employees,
servants, contractors or invitees or to any occupant of the Premises shall be
there at the risk of the Tenant or such other person only and Landlord shall not
be liable for damage thereto or theft, misappropriation or loss thereof.
Notwithstanding anything contained in this Section 8 to the contrary, no
agreement of Tenant in this Section 8 shall be deemed to exempt Landlord from
liability for injury to persons or damage to property caused by or resulting
from the negligence of Landlord, its agents or employees in the operation or
maintenance of the Premises or the Project.
B. Landlord and Tenant agree to have all property insurance policies
which may be carried by either of them endorsed with a clause providing that any
release from liability of or waiver of claim for recovery from the other party
entered into in writing by the insured thereunder prior to any loss or damage
shall not affect the validity of said policy or the right of the insured to
recover thereunder. Without limiting any release or waiver of liability or
recovery contained in any other Section of this Lease but rather in confirmation
and furtherance thereof, Landlord and Tenant each hereby waive any and every
claim for recovery from the other for any and all loss of or damage to the
Project or the Premises or to the contents thereof, which loss or damage is
covered by valid and collectible fire and extended coverage insurance policies,
to the extent that such loss or damage is recoverable under said insurance
policies. Inasmuch as this mutual waiver will preclude the assignment of any
such claim by subrogation (or otherwise) to an insurance company (or any other
person), Landlord and Tenant each agree to give to each insurance company which
has issued, or in the future may issue, its policies of fire and extended
coverage insurance, written notice of the terms of this mutual waiver, and to
have said insurance policies properly endorsed, if necessary to prevent the
invalidation of said insurance coverage by reason of said waiver.
C. At all times during the Term of this Lease, Tenant shall at its sole
cost and expense maintain in full force and effect insurance protecting Tenant
and Landlord and their respective agents and employees, and any other parties
designated by Landlord from time to time, with terms, coverages and in companies
at all times satisfactory to Landlord and with such increases in limits as
Landlord may, from time to time, request. Initially, such coverage shall be in
the following amounts:
(1) Comprehensive or Commercial General Liability Insurance,
including Contractual Liability insuring the indemnification provisions
contained in this Lease, with limits of not less than One Million Dollars
($1,000,000.00) combined single limit per occurrence for Bodily Injury,
Death and Property Damage, and umbrella coverage of not less than Three
Million Dollars ($3,000,000). The Comprehensive or Commercial General
Liability policy shall include the Landlord and Landlord's building manager
as additional insureds, with a severability of interest endorsement.
(2) Insurance against (a) "All Risks" of physical loss covering the
tenant improvements (if any) described in Item 14
- 17 -
<PAGE>
of the Schedule, the Work, movable fixtures, office equipment, furniture,
trade fixtures, merchandise and all other items of Tenant's property on the
Premises, and (b) loss of use of the Premises.
D. Tenant hereby agrees to, prior to the commencement of the Term hereof
and prior to the expiration of any policy, furnish Landlord certificates
evidencing that all required insurance is in force and providing that such
insurance may not be cancelled or changed without at least thirty (30) days,
prior written notice to Landlord and Tenant (unless such cancellation is due to
nonpayment of premiums, in which event ten (10) days' prior written notice shall
be provided).
E. Tenant hereby agrees to indemnify, defend and hold harmless Landlord
and its officers, directors, servants, agents and employees against any claims
or liability for damage to person or property (or for loss or misappropriation
of property) occurring in the Premises or Project, arising from any breach or
default on the part of Tenant during the Term of this Lease or from any act or
omission of Tenant or of any employee, agent, servant, invitee or contractor of
Tenant, and from any costs relating thereto (including, without limitation,
attorneys' fees).
Landlord hereby agrees to indemnify, defend and hold harmless Tenant and
its officers, directors, servants, agents and employees against any claims or
liability for damage to person or property (or for loss or misappropriation of
property), proximately caused by the intentional misconduct or sole negligence
of Landlord or of any employee, agent, servant, invitee or contractor of
Landlord, and from any costs relating thereto (including, without limitation,
attorneys' fees); provided, however, that such indemnification shall be
effective only to the extent of the insurance proceeds recoverable and recovered
under Landlord's general liability insurance policy or policies covering the
Building, together with the amount of any deductible carried by Landlord under
such policy.
9. FIRE AND OTHER CASUALTY.
A. In the event that (i) the Premises are made substantially untenantable
by fire or other casualty, including damage or casualties of war, and Landlord
shall decide not to restore or repair the same, or (ii) the Building is so
damaged by fire or other casualty that Landlord shall decide to demolish or not
rebuild the same, then, in either of such events, either Landlord or Tenant
shall have the right to terminate this Lease by notice to the other within
ninety (90) days after the date of such fire or other casualty.
B. If the Premises or the Building are made untenantable by fire or other
casualty, and this Lease is not terminated pursuant to Section 9A above,
Landlord shall, to the extent permitted by any mortgages or Ground Leases with
respect to the Premises and the Project, immediately take such action as is
necessary to make applicable insurance proceeds available and to use the same to
reconstruct, repair and restore the Building and the Premises, subject to zoning
laws and building codes then in effect, or, if any portion of the Premises has
been leased on an "as is" basis, including only improvements similar to those
located in such portion of the Premises on the Commencement Date or the date on
which such
- 18 -
<PAGE>
portion was added to the Premises, if later than the Commencement Date (herein,
the improvements Landlord is required to make are called the "Required
Improvements"), and at Landlord's option Tenant may be permitted or required to
devote the proceeds of its insurance described in Section 8C(2)(a) to cause
restoration of tenant improvements over and above the Required Improvements,
and pay for the same to Landlord or through Landlord as if newly done pursuant
to Section 5 of this Lease. In the event a fire or other casualty occurs and
both Landlord and Tenant are insured, it is agreed that the coverage of the
Landlord shall be primary and that Landlord's recovery in no event shall be
reduced by any insurance recovery to Tenant.
C. Notwithstanding anything in this Section 9 to the contrary (except
that Section 9A shall supersede this Section 9C), if all or any portion of the
Premises shall be made untenantable by a fire or other casualty, Landlord shall
with reasonable promptness, cause a registered architect selected by Landlord
and licensed to do business in Illinois to estimate the amount of time required
to substantially complete repair and restoration of the Premises and make the
Premises tenantable again, using standard working methods. If the estimate
indicates that the Premises cannot be made tenantable within twelve (12) months
from the date the repair and restoration is started, either party shall have the
right to terminate this Lease by giving to the other notice of such election
within ten (10) days after its receipt of the architect's certificate. If the
estimate of the registered architect indicates that the Premises can be made
tenantable within twelve (12) months from the date the repair and restoration is
started, or if neither party terminates this Lease pursuant to this Section 9C,
Landlord shall proceed with reasonable promptness to repair and restore the
Premises, provided that if the estimate of the registered architect indicates
that the Premises can be made tenantable within twelve (12) months from the date
repair and restoration is started, and if Landlord does not repair and restore
the Premises within said twelve (12) month period, which twelve (12) month
period shall be extended to the extent of any Reconstruction Delays, then Tenant
may terminate this Lease upon fifteen (15) days' prior written notice to
Landlord. For purposes of this Lease, the term "Reconstruction Delays" shall
mean: (i) any delays caused by the insurance adjustment process, (ii) any delays
caused by Tenant, and (iii) any delays caused by events beyond Landlord's
reasonable control.
D. In the event that this Lease is terminated pursuant to Section 9A or
Section 9C above, rent shall be apportioned on a per diem basis and be paid to
the date of the fire or other casualty. In the event that such fire or casualty
renders all or any portion of the Premises untenantable and this Lease is not
terminated pursuant to Section 9A or Section 9C, then subject to the last
sentence of this Section 9D, the rent provided for in this Lease shall abate on
a per diem basis during the period of repair and restoration until the Premises
are tenantable again, and the abatement shall be in an amount bearing the same
ratio to the total amount of rent due for such period as the untenantable
portion of the Premises from time to time bears to the entire Premises. Any
provision hereof notwithstanding, Tenant's rent shall not abate if its
negligence was the cause of the fire or other casualty; and whether or not the
Lease is terminated, Tenant's recovery shall be limited to the amount necessary
to cause restoration of the tenant improvements as described in this Section 9.
- 19 -
<PAGE>
10. RIGHTS RESERVED TO THE LANDLORD. Landlord reserves the following
rights, exercisable without notice to Tenant except as otherwise expressly
provided herein, and without liability to Tenant for damage or injury to
property, person or business (all such claims being hereby released, except to
the extent they are caused by Landlord's negligence), and without effecting an
eviction or disturbance of Tenant's use or possession or giving rise to any
claim for offsets, or abatements of rent or affecting any of Tenant's
obligations under this Lease. Specification of the rights reserved to Landlord
herein shall not exclude any right accruing to Landlord by operation of law or
reserved specifically or by inference from any provision contained in this
Lease:
A. Name: To change the Project's name or street address, provided,
----
however, that with respect only to a change of street address, if the same is
voluntarily undertaken by Landlord, Landlord shall give 60 days prior notice to
Tenant and shall reimburse Tenant's reasonable costs incurred in changing the
street address on printed materials.
B. Signs: To install, affix and maintain any and all signs on the
-----
exterior and interior of the Building. No signs visible from the exterior of the
Building or from within its lobbies or common corridors shall be permitted to be
installed in the Premises by Tenant without Landlord's approval of the sign and
the location thereof, which may be withheld in Landlord's sole discretion.
Landlord reserves the right to remove at Tenant's expense any such sign not so
approved by Landlord.
C. Windows: To designate and approve, prior to installation, all types of
-------
window shades, blinds, drapes, awnings, window ventilators and other similar
equipment and to control all the internal lighting that may be visible from the
exterior of the Building.
D. Service Contracts: To designate all sources furnishing sign painting
-----------------
and lettering, ice and drinking water, towels, toilet supplies, beverages, food
service, shoe shining or other services on the Premises, provided that the
rates for such services as are designated by Landlord are reasonably competitive
with rates charged therefor in the Chicago metropolitan area. No vending or
dispensing machines of any kind shall be placed in or about the Premises
without the prior written consent of Landlord.
E. Keys: To retain at all times and to use passkeys to the Premises and
----
keys to all locks within and into the Premises. No locks or bolts shall be
altered, changed or added without the prior written consent of Landlord.
F. Access for Repairs, etc.: To have access to the Premises to perform
------------------------
its duties and obligations under this Lease and to inspect the Premises, make
repairs, alterations, additions or improvements, whether structural or
otherwise, in and about the Premises, the Project or any part thereof as set
forth in and subject to various Sections of this Lease including, without
limitation, Section 5 and Section 10N.
G. Occupancy: To decorate, remodel, repair, alter or otherwise prepare
---------
the Premises for reoccupancy at any time after Tenant vacates or abandons the
Premises and defaults in the payment
- 20 -
<PAGE>
of rent. Such acts of Landlord shall not relieve Tenant of its
obligation to pay rent to the Termination Date.
H. Rights to conduct Businesses: To grant to anyone the exclusive
----------------------------
right to conduct any business or render any service in the Project
provided such exclusive right shall not operate to exclude Tenant from
the use permitted by this Lease.
I. Heavy Equipment: To approve the weight, size or location of
---------------
safes and other heavy equipment and articles in and about the Premises
and the Project and to require all such items and furniture to be moved
into and out of the Building or anywhere else in the Project and the
Premises only at such times and in such manner as Landlord shall direct
in writing. Movement of Tenant's property into or out of the Project and
within the Project is entirely at the risk and responsibility of Tenant.
Any furniture, equipment, curtains and similar articles desired to be
removed from the Premises or the Building shall be listed in a written
notice from Tenant to Landlord and a removal permit therefor shall be
obtained from Landlord prior to removal thereof.
J. Show Premises: To show the Premises to prospective tenants or
-------------
brokers during the last year of the Term of this Lease or the last year
of any extension thereof or to show the Premises to prospective
purchasers at all reasonable times, provided prior notice is given to
Tenant in each case and Tenant's use and occupancy of the Premises shall
not materially be inconvenienced by any such action of Landlord.
K. Close Protect: To close or restrict access to the Project
-------------
during such hours as Landlord shall from time to time reasonably
determine, and on Holidays subject, however, to Tenant's right to
admittance at all times under such regulations as Landlord may prescribe
from time to time which may include, by way of example but not of
limitation, that persons entering or leaving the Project identify
themselves to a security guard by registration or otherwise and that
said persons establish their right to enter or leave the Project.
L. Substitution of Space: At any time hereafter, Landlord may
---------------------
relocate all of the Premises to another area in the Project (the "new
premises") upon sixty (60) days' prior written notice, provided that:
(1) the new premises shall be similar to the Premises in
area and suitable for the use which Tenant had made of the
Premises;
(2) such change shall be made in order to put into the
Premises a major tenant in the Project;
(3) Landlord will pay all of the costs of improving the new
premises so they are substantially similar to the Premises;
(4) Landlord shall pay all of Tenant's moving costs,
reasonable costs of new stationery and announcements and other
reasonable expenses incurred in connection with such move; and
-21-
<PAGE>
(5) Such move shall be made during evenings, weekends or
otherwise so as to incur the least inconvenience to Tenant under the
circumstances.
Tenant shall cooperate with Landlord in all reasonable ways to
facilitate the move to the new premises including, by way of example but
not of limitation, designating locations to move furniture and equipment,
supervising moving of files or fragile equipment, designating location of
telephone outlets, and listing color of paint and of flooring desired in
the new premises.
M. Use of Lock Box by Landlord: Landlord may from time to time elect
---------------------------
to designate a lock box collection agent (independent agent, bank or other
financial institution) to act as Landlord's agent for the collection of
amounts due Landlord. In such event the date of payment of rent or other
sums paid Landlord through such agent shall be the date of agent's receipt
of such payment (or the date of collection of any such sum if payment is
made in the form of a negotiable instrument thereafter dishonored upon
presentment); however, for purposes of this Lease, no such payment or
collection shall be deemed "accepted" by Landlord if Landlord issues a check
payable to the order of the Tenant in the amount sent to the lock box and if
Landlord mails the check to the Tenant addressed to the place designated in
this Lease for notice to Tenant within twenty-one (21) days after the amount
sent by the Tenant is received by the lock box collection agent or if the
Landlord returns a dishonored instrument within twenty-one (21) days of its
dishonor. Return of any such sum to Tenant by so sending such a check of the
Landlord or by so sending a dishonored instrument to the Tenant within the
appropriate twenty-one (21) day period shall be deemed to be rejection of
Tenant's tender of such payment for all purposes as of the date of
Landlord's lock box collection agent's receipt of such payment (or
collection). The return of Tenant's payment in the manner described in this
Section 10M shall be deemed not to be a waiver of any breach by Tenant of
any term, covenant or condition of this Lease nor a waiver of any of
Landlord's rights or remedies granted in this Lease. The possession of
Tenant's funds or negotiation of Tenant's negotiable instrument by
Landlord's agent or Landlord during the applicable twenty-one (21) day
period shall be deemed not to be a waiver of any defaults of Tenant or any
rights of Landlord theretofore accrued nor shall any such possession or
negotiation be considered an acceptance of Tenant's tender.
N. Repairs and Alterations: At any time Landlord may decorate, make
-----------------------
alterations, additions or improvements, structural or otherwise, in or to
the Project or any part thereof, including the Premises, and perform any
acts required or permitted hereunder, or related to the safety, protection,
preservation or improvement of the Project or the Premises, and during such
operations Landlord shall have the right to take into and through the
Premises or any part of the Project all material and equipment required and
to close and temporarily suspend operation of entrances, doors, corridors,
elevators and other facilities, and to have access to and open all ceilings,
without liability to Tenant by reason of interference, inconvenience,
annoyance or loss of business; provided, however, that Landlord shall cause
as little inconvenience or annoyance to Tenant as is reasonably possible
under the circumstances, and shall not do any act which would permanently
reduce the size of the Premises. Landlord shall do any such work during
ordinary business hours, and Tenant shall pay Landlord for overtime and for
any other incremental or extra expenses incurred if such work is done during
-22-
<PAGE>
other hours at Tenant's request. Landlord may do or permit any work
to be done upon or along, and any use of, any adjacent or nearby
building, land, street, alley or way.
O. Mail Chutes: To have access for Landlord and other occupants
-----------
of the Building to any mail chutes according to the rules of the United
States Postal Service.
P. Other Rights: All other rights reserved by the Landlord
------------
pursuant to the provisions of this Lease.
11. DEFAULT AND LANDLORD'S REMEDIES.
A. Defaults. The occurrence of any of the following shall
--------
constitute a default hereunder:
(1) If Tenant defaults in the payment of rent (whether Base
Rent, Operating Cost Share Rent, Tax Share Rent or Additional
Rent), or any other sum required to be paid by this Lease;
provided, however, that Landlord shall not be entitled to
exercise its remedies set forth herein or at law or in equity
with respect to such default, unless such default is not remedied
within five (5) days after written notice thereof by Landlord to
Tenant;
(2) If Tenant defaults in the prompt and full performance or
observance of any term, covenant, agreement or provision of this
Lease (except those specified in Subsections (1), (3), (4), (5),
(6), (7), (8) and (9) of this Section 11A); provided, however,
that Landlord shall not be entitled to exercise its remedies set
forth herein or at law or in equity with respect to such default,
(i) if such default is remedied within seven (7) days after
written notice thereof by the Landlord, (or if such default
involves a hazardous condition and it is not cured by Tenant
immediately upon written notice to Tenant), or (ii) with respect
to a default which cannot reasonably be cured within seven (7)
days, if Tenant immediately commences to cure and diligently
proceeds to complete the cure of such default within a reasonable
time period which shall in no event extend beyond ninety (90)
days after Tenant receives written notice of such default;
(3) If Tenant abandons or vacates the Premises during
the Term hereof without rent being paid;
(4) If the leasehold interest of Tenant is levied upon under
execution or is attached under process of law, which levy or
attachment continues for a period of thirty (30) days;
(5) If Tenant becomes insolvent or bankrupt or shall
generally not pay its debts as they become due or shall admit in
writing its inability to pay its debts or shall make a general
assignment for the benefit of creditors;
(6) If Tenant shall commence any case, proceeding or other
action seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under
any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any
substantial part of its property;
-23-
<PAGE>
(7) If Tenant shall take any corporate or other action to
authorize any of the actions set forth above in Subsections (5) and
(6) of this Section 11A;
(8) If any case, proceeding or other action against Tenant
shall be commenced seeking to have an order for relief entered
against it as debtor, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or
for all or any substantial part of its property, and such case,
proceeding or other action (i) results in the entry of an order for
relief against it which is not fully stayed within seven (7)
business days after the entry thereof or (ii) remains undismissed
for a period of thirty (30) days; or
(9) If Tenant does any act, or any other circumstance
occurs, which this Lease expressly provides is a default hereunder.
B. Landlord's Remedies.
-------------------
(1) Upon the occurrence of any one or more defaults by
Tenant, Landlord may elect, by written notice to Tenant, to
terminate this Lease and Tenant's right to the Premises as of the
date set forth in the notice or, without terminating this Lease, to
terminate Tenant's right to possession of the Premises as of the
date set forth in the notice. Upon any termination of this Lease,
whether by lapse of time or otherwise, or upon any termination of
Tenant's right to possession without termination of the Lease,
Tenant shall surrender possession and vacate the Premises and
deliver possession thereof to Landlord, and Tenant hereby grants to
Landlord full and free license to enter into and upon the Premises
with process of law in the event of any such termination of this
Lease or of Tenant's right to possession, and to repossess Landlord
of the Premises as of Landlord's former estate and to expel or
remove Tenant and any others who may be occupying or be within the
Premises and to remove any and all property therefrom using such
force as may be necessary without being deemed in any manner guilty
of trespass, eviction or forcible entry or detainer, and without
relinquishing Landlord's rights to rent or any other right given to
Landlord hereunder or by law or in equity. Except as otherwise
provided in this Section 11, Tenant expressly waives the service of
any notice of intention to terminate this Lease or to reenter the
Premises and waives the service of any demand for payment of rent
or possession and waives the service of any other notice or demand
prescribed by any statute or other law, and agrees that the simple
breach of any of the covenants or conditions of this Lease shall,
without the service of any demand or notice whatsoever, constitute
a forcible detainer by Tenant of the Premises within the meaning of
the statutes of the State of Illinois.
(2) If Landlord elects to terminate Tenant's right to
possession only without terminating the Lease, and Landlord does so
elect, Landlord may at Landlord's option enter into the Premises,
remove Tenant's signs and other evidences of
-24-
<PAGE>
tenancy, and take and hold possession thereof as set forth in
subsection B(1) of this Section 11, without such entry and
possession terminating the Lease or releasing Tenant, in whole or
in part, from Tenant's obligation to pay the rent hereunder for the
full Term, and, at Landlord's option, the present value of the
aggregate amount of the Base Rent, Operating Cost Share Rent and
Tax Share Rent (based upon the amount thereof for the calendar
month immediately preceding the month in which the default has
occurred) for the period from the date stated in the written notice
terminating possession to the stated end of the Term (such present
value to be computed on the basis of a per annum discount rate
equal to three (3) percentage points below the Corporate Base Rate
at the time of the default) shall be immediately due and payable by
Tenant to Landlord, together with any other monies due hereunder,
and Landlord shall have right to immediate recovery of all such
amounts. In the alternative, Landlord shall have the right from
time to time, to recover from Tenant, and Tenant shall remain
liable for, all rent not theretofore accelerated and paid pursuant
to the foregoing sentence and any other sums thereafter accruing as
they become due under this Lease during the period from the date
stated in the notice terminating possession to the stated end of
the Term. Upon and after entry into possession without termination
of the Lease, subject to Landlord's right to first rent other
vacant areas in the Building, Landlord may relet the Premises or
any part thereof to any person, firm or corporation other than
Tenant for such rent, for such time (which may be a period
extending beyond the stated Term of this Lease) and upon such terms
as Landlord in Landlord's sole discretion shall determine, and
Landlord shall not be required to accept any tenant offered by
Tenant or to observe any instructions by Tenant relating to such
reletting. In any such case, Landlord may make repairs, alterations
and additions in or to the Premises and redecorate the same to the
extent deemed necessary or desirable by Landlord, and in connection
therewith Landlord may change the locks to the Premises, and Tenant
shall upon written demand pay the cost thereof, together with
Landlord's expenses of reletting. Any proceeds from the reletting
of the Premises by Landlord shall be collected by Landlord and
shall first be applied against the cost and expenses of reentry and
of reletting the Premises including, but not limited to, all
brokerage, advertising, legal, alteration, redecoration, repair,
and other reasonably necessary costs and expenses incurred to
secure a new tenant for the Premises, and second to the payment of
rent herein provided to be paid by the Tenant. If the consideration
collected by Landlord upon any such reletting, after payment of the
expenses of reletting the Premises, is not sufficient to pay any
accelerated amounts of rent due and owing and to pay monthly the
full amount of the rent reserved in this Lease and not theretofore
accelerated, Tenant shall pay to Landlord the accelerated amounts
upon demand, and the amount of each monthly deficiency as it
becomes due. If the consideration collected by Landlord upon any
such reletting for Tenant's account after payment of the expenses
of reletting the Premises is greater than the amount necessary to
pay accelerated amounts of rent due and owing and to pay the full
amount of the rent reserved in this Lease and not theretofore
accelerated, the full amount of such excess shall be retained by
Landlord and in no event shall be payable to Tenant. No such
reentry, repossession, repairs,
-25-
<PAGE>
alterations, additions or reletting shall be construed as an
eviction or ouster of Tenant or as an election on Landlord's part
to terminate this Lease, unless written notice of such intention is
given to Tenant, or shall operate to release Tenant in whole or in
part from any of Tenant's obligations hereunder. Notwithstanding
any provision hereof which may be to the contrary, Landlord agrees
to use all reasonable efforts to mitigate damages to the extent
required by law.
(3) If Landlord shall decide to terminate this Lease,
Landlord shall be entitled to recover from Tenant all of the
amounts of rent accrued and unpaid for the period up to and
including the date of the termination, as well as all other
additional sums for which Tenant is liable, or in respect of which
Tenant has agreed to indemnify Landlord under any of the provisions
of this Lease, which may then be owing and unpaid, and all
reasonable costs and expenses including, without limitation, court
costs and attorneys' fees incurred by Landlord in the enforcement
of its rights and remedies hereunder, and in addition, Landlord, at
its sole option, shall be entitled to recover from Tenant, in lieu
of any amounts due under Section 11B(2) hereof, and Tenant shall
pay to Landlord, on demand, as final and liquidated damages (and
not as a penalty), a sum equal to the amount of Landlord's
reasonable estimate of the aggregate amount of Base Rent, Operating
Cost Share Rent, Tax Share Rent and Additional Rent that would be
payable for the period from the date of such termination through
the Termination Date, reduced by the then reasonable rental value
of the Premises for the same period, both discounted to present
value at the rate per annum equal to three (3) percentage points
below the Corporate Base Rate at the time of the default. If,
before presentation of proof of such liquidated damages to any
court, commission or tribunal, the Premises, or any part thereof,
shall have been relet by Landlord for such period, or any part
thereof, the amount of rent payable upon such reletting shall be
deemed to be the reasonable rental value for the part or the whole
of the Premises relet during the term of the reletting.
(4) Landlord may but shall not be obligated to cure any
default by Tenant hereunder, but, if Landlord so elects, all costs
and expenses paid by Landlord in curing such default and legal fees
in connection therewith shall be Additional Rent due on the next
rent date.
(5) Notwithstanding anything in the Lease to the contrary,
any and all remedies set forth in this Lease (i) shall be in
addition to any and all other remedies Landlord may have at law or
in equity and (ii) shall be cumulative. The waiver by Landlord of
any breach of any term, covenant or condition herein contained
shall only be effective if it is in writing and shall not be deemed
to be a waiver of a continuing or subsequent breach of the same, or
of any other term, covenant or condition herein contained. The
acceptance of rent or any other amounts due hereunder shall not be
construed to be a waiver of any breach by Tenant of any term,
covenant or condition of this Lease, and if the same shall be
accepted after the termination of this Lease, by lapse of time or
otherwise, or of the Tenant's right of possession hereunder, or
after the giving of any notice, such acceptance shall not
reinstate, continue or extend the Term of this Lease or affect
-26-
<PAGE>
any notice given to Tenant prior to the receipt of such
amounts, it being agreed that after the service of notice or
the commencement of a suit or after final judgment for
possession of the Premises, Landlord may receive and collect
any rent and other sums due, and the payment of the same shall
not waive or affect said notice, suit or judgment.
(6) Notwithstanding any provision in this Lease prohibiting
Landlord from exercising its rights hereunder or at law or in
equity if Tenant cures a default within a specified period of time,
if Tenant shall default (i) in the timely payment of rent (whether
any or all of Base Rent, Operating Cost Share Rent, Tax Share Rent
or Additional Rent) three or more times in any period of 12
consecutive months, or (ii) in the performance of any particular
term, condition or covenant of this Lease three or more times in
any period of six consecutive months, then, notwithstanding that
such defaults shall have each been cured within any applicable cure
period after notice, if any, as provided in this Lease, any further
similar default (including, without limitation, with respect to
non-payment of rent, the further non-payment of any kind of rent
payable under this Lease) shall not be curable by Tenant and
Landlord shall have the right to exercise all of the remedies
provided in this Lease (including, without limitation, any and all
remedies at law and in equity) immediately after the occurrence of
such similar default.
(7) If the term of any lease, other than this Lease, made by
the Tenant for any demised premises in the Building or any other
building owned by Landlord or an affiliate of Landlord shall be
terminated or terminable after the making of this Lease because of
any default by the Tenant under such other lease, such fact shall
empower the Landlord, at Landlord's sole option, to terminate this
Lease by written notice to the Tenant.
(8) In the event that Tenant shall file for protection under
the Bankruptcy Code now or hereinafter in effect, or a trustee in
bankruptcy shall be appointed for Tenant, Landlord and Tenant agree
to the extent permitted by law, to request that the debtor-in-
possession or trustee-in-bankruptcy, if one shall have been
appointed, assume or reject this Lease within sixty (60) days
thereafter.
12. HOLDOVER. If Tenant retains possession of the Premises or any
part thereof after the termination of the Term or any extension thereof,
by lapse of time or otherwise, Tenant shall become a tenant from month-
to-month only upon each and all of the terms herein provided as may be
applicable to such month-to-month tenancy and any such holding over
shall not constitute an extension of this Lease; provided, however, that
during such holding over, Tenant shall pay Base Rent, Operating Cost
Share Rent and Tax Share Rent at 150% of the rate payable for the fiscal
year, or portion thereof, immediately preceding said holding over,
computed on a monthly basis for the time Tenant thus remains in
possession and, in addition, Tenant shall pay Landlord all damages,
consequential as well as direct, sustained by reason of Tenant's holding
over. Alternatively, at the election of Landlord expressed in a written
notice to Tenant and not otherwise, if such retention of possession
lasts more than sixty (60) days, such retention of possession shall
constitute a renewal of this Lease for one (1) year; provided,
-27-
<PAGE>
however, that Tenant shall pay Base Rent in an amount equal to the
greater of 150% of the rate payable for the immediately preceding fiscal
year, or portion thereof or 150% of the then current market rate
(hereinafter defined) as determined by Landlord, and Tenant shall
continue to make all other payments required under this Lease,
including, without limitation, Operating Cost Share Rent and Tax Share
Rent. Neither the acceptance of rent by the Landlord after termination,
nor the provisions of this Section: (i) shall be construed as, or
operate as, a renewal or as a waiver of Landlord's right of re-entry or
right to regain possession by actions at law or in equity or by any
other right or remedy hereunder, or (ii) shall be construed as, or
operate as, a waiver of any other right or remedy of Landlord.
13. SUBORDINATION TO MORTGAGES, TRUST DEEDS AND GROUND LEASES.
A. Subordination. This Lease shall be subordinated to any and
-------------
all Ground Leases now or hereafter in force with respect to the Project
at the election of the ground lessor under any such Ground Lease. This
Lease shall be subject to all of the terms and conditions of such Ground
Leases, which are hereby incorporated in this Lease by this reference,
and in the event of any conflict between the terms hereof and the terms
of any such Ground Leases, the terms of such Ground Leases shall
control. This Lease shall be subordinated to the lien of any and all
mortgages now or hereafter in force against (a) the Project and (b) any
and all Ground Leases with respect to the Project, at the election of
the mortgagee under any such mortgage. Landlord hereby represents that
as of the date hereof there are no Ground Leases with respect to the
Project.
The respective rights to so subordinate this Lease at the
election of any such ground lessor or mortgagee shall continue during
any amendment, renewal, modification, consolidation, replacement or
extension of each such Ground Lease or mortgage, and shall apply to any
and all advances made or hereafter made on the security of each such
mortgage.
Subordination shall be effective at election of any such ground
lessor or mortgagee. Election shall not be dependent on receipt of
notice by Tenant of the election to subordinate. Without limiting the
foregoing, notice of the election to subordinate may be given as
provided for notices pursuant to this Lease.
Any subordination at the election of any such ground lessor or
mortgagee shall be self-operating. Nevertheless, Tenant or its
successors in interest upon request of Landlord shall promptly
execute and deliver (within ten (10) days after a request therefor)
at any time and from time to time upon the request of Landlord, such
instruments as are reasonably necessary or appropriate in Landlord's
judgment to evidence such subordination.
B. Termination of Ground Lease or Foreclosure of Mortgage.
------------------------------------------------------
Should any mortgage on the Project or on any Ground Lease be foreclosed
or if any Ground Lease be terminated and this Lease be continued:
(1) The liability of the mortgagee, ground lessor or
purchaser at such foreclosure sale shall exist only during the
time such mortgagee, ground lessor or purchaser is the owner of
the Project.
-28-
<PAGE>
(2) Tenant shall attorn, as Tenant under this Lease,
without any deductions or setoffs whatsoever (except that Tenant
shall receive full credit for any rents theretofore paid by
Tenant), to the purchaser at the foreclosure sale (or the
mortgagee if the mortgagee becomes owner of the fee estate or
lessor under any Ground Lease) or, if any Ground Lease be
terminated for any reason, Tenant shall be deemed to have
attorned as Tenant under this Lease to the ground lessor under
the Ground Lease, and this Lease shall continue in full force and
effect as a direct lease between and binding upon Tenant and such
mortgagee or ground lessor, as the case may be. Likewise, Tenant
will attorn to a leasehold mortgagee in the event a leasehold
mortgagee should ever become the owner of the leasehold estate
covered by its mortgage or should become the owner of any new
lease in replacement or substitution of such leasehold estate.
Tenant agrees to promptly execute and deliver (within ten (10)
days after a request therefor) at any time and from time to time
upon the request of Landlord, or of any ground lessor under any
such Ground Lease, or of any holder of any such mortgage or
leasehold mortgage, or of any such purchaser, any instrument
which, in the sole judgment of such requesting party, may be
necessary or appropriate in any such foreclosure or termination
proceeding or otherwise to evidence such attornment.
(3) As used in this Section 13, "mortgage" shall include
"trust deed" and "mortgagee" shall include "trustee" and
successors and assigns of such party (whether immediate or
remote), the purchaser of any mortgage, whether at foreclosure
or otherwise and the successors, assigns and mortgagees of such
purchaser (whether immediate or remote).
C. Security Deposit. The mortgagee under a mortgage and the
-----------------
lessor under any Ground Lease shall have no responsibility for the
return of the security deposit, if any, except to the extent the
security deposit is held by such mortgagee or ground lessor.
D. Notice and Right to Cure. Landlord hereby notifies Tenant
------------------------
that the Project is subject to the mortgages set forth on Appendix E
attached hereto (Mortgages Currently Affecting the Project), and
Landlord agrees promptly to notify Tenant of the placing of any
additional Ground Leases, mortgages or trust deeds against the real
property or leasehold estate of which the Premises form a part.
Tenant agrees to give the mortgagees shown on Appendix E and any
other mortgagee or holder of a deed of trust or lessor of any Ground
Lease, by registered mail, a copy of any notice of default served upon
the Landlord, provided that prior to such notice Tenant has been
notified, in writing (by way of notice of Assignment of Rents and
Leases, or otherwise), of the address of such mortgagee, holder of a
deed of trust or lessor under any Ground Lease. Tenant further agrees
that if Landlord shall have failed to cure such default within the
time provided for in this Lease, then such mortgagee, holder of a deed
of trust or lessor under any Ground Lease shall have an additional
thirty (30) days within which to cure such default, or if such default
cannot be cured within that time, such mortgagee, holder of a deed of
trust or lessor under any Ground Lease shall have such additional time
as may be necessary to cure such default, provided that within such
thirty (30) days, any mortgagee, holder of a deed of trust or lessor
under any Ground
-29-
<PAGE>
Lease, as the case may be, has commenced and is diligently pursuing the
cure of such default (including but not limited to commencement of
foreclosure or lease forfeiture proceedings, if necessary to effect such
cure), and Tenant shall not pursue any of the remedies it may have for such
default and this Lease shall not be terminated, while such cure is being
diligently pursued, so long as the default is completely cured within a
reasonable time thereafter. During the period between the giving of such
notice and the remedying of Landlord's default, the rent herein recited
shall be abated and apportioned to the extent that any part of the Premises
shall be untenantable.
14. ASSIGNMENT AND SUBLETTING BY TENANT.
A. Tenant shall not, without the prior written consent of Landlord
in each instance, (i) assign, transfer, mortgage, pledge, hypothecate or
encumber or subject to or permit to exist upon or be subjected to any lien
or charge, this Lease or any interest under it, (ii) allow to exist or
occur any transfer of or lien upon this Lease or the Tenant's interest
herein by operation of law, (iii) sublet the Premises or any part thereof,
or (iv) permit the use or occupancy of the Premises or any part thereof for
any purpose not provided for under Section 6 of this Lease or by anyone
other than the Tenant and Tenant's employees. In no event shall this Lease
or any interest herein be assigned or assignable by voluntary or
involuntary bankruptcy proceedings or by operation of law or otherwise, and
in no event shall this Lease or any rights or privileges hereunder be an
asset of Tenant under any bankruptcy, insolvency or reorganization
proceedings, except as provided by law.
B. Consent by Landlord to any assignment, subletting, use,
occupancy, transfer or encumbrance shall not operate to relieve Tenant from
any covenant, liability or obligation hereunder (whether past, present or
future), including, without limitation, the obligation to pay rent, except
to the extent, if any, expressly provided for in such consent, or be deemed
to be a consent to any subsequent assignment, subletting, use, occupancy,
transfer or encumbrance. Tenant shall pay all of Landlord's costs, charges
and expenses, including without limitation, reasonable attorney's fees,
incurred in connection with any assignment, subletting, use, occupancy,
transfer or encumbrance made or requested by Tenant.
C. Tenant shall, by notice in writing, advise Landlord of its
intention from, on and after a stated date (which shall not be less than
sixty (60) days after the date of Tenant's notice) to assign this Lease or
sublet any part or all of the Premises for the balance or any part of the
Term, and, in such event, Landlord shall have the right, to be exercised by
giving written notice to Tenant within thirty (30) days after receipt of
Tenant's notice, to terminate this Lease with respect to the space
described in Tenant's notice as of the date stated in Tenant's notice for
the commencement of the proposed assignment or sublease. Tenant's notice
shall include the name and address of the proposed assignee or subtenant, a
true and complete copy of the proposed assignment or sublease and
sufficient information as Landlord deems necessary to permit Landlord to
determine the financial responsibility and character of the proposed
assignee or subtenant. If Tenant's notice covers all of the Premises and if
Landlord exercises its right to terminate this Lease as to such space, then
the Term of this Lease shall expire and end on the commencement date stated
in Tenant's notice as
-30-
<PAGE>
fully and completely as if that date had been the Termination Date. If,
however, Tenant's notice covers less than all of the Premises, and if
Landlord exercises its right to terminate this Lease with respect to
such space described in Tenant's notice, then as of the commencement
date stated in Tenant's notice, the rent reserved herein shall be
adjusted on the basis of the number of rentable square feet retained by
Tenant, and this Lease as so amended, shall continue thereafter in full
force and effect. If Landlord, upon receiving Tenant's notice, does not
exercise its right to terminate as aforesaid, Landlord will not
unreasonably withhold its consent to Tenant's assignment of this Lease
or subletting the space covered by its notice. Without limitation, it
shall be deemed reasonable for Landlord to withhold its consent to
Tenant's assignment of this Lease or subletting the space covered by its
notice if the proposed assignee or sublessee is a tenant or occupant of
the Building or an affiliate (a person controlling, controlled by or
under common control with) of a tenant or occupant of the Building.
D. If Tenant, having first obtained Landlord's consent to any
assignment or sublease, or if Tenant or a trustee in bankruptcy for
Tenant pursuant to the Bankruptcy Code, shall assign this Lease or
sublet the Premises, or any part thereof, at a rental or for other
consideration in excess of the aggregate of the Base Rent, Operating
Cost Share Rent and Tax Share Rent due and payable by Tenant under this
Lease, then Tenant shall pay to Landlord as Additional Rent sixty
percent (60%) of all of such excess rent or other consideration within
ten (10) days after receipt thereof from time to time.
E. If Tenant shall assign this Lease as permitted herein, the
assignee shall expressly assume all of the obligations of Tenant
hereunder and agree to comply with and be bound by all of the terms,
provisions and conditions of this Lease, in a written instrument
satisfactory to Landlord and furnished to Landlord not later than
fifteen (15) days prior to the effective date of the assignment. If
Tenant shall sublease the Premises as permitted herein, Tenant shall
obtain and furnish to Landlord, not later than fifteen (15) days prior
to the effective date of such sublease and in form satisfactory to
Landlord, the written agreement of such subtenant that it shall comply
with and be bound by all of the terms, provisions and conditions of this
Lease and that it will attorn to Landlord, at Landlord's option and
written request, in the event this Lease terminates before the
expiration of the sublease.
F. If Tenant is a corporation whose stock is not publicly
traded, any transaction or series of transactions (including, without
limitation, any dissolution, merger, consolidation or other
reorganization of Tenant, or any issuance, sale, gift, transfer or
redemption of the beneficial ownership of any capital stock of Tenant,
whether voluntary, involuntary or by operation of law, or any
combination of any of the foregoing transactions) resulting in the
transfer of control of Tenant, other than by reason of death or an
initial public offering by Tenant, shall be deemed to be a voluntary
assignment of this Lease by Tenant subject to the provisions of this
Section 14. If Tenant is a partnership, any transaction or series of
transactions (including without limitation any withdrawal or admittance
of a partner or any change in any partner's interest in Tenant, whether
voluntary, involuntary or by operation of law, or any combination of any
of the foregoing transactions) resulting in the transfer of control of
Tenant, other than by reason of death, shall be deemed to be a voluntary
-31-
<PAGE>
assignment of this Lease by Tenant subject to the provisions of this
Section 14. The term "control" as used in this Section 14F means the
power to directly or indirectly direct or cause the direction of the
management or policies of Tenant. If Tenant is a corporation, a change
or series of changes in ownership of stock which would result in direct
or indirect change in ownership by the stockholders or an affiliated
group of stockholders of less than fifty percent (50%) of the
outstanding stock as of the date of the execution and delivery of this
Lease shall not be considered a change of control.
G. Any assignment, subletting, use, occupancy, transfer or
encumbrance of this Lease or the Premises without Landlord's prior
written consent shall be of no effect and shall, at the option of
Landlord, constitute a default under this Lease.
15. SALE BY LANDLORD. In the event of sale, conveyance,
assignment or transfer by Landlord of its interest in the Project or in
the Building or in this Lease, the same shall operate to release
Landlord (subject to the second paragraph of Section 17 hereof) from any
future obligations and any future liability for or under any of the
covenants or conditions, express or implied, herein contained in favor
of Tenant, and in such event, and with respect to such obligations,
covenants and conditions, Tenant agrees to look solely to the successor
in interest of Landlord in and to this Lease. This Lease shall not be
affected by any such sale, conveyance or transfer.
16. ESTOPPEL CERTIFICATE. Landlord shall, at the request of
Tenant and Tenant shall, at the request of Landlord at any time and from
time to time upon not less than ten (10) days' prior written notice,
execute, acknowledge in recordable form, and deliver to the other, or
for the Tenant to its auditor or a prospective purchaser of its business
or assets, or to its assignee or subtenant if acceptable to Landlord, or
for the Landlord to Landlord's mortgagee, the lessor under any Ground
Lease, auditors or a prospective purchaser of the Project or any part
thereof, a certificate stating that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full
force and effect), and the dates to which the rent and other charges are
paid, and that Tenant is paying rent on a current basis with no offsets
or claims, and there are not, to Tenant's or Landlord's knowledge, as
the case may be, any uncured defaults on the part of Landlord or of
Tenant (or specifying such offsets, claims or defaults, if any are
claimed). Such certificate may require the party giving it to specify
the date of commencement of rent, the Commencement Date, the Termination
Date, the Base Rent, current Operating Cost Share Rent and Tax Share
Rent estimates, the date to which rent has been paid, whether or not
Landlord has completed any improvements required to be made to the
Premises and such other matters as may be required. It is expressly
understood and agreed that any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the
Project or by any ground lessor, or by a purchaser or assignee or lender
to Tenant or to auditors of either party hereto or by any other person
to whom it is delivered. The failure to deliver such statement within
the time required hereunder shall, at the option of the requesting
party, be a default under this Lease, or be conclusive evidence, binding
upon the nonperforming party that this Lease is in full force and
effect, without modification except as may be represented by the
requesting party, that there are no uncured defaults by the requesting
party
-32-
<PAGE>
and that not more than one (1) month's rent has been paid in advance,
and the nonperforming party shall be estopped from asserting any
defaults known to it at that time.
17. SECURITY DEPOSIT. Tenant has deposited with Landlord
security for the full and faithful performance of every provision of
this Lease to be performed by Tenant in the amount, if any, set forth as
Item 11 in the Schedule. If Tenant defaults with respect to any
provision of this Lease, Landlord may use all or any part of this
security deposit for the payment of any rent and any other sum due or in
default, or for the payment of any other amount which Landlord may spend
or become obligated to spend by reason of Tenant's default, or to
compensate Landlord for any loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of such deposit is to be
used, Tenant shall within fifteen (15) days after written demand
therefor deposit cash with Landlord in an amount sufficient to restore
the security deposit to its original amount and Tenant's failure to do
so shall be a material breach of this Lease. Landlord shall not be
required to keep this security deposit separate from its general funds
and Tenant shall not be entitled to interest on such deposit. If Tenant
shall fully and faithfully perform every provision of this Lease to be
performed by it, the security deposit or any balance thereof shall be
returned to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest hereunder) at the expiration of this Lease and upon
vacation of the Premises in accordance with the provisions hereof. Said
security deposit shall not be deemed an advance payment of rent or a
measure of Landlord's damages for any default hereunder by Tenant.
Tenant acknowledges that Landlord has the right to transfer all
or any part of its interest in the Project or this Lease, and Tenant
agrees that in the event of any such transfer, Landlord shall have the
right to transfer such security deposit to the transferee. Upon delivery
by Landlord to Tenant of such transferee's written acknowledgement of
its receipt of such security deposit, Landlord shall thereby be released
by Tenant from all liability or obligation for the return of such
deposit and Tenant agrees to look solely to such transferee for the
return of the security deposit.
18. EXCUSE OF LANDLORD'S INABILITY TO PERFORM; LANDLORD'S
DEFAULT. Except as specifically provided to the contrary in this Lease,
this Lease and the obligation of Tenant to pay rent hereunder and
perform all of Tenant's covenants and agreements hereunder shall not be
impaired nor shall Landlord be in default hereunder because Landlord is
unable to fulfill any of its obligations under this Lease, if Landlord
is prevented or delayed from so doing by any of the following (which
shall be referred to herein as a "Force Majeure"): any accident,
breakage, repairs, alterations, improvements, strike or labor troubles,
or any other cause whatsoever beyond the reasonable control of Landlord,
including, but not limited to, energy shortages or governmental
preemption in connection with a national emergency, or by reason of
government laws or any rule, order or regulation of any department or
subdivision thereof of any governmental agency, or by reason of the
conditions of supply and demand which have been or are affected by war
or other emergency.
19. PERSONAL PROPERTY AND TENANT FIXTURES. Tenant hereby conveys
to Landlord all of the personal property and Tenant's fixtures situated
and to be situated on the Premises as security for
-33-
<PAGE>
the payment of all rent due or to become due hereunder. Said property shall not
be removed therefrom without the consent of Landlord until all rent due or to
become due hereunder shall have first been paid and discharged. It is intended
by the parties hereto that this Lease constitutes a security agreement creating
a security interest in and to such property, subject to the liens of any
existing creditors, and Landlord, upon default of Tenant in the payment of rent,
shall have all the rights of a secured party, as provided in the Illinois
Uniform Commercial Code, as from time to time in effect. Landlord shall have the
right to file this security agreement as a financing statement, after the
occurrence of a default by Tenant which is not cured within any applicable cure
period.
20. NOTICES. All notices and approvals to be given by one party to the
other party under this Lease shall be given in writing, mailed or delivered as
follows:
A. To Landlord as follows:
Teachers Insurance and Annuity Teachers Insurance and Annuity
Association of America Association of America
c/o Office of the Building 730 Third Avenue
Manager New York, New York 10017
676 St. Clair Attn: Vice President
Chicago, Illinois 60611
or to such other person at such other address designated by notice to Tenant.
B. To Tenant at the place set forth as Item 12 on the Schedule until
Tenant takes possession of the Premises, and thereafter at the Premises or at
such other address designated by notice to Landlord, with a copy to Scott L.
Glickson, Esq., Gordon & Glickson, P.C., 444 North Michigan Avenue, Suite 3600,
Chicago, IL 60611.
Mailed notices shall be sent by United States Certified or Registered Mail,
postage prepaid. Mailed notices shall be deemed to have been given upon posting
in the United States mails, and notices delivered personally shall be deemed to
have been given upon delivery or attempted delivery.
21. QUIET POSSESSION. So long as Tenant shall observe and perform the
covenants and agreements binding on it hereunder, Tenant shall at all times
during the Term herein granted and subject to the provisions of this Lease
peacefully and quietly have and enjoy the possession of the Premises without any
encumbrance or hindrance by, from or through Landlord, its successors or
assigns.
22. REAL ESTATE BROKER. Tenant represents that it has not dealt with any
real estate broker except for The John Buck Company and that broker listed, if
any, in Item 13 in the Schedule, with respect to this Lease and, to its
knowledge no other broker initiated or participated in the negotiation of this
Lease, submitted or showed the Premises to Tenant or is entitled to any
commission in connection with this Lease. Tenant agrees to indemnify and hold
Landlord harmless from all claims from any other real estate broker for
commission or fees in connection with this Lease.
-34-
<PAGE>
23. CONDEMNATION. If all or any portion of the Project or Premises are
taken by eminent domain so that the Premises cannot be reasonably used by Tenant
for the purposes for which they are demised, then at the option of either party
this Lease may be terminated effective as of the date of the taking and all rent
reserved hereunder shall be paid to the date of such taking. The entire award
for any total or partial taking shall be paid to and retained by Landlord. If
any condemnation proceeding shall be instituted in which it is sought to take or
damage any part of the Project, or if the grade of any street or alley adjacent
to the Project is changed by any competent authority and such change of grade
makes it necessary or desirable to remodel the Project to conform to the changed
grade, Landlord shall have the right to terminate this Lease upon not less than
ninety (90) days' notice prior to the date of termination designated in the
notice. No money or other consideration shall be payable by Landlord to Tenant
for said termination, and the Tenant shall have no right to share in the
condemnation award or in any judgment for damages caused by said eminent domain
proceeding.
24. SPRINKLERS. If the sprinkler system installed at the Project or any of
its appliances shall be damaged or injured or not in proper working order by
reason of any act or omission of Tenant, Tenant's agents, servants, employees,
licensees or invitees, Tenant shall forthwith restore the same to good working
condition at its own expense. Tenant shall not do or permit anything to be done
upon the Premises, or bring or keep anything thereon which is in violation of
rules, regulations and requirements of the Illinois Inspection and Rating
Bureau, Fire Insurance Rating Organization or any similar authority having
jurisdiction over the Building, and if the Board of Fire Underwriters or Fire
Insurance Exchange or any bureau, department or official of the state or city
government, requires or recommends that any changes, modifications, alterations
or additional sprinkler heads or other equipment be made or supplied by reason
of Tenant's business or acts or the location of partitions, trade fixtures, or
other contents of the Premises, or if any such changes, modifications,
alterations, additional sprinkler heads or other equipment, become necessary to
prevent the imposition of a penalty or charge against the full allowance for a
sprinkler system in the fire insurance rate as fixed by said Exchange, or by any
fire insurance company, Tenant shall, at Tenant's expense, promptly make and
supply such changes, modifications, alterations, additional sprinkler heads or
other equipment.
25. MISCELLANEOUS.
A. Covenants Binding on Successors. Subject to the terms and provisions
-------------------------------
of Section 14 of this Lease, each provision of this Lease shall extend to and
shall, as the case may require, bind and inure to the benefit of Landlord and
Tenant and their respective heirs, legal representatives and successors and
assigns.
B. Date Payments Are Due. All amounts owed to Landlord hereunder, for
---------------------
which the date of payment is not expressly fixed herein, shall be paid within
thirty (30) days from the date Landlord renders statements of account therefor
and shall bear interest at the rate provided in Section 2D(3) from the date due
until paid.
C. Meaning of "Re-entry" and "Landlord". The words "re-enter" and "re-
------------------------------------
entry" as used in this Lease are not restricted to their technical legal
meaning. The term "Landlord," as used in
-35-
<PAGE>
this Lease, means only the landlord from time to time, and upon conveying or
transferring its interest, such conveying or transferring landlord shall be
relieved from any further obligation or liability pursuant to Sections 13B(1),
13C, 15 and 17 of this Lease.
D. Time Is of the Essence. Time is of the essence of this Lease and each
----------------------
and all of its provisions.
E. No Option. Submission of this instrument for examination or signature
---------
by Tenant does not constitute a reservation of or option for lease, and it is
not effective as a lease or otherwise until execution and delivery by both
Landlord and Tenant.
F. Severability. The invalidity or unenforceability of any provision
------------
hereof shall not affect or impair any other provisions.
G. Governing Laws. This Lease shall be governed by and construed pursuant
--------------
to the laws of the State of Illinois.
H. Lease Modification. Should any mortgage require a modification of this
------------------
Lease, which modification will not bring about any increased cost or expense to
Tenant or in any other way substantially change the rights and obligations of
Tenant hereunder, Tenant agrees that this Lease may be so modified.
I. No Oral Modification. No subsequent alteration, amendment, change or
--------------------
addition to this Lease shall be binding upon Landlord or Tenant unless in
writing signed by both parties.
J. Litigation and Arbitration Costs. In the event of any litigation or
--------------------------------
arbitration between the parties hereto with respect to the enforcement or
interpretation of this Lease, the nonprevailing party shall pay the attorneys'
fees, court costs and other costs of the prevailing party, provided that Tenant
shall notify Landlord of any alleged breach of Landlord's obligations under this
Lease and shall take no action with respect to such breach as long as Landlord
immediately commences to cure and diligently proceeds to complete the cure of
said breach within a reasonable time period. Each party hereto shall pay the
attorneys' fees, court costs (if any) and other costs incurred by the other
party in any litigation, negotiation or transaction in which such party causes
the other party, without the other party's fault, to become involved or
concerned (including, without limitation, any request for Landlord's consent to
a sublet or assignment).
K. Captions. The marginal headings and titles to the paragraphs of this
--------
Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
L. Remedies and Rights May Be Exercised by Landlord In Its Own Name;
-----------------------------------------------------------------
Authority to Execute This Lease. All rights and remedies of Landlord under this
- -------------------------------
Lease, or that may be provided by law, may be exercised by Landlord in its own
name individually, or in its name by any agent thereof, and all legal
proceedings for the enforcement of any such rights or remedies, may be commenced
and prosecuted to final judgment and executed by Landlord in its own name
individually or in its name by any agent thereof. Landlord and Tenant each
represents to the other that each has full power and authority to
-36-
<PAGE>
execute this Lease and to make and perform the agreements herein
contained.
M. Payments to Affiliates. Nothing in this Lease shall be
----------------------
construed to prevent Landlord from paying for services rendered or
materials delivered with respect to the Project or to the Premises
(including, without limitation, management services and contracting
out capital improvements or other capital repairs or construction
items) by affiliates of Landlord provided that the fees or costs of
such services and materials are at market rates in the Chicago
metropolitan area. All such fees or costs paid by Landlord to such
affiliates shall be deemed to constitute Operating Costs on the same
terms and conditions as if such fees and costs were paid to
non-affiliates of Landlord.
N. Entire Agreement. This Lease (including, without limitation,
----------------
any Rider attached hereto and signed by both parties and Appendices A
through E, all of which are incorporated herein by this reference)
constitutes the entire agreement between the Landlord and the Tenant.
Tenant acknowledges that it has not been induced to enter this Lease by
any promises, assurances, agreements, statements or representations
(collectively, "Representations") which are not set forth in this Lease
(including without limitation any Representations concerning Operating
Costs or Taxes). Tenant acknowledges that it has not relied on any such
Representations, agrees that no such Representations shall be used in
the construction or interpretation of this Lease and agrees that
Landlord shall have no liability for any consequences arising as a
result of any such Representations.
O. Landlord's Title. Landlord's title is and always shall be
----------------
paramount to the interest of Tenant, and nothing herein contained shall
empower Tenant to do any act which can, shall or may encumber Landlord's
title.
P. Light and Air Rights. This Lease does not grant any rights
--------------------
to light or air over or about the Project. Landlord specifically excepts
and reserves to itself the use of any roofs, the exterior portions of
the Premises, all rights to and the land and improvements below the
improved floor level of the Premises, the improvements and air rights
above the Premises and the improvements and air rights located outside
the demising walls of the Premises, and such areas within the Premises
as are required for installation of utility lines and other
installations required to serve any occupants of the Building and the
right to maintain and repair the same, and no rights with respect
thereto are conferred upon Tenant unless otherwise specifically provided
herein.
Q. Consents. Except as otherwise expressly set forth herein,
--------
wherever the consent or approval of either Landlord or Tenant is
required by the provisions of this Lease, such party shall not
unreasonably withhold or delay such consent or approval.
R. Landlord's Agents. Any rights reserved or granted to
-----------------
Landlord hereunder may be exercised by Landlord or any of its agents,
employees, contractors or designees.
S. Terms "Landlord" and "Tenant". The words "Landlord" and
-----------------------------
"Tenant" whenever used in this Lease shall be construed to mean the
plural where necessary, and the necessary grammatical changes required
to make the provisions hereof apply either to entities or
-37-
<PAGE>
individuals, or men or women, shall in all cases be assumed as though in
each case fully expressed.
T. Rent Not Based on Income. It is agreed by Landlord and
------------------------
Tenant that no rental or other payment for the use, occupancy or
utilization of the Premises demised hereunder shall be, or is, based in
whole or in part on the net income or profits derived by any person from
the Building or the Premises so leased, used, occupied, or utilized, and
Tenant further agrees that it will not enter into any sublease, license,
concession or other agreements for any use, occupancy or utilization of
the Premises which provides for a rental or other payment for such use,
occupancy or utilization based in whole or in part on the net income or
profits derived by any person from the Premises so leased, used,
occupied or utilized.
U. No Recording by Tenant. Tenant shall not record or file in
----------------------
any public records this Lease or any portion thereof.
V. Blue Cross Association, etc. Tenant is not granted by this
---------------------------
Lease and shall not be entitled to have any exclusive rights in the
Building other than the rights of its occupancy. Tenant further agrees
that it will not use its space in the Building in any way which could
cause any likelihood of confusion with Blue Cross Association (BCA) or
Blue Shield Association (BSA) or their services, or other harm to BCA or
BSA by reason of its name. For purposes of this paragraph only, the term
BCA or BSA includes BCA, BSA, Health Service Incorporated (HSI) or
Medical Indemnity of America, Inc. (MIA) or the successors of any of
them or any other entity or organization which shall be in any way
affiliated with or related to BCA, BSA (or any member Plan of either),
HSI or MIA, and which has as one of its major purposes a function
similar or related to those of the aforesaid organizations (for the
purposes of this Lease, such affiliation or relation may be legal,
equitable or functional) which includes in its legal or trade name the
terms "Blue", "Shield", "Cross", or any similar term if they are tenants
or subtenants in the Building.
26. UNRELATED BUSINESS INCOME.
A. Landlord shall have the right at any time and from time to
time to unilaterally amend the provisions of this Lease, if Landlord is
advised by its counsel that all or any portion of the monies paid by
Tenant to Landlord hereunder are, or may be deemed to be, unrelated
business income within the meaning of the United States Internal Revenue
Code or regulations issued thereunder, and Tenant agrees that it will
execute all documents or instruments necessary to effect such amendment
or amendments, provided that no such amendment shall result in Tenant
having to pay in the aggregate more money on account of its occupancy of
the Premises under the terms of this Lease, as so amended, and provided
further that no such amendment shall result in Tenant receiving fewer
services than it is presently entitled to receive under this Lease.
B. Any services which Landlord is required to furnish pursuant
to the provisions of this Lease may, at Landlord's option, be furnished
from time to time, in whole or in part, by employees of Landlord or the
building manager of the Project or its employees or by one or more third
persons hired by Landlord or the building manager of the Project. Tenant
agrees that upon Landlord's written request it will enter into direct
agreements with the building manager of the Project or other parties
designated by Landlord for
-38-
<PAGE>
the furnishing of any such services required to be furnished by Landlord
hereunder, in form and content approved by Landlord, provided however
that no such contract shall result in Tenant having to pay in the
aggregate more money on account of its occupancy of the Premises under
the terms of this Lease, and provided further that no such contract
shall result in Tenant receiving fewer services or services of a lesser
quality than it is presently entitled to receive under this Lease.
27. HAZARDOUS MATERIALS. Tenant shall not (either with or
-------------------
without negligence) cause or permit the escape, disposal or release of
any biologically or chemically active or other hazardous substances, or
materials. Tenant shall not allow the storage or use of such substances
or materials in any manner not sanctioned by law or by the highest
standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the Project any
such materials or substances except to use in the ordinary course of
Tenant's business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Without
limitation, hazardous substances and materials shall include those
described in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901 et seq., any applicable state or local laws and the regulations
adopted under these acts. If any present or future lender or
governmental agency shall ever require testing to ascertain whether or
not there has been any release of hazardous materials, then the
reasonable costs thereof shall be reimbursed by Tenant to Landlord upon
demand as Additional Rent hereunder if such requirement applies to the
Premises. In addition, Tenant shall execute affidavits, representations
and the like from time to time at Landlord's request concerning Tenant's
best knowledge and belief regarding the presence of hazardous substances
or materials on the Premises. In all events, Tenant shall indemnify
Landlord in the manner elsewhere provided in this lease from any release
or hazardous materials on the Premises occurring while Tenant is in
possession, or elsewhere if caused by Tenant or persons acting under
Tenant. The within covenants shall survive the expiration or earlier
termination of the Lease Term.
28. EXCULPATORY PROVISIONS. It is expressly understood and
----------------------
agreed by and between the parties hereto, anything herein to the
contrary notwithstanding, that each and all of the representations,
warranties, covenants, undertakings and agreements herein made on the
part of any Landlord while in form purporting to be the representations,
warranties, covenants, undertakings and agreements of such Landlord are
nevertheless each and every one of them made and intended, not as
personal representations, warranties, covenants, undertakings and
agreements by such Landlord, or for the purpose or with the intention of
binding such Landlord personally, but are made and intended for the
purpose only of subjecting such Landlord's interest in the Premises and
the Project to the terms of this Lease and for no other purpose
whatsoever, and in case of default hereunder by such Landlord (or
default through, under or by any of the beneficiaries of any Landlord
which is a land trust, or any of the agents, servants, employees or
representatives of such Landlord or said beneficiaries), Tenant shall
look solely to the interests of such Landlord in the Premises and the
Project; that no Landlord nor any of the beneficiaries of any Landlord
which is a land trust shall have any personal liability to pay any
indebtedness
-39-
<PAGE>
accruing hereunder or to perform any covenant, either express or
implied, herein contained and no liability or duty shall rest upon any
Landlord which is a land trust to sequester the trust estate or the
rents, issues and profits arising therefrom, or the proceeds arising
from any sale or other disposition thereof; that no personal liability
or personal responsibility of any sort is assumed by, nor shall at any
time be asserted or enforceable against, any Landlord, or against any of
the beneficiaries of any Landlord which is a land trust, on account of
this Lease or on account of any representation, warranty, covenant,
undertaking or agreement of Landlord in this Lease contained, either
express or implied, all such personal liability, if any, being expressly
waived and released by Tenant and by all persons claiming by, through or
under Tenant; that this Lease, if executed by any Landlord which is a
land trust, is executed and delivered solely in the exercise of the
powers conferred upon it as such Trustee; and that as to any partnership
which is a Landlord or the beneficiary of a Landlord which is a land
trust, a deficit capital account of any partner of such partnership
shall not be deemed to be an asset or property of such partnership.
29. RIGHT OF FIRST OFFER. Subject to Section 29B below, during
--------------------
the Term of this Lease, Tenant shall have and is hereby granted a right
of first offer on the entire 8th floor of the Building, comprising
approximately 24,615 rentable square feet (the "ROFO Space"), which
right shall be exercised in accordance with the procedures set forth in
Section 29A below.
A. If at any time during the Term of this Lease the ROFO Space
becomes available for lease, Landlord shall give written notice thereof
to Tenant (the "Landlord's ROFO Notice"). Landlord's ROFO Notice may be
given at any time up to sixteen (16) months in advance of such
availability and shall contain the terms upon which Landlord intends to
offer the ROFO Space for lease to the market. Tenant shall notify
Landlord within thirty (30) days of receipt of Landlord's ROFO Notice
whether it desires to lease the ROFO Space on the terms set forth in
Landlord's ROFO Notice. Tenant's failure to notify Landlord within said
30-day period shall be deemed a refusal by Tenant. After any such
refusal or deemed refusal, Tenant shall have no further rights to the
ROFO Space and Landlord shall be free to lease such space to any person
or entity for any term. If Tenant exercises its right of first offer
with respect to the ROFO Space, such space shall be added to the
Premises for the remaining Term of the Lease on (a) all the terms,
covenants and conditions specified in the Landlord's ROFO Notice, and
(b) the terms, covenants and conditions of this Lease to the extent that
such terms, covenants and conditions of this Lease do not conflict with
the terms, covenants and conditions specified in the Landlord's ROFO
Notice. The ROFO Space so added to the Premises pursuant to this Section
29 shall become a part of the Premises for all purposes of this Lease,
and any reference in this Lease to the term "Premises" shall be deemed
to refer to and include the ROFO Space, except as expressly provided
otherwise in this Lease.
B. Tenant's right to exercise its right of first offer with
respect to the ROFO Space pursuant to this Section 29 is subject to the
following conditions: (i) that on the date that Tenant delivers its
binding written notice of its election to exercise its right of first
offer, Tenant is not in default under any of the terms, covenants or
conditions of the Lease, and an unmatured event of default has not
occurred and is not continuing; and (ii) that Tenant shall not have
assigned the Lease or sublet any portion of the
-40-
<PAGE>
Premises at any time during the period commencing with the date that
Tenant delivers its binding written notice to Landlord of its exercise
of its right of first offer and ending on the date on which the ROFO
Space is available to be added to the Premises, or at any time prior to
such period, if such assignment or sublease extends into such period.
C. Promptly after Tenant's exercise of its right of first offer
pursuant to this Section 29, Landlord shall prepare an amendment to the
Lease to reflect changes in the size of the Premises, Base Rent,
Tenant's Proportionate Share and any other appropriate terms, due to the
addition of the ROFO Space. Tenant shall execute and return such an
amendment to the Lease within fifteen (15) days after its submission to
Tenant.
30. PARKING. Landlord shall provide Tenant with two reserved
parking spaces in the Building parking lot. Such parking spaces shall be
provided at Landlord's current rates for parking.
-41-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease on the
date first above written.
LANDLORD:
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA, a New
York Corporation
By:__________________________________
Print Name:__________________________
Title:_______________________________
TENANT:
OPEN PORT TECHNOLOGY, INC., an
Illinois corporation
By: /s/ Randy Storch
----------------------------------
Print Name: Randy Storch
--------------------------
Title: President
-------------------------------
-42-
<PAGE>
APPENDIX A
[PLAN APPEARS HERE]
<PAGE>
APPENDIX B
CLEANING SCHEDULE
Landlord shall furnish janitorial service as described below:
DAILY
-----
Sweep, dry mop (using treated mops), or vacuum all floor areas (moving
light furniture) of resilient wood or carpet, remove matter such as gum and tar
which had adhered to the floor.
Empty and damp wipe all ashtrays and waste baskets and remove all trash.
Dust all horizontal surfaces with treated dust cloth, including furniture,
files, equipment, blinds, and louvers that can be reached without a ladder.
Damp wipe all telephones, including dials and crevices.
Spot wash to remove smudges, marks and fingerprints from such areas as
walls, equipment, doors, partitions and light switches within reach.
Wash and disinfect water fountains and water coolers.
Damp mop all non-resilient floors such as concrete, terrazzo and ceramic
tile.
Empty all waste containers.
Dust and rub down elevator doors, walls, and metal work in elevator cabs.
TOILET ROOMS
------------
Clean mirrors, soap dispensers, shelves, wash basins, exposed plumbing,
dispenser and disposal container exteriors using detergent disinfectant and
water. Damp wipe all ledges, toilet stalls and doors, spot clean light switches,
doors and walls.
Clean toilets and urinals with detergent disinfectant, beginning with seats
and working down. Pour one ounce of bowl cleaner into urinal after cleaning and
do not flush.
Furnish and refill all soap, toilet, sanitary napkin and towel dispensers.
Clean all baseboards.
Damp mop floors using detergent disinfectant.
WEEKLY
------
Wash all directory board, display, entry door and side light glass, as
necessary.
Spot clean carpet stains.
APPENDIX B
Page 1 of 2
<PAGE>
Spot wash interior partition glass and door glass to remove smudge marks,
and all smudge marks and finger marks from doors, partitions, woodwork, window
ledges and window mullions.
MONTHLY
-------
Sweep stairwells and landings.
Wash all uncarpeted areas.
High dust all horizontal and vertical surfaces not reached in nightly
cleaning, such as pipes, light fixtures, door frames, picture frames and other
wall hangings.
QUARTERLY
---------
Vacuum all ceilings and wall air supply and exhaust diffusers or grills.
Wash all stairwell landings and treads.
Exterior windows of the building will be cleaned, weather permitting.
All tile areas to be scrubbed, waxed and buffed.
APPENDIX B
Page 2 of 2
<PAGE>
APPENDIX C
RULES AND REGULATIONS
1. Tenant shall not place anything, or allow anything to be placed near
the glass of any window, door, partition or wall which may, in Landlord's
judgment, appear unsightly from outside of the Project.
2. The Project directory shall be available to Tenant solely to display
names and their location in the Project, which display shall be as directed by
Landlord.
3. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used by Tenant for any purposes
other than for ingress to and egress from the Premises. Tenant shall lend its
full cooperation to keep such areas free from all obstruction and in a clean and
sightly condition and shall move all supplies, furniture and equipment as soon
as received directly to the Premises and move all such items and waste, being
taken from the Premises (other than waste customarily removed by employees of
the Building) directly to the shipping platform at or about the time arranged
for removal therefrom. The halls, passages, exits, entrances, elevators,
stairways, balconies and roof are not for the use of the general public and
Landlord shall, in all cases, retain the right to control and prevent access
thereto by all persons whose presence in the judgment of Landlord, reasonably
exercised, shall be prejudicial to the safety, character, reputation and
interests of the Project. Neither Tenant nor any employee or invitee of Tenant
shall go upon the roof of the Project.
4. The toilet rooms, urinals, wash bowls and other apparatuses shall not
be used for any purposes other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein, and to the
extent caused by Tenant or its employees or invitees, the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by Tenant.
5. Tenant shall not cause any unnecessary janitorial labor or services by
reason of Tenant's carelessness or indifference in the preservation of good
order and cleanliness.
6. Tenant shall not install or operate any refrigerating, heating or air
conditioning apparatus or carry on any mechanical business without the prior
written consent of Landlord; use the Premises for housing, lodging or sleeping
purposes; or permit preparation or warming of food in the Premises (warming of
coffee and individual meals with employees and guests excepted). Tenant shall
not occupy or use the Premises or permit the Premises to be occupied or used for
any purpose, act or thing which is in violation of any public law, ordinance or
governmental regulation or which may be dangerous to persons or property.
7. Tenant shall not bring upon, use or keep in the Premises or the
Project any kerosene, gasoline or inflammable or combustible fluid or material,
or any other articles deemed hazardous to persons or property, or use any method
of heating or air conditioning other than that supplied by Landlord.
8. Landlord shall have sole power to direct electricians to where and how
telephone and other wires are to be introduced. No
APPENDIX C
Page 1 of 4
<PAGE>
boring or cutting for wires is to be allowed without the consent of Landlord.
The location of telephones, call boxes and other office equipment affixed to the
Premises shall be subject to the approval of Landlord.
9. No additional locks shall be placed upon any doors, windows or
transoms in or to the Premises. Tenant shall not change existing locks or the
mechanism thereof. Upon termination of the lease, Tenant shall deliver to
Landlord all keys and passes for offices, rooms, parking lot and toilet rooms
which shall have been furnished Tenant, and shall make known to Landlord the
combination of all locks there remaining in the Premises. In the event of the
loss of keys so furnished, Tenant shall pay Landlord therefor. Tenant shall not
make, or cause to be made, any such keys and shall order all such keys solely
from Landlord and shall pay Landlord for any keys in addition to the two sets of
keys originally furnished by Landlord for each lock.
10. Tenant shall not install linoleum, tile, carpet or other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord.
11. No furniture, packages, supplies, equipment or merchandise will be
received in the Project or carried up or down in the freight elevator, except
between such hours and in such freight elevator as shall be designated by
Landlord. Tenant shall not take or permit to be taken in or out of other
entrances of the Building or take or permit on other elevators, any item
normally taken in or out through the trucking concourse or service doors or in
or on freight elevators.
12. Tenant shall cause all doors to the Premises to be closed and securely
locked and shall turn off all utilities, lights and machines, before leaving the
Project at the end of the day.
13. Without the prior written consent of Landlord, Tenant shall not use
the name of the Project or any picture of the Project in connection with, or in
promoting or advertising the business of, Tenant, except Tenant may use the
address of the Project as the address of its business.
14. Tenant recognizes that the Blue Cross Association and the Blue Shield
Association and other entities associated with them have the right to use the
name of the Building and pictures or illustrations thereof, and that no other
tenant shall in advertising or in other publicity use the name of the Building
or pictures or illustrations of the Building except with the consent of Blue
Cross Association, Blue Shield Association and Landlord.
15. Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Premises' or the Project's heating and air
conditioning, and shall refrain from attempting to adjust any controls, other
than room thermostats installed for Tenant's use. Tenant shall keep corridor
doors closed.
16. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage, which may arise from a cause other than Landlord's
negligence, which includes keeping doors locked and other means of entry to the
Premises closed and secured.
17. Peddlers, solicitors and beggars shall be reported to the office of
the Project or as Landlord otherwise requests.
APPENDIX C
Page 2 of 4
<PAGE>
18. Tenant shall not advertise the business, profession or activities of
Tenant conducted in the Project in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities.
19. No bicycle or other vehicle and no animals or pets shall be allowed in
the Premises, halls, freight docks, or any other parts of the Building except
that blind persons may be accompanied by "seeing eye" dogs. Tenant shall not
make or permit any noise, vibration or odor to emanate from the Premises, or do
anything therein tending to create, or maintain, a nuisance, or do any act
tending to injure the reputation of the Building.
20. Tenant acknowledges that Building security problems may occur which
may require the employment of extreme security measures in the day-to-day
operation of the Project.
Accordingly:
(a) Landlord may, at any time, or from time to time, or for regularly
scheduled time periods, as deemed advisable by Landlord and/or its agents,
in their sole discretion, require that persons entering or leaving the
Project or the Property identify themselves to watchmen or other employees
designated by Landlord, by registration, identification or otherwise.
(b) Tenant agrees that it and its employees will cooperate fully with
Project employees in the implementation of any and all security procedures.
(c) Such security measures shall be the sole responsibility of
Landlord, and Tenant shall have no liability for any action taken by
Landlord in connection therewith.
21. Tenant shall not do or permit the manufacture, sale, purchase, use or
gift of any fermented, intoxicating or alcoholic beverages without obtaining
written consent of Landlord.
22. Tenant shall not disturb the quiet enjoyment of any other tenant.
23. Tenant shall not provide any janitorial services or cleaning without
Landlord's written consent and then only subject to supervision of Landlord and
at Tenant's sole responsibility and by janitor or cleaning contractor or
employees at all times satisfactory to Landlord.
24. Landlord may retain a pass key to the Premises and be allowed
admittance thereto at all times to enable its representatives to examine the
Premises from time to time and, upon reasonable prior notice to Tenant when
practicable, to exhibit the same, and during the last twelve (12) months of the
Term, Landlord may place and keep on the windows and doors of the Premises at
any time signs advertising the Premises for rent.
25. No equipment, mechanical ventilators, awnings, special shades or other
forms of window covering shall be permitted either inside or outside the windows
of the Premises without the prior written consent of Landlord, and then only at
the expense and risk
APPENDIX C
Page 3 of 4
<PAGE>
of Tenant, and they shall be of such shape, color, material, quality, design and
make as may be approved by Landlord.
26. Tenant shall not during the term of this Lease canvas or solicit other
tenants of the Building for any purpose.
27. Tenant shall not install or operate any phonograph, musical or sound
producing instrument or device, radio receiver or transmitter, TV receiver or
transmitter, or similar device in the Building, nor install or operate any
antenna, aerial, wires or other equipment inside or outside the Building, nor
operate any electrical device from which may emanate electrical waves which may
interfere with or impair radio or television broadcasting or reception from or
in the Building or elsewhere, without in each instance the prior written
approval of Landlord. The use thereof, if permitted, shall be subject to control
by Landlord to the end that others shall not be disturbed.
28. Tenant shall promptly remove all rubbish and waste from the Premises.
29. Tenant shall not exhibit, sell or offer for sale, rent or exchange in
the Premises or at the Project any article, thing or service except those
ordinarily embraced within the use of the Premises specified in Section 6 of
this Lease, without the prior written consent of Landlord.
30. Tenant shall list all furniture, equipment and similar articles Tenant
desires to remove from the Premises or the Building and deliver a copy of such
list to Landlord and procure a removal permit from the Office of the Building
authorizing Building employees to permit such articles to be removed.
31. Tenant shall not overload any floors in the Premises or any public
corridors or elevators in the Building.
32. Tenant shall not do any painting in the Premises, or mark, paint, cut
or drill into, drive nails or screws into, or in any way deface any part of the
Premises or the Building, outside or inside, without the prior written consent
of Landlord.
33. Whenever Landlord's consent, approval or satisfaction is required
under these Rules, then unless otherwise stated, any such consent, approval or
satisfaction must be obtained in advance, such consent or approval may be
granted or withheld in Landlord's sole discretion, and Landlord's satisfaction
shall be determined in its sole judgment.
34. Tenant and its employees shall cooperate in all fire drills conducted
by Landlord in the Building.
APPENDIX C
Page 4 of 4
<PAGE>
APPENDIX D
INTENTIONALLY OMITTED
APPENDIX D
Page 1 of 5
<PAGE>
EXHIBIT A to APPENDIX D
INTENTIONALLY OMITTED
EXHIBIT A of APPENDIX D
Page 1 of 4
<PAGE>
APPENDIX E
MORTGAGES CURRENTLY AFFECTING THE PROJECT
-----------------------------------------
NONE.
APPENDIX E
Page 1 of 1
<PAGE>
APPENDIX F
CONSTRUCTION BID
----------------
SEE ATTACHED
APPENDIX E
Page 1 of 1
<PAGE>
Exhibit 10.12
FIRST AMENDMENT TO LEASE
------------------------
THIS FIRST AMENDMENT TO LEASE (this "Amendment") is made and entered into
---------
as of this 2 day of October, 1996 by and between TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA, a New York corporation ("Landlord") and OPEN PORT
--------
TECHNOLOGY, INC., an Illinois corporation ("Tenant");
------
W I T N E S S E T H
-------------------
WHEREAS, Landlord and Tenant entered into that certain lease dated as of
August 23, 1995 (such lease as it may be modified or amended hereafter, is
called the "Lease") pursuant to which Landlord leased to Tenant certain premises
(the "Premises") on the ninth (9th) floor in a building commonly known as 676
--------
St. Clair situated at 676 St. Clair, Chicago, Illinois (the "Building"), as more
--------
particularly set forth in the Lease;
WHEREAS, Tenant desires to continue its occupancy of the Premises and
Landlord agrees to allow Tenant to continue such occupancy on all of the terms
and conditions of the Lease, except as the same are expressly modified or
amended hereby;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. Controlling Language: Insofar as the specific terms and provisions of
--------------------
this Amendment purport to amend or modify or are in conflict with the specific
terms, provisions and exhibits of the Lease, the terms and provisions of this
Amendment shall govern and control; in all other respects, the terms, provisions
and exhibits of the Lease shall remain unmodified and in full force and effect.
2. Term of the Lease: The Term of the Lease is hereby renewed for five
-----------------
(5) years beginning on March 1, 1997 (the "Renewal Commencement Date") and
-------------------------
ending on February 28, 2002, inclusive (the "Renewal Term"), on all the terms,
------------
covenants and conditions of the Lease, except as hereinafter set forth, and any
reference in the Lease to the Term of the Lease shall be deemed to include the
Renewal Term and apply thereto unless it is expressly provided otherwise.
Likewise, any reference in the Lease to the Termination Date of the Lease shall
be deemed to mean February 28, 2002.
3. Base Rent. As of the Renewal Commencement Date, Base Rent for the
---------
Premises shall be as set forth in the following schedule, which shall replace
and supersede all Base Rent amounts set forth in the Schedule to the Lease.
<PAGE>
<TABLE>
<CAPTION>
Monthly Installments
Period Base Rent of Base Rent
------ --------- --------------------
<S> <C> <C>
First Renewal Lease Year $404,761.50 ($16.50 x $33,730.13
24,531 rentable square feet)
Second Renewal Lease Year $417,027.00 ($17.00 x $34,752.25
24,531 rentable square feet)
Third Renewal Lease Year $429,292.50 ($17.50 x $35,774.38
24,531 rentable square feet)
Fourth Renewal Lease Year $441,558.00 ($18.00 x $36,796.50
24,531 rentable square feet)
Fifth Renewal Lease Year $453,823.50 ($18.50 x $37,818.63
24,531 rentable square feet)
</TABLE>
For purposes of this Amendment, "First Renewal Lease Year" shall mean the
------------------------
period beginning with the Renewal Commencement Date and ending February 28,
1998, and the "Second Renewal Lease Year" shall be the twelve-month period
-------------------------
beginning March 1, 1998 and each subsequent Renewal Lease Year shall be the
period of twelve months following the last day of the prior Renewal Lease Year.
Tenant shall pay the Security Deposit, One Hundred One Thousand One Hundred
Ninety and 39/100ths Dollars ($101,190.39), on or before February 28, 1997.
4. Schedule: As of the Renewal Commencement Date, the Schedule to the
--------
Lease shall be amended as follows:
Security Deposit: $ 101,190.39 (subject to decrease at the
end of the Second Lease Year as provided in
Section 17)
Base Operating Expenses: $ 3,534,531.60
Base Taxes: $ 3,915,003.90
5. Condition of Premises. Throughout the Renewal Term, Landlord is
---------------------
leasing the Premises to Tenant "as is", without any representations and
warranties of any kind (including, without limitation, any express or implied
warranties of merchantability, fitness or habitability) and, except as
expressly provided herein or in the Lease, without any obligation on the part of
Landlord to alter, remodel, improve, repair, or decorate the Premises or any
part thereof.
2
<PAGE>
6. Minimum Improvements to Premises. In addition to any improvements to
--------------------------------
the Premises performed by Tenant prior to February 28, 1997, Tenant shall, at
Tenant's sole expense, complete improvements (not including furniture,
furnishing or trade fixtures) to the Premises valued at least Forty Thousand and
no/100 Dollars ($40,000.00), by February 28, 1999 (as evidenced by "paid"
invoices submitted to Landlord no later than thirty (30) days after the
completion of such improvements).
7. Parking. Section 30 of the Lease is hereby deleted and the following
-------
inserted in lieu thereof:
"30. PARKING. Landlord shall provide Tenant with two (2)
reserved parking spaces in the Building parking lot. Such
parking spaces shall be provided at the current monthly rate
charged by Landlord."
8. Security Deposit. The first grammatical paragraph of Section 17 of
----------------
the Lease is hereby deleted and the following inserted in lieu thereof:
"On or before February 28, 1997, Tenant shall deposit with
Landlord security for the full and faithful performance of every
provision of this Lease to be performed by Tenant in the amount,
if any, set forth as the Security Deposit in the Schedule (One
Hundred One Thousand One Hundred Ninety and 39/100ths Dollars
($101,190.39)). Upon receipt thereof, Landlord shall deposit the
Security Deposit in an interest bearing account at a financial
institution selected by Landlord in its sole discretion. If Tenant
defaults with respect to any provision of this Lease, Landlord may
use all or any part of the Security Deposit and any interest
earned thereon for the payment of any rent and any other sum due
or in default, or for the payment of any other amount which
Landlord may spend or become obligated to spend by reason of
Tenant's default, or to compensate Landlord for any loss or damage
which Landlord may suffer by reason of Tenant's default. If any
portion of the Security Deposit is to be used, Tenant shall within
five (5) days after written demand therefor deposit cash with
Landlord in an amount sufficient to restore the security deposit
to its original amount (plus any interest thereon, but less the
amount, if any, returned to Tenant pursuant to the next
grammatical sentence) and Tenant's failure to do so shall be a
material breach of this Lease. Provided that Tenant is not then in
default after any applicable notice and cure period, Landlord
shall return Thirty Three Thousand Seven Hundred Thirty and
13/100ths Dollars
3
<PAGE>
($33,730.13) of the Security Deposit to Tenant at the end of the
Second Lease Year (in which event the Security Deposit for the
remainder of the Term of the Lease shall be Sixty Seven Four
Hundred Sixty and 26/100ths Dollars ($67,460.26)). If Tenant shall
fully and faithfully perform every provision of this Lease to be
performed by it, the Security Deposit plus such interest actually
earned thereon but not previously applied by Landlord in
accordance with this Section 17, less the amount, if any, refunded
to Tenant pursuant to the previous grammatical sentence (or, at
Landlord's option, to the last assignee of Tenant's interest
hereunder) at the expiration of this Lease and upon vacation of
the Premises in accordance with the provisions hereof. Said
security deposit shall not be deemed an advance payment of rent or
a measure of Landlord's damages for any default hereunder by
Tenant."
9. Preparation and Condition of Premises, Possession and Surrender of
------------------------------------------------------------------
Premises. Section 3C of the Lease is hereby deleted and the following inserted
- --------
in lieu thereof:
"C. Unless otherwise provided by written agreement, signed by Landlord, all
Work (hereinafter defined), partitions, hardware, light fixtures and other
fixtures (except trade fixtures and movable furniture and equipment
belonging to Tenant) in or upon the Premises, whether placed there by
Landlord or Tenant, shall be surrendered with the Premises at the
termination of this Lease, by lapse of time or otherwise, or at the
termination of Tenant's right to possession without termination of this
Lease, and shall become Landlord's property without compensation to Tenant;
provided, however, that if prior to any such termination of the Lease, or
of the right to possession, or within ten (10) days thereafter, Landlord so
directs by written notice, Tenant shall promptly remove any Work (except as
provided in Section 5A), partitions, hardware, light fixtures or other
fixtures placed in or upon the Premises by Tenant and designated in such
notice and repair any damage to the Premises caused by such removal,
failing which Landlord may remove the same and repair the Premises and
Tenant shall pay the cost thereof to Landlord upon demand."
10. Rules of Interpretation and Computation of Base Rent and Rent
-------------------------------------------------------------
Adjustments. The second grammatical sentence of Section 2D(9) of the Lease is
- -----------
hereby deleted and the following inserted in lieu thereof:
"(9) If any Operating Cost relates to more than one parcel of property
such Operating Cost shall be proportionately allocated among all parcels of
property to which it relates."
11. Alterations and Repairs. The fifth grammatical sentence of Section 5A
-----------------------
of the Lease is hereby deleted and the following inserted in lieu thereof:
4
<PAGE>
"Landlord hereby agrees to inform Tenant of its approval or disapproval of
any such Systems/Structure Work or Non-Systems Work within fifteen (15)
days after receipt of a complete set of plans and specifications therefor,
and if Landlord approves, Landlord shall, together with such approval,
notify Tenant of what items of Work must be removed at the end of the
Term of the Lease or earlier termination of Tenant's right to possession."
12. Fire and Other Casualty. Section 9C is hereby amended by adding the
-----------------------
following sentence at the end of such section:
"Notwithstanding anything in this Section 9C to the contrary, if all or
substantially all of the Premises shall be made untenantable by a fire or
other casualty occurring in the last year of the Term of this Lease, all
other provisions of this Section 9C shall apply except that Landlord shall
have six (6) months to make the Premises tenantable instead of twelve (12)
months."
13. Assignment and Subletting by Tenant. Section 14D of the Lease is
-----------------------------------
hereby deleted and the following inserted in lieu thereof:
"D. If Tenant, having first obtained Landlord's consent to any assignment
or sublease, or if Tenant or a trustee in bankruptcy for Tenant pursuant to
the Bankruptcy Code, shall assign this Lease or sublet the Premises, or any
part thereof, at a rental or for other consideration in excess of the
aggregate of the Base Rent, Operating Cost Share Rent and Tax Share Rent
due and payable by Tenant under this Lease, then Tenant shall pay to
Landlord as Additional Rent fifty percent (50%) of all of such excess rent
or other consideration within ten (10) days after receipt thereof from time
to time."
14. Rights Reserved to the Landlord. Section 10L is hereby amended by
-------------------------------
adding as the following after subsection (5):
"(6) the new premises is not located on the third (3rd) floor of the
Building."
15. Real Estate Broker. Tenant represents that it has not dealt with any
------------------
real estate broker except for The John Buck Company and Julien Studley, Inc.,
with respect to this Amendment to the Lease and, to its knowledge no other
broker initiated or participated in the negotiation of this Lease, submitted or
showed the Premises to Tenant or is entitled to any commission in connection
with this Lease. Tenant agrees to indemnify and hold Landlord harmless from all
claims from any other real estate broker for commission or fees in connection
with this Amendment to the Lease.
16. Landlord and Tenant hereby agree that (a) this Amendment is
incorporated into and made a part of the Lease, (b) any and all references to
the Lease hereafter shall include
5
<PAGE>
this Amendment, and (c) the Lease and all terms, conditions and provisions of
the Lease are in full force and effect as of the Date hereof, except as
expressly modified and amended hereinabove.
17. All terms capitalized but not defined herein shall have the same
meaning ascribed to such terms in the Lease.
18. This Amendment shall be governed by and construed under the laws of
the State of Illinois.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
LANDLORD: TENANT:
TEACHERS INSURANCE AND OPEN PORT TECHNOLOGY, INC.
ANNUITY ASSOCIATION OF an Illinois corporation
AMERICA, a New York corporation
By:_______________________ By: /s/ David P. Aniol
------------------------
Name:_____________________ Name: DAVID P. ANIOL
----------------------
Title:____________________ Title: CFO
---------------------
6
<PAGE>
EXHIBIT 10.13
MASTER LEASE AGREEMENT
No. 101-15001-01
THIRD COAST VENTURE LEASE PARTNERS I, L.P.
900 North Franklin Street, Suite 700
Chicago, Illinois 60610
(312) 337-3303
Lessee: OPEN PORT TECHNOLOGY, INC.
Address: 676 North St. Clair Street
Suite 900
Chicago, IL 60611
Date: June 22, 1998
Lessor hereby leases to Lessee and Lessee leases from Lessor, in accordance with
the terms and conditions hereinafter set forth, the Equipment. No respective
Schedule shall be construed as an independent separate lease unless assigned by
Lessor pursuant to Section 15 hereof. In the event of a conflict between the
terms of this Lease and the terms and conditions of a Schedule, the terms and
conditions of the Schedule shall govern and control that Schedule.
1. Definitions.
-----------
"Acceptance Date" shall mean (1) the date of delivery of the Equipment to
---------------
Lessee; (2) in the case of Equipment which is the subject of a sale and
leaseback between Lessor and Lessee, the date upon which Lessor purchases the
Equipment from Lessee; or (3) in the case of Equipment requiring installation,
the date of installation of the Equipment.
"Additions" shall mean all replacement parts, modifications, improvements,
---------
repairs, additions, accessories and alterations incorporated in the Equipment
as now or hereafter affixed thereto including proceeds thereof.
"Article 2A" shall mean Uniform Commercial Code Article 2A--Leases as
----------
adopted in the State of Illinois.
"Commencement Date" shall mean the Acceptance Date, except that if the
-----------------
Acceptance Date is other than the first day of a calendar quarter, then the
Commencement Date shall be the first day of the calendar quarter following the
month which includes the Acceptance Date.
"Default Date" shall mean the date of occurrence of an Event of Default as
------------
set forth in Section 13.
Page 1
<PAGE>
"Discount Rate" shall mean the charge on loans to depository institutions by
-------------
the Federal Reserve Banks in effect from time to time, as published in the Wall
Street Journal, Midwest Edition.
"Equipment" shall mean the equipment described in each Schedule together
---------
with all Additions which shall consist of personal computers, servers,
telecommunications equipment, and other office equipment.
"Equipment Acceptance" shall mean the written confirmation by Lessee of
--------------------
unconditional acceptance of the Equipment in the form supplied by Lessor.
"Equipment Loss" shall mean the loss, damage, theft or destruction of the
--------------
Equipment, or any portion thereof, from any cause whatsoever.
"Event of Default" shall mean those events set forth in Section 13 hereof.
----------------
"Fair Market Value" or "Fair Rental Value", as the case may be, shall mean
----------------- -----------------
the value determined on the basis of and equal in amount to the value which
would be obtained in an arm's-length transaction between an informed and willing
buyer-user or lessee-user (other than a used equipment dealer) and an informed
and willing seller or lessor under no compulsion to sell or lease, on the
assumptions that: all such Equipment (a) is being sold "in place and in use";
(b) is free and clear of all liens and encumbrances; (c) is in the condition
required upon the return of the Equipment under Sections 4 and 6 of this Lease;
(d) and does not include any Additions which Lessee may have incorporated into
the Equipment as may be permitted under Section 3 of the Lease. In such
determination, costs of removal of the Equipment from the location of current
use by Lessee shall be in addition to such value(s).
"Initial Lease Term" shall mean the term of this Lease for any item of
------------------
Equipment as set forth in the Addendum or Schedule relating to such item of
Equipment.
"Lease" shall mean this Master Lease Agreement No. 101-15001-01 and any
-----
Addenda executed pursuant to Section 24 hereof.
"Lessee" shall mean Open Port Technology, Inc., a corporation incorporated
------
under the laws of Illinois, with its principal place of business at 626 North
St. Clair Street, Suite 900 Chicago, IL 60611.
"Lessor" shall mean Third Coast Venture Lease Partners I, L.P., a Delaware
------
limited partnership with its principal place of business at 900 North Franklin
Street, Suite 700, Chicago, Illinois 60610.
"Obligor" shall mean any guarantor or surety of any obligations of Lessee
-------
to Lessor under this Lease and any Schedule hereto.
"Premises" shall mean the premises of Lessee where the Equipment is located
--------
as set forth in the applicable Schedule.
"Prime Rate" shall mean the base rate on corporate loans posted by at least
----------
75% of the nation's 30 largest banks (or its equivalent) per annum in effect
from time to time, as published in the Wall Street
Page 2
<PAGE>
Journal, Midwest Edition.
"Schedule(s)" shall mean those equipment schedule(s) which may be executed
-----------
by Lessor and Lessee from time to time each of which is made a part hereof.
"Service Charge" shall mean a charge equal to two percent (2%) per month of
--------------
the overdue payments or the maximum rate permitted by law, whichever is less.
"Supplier" shall mean the vendor, dealer, seller, manufacturer or supplier
--------
of the Equipment as defined in Article 2A.
2. Term and Rental. Lessee shall pay to Lessor, in addition to all other sums
---------------
due hereunder, an amount equal to the product of (i) the amount funded by
Lessor; multiplied by (ii) one-thirtieth of the applicable Monthly Rent Factor
(as such term is defined in the Addendum); multiplied by (iii) the number of
days from and including the date of such funding by Lessor to the Commencement
Date of the Initial Lease Term. Lessee agrees to pay the total rental for the
entire term hereof, which shall be the total amount of all rental payments set
forth in the Schedule(s), plus such additional amounts as may become due
hereunder or pursuant to any written modification hereof or additional written
agreement hereto. Except as otherwise specified in the Schedule(s), rental
payments hereunder shall be monthly and shall be payable in advance on the first
day of each month during the term of this Lease beginning with the Commencement
Date of the Initial Lease Term and shall be sent to the address of the Lessor
specified in this Lease or in the Schedule(s) or as otherwise directed by the
Lessor in writing. Rental payments or any other payments due hereunder not made
on or before the due date shall be overdue and shall be subject to a Service
Charge after a ten (10) day payment grace period. If Lessor shall at any time
accept a rental payment after it shall become due, such acceptance shall not
constitute or be construed as a waiver of any or all of Lessor's rights
hereunder, including without limitation those rights of Lessor set forth in
Sections 13 and 14 hereof.
3. Title. This is an agreement of lease only. Lessee shall have no right,
-----
title or interest in or to the Equipment leased hereunder, except as to the use
thereof subject to the terms and conditions of this Lease. All of the Equipment
shall remain personal property (whether or not the Equipment may at any time
become attached or affixed to real property). The Equipment is and shall remain
the sole and exclusive property of Lessor or its assignees. This Lease is
intended to constitute a true lease and not a sale of the related Equipment.
However, to the extent, at any time or from time to time, this Lease is
construed to be a transaction intended as security, Lessor retains and Lessee
hereby grants to Lessor a security interest in and to the Equipment, the
proceeds of any sale thereof, the assignment, lease, or sublease thereof, any
insurance proceeds with respect thereto, and any other rights of Lessee,
tangible or intangible, in and to the Equipment, the Lease, and their proceeds;
provided, further, that Lessee may not, to the extent this Lease is construed
to be a transaction intended as security, sell or otherwise encumber the
Equipment without Lessor's prior written consent. No right, title or interest in
the Equipment shall pass to Lessee other than, conditioned upon Lessee's
compliance with and fulfillment of the terms and conditions of this Lease, the
right to maintain possession and use of the Equipment for the Lease Term as
provided in Schedule(s). Any Additions, whether incorporated or affixed before
or after the Commencement Date, shall become the property of Lessor upon being
so incorporated or affixed and shall be returned to Lessor as provided in
Section 4. Upon the request of Lessor, Lessee will affix to the Equipment labels
or other markings supplied by Lessor indicating Lessor's
Page 3
<PAGE>
ownership of the Equipment and shall keep the same affixed for the entire term
of this Lease. Lessee agrees to promptly execute and deliver or cause to be
executed and delivered to Lessor and Lessor is hereby authorized to record or
file, any statement and/or instrument requested by Lessor for the purpose of
showing Lessor's interest in the Equipment, including without limitation,
financing statements, security agreements, and waivers with respect to rights in
the Equipment from any owners or mortgagees of any real estate where the
Equipment may be located. Lessee hereby appoints Lessor as Lessee's limited
attorney-in-fact to execute and record all documents necessary to perfect or
maintain the perfection of Lessor's interests hereunder or to make claim for,
receive payment of, and execute and endorse all documents, checks or drafts for
loss or damage under any insurance policy. Lessee shall pay Lessor for any costs
and fees relating to any filings hereunder including, but not limited to, costs,
fees, searches, document preparation, documentary stamps, privilege taxes and
reasonable attorneys' fees. If any item of Equipment includes computer software,
Lessee shall execute and deliver and shall cause Supplier (as hereinafter
defined) to deliver all such documents as are necessary to effectuate assignment
of all applicable software licenses to Lessor. Lessee shall at its expense: (a)
indemnify, protect and defend Lessor's title to the Equipment from and against
all persons claiming against or through Lessee; (b) at all times keep the
Equipment free from any and all liens, encumbrances, attachments, levies,
executions, burdens, charges or legal process of any and every type whatsoever;
(c) give Lessor immediate written notice of any breach of this Lease described
in clause (b); and (d) indemnify, protect and save Lessor harmless from any
loss, cost or expense (including reasonable attorneys' fees) caused by the
Lessee's breach of any of the provisions of this Lease.
4. Acceptance and Return of Equipment. Lessor shall, at any time prior to
----------------------------------
unconditional acceptance of all Equipment by Lessee, have the right to cancel
this Lease with respect to such Equipment (and if the Equipment or any portion
thereof has not previously been accepted, Lessor may refuse to pay for the
Equipment or any portion thereof or refuse to cause the same to be delivered)
if: (a) the Acceptance Date with respect to any item of Equipment to be leased
pursuant to any Schedule has not occurred within sixty (60) days of the
estimated Acceptance Date set forth in such Schedule or (b) there shall be, in
the reasonable judgment of Lessor, a material adverse change in the financial
condition or credit standing of Lessee or of any guarantor of Lessee's
performance under this Lease or failure of Lessee to substantially achieve
operational and financial objectives as set forth in Lessee's most recent
operating plan. Upon any cancellation by Lessor pursuant to this Section or the
provisions of any Schedule, Lessee shall forthwith reimburse to Lessor all sums
paid by Lessor with respect to such Equipment plus all costs and expenses of
Lessor incurred in connection with such Equipment and any interest or rentals
due hereunder in connection with such Equipment and shall pay to Lessor all
other sums then due hereunder, whereupon if Lessee is not then in default and
has fully performed all of its obligations hereunder, Lessor will, upon request
of Lessee, transfer to Lessee without warranty or recourse any rights that
Lessor may then have with respect to such Equipment. Lessee shall execute and
deliver to Lessor the Equipment Acceptance within thirty (30) days after the
Acceptance Date. Lessee agrees, before execution of the aforesaid Equipment
Acceptance, to inform Lessor in writing of any defects in the Equipment, or in
the installation thereof, which have come to the attention of Lessee or its
agents and which might give rise to a claim by Lessee against the Supplier or
any other person. If Lessee fails to give notice to Lessor of any such defects
or fails to deliver to Lessor the Equipment Acceptance as provided herein, it
shall be deemed an acknowledgment by Lessee (for purposes of this Lease only)
that no such defects in the Equipment or its installation exist and it shall be
conclusively presumed, solely as between Lessor and its assignees and Lessee,
that such Equipment has been unconditionally accepted by Lessee for lease
hereunder. Except as otherwise provided in any Schedule,
Page 4
<PAGE>
Lessee shall provide Lessor ninety (90) days prior written notice of its
intention to return the Equipment upon expiration of the Initial Lease Term.
Upon expiration or the cancellation or termination of the Lease with respect to
any Equipment, Lessee shall, at its own expense, assemble, crate, insure and
deliver all of the Equipment and all of the service records and all software and
software documentation subject to this Lease and any Schedules hereto to Lessor
in the same good condition and repair as when received, reasonable wear and tear
resulting only from proper use thereof excepted, to such reasonable destination
within the continental United States as Lessor shall designate. The Equipment
shall be deemed delivered to Lessor upon Lessor's execution of its certificate
of receipt. Lessee shall, immediately prior to such return of each item of
Equipment, provide to Lessor a letter reasonably acceptable to Lessor certifying
that said item is in good working order, reasonable wear and tear resulting only
from proper use thereof excepted. If any computer software requires relicensing
when removed from Lessee's premises, Lessee shall bear all costs of such
relicensing. If Lessee fails or refuses to return the Equipment as provided
herein at the end of any holdover period, Lessee shall pay to Lessor, at
Lessor's option, an amount equal to the highest monthly payment set forth in the
Schedule for each month the Equipment is not delivered. If Lessee fails or
refuses to return the Equipment as provided herein at the end of any holdover
period, Lessee shall pay to Lessor, at Lessor's option, an amount equal to the
highest monthly payment set forth in the Schedule or the highest rate permitted
by law, whichever is less, for each month or portion thereof, until Lessee so
returns the Equipment to Lessor.
5. Disclaimer of Warranties. The Lessee and Lessor agree that this Lease is a
------------------------
Finance Lease as defined in Uniform Commercial Code Article 2A--Leases. The
Lessee also acknowledges that: (a) the Lessee has selected the Supplier and
directed the Lessor to purchase the Equipment from the Supplier; (b) the Lessee
has been informed in writing, before signing this Lease, that the Lessee is
entitled under Article 2A to the promises and warranties, including those of any
third party, provided to the Lessor by the Supplier in connection with or as
part of the contract by which the Lessor acquired the Equipment; and (c) the
Lessee may communicate with the Supplier and receive an accurate and complete
statement of those promises and warranties, including any disclaimers and
limitations thereof or of any remedies in connection therewith. LESSEE HAS
EXCLUSIVELY SELECTED AND CHOSEN THE TYPE, DESIGN, CONFIGURATION, SPECIFICATION
AND QUALITY OF THE EQUIPMENT HEREIN LEASED AND THE SUPPLIER THEREOF, AS SET
FORTH IN THE SCHEDULES. LESSOR MAKES NO REPRESENTATION OR WARRANTY, EITHER
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION,
THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS,
ADAPTABILITY, ANY IMPLIED WARRANTY OF QUIET ENJOYMENT OR NON-INTERFERENCE OR
SUITABILITY FOR ANY PARTICULAR PURPOSE, AND, LESSEE LEASES, HIRES AND RENTS THE
EQUIPMENT "AS IS." Lessee understands and agrees that neither Supplier, nor any
agent of Supplier, is an agent of Lessor or is in any manner authorized to waive
or alter any term or condition of this Lease. Lessor shall not be liable for any
loss or damage suffered by Lessee or by any other person or entity, direct or
indirect or consequential, including, but not limited to, business interruption
and injury to persons or property, resulting from non-delivery or late delivery,
installation, failure or faulty operation, condition, suitability or use of the
Equipment leased by Lessee hereunder, or for any failure of any representations,
warranties or covenants made by the Supplier. Any claims of Lessee shall not be
made against Lessor but shall be made, if at all, solely and exclusively against
Supplier, or any persons other than the Lessor. Lessor hereby authorizes Lessee
to enforce during the term of this Lease, in its name, but at Lessee's sole
effort and expense, all
Page 5
<PAGE>
warranties, agreements or representations, if any, which may have been made by
Supplier to Lessor or to Lessee, and Lessor hereby assigns to Lessee solely for
the limited purpose of making and prosecuting any such claim, all rights which
Lessor may have against Supplier for breach of warranty or other representation
respecting the Equipment.
6. Care, Transfer and Use of Equipment. Lessee, at its own expense, shall
-----------------------------------
maintain the Equipment in good operating condition, repair and appearance in
accordance with Supplier's specifications and in compliance with all applicable
laws and regulations and shall protect the Equipment from deterioration except
for reasonable wear and tear resulting only from proper use thereof. When
generally offered, Lessee shall, at its expense, keep a maintenance contract in
full force and effect, throughout the term of this Lease and any Schedule
hereto. The disrepair or inoperability of the Equipment regardless of the cause
thereof shall not relieve Lessee of the obligation to pay rental hereunder.
Lessee shall not make any Addition to the Equipment (other than normal operating
accessories or controls) without the prior written consent of Lessor. Lessee
will not, and will not permit anyone other than the authorized field engineering
representatives of Supplier or other maintenance organization reasonably
acceptable to Lessor to effect any inspection, adjustment, preventative or
remedial maintenance or repair to the Equipment. Lessee may not (a) relocate or
operate the Equipment at locations other than the Premises, except with Lessor's
prior written consent, which shall not be unreasonably withheld if such other
location within the continental United States, or (b) SELL, CONVEY, TRANSFER,
ASSIGN, SUBLEASE, ENCUMBER ALL OR ANY OF ITS INTEREST IN THIS LEASE, ANY
SCHEDULE OR ANY ITEMS OF EQUIPMENT [INCLUDING PARTING WITH POSSESSION OF ANY
ITEM OF EQUIPMENT], AND ANY SUCH PURPORTED TRANSACTION SHALL BE NULL AND VOID
AND OF NO FORCE OR EFFECT. In the event of a relocation of the Equipment or any
item thereof to which Lessor consents, all costs (including, but not limited to,
Uniform Commercial Code filing fees, any additional property taxes or other
taxes and any additional expense of insurance coverage) resulting from any such
relocation, shall be promptly paid by Lessee upon presentation to Lessee of
evidence supporting such cost. Lessor shall have the right during normal hours
upon reasonable notice to Lessee, subject to applicable laws and regulations, to
enter Lessee's Premises in order to inspect, observe, affix labels or other
markings, or to exhibit the Equipment to prospective purchasers or future
lessees thereof, or to otherwise protect Lessor's interest therein.
7. Net Lease. THIS LEASE AND ANY SCHEDULE HERETO IS A NET LEASE, AND ALL
----------
PAYMENTS HEREUNDER ARE NET TO LESSOR. All taxes, assessments, licenses, and
other charges (including, without limitation personal property taxes and sales,
franchise, gross receipt, use and leasing taxes and penalties and interest on
such taxes) imposed, levied or assessed on the ownership, possession, rental or
use of the Equipment during the term of this Lease and any Schedule hereto
(except for Lessor's federal or state net income taxes) shall be paid by Lessee
when due and before the same shall become delinquent, whether such taxes are
assessed or would ordinarily be assessed against Lessor or Lessee. To the extent
possible under applicable law, for personal property or ad valorem tax return
purposes only, Lessee shall include the Equipment on such returns as may be
required, which returns shall be timely filed by it. In any event, Lessee shall
file all tax returns required for itself or Lessor and Lessor hereby appoints
Lessee as its attorney- in-fact for such purpose. In case of failure by Lessee
to so pay said taxes, assessments, licenses or other charges, Lessor may pay all
or any part of such items, in which event the amount so paid by Lessor including
any interest or penalties thereon and reasonable attorneys' fees incurred by
Lessor shall be immediately paid by Lessee to Lessor as additional rental
hereunder. Lessee shall promptly pay all costs,
Page 6
<PAGE>
expenses and obligations of every kind and nature incurred in connection with
the use or operation of the Equipment which may arise or become due during the
term of this Lease and any Schedule hereto, whether or not specifically
mentioned herein. In case of failure by Lessee to comply with any provision of
this Lease and any Schedule hereto, Lessor shall have the right, but not the
obligation, to effect such compliance on behalf of Lessee. In such event, all
costs and expenses incurred by Lessor in effecting such compliance shall be
immediately paid by Lessee to Lessor as additional rental hereunder.
8. Indemnity. Lessee shall and does hereby agree to indemnify, defend and hold
---------
Lessor and its assigns harmless from and against any and all liability, loss,
costs, injury, damage, penalties, suits, judgments, demands, claims, expenses
and disbursements (including without limitation, reasonable attorneys' fees) of
any kind whatsoever arising out of, on account of, or in connection with this
Lease, any Schedule hereto and the Equipment leased hereunder, including,
without limitation, its manufacture, selection, purchase, delivery, rejection,
installation, ownership, possession, leasing, renting, operation, control, use,
maintenance and the return thereof. Lessee's indemnity shall include any loss of
the tax benefits which Lessor, its affiliates, partners and assignees currently
are entitled to enjoy caused by (a) acts, omissions or misrepresentations of
Lessee in violation of its agreement. Such items shall include, but not be
limited to the following: if (i) Lessor shall not be entitled to accelerated
cost recover deductions (the "MACRS deductions") as allowed under Section 168 of
the Internal Revenue Code of 1986, as amended, ("the Code") based on 100% of the
Original Cost of the Equipment to Lessor and utilizing the depreciable life and
method referred to in the attached Schedule(s), or (ii) if Lessor is required to
recognize income other than rent as contemplated under the Lease, or (iii) if
any item of income, gain, loss or deduction is treated as having been derived
from or allocable to sources outside the U.S. This indemnity shall survive the
Initial Lease Term or earlier cancellation or termination of this Lease and any
Schedule hereto.
9. Insurance. Commencing on the date that risk of loss or damage passes to
---------
Lessor from the Supplier and continuing until Lessee has re-delivered the
Equipment to Lessor, Lessee shall, at its own expense, keep the Equipment
insured against all risks of loss or damage from every and any cause whatsoever
in such amounts (but in no event less than the greater of the replacement value
thereof or the amount set forth in the applicable casualty schedule, whichever
is higher and with a deductible amount not to exceed $5,000.00) and in such form
as is reasonably satisfactory to Lessor. All such insurance policies shall
protect Lessor and Lessor's assignee(s) as principal loss payees as their
interests may appear. Lessee shall also, at its own expense, carry public
liability insurance, with Lessor and Lessor's assignee(s) as an additional
insured, in such amounts with such companies and in such form as is satisfactory
to Lessor, with respect to injury to person or property resulting from or based
in any way upon or in any way connected with or relating to the installation,
use or alleged use, or operation of any or all of the Equipment, or its
location or condition. Not less than ten (10) days prior to the Acceptance Date,
Lessee shall deliver to Lessor satisfactory evidence of such insurance and shall
further deliver evidence of renewal of each such policy not less than thirty
(30) days prior to expiration thereof. Each such policy shall contain an
endorsement providing that the insurer will give Lessor and its assignees not
less than thirty (30) days prior written notice of the effective date of any
alteration, change, cancellation, or modification of such policy or the failure
by Lessee to timely pay all required premiums, costs or charges with respect
thereto. Upon Lessor's request, Lessee shall cause its insurance agent(s) to
execute and deliver to Lessor Loss Payable Clause Endorsement and Additional
Insured Endorsement (bodily injury and property damage liability insurance)
forms provided to Lessee by Lessor and name any assignees of Lessor designated
by Lessor. Each policy shall be primary without rights of
Page 7
<PAGE>
contribution from any other insurance which is carried by Lessor and shall
expressly provide that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each insured. Each policy shall provide for payment to Lessor and its
assignees notwithstanding any action, inaction or breach of representation or
warranty by Lessee or Lessor. In case of the failure to procure or maintain such
insurance, Lessor shall have the right, but not the obligation, to obtain such
insurance and there shall be no recourse against Lessor or its assignees for
payment of such premiums or other amounts with respect thereto. Any premium paid
by Lessor shall be immediately due and payable by Lessee to Lessor as additional
rent hereunder. The maintenance of any policy or policies of insurance pursuant
to this Section shall not limit any obligation or liability of Lessee pursuant
to Sections 8 or 10 or any other provision of this Lease and any Schedule
hereto. Lessee shall, to the extent reasonably possible, obtain liability
insurance required hereunder on an occurrence basis rather than a claims-made
basis. To the extent that the Lessee must obtain some or all of this coverage on
a claims-made basis, Lessee shall provide Lessor with satisfactory evidence that
the retroactive date of the claims-made policy is prior to the Commencement Date
or the date of Delivery and Acceptance by Lessee, whichever is earlier; that the
then remaining aggregate amount of Lessee's coverage is and will be sufficient
to meet the minimum amount of coverage required hereunder, and that the policy
will either remain in force, be renewed, or a satisfactory replacement policy
will be purchased to cover any claims which might arise hereunder in the
future. Lessee's obligation to keep the Equipment insured as provided herein
shall continue until the Equipment is returned to Lessor pursuant to Section 4
hereof.
10. Risk of Loss. Until such time as the Equipment is returned and delivered to
------------
Lessor, pursuant to the terms of this Lease and any Schedule hereto, Lessee
hereby assumes and shall bear the entire risk of any Equipment Loss. Without
limitation of the foregoing, no Equipment Loss shall relieve Lessee in any way
from its obligations hereunder. Lessee shall promptly notify Lessor in writing
of any Equipment Loss. In the event of any such Equipment Loss, Lessee shall:
(a) in the event Lessor determines such Equipment to be repairable, promptly
place, at Lessee's expense, the Equipment in good repair, condition and working
order in accordance with Supplier's specifications and to the satisfaction of
Lessor; or (b) in the event of an actual or constructive total loss of any item
of Equipment, at Lessor's option: (i) promptly replace, at Lessee's expense, the
Equipment with like equipment of the same or a later model with the same
Additions as the Equipment, and in good repair, condition and working order in
accordance with the Supplier's specifications and to the satisfaction of Lessor;
or (ii) immediately pay to Lessor the amount obtained by multiplying the
Equipment Cost as specified in the applicable Schedule by the percentage
contained in any casualty schedule for the date of such Equipment Loss plus, any
unpaid rentals or any amounts due hereunder or, if no casualty schedule has been
made a part of any applicable Schedule, an amount equal to the present value of
the total amount of unpaid rentals and all other amounts due and to become due
under any applicable Schedule during the term thereof as of the date of any
payment, discounted at a rate equal to the Discount Rate in effect as of the
Commencement Date of the Lease with respect to each applicable Schedule, plus an
additional amount equal to the Fair Market Value of the Equipment immediately
prior to the Equipment Loss, but in no event shall the amount of such Fair
Market Value be less than twenty percent (20%) of the Equipment Cost as
specified in the applicable Schedule. In the event Lessee is required to repair
or replace any such item of Equipment pursuant to Subsections (a) or (b)(i) of
the preceding sentence, the insurance proceeds received by Lessor and its
assignees, if any, pursuant to Section 9, after the use of such funds to pay any
unpaid amounts then due hereunder, shall be paid to Lessee or, if applicable, to
a third party repairing or replacing the Equipment upon Lessee's furnishing
proof satisfactory to Lessor and its assignee that such repair or
Page 8
<PAGE>
replacement has been completed in a satisfactory manner. In the event Lessor
elects the option set forth in Subsection (b)(ii), Lessee shall be entitled to a
credit against the payment required by said Subsection in an amount equal to
such insurance proceeds actually received by Lessor with any excess returned to
Lessee and its assignee pursuant to Section 9 on account of such Equipment, and,
upon payment by Lessee to Lessor of all of the sums required pursuant to
Subsection (b)(ii), the applicable Schedule shall terminate with respect to such
item of Equipment and Lessee shall be entitled to whatever interest Lessor may
have in such item "as is, where is" and "with all faults" in its then condition
and location without warranties of any type whatsoever, express or implied.
11. Covenants of Lessee. Lessee agrees that its obligations under this Lease
-------------------
and any Schedule hereto, including without limitation, the obligation to pay
rental, are irrevocable and absolute, shall not abate for any reason whatsoever
(including any claims against Lessor), and shall continue in full force and
effect regardless of any inability of Lessee to use the Equipment or any part
thereof for any reason whatsoever including, without limitation, war, act of
God, storms, governmental regulations, strike or other labor troubles, loss,
damage, destruction, disrepair, obsolescence, failure of or delay in delivery of
the Equipment, or failure of the Equipment to properly operate for any cause. In
the event of any alleged claim (including a claim which would otherwise be in
the nature of a set-off) against Lessor, Lessee shall fully perform and pay its
obligations hereunder (including all rents, without set-off or defense of any
kind) and its only exclusive recourse against Lessor shall be by a separate
action. Lessee shall provide Lessor with not less than thirty (30) days prior
written notice of any proposed change in Lessee's financial structure or
ownership (e.g., merger, consolidation, sale, lease or other disposition of
assets not in the ordinary course).
12. Representations and Warranties. In order to induce Lessor in enter into
------------------------------
this Lease and any Schedule hereto and to lease the Equipment to Lessee
hereunder, Lessee represents and warrants that:
(a) Financial Statements. (i) applications, financial statements, reports
and operating plans which have been submitted by Lessee and any Obligors to
Lessor are, and all information hereafter furnished by Lessee and Obligors
to Lessor will be, true and correct in all material respects as of the date
submitted; (ii) as of the date hereof, the date of any Schedule and any
Acceptance Date, there has been no material adverse change in any matter
stated in such applications, financial statements and reports; (iii) as of
the date hereof, the date of any Schedule and any Acceptance Date, Lessee
has not failed to substantially achieve operational and financial
objectives as set forth in Lessee's operating plan and financial
projections furnished to Lessor in connection with Lessor's approval of
this transaction; and, (iv) none of the foregoing omit or omitted to state
any material fact.
(b) Organization. Lessee is an organizational entity described on the
signature page hereof and is duly organized, validly existing and is duly
qualified to do business and is in good standing in each State in which the
Equipment will be located.
(c) Authority. Lessee has full power, authority and right to own and/or
lease property and to execute, deliver and perform this Lease and any
Schedule hereto, and the execution, delivery and performance hereof has
been authorized by all necessary action of Lessee.
Page 9
<PAGE>
(d) Enforceability. This Lease and any Schedule or other document executed
in connection therewith has been duly executed and delivered by Lessee and
any Obligor and constitutes a legal, valid and binding obligation of Lessee
and any Obligor enforceable in accordance with its terms.
(e) Consents. The execution, delivery and performance of this Lease and
any Schedule hereto does not require any approval or consent of any
stockholders, partners or proprietors or of any trustee or holders of any
indebtedness or obligations of Lessee, and will not contravene any law,
regulation, judgment or decree applicable to Lessee, or the certificate of
incorporation, partnership agreement, by-laws or other governing documents
of Lessee, or contravene the provisions of, or constitute a default under,
or result in the creation of any lien upon any property of Lessee under any
mortgage, instrument or other agreement to which Lessee is a party or by
which Lessee or its assets may be bound or affected. Except as disclosed,
no authorization, approval, license, filing or registration with any court
or governmental agency or instrumentality is necessary in connection with
the execution, delivery, performance, validity and enforceability of this
Lease and any Schedule hereto.
(f) Title. On each Commencement Date, Lessor shall have good and
marketable title to the items of Equipment which are subject to this Lease
and any Schedule hereto on such date, free and clear of all liens, except
the lien of Supplier which will be released upon receipt of payment. Lessee
warrants that no party has a security interest in the Equipment which will
not be released on or before payment by Lessor to Supplier of the Equipment
and that the Equipment is and shall at all times remain personal property
regardless of how it may be affixed to any real property.
(g) Litigation. There is no action, suit, investigation or proceeding by
or before any court, arbitrator, agency or governmental authority pending
or threatened against or affecting Lessee: (i) which involves the Equipment
or the transactions contemplated by this Lease and any Schedule hereto; or
(ii) which, if adversely determined, could have a material adverse effect
on the financial condition, business or operation of Lessee.
13. Events of Default. An Event of Default shall occur hereunder if Lessee or
-----------------
any Obligor: (a) fails to pay any installment of rent or other payment required
hereunder when due after a ten (10) day grace period; or (b) attempts to or does
remove from the Premises (except a relocation with Lessor's written consent as
provided in Section 6), sell, transfer, encumber, part with possession of, or
sublet any item of the Equipment; or (c) shall suffer or have suffered, in the
reasonable judgment of Lessor, any event the result of which has caused the
Lessor to deem itself to be insecure including, but not limited to, any of the
following: (i) a material adverse change in its financial condition or business
prospects as taken as a whole; (ii) a material change in structure (e.g.,
merger, consolidation, sale, lease or other disposition of assets not in the
ordinary course); (iii) a material change in ownership (e.g., sale of over 50%
of stock); (iv) failure of Lessee to substantially achieve operational and
financial objectives as set forth in Lessee's operating plan and financial
projections furnished to Lessor in connection with Lessor's approval of this
transaction; or (v) any of the statements or other documents or information
submitted at any time heretofore or hereafter by Lessee or Obligor to Lessor has
materially misstated or shall misstate or has failed or shall fail to state a
material fact; or (d) breaches or shall have breached any material
representation or material warranty made or given by Lessee or Obligor in this
Lease or in any other document furnished to Lessor in connection herewith, or
any such representation or warranty shall be untrue in any material respect or,
by reason of failure to state a
Page 10
<PAGE>
material fact or otherwise, shall be misleading; or (e) fails to perform or
observe any other material covenant, condition or agreement to be performed or
observed by it hereunder, and such failure or breach shall continue unremedied
for a period of ten (10) days after the earlier of (i) the date on which Lessee
obtains, or should have obtained knowledge of such failure or breach, or (ii)
the date on which notice thereof shall be given by Lessor to Lessee; or (f)
shall become insolvent or bankrupt or make an assignment for the benefit of
creditors or consent to the appointment of a trustee or receiver, or a trustee
or receiver shall be appointed for a substantial part of its property without
its consent, or bankruptcy or reorganization or insolvency proceeding shall be
instituted by or against Lessee or Obligor and such preceding is not dismissed
in ninety (90) days; or (g) conveys, sells, transfers, subleases or assigns
substantially all of Lessee's or Obligor's assets or ceases doing business as a
going concern, or, if a corporation, ceases to be in good standing unless cured
or files a statement of intent to dissolve, or abandons any or all of the
Equipment; or (h) shall be in breach of or default under any lease or other
agreement at any time executed with Lessor or any other lessor or with any
lender to Lessee or Obligor.
14. Remedies. From and after the Default Date, Lessor may, in its sole and
--------
absolute discretion, do any one or more of the following: (a) upon notice to
Lessee, cancel all or any portion of this Lease and some or all Schedules
executed pursuant thereto; (b) enter Lessee's Premises and without removal of
the Equipment, render the Equipment unusable or, require Lessee to assemble the
Equipment and make it available to Lessor at a place designated by Lessor,
and/or dispose of the Equipment by sale or otherwise (all of which
determinations may be made by Lessor in its sole and absolute discretion)
without any duty to account for such action or inaction or for any proceeds or
profits with respect thereto; (c) declare immediately due and payable all sums
due and to become due hereunder for the full term of the Lease (including any
renewal or purchase obligations which Lessee has contracted to pay); (d) with or
without canceling this Lease, recover from Lessee damages, in an amount equal to
the sum of: (i) all unpaid rent and other amounts that became due and payable
on, or prior to, the Default Date; (ii) the present value of all future rentals
and other amounts described in the Lease and not included in (i) above
discounted to the Default Date at a rate equal to the Discount Rate as of the
Commencement Date of the Lease with respect to each Schedule (which Discount
Rate, Lessee agrees is a commercially reasonable rate which takes into account
the facts and circumstances at the time such Schedule commenced); (iii) all
commercially reasonable costs and expenses incurred by Lessor in enforcing
Lessor's rights under this Lease, including but not limited to, costs of
repossession, recovery, storage, repair, sale, re-lease and reasonable
attorneys' fees; (iv) the estimated residual value of the Equipment as of the
expiration of the Lease; (v) any indemnity amount payable to Lessor; and (vi)
interest on all of the foregoing from the Default Date until the date payment is
received by Lessor at 2-1/2% in excess of the Prime Rate in effect on the date
of such payment, or the highest rate permitted by law, whichever is less; (e)
exercise any other right or remedy which may be available to it under the
Uniform Commercial Code or any other applicable law. Lessor reserves the right,
in its sole and absolute discretion, to release or sell any or all of the
Equipment at a public auction or in a private sale, at such time, on such terms
and with such notice as Lessor shall in its sole and absolute discretion deem
reasonable. In such event, without any duty on Lessor's part to effect any such
re-lease or sale of the Equipment, Lessor will credit the present value of any
proceeds from such sale or re-lease actually received and retainable by it (net
of any and all costs or expenses) discounted from the date of Lessor's receipt
thereof to the Default Date at 2-1/2% in excess of the Prime Rate in effect on
the date of such payment, or the highest rate permitted by law, whichever is
less to the amounts due to Lessor from Lessee under the provisions of (c), (d)
and/or (e) above. A cancellation of this Lease shall occur only upon notice by
Lessor and only as to such items of Equipment as Lessor
Page 11
<PAGE>
specifically elects to cancel and this Lease shall continue in full force and
effect as to the remaining items of Equipment, if any. If this Lease and/or any
Schedule is deemed at any time to be one intended as security, Lessee agrees
that the Equipment shall secure, in addition to the indebtedness set forth
herein, any other indebtedness at any time owing by Lessee to Lessor. No remedy
referred to in this Section is intended to be exclusive, but shall be cumulative
and in addition to any other remedy referred to above or otherwise available to
Lessor at law or in equity. No express or implied waiver by Lessor of any
default shall constitute a waiver of any other default by Lessee or a waiver of
any of Lessor's rights.
15. Assignment by Lessor. LESSOR MAY (WITH OR WITHOUT NOTICE TO LESSEE) SELL,
--------------------
TRANSFER, ASSIGN OR GRANT A SECURITY INTEREST IN ALL OR ANY PART OF ITS INTEREST
IN THIS LEASE, ANY SCHEDULE, ANY ITEMS OF EQUIPMENT OR ANY AMOUNT PAYABLE
HEREUNDER. In such an event, Lessee shall, upon receipt of notice, acknowledge
any such sale, transfer, assignment or grant of a security interest and shall
pay its obligations hereunder or amounts equal thereto to the respective
transferee, assignee or secured party in the manner specified in any
instructions received from Lessor. Notwithstanding any such sale, transfer,
assignment or grant of a security interest by Lessor and so long as no event of
default shall have occurred hereunder, neither Lessor nor any transferee,
assignee or secured party shall interfere with Lessee's right of use or quiet
enjoyment of the Equipment. In the event of such sale, transfer, assignment or
grant of a security interest in all or any part of this Lease and any Schedule
hereto, or in the Equipment or in sums payable hereunder, as aforesaid, Lessee
agrees to execute such documents as may be reasonably necessary to evidence,
secure and complete such sale, transfer, assignment or grant of a security
interest and to perfect the transferee's, assignee's or secured party's interest
therein and Lessee further agrees that the rights of any transferee, assignee or
secured party shall not be subject to any defense, set-off or counterclaim that
Lessee may have against Lessor or any other party, including the Supplier, which
defenses, set-offs and counterclaims shall be asserted only against such party,
and that any such transferee, assignee or secured party shall have all of
Lessor's rights hereunder, but shall assume none of Lessor's obligations
hereunder. Lessee acknowledges that any assignment or transfer by Lessor shall
not materially change Lessee's duties or obligations under this Lease nor
materially increase the burdens and risks imposed on Lessee. Lessee agrees that
Lessor may assign or transfer this Lease or Lessor's interest in the Equipment
provided that the transfer does not materially affect the interests of Lessee.
Nothing in the preceding sentence shall affect or impair the provisions of
Section 4, Section 10 or any other provision of this Lease.
16. Amendments. This Lease and any Schedules hereto contain the entire
----------
agreement between the parties with respect to the Equipment, this Lease and any
Schedules hereto and there is no agreement or understanding, oral or written,
which is not set forth herein. This Lease and any Schedules hereto may not be
altered, modified, terminated or discharged except by a writing signed by the
party against whom such alteration, modification, termination or discharge is
sought.
Lessee's Initials /s/ DPA
-------------
17. Law. This Lease and any Schedules hereto shall be binding only when
---
accepted by Lessor at its principle place of business in Illinois and shall in
all respects be governed and construed, and the rights and the liabilities of
the parties hereto determined, except for local filing requirements, in
accordance with the laws of the State of Illinois. LESSEE WAIVES TRIAL BY JURY
AND SUBMITS TO THE
Page 12
<PAGE>
JURISDICTION OF THE FEDERAL DISTRICT COURTS OF COMPETENT JURISDICTION OR ANY
STATE COURT WITHIN THE STATE OF ILLINOIS AND WAIVES ANY RIGHT TO ASSERT THAT ANY
ACTION INSTITUTED BY LESSOR IN ANY SUCH COURT IS IN THE IMPROPER VENUE OR SHOULD
BE TRANSFERRED TO A MORE CONVENIENT FORUM.
18. Invalidity. In the event that any provision of this Lease and any Schedule
----------
hereto shall be unenforceable in whole or in part, such provision shall be
limited to the extent necessary to render the same valid, or shall be excised
from this Lease or any Schedule hereto, as circumstances may require, and this
Lease and the applicable Schedule shall be construed as if said provision had
been incorporated herein as so limited, or as if said provision had not been
included herein, as the case may be without invalidating any of the remaining
provisions hereof.
19. Miscellaneous. All notices and demands relating hereto shall be in writing
-------------
and mailed by certified mail, return receipt requested, to Lessor or Lessee at
their respective addresses above or shown in the Schedule, or at any other
address designated by notice served in accordance herewith. Notice shall become
effective when deposited in the United States mail, with proper postage prepaid,
addressed to the party intended to be served at the address designated herein.
All obligations of Lessee shall survive the termination or expiration of this
Lease and any Schedule hereto. Should Lessor permit use by Lessee of any
Equipment beyond the Initial Lease Term, or, if applicable, any exercised
extension or renewal term, the lease obligations of Lessee shall continue and
such permissive use shall not be construed as a renewal of the term thereof, or
as a waiver of any right or continuation of any obligation of Lessor hereunder,
and Lessor may take possession of any such Equipment at any time upon demand. If
more than one Lessee is named in this Lease, the liability of each shall be
joint and several. Lessee shall, upon request of Lessor from time to time,
perform all acts and execute and deliver to Lessor all documents which Lessor
deems reasonably necessary to implement this Lease and any Schedule hereto,
including, without limitation, certificates addressed to such persons as Lessor
may direct stating that this Lease and the Schedule hereto is in full force and
effect, that there are no amendments or modifications thereto, that Lessor is
not in default hereof or breach hereunder, setting forth the date to which
rentals due hereunder have been paid, and stating such other matters as Lessor
may request. This Lease and any Schedule hereto shall be binding upon the
parties and their successors, legal representatives and assigns. Lessee's
successors and assigns shall include, without limitation, a receiver, debtor-in-
possession, or trustee of or for Lessee. If any person, firm, corporation or
other entity shall guarantee this Lease and the performance by Lessee of its
obligations hereunder, all of the terms and provisions hereof shall be duly
applicable to such Obligor.
20. Lessee's Waivers. To the extent permitted by applicable law, Lessee hereby
----------------
waives any and all rights and remedies conferred upon a Lessee by Article 2A of
the Uniform Commercial Code as adopted in any jurisdiction, including but not
limited to Lessee's rights to: (a) cancel this Lease; (b) repudiate this Lease;
(c) reject the Equipment; (d) revoke acceptance of the Equipment; (e) recover
damages from Lessor for any breaches of warranty or for any other reason; (f)
claim a security interest in the Equipment in Lessee's possession or control for
any reason (g) deduct all or any part of any claimed damages resulting from
Lessor's default, if any, under this Lease; (h) accept partial delivery of the
Equipment; (i) "cover" by making any purchase or lease of or contract to
purchase or lease Equipment in substitution for those due from Lessor; (j)
recover any general, special, incidental, or consequential damages for any
reason whatsoever; and (k) specific performance, replevin, detinue,
sequestration, claim, and delivery of the like for any Equipment
Page 13
<PAGE>
identified to this Lease. To the extent permitted by applicable law, Lessee also
hereby waives any rights now or hereafter conferred by statute or otherwise
which may require Lessor to sell, lease or otherwise use any Equipment in
mitigation of Lessor's damages as set forth in Paragraph 14 or which may
otherwise limit or modify any of Lessor's rights or remedies under Paragraph 14.
Any action by Lessee against Lessor for any default by Lessor under this Lease,
including breach of warranty or indemnity, shall be commenced within one (1)
year after any such cause of action accrues.
21. Reports. So long as this Lease is in effect or Lessor holds any unexpired
-------
and unexercised warrants, Lessee shall provide Lessor with the following: (a)
annual financial statements of Lessee (and of any Obligors), prepared in
accordance with generally accepted accounting principles and certified by
independent certified public accountants within ninety (90) days after Lessee's
(and any Obligor's) fiscal year end, (b) monthly financial and operating
performance data as and when provided to members of Lessee's Board of Directors,
investors and, if applicable, the S.E.C.; and (3) prompt written notice of any
material adverse change in Lessee's financial condition, operating plan or
business prospects.
22. Tax Benefits. All Equipment shall be tangible personal property eligible
------------
for MACRS depreciation under the Internal Revenue Code of 1986, as amended. The
depreciation benefits arising from the Equipment will be for the account of
Lessor.
23. Counterparts. This Lease may be executed in any number of counterparts,
------------
each of which shall be deemed an original. Each Schedule shall be executed in
three (3) counterparts each of which shall be deemed an original but only
counterpart number 1 shall constitute "chattel paper" or "collateral" within the
meaning of the Uniform Commercial Code in any jurisdiction.
Page 14
<PAGE>
24. Addendum. ("X" if applicable) [X] See Addenda attached hereto and made a
--------
part of this Lease. In the event of a conflict between the terms and conditions
of this Lease and the terms and conditions of an Addendum, the terms and
conditions of the Addendum shall govern and control.
The person executing this Lease for and on behalf of Lessee represents and
warrants, which representation and warranty shall survive the expiration or
termination of this Lease, that this Lease and the execution hereof has been
duly and validly authorized by Lessee, constitutes a valid and binding
obligation of Lessee and that he has authority to make such execution for and on
behalf of Lessee.
IN WITNESS WHEREOF, this Lease has been executed by Lessee this 22 day of June,
1998
OPEN PORT TECHNOLOGY, INC., Lessee
626 North St. Clair Street
Suite 900
Chicago, IL 60611
(An Illinois corporation)
By: /s/ David P. Aniol
--------------------------
Name: D.P. Aniol
--------------------------
Title: CFO
--------------------------
ACCEPTED AT CHICAGO, ILLINOIS
THIRD COAST VENTURE LEASE PARTNERS I, L.P., Lessor
900 North Franklin Street, Suite 700
Chicago, Illinois 60610
By its General Partner, Third Coast GP-I, L.L.C.
By: /s/ Miroslav Anic
--------------------------
Name: Miroslav Anic
--------------------------
Title: Manager
Page 15
<PAGE>
THIRD COAST CAPITAL
900 NORTH FRANKLIN STREET
SUITE 950
CHICAGO, ILLINOIS 60610
V 312 337 3303
-----
F 312 337 2567
1999, April 15
VIA Messenger
-------------
David P. Aniol
CFO
Open Port Technology, Inc.
676 North St. Clair, Suite 900
Chicago, IL 60611
Re: Warrant No. PW-2 and related Warrant Purchase Agreement (Warrant")
David,
Third Coast Venture Lease Partners I, LP ("Fund") has assigned 100% of its
interests in the Warrant to DVI Financial Services, Inc. Enclosed is the form
prescribed by the Warrant notifying you of such assignment.
Please acknowledge your receipt of the enclosed Assignment by adding your
signature to the signature block below and returning the original executed copy
of this letter to:
Melvin Breaux, Esq.
General Counsel
DVI, Inc.
500 Hyde Park
Doylestown, PA 18901
Please disregard our earlier request that a new warrant be issued.
Acknowledgement and acceptance of this Assignment will obviate the need for a
new warrant (and avoid any additional legal costs). Please advise if you have
any questions or comments.
Sincerely, ASSIGNMENT ACKNOWLEGED &
ACCEPTED on behalf of
Open Port Technology, Inc.
Miroslav Anic David P. Aniol
Managing Director Chief Financial Officer Date April 16, 1999
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
------------------
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. PW-_____), hereby agrees to subscribe for the purchase
of _______ shares of the Warrant Stock covered by such Warrant and makes payment
herewith in full therefor at the price per share provided by such Warrant.
Signature ________________________
Address _________________________
EXHIBIT II
ASSIGNMENT
----------
FOR VALUE RECEIVED, THIRD COAST VENTURE LEASE PARTNERS I, L.P. hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. PW-2) with respect to the number of shares of
the Warrant Stock covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
- ----------------- ------- -------------
DVI FINANCIAL SERVICES, INC. 500 HYDE PARK 91877
DOYLESTOWN, PA 18901
Dated: 4/15/99 Signature Third Coast Venture Lease
----------------------------
Partners I, L.P.
----------------------------
By Its General Partner
----------------------------
Third Coast GP-I, UC
----------------------------
Witness: /s/ Kathleen Wilkinson By: /s/ Miroslav Anic
------------------------
Miroslav Anic
------------------------
General Manager
------------------------
<PAGE>
ADDENDUM NO. 01 TO
MASTER LEASE AGREEMENT NO. 101-15001-01
DATED AS OF ______________________
BETWEEN
THIRD COAST VENTURE LEASE PARTNERS 1, L.P., LESSOR
AND
OPEN PORT TECHNOLOGY, INC., AS LESSEE
This Addendum is attached to and forms part of that certain Master Lease
Agreement No. 101-15001-01 dated as of __________________, 1998, between
THIRD COAST VENTURE LEASE PARTNERS I, L.P. ("Lessor") and OPEN PORT TECHNOLOGY,
INC., ("Lessee"), ("Lease") agreeing as follows:
A. Terms defined in the Lease shall have the same meanings herein unless
otherwise expressly set forth herein or otherwise required by context hereof.
B. The following shall be added to the terms of the Lease and are hereby
incorporated therein by reference.
C. To the extent any terms or conditions contained in this Addendum may be
inconsistent or conflict with any terms or conditions contained in the Lease,
the terms and conditions contained in this Addendum shall govern and control.
25. Definitions.
-----------
"Base Implicit Rate" shall mean as set forth in Section 28(b) herein.
------------------
"Base Monthly Rent Factor" shall mean as set forth in Section 28(b) herein.
------------------------
"Base Treasury Rate" shall mean as set forth in Section 28(b) herein.
------------------
"Equipment Cost" shall mean the lowest of: (a) manufacturer's net invoice
--------------
price; (b) net book value (determined in accordance with generally accepted
accounting principles); and (c) fair market value. Equipment Cost shall exclude
sales tax, delivery costs, installation costs, leasehold improvements and
software in excess of twenty-five percent (25%) of total fundings hereunder.
"Funding Period" shall mean from the date hereof to July 1, 1999.
--------------
"Implicit Rate" shall mean the annual implicit rate set forth in Section
-------------
28(c) herein.
"Index Instrument" shall mean the U.S. Treasury Notes maturing closest to
----------------
the date thirty-six (36) months from the Commencement Date of each Schedule.
"Lease Line" shall mean the equipment lease line of credit as set forth in
----------
Section 26 herein.
"Lease Line Amount" shall be the amount of the Lease Line to be provided
-----------------
hereunder as set forth in Section 26(b) herein.
Page 1
<PAGE>
"Monthly Rent Factor" shall mean as set forth in Section 28(c) herein.
-------------------
"New Equipment" shall include Equipment purchased by Lessor from Suppliers
-------------
and Equipment purchased by Lessee within ninety (90) days of resale to Lessor.
Lessor's purchase price for New Equipment shall be 100% of Equipment Cost.
"Treasury Rate" shall mean the yield of the Index Instrument as reported,
-------------
from time to time, in the Wall Street Journal, Midwest Edition.
26. Lease Line.
----------
(a) Subject to the terms and conditions of the Lease, this Addendum and
any applicable Schedules, and provided no Event of Default shall have occurred
and be then continuing, Lessor agrees to purchase and lease New Equipment to
Lessee.
(b) The aggregate Equipment Cost of such Equipment shall not exceed
$1,000,000.
(c) All Equipment to be purchased by Lessor and leased to Lessee under
this Lease Line shall be delivered, accepted, fully operational and funded by no
later than July 1, 1999, provided however, that aggregate takedowns prior to
January 1, 1999 shall be no less than $100,000.
(d) The Equipment shall be located at Lessee's locations at 676 North St.
Clair Street, Suite 900, Chicago, IL 60611 and at Lessee's current remote
offices, or such other locations, as Lessor may approve prior to funding in
writing, all as set forth in the applicable Schedules.
(e) No unit of Equipment with an aggregate Equipment Cost of less than
$1,000 shall be included in the Equipment.
(f) Each piece of Equipment, its Supplier and all purchase orders,
invoices & related documents will be subject to review and approval by Lessor.
27. Fundings.
--------
(a) Lessor, upon Lessee's request, may make payments for any unit of
Equipment with a unit cost over $1,000 to the Supplier in accordance with
Lessor's standard procedures. Lessee shall pay Lessor interim rent from the date
of each progress payment to the Commencement Date as set forth in Section 2 of
the Lease.
(b) In the event Lessee shall not deliver to Lessor its Equipment
Acceptance in respect of the Equipment on or before three (3) months from the
date of the first progress payment made hereunder, Lessee shall pay Lessor, upon
demand, an amount equal to the sum of all progress payments made by Lessor
together with all accrued and unpaid interim rent.
(c) Alternatively, Lessor may purchase Equipment from Lessee for which
Lessee may have purchased and paid the Supplier. In such event, Lessee shall
submit to Lessor evidence satisfactory to Lessor of payment to the Supplier,
within ninety (90) days of such payment by Lessee to Supplier.
(d) Lessor shall in its sole discretion accumulate Lessee's paid invoices
and progress payment made by
Page 2
<PAGE>
Lessor into Schedules of no less than $50,000 (except a final Schedule in a
lesser amount as required to utilize the remaining Lease Line) which Schedules
shall commence on the Commencement Date.
28. Lease Economics.
---------------
(a) The Initial Lease Term shall be thirty-six (36) months.
(b) The Base Monthly Rent Factor shall be 3.134% of Equipment Cost,
payable monthly in advance, and reflects a Base Implicit Rate of
8.50%, which corresponds to a Base Treasury Rate of 5.70%.
(c) For each Schedule, the Monthly Rent Factor shall be calculated based
on the Implicit Rate in effect on the Commencement Date of such Schedule. Such
Implicit Rate shall be equal to the Base Implicit Rate plus or minus (as
appropriate) the number of basis points by which the Treasury Rate on such
Commencement Date differs from the Base Treasury Rate. Notwithstanding anything
to the contrary contained herein, the minimum Implicit Rate shall be 8.50%. Upon
the commencement of each Schedule, the Monthly Rent Factor for such Schedule
shall be fixed for the Initial Lease Term of such Schedule.
29. Fees.
----
(a) Lessor acknowledges the receipt of an application fee of $5,000. The
application fee shall be applied to pay Lessor's due diligence costs, legal
costs and on-site document preparation costs. Any remaining balance will be
applied pro-rata to the first month's rent due under each Schedule.
(b) Last month's rent on $500,000 of the Lease Line shall be due on the
Commencement Date of the first Equipment Schedule. The last month's rent on the
additional $500,000 of the Lease Line shall be due on the Commencement Date of
the first Equipment Schedule that causes the total equipment funded to exceed
$500,000. Such rent shall be applied to the last month's rent for each Equipment
Schedule on a pro-rata basis. If Lessee does not utilize the Lease Line Amount,
Lessor shall retain any such unapplied balance of such Advance Rental.
(c) Lessee shall pay Lessor $500 per Equipment Location for administrative
expenses.
(d) An amount equal to the last month's rent representing the last payment
due calculated by multiplying the Base Monthly Rent Factor and $500,000 of the
Lease Line Amount, will be due on the Commencement Date of the first Schedule
and will be applied to the last payment due under each Schedule on a pro rata
basis. An amount equal to the last month's rent representing the last payment
due calculated by multiplying the Base Monthly Rate Factor and $500,000 of the
Lease Line Amount, will be due on the Commencement Date of the first Schedule
which causes the total equipment funded to exceed $500,000.
30. End of Term Options. Provided that this Lease has not been cancelled and
-------------------
that no Event of Default or event which, with notice or lapse of time or both,
would become an Event of Default shall have occurred and be continuing, Lessee
shall elect one of the following options in clauses (a), (b), or (c) below:
(a) Lessee's Option to Renew: At the expiration of the Initial Lease Term
of the first Schedule hereto, Lessee may elect to renew the Lease with respect
to all, and not less than all, of the Equipment under all Schedules at their
respective expiration dates for not less than twelve (12) months nor more than
twenty-four (24) months at the Equipment's Fair Rental Value, but not less than
1.50% of Equipment Cost per month, which rent shall be paid monthly in advance
plus any applicable taxes. Upon the expiration of such extended lease term,
Lessee shall purchase
Page 3
<PAGE>
the Equipment as provided in Section 30(b) unless Lessee shall have returned the
Equipment as provided in Section 30(c).
(b) Lessee's Option to Purchase: At the expiration of the Initial Lease
Term of the first Schedule hereto, Lessee may elect to purchase all, but not
less than all, of the Equipment under all Schedules at their respective
expiration dates for a purchase price equal to the then Fair Market Value, but
not less than 10% nor more than 15% of original Equipment Cost determined as of
the Commencement Date applicable to each Schedule, plus any applicable sales or
other transfer taxes payable as a result of such sale plus any amounts that
remain unpaid to Lessor under the Lease.
(c) Lessee's Option to Return: At the expiration date of Initial Lease
Term of the first Schedule hereto, Lessee may elect to return all, but not less
than all, of the Equipment under all Schedules at their respective expiration
dates in accordance with the return provisions of Section 4 of the Lease.
The foregoing options in clauses (a), (b), or (c) shall be exercised by written
notice delivered to Lessor not more than 180 days and not less than 90 days
prior to the expiration of the Initial Lease Term of the first Schedule hereto.
If none of the foregoing options in clauses (a), (b), or (c) of this section is
duly exercised by Lessee, this Lease shall be automatically extended at the
Monthly Rent Factor in effect immediately prior to the expiration date of the
Initial Lease Term applicable to first Schedule with respect to all Equipment
covered by any Schedule from the expiration date of the Initial Lease Term of
each Schedule on a month-to-month basis. Lessee may terminate any such extended
term on ninety (90) days' prior written notice to Lessor and so long as with
such notice Lessee elect one of the options described in clauses (a), (b), or
(c) above.
The purchase of the Equipment by Lessee pursuant to any options herein granted
shall be "AS IS, WHERE IS," without recourse to or any warranty by Lessor, other
than a warranty that the Equipment is free and clear of liens and encumbrances
resulting by or through acts of Lessor.
31. Warrants. Lessee shall issue and deliver to Lessor a warrant to purchase
--------
shares of the same class and at the same price as Lessee's Series C Preferred
round of financing ("Last Equity Round"). The warrants shall be issued and
delivered to Lessor upon the execution of the Lease, but in no event later than
the execution of this Addendum. The warrant expiration date shall be July 1,
2008. The terms of the warrant shall include piggyback registration rights on a
pro rata basis with the shares of other shareholders, acceptable anti-dilution
rights and shall provide for a "cashless" exercise provision in the event of
exercise by Lessor.
The warrant shall permit Lessor to purchase that number of shares in the Last
Equity Round equal to 2.00% of the Lease Line Amount divided by the Exercise
Price, which is the Warrant strike price equal to the price per share of the
Last Equity Round.
32. Additional Warrants. Upon the funding of a lease Schedule that causes the
-------------------
total equipment funded to exceed $500,000, Lessee shall issue Additional
Warrants to Lessor which shall permit Lessor to purchase additional shares of
Series C Preferred Stock at the same price as the Lessee's Last Equity Round.
Shares subject to such Additional Warrants shall have the same registration
rights, anti-dilution rights and other shareholder rights as granted to
investors in the Last Equity Round. In addition, the Additional Warrants shall
provide for a "cashless" exercise provision in the event of exercise by Lessor.
The Additional Warrant shall permit Lessor to purchase that number of shares in
the Last Equity Round equal to
Page 4
<PAGE>
2.00% of the Lease Line Amount divided by the Exercise Price, which is the
Warrant strike price equal to the price per share of the Last Equity Round.
33. Right of First Refusal. Until January 1, 2000, Lessee shall provide Lessor
----------------------
with the right to provide or arrange financing for the acquisition of Lessee's
additional Equipment for Lessee's use. In that regard, Lessee shall present to
Lenders any bona fide third party offer to provide financing for such equipment
and Lessor shall have the right to provide such financing on the offered terms
and conditions. Lessor shall respond to such right of first refusal within ten
(10) Business Days of receipt of a notice of such offer delivered as set forth
herein. If Lessor declines to provide such financing or fails to respond within
the ten (10) Business Day period, Lessee may accept and close the offered
financing within ninety (90) days of the notice to Lenders.
34. Conditions Precedent. Lessee shall cause the following documents to be
--------------------
delivered to Lessor in form and substance acceptable to Lessor:
(a) Condition to closing and Lessor's performance:
1. Master Lease Agreement;
2. Addendum;
3. Warrant and related documents;
4. Certified copy of Lessee's Articles of Incorporation and
By-Laws;
5. Certificate of Good Standing from Lessee's State of
Incorporation;
6. Certified Copy of Corporate Resolution;
7. UCC Search, Tax and Judgment Lien Search results satisfactory to
Lessor;
8. Release or subordination of any prior security interests in the
Equipment including "after acquired" clauses;
9. Current financial statements prepared by Lessee;
10. Most recent audited financial statements of Lessee prepared by
Independent Auditor;
11. Lessee's most current operating plan (including five year
financial and operating projections);
12. Insurance Letter, Loss Payable Clause Endorsement, Additional
Insured Endorsement and related Certificates of Insurance;
13. Release, Disclaimer or Subordination Agreements by each Owner and
Mortgagee of the Premises of the Equipment;
14. Such other items or documents as Lessor may request.
(b) Condition to any purchase of or payment on account of the purchase of
Equipment:
1. UCC-1 financing statements and protective fixture filings signed
by Lessee (to be filed prior to the earlier of funding or, for
Equipment delivered after the date of the Lease, delivery of
Equipment to Lessee) together with any UCC Amendments relating
thereto for any prior, present or subsequent Schedule;
2. Equipment Acceptance Certificate;
3. Schedule;
4. Software License Assignment Agreement (if applicable);
5. User Agreement (if applicable);
Page 5
<PAGE>
6. For new Equipment, Copies of Purchase Order(s), Purchase
Agreement Assignment(s), Progress Payment Authorization (if
applicable) and Original Invoices issued to Lessor;
7. For used Equipment, Certified Copies of Original Invoices, Copies
of Cancelled Checks (front and back), Bill of Sale and UCC-3
Release(s);
8. Such other items or documents as Lessor may request.
35. Software. No more than 25% of the Lease Line may be utilized for the
--------
purchase of software at a purchase price equal to 100% of Equipment Cost in
accordance with the Software Rider attached hereto and made an integral part
hereof. In the event of a conflict between the terms and conditions of the
Software Rider and the Lease or any Addendum thereto, the terms and conditions
of the Software Rider shall govern and control.
IN WITNESS WHEREOF, this Addendum has been executed by a duly authorized officer
of Lessee as of the 22nd day of June, 1998.
OPEN PORT TECHNOLOGY, INC., Lessee
676 North St. Clair Street
Suite 900
Chicago, IL 60611
By: /s/ David P. Aniol
-------------------------
Name: D.P. ANIOL
-------------------------
Title: CFO
-------------------------
THIRD COAST VENTURE LEASE PARTNERS I, L.P., Lessor
900 North Franklin Street, Suite 700
Chicago, Illinois 60610
By its General Partner, Third Coast GP-I, L.L.C.
By: /s/ Miroslav Anic
------------------------
Name: MIROSLAV ANIC
------------------------
Title: Manager
------------------------
Page 6
<PAGE>
EXHIBIT 10.14
[LOGO]
No.____________________ Agreement
Dated:____________________
OPEN PORT TECHNOLOGY, INC.
SOFTWARE LICENSE AGREEMENT
Open Port Technology, Inc. ("OPT") either owns or has the right to
license those software products and their accompanying documentation listed on
Schedule A to this Agreement and on one or more additional Schedules that may be
executed from time to time ("Software"). OPT desires to grant and
____________________ ("CUSTOMER") desires to accept a license to use the
Software, subject to the terms and conditions of this Software License
Agreement ("Agreement"). In consideration of the foregoing and the mutual
covenants and conditions contained herein, OPT and CUSTOMER agree as follows:
1. LICENSE GRANT; DEFINITIONS.
1.1 License. OPT hereby grants to CUSTOMER, and CUSTOMER hereby accepts,
a non-exclusive, non-transferable and non-assignable license to use the Software
in object code form only, in accordance with the terms and conditions contained
in this Agreement. OPT does not grant to CUSTOMER, and CUSTOMER does not obtain
the right to sublicense the Software to any third party. The term of the license
granted under this Agreement shall be perpetual unless terminated earlier by
either party in accordance with this Agreement.
1.2 Definitions. For purposes of the Agreement, "Software" means the
object code related to the software identified on Schedule A. "Object Code"
means the machine-readable object code form of the Software. Collectively,
"Software" means Object Code and all custom software developed by or for OPT.
"CUSTOMER RESELLERS" are those entities which contract directly with CUSTOMER
for goods and services. "End-User Customers" are those entities which contract
directly with CUSTOMER or CUSTOMER RESELLERS for goods and services. Where used
in this Agreement, the term "System", when used in conjunction with Software
which is being licensed pursuant to this Agreement, means the Software and is
not to be interpreted to include any computer hardware or other parties'
software or operating systems.
2. OWNERSHIP AND USE OF SOFTWARE.
2.1 Ownership. OPT shall have sole and exclusive ownership of all right,
title, and interest in and to the Software and all updates, releases,
corrections, enhancements, modifications and derivative works thereof (including
ownership of all trade secrets, copyrights and other proprietary rights
pertaining thereto), subject only to the rights and privileges expressly granted
by OPT. This Agreement does not provide CUSTOMER with title or ownership of the
Software, but only a right of limited use.
2.2 CUSTOMER'S Use of Software. CUSTOMER may use this Software solely in
conjunction with the provision of consulting services to third parties. CUSTOMER
must keep the Software free and clear of all liens, claims and encumbrances.
CUSTOMER shall not copy the Software, or any part thereof, except for the
purpose of making one back-up copy of any diskettes containing the Software.
CUSTOMER shall not decompile, reverse engineer, disassemble or otherwise produce
a source code of the Software. CUSTOMER shall use the Software only in
accordance with this Article.
2.3 Authorized User Limits. CUSTOMER agrees that in no event shall it
allow the Software to be used concurrently by users in excess of the number
listed on Schedule A.
2.4 Network Server Limits. CUSTOMER agrees that in no event shall the
Software be concurrently resident on a number of network servers in excess of
the number listed on Schedule A.
2.5 Port Limits. CUSTOMER agrees that in no event shall it use the
Software with a number of ports in excess of the number listed on Schedule A.
2.6 Use of Proprietary Marks. OPT hereby authorizes CUSTOMER to use the
service marks and trade names of CUSTOMER's choosing in using the Software.
CUSTOMER shall ensure that those trade and service marks and trade names of OPT
which appear upon log-on and in any related documentation (including marketing
materials) shall continue to be displayed to all users during the term of this
Agreement and thereafter, to the extent required to protect OPT's intellectual
property rights.
<PAGE>
3. DELIVERY. OPT shall deliver the Software and the accompanying
documentation to the address indicated on the applicable Schedule,
electronically or by any commercially reasonable means and may select the
carrier and route. Delivery of the Software by OPT to a carrier at point of
shipment shall constitute tender of delivery to CUSTOMER for all purposes. OPT
does not insure the Software media against loss or damage in transit. All
shipping and delivery dates are estimates and do not guarantee a particular date
of shipment, but OPT shall use every commercially reasonable effort to meet such
shipment date. OPT shall not be liable, however, for any losses or damages
(whether incidental, consequential or otherwise) resulting from any delays in
delivery or shipping or damage occurring during shipping. Additional copies of
the Software's documentation can be purchased at OPT's then-current prices.
4. TRAINING AND OTHER SERVICES. OPT will provide CUSTOMER training in the
use of the Software and such other services as specified and at the fees stated
on the applicable Schedule(s). CUSTOMER will pay within 30 days of invoice
therefor reasonable (in accordance with CUSTOMER's normal travel policies)
travel and living costs incurred by OPT personnel in providing such training or
other services, as well as other costs incurred at CUSTOMER's request such as
shipping of materials or special equipment. OPT will provide reasonable
documentation for such expenses at the request of CUSTOMER. Additional training
or other services beyond those specified may be purchased by CUSTOMER in
accordance with the fees stated on the applicable Schedule(s).
5. PAYMENTS.
5.1 CUSTOMER'S Payments to OPT. In consideration of the license granted
pursuant to Article 1, CUSTOMER shall pay to OPT the License fees and Annual
Technical Support Services/Other Services fees indicated in Schedule A (a
"Payment" or collectively referred to as the "Payments").
5.2 Method of Payment; Monthly Reports. CUSTOMER agrees to pay OPT the
Payments in accordance with this Section. Within 15 days after the Effective
Date, CUSTOMER will pay OPT the licensee fees due under Section 6.1. For any
other Payments, CUSTOMER will pay OPT within 30 days of the invoice date. The
Payments do not include freight and handling costs, insurance, local, state or
federal sales, use, excise, personal property or other similar taxes or duties
(excluding taxes based on income); any such charges and taxes shall be paid for
by CUSTOMER or, with respect to any such taxes in lieu thereof, CUSTOMER shall
furnish OPT a tax exemption certificate acceptable to the appropriate taxing
authorities. Further, CUSTOMER shall be solely responsible for any and all
customs clearance procedures, fees, tariffs, and import/export duties, if any,
provided, that OPT shall reasonably cooperate in any such process. All payments
due under this Agreement shall be made without any deduction or withholding,
unless such deduction or withholding is required by any applicable law of any
relevant governmental revenue authority then in effect. If CUSTOMER is required
to deduct or withhold, CUSTOMER will promptly notify OPT of the requirement, pay
the required amount to the relevant governmental authority, and provide OPT
with an official receipt or certified copy or other documentation acceptable to
OPT evidencing the payment. Expedited freight costs shall only be charged if
expedited shipping is requested by CUSTOMER. Along with the Payments due to OPT,
CUSTOMER will provide OPT with a report setting out the revenue generated by any
services provided by CUSTOMER to third parties in connection with the use of the
Software during the calendar month just ended, including without limiting the
foregoing, a detailed account of all revenues due to CUSTOMER under this
agreement and such other information as OPT may from time to time require. Any
Payments due by CUSTOMER to OPT that are not paid when due shall, at the option
of OPT, accrue interest until paid at a rate of interest equal to one and one-
half percent (1 1/2%) per month, or the maximum rate of interest allowed by
applicable law, if less.
5.3 Recording System; Audit Rights. CUSTOMER hall maintain complete
records of all transactions subject to payment to OPT under this Agreement,
which shall have information sufficient to provide the reports referred to in
Section 6.2 and shall keep such information in accordance with Generally
Accepted Accounting Practices. OPT shall have the right upon 10 days notice at
any time to perform a financial audit with respect to CUSTIOMER's Payments.
CUSTOMER shall grant OPT and its representatives full and complete access to
CUSTOMER's book and records, and other documents of CUSTOMER, as they relate to
this Agreement or as they may be required in order for OPT to ascertain any
facts relative to CUSTOMER's Payments. CUSTOMER shall provide OPT, or its
authorized representatives, such information and assistance as requested to
perform such audits; provided, however, that OPT and CUSTOMER shall endeavour to
arrange such assistance in such a way that it minimizes interference with the
performance of CUSTOMER's duties and obligations hereunder. If any audit reveals
that the amount which should have been paid for any period is more than 5%
greater than the amount actually paid, then CUSTOMER shall not only immediately
pay any amounts due, but shall also bear the entire cost of such audit.
6. LIMITED WARRANTY. For a period of 90 days after the Effective Date, OPT
warrants that the Software furnished or developed under this Agreement shall
conform to and perform in substantial accordance with OPT's then current,
published specifications for the Software (the "Specifications") and shall
operate satisfactorily in the system environment in which the Software was
designed to operate, as described in the Specifications. OPT does not warrant
that the Software is error free. The Software will be free from material defects
in materials and in workmanship. The foregoing limited warranties shall not
apply to any part of the Software which has been: (a) repaired or altered by
anyone other than OPT, or (b) subject to improper use, storage or maintenance,
negligence or accident. CUSTOMER's exclusive remedies for breach of this limited
warranty are limited to repair or replacement of any nonconforming components of
the Software. THE LIMITED WARRANTY OF OPEN PORT SET FORTH IN ARTICLE 7 IS MADE
FOR THE BENEFIT OF CUSTOMER ONLY, AND SHALL NOT EXTEND TO ANY THIRD PARTIES,
INCLUDING, BUT NOT LIMITED TO, CUSTOMER RESELLERS AND THEIR END-USER CUSTOMERS.
THE REMEDY DESCRIBED IN ARTICLE 7 IS THE SOLE AND
-2-
<PAGE>
EXCLUSIVE REMEDY FOR BREACH OF THE LIMITED WARRANTY SET FORTH IN ARTICLE 7.
THERE ARE NO OTHER WARRANTIES, WHETHER WRITTEN, OR ORAL, EXPRESS OR IMPLIED,
WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
7. INTELLECTUAL PROPERTY WARRANTIES AND INDEMNIFICATION.
7.1. Intellectual Property Warranty. OPT warrants that the Software does
not violate any U.S. patent, U.S. copyright, U.S. trade secret or U.S. trademark
right of any third party.
7.2 Intellectual Property Indemnification. In the event that legal
proceedings are brought against CUSTOMER claiming an infringement of any such
right based upon CUSTOMER's use of the Software, OPT, at its own expense, will
indemnify, defend or settle any such claim, suit or proceeding, and hold
harmless CUSTOMER against any and all costs and damages arising as a result of
any such proceedings, provided that: (i) OPT is given prompt notice of any such
claim; (ii) OPT is given sole control of the defense of such claim including any
an all negotiations, appeals and settlements, and (iii) CUSTOMER provides OPT
with the information, authority, and any and all assistance reasonably required
to perform the aforementioned defense. If the Software is held to infringe, or
in OPT's opinion is likely to be held to infringe, any third party's U.S.
patent, U.S. copyright, U.S. trade secret, or U.S. trademark right, OPT shall,
at its expense, secure the right for CUSTOMER to continue use of the Software or
replace or modify the Software to make it non-infringing. If commercially
reasonable efforts to achieve the foregoing are unsuccessful, CUSTOMER shall be
entitled to terminate the license rights granted hereunder and such termination
shall have the effect of a termination under Article 13. THE FOREGOING STATES
THE ENTIRE LIABILITY OF OPT AND CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR
INFRINGEMENT AND MISAPPROPRIATION CLAIMS AND ACTIONS.
7.3 Limitation to Intellectual Property Indemnification. The indemnity
provided under this Section shall not apply to any claim of infringement if: (i)
CUSTOMER is not using the latest revision of the Software provided by OPT
("Current Release"), to the extent such infringement could have been avoided by
use of the Current Release; (ii) CUSTOMER is using a form of the Software that
has been modified, except for modifications expressly approved by OPT in
writing, to the extent such claimed infringement could have been avoided by use
of an unmodified form of the Current Release, or (iii) the Software has been
combined, operated, or used with products or data not supplied, to the extent
such claimed infringement could have been avoided by the use of the Software
without such products or data.
8. CONFIDENTIALITY. CUSTOMER acknowledges and agrees that OPT owns all right,
title, and interest in and to the Software, documentation and related
information, regardless of the media on which it is recorded. CUSTOMER shall
have no rights to such Software, documentation or related information except
those rights expressly granted herein. Further, CUSTOMER agrees to preserve the
confidential nature of any proprietary, trade secret information, contained in
the Software and agrees not to permit the use of the Software by any
unauthorized persons or any party. The obligations of this Section shall survive
any termination of the license rights granted under this Agreement. The parties
agree that any confidential information exchanged pursuant to the Software
Evaluation Agreement will be governed under the terms of this Agreement.
-3-
<PAGE>
8.1. Confidential Information. "Confidential Information" means: (a) the
Software; and (b) any business or technical information of OPT, including but
not limited to any information relating to OPT's product plans, designs, costs,
finances, marketing plans, business opportunities, personnel, research,
development or know-how. Confidential Information shall not include information
that: (i) is in or enters the public domain without breach of this Agreement
through no fault of CUSTOMER; (ii) CUSTOMER was in possession of prior to first
receiving it from OPT; (iii) was developed by CUSTOMER independently and without
use of or reference to OPT's Confidential Information; or (iv) CUSTOMER receives
from a third party without restriction on disclosure and without breach of a
nondisclosure obligation.
8.2. Obligations. CUSTOMER will maintain the Confidential Information of
OPT in strict confidence and will exercise due care with respect to the handling
and protection of such Confidential Information, consistent with its own
policies concerning protection of its own Confidential Information of like
importance. CUSTOMER will use the Confidential Information of OPT only as
expressly permitted herein, and will disclose such Confidential Information only
to its employees and consultants as is reasonably required in connection with
the exercise of its rights and obligations under this Agreement (and only
subject to binding use and disclosure restrictions at least as protective as
those set forth herein executed in writing by such employees and consultants).
However, CUSTOMER may disclose Confidential Information of OPT pursuant to the
order or requirement of a court, administrative agency, or other governmental
body, provided that CUSTOMER gives reasonable notice to OPT to contest such
order or requirement. Any such disclosure by CUSTOMER of the Confidential
Information of OPT, will, in no way, be deemed to change, affect or diminish the
confidential and proprietary status of such Confidential Information.
8.3 Injunctive Relief. CUSTOMER acknowledges that improper use or
disclosure of the Confidential Information of OPT would cause substantial harm
to OPT that could not be remedied by the payment of damages alone. Accordingly,
OPT will be entitled to preliminary and permanent injunctive relief and other
equitable relief for any breach of this Article 9.
9. ASSIGNMENT. The license granted under this Agreement may not be assigned,
sublicensed or otherwise transferred, either voluntarily, by operation of law or
otherwise, without the prior written approval of OPT and any such assignment
without OPT's written consent shall be void. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties to this Agreement and any
permitted successors and assigns.
10. MAINTENANCE SERVICES. During the Warranty period or so long as CUSTOMER
has paid on a current basis all License Fees and Technical Support Fees, OPT
agrees to deliver to CUSTOMER Technical Support Services in accordance with
Schedule A. If the reported error is not in the Software, or the error has
resulted from the negligence of CUSTOMER or modification of the Software by
CUSTOMER or any third party not authorized by OPT, CUSTOMER will be billed and
shall pay for such support at the then prevailing customer support rates, as
well as any reasonable, documented travel and living expenses incurred by OPT.
CUSTOMER shall be responsible for, and reimburse OPT, the cost of shipping any
media containing any new releases, corrections, enhancements or improvements to
the Software available under this Section and the documentation thereof.
Maintenance services do not include new software or hardware products or options
sold separately by OPT. CUSTOMER shall establish a maximum of two support
coordinators per location who shall be familiar with and trained in the use of
the Software and to whom all authorized users shall be instructed to direct all
questions and problems regarding use, operation and maintenance of the Software;
only such support coordinators shall be entitled to contact OPT for maintenance
or other assistance.
11. LIMITATION OF LIABILITY AND GENERAL INDEMNIFICATION.
11.1 Limitation of liability. WITHOUT LIMITING ANY LIABILITY UNDER
ARTICLE 9 AND REGARDLESS OF WHETHER ANY REMEDY SET FORTH IN THIS AGREEMENT FAILS
OF ITS ESSENTIAL PURPOSE, IN NO EVENT SHALL OPT'S LIABILITY ARISING UNDER THIS
AGREEMENT FOR DAMAGES EXCEED THE AMOUNT OF THE LICENSE FEES PAID TO OPT PURSUANT
TO SECTION 6.1 FOR A PERIOD OF SIX MONTHS PRECEDING THE OCCURRENCE OF THE LOSS
OR DAMAGES. FURTHER, IN NO EVENT SHALL OPT BE LIABLE TO CUSTOMER OR ANY THIRD
PARTY FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, ARISING FROM ANY
CLAIMED BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN
TORT, OR ANY OTHER LEGAL THEORY, EVEN IF OPT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. SUCH EXCLUDED DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOST
PROFITS, COST OF ANY SUBSTITUTE GOODS OR SERVICES, LOST BUSINESS INFORMATION,
BUSINESS INTERRUPTION, OR CLAIMS OF CUSTOMER FOR ANY SUCH DAMAGES.
11.2 General Indemnification. CUSTOMER HEREBY AGREES TO INDEMNIFY,
DEFEND, AND HOLD OPT HARMLESS FROM AND AGAINST ANY CLAIM, JUDGMENT, LIABILITY,
INJURY, LOSS, COST, OR EXPENSE, INCLUDING ATTORNEYS' FEES AND COURT COSTS,
ARISING OUT OF (A) CUSTOMER'S FAILURE TO COMPLY (EITHER BY ACT OR FAILURE TO
ACT) WITH ANY OF ITS OBLIGATIONS AS SET FORTH IN THIS AGREEMENT; (B) A BREACH OF
ANY OF CUSTOMER'S OBLIGATIONS TO ANY CUSTOMER END-USERS, CUSTOMER RESELLERS OR
THEIR END-USERS IN CONNECTION WITH OR ARISING OUT OF CUSTOMER'S USE OF THE
SOFTWARE, OR (C) ANY OTHER WRONGFUL CONDUCT OF CUSTOMER, ITS EMPLOYEES, AGENTS,
AND REPRESENTATIVES. CUSTOMER SHALL AT ALL TIMES CONDUCT ITS OPERATIONS AND USE
THE SOFTWARE IN ACCORDANCE WITH ALL APPLICABLE FEDERAL, STATE, AND LOCAL
STATUES, LAWS, REGULATIONS, OR ORDINANCES OF ANY APPLICABLE COUNTRY OR
JURISDICTION.
-4-
<PAGE>
12. TERMINATION.
12.1 Termination. This Agreement and the license granted hereunder shall
terminate upon the earliest to occur of the following: (a) 30 days after OPT
gives CUSTOMER notice of CUSTOMER's material breach of any provision of the
Agreement (other than CUSTOMER's breach of its obligations under Sections 3 and
9, which breach will result in immediate Termination), including more than 30
days delinquency in CUSTOMER's payment of any fees due hereunder, unless
CUSTOMER has cured such breach during such 30-day period; (b) 10 days after OPT
gives CUSTOMER notice of OPT's termination of its own licensing rights into the
Software; and (c) immediately if CUSTOMER files for bankruptcy, becomes
insolvent, or makes an assignment for the benefit of creditors.
12.2 CUSTOMER's Obligations Upon Termination; Effect of Termination.
Upon the termination of the license rights granted under this Agreement for any
reason, the Software, documentation and any copies thereof shall be immediately
returned to OPT, and CUSTOMER shall contemporaneously deliver a duly authorized
certification that all such copies have been returned or removed from CUSTOMER's
and CUSTOMER RESELLER'S systems, including the systems of their respective End-
User Customers, and that CUSTOMER no longer has any right to the Software. All
provisions of this Agreement relating to disclaimers of warranties, limitation
of liability, remedies, damages, confidentiality, indemnification, applicable
law, forum selection and the proprietary rights of OPT shall survive any
termination of the license rights granted hereunder.
13. MISCELLANEOUS.
13.1 Patent Protection. CUSTOMER acknowledges OPT's claim that the
Software is protected by pending and/or issued United States patents as well as
copyrights, trade marks and trade secrets and that only a license is granted
thereto. CUSTOMER acknowledges OPT's representation that it has received United
States patents that may relate to one or more aspects of the Software and that
OPT has informed CUSTOMER that it has pending United States and provisional
patent applications directed to the Software, including allowed United States
patent applications covering certain aspects of the Software.
13.2 Force Majeure. If performance by OPT is delayed or made impractical
or burdensome by any cause beyond OPT's control, including, without limitation,
any acts of God, fire, flood, explosion, vandalism, sabotage, riot,
insurrection, severe weather, curtailment or termination of OPT's regular
sources of supplies, inability to obtain or a delay in obtaining any licenses or
permit, acts or omissions of the CUSTOMER or its representatives, shipping
delays, strikes or labor disputes, or any existing or future law or act of any
government or regulatory body, then (i) OPT shall be excused from performance to
the extent that and for so long as such performance is delayed or made
impracticable or burdensome by such cause, and (ii) OPT may adjust the Payments
required to be made hereunder.
13.3 Risk Allocation. CUSTOMER acknowledges and agrees that the fees
charged by OPT in this Agreement reflect the allocation of risks, including, but
not limited to, the limitation of liability set forth in Section 12.1 and the
limited warranties set forth in Article 7. A modification of the allocation of
risks set forth in this Agreement would affect the Payments, and in
consideration of such Payments CUSTOMER agrees to such allocation of risks.
13.4 Notices. Any notice or communication required or permitted under
this Agreement shall be in writing and deemed received by a party when
personally delivered to it or, when received by overnight courier service
(provided it shall be deemed received no more than two (2) days after delivery
to such courier drop-off site), or when received by certified or registered mail
(provided it shall be deemed received no more than five (5) business days after
posting), if addressed to the party at the address of such party specified on
the signature page of this Agreement or at such other address as specified by
such party in a notice delivered to the other party in accordance with this
Section 14.4.
13.5 Applicable Law; Forum Selection. The formation, operation, and
performance of this Agreement shall be governed, construed, applied, and
enforced in accordance with the laws of the State of Illinois, without regard to
Illinois conflict of laws provisions. The parties consent and agree that all
cases, claims, and controversies based upon this Agreement shall be adjudicated
only in an Illinois state or Federal court located in Cook County, Illinois.
Each party consents to the jurisdiction or such courts over each of the parties.
13.6 Compliance with Laws and Regulations. CUSTOMER agrees to comply
fully with all applicable laws and regulations of the United States of America
and any and all other applicable foreign laws and regulations as they may exist
from time to time with respect to this Agreement. Without limiting the
generality of the foregoing, CUSTOMER acknowledges that the laws and regulations
of the United States of America restrict the export and re-export of commodities
and technical data of United States of America origin. CUSTOMER agrees that it
will not export or re-export the Software or any technical data (or any direct
products thereof) of OPT in any form in violation of such terms and regulations,
or without the appropriate United States of America and foreign government
licenses.
13.7 Entire Agreement; Modification. This Agreement and each Schedule or
Exhibit that references this Agreement contain all of the agreements and
understandings between the parties with respect to the subject matter hereof and
supersedes all
-5-
<PAGE>
prior and contemporaneous agreements and understanding, whether oral or written,
of the parties. No modification of this Agreement will be effective unless it is
in writing and signed by an authorized representative of each party. The
headings contained in this Agreement are inserted solely for convenience and
shall not constitute a part of this Agreement, nor shall they affect the
meaning, construction, interpretation or effect of this Agreement. Additional
Schedules or Exhibits may be entered into from time to time between the parties
for the provision of additional products and services. Each of those Schedules
or Exhibits shall become part of this Agreement and shall be subject to the
terms and conditions of this Agreement. If there is any conflict between this
Agreement and any Schedule or Exhibit, the Schedule or Exhibit shall control for
purposes of the products and services specified thereon; otherwise this
Agreement shall control for all other purposes. Every provision of this
Agreement is intended to be severable; if any term or provision is determined to
be illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the validity of the remainder of this Agreement. A waiver of
any breach or default under this Agreement must be in writing and shall not be
deemed a waiver of any other or subsequent breach or default. Failure or delay
by either party to enforce compliance with any term or condition of this
Agreement shall not constitute a waiver of such term or condition.
IN WITNESS WHEREOF, each of the parties hereto have caused this Software
License Agreement as of date first written above, and represents and warrants to
other that it is legally free to enter into this Agreement and that its
execution has been duly authorized.
OPEN PORT TECHNOLOGY, INC.: [CUSTOMER]:
By: _____________________________ By:_______________________________
Name:____________________________ Name:_____________________________
Its: ____________________________ Its:______________________________
Address: 676 North St. Clair, 9th Floor
Chicago, Illinois 60611
-6-
<PAGE>
SOFTWARE LICENSE AGREEMENT
SCHEDULE A TO SOFTWARE LICENSE AGREEMENT
BETWEEN OPEN PORT TECHNOLOGY, INC. AND ______________________________CUSTOMER
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Initial License Fee
Software: # Network Per unit
Servers # Ports Price
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Maintenance Fee:
20% *Software List Price (period runs from ______________________________ ("Start Date") to __________________________.
(90 days after Effective Date) (12 months after Start Date)
Annual Maintenance Renewal is 20% * the then current list price.
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Total Software and Maintenance:
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Invoice Address Shipping Address (if different)
________________________________ _________________________________
________________________________ _________________________________
________________________________ _________________________________
________________________________ _________________________________
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES JURISDICTION
-------------------- ------------
Open Port Technology B.V. Netherlands
Open Port Europe SARL France
Open Port Technology Belgium Belgium
<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 April 4, 2000, relating to the financial statements of Open Port
Technology, Inc., which appears in such Registration Statement. We also consent
to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
April 4, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<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> 277
<SECURITIES> 0
<RECEIVABLES> 801
<ALLOWANCES> 319
<INVENTORY> 0
<CURRENT-ASSETS> 1,127
<PP&E> 5,624
<DEPRECIATION> (3,608)
<TOTAL-ASSETS> 4,705
<CURRENT-LIABILITIES> 11,774
<BONDS> 0
35,542
0
<COMMON> 13
<OTHER-SE> (47,552)
<TOTAL-LIABILITY-AND-EQUITY> 4,705
<SALES> 2,350
<TOTAL-REVENUES> 2,350
<CGS> 2,849
<TOTAL-COSTS> 16,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,322)
<INCOME-PRETAX> (15,835)
<INCOME-TAX> 25
<INCOME-CONTINUING> (15,860)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,860)
<EPS-BASIC> (1.64)
<EPS-DILUTED> (1.64)
</TABLE>
