<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MEDIBUY.COM, INC.
(NAME OF ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5961 33-0822977
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
------------------------
10120 PACIFIC HEIGHTS BOULEVARD
SAN DIEGO, CALIFORNIA 92121
(858) 587-7200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DENNIS J. MURPHY
CHIEF EXECUTIVE OFFICER
MEDIBUY.COM, INC.
10120 PACIFIC HEIGHTS BOULEVARD
SAN DIEGO, CALIFORNIA 92121
(858) 587-7200
(NAME, ADDRESS, TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JEREMY D. GLASER, ESQ. FRANK H. GOLAY, JR., ESQ.
DENNIS A. CALDERON, ESQ. SULLIVAN & CROMWELL
COOLEY GODWARD LLP 1888 CENTURY PARK EAST,
4365 EXECUTIVE DRIVE, SUITE 1100 SUITE 2100
SAN DIEGO, CALIFORNIA 92121 LOS ANGELES, CALIFORNIA 90067
(858) 550-6000 (310) 712-6600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par value................... $75,000,000 $19,800
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares that the Underwriters will have the option to purchase
solely to cover over-allotments, if any. Estimated solely for the purpose of
calculating the amount of the registration fee in accordance with Rule
457(o) under the Securities Act of 1933, as amended.
------------------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES
IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER OR SALE IS NOT PERMITTED.
Subject to Completion. Dated January 13, 2000.
Shares
MEDIBUY LOGO
Common Stock
----------------------
This is an initial public offering of our common stock. All of the
shares of common stock are being sold by us.
Prior to this offering, there has been no public market for our common
stock. We anticipate that the initial public offering price per share will be
between $ and $ . Application has been made for quotation of
our common stock on the Nasdaq National Market under the symbol "MBUY".
See "Risk Factors" on page 8 to read about factors you should consider
before buying shares of our common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price...............................
Underwriting discount.......................................
Proceeds, before expenses, to us............................
</TABLE>
To the extent that the underwriters sell more than shares of
common stock, the underwriters have the option to purchase up to an additional
shares from us at the initial public offering price less the
underwriting discount.
----------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
THOMAS WEISEL PARTNERS LLC
WIT CAPITAL CORPORATION
----------------------
Prospectus dated , 2000.
<PAGE> 3
INSIDE FRONT COVER
[Picture of a partial map of North America over pictures of two individuals, two
hands clasped in a handshake and shipping boxes.]
[medibuy.com logo]
your healthcare business-to-business e commerce solution
www.medibuy.com
INSIDE TWO-PAGE GATEFOLD SPREAD
InstaCat(TM) technology interface
[Background contains pictures of a partial map of North America, a personal
computer showing the medibuy.com home page, and a stethoscope.]
[medibuy.com logo]
<TABLE>
<CAPTION>
buyers sellers
<S> <C> <C>
- ---------------------------------- ---------------------------------- ----------------------------------
hospital buyer InstaCat(TM) s s distributor
- ---------------------------------- i technology interface e y ----------------------------------
existing information systems n s ---------------------------------- l s database
- ---------------------------------- t e customer-specific pricing l t ----------------------------------
e c ---------------------------------- e e f catalog data
- ---------------------------------- r u real-time product availability r m e i ----------------------------------
n r ---------------------------------- p r marketing information
- ---------------------------------- e e multi-parameter search d i o e ----------------------------------
t ---------------------------------- a n r w brand showcase
- ---------------------------------- q purchase history t t t a ----------------------------------
u ---------------------------------- a e l customer pricing
e user profiles b r l ----------------------------------
r ---------------------------------- a f enterprise systems
md clinic i customer service s a ----------------------------------
- ---------------------------------- i e ---------------------------------- e c order
existing information systems n s click and buy ordering e ----------------------------------
- ---------------------------------- t ---------------------------------- & inventory
e a real-time authorizations ----------------------------------
- ---------------------------------- r n ---------------------------------- f
n d end-to-end system integration i
- ---------------------------------- e ---------------------------------- n ----------------------------------
t o accounting efficiencies a manufacturer
- ---------------------------------- r ---------------------------------- n ----------------------------------
d data capture c database
e ---------------------------------- i ----------------------------------
- ---------------------------------- r process automation a f catalog data
alternate site s ---------------------------------- l e i ----------------------------------
- ---------------------------------- i p r marketing information
long-term care n o e ----------------------------------
- ---------------------------------- t r w brand showcase
home care e t a ----------------------------------
- ---------------------------------- r l customer pricing
lab n l ----------------------------------
- ---------------------------------- e enterprise systems
other t ----------------------------------
- ---------------------------------- order
----------------------------------
inventory
----------------------------------
</TABLE>
www.medibuy.com
INSIDE BACK COVER
www.medibuy.com www.medibuy.com
Once again, a medical breakthrough that would not be possible without a mouse.
[Picture of a computer mouse printed with "medibuy.com".]
It was time medical supply buyers had their own miracle of modern medicine. So
some of the most experienced people in the medical industry created medibuy.com,
the easiest way to buy healthcare supplies and services. From 5,000 bed sheets
and 1,000 sheets of x-ray film to MRI machines and lawnmowers -- If you have a
computer you can do everything from bidding to ordering. Check out our web site
and see why our buyers and sellers around the world rely on us, medibuy.com.
The relief you've been looking for, finally.
[medibuy.com logo]
Global Choice -- Local Power
Register on-line at www.medibuy.com or call 1-877-287-8448.
<PAGE> 4
PROSPECTUS SUMMARY
Before making an investment decision, you should read the following summary
together with the more detailed information regarding us and our common stock
and our financial statements and the notes to our financial statements appearing
elsewhere in this prospectus. You should also carefully consider the information
discussed in "Risk Factors".
MEDIBUY.COM, INC.
medibuy.com operates a leading business-to-business Internet marketplace
for the purchase and sale of medical and non-medical products and services used
by the healthcare industry worldwide. Our marketplace enables buyers and sellers
to reduce many of the inefficiencies of the traditional healthcare supply chain.
We provide buyers and sellers with a scalable, secure and real-time exchange to
conduct daily commerce and access information relating to products, services and
market trends. We capture valuable transaction information which our customers
can access through a variety of reporting and analytical tools. To accelerate
adoption of our marketplace solution, we have established strategic alliances
with a number of companies, including Allianz Capital Partners, Ernst & Young
LLP, Owen Healthcare, Physiciansite.com and Vitria Technology.
The market for new medical products, supplies and equipment used by
healthcare providers is estimated at $85 billion in the United States and $150
billion worldwide. These estimates do not include services or non-medical or
used products, supplies and equipment purchased by healthcare providers, which
we believe will contribute significantly to our market opportunity. In the
United States, there are approximately 30,000 medical supplies manufacturers and
distributors selling products to approximately 5,300 hospitals and hundreds of
thousands of other healthcare providers. In addition, in the United States there
are approximately 25,000 non-medical manufacturers and distributors that sell
their products to healthcare providers and approximately 10,000 organizations
that market services such as maintenance, nursing care, home care and medical
billing to these providers.
The traditional process of buying and selling products and services used by
the healthcare industry is time consuming and inefficient and does not
adequately address the needs of buyers and sellers. A 1996 study published by an
industry association found that $11 billion is spent annually in the United
States on avoidable costs associated with healthcare supply chain
inefficiencies. These inefficiencies result from a number of factors, including
the large number of geographically dispersed buyers and sellers, the
multi-facility nature of many healthcare providers, and the heavy reliance on
telephones, faxes, catalogs and electronic data interchange, or EDI.
To address these inefficiencies and to better serve buyers and sellers, we
have created a marketplace solution that spans the breadth of purchasing
activities. Our eCatalog service provides buyers with real-time access to
current market pricing as well as customer-specific, pre-negotiated product
pricing, transaction activity reporting and current product availability
information, and provides sellers with cost-effective access to new customers
and markets. Our eRFP service automates the time-consuming, paper-based
processes of distributing a request-for-proposal to appropriate sellers and
coordinating responses from the seller community. Through our eAuction service,
we offer auction capabilities enabling users to buy and sell new and used
medical equipment. Our eSpecials service allows the seller community to actively
promote and sell products and offer discounted prices directly to the buyer. All
of our e-commerce services are powered by our proprietary InstaCat and ePort
technologies, which enable real-time transactions with multiple parties.
The medibuy.com marketplace provides substantial benefits to participating
buyers and sellers by reducing order processing and tracking costs and improving
the utilization of data
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<PAGE> 5
relating to products, services, transactions, and market trends. In addition,
our marketplace benefits buyers by providing access to a global seller community
and by streamlining the purchasing process. Our marketplace also benefits
sellers by providing access to a worldwide buyer community, reducing sales and
marketing costs, and improving inventory and rebate management.
Our objective is to become the preferred marketplace for products and
services used by the healthcare industry. To achieve this objective, we intend
to pursue a strategy that involves the following key components:
- - Maintain our neutrality with respect to sellers who participate in our
marketplace
- - Maintain our commitment to technological leadership
- - Accelerate the adoption and use of our marketplace
- - Continue to build brand recognition
- - Expand our service offerings
- - Continue to excel in customer service
- - Expand internationally
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common stock offered......................... shares
Common stock to be outstanding after this shares
offering.....................................
Proposed Nasdaq National Market symbol....... "MBUY"
Use of proceeds.............................. We intend to use the net proceeds from the
offering for increased sales and marketing
efforts, enhancement and development of our
Internet services, potential acquisitions of
complementary products, services,
technologies and businesses and for other
working capital and general corporate
purposes.
</TABLE>
The number of shares of common stock to be outstanding after the offering
is based upon the pro forma number of shares outstanding as of September 30,
1999. Unless otherwise stated, information on our common stock outstanding is as
of September 30, 1999 and assumes:
- - a 2 for 1 split of our common stock that will take effect prior to the
effective date of this offering
- - no exercise of the underwriters' option to purchase additional shares in this
offering
- - no exercise of options to acquire our common stock
As of September 30, 1999, there were 6,385,750 shares authorized for
issuance on exercise of options under our stock option plans, of which 4,214,950
options were outstanding with a weighted average exercise price of $0.27 per
share. There were no warrants outstanding as of September 30, 1999.
-------------------------
CORPORATE INFORMATION
We were incorporated in the State of Delaware on August 18, 1998 under the
name HS.com, Inc. In January 1999, we changed our name to medibuy.com, Inc. Our
executive offices are located at 10120 Pacific Heights Boulevard, San Diego,
California 92121. Our telephone number is (858) 587-7200. Our address on the
World Wide Web is http://www.medibuy.com. Information contained at our Web site
is not part of this prospectus.
TRADEMARKS
medibuy.com(TM), medibuy(TM), eRFP(TM), eAuction(TM), eCatalog(TM),
eCertified(TM), InstaCat(TM), ePort(TM), cowhorn.com(TM), eSource(TM) and
eSpecials(TM) are trademarks of medibuy.com. This prospectus also refers to
trade names and trademarks of other organizations.
5
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following financial information should be read together with the
"Selected Financial Information" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM AUGUST 18,
AUGUST 18, 1998 1998
(INCEPTION) (INCEPTION) NINE MONTHS
THROUGH THROUGH ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1999
--------------- ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............................... $ -- $ -- $ 20
Loss from operations....................... (1,454) (689) (21,564)
Net loss................................... (1,452) (689) (21,359)
Net loss per share, basic and diluted...... $ (0.20) $ (0.15) $ (2.51)
Shares used in per share computations,
basic and diluted........................ 7,189,816 4,576,584 8,521,361
Pro forma net loss per share, basic and
diluted.................................. $ (0.74)
Shares used in pro forma per share
computations, basic and diluted.......... 28,806,689
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
------- --------- ------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $29,421 $105,810
Working capital........................................ 26,549 102,569
Total assets........................................... 34,765 122,414
Stockholders' equity................................... 31,725 117,383
</TABLE>
See our financial statements and accompanying notes for a description of
the computation of the net loss per share, pro forma net loss per share and the
number of shares used in the per share calculations in statement of operations
data above. Pro forma net loss per share reflects the conversion of our
outstanding preferred stock into common stock, retroactive to the date of
issuance.
The pro forma balance sheet data listed above reflects:
- - the sale of 769,394 shares of Series D preferred stock subsequent to September
30, 1999 for net proceeds totaling $9,137
- - the sale of 3,281,515 shares of Series E preferred stock in December 1999 and
January 2000 for net proceeds totaling $67,252
- - the issuance of 1,170,098 shares of common stock and 579,850 options to
purchase common stock with an estimated aggregate fair value of approximately
$9,269 in connection with our acquisition of PartNET, Inc. in November 1999
- - the subsequent conversion of all of our outstanding preferred stock into
common stock immediately prior to this offering
The pro forma as adjusted balance sheet data listed above also reflects the
sale of shares of our common stock in this offering at an assumed
initial public offering
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<PAGE> 8
price of $ per share after deducting an assumed underwriting discount and
estimated offering expenses. See "Use of Proceeds" and "Capitalization" for a
discussion about how we intend to use the proceeds from this offering and about
our capitalization.
Immediately prior to this offering, each share of our Series A and Series B
preferred stock will convert into 20 shares of common stock and each share of
our Series C, Series D and Series E preferred stock will convert into two shares
of common stock.
7
<PAGE> 9
RISK FACTORS
Before purchasing our common stock you should carefully consider the risks
and uncertainties described below. If any of the following risks actually occur,
our business, financial condition or results of operations could be harmed. In
that case, the trading price of our common stock could decline, and you could
lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
WE EXPECT TO CONTINUE TO INCUR LOSSES AND MAY NEVER ACHIEVE PROFITABILITY, WHICH
MAY CAUSE OUR STOCK PRICE TO FALL.
At September 30, 1999, we had an accumulated deficit of $22.8 million. We
had a net loss of $1.5 million from our inception to December 31, 1998 and a net
loss of $21.3 million for the nine months ended September 30, 1999. We have
never been profitable, and we expect to continue to incur losses for the
foreseeable future. Our business strategy has only recently been implemented
and, as a result, our revenues have been minimal. Additionally, we have spent
significant amounts on Web site development and sales and marketing efforts, and
we expect these costs to continue. If we are unable to achieve profitability,
our stock price may fall.
OUR BUSINESS MODEL IS UNPROVEN AND IF WE DO NOT GENERATE SUFFICIENT REVENUES OUR
BUSINESS MAY BE HARMED.
Our model for conducting business and generating revenues from the sale of
medical and non-medical products and services over the Internet is new and
unproven. As a result, demand and market acceptance for our services are subject
to a high degree of uncertainty and risk. We are attempting to capitalize on a
business model not currently implemented by traditional participants in the
healthcare supplies industry. We cannot assure you that users in the healthcare
industry will adopt our Internet solution for obtaining healthcare supplies. If
this new market fails to develop, develops more slowly than expected or becomes
saturated with competitors, or our services do not achieve or sustain market
acceptance, our business could be harmed.
WE ARE A STARTUP COMPANY AND OUR LIMITED OPERATING HISTORY MAKES AN EVALUATION
OF OUR BUSINESS AND PROSPECTS DIFFICULT.
Since our inception in August 1998, our operating activities have consisted
largely of developing the infrastructure necessary to provide our healthcare
supplies e-commerce marketplace. Our limited operating history makes it
difficult to evaluate our current business and prospects. Before investing, you
should evaluate the risks, expenses and problems frequently encountered by
companies like ours that are in the early stages of development.
RAPID GROWTH IN OUR OPERATIONS AND INFRASTRUCTURE IS PLACING A SIGNIFICANT
STRAIN ON OUR RESOURCES, AND FAILURE TO MANAGE THIS GROWTH EFFECTIVELY COULD
DISRUPT OUR OPERATIONS AND HARM OUR BUSINESS.
We are experiencing a period of rapid expansion in our Web site traffic,
number of employees, facilities and infrastructure. Since our inception through
December 31, 1999, we have registered over 2,100 buyers and over 1,700 sellers
on our Web site. In April 1999, when we began recording transactions, we
recorded 485 average daily visitors to our Web site. In November 1999, we
recorded 1,228 average daily visitors to our Web site, representing a 153%
increase. Our number of employees increased from 15 on December 31, 1998 to 171
on December 31, 1999. We expect further significant expansion will be required
to address potential increases in the number of users, the breadth of our
service offerings and other opportunities. This expansion has placed, and we
expect it will continue to place, a significant strain on our
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<PAGE> 10
management, operational and financial resources. Our failure to effectively
manage our growth could disrupt our operations and harm our business.
IF WE ARE UNABLE TO ATTRACT AND RETAIN A CRITICAL MASS OF BUYERS AND SELLERS,
OUR BUSINESS WILL BE ADVERSELY AFFECTED.
Our business model depends in large part on our ability to build a critical
mass of buyers and sellers. To attract and maintain sellers we must build a
critical mass of buyers. However, buyers must perceive value in our e-commerce
solution which, in large part, depends upon the breadth of the product offerings
from our sellers. Creating a network effect, where the value to buyers and
sellers alike increases as the number of participants increases, is a key
component of our strategy. If we are unable to increase the number of buyers and
sellers to our Web site, we will not be able to benefit from this network
effect. As a result, the overall value of our e-commerce solution would be
diminished, which would negatively affect our future revenues and business.
IF WE ARE UNABLE TO INCREASE OUR TRANSACTION VOLUME OR THE DOLLAR VALUE OF OUR
TRANSACTIONS, OUR FUTURE REVENUES MAY SUFFER.
We expect that a substantial portion of our future revenues will be
generated by the products and services offered by sellers through our healthcare
supplies e-commerce marketplace. Accordingly, our revenues will depend on the
dollar volume of transactions conducted through our Web site. To maintain
revenue growth, we will need to increase the total number of transactions
conducted through our Web site and their dollar value. In order to increase our
transactions and dollar volume, we will need to:
- - Generate increasing levels of traffic on our Web site, from both new and
repeat customers
- - Increase the percentage of visitors to our Web site who purchase or sell
healthcare supplies
- - Increase the average dollar value of each transaction
Our failure to do one or more of these could have an adverse effect on our
future revenues.
IF OUR WEB SITE AND TRANSACTION PROCESSING SYSTEMS ARE NOT ABLE TO ADEQUATELY
SERVICE INCREASING TRAFFIC LEVELS, OUR REPUTATION AND BUSINESS MAY SUFFER.
Our success depends in large part on the number of customers who use our
Web site and services to buy and sell healthcare supplies. Accordingly, our
system must be able to service increasing traffic while maintaining adequate
customer service. Any interruptions or delays in our system would reduce the
volume of transactions carried on through our Web site and the attractiveness of
our e-commerce solution, which could reduce customer satisfaction and harm our
reputation and business. Interruptions in our system could occur from time to
time and could adversely affect our service. Substantial increases in the volume
of traffic on our Web site or the number of transactions will require expansion
and upgrades of our technology infrastructure. We cannot be sure that our
systems will be able to accommodate increased traffic in the future. Any failure
of our system could result in fewer transactions and, if sustained or repeated,
could impair our reputation and the attractiveness of our services or prevent us
from providing our services entirely.
WE MAY EXPERIENCE SIGNIFICANT DELAYS IN GENERATING REVENUES IF POTENTIAL
CUSTOMERS TAKE A LONG TIME TO EVALUATE AND ADOPT OUR SERVICES.
A key element of our strategy is to market our services directly to large
healthcare organizations, manufacturers and distributors. We do not control many
of the factors that will influence the decisions of those organizations
regarding the use of our services. We expect that the evaluation and adoption
process will be lengthy and will involve significant technical
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<PAGE> 11
evaluation and commitment of resources by these organizations. The use of our
services by buyers and sellers may be delayed due to their reluctance to modify
existing procedures. Delays in adoption of our services could postpone our
realization of revenues and result in increased or prolonged losses.
IF WE DO NOT SUCCESSFULLY MARKET THE MEDIBUY.COM BRAND, OUR BUSINESS MAY SUFFER.
We believe that establishing, maintaining and enhancing the "medibuy.com"
brand is critical in attracting and expanding traffic to our Web site. There are
a number of Web sites that offer competing services. Some of these sites already
have well-established brands in either online services or the healthcare
supplies market. As a result, it is critical that we establish and enhance the
medibuy.com brand. We believe that increased competition may make establishing
our brand significantly more expensive. Promotion of our brand will depend
largely on expanding our sales and marketing capabilities and providing an open
marketplace with a large number of buyers and sellers. We intend to use a
portion of the proceeds of this offering to expand our sales and marketing
activities. We cannot be certain that we will be successful in marketing the
medibuy.com brand. If we are unable to successfully promote our brand, our
revenues and business may be harmed. If we incur greater expenses than expected
in marketing our brand, our financial results may be harmed.
IF WE ARE UNABLE TO ENTER INTO AND MAINTAIN RELATIONSHIPS WITH LARGE HEALTHCARE
GROUP PURCHASING ORGANIZATIONS, OUR GROWTH AND REVENUES COULD SUFFER.
We believe that we must establish relationships with large healthcare group
purchasing organizations, or GPOs, in order for us to increase our access to a
significant portion of the healthcare supplies market. GPOs have the ability to
significantly influence the purchasing decisions of their members. We do not
negotiate prices on behalf of buyers or perform other services traditionally
offered by GPOs. Nonetheless, it is possible that GPOs may perceive our
e-commerce solution as competitive with their businesses. The inability to enter
into and maintain favorable relationships with GPOs and the hospitals they
represent could impact the breadth of our customer base and could harm our
growth and revenues.
WE EXPECT TO RELY ON A LIMITED NUMBER OF LARGE CUSTOMERS FOR A SIGNIFICANT
PORTION OF OUR REVENUES IN THE FUTURE. LOSING ONE OR MORE OF THESE CUSTOMERS MAY
ADVERSELY AFFECT OUR FUTURE REVENUE GROWTH.
We expect that for the foreseeable future we will generate a significant
portion of our revenues from a limited number of large customers. Further, our
customers are not obligated to use our e-commerce solution exclusively or for
any minimum number of transactions or dollar amounts. Our customers may
discontinue use of our e-commerce solution at any time without penalty. If we
lose any of our large customers or if we are unable to add new large customers,
we may be unable to increase our revenues.
SINCE WE RELY ON SELLERS TO FULFILL ORDERS FOR OUR BUYERS, WE HAVE LITTLE OR NO
CONTROL OVER THE TIMING AND ACCURACY OF ORDER FULFILLMENT AND, CONSEQUENTLY, WE
CANNOT CONTROL BUYER SATISFACTION. IF BUYERS ARE NOT SATISFIED WITH TRANSACTIONS
ON OUR WEB SITE, OUR REPUTATION AND BUSINESS COULD BE HARMED.
We do not carry inventory or directly supply products. As a result, we rely
on our sellers for timely order fulfillment and other customer service functions
relating to delivery of products and services to ensure buyer satisfaction. We
have little or no control over the fulfillment of buyers' orders. If our sellers
do not provide high quality customer service, customer satisfaction could be
harmed, as well as our reputation and business. Customer dissatisfaction may
also negatively impact our ability to collect our accounts receivable. In order
to be successful, we must maintain
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relationships with sellers that will produce, stock and deliver high quality
products to buyers through our Web site.
IF WE ARE NOT ABLE TO SUCCESSFULLY INTEGRATE OUR SYSTEMS WITH THE INTERNAL
INFORMATION SYSTEMS OF OUR CUSTOMERS, OUR RELATIONSHIPS WITH THEM WILL BE
ADVERSELY AFFECTED.
In order for buyers and sellers to fully benefit from our e-commerce
solution, our system must integrate with their systems. There is little
uniformity in the systems used by our customers, which complicates the
integration process. If these systems are not successfully integrated, our
relationships with our customers would be adversely affected, and they could be
dissuaded from using our e-commerce solution, which would harm our business.
OUR PRIMARY COMPUTER AND TELECOMMUNICATIONS SYSTEMS ARE IN THE SAME GEOGRAPHIC
LOCATION, WHICH MAKES THEM MORE VULNERABLE TO DAMAGE OR INTERRUPTION. THIS
DAMAGE OR INTERRUPTION COULD HARM OUR BUSINESS.
Though we do have back-up systems, substantially all of our primary
computer and telecommunications systems are located in one geographic area.
These systems are vulnerable to damage or interruption from, among other things:
- - fire
- - earthquake
- - water damage
- - sabotage
- - flood
- - power loss
- - technical or telecommunications failure
While we have business interruption insurance, this coverage may not
adequately compensate us for our lost business and will not compensate us for
any liability to our customers due to our inability to provide services to them.
Although we have implemented network security measures, our systems, like all
systems, are vulnerable to computer viruses, physical or electronic break-ins
and similar disruptions. These disruptions could lead to interruptions, delays,
loss of data or the inability to accept and confirm buyer purchases. Any of
these occurrences would impair our ability to serve our customers and harm our
business.
IF WE ARE NOT ABLE TO OFFER NEW SERVICES, WE MAY NOT BE ABLE TO GROW OUR
REVENUES.
We plan to introduce new and expanded services and to expand our
third-party relationships in order to attract more buyers and sellers to our Web
site and increase transaction volume. We cannot be certain that we will be able
to offer these services in a cost-effective or timely manner. Any new services
that are not favorably received by buyers or sellers could damage our
reputation. Expansion of our services will require us to devote a significant
amount of time and money and may strain our resources and divert the attention
of our management. Our failure to expand our services could delay or prevent our
revenue growth.
WE FACE INTENSE COMPETITION WHICH COULD LIMIT OUR ABILITY TO MAINTAIN OR EXPAND
THE BASE OF BUYERS AND SELLERS OF HEALTHCARE SUPPLIES USING OUR SERVICES.
The market for business-to-business e-commerce is new and rapidly evolving.
Competition is intense and is expected to increase significantly in the future.
Barriers to entry are relatively
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insubstantial. We believe that the critical success factors for companies
seeking to create business-to-business e-commerce solutions include the
following:
- - brand recognition
- - breadth, depth and quality of product offerings
- - ease of use and convenience
- - ability to integrate their services with users' existing systems and software
- - quality and reliability of their services
- - customer service
- - number of users and transaction volume
- - the amount of the fees charged to sellers
The online market for healthcare supplies is new, rapidly evolving and
intensely competitive. We believe we face competition in three general market
segments:
- - Online healthcare supplies marketplaces
- - Traditional healthcare supply chain participants
- - Other companies providing Internet e-commerce services
Our current and potential competitors' services may achieve greater market
acceptance than our services. Many of our existing and potential competitors
have longer operating histories in the healthcare supplies industry, greater
name recognition, larger customer bases or greater financial, technical and
marketing resources than we do. As a result of these factors, our competitors
and potential competitors may be able to respond more quickly to market forces,
undertake more extensive marketing campaigns for their brands and services and
make more attractive offers to buyers and sellers, potential employees and
strategic partners. In addition, new technologies may increase competitive
pressures. We cannot be certain that we will be able to expand our buyer and
seller base, or retain our current buyer and seller customers. We may not be
able to compete successfully against current and future competitors and
competition could harm our business.
IF WE ARE UNABLE TO SUCCESSFULLY IMPLEMENT OUR ACQUISITION STRATEGY, WE MAY NOT
BE ABLE TO GROW OUR REVENUES.
In November 1999, we acquired PartNET, Inc. In addition, we plan to make
future acquisitions as a part of our growth strategy. The acquisition of PartNET
and the acquisition of any other companies in the future involve risks that
could harm our future revenues and operating results. For example:
- - We may not be able to identify suitable acquisition candidates or to acquire
companies on favorable terms.
- - We compete with others to acquire companies. We believe that this competition
will increase and may result in decreased availability or increased prices for
suitable acquisition candidates.
- - We may not be able to obtain the necessary financing, on favorable terms or at
all, to finance any of our potential acquisitions.
- - We may ultimately fail to close an acquisition even if we announce that we
plan to acquire a company.
- - We may fail to integrate successfully or manage any acquired company due to
differences in technology, business systems or corporate cultures.
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- - An acquired company may not perform as we expect.
- - We may choose to acquire a company that is not profitable.
- - If we fail to integrate successfully any acquired company, our business and
reputation could be damaged, potentially making it more difficult to market
our services or to acquire additional companies in the future.
- - Our acquisition strategy may divert management's attention away from our
primary service offerings, result in the loss of key customers and/or
personnel and expose us to unanticipated liabilities.
IF WE LOSE KEY MEMBERS OF OUR MANAGEMENT TEAM, OR FAIL TO INTEGRATE THEM, OUR
BUSINESS AND PROSPECTS MAY BE HARMED.
Almost all of our management team joined us in 1999. Many of these
individuals have not previously worked together and are currently being
integrated as a management team. Our future performance will substantially
depend on our ability to effectively integrate our management team as well as
our ability to retain them. Furthermore, because the growth of our business is
dependent upon the individual personal relationships that members of our
management team have with contacts elsewhere in the healthcare industry, if some
or all of them terminate their employment with us, our business and prospects
may be harmed.
We have employment agreements with Dennis Murphy, our Chief Executive
Officer and President, James Hersma, our Executive Vice President, Market
Development, Charles Smith, our Executive Vice President, Customer Advocacy,
Norman Farquhar, our Executive Vice President and Chief Financial Officer,
Robert Witt, our Executive Vice President, Chief Information Officer and Don
Brown, President of our PartNET subsidiary; however those agreements cannot
guarantee that any of those officers will not terminate employment with us.
Further, we do not maintain any "key person" life insurance policies.
OUR BUSINESS COULD BE HARMED IF WE ARE NOT ABLE TO HIRE AND RETAIN A SUFFICIENT
NUMBER OF QUALIFIED EMPLOYEES.
Our future success will depend on our ability to attract and retain other
highly skilled personnel. In particular, competition for healthcare industry
professionals and technical personnel is intense. Substantially all of our
employees joined us in 1999, and we expect that our hiring will continue. An
inability to hire and retain qualified personnel in sufficient numbers may
reduce the quality of our service offerings and could harm our business.
WE COULD BE LIABLE FOR PRODUCT LIABILITY CLAIMS RELATED TO PRODUCTS AND SERVICES
PURCHASED THROUGH OUR WEB SITE, AND OUR BUSINESS COULD BE HARMED.
Many of the products obtained by buyers through our system will be used to
treat patients. Any defects or other performance problems of these products
could result in injury to these patients. A product liability claim brought
against us could expose us to substantial liability and, even if not successful,
would likely be time consuming and costly, would divert management attention
from the operation of our business, and could seriously harm our business. Any
insurance coverage we have may not be applicable to such a claim. Even if our
insurance is applicable, the amount of coverage may be inadequate.
IF OUR SYSTEMS DAMAGE OUR CUSTOMERS' INFORMATION SYSTEMS OR BUSINESSES, WE COULD
BE LIABLE AND OUR REPUTATION AND BUSINESS COULD BE HARMED.
Our systems are integrated with our customers' information systems. If
malfunctions in our system cause our customers to be unable to make purchases or
sales of supplies, we may be held liable for any losses that they suffer as a
result. In addition, our systems could cause a
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user's information systems to fail, in whole or in part, which could subject us
to substantial liability for their loss of business and adversely affect our
reputation and our ability to grow our business.
THE CONTENTS OF OUR WEB SITE MAY EXPOSE US TO VARIOUS CLAIMS, WHICH COULD RESULT
IN SUBSTANTIAL COSTS AND LIABILITIES.
Our Web site contains information concerning the products offered by
sellers, including product descriptions, specifications and pricing. This
information is provided by sellers and we generally do not independently verify
this information. As a result, we could potentially face liability for fraud,
negligence, copyright, patent or trademark infringement and other claims based
on the information contained on our Web site. A successful claim could subject
us to significant liability that would harm our reputation and financial
results. Even the successful defense of a claim could divert the attention of
our management and damage our brand perception and reputation.
WE RELY ON OUR SELLERS AND THEIR CARRIERS TO COMPLY WITH GOVERNMENT REGULATIONS
REGARDING THE SALE AND DISTRIBUTION OF REGULATED PRODUCTS, AND THEIR FAILURE TO
COMPLY COULD RESULT IN SUBSTANTIAL CIVIL AND CRIMINAL LIABILITY.
Many of the products offered through our Web site are subject to direct
regulation by governmental agencies. We rely upon sellers who use our services
to meet all packaging, distribution, labeling, hazard and health information
notice, record keeping and licensing requirements applicable to transactions
conducted on our system. We may be subject to liability for violations of these
regulations regardless of our actual involvement in a violation. In addition, we
rely upon the carriers retained by our sellers to comply with regulations
regarding the shipment of any hazardous materials sold through our system. We
cannot assure you that our sellers or their carriers will comply with all
applicable government regulations. We could be fined or exposed to civil or
criminal liability for any violations which could have a negative impact on our
business or financial results.
WE INTEND TO EXPAND OUR BUSINESS INTO INTERNATIONAL MARKETS, WHICH WOULD MAKE
OUR BUSINESS SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED WITH INTERNATIONAL
OPERATIONS.
Our international strategy will necessitate expanding our international
operations and hiring additional personnel. A key component of our strategy is
to enter into relationships with companies having a significant presence and
expertise in the foreign markets we target. Our entry into international markets
may require significant management attention and financial resources, which may
harm our ability to effectively manage our existing business. We expect to
commit significant resources to expand our international sales and marketing
activities. Even if we are successful in expanding our operations
internationally or entering into international strategic relationships, we will
be subject to a number of risks associated with international business
activities. These risks include:
- - Currency exchange rate fluctuations
- - Cultural and language barriers
- - Unexpected changes in regulatory requirements
- - Tariffs, export controls and other trade barriers
- - Longer accounts receivable payment cycles and difficulty collecting
receivables
- - Difficulties managing and staffing international operations
- - Potentially adverse tax consequences, including restrictions on the
repatriation of earnings
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- - Compliance with a wide variety of foreign laws
- - Political instability
- - Competitors with greater local market knowledge may exist or arise in these
markets and impede our growth
YEAR 2000 PROBLEMS MAY HARM OUR BUSINESS.
The year 2000 compliance problem could harm our business. Systems that do
not properly recognize date information could generate erroneous data or cause a
system to fail. We have evaluated both our information technology and our
non-information technology computer systems and determined that they are year
2000 compliant. However, we believe that it is not possible to determine with
complete certainty that all year 2000 problems affecting us have been identified
or corrected. Any failure to identify or fully resolve any system problems
relating to the year 2000 could harm our business, financial condition and
results of operations.
Since our solution is integrated with our sellers' and the buyers' systems,
any failure of their systems to be year 2000 compliant could cause interruptions
or delays on our system and have a negative impact on our reputation and
business. Uncertainty exists concerning the potential costs and effects
associated with any year 2000 compliance program, and we intend to continue to
make efforts to ensure that third parties with whom we have relationships are
year 2000 compliant. We have included additional discussion of year 2000 issues
later in this prospectus under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Year 2000".
IF THE PROTECTION OF OUR INTELLECTUAL PROPERTY IS INADEQUATE, OUR COMPETITORS
MAY GAIN ACCESS TO OUR TECHNOLOGY AND WE MAY LOSE CUSTOMERS.
We depend on our ability to develop and maintain the proprietary aspects of
our business strategies and our technology. To protect our proprietary
information and technology, we rely primarily on a combination of contractual
provisions, confidentiality procedures, trade secrets and patent, copyright and
trademark laws.
We seek to avoid disclosure of our trade secrets through a number of means,
including requiring those persons with access to our proprietary information to
execute confidentiality agreements with us. We seek to protect our software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection. We currently have no patents protecting
our technology, although we have filed two patent applications through PartNET,
Inc., our wholly-owned subsidiary. From time to time, we expect to file
additional patent applications directed to aspects of our proprietary
technology. We cannot assure you that any of these applications will be
approved, that any issued patents will protect our intellectual property or that
any issued patents will not be challenged by third parties. We cannot assure you
that any of our proprietary rights with respect to our system will be viable or
of value in the future because the validity, enforceability and type of
protection of proprietary rights in Internet-related industries are uncertain
and still evolving.
Despite our efforts to protect our proprietary rights, unauthorized parties
may be able to copy aspects of our services or to obtain and use information
that we regard proprietary. In addition, the laws of some foreign countries do
not protect our proprietary rights to as great an extent as do the laws of the
United States. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our service offerings or design around any patents that may be issued
to us or our other intellectual property.
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If we are unable to protect our intellectual property, our competitors may
be able to duplicate our service offerings. We may then lose customers and our
business and financial results could be harmed.
OUR SERVICES AND OTHER PROPRIETARY RIGHTS MAY INFRINGE ON THE PROPRIETARY RIGHTS
OF THIRD PARTIES, WHICH MAY EXPOSE US TO LITIGATION.
There has been a substantial amount of litigation in the Internet industry
regarding intellectual property rights. It is possible that in the future third
parties may claim that our current or future services infringe their
intellectual property. We expect that providers of e-commerce solutions will
increasingly be subject to infringement claims as the number of services and
competitors in our industry segment grows and the range of services in different
industry segments overlap. Any claims, with or without merit, could be
time-consuming, result in costly litigation, divert management attention, cause
disruptions in our services or require us to enter into royalty or licensing
agreements. Royalty or licensing agreements, if required, may not be available
on terms acceptable to us or at all. Any of these results could harm our
financial results and our business.
WE MAY NEED TO OBTAIN ADDITIONAL FINANCING WHICH MAY NOT BE AVAILABLE OR, IF IT
IS AVAILABLE, MAY RESULT IN A REDUCTION IN THE PERCENTAGE OWNERSHIP OF OUR
EXISTING STOCKHOLDERS.
The proceeds of this offering are expected to be sufficient to meet our
cash requirements for at least the next 12 months. However, we may need to raise
additional funds in order to:
- - Finance unanticipated working capital requirements
- - Develop or enhance our technological infrastructure and our existing services
- - Fund strategic relationships
- - Respond to competitive pressures
- - Acquire complementary businesses, technologies, products or services
Additional financing may not be available on terms favorable to us, or at
all. If adequate funds are not available or are not available on acceptable
terms, our ability to fund our expansion, take advantage of unanticipated
opportunities, develop or enhance technology or services or otherwise respond to
competitive pressures would be significantly limited. If we raise additional
funds by issuing equity or convertible debt securities, the percentage ownership
of our then-existing stockholders will be reduced, and these securities may have
rights, preferences or privileges senior to those of our existing stockholders.
RISKS RELATED TO OUR INDUSTRY
OUR BUSINESS IS DEPENDENT ON THE CONTINUED DEVELOPMENT AND MAINTENANCE OF THE
INTERNET WHICH IS BEYOND OUR CONTROL. IF THE INTERNET IS NOT DEVELOPED AND
MAINTAINED OUR BUSINESS WILL BE HARMED.
The success of our business will depend on others for the ongoing
development and maintenance of the Internet infrastructure. This includes
maintenance of a reliable network with the necessary speed, data capacity and
security, as well as timely development of complementary products like high
speed modems, for providing reliable Internet access and services. Because
global commerce on the Internet and the online exchange of information is new
and evolving, we cannot predict whether the Internet will prove to be a viable
commercial marketplace in the long term. The success of our business is
dependent on the continued improvement of the Internet as a convenient means of
interaction and commerce, as well as an efficient medium for the purchase and
sale of healthcare supplies. If the Internet does not
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develop into an efficient medium for these transactions, our business and
financial condition and results of operation will be harmed.
RAPIDLY CHANGING TECHNOLOGY MAY IMPAIR OUR ABILITY TO DEVELOP AND MARKET OUR
SERVICES.
All businesses which rely on Internet technology, including the healthcare
supplies e-commerce marketplace business that we are developing, are subject to
risks and uncertainties, including:
- - Rapid technological change
- - Changing customer needs
- - Frequent new service introductions
- - Evolving industry standards
- - Relatively low barriers to entry
Internet technologies are evolving rapidly, and the technology used by our
e-commerce business is subject to rapid change. These market characteristics are
magnified by the emerging nature of the market and the fact that many companies
are expected to introduce new Internet products and services in the near future.
In addition, use of the Internet may decrease if alternatives are developed or
if problems associated with increased Internet use are not resolved. As the
communications, computer and software industries continue to experience rapid
technological change, we will need to modify our services so that they adapt to
those changes. We may experience difficulties that could delay or prevent the
successful development and introduction of our services or hinder our ability to
respond to technological changes in a timely and cost-effective manner.
Moreover, technologically superior service offerings could be developed by
competitors. These factors could harm our business and our ability to develop
and market our services.
ONLINE COMMERCE AND DATABASE SECURITY CONCERNS COULD REDUCE TRAFFIC ON OUR WEB
SITE AND EXPOSE US TO LIABILITY.
The secure transmission of confidential information over public networks is
a fundamental requirement for e-commerce. Concerns over the security of
transactions and commercial online services and other privacy issues may inhibit
the growth of the Internet and the online commerce industry. We license
encryption and authentication technology for the transmission of confidential
information, such as buyer credit card numbers, through our online system. In
addition, we maintain an extensive confidential database of buyer and seller
profiles and transaction information. Technological advances, including new
discoveries in the field of cryptography, could result in a compromise or breach
of our security systems. Security breaches could harm our reputation and impair
our business. An intruder who breaches our security measures could
misappropriate proprietary information or cause interruptions in our system. We
could be required to spend a significant amount of time and money to protect
against security breaches or to alleviate problems caused by breaches. Security
breaches could also expose us to litigation and possible liability. We cannot be
certain that our security measures will prevent security breaches.
THE APPLICATION OF SALES AND OTHER TAXES TO ONLINE COMMERCE COULD REDUCE DEMAND
FOR OUR SERVICES AND MAY BE ADMINISTRATIVELY BURDENSOME FOR US OR OUR CUSTOMERS.
The application of sales and other taxes by state and local governments to
e-commerce is uncertain and may take years to resolve. In particular, a number
of states are currently reviewing the appropriate tax treatment of e-commerce,
and new state tax regulations may subject us, our sellers or our buyers to
additional state sales and income taxes. The imposition of additional
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sales taxes on transactions conducted through our Web site could make our
service less valuable to buyers and sellers and reduce transaction volume. This
effect would harm our revenues. In addition, the collection and payment of such
taxes may cause us or our customers to incur significant administrative effort
and expense. Our failure to properly collect and pay such taxes in any
jurisdiction could subject us to penalties.
Federal legislation imposing limitations on the ability of states to tax
Internet access was enacted in 1998. The Internet Tax Freedom Act, as this
legislation is known, exempts specific transactions conducted over the Internet
from multiple or discriminatory state and local taxation through October 21,
2001. It is possible that this legislation will not be renewed when it
terminates in October 2001. Failure to renew this legislation could allow state
and local governments to impose taxes on particular transactions, and these
taxes could decrease the demand for our services or increase our costs of
operations.
GOVERNMENT REGULATION OF THE INTERNET OR HEALTHCARE E-COMMERCE COULD HARM OUR
BUSINESS.
Our services may be subject to extensive and frequently changing regulation
at federal, state and local levels. The Internet and its associated technologies
are also subject to government regulation. Many existing laws and regulations,
when enacted, did not anticipate the Internet or the methods of healthcare
supplies e-commerce we are developing. We believe, however, that some of these
laws and regulations may nonetheless be applied to our business. In addition,
numerous jurisdictions have laws and regulations that may affect the services we
offer, such as regulations affecting auctions or regulations affecting escrow
arrangements. Our business may be affected by current regulations as well as
future regulations specifically targeting the healthcare supplies industry or
the nature of our services.
We intend to conduct our business in compliance with the federal, state and
local laws and regulations governing our operations. However, the impact of
regulatory developments in the healthcare supplies industry is complex and
difficult to predict, and we cannot assure you that our business will not be
harmed by existing or new regulatory requirements or interpretations. It is also
possible that those requirements or interpretations could limit the
effectiveness of the use of the Internet for the methods of e-commerce we are
developing. Application of any regulations or requirements to our business could
harm our business. Please refer to "Business -- Government Regulation" for a
more detailed description of the regulations generally applicable to our
business.
THE CHANGING UNITED STATES HEALTHCARE ENVIRONMENT COULD HAVE A NEGATIVE IMPACT
ON OUR BUSINESS.
In recent years, the healthcare industry has undergone significant change
driven by various efforts to reduce costs and to improve access and quality.
Those efforts include potential national healthcare reform, trends toward
managed care, reductions in reimbursement, consolidation of healthcare suppliers
and the further development of large, sophisticated purchasing groups. This
industry is expected to continue to undergo significant changes for the
foreseeable future. Other factors that could have an adverse effect on our
business include:
- - Changes in governmental support or payment for healthcare services
- - Changes in purchasing and reimbursement policies of third-party insurers, not
just government payors
- - Changes in methods by which healthcare services are delivered or the prices
for healthcare services
- - Adoption of other legislation or regulations governing healthcare services or
mandated benefits
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RISKS RELATED TO THIS OFFERING
WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS, AND OUR INVESTMENT OF
THESE PROCEEDS MAY NOT YIELD A FAVORABLE RETURN.
The net proceeds of this offering are intended to be used as designated
under the heading "Use of Proceeds" in this prospectus. However, funds are not
currently allocated for specific uses within these general purposes. Our
management can spend the proceeds from this offering in ways with which the
stockholders may not agree. We cannot predict that the proceeds will be invested
to yield a favorable return.
OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS WILL CONTROL % OF
OUR COMMON STOCK AFTER THIS OFFERING, AND THIS CONCENTRATION OF OWNERSHIP MAY
DETER A CHANGE IN CONTROL OR OTHER TRANSACTION THAT IS FAVORABLE TO OUR
STOCKHOLDERS.
After this offering, executive officers, directors and holders of 5% or
more of our outstanding common stock will, in the aggregate, beneficially own
approximately % of our outstanding common stock. These stockholders would
be able to effectively control all matters requiring approval by our
stockholders, including the election of directors and the approval of
significant corporate transactions. This concentration of ownership may also
delay, deter or prevent a change in control and may make some transactions more
difficult or impossible to complete without the support of these stockholders,
even if the transaction is favorable to our stockholders.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY, AND THIS COULD
DEPRESS OUR STOCK PRICE.
Delaware corporate law and our certificate of incorporation and bylaws
contain provisions that could delay, defer or prevent a change in control of us
or our management. These provisions could also discourage proxy contests and
make it more difficult for you and other stockholders to elect directors and
take other corporate actions. As a result, these provisions could limit the
price that investors are willing to pay in the future for shares of our common
stock. These provisions:
- - Authorize the issuance of "blank check" preferred stock, which is preferred
stock that can be created and issued by the Board of Directors without prior
stockholder approval, with rights that are superior to those of common stock
- - Provide for a staggered Board of Directors, so that no more than two directors
could be replaced each year and it would take three successive annual meetings
to replace all directors
- - Prohibit stockholder action by written consent
- - Establish advance notice requirements for submitting nominations for election
to the Board of Directors and for proposing matters that can be acted upon by
stockholders at a meeting
- - Restrict business combinations with any interested stockholder
OUR SECURITIES HAVE NO PRIOR PUBLIC MARKET, AND WE CANNOT ASSURE YOU THAT OUR
STOCK PRICE WILL NOT DECLINE AFTER THE OFFERING.
Before this offering, there has not been a public market for our common
stock, and the trading market price of our common stock may decline below the
initial public offering price. The initial public offering price has been
determined by negotiations between us and the representatives of the
underwriters. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. In addition, an active public
market for our common stock may not develop or be sustained after this offering.
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CHANGES IN OUR BUSINESS MAY CAUSE THE PRICE OF OUR STOCK TO FLUCTUATE, AN EFFECT
WHICH WILL BE MAGNIFIED DUE TO THE HIGHLY VOLATILE NATURE OF THE MARKET FOR
STOCKS OF INTERNET COMPANIES.
The market price for our common stock is likely to be highly volatile and
is likely to experience wide fluctuations in response to factors including the
following:
- - Actual or anticipated variations in our quarterly operating results
- - Announcements of technological innovations or new services by us or our
competitors
- - Changes in financial estimates by securities analysts
- - Conditions or trends in the e-commerce or healthcare supplies industries
- - Changes in the economic performance or market valuations of other e-commerce
or healthcare supplies companies
- - Announcements by us or our competitors of significant acquisitions, strategic
relationships, joint ventures or capital commitments
- - Additions or departures of key personnel
- - Release of lock-up or other transfer restrictions on our outstanding shares of
common stock or sales of additional shares of common stock
- - Potential litigation
- - Changes in overall market conditions
The market prices of the securities of Internet related companies have been
especially volatile. Broad market and industry factors may adversely affect the
market price of our common stock, regardless of our actual operating
performance. In the past, following periods of volatility in the market price of
their stock, many companies have been the subject of securities class action
litigation. If we were sued in securities class action, it could result in
substantial costs and a diversion of management's attention and resources and
would adversely affect our stock price.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price is substantially higher than the net
tangible book value of each outstanding share of our common stock. As a result,
purchasers of our common stock in this offering will suffer immediate and
substantial dilution. The dilution will be $ per share in the net tangible
book value of the common stock from the initial public offering price. This
dilution is described in greater detail under "Dilution" in this prospectus. If
additional shares are sold by the underwriters following exercise of their
option to purchase additional shares, or if outstanding options or warrants to
purchase shares of common stock are exercised, there will be further dilution.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could decline. Based on pro forma shares outstanding as of September 30, 1999,
upon completion of this offering we will have outstanding shares
of common stock, assuming no exercise of the underwriters' option to purchase
additional shares. Of these shares, the shares of our common
stock sold in this offering will generally be freely tradeable, without
restriction, in the public market. Our directors, officers and stockholders and
optionees have entered into lock-up agreements in connection with this offering
generally providing that, for 180 days after the date of this prospectus, they
will not offer, sell, contract to sell or grant any option to purchase or
otherwise dispose of our common stock or any securities exercisable for or
convertible into our common stock without the prior written consent of Goldman,
Sachs & Co. According to the
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lock-up agreements, at any time beginning on the third business day following
the public release of our earnings for the quarter ended March 31, 2000, each
stockholder may offer, sell, transfer, assign, pledge or otherwise dispose of up
to 10% of his or her shares owned or issuable upon exercise of an option to
purchase our shares outstanding as of the date of this prospectus; and at any
time beginning on the third business day following the public release of our
earnings for the quarter ended June 30, 2000, each stockholder may offer, sell,
transfer, assign, pledge or otherwise dispose of up to an additional 15% of his
or her shares owned or issuable upon exercise of an option to purchase our
shares outstanding as of the date of this prospectus. The lock-up restrictions
will expire as to the remaining shares on the date that is 180 days after the
date of this prospectus. As a result, a substantial number of shares of our
common stock will be eligible for sale in the public market prior to the
expiration of the customary 180-day lock-up period following an initial public
offering.
In addition, approximately 4,214,950 shares under outstanding options and
approximately 2,170,800 shares reserved for future issuance under our stock
option plans as of September 30, 1999 will be eligible for sale in the public
market subject to vesting, the expiration of lock-up agreements and restrictions
imposed under Rules 144 and 701 under the Securities Act. See "Shares Eligible
for Future Sale".
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are subject to a
number of risks and uncertainties, many of which are beyond our control. All
statements, other than statements of historical facts included in this
prospectus, regarding our strategy, future operations, financial position,
revenues or revenue growth, projected costs, prospects, plans and objectives of
management are forward-looking statements. When used in this prospectus, the
words "may", "intend","will", "should", "could", "potential", "expect",
"anticipate", "believe", "estimate", "plan", "predict", or "continue" and
similar expressions, are intended to identify forward-looking statements,
although not all forward-looking statements contain these identifying words. All
forward-looking statements speak only as of the date of this prospectus. You
should not place undue reliance on these forward-looking statements. Although we
believe that our plans, intentions and expectations reflected in or suggested by
the forward-looking statements we make in this prospectus are reasonable, we can
give no assurance to you that these plans, intentions or expectations will be
achieved. We disclose important factors which could cause our actual results to
differ materially from our expectations under "Risk Factors" and elsewhere in
this prospectus. These cautionary statements qualify all forward-looking
statements attributable to us or persons acting on our behalf.
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<PAGE> 24
USE OF PROCEEDS
We estimate that our net proceeds from this offering will be approximately
$ million (based upon an assumed initial public offering price of
$ per share), after deducting an assumed underwriting discount and
estimated offering expenses. If the underwriters' option to purchase additional
shares is exercised in full, we estimate that net proceeds will be $
million.
We presently intend to use the net proceeds of this offering for increased
sales and marketing efforts, enhancement and development of our Internet
services, potential acquisitions of complementary products, services,
technologies and businesses, and for other working capital and general corporate
purposes. Pending those uses, the net proceeds of this offering will be invested
in short-term, interest-bearing, investment-grade securities. We are not
currently a party to any contracts or letters of intent with respect to any
acquisitions.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
presently intend to retain future earnings, if any, to finance the expansion of
our business and do not expect to pay any cash dividends in the foreseeable
future. Any future determination to pay cash dividends will be at the discretion
of our board of directors and will be dependent upon our financial condition,
results of operations, capital requirements, general business conditions, any
contractual restrictions and other factors that the board of directors may deem
relevant.
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<PAGE> 25
CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table sets forth our capitalization as of September 30, 1999:
- On an actual basis
- On a pro forma basis after giving effect to:
-- the sale of 769,394 shares of Series D preferred stock subsequent to
September 30, 1999 for net proceeds totaling $9,137
-- the sale of 3,281,515 shares of Series E preferred stock in December
1999 and January 2000 for net proceeds totaling $67,252
-- the issuance of 1,170,098 shares of common stock and 579,850 options
to purchase common stock with an estimated aggregate fair value of
approximately $9,269 in connection with our acquisition of PartNET,
Inc. in November 1999
-- the subsequent conversion of all of our outstanding preferred stock
into common stock immediately prior to this offering
- On a pro forma as adjusted basis to further reflect the estimated net
assumed proceeds from the sale of shares of common stock in
this offering at an assumed initial public offering price of $ per
share after deducting an assumed underwriting discount and estimated
offering expenses.
You should read this table in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and the notes to those statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
<S> <C> <C> <C>
Long-term liabilities................................... $ -- $ 1,326 $
-------- -------- -------
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares
(15,000,000 shares pro forma and pro forma as
adjusted) authorized; 6,515,601 shares issued and
outstanding (actual), no shares issued or
outstanding (pro forma and pro forma as
adjusted).......................................... 6 --
Common stock, $0.001 par value; 40,000,000 shares
(100,000,000 shares pro forma and pro forma as
adjusted) authorized; 11,616,050 shares issued and
outstanding (actual), 41,103,294 shares issued and
outstanding (pro forma), shares
issued and outstanding (pro forma as adjusted)..... 12 41
Additional paid-in capital............................ 60,219 152,012
Unearned stock-based compensation..................... (5,701) (5,701)
Accumulated deficit................................... (22,811) (28,969)
-------- -------- -------
Total stockholders' equity.................... 31,725 117,383
-------- -------- -------
Total capitalization.......................... $ 31,725 $118,709 $
======== ======== =======
</TABLE>
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<PAGE> 26
DILUTION
Our pro forma net tangible book value as of September 30, 1999 was
$106,679,000, or $2.60 per share of common stock. Pro forma net tangible book
value represents the amount of total tangible assets less total liabilities
divided by the total number of shares of common stock outstanding and gives
effect to:
- - the sale of 769,394 shares of Series D preferred stock subsequent to September
30, 1999 for net proceeds totaling $9,137,000
- - the sale of 3,281,515 shares of Series E preferred stock in December 1999 and
January 2000 for net proceeds totaling $67,252,000
- - the issuance of 1,170,098 shares of common stock and 579,850 options to
purchase common stock with an estimated aggregate fair value of approximately
$9,269,000 in connection with our acquisition of PartNET, Inc. in November
1999
- - the subsequent conversion of all of our outstanding preferred stock into
common stock immediately prior to this offering
After giving effect to our sale of common stock offered by this prospectus
at an assumed initial public offering price of $ per share, and our receipt
of the estimated net proceeds from the offering, our pro forma net tangible book
value as of September 30, 1999 would have been approximately $ million, or
$ per share. This represents an immediate increase in net tangible book
value of $ per share to existing stockholders and an immediate dilution of
$ per share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before the
offering............................................... $
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 September 30,
1999, the differences between existing stockholders and the new investors with
respect to the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid before deducting an
assumed underwriting discount and our estimated offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 41,103,294 % $118,559,297 % $2.88
New investors.............. % %
----------- ----- ------------ ------
Total............ 100.0% $ 100.0%
=========== ===== ============ ======
</TABLE>
As of September 30, 1999, there were options outstanding to purchase a
total of 4,214,950 shares of common stock, with a weighted average exercise
price of $0.27 per share. To the extent that any of these options are exercised,
there will be further dilution to new investors.
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<PAGE> 27
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
The statement of operations data presented below for the period from August
18, 1998 (inception) through December 31, 1998 and the selected balance sheet
data at December 31, 1998 are derived from our financial statements that have
been audited and are included elsewhere in this prospectus. The statement of
operations data for the nine months ended September 30, 1999 and the period from
August 18, 1998 to September 30, 1998 and the balance sheet data at September
30, 1999 are derived from our unaudited financial statements included elsewhere
in this prospectus. The unaudited financial statements have been prepared on the
same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of our financial position and results of operations for these
periods. The selected financial data for the nine months ended September 30,
1999 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1999 or any other future period.
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 18, 1998
PERIOD FROM (INCEPTION) NINE MONTHS
AUGUST 18, 1998 THROUGH ENDED
(INCEPTION) THROUGH SEPTEMBER 30, SEPTEMBER 30,
DECEMBER 31, 1998 1998 1999
------------------- ------------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................ $ -- $ -- $ 20
---------- ---------- -----------
Operating expenses:
Sales and marketing....................... 368 12 5,500
Systems and product development........... 84 -- 4,789
General and administrative................ 731 677 8,809
Amortization of stock-based
compensation........................... 271 -- 2,486
---------- ---------- -----------
Total operating expenses.......... 1,454 689 21,584
---------- ---------- -----------
Loss from operations........................ (1,454) (689) (21,564)
Interest income............................. 2 -- 205
---------- ---------- -----------
Net loss.................................... $ (1,452) $ (689) $ (21,359)
========== ========== ===========
Net loss per share, basic and diluted....... $ (0.20) $ (0.15) $ (2.51)
========== ========== ===========
Shares used in per share computations, basic
and diluted............................... 7,189,816 4,576,584 8,521,361
========== ========== ===========
Pro forma net loss per share, basic and
diluted................................... $ (0.74)
===========
Shares used in pro forma per share
computations, basic and diluted........... 28,806,689
===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 54 $29,421
Working capital........................................... (471) 26,549
Total assets.............................................. 520 34,765
Stockholders' equity (deficit)............................ (26) 31,725
</TABLE>
See our financial statements and accompanying notes for a description of
the computation of the net loss per share, pro forma net loss per share and the
number of shares used in the per share calculations in statement of operations
data above. Pro forma net loss per share reflects the conversion of our
outstanding preferred stock into common stock, retroactive to the date of
issuance.
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<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the related notes to our financial statements and the other
financial information included elsewhere in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from the results contemplated by these
forward-looking statements as a result of certain factors, including those
discussed below and elsewhere in this prospectus, particularly under the heading
"Risk Factors."
OVERVIEW
We operate a business-to-business Internet marketplace for the purchase and
sale of medical and non-medical products and services used by the healthcare
industry worldwide. Through our marketplace, registered buyers and sellers
purchase and sell medical and surgical products and equipment, commodity items,
capital equipment, and other non-medical supplies used in the operation of
healthcare facilities. Our business consists of a single operating segment, and
our operations and customers are located primarily in the United States.
Our marketplace offers a number of different services. Our eCatalog service
provides buyers with real-time access to current market pricing and
customer-specific, pre-negotiated product pricing, transaction activity
reporting and current product availability information, and provides sellers
with cost-effective access to new customers and markets. Our eRFP service
automates the time-consuming, paper-based processes of distributing a
request-for-proposal to appropriate sellers and coordinating responses from the
seller community. Through our eAuction service, we offer auction capabilities
enabling users to buy and sell new and used medical equipment. Our eSpecials
service allows the seller community to actively promote and sell products and
offer discounted prices directly to the buyer. Our eCertified service allows
pre-approved sellers to offer reconditioned, pre-owned and excess equipment that
has been inspected by third party inspectors and may have 90 day seller-provided
warranties, optional extended seller warranties and service manuals. Our eSource
service allows buyers to request our assistance in locating hard-to-find
healthcare supplies and services. All of our e-commerce services are powered by
our proprietary InstaCat and ePort technologies, which enable real-time
transactions with multiple parties.
Our revenue is typically a percentage of the gross transaction value of the
underlying purchase, as we do not take title to the equipment or products sold
through our Web site. The transaction fee is paid by the seller. eAuction
transaction fees are recognized when the buyer accepts the related equipment.
For all other transactions, fees are recognized at the time the buyer's order
for goods or services is accepted by the seller and when we believe collection
is reasonably assured. We record an allowance for doubtful accounts at the time
revenue is recognized based on our historical experience and expectations. We
have entered into revenue sharing agreements with other Internet companies and
registered buyers. These agreements provide for the sharing of fees earned based
on Internet referrals and buyer purchasing volumes. We record fees under these
agreements, which to date have been insignificant, as a reduction of revenue.
We were incorporated in August 1998, and the remainder of 1998 and the
first quarter of 1999 were spent primarily developing an Internet interface for
our business model and developing industry relationships. Accordingly, we did
not record any revenue in 1998 or the first quarter of 1999.
We have recorded minimal revenues to date and our ability to generate
significant revenues in the future is uncertain. We have incurred significant
losses since inception. We currently expect our losses to increase, and we
cannot assure you that we will ever achieve or sustain profitability. Our
expenditures are anticipated to increase substantially, primarily in the areas
of
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<PAGE> 29
sales and marketing and Web site maintenance and development. Due to our limited
operating history, our business and prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in early
stages of development, particularly companies in new and rapidly evolving
markets such as electronic commerce.
On November 22, 1999, we acquired all of the outstanding stock of PartNET,
Inc., an Internet software company, in exchange for 1,170,098 shares of common
stock and the issuance of 579,850 stock options to purchase shares of our common
stock. This acquisition will be accounted for under the purchase method of
accounting. Accordingly, we will record an aggregate of approximately $11
million in acquired software and goodwill in the fourth quarter of 1999, which
will be amortized on a straight-line basis over three years. The results of
PartNET, Inc. will be incorporated into our financial statements subsequent to
the purchase date.
RESULTS OF OPERATIONS
For the period since our inception on August 18, 1998 through December 31,
1998, we recorded a net loss totaling $1.5 million. For the nine months ended
September 30, 1999, our net loss was $21.3 million. Given our short operating
history and our limited operations in 1998, we believe that comparisons between
any period in 1999 and the comparable period in 1998 would not be meaningful;
therefore, these comparisons are not discussed.
NET REVENUES. Since our inception through the first quarter of 1999, we
were in a development stage. As a result, in 1998 and the first quarter of 1999
we did not transact any business through our Web site and did not record any
revenues. For the nine months ended September 30, 1999, we recorded revenues of
$20,000, representing a percentage of gross transactions conducted through our
Web site.
We intend to evaluate additional opportunities to expand our revenue base.
Additional sources may include subscription fees, information services and
enhanced seller profiles. Due to our acquisition of PartNET, we will also earn
revenues from providing software development and other related services. For the
year ended December 31, 1998 and for the nine months ended September 30, 1999,
PartNET's revenues totaled $1.8 million and $2.0 million, respectively.
PartNET's revenues are primarily derived from a long-term software development
contract with the United States government that ends in January 2001 and
provides for reimbursement of costs plus a fixed percentage fee.
SALES AND MARKETING. For the period from our inception through December 31,
1998, our sales and marketing expenses totaled $368,000. For the nine months
ended September 30, 1999, these expenses totaled $5.5 million. Sales and
marketing expenses consisted primarily of sales and marketing personnel costs
and associated travel. We anticipate that these expenses will increase as our
sales force and our product offerings continue to grow. Additionally, as demand
dictates, we have and plan to continue to use outside consultants to accommodate
customer implementation of our marketplace solution. We also expect to incur
significant advertising costs in order to increase brand awareness and to
attract additional buyers and sellers.
SYSTEMS AND PRODUCT DEVELOPMENT. These expenses include amounts expended
for our Web site development, design and improvements, as well as recurring
operating expenses related to maintaining and enhancing our Web site. These
expenses totaled $84,000 for the period from our inception to December 31, 1998
and consisted primarily of personnel costs.
For the nine months ended September 30, 1999, systems and product
development expenses totaled $4.8 million. There were two primary sources of
expenditures: consulting expenses and personnel expenses. These consulting
expenses were paid in cash, except for $3.8 million representing the value of
vesting common stock provided to software design firms which assisted us in
enhancing our Web site. We anticipate our Web site will undergo improvements in
functionality and capability over the next 12 months. In connection with these
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<PAGE> 30
improvements and our acquisition of PartNET, we anticipate spending a material
amount on product maintenance and development. Expenditures related to Web site
development and significant enhancements are capitalized and amortized over the
useful lives of new products developed. During the nine months ended September
30, 1999, we capitalized approximately $5.1 million in Web site development
expenses of which approximately $2.6 million was amortized to systems and
product development expense.
GENERAL AND ADMINISTRATIVE. General and administrative expenses totaled
$731,000 for the period from our inception to December 31, 1998 and $8.8 million
for the nine months ended September 30, 1999. For 1998, this category primarily
includes personnel costs, office rent and supplies, and various general
expenses.
In 1999, we recorded expenses relating to the hiring and relocation of some
of our management personnel. General and administrative expenses also include
recruiting fees for other personnel hires, consulting fees, travel expenses,
general office expenses and personnel costs. These costs are expected to
continue to increase as our personnel base expands and our business activity
increases.
General and administrative expenses include non-cash charges totaling
$519,000 for the period from August 18, 1998 to December 31, 1998 and $6.3
million for the nine months ended September 30, 1999. The 1998 amount and $2.6
million of the 1999 amount represent the value of stock-based compensation
issued to non-employees as measured over their respective service periods. In
addition, in June 1999, two investors of our Series C preferred stock purchased
a total of 1,083,000 shares of common stock from existing stockholders,
including two of our officers. These investors paid more for the common stock
than the deemed fair value of the stock at the time of sale. This difference of
$3.7 million was recorded as non-cash compensation expense. We anticipate
recording non-cash charges in the fourth quarter of 1999 of $1.7 million due to
vesting schedules of vesting stock and stock options issued to non-employees.
AMORTIZATION OF STOCK-BASED COMPENSATION. Stock-based compensation
represents the aggregate difference between the deemed fair value of common
stock at the time of issuance and the actual purchase price of stock sold to
employees and directors, or the exercise price in the case of stock options.
Stock-based compensation is amortized to expense, as a non-cash charge, over the
related vesting periods of the options and vesting stock using an accelerated
graded method. These non-cash charges totaled $271,000 for the period from
August 18, 1998 to December 31, 1998 and $2.5 million for the nine months ended
September 30, 1999. We anticipate recording additional unearned stock-based
compensation totalling approximately $8.9 million in the fourth quarter of 1999,
as we have continued to issue stock options to employees below the deemed fair
value of our common stock through December 31, 1999.
INTEREST INCOME. We invest our excess cash in a combination of money market
accounts and investments in Treasury Bills with maturities of less than three
months from the date of purchase. In 1998, we recorded interest income of $2,000
and for the nine months ended September 30, 1999, we recorded interest income of
$205,000.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through
private placements of equity securities. During 1998, and for the nine months
ended September 30, 1999, we received $636,000 and $40.5 million, respectively,
in net proceeds from the sale of our capital stock. Subsequent to September 30,
1999, we sold additional capital stock for net proceeds of $76.4 million.
From September 1998 through January 1999, we sold common stock for net
proceeds of $681,000. In January 1999, this common stock was exchanged for
Series A preferred stock of an
29
<PAGE> 31
equivalent amount. On an as-converted basis, this preferred stock is equivalent
to 1,362,000 shares of our common stock.
In March 1999, we sold shares of our Series B preferred stock to investors
for net proceeds of $4.9 million. These shares are convertible into 6,698,140
shares of our common stock.
In June 1999, we sold shares of our Series C preferred stock to investors
for net proceeds of $15.4 million. These shares are convertible into 8,916,664
shares of our common stock. In August and September 1999, we sold shares of our
Series D preferred stock for net proceeds of $20.0 million. The Series D
preferred stock is convertible into 3,308,524 shares of our common stock.
Subsequent to September 30, 1999, we sold 769,394 additional shares of
Series D preferred stock for net proceeds of $9.1 million and 3,281,515 shares
of Series E preferred stock for net proceeds of $67.3 million. These securities
are convertible into 8,101,818 shares of our common stock.
Immediately prior to consummation of this offering, all issued and
outstanding shares of preferred stock will be converted into common stock.
Effective September 1999, we entered into a renewable three-month agreement
with Ernst & Young under which its Healthcare Consulting group is assisting us
to expedite the implementation and use of our e-commerce solution into the
healthcare supply chain. Under the arrangement, medibuy.com was required to make
payments to Ernst & Young LLP totalling $1.2 million in the fourth quarter of
1999. In 2000, we are continuing to use Ernst & Young's services and are
negotiating an extension of the agreement.
In November 1999, we entered into a strategic agreement with
Physiciansite.com, Inc. to channel physicians and their staffs to our Web site.
During the three-year term of the agreement and for up to two years following
the expiration or termination of the agreement, we are required to make revenue
sharing payments to Physiciansite.com based on a percentage of revenue generated
from joint users.
In December 1999, we entered into an agreement with Vitria Technology, Inc.
to license software and obtain support services. In accordance with the
agreement, Vitria has agreed to pay us fees equal to a percentage of net
software license revenue Vitria receives for each qualified customer referral by
us. Through December 31, 1999, we have not earned any such fees.
In January 2000, we entered into an agreement with two investors, including
Allianz Capital Partners, Gmbh, to provide us strategic information and
assistance services in connection with the development of our business in
Europe. Allianz is a global leader in insurance and asset management and is
headquartered in Munich, Germany. In connection with this agreement, we issued
those investors warrants to purchase a total of 379,968 shares of our common
stock. These warrants are valued at $3.8 million, which will be recorded as a
sales and marketing expense in 2000.
As of September 30, 1999, our primary source of liquidity consisted of
$29.4 million in cash and cash equivalents. At December 31, 1998, we had $54,000
in cash and cash equivalents. This increase is directly attributable to the
sales of our preferred stock.
Net cash used in operating activities was $89,000 from our inception to
December 31, 1998. For the nine months ended September 30, 1999, we used $7.3
million of cash in operating activities. Those amounts consisted of our net
losses offset primarily by equity-based non-cash compensation expense and
increases in accounts payable and accrued expenses. We anticipate that we will
continue to use cash on hand to fund our operations.
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<PAGE> 32
Net cash used in investing activities was $493,000 during 1998 and $3.8
million for the nine months ended September 30, 1999. These expenditures were
primarily for the purchase of computer equipment, acquired and internally
developed software, telephone systems, leasehold improvements and furniture. We
anticipate that we will continue to incur significant capital expenditures as we
continue to develop our Web site and acquire fixed assets to support our
expanding employee base.
As of December 31, 1998, there were no significant commitments that
extended beyond a 12-month period. During 1999, we entered into a
non-cancellable lease for office space in Cincinnati, Ohio. The lease has a
five-year term with minimum lease payments of $347,000 over the term. In July
1999, we signed a five-year non-cancellable lease agreement for our new
corporate office facilities in San Diego, California. Minimum rental obligations
for this lease total $2.3 million over the five-year term of the lease which
commenced November 1, 1999. We have also leased offices in Salt Lake City, Utah,
Tulsa, Oklahoma and Palo Alto, California, and we are leasing portions of our
office equipment and furniture.
In October, we entered into an operating lease with a manufacturer to lease
computer equipment and related software. The lease is a two-year operating lease
with monthly rentals of $22,000.
We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures at least through the next 12 months.
Our future long-term capital needs will be highly dependent on achieving
sufficient revenue to achieve profitability. Thus, any projections of future
long-term cash needs and cash flows are subject to substantial uncertainty.
To the extent our net revenues increase in the future, we anticipate
significant increases in our working capital requirements to finance higher
relative levels of associated accounts receivable, prepaid expenses and other
current assets, offset by increases in accounts payable and other liabilities.
However, we do not expect that the increases in accounts payable and other
liabilities will offset the increases in accounts receivable, prepaid expenses
and other current assets.
If the net proceeds of this offering, together with our available funds and
cash generated from operations are insufficient to satisfy our long-term
liquidity requirements, we may seek to sell additional equity or debt
securities, obtain a line of credit or curtail our expansion plans. The terms of
any credit facility we may have could contain restrictions on our ability to
incur debt or issue equity securities. In addition, if we issue additional
securities to raise funds, those securities may have rights, preferences or
privileges senior to those of the rights of our common stock and our
stockholders may experience additional dilution. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all.
YEAR 2000
The year 2000 date recognition problem may affect the computers, software
and other equipment that we use, operate or maintain in our operations. As a
result, we formalized our year 2000 compliance plan which was implemented by a
team of employees, led by our internal information technology staff, responsible
for monitoring the assessment and remediation status of our year 2000 projects
and reporting its status to our Board of Directors.
INFORMATION TECHNOLOGY SYSTEMS. As part of our compliance plan, we made an
assessment of the year 2000 readiness of our information technology systems,
including the hardware and software that operate our Web site and our
non-information technology systems. We believe that substantially all of our
applications, databases and infrastructure are year 2000 compliant. We have been
informed by all of our material vendors of material hardware and software
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<PAGE> 33
components of our information technology systems that substantially all of the
products we use are currently year 2000 compliant.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to computers
and related systems, the operation of office and facilities equipment, such as
fax machines, telephone switches, security systems and other common devices, may
be affected by the year 2000 problem.
COSTS OF REMEDIATION. We have spent less than $100,000 to date for
remediation. We estimate that any costs to us of completing any required
modifications, upgrades or replacements of our internal systems will be minimal.
While we cannot determine with complete certainty that all year 2000
problems affecting us have been identified or corrected, we do not believe that
the year 2000 problem will have a material adverse effect on our business or
operating results. In addition, we have not deferred any material information
technology projects, or equipment purchases, as a result of our year 2000
problem activities.
SUPPLIERS. As part of our compliance plan, we contacted third-party
suppliers of components and our key subcontractors used in the delivery of our
services to identify and, to the extent possible, resolve issues involving the
year 2000 problem. However, we have limited or no control over the actions of
these third-party suppliers and subcontractors. Thus, while we expect that we
will be able to resolve any significant year 2000 problems with these third
parties, there can be no assurance that these suppliers will resolve any or all
year 2000 problems before the occurrence of a material disruption to the
operation of our business. Any failure of these third parties to resolve year
2000 problems with their systems in a timely manner could have a material
adverse effect on our business, financial condition and results of operations.
MOST LIKELY CONSEQUENCES OF YEAR 2000 PROBLEMS. We believe that we have
resolved any material year 2000 problems that we could identify in our review of
our systems. However, we believe that it is not possible to determine with
complete certainty that all year 2000 problems affecting us have been identified
or corrected. As a result, we believe that the following consequences are
possible:
- - operational inconveniences and inefficiencies for us and our customers that
will divert management's time and attention and financial and human resources
from ordinary business activities
- - business disputes alleging that we failed to comply with the terms of
contracts or industry standards of performance, some of which could result in
litigation or contract termination
- - loss of revenues and customer loyalty as a result of network, software or
hardware failures that affect our customers' ability to access our Web
services
CONTINGENCY PLANS. We did not develop contingency plans to be implemented
if our efforts to identify and correct year 2000 problems were not effective. If
the need arises, we will rapidly develop contingency plans that may include:
- - accelerated replacement of affected equipment or software
- - short to medium-term use of backup equipment and software or other redundant
systems
- - increased work hours for our personnel or the hiring of additional information
technology staff
- - the use of contract personnel to correct, on an accelerated basis, any year
2000 problems that arise or to provide interim alternate solutions for
information system deficiencies
Our implementation of any of these contingency plans could have a material
adverse effect on our business, financial condition and results of operations.
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<PAGE> 34
DISCLAIMER. The discussion of our efforts and expectations relating to year
2000 compliance contains forward-looking statements. Our ability to achieve year
2000 compliance, and the associated level of incremental costs, could be
adversely affected by, among other things, the availability and cost of contract
personnel and external resources, third-party suppliers' ability to modify
proprietary software, and unanticipated problems not identified in the ongoing
compliance review.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designed as part of a
hedge transaction and, if it is, the type of hedge transaction. We do not expect
that the adoption of SFAS No. 133 will have a material impact on our financial
statements because we do not currently hold any derivative instruments and do
not engage in any hedging activities.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We invest our excess cash balances in a combination of U.S. Treasury Bills
and money market funds. All of the cash equivalent investments we have purchased
have maturity dates of less than three months from the date of purchase. We do
not currently hold, and we have never held, any derivative financial
instruments. As a result, we do not expect changes in interest rates to have a
material impact on our results of operations or financial position.
To date, all of our revenues have been denominated in United States dollars
and are primarily from customers in the United States. We have not engaged in
foreign currency hedging. In the future, a portion of our revenues we expect to
derive from international operations may be denominated in foreign currencies.
As a result, our operating results could become subject to significant
fluctuations based upon the changes in the exchange rates of those international
revenues denominated in United States dollars. Although currency fluctuations
are currently not a material risk to our operating results, we will continue to
monitor our exposure to currency fluctuations and if appropriate, use financial
hedging techniques in order to minimize the effect of these fluctuations in the
future. We cannot assure you that exchange rate fluctuations will not harm our
business in the future or that any financial hedging techniques will be
successful in reducing the impact of exchange rate fluctuations.
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BUSINESS
OVERVIEW
medibuy.com operates a leading business-to-business Internet marketplace
for the purchase and sale of medical and non-medical products and services used
by the healthcare industry worldwide. We provide buyers and sellers with a
scalable, secure and real-time exchange to conduct daily commerce and access
information relating to products, services and market trends. The medibuy.com
marketplace provides substantial benefits to participating buyers and sellers by
reducing order processing and tracking costs and improving the utilization of
data relating to products, services, transactions and market trends. In
addition, our marketplace benefits buyers by providing access to a global seller
community and by streamlining the purchasing process, and benefits sellers by
providing access to a worldwide buyer community, reducing sales and marketing
costs, and improving inventory and rebate management.
INDUSTRY BACKGROUND
GROWTH OF BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE
The Internet is one of the fastest growing means of communication and is
dramatically changing the competitive landscape of many industries, creating
significant opportunities for companies to expand and grow their businesses.
Companies are increasingly using the Internet to develop business-to-business
e-commerce solutions to streamline complex processes, lower costs and enable
buyers and sellers in fragmented markets to reduce supply chain inefficiencies.
According to Forrester Research, business-to-business e-commerce is expected to
grow from $109 billion in 1999 to $1.3 trillion in 2003, accounting for more
than 90% of the dollar value of e-commerce in the United States by 2003.
The expected growth of business-to-business commerce on the Internet has
given rise to a variety of business-to-business electronic marketplaces where
buyers and sellers can come together to conduct transactions, communicate, share
ideas and manage inventory. Some of these marketplaces are "horizontal" in the
sense that they provide a specific application, such as auctions, across a
variety of industries. Others are "vertical" in the sense that they serve the
needs of a specific industry such as agricultural products, steel or healthcare
supplies. Both horizontal and vertical marketplaces are growing in popularity
because they offer the potential to bring together large numbers of buyers and
sellers, reduce paperwork and transaction costs, and streamline buyers' supply
chains.
The dynamics of business-to-business electronic marketplaces differ from
those of other e-commerce forums, particularly in the business-to-consumer area.
Because business-to-business electronic marketplaces automate or otherwise
impact business processes related to the purchase and sale of products and
services, they must be closely integrated with the existing business information
systems of buyers and sellers. In addition, employees of both buyers and sellers
must be trained in the use of these marketplaces. Consequently, the decision by
a buyer or seller to use a particular electronic marketplace represents a
significant commitment, and the cost of switching to an alternative marketplace
is high.
THE HEALTHCARE SUPPLIES MARKET
HEALTHCARE SUPPLIES. An independent consulting firm estimates that in 1998
the market for new medical products, supplies and equipment totaled an estimated
$150 billion worldwide, including approximately $85 billion in the United
States. These estimates do not include services or non-medical or used products,
supplies and equipment purchased by healthcare providers, which we believe will
contribute significantly to our market opportunity. The market for healthcare
supplies includes over one million medical and non-medical products and
services. Medical
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<PAGE> 36
products include consumables such as syringes, gloves and bandages and capital
equipment such as diagnostic and monitoring devices. Non-medical products and
services include such items as office supplies, computer equipment and
maintenance and janitorial services used in the operation of healthcare
facilities.
BUYERS. The buyers of healthcare supplies are comprised of a large number
of geographically dispersed healthcare providers, including hospitals, clinics,
long-term care facilities and physician offices. According to the American
Hospital Association, there are over 5,015 non-federal hospitals in the United
States. In addition, according to the United States Department of Defense, there
are 281 federally-owned hospitals in the United States. According to the
American Medical Association, there are over 600,000 practicing physicians in
the United States.
The end users of healthcare supplies can be classified as acute care
providers or non-acute care providers. Acute care providers serve patients
needing immediate medical or surgical care and consequently consume a large
volume of healthcare products and services. Acute care providers are primarily
individual hospitals linked together in hospital systems, such as integrated
delivery networks. Acute care providers account for the substantial majority of
total healthcare supply expenditures made annually in the U.S. Non-acute care
providers include clinics, physician offices, and long-term care facilities such
as nursing homes or rehabilitation clinics.
Acute care providers typically negotiate contracts through group purchasing
organizations, commonly referred to as GPOs, for the purchase of products at
national or regional levels. Buyers at local hospitals have varying degrees of
discretion to purchase under these contracts or outside these contracts.
Non-acute care providers typically negotiate and purchase products and services
individually.
SELLERS. The Health Industry Manufacturers' Association reports that there
are approximately 20,000 medical products manufacturers in the United States.
The Health Industry Distributors Association, or HIDA, counts 450 national
medical distributors, and according to One Source Online Database, there are an
additional 10,000 regional medical distributors. According to data from the U.S.
Department of Defense and the Small Business Association, there are 25,000
non-medical manufacturers and distributors that sell their products to the
healthcare industry, and more than 10,000 organizations that market a diverse
array of services such as maintenance, nursing care, home care and medical
billing to these providers. While the collective number of potential sellers in
the healthcare supplies market is quite large and difficult to determine with
accuracy, HIDA reports that fewer than 800 sellers account for more than 80% of
the dollar value of medical products sold in the U.S. healthcare market.
LIMITATIONS OF TRADITIONAL PURCHASING METHODS FOR HEALTHCARE SUPPLIES
The traditional process of locating and purchasing medical and non-medical
products and services is inefficient and does not adequately address the needs
of buyers or sellers. A 1996 study published by an association of healthcare
manufacturers, distributors and providers known as the Efficient Healthcare
Consumer Response found that in the United States, $11 billion is spent annually
on avoidable costs associated with healthcare supply chain inefficiencies.
LIMITATIONS AFFECTING BUYERS. A healthcare system will typically purchase
and manage approximately 100,000 different products and services on a regular
basis. Healthcare purchasers are responsible for securing these products and
services and delivering them to widely dispersed locations. Their efforts are
limited by a number of factors, including:
- - INEFFICIENT PURCHASING PROCESS. Buyers typically make purchases, place and
track orders and manage their accounts payable using manual and automated
processes. The manual processes, involving telephone, fax, paper and e-mail,
are labor intensive, expensive and prone to error. Automated processes,
involving electronic data interchange, commonly known as EDI,
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<PAGE> 37
are limited to interactions with a few specific sellers and do not facilitate
the process of requesting product or pricing proposals from multiple sellers.
- - LIMITED ACCESS TO SELLERS. Identifying, assessing and purchasing from the
large number of available sellers is time consuming and expensive. Sellers are
geographically dispersed and market their products through a variety of means
including catalogs, trade advertising and sales forces. Many sellers
specialize in a limited number of products and services. Even though many
sellers are developing proprietary Web sites, many do not have online ordering
capability, and it is inefficient for healthcare buyers to search, navigate
and order from multiple Web sites.
- - LIMITED PRODUCT INFORMATION. Buyers have limited access to information
regarding product selection, availability and pricing. Historically, there
have been no comprehensive, real-time product catalogs available for sourcing
and purchasing healthcare supplies. Nor have there been any real-time
cross-reference tools for locating and comparing alternative products. Buyers
also have difficulty accessing other product information such as product
recalls, clinical information and basic product specifications.
- - LIMITED TRANSACTION DATA. Buyers typically have no comprehensive repository of
their historical transaction data because they tend to place orders from
multiple locations using a variety of purchasing methods with a large number
of sellers. Although buyers often rely on sellers to track and report their
purchasing activities, sellers typically have difficulty providing this
information. Without access to comprehensive transaction data, buyers have
difficulty negotiating volume discounts.
- - UNCOORDINATED PURCHASING. The healthcare purchasing function is often
decentralized and uncoordinated. Expediency requires that purchase decisions
be made by multiple parties within the buyer organization, but such
decentralized purchasing is difficult to coordinate and frequently results in
purchases being made without the benefit of pre-negotiated contract prices.
LIMITATIONS AFFECTING SELLERS. In order to grow their businesses, sellers
must devote significant resources to market and sell their products to a large,
fragmented group of buyers and to efficiently manage transactions and inventory.
Their challenges include the following:
- - INEFFICIENT SALES PROCESS. The traditional processes of finding and selling to
motivated buyers and processing their orders is inefficient. EDI partially
addresses this inefficiency, but only for a limited number of buyers and
sellers, and applies only to processing orders. Sellers that do not have
EDI-enabled systems typically receive orders by telephone, fax, mail and
e-mail. Processing these orders manually is time consuming, labor intensive
and prone to error.
- - LIMITED ACCESS TO BUYERS. Due to the important role existing relationships
play in healthcare commerce and the inherent geographical limitations of a
traditional sales force, sellers are not able to access a broad range of
potential customers for their products.
- - HIGH SALES AND MARKETING COSTS. Establishing a traditional sales and marketing
presence is costly and time consuming. Sellers must hire, train and supervise
local, regional and national sales forces to reach a broad variety of buyers.
In addition, sellers must print catalogs and distribute them to potential
buyers in multiple market segments. These sales and marketing expenditures are
further constrained by market pressures on sellers for cost-savings. Smaller
manufacturers are particularly disadvantaged by high sales and marketing costs
because they have limited financial resources and do not have the economies of
scale to negotiate advantageous terms with distributors and GPOs.
- - INEFFICIENT INVENTORY MANAGEMENT. Sellers often have difficulty effectively
managing their inventory because they cannot accurately estimate demand for
their products. Estimating demand is difficult for manufacturers and
distributors because both parties have a limited
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ability to access and use industry data to project trends in product demand.
Manufacturers have two additional problems when trying to accurately estimate
demand. First, distributors often provide incomplete coverage of a
manufacturer's inventory in their catalogs due to space constraints. Second,
because distributors frequently perform the marketing function for
manufacturers, manufacturers are not sufficiently close to the preferences of
buyers to know when product demand is changing.
- - INEFFICIENT REBATE MANAGEMENT. Under traditional methods, sellers often have
difficulty keeping accurate records of rebates owed to buyers and specific
buying organizations. Managing rebate programs requires dedicated personnel
and systems to track aggregate sales and calculate rebates due.
OPPORTUNITY FOR A BUSINESS-TO-BUSINESS E-COMMERCE SOLUTION
The emergence of the Internet and the potential benefits of
business-to-business e-commerce solutions have highlighted the inefficiencies
inherent in the traditional healthcare supplies market and put increasing
pressure on healthcare buyers and sellers to streamline their business
processes. External pressures such as reductions in healthcare reimbursement by
government and third-party payors compound the need for more cost-effective
processes. A business-to-business e-commerce solution also provides
manufacturers and distributors of healthcare supplies with the opportunity to
grow their revenues and increase their market share. The combination of new
technologies and rising cost pressures creates an opportunity for an efficient,
easily adaptable e-commerce marketplace solution for healthcare supplies.
THE MEDIBUY.COM SOLUTION
medibuy.com operates a leading business-to-business Internet marketplace
for the purchase and sale of medical and non-medical products and services used
by the healthcare industry worldwide. We provide buyers and sellers with a
scalable, secure and real-time exchange to conduct daily commerce and access
information relating to products, transactions and market trends. We believe our
services address the limitations of the traditional healthcare supply chain by
enabling our users to efficiently and cost-effectively buy and sell a broad
variety of medical and non-medical healthcare products and services in an open,
online marketplace. The following table illustrates how our solution addresses
limitations of the traditional healthcare supply chain:
<TABLE>
-------------------------------------------------------------------------------------
LIMITATIONS OF
TRADITIONAL HEALTHCARE SUPPLY CHAIN BENEFITS OF MEDIBUY.COM SOLUTION
<S> <C> <C>
---------------------------------------------------------------------------------------------
- Inefficient purchasing process - Automated, cost-effective purchasing
- Limited access to sellers process
BUYERS - Limited product information - Expanded access to sellers
- Limited transaction data - Extensive product information
- Uncoordinated purchasing - Extensive transaction data
- Coordinated purchasing
- ----------------------------------------------------------------------------------------------
- Inefficient sales process - Automated, cost-effective sales process
- Limited access to buyers - Expanded access to buyers
- High sales and marketing costs - Reduced sales and marketing costs
SELLERS - Inefficient inventory management - Improved inventory management
- Inefficient rebate management - More effective rebate management
- ----------------------------------------------------------------------------------------------
</TABLE>
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BENEFITS TO BUYERS
AUTOMATED, COST-EFFECTIVE PURCHASING PROCESS. Our Web-based solution allows
buyers to streamline the process of finding, comparing, purchasing, tracking and
managing the procurement of medical and non-medical healthcare supplies. Our
solution allows buyers to automate and integrate order processing, consolidate
purchase orders and payments and obtain current inventory and pricing
information on a real-time basis.
EXPANDED ACCESS TO SELLERS. Using our Web-based solution, buyers have
immediate access to a broad range of participating sellers.
EXTENSIVE PRODUCT INFORMATION. Our solution gives buyers real-time access
to sellers' product catalogs with current market and customer-specific pricing
and product information for a broader range of products than traditionally
available. Buyers can search our sellers' product databases to compare pricing,
product attributes and technical information across multiple sellers, including
sellers not previously used by or available to the buyer.
EXTENSIVE TRANSACTION DATA. By using our Web-based, integrated solution,
buyers are able to access a single repository of transaction data to better
track and report their purchasing, product use and pricing. Buyers can use this
data for improved contract negotiation, budget forecasting and assessing and
comparing operational performance.
COORDINATED PURCHASING. With our solution, buyers can streamline their
purchasing process by combining purchasing information from multiple points of
care into one centralized purchasing source. This solution enables buyers to
more efficiently use their resources and ensure that purchases take advantage of
pre-negotiated contract prices.
BENEFITS TO SELLERS
AUTOMATED, COST-EFFECTIVE SALES PROCESS. Our Web-based solution allows
sellers to streamline the process of finding and selling to motivated buyers.
Our solution enables sellers to compress their payment cycles, automate and
standardize order processing and provide real-time product pricing and
availability information to buyers.
EXPANDED ACCESS TO BUYERS. Our solution enables sellers to reach a broad
range of buyers at potentially reduced cost. Sellers can access buyers in
multiple locations and in various markets associated with the delivery of care,
ranging from hospitals, GPOs and integrated delivery networks to long-term care
facilities and physician offices. Our services give sellers of all sizes direct
online access to decision makers in buyers' procurement processes.
REDUCED SALES AND MARKETING COSTS. Our solution allows sellers to sell
their products directly to buyers online and to more easily market their brand
to a wider audience without corresponding increases in sales and marketing
costs. Our services also permit sellers to potentially reduce existing sales and
marketing costs and avoid the expenses of developing and maintaining their own
e-commerce or EDI solution.
IMPROVED INVENTORY MANAGEMENT. Using our Web-based system, manufacturers
and distributors are better able to predict demand through enhanced access to
information about historical transactions. In addition, manufacturers are not
dependent on distributor catalogs for the breadth of their offerings and can
gauge buyer preferences more directly. As a result, both manufacturers and
distributors are better able to manage their inventory.
MORE EFFECTIVE REBATE MANAGEMENT. By consolidating and tracking transaction
information about specific buyers' purchases, sellers are better able to manage
and direct their rebate programs. This results in improved relationships with
buyers and better-informed rebate budgeting for negotiation of volume discounts
and rebates.
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THE MEDIBUY.COM STRATEGY
Our objective is to become the preferred marketplace for products and
services used by the healthcare industry. Key elements of our strategy include:
MAINTAIN SELLER NEUTRALITY. We intend to maintain our manufacturer and
distributor neutrality to promote an open marketplace allowing unbiased access
to a broad range of products from a large number of diverse sellers. We believe
that our seller neutrality maximizes the attractiveness of our marketplace to
buyers and sellers and provides us with a competitive advantage over single- or
limited-source seller solutions.
MAINTAIN COMMITMENT TO TECHNOLOGICAL LEADERSHIP. We believe our internally
developed and acquired technologies give us important competitive advantages.
These technologies include InstaCat, a scalable distributed catalog technology
providing real-time transactions and online access to product pricing and
availability information, and ePort, a technology allowing automated responses
to specific queries from buyers directly from sellers' databases. We intend to
continue to internally develop and acquire technologies to maintain our
technological leadership. We also intend to continue to bolster our competitive
position through alliances with leading technology and software producers.
ACCELERATE ADOPTION AND USE OF OUR MARKETPLACE. We intend to attract new
customers through dedicated sales and marketing efforts and by continuing to
build brand awareness. We have developed an implementation team to assist in the
technical integration of our services with a customer's existing systems. This
team minimizes the initial commitment of time and capital for new users of our
solution. We also provide ongoing post-implementation support and education
concerning the benefits of our solution. We believe our focus on implementation
and ongoing support and education will accelerate adoption and use of our
marketplace services.
CONTINUE TO BUILD BRAND RECOGNITION. To enhance awareness of our healthcare
marketplace solution, we are pursuing an aggressive brand development strategy
through targeted trade advertising, participation in industry events, trade
shows and trade associations, promotional activities and public relations. We
intend to continue to invest heavily in building the medibuy.com brand by
accelerating our marketing, sales, advertising and public relations efforts.
EXPAND SERVICE OFFERINGS. Through internal efforts or by acquisition, we
have developed and intend to continue to develop innovative service offerings to
meet the needs of our customers. Initially we offered our eRFP service and then
expanded our services to include eCatalog, eAuction, eSpecials, and other
e-commerce applications. We will continue to develop and acquire new service
offerings, technologies and businesses to provide opportunities for our users to
increase revenues and profitability while reducing their costs. For example, we
plan to expand the range of our services to provide content, data warehousing
and data mining services. In addition, we intend to apply our model to create
separate, specialized marketplaces focused on other segments in healthcare, such
as dental and eye care.
CONTINUE TO EXCEL IN CUSTOMER SERVICE. We believe that attentive customer
support and service is a critical component to the success of
business-to-business e-commerce. We intend to continue to emphasize a high level
of customer support in order to attract and retain users. We believe that our
commitment to excellent service will produce new referrals from satisfied
participants in our marketplace and enhance customer retention.
EXPAND INTERNATIONALLY. We plan to leverage our technology, expertise and
existing seller and strategic relationships to expand our marketplace to
selected international markets. We believe the international reach of the
Internet and the fragmented nature of many international healthcare supplies
markets present opportunities to expand our marketplace internationally.
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THE MEDIBUY.COM MARKETPLACE
We derive our revenues primarily from transaction fees related to the sale
of products and services through our Web site. Our fees vary depending on the
type of transaction and service being used. For example, our per-transaction fee
will differ depending on whether the transaction is completed through eCatalog,
eRFP, eAuction or eSpecials, among others. We expect that transaction fees will
continue to be our primary source of revenues in the future. In addition to
transaction fees, we plan to generate revenues from a combination of seller
subscriptions, information services, data warehousing and data mining in the
year 2000. We do not take legal title to any products sold through our Web site.
ECOMMERCE SERVICE OFFERINGS
We have developed a suite of service offerings designed to address a wide
variety of needs of companies engaged in the purchase and sale of healthcare
supplies. Our offerings include the following:
ECATALOG. Our eCatalog service, launched in December 1999, provides our
buyers with the ability to purchase a large variety of products and services
through our Web site's electronic catalog. Buyers can use eCatalog to compare
products and services based on product characteristics and price and to purchase
and automatically re-order these products and services.
The information provided through our eCatalog service is electronically
linked with our sellers' databases, ensuring current and accurate seller pricing
and immediate access to available inventory information. Our eCatalog service
provides consistently updated seller information reflecting changes to a
seller's product database. In addition, our eCatalog service coordinates
buyer-specific pricing structures to offer buyers either current market pricing
or specific pre-negotiated contract pricing. eCatalog enables sellers to provide
targeted electronic marketing information to accompany their product listings,
allowing them to compete on product features and not just price. Should a buyer
ultimately decide that a product's price, availability or other terms are not
attractive, the buyer can immediately use eRFP to solicit proposals from
potential sellers in an attempt to improve these terms.
ERFP. Our eRFP service, launched in April 1999, automates and reduces
inefficiencies in the request-for-proposal process for the procurement of
healthcare supplies. Through eRFP, a buyer can anonymously submit a
request-for-proposal, commonly known as an RFP, to sellers registered within the
product categories selected by the buyer. In this manner, buyers can submit RFPs
for items in our eCatalog as well as other items and services not currently in
our eCatalog. Sellers can then submit proposals in response to the RFP. Finally,
the buyer can review aggregated responses and accept the proposal that best
meets its needs. eRFP gives sellers an equal opportunity to submit proposals
against RFPs in an anonymous setting and is designed to lower costs and reduce
the time required for buyers to locate products and services.
EAUCTION. Our eAuction service, launched in June 1999, gives users the
opportunity to buy and sell new and used equipment in an auction style format.
Through eAuction, buyers can access information about and submit bids for items
being auctioned by sellers. Buyers can browse available auctioned products or
conduct specific searches through hundreds of products ranging from pre-owned,
"as-is" products to reconditioned and seller-warranted products.
Through eAuction, sellers can maximize the value of their excess assets by
offering them for sale on a worldwide basis. The auction style format helps
distributors, manufacturers and healthcare providers by automating and reducing
the costs of liquidating excess inventory.
ECERTIFIED. Our eCertified service, launched in December 1999, allows
pre-approved sellers to offer reconditioned, pre-owned and excess equipment.
Products offered through eCertified
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have been inspected by third party inspectors and may have 90 day
seller-provided warranties, optional extended seller warranties and service
manuals.
ESPECIALS. Our eSpecials service, launched in December 1999, gives buyers
direct access to sellers' discounted offerings and allows sellers to actively
promote and merchandise specials. For example, registered sellers can offer
unused healthcare supplies through this service to facilitate inventory
closeouts or for special promotions at reduced costs.
ESOURCE. Our eSource service, launched in December 1999, allows buyers to
request our assistance in locating hard-to-find healthcare products and
services. Buyers provide us with information about their needs, time frame,
planned use and other purchase requirements, and we then assist them in locating
these items.
FUTURE OFFERINGS
In addition to our existing service offerings, we are developing new
services aimed at giving our customers valuable information to further assist
them in their purchasing, selling and planning functions. We anticipate that our
new services will include the following:
DATA WAREHOUSING AND MINING. We are developing a data warehouse to give our
customers access to their transactional data. Our data warehouse will allow
users to mine their transactional data to track and respond to business trends
and to facilitate forecasting and planning efforts. Our data mining resources
will provide our customers with the following:
- - Access to Web-enabled forecasting and statistical analysis tools
- - Secure access to the customers' own transactional information
- - Access to enhanced reporting functions such as price analysis
THE MEDIBUY.COM DESKTOP. Beginning in the year 2000, we plan on introducing
the medibuy.com desktop, which will integrate our e-commerce solution with
buyers' existing desktop systems. We intend to broaden and deepen the usefulness
of the site to include the following:
- - Product-oriented clinical information
- - E-mail
- - Delivery of seller and product updates
- - User chat rooms and bulletin boards
ASSET MANAGEMENT. We are developing asset management offerings, which may
include the following:
- - Equipment assessment services
- - Life cycle planning services
- - Finance and leasing services
ENABLING TECHNOLOGIES
Our service offerings are enabled by a combination of internally developed
and acquired technologies. Our e-commerce offerings are driven by our
proprietary InstaCat technology, which runs on our system, and our proprietary
ePort technology, which runs on the sellers' systems.
- - ePort is a search mechanism at the seller's database which returns
buyer-specific, real-time information such as product pricing and
availability.
- - InstaCat enables real-time transactions and retrieves data from the ePort at
the seller's database, instantly incorporating it into our eCatalog.
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The following chart illustrates our eCatalog service using our proprietary
InstaCat and ePort technologies:
[medibuy.com]
<TABLE>
<CAPTION>
buyers sellers
<S> <C> <C>
- ---------------------------------- ---------------------------------- ----------------------------------
hospital buyer InstaCat(TM) s s distributor
- ---------------------------------- i technology interface e y ----------------------------------
existing information systems n s ---------------------------------- l s database
- ---------------------------------- t e customer-specific pricing l t ----------------------------------
e c ---------------------------------- e e f catalog data
- ---------------------------------- r u real-time product availability r m e i ----------------------------------
n r ---------------------------------- p r marketing information
- ---------------------------------- e e multi-parameter search d i o e ----------------------------------
t ---------------------------------- a n r w brand showcase
- ---------------------------------- q purchase history t t t a ----------------------------------
u ---------------------------------- a e l customer pricing
e user profiles b r l ----------------------------------
r ---------------------------------- a f enterprise systems
md clinic i customer service s a ----------------------------------
- ---------------------------------- i e ---------------------------------- e c order
existing information systems n s click and buy ordering e ----------------------------------
- ---------------------------------- t ---------------------------------- & inventory
e a real-time authorizations ----------------------------------
- ---------------------------------- r n ---------------------------------- f
n d end-to-end system integration i
- ---------------------------------- e ---------------------------------- n ----------------------------------
t o accounting efficiencies a manufacturer
- ---------------------------------- r ---------------------------------- n ----------------------------------
d data capture c database
e ---------------------------------- i ----------------------------------
- ---------------------------------- r process automation a f catalog data
alternate site s ---------------------------------- l e i ----------------------------------
- ---------------------------------- i p r marketing information
long-term care n o e ----------------------------------
- ---------------------------------- t r w brand showcase
home care e t a ----------------------------------
- ---------------------------------- r l customer pricing
lab n l ----------------------------------
- ---------------------------------- e enterprise systems
other t ----------------------------------
- ---------------------------------- order
----------------------------------
inventory
----------------------------------
</TABLE>
Additionally, our technology employs widely used customer identification
standards to verify the identity of qualified buyers and sellers to enhance the
usefulness of our services to users.
We have also licensed Dun & Bradstreet's Supplier Assessment Management
System to help us identify buyers and sellers in the registration process and to
determine that they are qualified to use our Web site. The system also provides
a user identification which becomes part of our buyer and seller information
database.
We require buyers to provide us their Healthcare Identification Number, or
HIN, in the registration process. The buyer's HIN is a unique identifier
commonly used in the healthcare industry. The buyer's HIN accompanies the
buyer's transactions on our system and enables our sellers' efforts to match the
buyer with any seller-customized information for the buyer, such as special
pricing.
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OUR CUSTOMERS
BUYERS
We have initially targeted our marketing efforts on high-volume healthcare
purchasers, with particular emphasis on multi-facility integrated delivery
networks and hospitals. We also serve nursing homes, assisted-living facilities,
large clinics, outpatient surgery centers and physician and dental practices. We
have designed our services and pricing structures to coordinate with GPOs and to
permit GPOs to provide improved value to their members. As of December 31, 1999,
we had over 2,100 registered buyers.
Registered buyers who have purchased healthcare supplies through our system
include integrated delivery networks such as Fairview Health System and BJC
Health System, independent hospitals such as Wyoming Medical Center, Glendale
Memorial and Mercy Regional Medical Center, hospitals associated with GPOs such
as Child Health Corporation of America, free-standing surgery centers such as
Central Kentucky Surgical Institute, and the U.S. military and Veterans
Administration hospitals.
SELLERS
We have initially targeted our marketing efforts on large-volume healthcare
manufacturers and distributors. In addition, we plan to recruit smaller medical
and non-medical manufacturers and distributors. As of December 31, 1999, we had
over 1,700 registered sellers. The following is a representative list of
registered sellers on our Web site:
<TABLE>
<S> <C>
3M Healthcare Grainger
Alcon Laboratories Hewlett-Packard Company
Allegiance Healthcare International Hitachi Medical Corporation
Boise Cascade Office Products Johnson & Johnson Medical, Inc.
CompUSA Roche Diagnostics Corporation
B&K Medical Terumo Medical Corporation
BM Healthcare
</TABLE>
PARTNET CUSTOMERS
As a result of our acquisition of PartNET, we obtained several new
customers from different industries. These customers have already installed the
ePort software on their systems to enable distributed catalog access for their
businesses. As a subsidiary, PartNET will continue to provide services to these
customers, which include the U.S. Department of Defense and Newark Electronics.
STRATEGIC RELATIONSHIPS
We have in the past established, and will continue to seek to establish,
strategic relationships with firms whose products, services, or market presence
enhance our ability to execute our core strategies. We enter alliances with the
overall goal of improving the benefits and attractiveness of our services to our
customers. We believe the integration of our services with existing information
systems technology and processes will accelerate the acceptance of our services
and the growth of our transaction volume. We have entered into strategic
relationships with a variety of companies to expedite this integration. Among
the most significant relationships are the following:
- - ERNST & YOUNG LLP is an internationally recognized independent accounting and
consulting firm. Effective September 1999, we entered into a renewable three
month agreement with Ernst & Young under which its Healthcare Consulting group
is assisting us to expedite the implementation and use of our e-commerce
solution into the healthcare supply chain. Under our arrangement, teams
consisting of medibuy.com and Ernst & Young personnel are working
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on-site with our registered customers to integrate our services into their
purchasing processes. The teams orient and educate groups of users, implement
compliance monitoring and provide a channel for us to seamlessly introduce
future services to our customers. Ernst & Young also supports the integration
of our systems with sellers' systems.
- - OWEN HEALTHCARE, INC. is a leading provider of hospital pharmacy and materials
management services. In October 1999, we entered into a one-year agreement to
license Owen Healthcare's Supplyline database to enhance our service
offerings. The Supplyline database classifies up to 500,000 consumable
healthcare products and enables us to allow buyers on our system to compare
products before placing an order for healthcare supplies. The Supplyline
database is widely used among healthcare providers, GPOs, distributors, and
the federal government.
- - PHYSICIANSITE.COM, INC. is an Internet-based physician portal site. In
November 1999, we entered into a three-year strategic agreement with
Physiciansite.com to channel physicians and their staffs to our Web site.
Under our agreement, Physiciansite.com will establish a healthcare supplies
service that will link directly to our Web site. Physiciansite.com users may
register on our Web site and will be able to purchase healthcare supplies
using our services. We have agreed to cooperatively market our joint offering
to attract users to our respective Web sites and to share revenue generated by
their users.
- - VITRIA TECHNOLOGY, INC. is a provider of eBusiness infrastructure software. In
December 1999, we entered into a renewable two-year agreement with Vitria to
license software that automatically controls and coordinates the flow of
transaction information between our internal e-commerce systems and the
systems of our registered buyers and sellers. Once Vitria's software has
automated a business process, it selectively gathers and analyzes process
information and business metrics in real time, enabling managers to identify
and resolve problems. Under this agreement, Vitria will provide ongoing
technical and user support to our customers. Additionally, Vitria has agreed
to share a percentage of new revenues that are generated by them based on our
referrals.
- - ALLIANZ CAPITAL PARTNERS, GMBH is a global leader in insurance and asset
management, headquartered in Munich, Germany. In January 2000, we entered into
a one-year agreement with Allianz Capital Partners to provide us with
information and assistance in connection with the development of our business
in Europe. Allianz Capital Partners will assist us in expanding our
marketplace in Europe by providing information and assistance relating to
European distribution channels and healthcare customs and practices as well as
introducing us to potential strategic partners and customers.
CUSTOMER SUPPORT
One of the distinguishing characteristics among e-commerce solutions is the
level of customer service they provide. We believe that our commitment to high
quality customer support differentiates us in the marketplace. Many e-commerce
entrants offer only limited customer support. For example, some e-commerce Web
sites only provide customer service by e-mail and Frequently Asked Questions, or
FAQs, on their Web sites. Often, personal assistance is nonexistent or difficult
to reach. E-mail responses may take days or weeks to be returned.
Our customer support organization's primary purpose is to provide support
services to buyers and sellers. Services provided by our customer support staff
go beyond simple e-mail or phone contact and include buyer and seller account
management, buyer and seller registration, technical support and field service.
Our customer support programs are divided into three distinct groups based on
our customers' differing needs: buyer support, seller support and technical
support.
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BUYER SUPPORT. Our buyer account coordination group is responsible for:
- - monitoring and managing transactions by territory for quality assurance
- - training buyers to use the site
- - recruiting additional sellers to respond to buyers' needs
- - ensuring that buyers are qualified healthcare providers
SELLER SUPPORT. Our seller account coordination group is responsible for:
- - working with current and prospective sellers to help them realize the value of
using our services to sell their healthcare supplies
- - obtaining and registering catalog information for sellers
TECHNICAL SUPPORT. Our technical support staff is responsible for:
- - performing field installations and system configuration
- - addressing technical questions regarding Internet access and the
implementation of our e-commerce applications
- - training customers on ePort implementation
Our customer support operations are located at our corporate headquarters
in San Diego, California and in Cincinnati, Ohio. As of December 31, 1999, we
had 22 employees in our customer support organization.
SALES AND MARKETING
We market and sell our services through a combination of direct sales and
traditional and Internet marketing initiatives. We are leveraging our management
team's relationships in the healthcare industry to build and promote our
business. To track and target potential customers, we use a corporate management
contact system that contains over 50,000 names and other key contact information
for executives at over 17,000 medical manufacturers, distributors, hospitals,
nursing homes and significant outpatient facilities in the United States.
Our sales force concentrates on selling our services to the leading
healthcare providers in the top 50 U.S. metropolitan statistical areas. Our
sales staff are located in field positions around the United States and
internationally. Our field representatives target senior executives, materials
managers and buyers.
We conduct a variety of marketing activities to build our brand and attract
buyers and sellers to our marketplace. These activities include:
- - targeted direct mail
- - telemarketing
- - print and online advertising
- - customer testimonials
- - trade shows
- - industry forums
- - speaking engagements
We also conduct comprehensive public relations programs that include
establishing and maintaining relationships with key trade press, business press
and industry analysts. As of December 31, 1999, we had 54 employees in our sales
and marketing group.
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TECHNOLOGY
Our system is built on an open, multi-tier, distributed architecture using
well-established software applications and hardware from leading technology
companies such as Sun Microsystems, Oracle Corporation, Cisco Systems, and
Veritas Software. Our technology platform integrates eCatalog, eRFP, eAuction,
eSpecials, our enterprise resource planning system, our enterprise application
integrator and a growing number of other services into a single system
architecture. We use industrial standard technology and tools in the development
of our architecture and e-commerce applications.
SCALABILITY. Our technology infrastructure is modular and enables us to
continuously enhance our services to meet the evolving needs of our users. Our
distributed architecture enables us to readily add capacity as our services
change and the number of users and transactions increase on our system.
SECURITY. We have implemented a variety of features to ensure the security
and integrity of transaction communications through our system. For example:
- - We use secure sockets layer, or SSL, an Internet security technology, at
appropriate points in the transaction flow to protect user information during
transactions
- - User information is encrypted to provide a high degree of security
- - Our employees do not have access to user information, except as necessary to
perform customer support functions
- - We use standard secure login and password systems to authenticate users
In addition, we have off-site stand-by systems for rapid disaster recovery.
Our e-commerce server hardware is co-located with Level (3) Communications,
Inc., our data center service provider, in San Diego, California, which provides
physical security for the premises, redundant battery- and generator-backed
electrical power, redundant climate control, and redundant high-capacity
Internet connections. In addition, our operations can be transferred to an
offsite server in the event of material disruptions in our services.
INTEGRATION WITH CUSTOMERS' INFORMATION SYSTEMS. Our system is designed
with an enterprise applications integrator to enable us to transfer data to and
from our customers' internal systems related to their healthcare supplies
purchasing and sale functions. Our distributed technology provides continuous
communication and access between trading partners regardless of the customers'
existing technology platforms.
COMPETITION
The online market for healthcare supplies is new, rapidly evolving and
intensely competitive. We believe we face competition in three general market
segments:
- - online healthcare marketplaces
- - traditional healthcare supply chain participants
- - other companies providing Internet e-commerce services
We face competition from e-commerce providers that have established online
marketplaces for healthcare supplies. These competitors include companies such
as Neoforma and Promedix. Neoforma provides an auction site for the sale of
used, refurbished and surplus products, and has introduced e-commerce services
for new products. Currently, Neoforma's marketplace solution is directed at
individual physicians' offices, though it is possible that this emphasis may
change. Promedix currently offers a Web site for the sale of new healthcare
products. Promedix recently announced that it has entered into an agreement to
be acquired by Chemdex, a provider
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of e-commerce solutions to the life sciences industry. In addition, new
companies may also be formed to offer healthcare supplies e-commerce
marketplaces to directly compete with us.
We also face competition from the numerous existing traditional healthcare
supplies manufacturers, distributors and GPOs. Traditional healthcare supplies
manufacturers, distributors and GPOs have well-established businesses, customer
relationships and infrastructures. Many of these competitors have long-standing
relationships with buyers of healthcare supplies. In addition, they have
well-trained sales forces and substantial marketing resources. A number of these
companies have or may in the future seek to establish their own e-commerce
initiatives for the purchase and sale of healthcare supplies or contract for
those services from other providers. Moreover, live auction houses focusing on
medical products may establish online auction services that compete with our
eAuction service.
We also face competition from a number of other Internet e-commerce
participants. Many companies have created Web sites to serve the information
needs of healthcare professionals, providing medical information, discussion
groups, bulletin boards and directories. Many of these companies are introducing
e-commerce functions that may compete with our services. In addition, providers
of online marketplaces and online auction services that currently focus on other
industries could expand the scope of their services to include healthcare
supplies.
We believe that companies in our market compete based on:
- - brand recognition
- - breadth, depth and quality of product offerings
- - ease of use and convenience
- - ability to integrate their services with users' existing systems and software
- - quality and reliability of their services
- - customer service
- - number of users and transaction volume
- - the amount of the fees charged to sellers
Competition is likely to intensify as our market matures. As competitive
conditions intensify, competitors may:
- - enter into strategic or commercial relationships with larger, more established
healthcare supplies and Internet companies
- - secure services and products from sellers on more favorable terms
- - devote greater resources to marketing and promotional campaigns
- - secure exclusive arrangements with buyers that impede our sales
- - devote substantially more resources to Web site and systems development
Our current and potential competitors' services may achieve greater market
acceptance than our services. Many of our existing and potential competitors
have longer operating histories in the healthcare supplies industry, greater
name recognition, larger customer bases or greater financial, technical and
marketing resources than we do. As a result of these factors, our competitors
and potential competitors may be able to respond more quickly to market forces,
undertake more extensive marketing campaigns for their brands and services and
make more attractive offers to purchasers and sellers, potential employees and
strategic partners. In addition, new technologies may increase competitive
pressures. We cannot be certain that we will be able to expand our buyer and
seller base or retain our current buyer and seller customers.
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We may not be able to compete successfully against current and future
competitors, and competition could seriously harm our business.
GOVERNMENT REGULATION
Many aspects of the healthcare supplies industry are subject to regulation
by federal, state and local government agencies. Many of the healthcare supplies
offered by sellers who use our system are subject to compliance with laws and
regulations, including operating and security standards for the sellers and
their distribution centers, and regulation by agencies including the Food and
Drug Administration, the Drug Enforcement Agency, the Occupational Safety and
Health Administration, state boards of pharmacy and, in some areas, state boards
of health. We rely upon sellers who use our services to meet all packaging,
distribution, labeling, hazard and health information notices to buyers, record
keeping and licensing requirements applicable to transactions conducted through
our system. We cannot guarantee that the sellers are in compliance with
applicable laws and regulations. If sellers have failed, or fail in the future,
to adequately comply with any of the relevant laws or regulations and we are
found in any way to be legally responsible, we could be subject to governmental
penalties or fines, as well as private lawsuits to enforce these laws and
regulations. Any damage awards, injunctions, penalties or fines resulting from
any of those actions could harm our business.
Regulation of the auction business varies by jurisdiction. Numerous states,
including California, the location of our headquarters, have regulations
regarding the manner in which auctions may be conducted and the liability of
auctioneers in conducting such auctions. In addition, we may be subject to
licensure requirements in various jurisdictions with respect to some of the
properties that may be sold on eAuction. Those regulations and licensure
requirements have not imposed a material impediment to our business to date, but
may affect the market generally for healthcare supplies sold through electronic
auctions. In addition, to the extent we operate eAuction in an international
setting, we could be subject to laws and regulations that are not directed
solely to the auction business, including, but not limited to, import and export
regulations and value added sales taxes. Our failure to comply with current or
future laws and regulations could subject us to civil and/or criminal penalties
and fines, and any penalties or fines or changes in laws and regulations could
negatively impact the operation of our eAuction service and harm our business.
Due to the increasing popularity and use of the Internet, it is possible
that a number of laws and regulations may be adopted or interpreted in the
United States and abroad with particular applicability to the Internet. It is
also possible that new laws and regulations may be adopted or interpreted by the
United States and foreign governments to address the sale and distribution of
healthcare supplies using the Internet. It is possible that governments will
enact legislation that may be applicable to us in areas including content,
product distribution, network security, encryption, the use of measures for data
and privacy protection, electronic authentication or "digital" signatures,
illegal and harmful content, access charges and re-transmission activities.
Moreover, the applicability to the Internet of existing laws governing issues
like property ownership, content, taxation, defamation, personal privacy,
product liability and environmental protection, as well as the necessity for
governmental permits, labeling, certifications and the need to supply
information to relevant parties, is uncertain. Most of these laws were adopted
before the widespread use and commercialization of the Internet and, as a
result, do not contemplate or address the unique issues of the Internet and
related technologies. Any export or import restrictions, new legislation or
regulation or governmental enforcement of existing regulations may limit the
growth of the Internet, increase our cost of doing business or increase our
liability exposure. Any of these factors could harm our business.
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PROPRIETARY RIGHTS
There are limited technological barriers to entry into the business of
providing an online healthcare supplies e-commerce marketplace system.
Consequently, others can develop, market and sell services substantially
equivalent to our services, or use technologies similar to those used by us.
We rely on a combination of copyright, trademark, trade secret and other
intellectual property law, nondisclosure agreements and other protective
measures to protect our proprietary rights. We also use proprietary know-how and
trade secrets and employ various methods to protect our trade secrets and
know-how. We currently have no patents protecting our technology, although we
have filed two patent applications through PartNET, Inc., our wholly-owned
subsidiary. From time to time, we expect to file additional patent applications
directed to aspects of our proprietary technology. We cannot assure you that any
of these applications will be approved, that any issued patents will protect our
intellectual property or that any issued patents will not be challenged by third
parties. In addition, other parties may independently develop similar or
competing technologies or design around any patents that may be issued to us. We
cannot assure you that our intellectual protection measures will be sufficient
to prevent misappropriation of our technology. In addition, the laws of many
foreign countries do not protect our intellectual property to the same extent as
the laws of the United States.
We believe that our proprietary technology does not infringe on any third
party's patents; however, we cannot be certain that we will not become involved
in litigation involving patents or proprietary rights. Patent and proprietary
rights litigation entails substantial legal and other costs, and we do not know
if we will have the necessary financial resources to defend or prosecute our
rights in connection with any litigation. Responding to, defending or bringing
claims related to our intellectual property rights may require our management to
redirect our human and monetary resources to address these claims.
EMPLOYEES
As of December 31, 1999, we had 171 full-time employees. Our employees are
not represented by unions, and we consider our employee relations to be good.
FACILITIES
Our executive offices are located in San Diego, California. We lease
approximately 36,091 square feet with an option to expand by an additional
16,828 square feet in a commercial building under a lease that expires October
2004. We have an option to renew the lease for an additional five years. We also
lease satellite office space under leases that have terms of 14 months to five
years. These facilities are located in Salt Lake City, Utah; Cincinnati, Ohio;
Tulsa, Oklahoma; and Palo Alto, California. We believe that these facilities are
adequate for our present and anticipated levels of operations for the
foreseeable future.
LEGAL PROCEEDINGS
We are not presently involved in any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth our directors and executive officers, their
ages and the positions held by them with us as of January 13, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Dennis J. Murphy...... 40 Chairman of the Board, Chief Executive Officer and President
James L. Hersma....... 51 Director, Executive Vice President, Market Development
Charles R. Smith...... 55 Executive Vice President, Customer Advocacy
Norman R. Farquhar.... 53 Executive Vice President, Chief Financial Officer and
Secretary
Robert B. Witt........ 48 Executive Vice President, Chief Information Officer
Don R. Brown.......... 39 President of PartNET, Inc.
Douglas C. Allred**... 49 Director
Brook H. Byers*....... 54 Director
Ann H. Lamont*........ 43 Director
John H. Stevens*,**... 39 Director
Mark A. Stevens**..... 39 Director
</TABLE>
- ---------------
* Member of the audit committee.
** Member of the compensation committee.
DENNIS J. MURPHY has served as a member of our board of directors and our
Chief Executive Officer since March 1999. In November 1999, Mr. Murphy was also
appointed President and the Chairman of our Board of Directors. From June 1998
to November 1998, Mr. Murphy was President of McKesson Health Systems, Inc., a
healthcare distributor. From August 1993 to June 1998, Mr. Murphy was a director
and Chief Operating Officer for Paper Pak, Inc., a healthcare product
manufacturer. Mr. Murphy has also held various management positions with Baxter
Healthcare Corporation, a healthcare distributor and manufacturer, including
Director of National Accounts, Vice President of Sales for the Hospital
Division, Area Manager and Western Zone Vice President.
JAMES L. HERSMA has served as a member of our board of directors and as our
Executive Vice President, Market Development since June 1999. From January 1998
to February 1999, Mr. Hersma was President and Chief Executive Officer of
Novation, LLC, a healthcare group purchasing organization. Mr. Hersma worked as
an independent consultant to the healthcare industry from June 1996 to December
1997. From November 1993 to May 1996, Mr. Hersma was President and Chief
Operating Officer for CIS Technologies, Inc., a healthcare claims transaction
software company. Mr. Hersma has also held various management positions with
Baxter Healthcare Corporation, including Southern Zone Vice President and
Corporate Sales Vice President. Mr. Hersma is on the Board of Directors of
TriStar Aerospace, Inc., a distributor of aerospace parts and supplies.
CHARLES R. SMITH served as a member of our board of directors from
September 1998 to January 2000 and served as our President from September 1998
to November 1999. In November 1999, Mr. Smith was appointed Executive Vice
President, Customer Advocacy. From April 1994 to August 1998, Mr. Smith was
Executive Vice President of NCI, Inc., a healthcare sales and marketing
consulting company. Mr. Smith has also been Chief Executive Officer of Southern
California Materials Management Alliance, a healthcare purchasing and
distribution alliance.
NORMAN R. FARQUHAR has served as our Executive Vice President, Chief
Financial Officer and Secretary since November 1999. From December 1998 to
October 1999, Mr. Farquhar was Executive Vice President and Chief Financial
Officer of Epicor Software Corporation, a developer
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of client/server enterprise resources planning software. From February 1996 to
December 1998, he was Executive Vice President and Chief Financial Officer of
DataWorks Corporation, a supplier of information systems, which in December 1998
was merged into Epicor Software Corporation. From April 1993 to December 1995,
Mr. Farquhar served as Senior Vice President, Chief Financial Officer and
Secretary at Wonderware Corporation, a software manufacturer. Mr. Farquhar
serves as a director for Dot Hill Corporation, a manufacturer of host and
network-attached data storage products.
ROBERT B. WITT has served as our Executive Vice President and Chief
Information Officer since May 1999. From September 1998 to May 1999, Mr. Witt
was Chief Information Officer at Oracle Corporation, a software manufacturer.
From November 1994 to September 1998, Mr. Witt was Chief Information Officer at
Sequent Computer Systems, Inc., a computer manufacturer. Mr. Witt is a Certified
Public Accountant.
DON R. BROWN has served as Chief Executive Officer of PartNET, Inc. since
its formation in 1993. Mr. Brown has also served as an Associate Professor of
Mechanical Engineering and an Adjunct Professor of Computer Science with the
University of Utah since 1989.
DOUGLAS C. ALLRED has served as a member of our board of directors since
November 1999. Mr. Allred has been the Senior Vice President/Vice President,
Customer Advocacy at Cisco Systems, Inc., a provider of networking equipment,
since August 1991 and has served as one of its directors since January 1997.
BROOK H. BYERS has served as a member of our board of directors since June
1999. Mr. Byers is a partner of Kleiner Perkins Caufield & Byers, a private
venture capital firm that he joined in 1977. Mr. Byers has been the founding
president and chairman of four life sciences companies: Athena Neurosciences,
Inc., Idec Pharmaceuticals Corporation, InSite Vision Opthalmics Inc. and Ligand
Pharmaceuticals, Inc. Mr. Byers also serves as a director of Chemdex.com, Inc.,
Drugstore.com, Inc. and a number of privately held technology companies. Mr.
Byers sits on the Board of Directors of the University of California, San
Francisco Foundation and is a director of the California Healthcare Institute.
ANN H. LAMONT has served as a member of our board of directors since June
1999. Since 1986, Ms. Lamont has served as general partner and managing member
of various limited partnerships affiliated with Oak Investment Partners, a
venture capital organization. Ms. Lamont joined Oak Investment Partners in 1982
as an associate. Prior to joining Oak Investment Partners she was in the
research department at Hambrecht & Quist. Ms. Lamont also serves on the Board of
Directors of Viropharma, Inc., a company she co-founded.
JOHN H. STEVENS, M.D. has served as a member of our board of directors
since June 1999. Since November 1999, Dr. Stevens has served as Chairman and
Chief Executive Officer of Netlens, Inc., an Internet technology company. Dr.
Stevens was also the founder and Chief Executive Officer of hippo.com, Inc., an
Internet start-up company founded in February 1999 that we acquired in June
1999. Dr. Stevens served as Chief Technology Officer of Heartport, Inc., a
medical device company that he co-founded in 1991, from 1996 to 1997. Dr.
Stevens has continued to serve as a director of Heartport since its inception.
Dr. Stevens is on the board of several privately held companies. Dr. Stevens
graduated from the University of Utah and received his M.D. from the Stanford
University School of Medicine.
MARK A. STEVENS has served as a member of our board of directors since June
1999. Mr. Stevens has been a general partner of Sequoia Capital, a venture
capital investment firm, since March 1993. Prior to that time, beginning in July
1989, he was an associate at Sequoia Capital. Prior to joining Sequoia Capital,
he held technical sales and marketing positions at Intel. Mr. Stevens currently
serves on the board of directors of MP3.com, Inc., Medicalogic, Inc., Terayon
Communication Systems, Inc., Nvidia Corporation, and several privately held
companies.
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BOARD COMPOSITION
Upon the closing of this offering, in accordance with the terms of our
restated certificate of incorporation, the terms of office of the board of
directors will be divided into three classes:
- - Class I directors, whose term will expire at the annual meeting of the
stockholders to be held in 2000
- - Class II directors, whose term will expire at the annual meeting of
stockholders to be held in 2001
- - Class III directors, whose term will expire at the annual meeting of
stockholders to be held in 2002
Our Class I directors will be Messrs. Byers and Hersma, our Class II
directors will be Mr. Mark Stevens and Ms. Lamont, and our Class III directors
will be Messrs. Murphy and Allred and Dr. John Stevens. At each annual meeting
of stockholders after the initial classification, the successors to directors
whose terms are then expiring will be elected to serve from the time of election
and qualification until the third annual meeting following their election. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible, each
class will consist of one-third of the directors. This classification of the
board of directors may have the effect of delaying or preventing changes in
control or management of our company.
Each officer is elected by, and serves at the discretion of, the board of
directors. Each of our officers and directors, other than non-employee directors
and officers, devotes full time to the affairs of medibuy.com. Our non-employee
directors devote their time to the affairs of medibuy.com as is necessary to
discharge their duties. There are no family relationships among any of our
directors, officers or key employees.
COMMITTEES OF THE BOARD OF DIRECTORS
The audit committee of the board of directors reviews our internal
accounting procedures and consults with and reviews the services provided by our
independent accountants. The audit committee currently consists of Ms. Lamont,
Dr. John Stevens and Mr. Byers.
Our compensation committee of the board of directors reviews and recommends
to the Board the compensation and benefits of all of our executive officers,
administers our stock option plan and establishes and reviews general policies
relating to compensation and benefits of our employees. The compensation
committee currently consists of Mr. Allred, Mr. Mark Stevens and Dr. John
Stevens. There are no interlocking relationships between our board of directors
or compensation committee and the board of directors or compensation committee
of any other company, nor has any such interlocking relationship existed in the
past.
DIRECTOR COMPENSATION
Our directors do not currently receive cash compensation for their service
as members of the board of directors, although they are reimbursed for some
expenses in connection with attendance at board and committee meetings. We do
not provide additional compensation for committee participation or special
assignments of the board of directors. From time to time, some of our directors
have received grants of options to purchase shares of our common stock under our
1999 Equity Incentive Plan and our 1999 Omnibus Equity Plan in connection with
their employment agreements. See "-- Executive Compensation -- Employment
Agreements" for a description of employment agreements with employee directors.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serve as a member of the board of directors
or compensation committee of any entity that has one or more executive officers
serving as a member of our board of directors or compensation committee.
Messrs. Allred and Mark Stevens and Dr. John Stevens serve on our
compensation committee. Mr. Byers previously served on our compensation
committee. No member of our compensation committee is or was an officer or
employee of medibuy.com. Investment entities affiliated with Messrs. Mark
Stevens and Byers have purchased shares of our preferred stock. In addition, we
have granted Mr. Allred stock options to purchase our common stock and Mr.
Allred has purchased shares of our Series D preferred stock. We issued Dr. John
Stevens shares of our common stock in connection with our acquisition of
hippo.com, Inc. See "Related Party Transactions" for a more detailed description
of these transactions.
1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In December 1999, the board adopted our 1999 Non-Employee Directors' Stock
Option Plan. The plan has not been approved by our stockholders. 300,000 shares
of our common stock are reserved for issuance under the plan. Additionally,
starting with the 2001 annual stockholders meeting, at each annual stockholders
meeting, the number of shares reserved for issuance under the plan shall be
increased automatically by the lesser of (i) 0.1% of the total number of shares
of our common stock then outstanding, including unexercised stock options and
warrants, (ii) 50,000 shares or (iii) a number determined by the board. Members
of our Board who are not employees are eligible to participate in the
non-employee directors' plan. On the date that each new director first becomes a
director he or she will automatically be granted an option to purchase 15,000
shares. At our annual meeting each year, each eligible director will
automatically be granted an additional option to purchase 5,000 shares if that
director has served continuously as a member of our Board since the date of that
director's initial grant. The option grants under the non-employee directors'
plan are automatic and nondiscretionary, and the exercise price of the options
must be 100% of the fair market value of the common stock on the date of grant.
The term of options granted under the non-employee directors' plan is ten years,
but they will terminate three months after the date on which the director ceases
to be one of our directors or consultants or 12 months if the termination is due
to disability or 18 months if termination is due to death. All options granted
under the non-employee directors' plan will vest as to 1/36(th) of the shares
each month until they are fully vested on the third anniversary of the date of
grant.
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EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to us in all capacities during the years ended
December 31, 1998 and December 31, 1999, by (1) our chief executive officer and
(2) the other four most highly compensated executive officers other than the
chief executive officer who were serving as executive officers as of December
31, 1998, and December 31, 1999, respectively, collectively, the "Named
Executive Officers."
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------------------
ANNUAL COMPENSATION RESTRICTED # SHARES
-------------------------------------- STOCK UNDER ALL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER AWARD OPTIONS OTHER
--------------------------- ---- -------- -------- ------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Dennis Murphy, CEO and President.... 1999 $156,333(1) $2,243(2) 1,680,000 $ 82,080(3)
Norman Farquhar, Executive Vice
President, CFO and Secretary........ 1999 42,188(4) $150,000(5) 600,000
James Hersma, Executive Vice
President, Market Development..... 1999 107,917(6) 840,000 2,960(7)
Charles Smith, Executive Vice
President, Customer Advocacy...... 1999 194,250(8) 18,000(9) 80,000
President......................... 1998 41,726(10) 720,000(11)
Robert Witt, Executive Vice
President, Chief Information
Officer........................... 1999 118,708(12) 400,000 130,000(13)
</TABLE>
- ---------------
(1) Mr. Murphy's annual salary was initially $195,000 pursuant to his
employment agreement dated March 29, 1999. Mr. Murphy's annual salary was
raised to $250,000 on October 26, 1999. Mr. Murphy began his employment
with us on March 29, 1999. The amount reflected in this table represents
only the actual salary earned by Mr. Murphy for his services from that date
through December 31, 1999.
(2) We agreed to reimburse Mr. Murphy up to $5,000 annually for the cost of
disability insurance premiums.
(3) Includes an $80,000 relocation allowance and $2,080 as reimbursement for
Mr. Murphy's legal fees incurred negotiating his employment agreement.
(4) Mr. Farquhar's annual salary is $225,000. Mr. Farquhar began his employment
with us on November 1, 1999. The amount reflected in this table represents
only the actual salary earned by Mr. Farquhar for his services from that
date through December 31, 1999.
(5) Signing bonus paid to Mr. Farquhar.
(6) Mr. Hersma's annual salary is $185,000. Mr. Hersma began his employment
with us on June 14, 1999. The amount reflected in this table represents
only the actual salary earned by Mr. Hersma for his services from that date
through December 31, 1999.
(7) Reimbursement, under Mr. Hersma's employment agreement, for legal fees he
incurred negotiating his employment agreement with us.
(8) Mr. Smith's base annual salary is $198,000 effective as of May 14, 1999.
(9) A one-time cash bonus paid to Mr. Smith pursuant to letter agreement dated
May 14, 1999.
(10) Mr. Smith's employment with us began on September 26, 1998. The amount
reflected in this table represents only the actual salary paid to Mr. Smith
for his services from that date through December 31, 1998. His equivalent
annual salary for 1998 was $150,000.
(11) Mr. Smith purchased 720,000 shares of our common stock for an aggregate
purchase price of $360, subject to our right to re-acquire some of these
shares as described under "Employment Agreements".
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<PAGE> 56
(12) Mr. Witt's annual salary is $185,000. Mr. Witt began his employment with us
on May 10, 1999. The amount reflected in this table represents only the
actual salary earned by Mr. Witt for his services from that date through
December 31, 1999.
(13) Represents reimbursement of his relocation expenses.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grant of stock
options to our Chief Executive Officer and each of our other four most highly
compensated executed officers during the fiscal year ended December 31, 1999.
- All of the stock options are intended to be incentive stock options
except for Mr. Farquhar's stock option, which is a nonstatutory stock
option.
- All of the stock options vest over four to five years, except for the
options granted to Messrs. Murphy and Hersma with an expiration date of
December 28, 2009, which were fully vested on the date of grant.
- The exercise price per share of each option was equal to the fair market
value of the common stock of the date of grant as determined by the board
of directors, except that Mr. Farquhar's stock option was granted with an
exercise price below deemed fair market value.
- The potential realizable value is calculated based on the term of the
option at its time of grant, which is 10 years. It is calculated assuming
that the fair market value of common stock on the date of grant
appreciates at the indicated annual rate compounded annually for the
entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated stock price. These numbers
are calculated based on the requirements of the SEC and do not reflect
our estimate of future stock price growth.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------ VALUE AT ASSUMED ANNUAL
NUMBER OF FAIR RATES OF STOCK PRICE
SECURITIES PERCENT OF TOTAL MARKET APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED EXERCISE VALUE ON TERM
OPTIONS TO EMPLOYEES PRICE PER DATE OF -----------------------
NAME GRANTED IN 1999 SHARE GRANT EXP. DATE 5% 10%
---- ---------- ---------------- --------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dennis Murphy........ 1,170,000 13.8% $ 0.08 $ 0.08 3/31/09 $ 55,224 $ 140,400
210,000 2.5 5.44 $ 5.44 11/17/09 718,410 1,820,700
300,000 3.5 10.27 $10.27 12/28/09 1,937,700 4,910,400
Norman Farquhar...... 600,000 7.1 1.80 $ 5.44 10/26/09 4,236,600 7,386,000
James Hersma......... 625,000 7.4 0.08 $ 0.08 5/26/09 29,500 75,000
65,000 0.8 5.44 $ 5.44 11/17/09 222,365 563,550
150,000 1.8 10.27 $10.27 12/28/09 968,850 2,455,200
Charles Smith........ 80,000 0.9 5.44 $ 5.44 10/26/09 273,680 693,600
Robert Witt.......... 400,000 4.7 0.08 $ 0.08 3/31/09 18,880 48,000
</TABLE>
The following table provides information concerning exercises of options to
purchase our common stock in the fiscal year ended December 31, 1999, and
unexercised options held as of December 31, 1999, by the Named Executive
Officers. The year end fair value of the unexercised in-the-money options is
based upon an assumed initial public offering price of per share, less the
exercise price of such options. The option exercise prices were set by our board
of directors and generally reflect its best estimate of the fair value of our
stock on the date of each grant based on recent sales of our equity securities,
developments in our business and developments in the financial markets. When the
board of directors elects to grant options at a lower price we recognize
stock-based compensation expense for the difference.
55
<PAGE> 57
AGGREGATE OPTION EXERCISES AND OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT YEAR-
OPTIONS AT YEAR-END END
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Murphy........... 170,000 $540,100 352,500 1,157,500
Norman Farquhar......... 0 600,000
James Hersma............ 156,250 590,625 166,250 517,500
Charles Smith........... 0 80,000
Robert Witt............. 52,000 348,000
</TABLE>
- ---------------
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of our Named Executive
Officers. Each agreement has a term of one year and automatically renews for
successive one-year periods unless it is otherwise terminated by its terms. Each
agreement may be terminated by the executive officer upon prior written notice
to us, though he will receive no severance pay if he does so. Each agreement
will also automatically terminate upon the executive's death or disability. We
may terminate each of these agreements for cause or without cause. If we
terminate an executive officer for cause he will receive no severance pay. If we
terminate an executive officer without cause, he will be entitled to payment of
his then-current base annual salary for an additional year after his
termination. Each executive officer is entitled to participate in any incentive
bonus program we establish, up to a maximum cash bonus equal to one-half of his
then-current base annual salary. The stock options granted to the newest
executive officers under their employment agreements are listed below. All of
the stock options vest over four years, except for Mr. Murphy's stock option,
which vests over five years. The table and bullets below describes other terms
that are specific to each executive officer under his employment agreement.
<TABLE>
<CAPTION>
# SHARES
SUBJECT TO
BASE INITIAL
DATE OF EMPLOYMENT ANNUAL OPTION EXERCISE
NAME OF EXECUTIVE OFFICER AGREEMENT SALARY GRANT PRICE
------------------------- ------------------ -------- ---------- --------
<S> <C> <C> <C> <C>
Dennis Murphy............... March 29, 1999 $250,000 1,170,000 $0.08
Norman Farquhar............. October 26, 1999 225,000 600,000 1.80
James Hersma................ May 26, 1999 185,000 625,000 0.08
Charles Smith............... September 26, 1998 198,000 -- N/A
Robert Witt................. May 10, 1999 185,000 400,000 0.08
</TABLE>
- - Mr. Murphy's employment agreement provides for a relocation allowance of
$80,000, reimbursement of up to $5,000 annually for disability insurance
premiums and reimbursement of attorneys fees related to the negotiation of his
employment agreement. In the event of a change of control of our company, 60%
of the shares covered by his stock options will become immediately vested and
the remaining shares vest monthly over the following year. The entire unvested
portion of Mr. Murphy's stock option will immediately vest if he is terminated
or if his duties significantly change within 12 months of a change in control.
- - Mr. Farquhar received a signing bonus of $150,000 upon entering into his
employment agreement with us. Mr. Farquhar's employment agreement also
provides that the unvested portion of Mr. Farquhar's stock option will
immediately vest if he is terminated or if his duties are significantly
changed within two years following a change of control.
- - Mr. Hersma's employment agreement provides that upon the first renewal, his
base salary will be increased to $300,000. In addition, if we terminate Mr.
Hersma without cause before his first
56
<PAGE> 58
anniversary with us or if we do not renew his agreement for a second year, he
will be entitled to receive severance payments for 18 months. If we terminate
Mr. Hersma without cause before his second anniversary with us or if we do not
renew his agreement for a third year, he will be entitled to receive severance
payments for 12 months. Mr. Hersma may be required to relocate to San Diego,
California. If he relocates, he will be entitled to relocation expense
reimbursement of up to $130,000. In the event of a change of control, 50% of
the shares covered by his stock options will become immediately vested and the
remaining shares vest monthly over the following year. The entire unvested
portion of Mr. Hersma's stock option will immediately vest if he is terminated
or if his duties are significantly changed within one year following a change
of control. In addition, under his employment agreement, Mr. Hersma was
elected to our board of directors and we agreed to include him in the
recommended slate of directors when stockholders are asked to elect directors.
We reimbursed Mr. Hersma for legal expenses related to his negotiation of his
employment agreement.
- - Mr. Smith purchased 720,000 shares of our common stock, however the shares are
subject to a right of repurchase by us at the price paid for the shares. Our
repurchase right lapses over a 48 equal monthly vesting schedule; however, our
repurchase right will immediately and entirely lapse if within the period of
one month before or 12 months following a change of control, Mr. Smith is
terminated by us without cause or if he voluntarily terminates his employment
for good reason, as defined in his employment agreement.
- - Mr. Witt's employment agreement provides for reimbursement of up to $130,000
for his relocation to the San Diego area. In addition, the entire unvested
portion of Mr. Witt's stock option will immediately vest if he is terminated
or if his duties are significantly changed within one year following a change
of control.
1999 EQUITY INCENTIVE PLAN
On March 12, 1999, our board adopted and our stockholders subsequently
approved our 1999 Equity Incentive Plan. The equity incentive plan was
subsequently amended to increase the number of authorized shares of common stock
which may be issued under the plan to 5,771,280 shares. The equity incentive
plan was suspended by our board on July 27, 1999. Consequently, we will not
grant any additional stock options under the equity incentive plan. Shares
subject to stock awards granted under the plan that have expired or otherwise
terminated without having been exercised in full will not be made available for
subsequent grants under the plan. In addition, exercised shares repurchased by
us under a right of repurchase will not again become available for grant.
Before it was suspended, the equity incentive plan permitted the grant of
options to our directors, officers, key employees and consultants as well as
consultants to or directors of our corporate parents or subsidiaries. Options
granted under the plan could be either nonstatutory stock options or incentive
stock options within the meaning of Section 422 of the Internal Revenue Code.
Incentive stock options could be granted only to employees under the plan. In
addition, the equity incentive plan permitted the grant of stock bonuses and
rights to purchase restricted stock.
According to its terms, the equity incentive plan could be administered by
the board or a committee appointed by the board. The board delegated the
authority to administer the equity incentive plan to the compensation committee
and, as administrator for non-officer stock awards, to Dennis Murphy. Subject to
the limitations set forth in the equity incentive plan, the compensation
committee and the administrator, Dennis Murphy, had the authority to select the
persons to whom award grants were to be made, to designate the number of shares
to be covered by each award, to determine whether an option was to be an
incentive stock option or a nonstatutory stock option, to establish vesting
schedules, to specify the exercise price of options
57
<PAGE> 59
and the type of consideration to be paid upon exercise and, subject to
applicable restrictions, to specify other terms of awards.
The maximum term of options granted under the equity incentive plan is ten
years. Incentive stock options granted under the equity incentive plan are
non-transferable except by the laws of descent. Options expire three months
after the termination of an optionholder's service unless the participant's
option agreement provides otherwise. However, if an optionholder is permanently
disabled or dies during his or her service, that person's options may be
exercised up to 12 months following his or her disability or 18 months following
his or her death, unless his or her option agreement provides otherwise.
The exercise price of options granted under the equity incentive plan was
determined by the board, committee or administrator. The exercise price of an
incentive stock option could not be set at less than 100% of the fair market
value of the underlying common stock on the date of the grant. The exercise
price of a nonstatutory stock option could not be set at less than 85% of the
fair market value of the underlying common stock on the date of the grant.
The board, committee or administrator has the power to accelerate the
exercise date or vesting schedule of any option or stock granted under the plan.
Options granted under the equity incentive plan vest at the rate determined
by the board, committee or administrator and specified in the participant's
option agreement. The terms of any stock bonuses or restricted stock purchase
awards granted under the equity incentive plan were determined by the board,
committee or administrator. The purchase price of restricted stock under any
restricted stock purchase agreement was not to be less than 85% of the fair
market value of our common stock on the date of the grant. Stock bonuses and
restricted stock purchase agreements awarded under the equity incentive plan are
nontransferable except by will or devise.
Stock bonuses granted under the plan are subject to repurchase by us upon
termination of employment or in accordance with a vesting schedule as provided
by the participant's stock award agreement. Repurchase may be effected at the
stock's full market value if the agreement so provides but in no event at less
than the original purchase price.
Upon the occurrence of a transaction resulting in a change of control of
our company, as this is defined under the equity incentive plan, the surviving
entity must either assume or substitute equivalent securities for all
outstanding stock awards. Under the plan transactions which constitute a change
in control include: a dissolution, liquidation or sale of all or substantially
all of our assets, a merger or consolidation in which we are not the surviving
entity or in which our stockholders are left holding only property other than
stock in the surviving entity, an acquisition which results in the concentration
of ownership of at least half of the voting power of our voting securities in a
person or group other than our employee benefit plan, or, after the completion
of this offering, an acquisition resulting in the replacement of at least half
of our board without the consent of at least half of the incumbent board
members. In the event the surviving entity does not assume or substitute the
stock awards, then the vesting and exercisability of outstanding awards will
accelerate fully prior to the change in control and the awards will terminate to
the extent not exercised prior to the change in control. In the event the
outstanding stock awards are assumed, and if any holder of an award is
terminated within 12 months following the transaction by the surviving company
or the holder voluntarily terminates employment under specified conditions, then
the vesting of all outstanding options and stock awards held by the holder will
accelerate and become immediately exercisable.
The Board could amend or terminate the equity incentive plan at any time.
Amendments were submitted for stockholder approval to the extent required by
applicable law.
58
<PAGE> 60
As of December 31, 1999, we had issued and outstanding, under the equity
incentive plan, options to purchase 3,716,950 shares of our common stock. The
weighted average exercise price of these options is $0.19 per share.
1999 OMNIBUS EQUITY PLAN
On July 27, 1999, our board adopted and on October 25, 1999 our
stockholders approved our 1999 Omnibus Equity Plan and the authorization of a
total of 2,660,400 shares of our common stock for issuance under the omnibus
equity plan. The compensation committee of our Board of Directors approved, on
December 14, 1999, an increase in the number of shares of our common stock
reserved for issuance under the plan by 1,200,000 shares to a total of
3,860,400, but our stockholders have not yet approved this increase. Each year
upon the annual meeting of stockholders starting in 2001, the total number of
shares reserved for issuance under the plan will increase by an amount equal to
the lesser of: (i) 2% of our outstanding capital stock, including unexercised
stock options and warrants, on such date, (ii) 1,200,000 shares or (iii) an
amount set by the board. Shares subject to stock awards that have expired or
otherwise terminated without having been exercised in full again become
available for grant under the plan, but exercised shares repurchased by us under
a right of repurchase will not again become available for grant under the plan.
The omnibus equity plan permits the grant of options to our directors,
officers, key employees and consultants as well as those of our corporate
parents or subsidiaries. Options granted under the plan may be either
nonstatutory stock options or incentive stock options within the meaning of
Section 422 of the Internal Revenue Code. Incentive stock options may only be
granted to employees. In addition, the omnibus equity plan permits the grant of
stock bonuses and rights to purchase restricted stock. No person may be granted
options to purchase more than 2,000,000 shares of common stock in any calendar
year.
The omnibus equity plan is administered by the board or a committee
appointed by the board. The board has delegated the authority to administer the
omnibus equity plan to the compensation committee and for non-officer stock
awards to Dennis Murphy, as administrator. Subject to the limitations set forth
in the omnibus equity plan, the compensation committee and the administrator
have the authority to select the eligible persons to whom award grants are to be
made, to designate the number of shares to be covered by each award, to
determine whether an option is to be an incentive stock option or a nonstatutory
stock option, to establish vesting schedules, to specify the exercise price of
options and the type of consideration to be paid upon exercise and, subject to
applicable restrictions, to specify other terms of awards.
The maximum term of options granted under the omnibus equity plan is ten
years. Incentive stock options granted under the omnibus equity plan generally
are non-transferable. Nonstatutory stock options generally are nontransferable,
although the applicable option agreement may permit some transfers. Options
generally expire three months after the termination of an optionholder's
service. However, if an optionholder is permanently disabled or dies during his
or her service, that person's options generally may be exercised up to 12 months
following his or her disability or 18 months following his or her death.
The exercise price of options granted under the omnibus equity plan is
determined by the board, a committee of the board or the administrator in
accordance with the guidelines set forth in the omnibus equity plan. The
exercise price of an incentive stock option cannot be less than 100% of the fair
market value of the underlying common stock on the date of the grant. The
exercise price of a nonstatutory stock option cannot be less than 85% of the
fair market value of the underlying common stock on the date of grant.
Options granted under the omnibus equity plan vest at rates determined by
the Board, a committee of the Board or the administrator. The vesting schedule
of each option is specified in each option agreement. The terms of any stock
bonuses or restricted stock purchase awards
59
<PAGE> 61
granted under the omnibus equity plan will be determined by the board, a
committee of the board or the administrator. The purchase price of restricted
stock under any restricted stock purchase agreement cannot be less than 85% of
the fair market value of our common stock on the date of grant. Stock bonuses
and restricted stock purchase agreements awarded under the omnibus equity plan
are generally nontransferable (except by will), although the applicable award
agreement may permit some transfers.
If we are acquired through the sale or lease of all or substantially all of
our assets or in a merger in which we are not the surviving entity or in which
our stockholders are left holding only property other than our stock, the
surviving entity must either assume, or substitute similar securities for all
outstanding options and other stock awards under the plan. In the event the
surviving entity does not assume or substitute for these securities, then the
vesting of outstanding options and stock awards will accelerate fully prior to
the transaction and the options and stock awards will terminate to the extent
not exercised prior to the closing of the transaction. Additionally, if
securities representing at least half of our voting power are acquired by a
person, entity or group other than our employee benefit plan, or if at least
half of our board is replaced by directors who are not approved by a majority of
the current board then the vesting and exercisability of outstanding options and
other stock awards held by currently eligible participants will accelerate
fully.
The board may amend or terminate the omnibus equity plan at any time.
Amendments will be submitted for stockholder approval to the extent required by
applicable law.
As of December 31, 1999, we had issued and outstanding under the omnibus
equity plan options to purchase 3,354,548 shares of our common stock. The
weighted average exercise price of these options is $4.59 per share.
EMPLOYEE STOCK PURCHASE PLAN
Effective upon the completion of this offering, we will implement an
employee stock purchase plan. A total of 1,000,000 shares of common stock have
been reserved for issuance under this purchase plan. Each year upon the annual
meeting of stockholders, the number of shares reserved for issuance under the
purchase plan will automatically be increased by 400,000 shares or a lesser
amount determined by the board. The purchase plan is intended to qualify as an
employee stock purchase plan within the meaning of Section 423 of the Internal
Revenue Code. Under the purchase plan, the board of directors or a committee
comprised of one or more members of the board of directors may authorize
participation by eligible employees, including officers, in periodic offerings
following the commencement of the purchase plan. The initial offering under the
purchase plan will commence on the effective date of this offering and terminate
on January 31, 2002.
Unless otherwise determined by the board of directors, employees are
eligible to participate in the purchase plan only if they are customarily
employed by us or one of our subsidiaries designated by the board of directors
for at least 20 hours per week and at least five months per calendar year.
Employees who participate in an offering may have up to 15% of their eligible
earnings withheld under the purchase plan. The amount withheld is then used to
purchase shares of the common stock on specified dates determined by the board
of directors. The price of common stock purchased under the purchase plan will
be equal to 85% of the lower of the fair market value of the common stock at the
commencement date of each offering period or the relevant purchase date.
Employees may end their participation in an offering at any time during that
offering, and their participation will end automatically on termination of their
employment with us or one of our affiliates.
In the event of a merger, reorganization, consolidation or liquidation that
involves us, the board of directors has discretion to provide that each right to
purchase common stock will be assumed or an equivalent right substituted by the
successor corporation or the board of directors
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<PAGE> 62
may provide for all sums collected by payroll deductions to be applied to
purchase stock immediately prior to a merger or other transaction. The board of
directors has the authority to amend or terminate the purchase plan.
401(k) PLAN
In October 1999, the board of directors adopted the medibuy.com, Inc.
401(k) plan covering our employees who are at least 21 years of age and have at
least one month of service with us. Eligible employees may make pre-tax
contributions to the 401(k) plan of up to 20% of their eligible earnings,
subject to a statutorily determined annual limit. Each participant is fully
vested in his or her deferred salary contributions. Participant contributions
are held and invested by the 401(k) plan's trustee. In addition, eligible
employees may make roll-over contributions to the 401(k) plan from a
tax-qualified retirement plan. The 401(k) plan allows us to make discretionary
matching contributions to a participant's account.
In July 1997, PartNET's board of directors adopted the PartNET, Inc. 401(k)
plan covering employees of PartNET who are at least 21 years of age. This 401(k)
plan was assumed by us in connection with our acquisition of PartNET. Eligible
employees may make pre-tax contributions to the 401(k) plan of up to 15% of
their eligible earnings, subject to a statutorily determined annual limit. Each
participant is fully vested in his or her deferred salary contributions.
Participant contributions are held and invested by the 401(k) plan's trustee. In
addition, eligible employees may make roll-over contributions to the 401(k) plan
from a tax-qualified retirement plan. The 401(k) plan allows us to make
discretionary matching contributions to a participant's account.
The 401(k) plans are intended to qualify under Section 401 of the Internal
Revenue Code so that contributions by us or plan participants to the 401(k) plan
and income earned on the 401(k) plan contributions, are not taxable to employees
until withdrawn from the plan, and so that our contributions, if any, will be
deductible by us when made.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. In addition, our bylaws require us to
indemnify our directors and officers, and allow us to indemnify our other
employees and agents, to the fullest extent permitted by law. We have also
entered into agreements to indemnify some of our directors and executive
officers. We believe that these provisions and agreements are necessary to
attract and retain qualified directors and executive officers. At present, there
is no pending litigation or proceeding involving any director, officer, employee
or agent where indemnification will be required or permitted. We are not aware
of any threatened litigation or proceeding that might result in a claim for such
indemnification. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
our company under the foregoing provisions, we have been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
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<PAGE> 63
RELATED PARTY TRANSACTIONS
In September 1998 and March 1999, we sold an aggregate of 80,000 shares of
common stock to Dennis Murphy, our Chief Executive Officer and Director for an
aggregate purchase price of $4,510.
In September 1998, we sold 720,000 shares of common stock to Charles Smith,
then our President and currently our Executive Vice President, Customer Advocacy
for an aggregate purchase price of $360. These shares are subject to repurchase
by us if Mr. Smith's employment terminates for any reason other than a change in
control of our company. The number of shares subject to repurchase decreases
ratably over a four-year period from the purchase date.
In March 1999, we sold 334,907 shares of our Series B preferred stock to
three investors, including Acorn Technology Fund, L.P. and a fund affiliated
with Ridgewood Capital, Inc., each a holder of more than 5% of our common stock.
In the transaction, Ridgewood Medibuy, LLC acquired 200,000 shares of our Series
B preferred stock and Acorn Technology Fund purchased 133,333 shares of our
Series B preferred stock, at a price of $15.00 per share.
On March 5, 1999, we entered into a Consulting Agreement with Ridgewood
Capital Management, LLC. Ridgewood Capital and two of its officers were issued
141,280 shares of common stock in exchange for providing us with financial
management services. These services were extended in September 1999, and in
December 1999 we issued them stock options to purchase an additional 70,000
shares of common stock at a weighted average exercise price of $2.20 per share.
In June 1999, we sold 4,458,332 shares of our Series C preferred stock for
a purchase price of $3.60 per share, to investors including John H. Stevens,
M.D., one of our directors, and funds affiliated with Sequoia Capital, Kleiner,
Perkins, Caulfield & Byers and Oak Investment Partners. Mark A. Stevens, Brook
H. Byers and Ann H. Lamont, also our directors, are either managing members of
the general partner or general partners of Sequoia Capital, Kleiner, Perkins,
Caulfield & Byers, and Oak Investment Partners, respectively. The following
table shows the number of shares purchased by these investors:
<TABLE>
<CAPTION>
INVESTOR NAME SHARES
------------- ---------
<S> <C>
Kleiner, Perkins, Caulfield & Byers.............. 2,722,222
Oak Investment Partners.......................... 833,333
Sequoia Capital.................................. 826,388
John H. Stevens, M.D............................. 62,500
</TABLE>
In June 1999, we also issued to Dr. Stevens 800,000 shares of our common
stock. The shares were issued in exchange for all of the outstanding capital
stock of hippo.com, Inc., a Delaware corporation founded by Dr. Stevens. We have
the right to repurchase up to 472,000 shares of the common stock issued to Dr.
Stevens until June 2002 if Dr. Stevens' services as a member of our Board of
Directors cease for any reason. The shares subject to repurchase decrease
ratably over a three-year period. The remaining shares have been accounted for
as stock-based compensation to Dr. Stevens because hippo.com was not considered
a business and had minimal assets.
Under an Amended and Restated Investors' Rights Agreement dated June 11,
1999 among us and several of our investors, the investors have registration
rights for shares of common stock held by them. The investors who are parties to
the agreement include John H. Stevens, one of our directors, and the funds that
are affiliated with Sequoia Capital, Kleiner Perkins Caulfield & Byers, Oak
Investment Partners, and Ridgewood Capital. See "Description of Capital
Stock -- Registration Rights" for a more complete description of these
registration rights.
In connection with the sale and issuance of our Series C preferred stock in
June 1999, we entered into an agreement with some of our stockholders, including
some of the investors who
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<PAGE> 64
purchased our Series B and Series C preferred stock. In August 1999, we
exercised our right to sell our Series D preferred stock under that agreement
following our achievement of specified milestones under the agreement, and we
sold 1,654,262 shares of our Series D preferred stock for a purchase price of
$12.09 per share, to funds affiliated with Sequoia Capital, Kleiner, Perkins,
Caulfield & Byers, Oak Investment Partners and Ridgewood Capital. The following
table shows the number of shares purchased by these investors:
<TABLE>
<CAPTION>
INVESTOR NAME SHARES
------------- -------
<S> <C>
Kleiner, Perkins, Caulfield & Byers............... 165,429
Oak Investment Partners........................... 413,565
Ridgewood Capital................................. 248,139
Sequoia Capital................................... 827,129
</TABLE>
In October 1999, we sold an additional 20,000 shares of our Series D
preferred stock to Douglas Allred, one of our directors, for a purchase price of
$12.09 per share.
In connection with our November 1999 acquisition of PartNET, Inc., we
issued Don R. Brown, President of PartNET, 927,974 shares of our common stock in
exchange for his shares of PartNET. We also entered into an employment agreement
with Mr. Brown and granted him an incentive stock option to purchase 200,000
shares of our common stock. The stock option vests over four years and has an
exercise price of $5.44 per share.
In addition, Mr. Brown owns a minority interest in Paradigm Resources,
L.C., the owner of the property leased by PartNET. The lease expires in January
2004, and has a base monthly rent of approximately $8,300.
In December 1999, we sold an additional 728,716 shares of our Series D
preferred stock at a price of $12.09 per share, to investors including Acorn
Technology Fund, Allianz Capital Partners Gmbh and funds affiliated with
MeriTech Capital Partners, each of which is a beneficial holder of more than 5%
of our common stock. The following table shows the number of shares purchased by
these investors:
<TABLE>
<CAPTION>
INVESTOR NAME SHARES
------------- ------
<S> <C>
Acorn Technology Fund.............................. 82,713
Allianz Capital Partners........................... 49,442
MeriTech Capital Partners.......................... 50,654
</TABLE>
In December 1999 and January 2000, we sold 3,281,515 shares of our Series E
preferred stock for a purchase price of $20.54 per share, to investors including
Acorn Technology Fund, funds affiliated with Sequoia Capital and Oak Investment
Partners, Allianz Capital Partners and funds affiliated with MeriTech Capital
Partners. The following table shows the number of shares purchased by these
investors:
<TABLE>
<CAPTION>
INVESTOR NAME SHARES
------------- ---------
<S> <C>
Acorn Technology Fund............................ 48,686
Allianz Capital Partners......................... 1,188,035
MeriTech Capital Partners........................ 1,217,138
Oak Investment Partners.......................... 243,428
Sequoia Capital.................................. 243,428
</TABLE>
In January 2000, we entered into a Strategic Relationship Agreement with
Allianz Capital Partners in connection with the development of our European
marketplace. In connection with that agreement, we granted Allianz Capital
Partners a warrant to purchase 309,706 shares of our common stock at an exercise
price of $.15 per share. The warrant will become exercisable upon the
effectiveness of this offering.
63
<PAGE> 65
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of December 31, 1999, and after the sale of
shares in this offering, by
- - each person who is known by us to own beneficially more than 5% of our
outstanding common stock
- - each named executive officer
- - each of our directors
- - all of our current directors and executive officers as a group
Except as indicated below, the persons named in the table have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable.
Unless otherwise indicated, the address for each stockholder is c/o medibuy.com,
Inc., 10120 Pacific Heights Boulevard, San Diego, California 92121. Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Percentage of
beneficial ownership is based on 41,103,294 pro forma shares of common stock
outstanding as of December 31, 1999 and assuming shares of common
stock outstanding after completion of this offering.
The table assumes no exercise of the underwriters' over-allotment option.
If the underwriters' over-allotment option is exercised in full, we will sell up
to an aggregate of shares of our common stock, and up to
shares of common stock will be outstanding after completion of
this offering.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
OUTSTANDING
-------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Brook H. Byers and
Kleiner Perkins Caulfield & Byers(1)....................... 5,775,302 14.1% %
2750 Sand Hill Road
Menlo Park, Ca 94025
Mark A. Stevens and Sequoia Capital(2)..................... 4,335,390 10.5
3000 Sand Hill Road, Bldg. 4, Suite 280
Menlo Park, CA 94025
Ann H. Lamont and Oak Investment Partners(3)............... 3,522,152 8.6
1 Gorham Island
Westport, CT 06880
Ridgewood Capital Management, LLC(4)....................... 4,585,066 11.1
947 Linwood Avenue
Ridgewood, NJ 07450
Acorn Technology Fund L.P.(5).............................. 2,929,458 7.1
5 Vaughn Drive
Princeton, NJ 08540
</TABLE>
64
<PAGE> 66
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
OUTSTANDING
-------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
MeriTech Capital Partners(6)............................... 2,535,584 6.2
90 Middlefield Road, Suite 201
Menlo Park, CA 94025
Allianz Capital Partners, Gmbh(7).......................... 2,784,660 6.7
Theresienstrase 1-5
80333 Munich, Germany
Douglas C. Allred(8)....................................... 66,667 0.2
Dennis J. Murphy(9)........................................ 478,500 1.2
James L. Hersma(10)........................................ 322,500 0.8
Charles R. Smith........................................... 630,000 1.5
Norman R. Farquhar......................................... 0 --
Robert B. Witt(11)......................................... 52,000 0.1
Don R. Brown............................................... 927,974 2.3
John H. Stevens, M.D.(12).................................. 925,000 2.3
All executive officers and directors as a group
(11 persons)(13)......................................... 17,035,485 40.9
</TABLE>
- ---------------
(1) Includes:
- 5,775,302 shares of common stock issuable upon conversion of our Series C
and Series D preferred stock held by KPCB Holdings, Inc.
- Mr. Byers is a partner of KPCB Holdings, and shares investment and voting
power over these shares with the other managing members or general
partners of the fund, none of whom are affiliated with us. Mr. Byers
disclaims beneficial ownership of those shares except to the extent of
this pecuniary interest in the fund.
(2) Includes:
- 1,497,910 shares of common stock issuable upon conversion of our Series C
preferred stock and 490,762 shares of common stock held by Sequoia
Capital VIII, which represents 4.8% and %, respectively, of the
total number of shares outstanding before and after this offering.
- 19,008 shares of common stock issuable upon conversion of our Series C
preferred stock and 6,228 shares of common stock held by Sequoia
International Technology Partners VIII, which represents 0.1% and %,
respectively, of the total number of shares outstanding before and after
this offering.
- 99,166 shares of common stock issuable upon conversion of our Series C
preferred stock and 32,490 shares of common stock held by Sequoia
International Technology Partners VIII (Q), which represents 0.3% and
%, respectively, of the total number of shares outstanding before
and after this offering.
- 33,056 shares of common stock issuable upon conversion of our Series C
preferred stock and 10,830 shares of common stock held by CMS Partners
LLC, which represents 0.1% and %, respectively, of the total number
of shares outstanding before and after this offering.
- 3,636 shares of common stock issuable upon conversion of our Series C
preferred stock and 1,190 shares of common stock held by Sequoia 1997,
which represents an insignificant percent of the total number of shares
outstanding before and after this offering.
65
<PAGE> 67
- 223,848 shares of common stock issuable upon conversion of our Series D
and Series E preferred stock held by Sequoia Capital Franchise Partners,
which represents 0.5% and %, respectively, of the total number of
shares outstanding before and after this offering.
- 1,917,266 shares of common stock issuable upon conversion of our Series D
and Series E preferred stock held by Sequoia Capital Franchise Fund,
which represents 4.7% and %, respectively, of the total number of
shares outstanding before and after this offering.
- Mark A. Stevens is a managing member of the general partner, or a
partner, of each of the above-listed investment funds, and shares
investment and voting power over these shares with the other managing
members or general partners of these funds, none of whom are affiliated
with us. Mr. Stevens disclaims beneficial ownership of those shares
except to the extent of his pecuniary interest in those funds.
(3) Includes:
- 2,924,020 shares of common stock issuable upon conversion of our Series
C, Series D and Series E preferred stock and 531,212 shares of common
stock held by Oak Investment Partners VIII, L.P., which represents 8.4%
and %, respectively, of the total number of shares outstanding
before and after this offering.
- 56,632 shares of common stock issuable upon conversion of our Series C,
Series D and Series E preferred stock and 10,288 shares of common stock
held by Oak VIII Affiliates Fund, L.P., which represents 0.2% and %,
respectively, of the total number of shares outstanding before and after
this offering.
- Ann H. Lamont is a managing member of the general partner of each of the
above-listed investment funds, and shares investment and voting power
over these shares with the other managing members of the general partners
of these funds, none of whom are affiliated with us. Ms. Lamont disclaims
beneficial ownership of those shares except to the extent of her
pecuniary interest in the funds.
(4) Includes 4,496,278 shares of common stock issuable upon conversion of our
Series B preferred stock and Series D preferred stock held by Ridgewood
Medibuy LLC and 88,788 shares of common stock and options exercisable
within 60 days of December 31, 1999 held by Ridgewood Capital Management
LLC. Ridgewood Capital Management LLC is an affiliate of Ridgewood Medibuy
LLC.
(5) Includes 2,929,458 shares of common stock issuable upon conversion of our
Series B, Series D and Series E preferred stock.
(6) Includes:
- 2,495,016 shares of common stock issuable upon conversion of our Series D
and Series E preferred stock held by MeriTech Capital Partners, LP, which
represents 6.1% and %, respectively, of the total number of shares
outstanding before and after this offering.
- 40,568 shares of common stock issuable upon conversion of our Series D
and Series E preferred stock held by Meritech Capital Affiliates, LP,
which represents 0.1% and %, respectively, of the total number of
shares outstanding before and after this offering.
(7) 2,474,954 shares of common stock issuable upon conversion of our Series D
and Series E preferred stock and a warrant to purchase 309,706 shares of
common stock which becomes exercisable effective upon this offering.
(8) Includes 60,000 shares of common stock issuable upon conversion of our
Series B preferred stock and Series D preferred stock held by the Allred
Family Trust dated
66
<PAGE> 68
March 23, 1995, Douglas Allred and Loretta Allred Trustees. Mr. Allred
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in the trust. Also includes 6,667 shares subject to
options exercisable within 60 days of December 31, 1999.
(9) Includes 63,000 shares of common stock held by Dennis Murphy and Veronica
Murphy, Trustees of the Murphy 1999 Trust No. 1 dated October 25, 1999 and
63,000 shares of common stock held by Dennis Murphy and Veronica Murphy,
Trustees of the Murphy 1999 Trust No. 2 dated October 25, 1999. Mr. Murphy
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in the trusts. Also includes 352,500 shares subject to
options exercisable within 60 days of December 31, 1999.
(10) Includes 166,250 shares subject to options exercisable within 60 days of
December 31, 1999.
(11) Includes 52,000 shares subject to options exercisable within 60 days of
December 31, 1999.
(12) Includes 125,000 shares of common stock issuable upon conversion of our
Series C preferred stock.
(13) Includes shares and options listed in footnotes (1) through (3) and (8)
through (12).
DESCRIPTION OF CAPITAL STOCK
After this offering, we will be authorized to issue 100,000,000 shares of
common stock, $0.001 par value, and 15,000,000 shares of preferred stock, $0.001
par value. The following description of our capital stock is qualified in all
respects by reference to our amended and restated certificate of incorporation,
which has been filed as an exhibit to the registration statement incorporating
this prospectus.
COMMON STOCK
At December 31, 1999, there were 12,716,148 shares of common stock
outstanding, which were held of record by 57 stockholders. The holders of
outstanding common stock are entitled to receive dividends out of assets legally
available therefore at times and in amounts as our board of directors may, from
time to time, determine, subject to any preferences which may be granted to the
holders of preferred stock. Holders of common stock are entitled to one vote per
share on all matters on which the holders of common stock are entitled to vote.
The common stock is not entitled to preemptive rights and is not subject to
redemption or conversion. Upon our liquidation, dissolution or winding-up, the
assets (if any) legally available for distribution to stockholders are
distributable ratably among the holders of the common stock after payment of all
our debt and liabilities and the liquidation preference of any outstanding class
or series of preferred stock, and the shares of common stock to be issued under
this offering will be, when issued and delivered, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of our preferred
stock will be converted into 28,387,146 shares of common stock. See our
financial statements for a description of our currently outstanding preferred
stock. After this offering, preferred stock may be issued from time to time in
one or more series, and our board of directors, without action by the holders of
the common stock, may fix or alter the voting rights, redemption provisions
(including sinking fund provisions), dividend rights, dividend rates,
liquidation preferences, conversion rights and any other rights, preferences,
privileges and restrictions of any wholly unissued series of preferred stock.
Our board of directors, without stockholder approval, can issue shares of
preferred stock with rights that could adversely affect the rights of holders of
common stock. No shares of preferred stock will be outstanding upon the closing
of this offering
67
<PAGE> 69
and we have no present plans to issue any preferred stock shares. The issuance
of preferred stock could adversely affect the voting power of holders of common
stock and could have the effect of delaying, deferring or preventing a change in
control or other corporate action.
WARRANTS
In January 2000, we issued warrants to purchase an aggregate of 379,968
shares of our common stock at an exercise price of $0.15 per share. These
warrants will become exercisable effective upon this offering. These warrants
will expire on the second anniversary of the date of grant, or earlier in
connection with a reorganization transaction or if the average daily closing
price of our stock over a 60 trading day period equals or exceeds $20.54 per
share.
REGISTRATION RIGHTS
Under our Second Amended and Restated Investor Rights Agreement dated
January 7, 2000 between us and several of our investors, the investors, holding
an aggregate of 27,025,146 shares of our common stock issued or issuable upon
conversion of our preferred stock, have registration rights pertaining to the
securities they hold. These investors may only exercise these rights after 180
days following this offering, however, if we propose to register any of our
securities under the Securities Act for our own account or the account of any of
our stockholders other than these holders of registrable shares, holders of the
registrable shares are entitled, subject to specified limitations and
conditions, to notice of the registration and are, subject to specified
conditions and limitations, entitled to include registrable shares in the
offering, provided, among other conditions, that the underwriters of the
offering have the right to limit the number of shares included in the
registration. In addition, we may be required to prepare and file a registration
statement under the Securities Act at our expense if requested to do so by the
holders of at least 30% in interest of the registrable shares. We are required
to use our best efforts to effect the registration, subject to specified
conditions and limitations. We are not obligated to effect more than two
stockholder-initiated registrations. Further, holders of registrable securities
may require us to file additional registration statements on Form S-3, subject
to conditions and limitations. We are required to bear substantially all costs
incurred in connection with those registrations, other than underwriting
discounts and commissions. The foregoing registration rights could result in
substantial future expenses for us and adversely affect any future equity or
debt offerings.
Other investors holding an aggregate of 1,362,000 shares of our common
stock issued or issuable upon conversion of our Series A preferred stock have
registration rights under their subscription agreements for their purchase of
our stock. These rights are similar to those registration rights granted to the
other investors as described above, however, these investors do not have the
right to require us to prepare and file a registration statement under the
Securities Act unless the registration statement is on Form S-3 and we are
eligible to use that form.
POSSIBLE ANTI-TAKEOVER MATTERS
CERTIFICATE OF INCORPORATION AND BYLAWS
Our amended and restated certificate of incorporation authorizes our board
of directors to establish one or more series of undesignated preferred stock,
the terms of which can be determined by the board of directors at the time of
issuance. See "-- preferred stock" for a description of our preferred stock. Our
amended and restated certificate of incorporation also provides that all
stockholder action must be effected at a duly called meeting of stockholders and
not by a consent in writing. Our bylaws provide that our board of directors will
be classified into three classes of directors. Please see "Management -- Board
Composition" for a list of our directors and the class to which they belong. Our
bylaws also require that stockholders give
68
<PAGE> 70
advance notice to our secretary of any nominations for director or other
business to be brought by stockholders at any stockholders' meeting and require
a supermajority vote of members of our board of directors and/or stockholders to
amend some bylaw provisions. These provisions of our amended and restated
certificate of incorporation and our bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control. These
provisions may also have the effect of preventing changes in our management.
DELAWARE ANTI-TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law
which, subject to specified exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder -- defined
as any person or entity that is the beneficial owner of at least 15% of a
corporation's voting stock -- for a period of three years following the time
that the stockholder became an interested stockholder, unless:
- - prior to that time, the corporation's board of directors approved either the
business combination or the transaction that resulted in the stockholder
becoming an interested stockholder
- - upon consummation of the transaction that resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of
the corporation's voting stock outstanding at the time the transaction
commenced, excluding, for purposes of determining the number of shares
outstanding, those shares owned by persons who are directors and also officers
and by employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer
- - at or subsequent to that time, the business combination is approved by the
corporation's board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote
of at least two-thirds of the outstanding voting stock that is not owned by
the interested stockholder
Section 203 defines business combination to include:
- - any merger or consolidation involving the corporation and the interested
stockholder
- - any sale, lease, exchange, mortgage, transfer, pledge or other disposition
involving the interested stockholder and 10% or more of the assets of the
corporation
- - subject to specified exceptions, any transaction which results in the issuance
or transfer by the corporation of any stock of the corporation to the
interested stockholder
- - any transaction involving the corporation that has the effect of increasing
the proportionate share of the stock of any class of series of the corporation
beneficially owned by the interested stockholder
- - the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation
NASDAQ NATIONAL MARKET
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "MBUY".
TRANSFER AGENT AND REGISTRAR
The stock transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services.
69
<PAGE> 71
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock in the public
market could adversely affect the market price of our common stock. Furthermore,
since only a limited number of shares will be available for sale shortly after
this offering because of contractual and legal restrictions on resale described
below, sales of substantial amounts of common stock in the public market after
the restrictions lapse could adversely affect the prevailing market price and
our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding
shares of common stock, assuming no exercise of the underwriters' over-allotment
option. Of these shares, the shares sold in this offering, will
generally be freely tradable without restriction or further registration under
the Securities Act. Of the remaining shares, subject to the
volume and other restrictions of Rule 144, shares of common stock
may be sold in the public market upon release under lock up agreements in the
amounts and on the dates set forth below:
<TABLE>
<CAPTION>
Released
Shares
--------
<S> <C>
Third business day following the date we release
our earnings for the quarter ending March 31,
2000...........................................
-------
Third business day following the date we release
our earnings for the quarter ending June 30,
2000.............................................
-------
The date 180 days after the date of this
prospectus.....................................
-------
</TABLE>
In general, under Rule 144 as currently in effect, our affiliates, or
persons (or persons whose shares are aggregated) who have beneficially owned
restricted shares for at least one year will be entitled to sell in any
three-month period a number of shares that does not exceed the greater of
- - one percent of the then outstanding shares of our common stock or
- - the average weekly trading volume of our common stock on the Nasdaq National
Market during the four calendar weeks immediately preceding the date on which
notice of the sale is filed with the SEC
Sales under Rule 144 are subject to requirements relating to manner of
sale, notice, and the availability of current public information about us. A
person (or persons whose shares are aggregated) who is not deemed to have been
an affiliate of ours at any time during the 90 days immediately preceding the
sale and who has beneficially owned restricted shares for at least two years is
entitled to sell those shares under Rule 144(k) without regard to the
limitations described above.
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 of the Securities Act, as currently in effect, may be
relied upon with respect to the resales of securities originally purchased from
us by our employees, directors, officers, consultants or advisers prior to the
date we become subject to the reporting requirements of the Securities Exchange
Act, under written compensatory benefit plans or written contracts relating to
the compensation of those persons. In addition, the SEC has indicated that Rule
701 will apply to typical stock options granted by an issuer before it becomes
subject to the reporting requirements of the Exchange Act, along with the shares
acquired upon exercise of the options (including exercises after the date of
this prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning
70
<PAGE> 72
90 days after the date of this prospectus, may be sold by persons other than
affiliates subject only to the manner of sale provisions of Rule 144 and by
affiliates under Rule 144 without compliance with its minimum holding period
requirements.
Shortly after this offering, we may also file a registration statement
under the Securities Act covering shares of common stock reserved for issuance
under our equity incentive plan, our omnibus equity plan, or non-employee
directors' stock option plan and our employee stock purchase plan. The
registration statement will cover approximately 9,857,350 shares. Shares
registered under this registration statement will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale in the open market,
unless the shares are subject to the lock-up agreements described above.
71
<PAGE> 73
UNDERWRITING
medibuy.com and the underwriters named below have entered into an
underwriting agreement with respect to the shares being offered. Subject to
certain conditions, each underwriter has severally agreed to purchase the number
of shares indicated in the following table. Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation, Thomas Weisel Partners LLC and Wit
Capital Corporation are the representatives of the underwriters.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co.........................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Thomas Weisel Partners LLC..................................
Wit Capital Corporation.....................................
-------
Total
=======
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from medibuy.com to cover such sales. They may exercise
that option for 30 days. If any shares are purchased pursuant to this option,
the underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by medibuy.com. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by medibuy.com
----------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share............................................. $ $
Total................................................. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.
medibuy.com and its directors and officers and stockholders have agreed
with the underwriters not to dispose of or hedge any of their common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180 days
after the date of this prospectus, except as permitted by the lock-up agreements
at various dates prior to the end of the 180-day lock-up period, and except with
the prior written consent of the representatives. See "Shares Eligible for
Future Sale" for a discussion of these provisions and other transfer
restrictions.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among medibuy.com and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be medibuy.com's historical performance, estimates of the
business potential and earnings prospects of medibuy.com, an assessment of
medibuy.com's management and the consideration of the above factors in relation
to market valuation of companies in related businesses.
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<PAGE> 74
Application has been made for quotation of the common stock on the Nasdaq
National Market under the symbol "MBUY".
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
this offering is in progress.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
The underwriters have reserved for sale, at the initial public offering
price, approximately shares of the common stock offered hereby for
individuals designated by medibuy.com who have expressed an interest in
purchasing such shares of common stock in this offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased will
be offered by the underwriters to the general public on the same basis as other
shares offered hereby.
medibuy.com estimates that its share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ .
medibuy.com has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
In December 1999, each of Goldman, Sachs & Co., Donaldson Lufkin & Jenrette
and Thomas Weisel Partners LLC purchased 41,357 shares of medibuy.com's Series D
preferred stock in a private placement. The aggregate purchase price for the
Series D shares purchased by the representatives was $1,500,018. In addition, in
December 1999, these three representatives of the underwriters purchased shares
of medibuy.com's Series E preferred stock in a private placement in the
following amounts:
<TABLE>
<S> <C>
Goldman, Sachs & Co......................................... 24,343 shares
Donaldson, Lufkin & Jenrette................................ 48,686 shares
Thomas Weisel Partners LLC.................................. 24,343 shares
</TABLE>
The aggregate purchase price for the Series E shares purchased by the
representatives was $2,000,021. Based on our assumed stock split, each of the
shares of Series D and Series E preferred stock purchased is convertible into
two shares of medibuy.com common stock immediately prior to the closing of this
offering.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998 Thomas Weisel Partners has been named as a lead or co-manager on 106 filed
public offerings of equity securities, of which 79 have been completed, and has
acted as a syndicate member in an
73
<PAGE> 75
additional 54 public offerings of equity securities. Thomas Weisel Partners does
not have any material relationship with us or any of our officers, directors or
other controlling persons, except for its contractual relationship with us under
the terms of the underwriting agreement entered into in connection with this
offering and the purchase of Series D and Series E preferred stock of
medibuy.com as described above.
Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in the offering as one of the representatives of the
underwriters. The National Association of Securities Dealers, Inc. approved the
membership of Wit Capital on September 4, 1997. Since that time, Wit Capital has
acted as an underwriter, e-Manager or selected dealer in over 170 public
offerings. Except for its participation as a representative in this offering,
Wit Capital has no relationship with medibuy.com or any of its founders or
significant stockholders.
VALIDITY OF COMMON STOCK
Cooley Godward LLP, San Diego, California and Sullivan & Cromwell, Los
Angeles, California, will pass on the validity of the shares of common stock
offered by this prospectus for us and for the underwriters, respectively.
Attorneys at Cooley Godward LLP are the beneficial owners, through an investment
partnership, of 8,271 shares of our Series D preferred stock which, based on our
assumed stock split, are convertible into 16,542 shares of our common stock.
EXPERTS
The financial statements of medibuy.com, Inc. as of December 31, 1998 and
for the period from August 18, 1998 (inception) to December 31, 1998, and the
financial statements of PartNET, Inc. as of December 31, 1998 and 1997 and for
each of the two years in the period ended December 31, 1998, included in this
prospectus have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington,
D.C., a registration statement on Form S-1 under the Securities Act of 1933,
with respect to the common stock offered by this prospectus. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits and schedules to the registration statement. For further
information with respect to us and our common stock, reference is made to the
registration statement and the exhibits and schedules filed as part of the
registration statement. Statements contained in this prospectus as to the
contents of any contract or document filed as an exhibit to the registration
statement are qualified by reference to the applicable exhibit as filed.
A copy of the registration statement, and the exhibits and schedules to the
registration statement, as well as reports and other information filed by us
with the SEC may be inspected without charge at the public reference facilities
maintained by the SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's regional offices located at the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, 13th Floor, New York, New York 10048, and copies of all or
any part of the registration statement may be obtained from those offices upon
the payment of the fees prescribed by the SEC. You can obtain information about
the operation of the public reference facilities by calling the SEC at
1-800-SEC-0330. In addition, registration statements and other filings we make
with the SEC through its electronic data gathering, analysis and retrieval, or
EDGAR, system, including our registration statement, are publicly available
through the Internet.
74
<PAGE> 76
The SEC maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The SEC's Web site is http://www.sec.gov.
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934 and, in accordance
with the Exchange Act, will file periodic reports, proxy statements and other
information with the SEC. Upon approval of the common stock for listing on
Nasdaq, these reports, proxy and information statements and other information
may also be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
75
<PAGE> 77
MEDIBUY.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MEDIBUY.COM, INC. FINANCIAL STATEMENTS
Report of Independent Accountants........................... F-2
Balance Sheet............................................... F-3
Statement of Operations..................................... F-4
Statement of Cash Flows..................................... F-5
Statement of Changes in Stockholders' Equity (Deficit)...... F-6
Notes to Financial Statements............................... F-7
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Overview.................................................... F-20
Unaudited Pro Forma Condensed Combined Balance Sheet........ F-21
Unaudited Pro Forma Condensed Combined Statement of
Operations................................................ F-22
Notes to Unaudited Pro Forma Condensed Combined Financial
Information............................................... F-23
PARTNET, INC. FINANCIAL STATEMENTS
Report of Independent Accountants........................... F-24
Balance Sheet............................................... F-25
Statement of Operations..................................... F-26
Statement of Cash Flows..................................... F-27
Statement of Changes in Stockholders' Equity................ F-28
Notes to Financial Statements............................... F-29
</TABLE>
F-1
<PAGE> 78
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
medibuy.com, Inc.
The two-for-one Common Stock split described in Note 1 to the financial
statements has not been consummated at January , 2000. When it has been
consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying balance sheet and the related statements
of operations, of cash flows and of changes in stockholders' equity
(deficit) present fairly, in all material respects, the financial position
of medibuy.com, Inc. (the "Company") at December 31, 1998, and the results
of its operations and its cash flows for the period from August 18, 1998
(inception) to December 31, 1998 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on
these financial statements based on our audit. We conducted our audit of
these statements in accordance with generally accepted auditing standards,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion
expressed above."
/s/ PRICEWATERHOUSECOOPERS LLP
San Diego, California
September 2, 1999
F-2
<PAGE> 79
MEDIBUY.COM, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
DECEMBER 31, --------------------------
1998 ACTUAL PRO FORMA
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 54 $ 29,421
Accounts receivable....................................... -- 1
Prepaid expenses and other current assets................. 21 167
------- --------
Total current assets...................................... 75 29,589
Property and equipment, net................................. 425 5,010
Other assets................................................ 20 166
------- --------
Total assets....................................... $ 520 $ 34,765
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 414 $ 1,876
Accrued expenses.......................................... 132 1,130
Amounts due to customers.................................. -- 34
------- --------
Total current liabilities................................. 546 3,040
------- --------
Commitments (Note 8)
Stockholders' equity (deficit):
Preferred Stock; $0.001 par value; 10,000,000 shares
authorized:
Series A, convertible; 68,100 shares authorized; 0,
68,100 and 0 shares issued and outstanding at December
31, 1998, September 30, 1999 and September 30, 1999
pro forma, respectively. Liquidation
preference -- $681.................................... -- -- $ --
Series B, convertible; 334,907 shares authorized; 0,
334,907 and 0 shares issued and outstanding at
December 31, 1998, September 30, 1999 and September
30, 1999 pro forma, respectively. Liquidation
preference -- $5,024.................................. -- -- --
Series C, convertible; 5,000,000 shares authorized; 0,
4,458,332 and 0 shares issued and outstanding at
December 31, 1998, September 30, 1999 and September
30, 1999 pro forma, respectively. Liquidation
preference -- $16,050................................. -- 4 --
Series D, convertible; 2,400,000 shares authorized; 0,
1,654,262 and 0 shares issued and outstanding at
December 31, 1998, September 30, 1999 and September
30, 1999 pro forma, respectively. Liquidation
preference -- $20,000................................. -- 2 --
Common Stock; $0.001 par value; 40,000,000 shares
authorized; 11,382,000, 11,616,050 and 31,901,378 shares
issued and outstanding at December 31, 1998, September
30, 1999 and September 30, 1999 pro forma,
respectively............................................ 11 12 32
Additional paid-in capital................................ 2,227 60,219 60,205
Unearned stock-based compensation......................... (808) (5,701) (5,701)
Receivables from stockholders............................. (4) -- --
Accumulated deficit....................................... (1,452) (22,811) (22,811)
------- -------- --------
Total stockholders' equity (deficit).................... (26) 31,725 $ 31,725
------- -------- ========
Total liabilities and stockholders' equity
(deficit)........................................ $ 520 $ 34,765
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 80
MEDIBUY.COM, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
AUGUST 18, 1998 AUGUST 18, 1998 NINE MONTHS
(INCEPTION) TO (INCEPTION) TO ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999
----------------- ------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net revenues.............................. $ -- $ -- $ 20
---------- ---------- -----------
Operating expenses:
Sales and marketing..................... 368 12 5,500
Systems and product development......... 84 -- 4,789
General and administrative.............. 731 677 8,809
Amortization of stock-based
compensation......................... 271 -- 2,486
---------- ---------- -----------
Total operating expenses................ 1,454 689 21,584
---------- ---------- -----------
Loss from operations...................... (1,454) (689) (21,564)
Other income (expense):
Interest income......................... 2 -- 205
---------- ---------- -----------
Net loss.................................. $ (1,452) $ (689) $ (21,359)
========== ========== ===========
Net loss per share, basic and diluted..... $ (0.20) $ (0.15) $ (2.51)
========== ========== ===========
Shares used in per share computations,
basic and diluted....................... 7,189,816 4,576,584 8,521,361
========== ========== ===========
Pro forma net loss per share, basic and
diluted................................. $ (0.74)
===========
Shares used in pro forma per share
computations, basic and diluted......... 28,806,689
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 81
MEDIBUY.COM, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM NINE MONTHS
AUGUST 18, 1998 AUGUST 18, 1998 ENDED
(INCEPTION) TO (INCEPTION) TO SEPTEMBER 30,
DECEMBER 31, 1998 SEPTEMBER 30, 1998 1999
----------------- ------------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................... $(1,452) $ (689) $(21,359)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... 48 -- 2,864
Loss on disposition of assets....... -- -- 31
Equity-based compensation........... 790 669 8,819
Changes in assets and liabilities:
Accounts receivable............... -- -- (1)
Prepaid expenses and other current
assets......................... (21) -- (146)
Accounts payable.................. 414 20 1,462
Accrued expenses.................. 132 -- 998
Amounts due to customers.......... -- -- 34
------- ------- --------
Net cash used in operating
activities.......................... (89) -- (7,298)
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.... (473) -- (3,660)
Other assets........................... (20) -- (146)
------- ------- --------
Net cash used in investing
activities.......................... (493) -- (3,806)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock............... 636 -- 150
Issuance of Preferred Stock............ -- -- 40,269
Exercise of stock options.............. -- -- 48
Collection of receivables from
stockholders........................ -- -- 4
------- ------- --------
Net cash provided by financing
activities.......................... 636 -- 40,471
------- ------- --------
Net increase in cash and cash
equivalents............................ 54 -- 29,367
Cash and cash equivalents, beginning of
period................................. -- -- 54
------- ------- --------
Cash and cash equivalents, end of
period................................. $ 54 $ -- $ 29,421
======= ======= ========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock, vesting
common stock and options for
consulting services................. $ 519 $ 519 $ 2,672
Vesting Common Stock issued to
consultants for development of
internal-use software............... -- -- 3,820
Exchange of Common Stock for Series A
Preferred Stock..................... -- -- 681
Purchase of software in exchange for
amount payable to related party..... -- 370 --
Receivables from stockholders.......... 4 -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 82
MEDIBUY.COM, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
------------------------------------------------------------------------
COMMON STOCK SERIES A SERIES B SERIES C SERIES D
------------------ -------------- --------------- ----------------- -----------------
PAR PAR PAR PAR PAR
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
---------- ----- ------ ----- ------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock.... 11,382,000 $11 -- $-- -- $-- -- $-- -- $--
Unearned stock-based
compensation................ -- -- -- -- -- -- -- -- -- --
Amortization of stock-based
compensation............... -- -- -- -- -- -- -- -- -- --
Net loss.................... -- -- -- -- -- -- -- -- -- --
---------- --- ------ -- ------- -- --------- -- --------- --
BALANCE AT DECEMBER 31,
1998....................... 11,382,000 11 -- -- -- -- -- -- -- --
January 1, 1999 to September
30, 1999 (Unaudited):
Issuance of Common Stock.... 1,028,520 1 -- -- -- -- -- -- -- --
Exchange of Common Stock for
Series A Preferred Stock... (1,362,000) -- 68,100 -- -- -- -- -- -- --
Issuance of Series B
Preferred Stock............ -- -- -- -- 334,907 -- -- -- -- --
Issuance of Series C
Preferred Stock............ -- -- -- -- -- -- 4,458,332 4 -- --
Compensation expense
resulting from security
transaction (Note 7)....... -- -- -- -- -- -- -- -- -- --
Issuance of Series D
Preferred Stock............ -- -- -- -- -- -- -- -- 1,654,262 2
Valuation of variable
stock-based awards issued
to non-employees........... 151,280 -- -- -- -- -- -- -- -- --
Exercise of stock options... 416,250 -- -- -- -- -- -- -- -- --
Unearned stock-based
compensation............... -- -- -- -- -- -- -- -- -- --
Amortization of stock-based
compensation............... -- -- -- -- -- -- -- -- -- --
Collection of receivables
from stockholders.......... -- -- -- -- -- -- -- -- -- --
Net loss.................... -- -- -- -- -- -- -- -- -- --
---------- --- ------ -- ------- -- --------- -- --------- --
BALANCE AT SEPTEMBER 30,
1999 (UNAUDITED)........... 11,616,050 $12 68,100 $-- 334,907 $-- 4,458,332 $4 1,654,262 $2
========== === ====== == ======= == ========= == ========= ==
<CAPTION>
ADDITIONAL UNEARNED RECEIVABLES
PAID-IN STOCK-BASED FROM ACCUMULATED
CAPITAL COMPENSATION STOCKHOLDERS DEFICIT TOTAL
---------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Issuance of Common Stock.... $ 1,148 $ -- $(4) $ -- $ 1,155
Unearned stock-based
compensation................ 1,079 (1,079) -- -- --
Amortization of stock-based
compensation............... -- 271 -- -- 271
Net loss.................... -- -- -- (1,452) (1,452)
------- ------- --- -------- --------
BALANCE AT DECEMBER 31,
1998....................... 2,227 (808) (4) (1,452) (26)
January 1, 1999 to September
30, 1999 (Unaudited):
Issuance of Common Stock.... 149 -- -- -- 150
Exchange of Common Stock for
Series A Preferred Stock... -- -- -- -- --
Issuance of Series B
Preferred Stock............ 4,918 -- -- -- 4,918
Issuance of Series C
Preferred Stock............ 15,397 -- -- -- 15,401
Compensation expense
resulting from security
transaction (Note 7)....... 3,661 -- -- -- 3,661
Issuance of Series D
Preferred Stock............ 19,948 -- -- -- 19,950
Valuation of variable
stock-based awards issued
to non-employees........... 6,492 -- -- -- 6,492
Exercise of stock options... 48 -- -- -- 48
Unearned stock-based
compensation............... 7,379 (7,379) -- -- --
Amortization of stock-based
compensation............... -- 2,486 -- -- 2,486
Collection of receivables
from stockholders.......... -- -- 4 -- 4
Net loss.................... -- -- -- (21,359) (21,359)
------- ------- --- -------- --------
BALANCE AT SEPTEMBER 30,
1999 (UNAUDITED)........... $60,219 $(5,701) $-- $(22,811) $ 31,725
======= ======= === ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 83
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY
ORGANIZATION AND BUSINESS
medibuy.com, Inc. (the "Company") was incorporated on August 18, 1998. The
Company operates a business-to-business Internet marketplace for the purchase
and sale of medical and non-medical products and services used by the healthcare
industry worldwide. Through the Company's marketplace, registered buyers
purchase, directly from registered sellers, medical and non-medical supplies and
services used in the operation of healthcare facilities. The Company's revenue
is typically a percentage of the gross transaction value of the underlying
purchase and is paid by the seller.
The Company's business consists of a single operating segment, and its
operations and customers are located primarily in the United States. The Company
did not record any revenue during 1998.
STOCK SPLIT
On June 4, 1999, the Company effected a ten-for-one Common Stock split. All
per share and share amounts in the financial statements have been retroactively
restated to reflect the effect of this stock split.
In connection with its proposed initial public offering ("IPO"), the
Company will be effecting a two-for-one Common Stock split. All per share and
share amounts in the financial statements have been retroactively restated to
reflect the effect of this stock split.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED FINANCIAL STATEMENTS
The interim financial statements as of September 30, 1999 and for the
periods ended September 30, 1998 and 1999 are unaudited and have been prepared
on the same basis as the audited financial statements and, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial information set forth
therein, in accordance with generally accepted accounting principles. Operating
results for interim periods are not necessarily indicative of operating results
for an entire year. All financial statement disclosures related to the periods
ended September 30, 1998 and 1999 and subsequent to September 30, 1999 are
unaudited.
UNAUDITED PRO FORMA BALANCE SHEET
The Company's Board of Directors has authorized the filing of a
Registration Statement with the Securities and Exchange Commission to register
shares of its Common Stock in an IPO. If the IPO is consummated as presently
anticipated, all outstanding shares of Preferred Stock will automatically
convert into shares of Common Stock under the terms of the Preferred Stock
agreements (see Note 6). The unaudited pro forma balance sheet as of September
30, 1999 reflects the conversion of all outstanding Preferred Stock into Common
Stock as if such conversion had occurred as of September 30, 1999.
USE OF ESTIMATES
In the normal course of preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect
F-7
<PAGE> 84
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the financial statement date, as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly-liquid investments with a maturity date of
three months or less from the date of purchase to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to significant
concentrations of credit risk, consist principally of cash and cash equivalents.
Substantially all of the Company's cash and cash equivalents are invested in
U.S. Treasury Bills and short-term money market accounts which bear minimal
risk, and are available on demand.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable, accrued expenses and amounts due to customers
approximate their fair value due to the short-term nature of these balances.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is depreciated using the
straight-line method over the estimated useful lives of the assets ranging from
two to three years. Leasehold improvements are amortized over the shorter of the
assets' lives or the related lease terms. Additions to property and equipment
together with major renewals and betterments are capitalized. Expenditures for
repairs, maintenance and minor renewals and betterments are charged to expense
as incurred.
LONG-LIVED ASSETS
The Company assesses potential impairments to its long-lived assets when
there is evidence that events or changes in circumstances indicate that the
carrying amount of an asset may not be recovered. An impairment loss is
recognized when an asset's fair value, determined based on undiscounted cash
flows, is less than its carrying amount. The Company has not incurred any such
losses.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for the
periods ended December 31, 1998 and September 30, 1999 was $29 and $641,
respectively.
SYSTEMS AND PRODUCT DEVELOPMENT COSTS
Systems and product development costs include expenses incurred by the
Company to enhance, manage, monitor and operate the Company's marketplace and
are generally expensed as incurred.
The software development component of systems and product development costs
are accounted for in accordance with Statement of Position ("SOP") 98-1,
"Accounting for the
F-8
<PAGE> 85
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Costs of Computer Software Developed or Obtained for Internal Use." In
accordance with SOP 98-1, internal and external costs incurred to develop
internal-use computer software during the application development stage are
capitalized. Application development stage costs generally include software
configuration, coding, installation to hardware and testing. Costs of
significant upgrades and enhancements that result in additional functionality
are also capitalized. Costs incurred for maintenance and minor upgrades and
enhancements are expensed as incurred. Capitalized systems and product
development costs are amortized on a straight-line basis over the estimated
useful lives of the related software applications of up to three years. Systems
and product development costs include depreciation and amortization expense of
$0, $0 and $2,659 for the periods ended December 31, 1998, September 30, 1998
and September 30, 1999, respectively.
INCOME TAXES
The Company provides for income taxes utilizing the liability method. Under
the liability method, current income tax expense or benefit represents income
taxes expected to be payable or refundable for the current period. Deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax and financial reporting bases of assets and
liabilities and for the expected future tax benefit to be derived from tax
credit and loss carryforwards. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts more likely than not to
be realized in future tax returns. Tax rate changes are reflected in income in
the period such changes are enacted.
REVENUE RECOGNITION
Revenues are derived primarily from transaction fees charged to sellers.
Transaction fees are calculated as a percentage of the gross transaction value
the seller negotiates with the buyer for goods or services purchased through the
Company's marketplace. The Company does not take title to the underlying
equipment or products. eAuction transaction fees are recognized when the buyer
has accepted the related equipment. eRFP transaction fees are recognized at the
time a buyer's order is accepted by a seller and collection is reasonably
assured. Provisions for doubtful accounts are provided at the time revenue is
recognized based upon the Company's historical experience and expectations.
Amounts due to customers represents cash payments received from buyers, and
amounts billed to vendors, in advance of transaction acceptance.
The Company has entered into revenue sharing agreements with other Internet
companies and registered buyers. These agreements provide for the sharing of
fees earned based on Internet referrals and buyer purchasing volumes,
respectively. The Company records fees payable under these agreements, which to
date have been insignificant, as a reduction of revenue.
EMPLOYEE STOCK-BASED COMPENSATION
The Company measures compensation expense for its employee stock-based
compensation plans using the intrinsic value method and provides pro forma
disclosures of net loss and net loss per share as if a fair value-based method
had been applied in measuring compensation expense. Accordingly, compensation
cost for stock awards is measured as the excess, if any, of the deemed fair
value for financial reporting purposes of the Company's Common Stock at the date
of grant over the amount an employee must pay to acquire the stock. Compensation
cost is
F-9
<PAGE> 86
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
amortized over the related vesting periods using an accelerated graded method in
accordance with Financial Accounting Standards Board Interpretation No. 28,
"Accounting for Stock Appreciation Rights and Other Variable Stock Option or
Award Plans." Accrued compensation costs for awards that are forfeited are
reversed against compensation expense in the period of forfeiture.
NON-EMPLOYEE STOCK-BASED COMPENSATION
Stock-based awards issued to non-employees are accounted for using a fair
value method and are marked to fair value at each period end until the earlier
of the date that performance by the counterparty is complete or the awards are
fully vested. Fair value is generally based on the deemed fair value for
financial reporting purposes of the Company's Common Stock.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) for all periods presented consists solely of
net loss.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing earnings (loss)
available to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings (loss) per share is computed by
dividing net earnings (loss) available to common stockholders by the weighted
average number of common shares outstanding during the period increased to
include, if dilutive, the number of additional common shares that would have
been outstanding if potential common shares had been issued. The dilutive effect
of outstanding stock options and vesting Common Stock is reflected in diluted
earnings (loss) per share by application of the treasury stock method.
The Company has excluded all convertible Preferred Stock, vesting Common
Stock and outstanding stock options from the calculation of diluted loss per
share for the periods ended December 31, 1998, September 30, 1998 and September
30, 1999 because all such securities are antidilutive. The number of potential
common shares excluded from the calculations of diluted loss per share was
1,920,000, 1,920,000 and 26,507,948 for the periods ended December 31, 1998,
September 30, 1998 and September 30, 1999, respectively.
Unaudited pro forma net loss per common share, basic and diluted, is
calculated assuming the conversion of all outstanding shares of Preferred Stock
into Common Stock at the date of issuance. The calculation of unaudited pro
forma net loss per common share for the nine months ended September 30, 1999
excludes 6,222,620 potential common shares as their impact would be
antidilutive.
F-10
<PAGE> 87
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
A reconciliation of shares used in the calculation of pro forma net loss
per share, basic and diluted, attributable to common shareholders is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1999
-------------------
(UNAUDITED)
<S> <C>
Weighted average shares outstanding..................... 8,521,361
Adjustments to reflect the assumed conversion of
outstanding preferred stock............................. 20,285,328
----------
Shares used in computing pro forma net loss per common
share, basic and diluted.............................. 28,806,689
==========
</TABLE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 is effective for fiscal years beginning after June 15,
2000. SFAS No. 133 requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. The Company does not expect that
the adoption of SFAS No. 133 will have a material impact on its financial
statements because it does not currently hold any derivative instruments and
does not engage in any hedging activities.
3. SUBSEQUENT EVENT -- ACQUISITION (UNAUDITED)
In November 1999, the Company acquired all the outstanding shares of common
stock of PartNET, Inc. ("PartNET") in exchange for 1,170,098 shares of Common
Stock and the issuance of 579,850 stock options to purchase Common Stock of the
Company. PartNET is a software developer engaged in the business of developing
electronic commerce catalog solutions. The acquisition will be accounted for
using the purchase method of accounting. The total purchase price for PartNET
has been valued at approximately $9,469. The Company stock and options issued
have an estimated fair value of approximately $9,269. Other direct expenses of
the acquisition totaled approximately $200. The purchase price was allocated to
the fair value of the net tangible liabilities assumed totaling approximately
$35, deferred tax liabilities totaling approximately $1,200, acquired software
totaling approximately $3,000 and goodwill totaling approximately $7,704. The
acquired software and goodwill will be amortized over their estimated useful
lives of three years.
The unaudited pro forma combined results of the Company and PartNET for the
year ended December 31, 1998 and the nine months ended September 30, 1999,
assuming the acquisition took place on January 1, 1998, are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE
ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Net revenues................................................ $ 1,811 $ 2,002
Net loss.................................................... (4,497) (23,485)
Net loss per share, basic and diluted (assuming conversion
of all shares of Preferred Stock)......................... (0.54) (0.78)
</TABLE>
F-11
<PAGE> 88
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
Property and equipment:
Computer equipment and internal-use software................ $443 $ 7,346
Furniture and fixtures.................................... 19 311
Leasehold improvements.................................... -- 140
Telecommunications equipment.............................. 11 125
---- -------
473 7,922
Accumulated depreciation and amortization................. (48) (2,912)
---- -------
$425 $ 5,010
==== =======
Accrued expenses:
Accrued payroll........................................... $ 78 $ 400
Accrued professional fees................................. 10 595
Other accrued expenses.................................... 44 135
---- -------
$132 $ 1,130
==== =======
</TABLE>
5. INCOME TAXES
No income tax provision was recorded during the period from August 18, 1998
(inception) to December 31, 1998 and the periods ended September 30, 1998 and
September 30, 1999 due to cumulative net losses of the Company. Based upon the
lack of prior earnings history of the Company and uncertainty regarding future
earnings, a full valuation allowance has been recorded against the Company's
deferred tax assets as it is more likely than not that such assets will not be
realized.
At September 30, 1999, the Company has federal and state net operating loss
carryforwards totaling approximately $8,804 and $8,802, which expire beginning
in 2018 and 2006, respectively. Pursuant to Section 382 of the Internal Revenue
Code, annual use of the Company's net operating loss carryforwards will be
limited due to cumulative changes in ownership of more than 50%.
The provision for income taxes differs from the amount computed by applying
the federal statutory income tax rate to loss before income taxes as follows:
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 18, NINE MONTHS
1998 TO ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
Federal income tax at statutory rate of 34%................. $(494) $(7,261)
State income taxes, net of federal benefit.................. (46) (657)
Stock-based compensation.................................... 221 3,507
Change in valuation allowance............................... 315 4,489
Other....................................................... 4 (78)
----- -------
$ -- $ --
===== =======
</TABLE>
F-12
<PAGE> 89
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Significant components of the Company's net deferred tax assets are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
Capitalized start-up costs.................................. $ 349 $ 1,096
Net operating loss carryforwards............................ 3 3,507
Accrued liabilities and other............................... 16 323
Stock-based compensation.................................... 56 216
Depreciation and amortization............................... (109) (338)
----- -------
315 4,804
Valuation allowance......................................... (315) (4,804)
----- -------
$ -- $ --
===== =======
</TABLE>
6. STOCKHOLDERS' EQUITY
PREFERRED STOCK RIGHTS AND PREFERENCES
The Board of Directors of the Company (the "Board") is authorized to issue
Preferred Stock and determine the series and number of preferred shares to be
issued and any related designations, powers, preferences, rights,
qualifications, limitations or restrictions. As of December 31, 1998, no
preferred shares were authorized. As of September 30, 1999, the total number of
preferred shares authorized was 10,000,000. The Board has authorized 68,100
shares as Series A Preferred Stock ("Series A"); 334,907 shares as Series B
Preferred Stock ("Series B"); 5,000,000 as Series C Preferred Stock ("Series
C"); and 2,400,000 as Series D Preferred Stock ("Series D"). The remaining
2,196,993 shares were undesignated. In December 1999, the Board increased the
authorized shares of Preferred Stock to 15,000,000, increased the authorized
Series D Preferred Stock to 2,800,000 shares, and authorized 4,900,000 shares of
Series E Preferred Stock ("Series E").
All Series of Preferred Stock are convertible into Common Stock at any time
at the option of the holder, or automatically upon the close of an underwritten
initial public offering. The automatic conversion of Series B, Series C and
Series D stock is contingent on the public offering resulting in gross proceeds
to the Company of at least $15,000 at a price of at least $6.05 per share. For
the Series E stock, gross proceeds must exceed $40,000 at a price of at least
$12.50 per share. Each share of Series A and Series B stock is convertible into
20 shares of Common Stock. Each share of Series C, Series D and Series E stock
is convertible into two shares of Common Stock. The conversion rate is subject
to adjustment for dilution, including stock splits, stock combinations, stock
dividends and stock distributions. The Company has reserved sufficient shares of
Common Stock for the conversion of its Preferred Stock.
In the event of a liquidation of the Company, holders of Series C, Series D
and Series E stock are entitled to be paid (in preference to the holders of
Series A, Series B and Common Stock) an amount equal to $3.60, $12.09 and $20.54
per share, respectively, plus declared and unpaid dividends. After the Series C,
Series D and Series E stockholders are paid, the holders of Series A and Series
B stock are entitled to be paid (in preference to the holders of Common Stock)
$10.00 and $15.00 per share, respectively, plus declared and unpaid dividends.
In the event that the assets of the Company are insufficient to make full
payment according to this schedule, assets will be distributed among the holders
of Series C, Series D and Series E stock ratably in proportion to the full
amounts they are entitled to under the liquidation preference described above;
if any assets are remaining, they will be distributed among the holders of
F-13
<PAGE> 90
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Series A and Series B stock ratably in proportion to the full amounts they are
entitled to under the liquidation preference described above. After the
distributions to the holders of Preferred Stock have been made, the remaining
assets of the Company will be distributed ratably to the holders of Common
Stock.
The holders of Preferred Stock are entitled to a number of votes equal to
the number of shares of Common Stock into which such Preferred Stock is
convertible. The holders of Preferred Stock are entitled to receive dividends if
declared by the Board, in preference to the holders of Common Stock. These
rights are not cumulative.
From October through December 1999, the Company sold an aggregate of
769,394 shares of Series D stock for net proceeds of $9,137. Of these shares,
728,716 shares were sold below their deemed fair value for financial reporting
purposes. As a result, in the fourth quarter of 1999, the Company will record a
beneficial conversion feature in the amount of $6,158 that will be reflected as
a preferred stock dividend.
In December 1999 and January 2000, the Company entered into agreements to
sell 3,281,515 shares of Series E stock for net proceeds of $67,252. The
proceeds from these sales were received in December 1999 and January 2000.
COMMON STOCK
As of September 30, 1999, the total number of authorized shares of Common
Stock was 40,000,000, with a par value of $0.001. In December 1999, the Board
increased the authorized shares to 100,000,000.
During the period ended December 31, 1998, the Company issued 5,958,660
shares of unrestricted Common Stock at their fair value and issued 300,000
shares of unrestricted Common Stock and 5,123,340 shares of vesting Common Stock
at below their deemed fair value. During the nine months ended September 30,
1999, the Company issued 90,000 shares of unrestricted Common Stock at their
fair value and issued 416,520 shares of unrestricted Common Stock and 673,280
shares of vesting Common Stock at below their deemed fair value. Common Stock
issued at below its deemed fair value is described in Note 7.
At September 30, 1999, shares of authorized Common Stock reserved for
future issuance consist of the following:
<TABLE>
<S> <C>
Conversion of Preferred Stock............................... 20,285,328
Shares reserved for future stock option exercises........... 6,385,750
----------
26,671,078
==========
</TABLE>
7. STOCK-BASED COMPENSATION
STOCK OPTIONS
In 1999, the Company adopted its 1999 Equity Incentive Plan and its 1999
Omnibus Equity Plan (the "Plans"). The 1999 Equity Incentive Plan provides for
the issuance of up to 5,771,280 shares of the Company's Common Stock (of which
670,400 shares were no longer available for issuance when the Equity Incentive
Plan was suspended in July 1999), and the 1999 Omnibus Equity Plan provides for
the issuance of up to 2,660,400 shares of the Company's Common Stock. The Plans
allow for the issuance of incentive stock options, non-qualified stock options,
stock bonuses and vesting stock to employees, directors and consultants. The
provisions for
F-14
<PAGE> 91
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
vesting and all other terms and conditions are determined by the Board of
Directors at the time of grant. Generally, no option is exercisable after ten
years from the date of grant. Awards granted under the Plans contain various
vesting provisions, although generally awards vest over three- to five-year
periods. At September 30, 1999, there were 2,170,800 shares of Common Stock
available for future issuance under the 1999 Omnibus Equity Plan.
The following table summarizes option activity under the Plans for the
nine-month period ended September 30, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Outstanding at December 31, 1998............................ -- $ --
Granted..................................................... 4,639,200 0.25
Exercised................................................. 416,250 0.11
Expired/forfeited......................................... 8,000 0.08
---------
Outstanding at September 30, 1999........................... 4,214,950 0.27
=========
</TABLE>
The following summarizes information regarding outstanding and exercisable
options as of September 30, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE OPTIONS REMAINING OPTIONS
PRICE OUTSTANDING LIFE (YEARS) EXERCISABLE
-------- ----------- ------------ -----------
<S> <C> <C> <C>
$0.08.............................. 3,234,950 9.55 48,500
0.90.............................. 980,000 9.80 110,000
--------- -------
4,214,950 158,500
========= =======
</TABLE>
In December 1999, the shares reserved for issuance under the 1999 Omnibus
Equity Plan was increased by 1,200,000 shares to a total of 3,860,400. For the
period from October 1, 1999 to December 31, 1999, the Company granted additional
options to purchase 3,857,618 shares of Common Stock at a weighted-average
exercise price of $4.26 per share. Included in these options are 988,270 options
granted at a weighted-average exercise price of $1.48 per share outside of the
Company's 1999 Omnibus Equity Plan. In the same period, no options were
exercised.
VESTING STOCK AND OTHER EMPLOYEE STOCK AWARDS
The Company issued 1,860,000 shares of vesting Common Stock to employees
and directors during the period from August 18, 1998 (inception) to December 31,
1998, and 532,000 shares of vesting Common Stock to employees and directors
during the nine-month period ended September 30, 1999. In addition, from August
18, 1998 to December 31, 1998 and the nine-month period ended September 30,
1999, the Company issued 300,000 shares and 406,520 shares, respectively, of
unrestricted Common Stock to employees and directors.
The weighted-average grant-date fair value per share of vesting Common
Stock issued to employees and directors during the period from August 18, 1998
(inception) to December 31, 1998 and the nine-month period ended September 30,
1999 was $0.50 and $1.85, respectively. The weighted-average grant-date fair
value per share of unrestricted Common Stock issued to
F-15
<PAGE> 92
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
employees and directors during the period from August 18, 1998 to December 31,
1998 and the nine-month period ended September 30, 1999 was $0.50 and $1.76,
respectively.
EMPLOYEE STOCK-BASED COMPENSATION
Employee stock-based compensation is recognized using the intrinsic value
method. In connection with the grant of stock options and the issuance of
vesting Common Stock and unrestricted Common Stock to employees and directors,
the Company recorded unearned stock-based compensation within stockholders'
equity of $1,079 and $7,379 during the period from August 18, 1998 (inception)
to December 31, 1998 and the nine months ended September 30, 1999, respectively.
In connection with options issued to employees from October 1, 1999 to December
31, 1999, the Company will record unearned stock-based compensation of
approximately $8,900 in the fourth quarter of 1999. This represents the
difference between the exercise price of these stock-based awards and the deemed
fair value of the underlying Common Stock on the date of grant. Amortization of
unearned stock-based compensation, net of any charges reversed during the period
for the forfeiture of unvested awards, was $271 and $2,486 for the period from
August 18, 1998 (inception) to December 31, 1998 and the nine months ended
September 30, 1999, respectively.
At September 30, 1999, the remaining unearned stock-based compensation of
$5,701 will be amortized as follows: $940 during the three months ended December
31, 1999, $2,644 in 2000, $1,427 in 2001, $636 in 2002 and $54 in 2003. The
amount of stock-based compensation expense to be recorded in future periods
could decrease if awards are forfeited for which accrued but unamortized
compensation expense has been recorded.
NON-EMPLOYEE STOCK-BASED COMPENSATION
In 1998, the Company issued 2,343,340 shares of vesting Common Stock to a
third party in exchange for a software license and development services. The
shares were subject to return to the Company in the event of non-performance. As
of December 31, 1998, the third party had not earned any shares. In February
1999, the number of shares earned was determined, and 500,000 shares were
returned to the Company. The remaining shares were valued during 1999 at $1,142,
which was recorded as capitalized internal-use software, with an associated
credit to additional paid-in capital.
In February 1999, the Company issued 500,000 shares to a third party in
exchange for software development services. These shares vested to the third
party in August 1999. During the nine-month period ended September 30, 1999, the
Company recorded $2,678 as capitalized internal-use software, with an associated
credit to additional paid-in capital, related to these services.
The Company issued 920,000 shares of unrestricted Common Stock to
non-employees during the period from August 18, 1998 (inception) to December 31,
1998. The Company issued 223,000 stock options, 141,280 shares of vesting Common
Stock and 10,000 shares of unrestricted Common Stock to non-employees for
consulting services during the nine-month period ended September 30, 1999. In
addition, several employees and directors entered into consulting agreements
with the Company upon their termination during the nine-month period ended
September 30, 1999. These consulting agreements allow the former employees and
directors to retain 540,000 shares of vesting Common Stock according to their
original vesting periods. In connection with these transactions, the Company
recorded $519 and $2,672 of
F-16
<PAGE> 93
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
compensation expense during the period from August 18, 1998 (inception) to
December 31, 1998 and the nine-month period ended September 30, 1999,
respectively.
The Company will be recording non-cash compensation expense in the fourth
quarter of 1999 for non-employee stock-based compensation in the amount of
approximately $1,700. Due to the vesting schedules for stock awards existing at
December 31, 1999, the Company does not anticipate recording additional
non-employee stock-based compensation after December 31, 1999.
In January 2000, in connection with a strategic relationship, the Company
issued warrants to purchase 379,968 shares of Common Stock. These warrants are
valued at $3,845, which will be recorded as a sales and marketing expense in
2000.
PRO FORMA EMPLOYEE COMPENSATION EXPENSE
Had compensation expense for employee stock options been determined based
on the fair value of the options on the date of grant, the Company's net loss
and net loss per share would have been as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1999
-------------
(UNAUDITED)
<S> <C>
Net loss:
As reported................................................. $(21,359)
Pro forma................................................. (21,401)
Net loss per share:
As reported............................................... $ 2.51
Pro forma................................................. 2.51
</TABLE>
The fair value of the options was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for grants during the nine-month period ended September 30, 1999:
<TABLE>
<S> <C>
Expected life............................................... 4 years
Risk-free interest rate..................................... 5.43%
Expected volatility......................................... 0%
Expected dividend yield..................................... 0%
</TABLE>
The volatility of the Company's Common Stock underlying the options was not
considered because the Company's equity was not publicly traded as of September
30, 1999. For purposes of pro forma disclosures, the estimated fair value of
options is amortized to expense over the options' vesting periods using an
accelerated graded method.
The weighted-average grant-date fair value per share of options granted to
employees during the nine-month period ended September 30, 1999 was $1.30. All
such options were granted at an exercise price below the deemed fair value of
the Common Stock on the date of grant.
F-17
<PAGE> 94
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STOCK SOLD BY SHAREHOLDERS
In June 1999, existing stockholders of the Company, including two of its
officers, sold 1,083,000 shares of Common Stock to certain of the purchasers of
Series C Preferred Stock of the Company. These shares were sold at a price
greater than their fair value at the time of sale. In connection with this sale,
the Company recorded a compensation charge to general and administrative expense
of $3,661.
8. COMMITMENTS
Rent expense under noncancellable operating lease arrangements is accounted
for on a straight-line basis and totaled $10 and $107 for the periods ended
December 31, 1998 and September 30, 1999, respectively.
Future minimum lease payments under non-cancellable operating lease
arrangements are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
Year Ending December 31,
1999........................................................ $ 39 $ 105
2000...................................................... 41 524
2001...................................................... 36 541
2002...................................................... -- 552
2003...................................................... -- 561
Thereafter................................................ -- 440
---- ------
$116 $2,723
==== ======
</TABLE>
In July 1999, the Company entered into an operating lease agreement for its
primary office space under a five-year noncancellable lease that commenced in
November 1999 and has minimum lease payments totalling $2,300 over the term of
the lease. In October 1999, the Company entered into a non-cancellable operating
lease with a manufacturer to lease computer equipment and related software. The
lease has a two-year term and monthly rentals of $22.
9. RELATED PARTY TRANSACTIONS
In September 1998, the Company purchased software under an exclusive
agreement from a related party for $370 that is included in accounts payable at
December 31, 1998. At the time of purchase, an executive of the related party
was a director of the Company.
From January 1, 1999 to September 30, 1999, the Company utilized the
professional services of certain former directors or their affiliates. These
parties provided general business consulting, financial consulting and
assistance with the sale of Series C Preferred Stock. The Company incurred fees
of $669 in cash and $1,940 in the form of stock options and vesting Common
Stock.
10. SUBSEQUENT EVENT -- EMPLOYEE COMPENSATION PLANS (UNAUDITED)
In October 1999, the Company adopted the medibuy.com, Inc. 401(k) Profit
Sharing Plan (the "401(k) Plan"). The 401(k) Plan covers substantially all
employees of the Company who are at least 21 years of age and have at least one
month of service. Employees may contribute
F-18
<PAGE> 95
MEDIBUY.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
up to 20% of their annual pre-tax compensation per year, not to exceed the
maximum limit imposed by federal tax law. Company contributions to the 401(k)
Plan are determined at management's discretion. Participants vest to Company
contributions and related earnings after four years of continuous service with
the Company. The Company has made no contributions to the 401(k) Plan.
In December 1999, the Company adopted an Employee Stock Purchase Plan
("ESPP") to be effective upon the completion of its proposed IPO. Under the
ESPP, employees of the Company who elect to participate may purchase Common
Stock at 85% of the lower of the fair market value of the Common Stock at the
commencement date of each offering period or the relevant purchase date.
Employees who participate in an offering may have up to 15% of their eligible
earnings withheld under the ESPP. The maximum number of shares that may be
issued under the ESPP is 1,000,000.
F-19
<PAGE> 96
MEDIBUY.COM, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
OVERVIEW
Effective November 22, 1999, medibuy.com, Inc. (the "Company") acquired all
the outstanding shares of common stock of PartNet, Inc. ("PartNet"), a software
developer that specializes in electronic commerce systems that combine the
Internet with instant access multiple distributed databases designed for
business-to-business buyers and sellers. The acquisition has been accounted for
using the purchase method of accounting, and accordingly, the purchase price has
been allocated to the tangible and intangible assets acquired and liabilities
assumed on the basis of their respective fair values on the acquisition date.
The fair value of acquired software was determined by a valuation prepared by
management of the Company and was based on estimated actual costs incurred by
PartNET in developing the acquired software. The excess of the purchase price
over the fair values of assets acquired less liabilities assumed was assigned to
goodwill.
The total purchase price of $9,469 consisted of 1,170,098 shares of the
Company's Common Stock and 579,850 options to purchase Common Stock with an
estimated aggregate fair value of approximately $9,269 and other
acquisition-related expenses of approximately $200, consisting primarily of
legal and other professional fees. The purchase price was allocated to the fair
value of the net tangible liabilities assumed on the purchase date totaling
approximately $35, deferred tax liabilities totaling approximately $1,200,
acquired software totaling approximately $3,000 and goodwill totaling
approximately $7,704. The acquired software and goodwill will be amortized over
their estimated useful lives of three years
The acquisition has been structured as a tax-free exchange of stock,
therefore the differences between the recognized fair values of acquired assets,
including tangible assets, and their historical tax bases are not deductible for
tax purposes.
The unaudited pro forma condensed combined balance sheet is provided as of
September 30, 1999, giving effect to the acquisition as though it had been
consummated on that date. The unaudited pro forma condensed combined statement
of operations gives effect to this acquisition as if it had occurred on January
1, 1998, by consolidating the results of operations of PartNet for the year
ended December 31, 1998 and the nine months ended September 30, 1999 with the
results of operations of medibuy.com, Inc. for the period from August 18, 1998
(inception) to December 31, 1998 and the nine months ended September 30, 1999,
respectively.
The unaudited pro forma condensed combined financial statements are not
necessarily indicative of the operating results or financial position that would
have been achieved had the transactions been in effect as of the beginning of
the periods presented and should not be construed as being representative of
future operating results or financial position.
The historical financial statements of the Company and PartNet are included
elsewhere in this Prospectus and the unaudited pro forma condensed combined
financial information presented herein should be read conjunction with those
financial statements and related notes.
F-20
<PAGE> 97
MEDIBUY.COM, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
MEDIBUY.COM PARTNET ADJUSTMENTS NOTES PRO FORMA
----------- ------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 29,421 $ 649 $ -- $ 30,070
Accounts receivable............. 1 170 -- 171
Prepaid expenses and other
current assets............... 167 17 -- 184
-------- ------ ------- --------
Total current assets............ 29,589 836 -- 30,425
Property and equipment, net....... 5,010 200 -- 5,210
Intangibles, net.................. -- -- 8,925 (A) 10,125
1,200 (B)
Other assets...................... 166 71 -- 237
-------- ------ ------- --------
Total assets.................... $ 34,765 $1,107 $10,125 $ 45,997
======== ====== ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................ $ 1,876 $ 68 $ -- $ 1,944
Accrued expenses and other
current liabilities.......... 1,130 249 200 (A) 1,579
Amounts due to customers........ 34 72 -- 106
Capital lease obligations....... -- 39 -- 39
-------- ------ ------- --------
Total current liabilities....... 3,040 428 200 3,668
Capital lease obligations,
long-term portion............... -- 135 -- 135
Deferred tax liability............ -- -- 1,200 (B) 1,200
Stockholders' equity:
Preferred stock................. 6 -- -- 6
Common stock.................... 12 1 -- 13
Additional paid-in capital...... 60,219 488 8,780 (A) 69,487
Unearned stock-based
compensation................. (5,701) (256) 256 (A) (5,701)
Accumulated deficit............. (22,811) 311 (311) (A) (22,811)
-------- ------ ------- --------
Total stockholders' equity...... 31,725 544 8,725 40,994
-------- ------ ------- --------
Total liabilities and
stockholders' equity......... $ 34,765 $1,107 $10,125 $ 45,997
======== ====== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
F-21
<PAGE> 98
MEDIBUY.COM, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------
MEDIBUY.COM PARTNET ADJUSTMENTS NOTES PRO FORMA
----------- ------- ----------- ----- ----------
<S> <C> <C> <C> <C> <C>
Net revenues........... $ -- $1,811 $ -- $ 1,811
Cost of revenues....... -- 921 -- 921
----------- ------ ------- ----------
Gross profit........... -- 890 -- 890
----------- ------ ------- ----------
Operating expenses:
Sales and
marketing.......... 368 -- -- 368
Systems and product
development........ 84 -- 3,568 (C) 3,652
General and
administrative..... 731 769 -- 1,500
Amortization of
stock-based
compensation....... 271 -- -- 271
----------- ------ ------- ----------
Total operating
expenses........... 1,454 769 3,568 5,791
----------- ------ ------- ----------
Income (loss) from
operations........... (1,454) 121 (3,568) (4,901)
Other income (expense),
net.................. 2 2 -- 4
----------- ------ ------- ----------
Income (loss) before
income taxes......... (1,452) 123 (3,568) (4,897)
Provision (benefit) for
income taxes......... -- 45 (45) (D) (400)
(400) (C)
----------- ------ ------- ----------
Net income (loss)...... $ (1,452) $ 78 $(3,123) $ (4,497)
=========== ====== ======= ==========
Net loss per share,
basic and
diluted(E)........... $ (0.20) $ (0.54)
=========== ==========
Shares used in per
share computations,
basic and
diluted(E)........... 7,189,816 8,359,914
=========== ==========
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------
MEDIBUY.COM PARTNET ADJUSTMENTS NOTES PRO FORMA
----------- ------- ----------- ----- -----------
<S> <C> <C> <C> <C> <C>
Net revenues........... $ 20 $1,982 $ -- $ 2,002
Cost of revenues....... -- 987 -- 987
-------- ------ ------- -----------
Gross profit........... 20 995 -- 1,015
-------- ------ ------- -----------
Operating expenses:
Sales and
marketing.......... 5,500 -- -- 5,500
Systems and product
development........ 4,789 -- 2,676 (C) 7,465
General and
administrative..... 8,809 813 -- 9,622
Amortization of
stock-based
compensation....... 2,486 -- -- 2,486
-------- ------ ------- -----------
Total operating
expenses........... 21,584 813 2,676 25,073
-------- ------ ------- -----------
Income (loss) from
operations........... (21,564) 182 (2,676) (24,058)
Other income (expense),
net.................. 205 68 -- 273
-------- ------ ------- -----------
Income (loss) before
income taxes......... (21,359) 250 (2,676) (23,785)
Provision (benefit) for
income taxes......... -- 93 (93) (D) (300)
(300) (C)
-------- ------ ------- -----------
Net income (loss)...... $(21,359) $ 157 $(2,283) $ (23,485)
======== ====== ======= ===========
Net loss per share,
basic and
diluted(E)........... $ (2.51) $ (0.78)
======== ===========
Shares used in per
share computations,
basic and
diluted(E)........... 8,521,361 29,976,787
======== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
F-22
<PAGE> 99
MEDIBUY.COM, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE DATA)
The following adjustments were applied to the Company's historical
financial statements and those of PartNET to arrive at the unaudited pro forma
condensed combined financial information.
(A) To record the issuance of 1,170,098 of medibuy.com common stock and 579,850
options to purchase common stock in exchange for all outstanding common shares
of PartNET, including the elimination of PartNET's historical equity accounts.
The total purchase price was determined as follows:
<TABLE>
<S> <C>
Value of medibuy.com stock and options...................... $9,269
Direct acquisition expenses................................. 200
------
$9,469
======
</TABLE>
The valuation of the medibuy.com common stock was based on the deemed fair
value of Common Stock as determined by management on October 29, 1999, the date
of the Agreement and Plan of Merger and Reorganization. The valuation of
medibuy.com options to purchase Common Stock was based on fair value estimates
on October 29, 1999 using the Black-Scholes option pricing model with the
following weighted-average assumptions: expected life of two years, risk-free
interest rate of 5.75%, expected volatility of 80% and expected dividend yield
of 0%.
(B) To adjust deferred tax liabilities for the tax effect of differences between
the estimated fair value and the tax basis assigned to acquired software.
(C) To record amortization of acquired intangible assets over the estimated
period of benefit of 36 months and the related tax effect.
(D) To offset PartNET income against medibuy.com operating losses.
(E) Pro forma basic and diluted net loss per share for the year ended December
31, 1998 and the nine months ended September 30, 1999 are computed using the
weighted average number of common shares outstanding, including the pro forma
effects of the automatic conversion of the Company's Preferred Stock into shares
of the Company's Common Stock effective upon the closing of this Offering as if
such conversion occurred on the date of original issuance. Pro forma basic and
diluted net loss per share excludes vesting common shares and outstanding stock
options as their effect is antidilutive. Differences between historical weighted
average shares outstanding and pro forma weighted average shares outstanding
used to compute net loss per share result from the inclusion of common shares
issued in conjunction with the acquisition as if such shares were outstanding
from January 1, 1998 and from the automatic conversion of the Company's
Preferred Stock effective upon the close of this Offering. These differences are
shown as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Historical weighted average shares
outstanding.................................... 7,189,816 8,521,361
Number of common shares issued on conversion of
preferred stock.............................. -- 20,285,328
Number of common shares issued as part of
acquisition.................................. 1,170,098 1,170,098
--------- ----------
Pro forma weighted average shares outstanding.. 8,359,914 29,976,787
========= ==========
</TABLE>
F-23
<PAGE> 100
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
PartNET, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of cash flows and of changes in stockholders' equity present fairly,
in all material respects, the financial position of PartNET, Inc. at December
31, 1997 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
San Diego, California
November 5, 1999
F-24
<PAGE> 101
PARTNET, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1997 1998 1999
----- ---- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 232 $377 $ 649
Accounts receivable (including unbilled amounts of $97,
$104 and $36)........................................ 121 170 170
Prepaid expenses and other current assets............... -- 5 17
----- ---- ------
Total current assets............................... 353 552 836
Property and equipment, net............................... 75 38 200
Deferred tax assets....................................... 12 47 71
----- ---- ------
Total assets....................................... $ 440 $637 $1,107
===== ==== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 26 $ 20 $ 68
Accrued compensation and related expenses............... 59 56 40
Deferred revenue........................................ 30 30 72
Bank line of credit..................................... -- 34 --
Note payable to stockholder............................. 16 16 --
Income taxes payable.................................... 74 129 209
Capital lease obligations............................... 22 23 39
----- ---- ------
Total current liabilities.......................... 227 308 428
Note payable to stockholder, long-term portion............ 16 -- --
Capital lease obligations, long-term portion.............. 19 7 135
----- ---- ------
Total liabilities.................................. 262 315 563
----- ---- ------
Commitments (Note 7)
Stockholders' equity:
Common stock, $0.01 par value; 1,000,000 shares
authorized, 109,569 shares issued and outstanding....... 1 1 1
Additional paid-in capital.............................. 213 227 488
Unearned stock-based compensation....................... (112) (60) (256)
Retained earnings....................................... 76 154 311
----- ---- ------
Total stockholders' equity......................... 178 322 544
----- ---- ------
Total liabilities and stockholder's equity......... $ 440 $637 $1,107
===== ==== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 102
PARTNET, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------- -------------------------
1997 1998 1998 1999
------ ------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues........................................ $1,655 $1,811 $1,257 $1,982
Cost of revenues................................ 801 921 639 987
------ ------ ------ ------
Gross profit.................................... 854 890 618 995
General and administrative expenses............. 668 769 560 813
------ ------ ------ ------
Income from operations.......................... 186 121 58 182
------ ------ ------ ------
Other income (expense):
Other income.................................. -- -- -- 100
Interest income............................... 1 9 7 11
Interest expense.............................. (11) (7) (7) (43)
------ ------ ------ ------
Other income (expense), net..................... (10) 2 -- 68
------ ------ ------ ------
Income before income taxes...................... 176 123 58 250
Provision for income taxes...................... 54 45 20 93
------ ------ ------ ------
Net income...................................... $ 122 $ 78 $ 38 $ 157
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 103
PARTNET, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------ --------------------------
1997 1998 1998 1999
---- ---- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. $122 $ 78 $ 38 $157
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock-based compensation................ 5 66 40 65
Deferred income taxes................... (12) (35) -- (24)
Depreciation and amortization........... 43 50 44 33
Changes in assets and liabilities:
Accounts receivable................... 32 (49) (77) --
Prepaid expenses and other current
assets............................. -- (5) (8) (12)
Accounts payable...................... (22) (6) (2) 48
Income taxes payable.................. 65 55 5 80
Accrued compensation and related
expenses........................... 24 (3) (22) (16)
Deferred revenue...................... (2) -- 15 42
---- ---- ---- ----
Net cash provided by operating
activities....................... 255 151 33 373
---- ---- ---- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........ (7) (2) (2) (28)
---- ---- ---- ----
Net cash used in investing
activities....................... (7) (2) (2) (28)
---- ---- ---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease
obligations............................. (17) (22) (17) (23)
Principal payments on note to
stockholder............................. (16) (16) (16) (16)
Principal payments on bank line of
credit.................................. -- -- -- (34)
Proceeds from bank line of credit.......... -- 34 -- --
---- ---- ---- ----
Net cash used in financing
activities....................... (33) (4) (33) (73)
---- ---- ---- ----
Net increase (decrease) in cash and cash
equivalents................................ 215 145 (2) 272
Cash and cash equivalents, beginning of
period..................................... 17 232 232 377
---- ---- ---- ----
Cash and cash equivalents, end of period..... $232 $377 $230 $649
==== ==== ==== ====
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for income taxes................. $ 2 $ 26 $ 17 $ 39
Cash paid for interest..................... 11 7 5 43
SUPPLEMENT SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Equipment acquired under capital leases.... -- 11 11 166
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 104
PARTNET, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNEARNED
---------------- PAID-IN STOCK-BASED RETAINED
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS TOTAL
------- ------ ---------- ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1996....................... 109,569 $ 1 $ 96 $ -- $(46) $ 51
Unearned stock-based
compensation............ -- -- 117 (117) -- --
Amortization of stock-based
compensation............ -- -- -- 5 -- 5
Net income................. -- -- -- -- 122 122
------- --- ---- ----- ---- ----
BALANCE AT DECEMBER 31,
1997....................... 109,569 1 213 (112) 76 178
Unearned stock-based
compensation............ -- -- 14 (14) -- --
Amortization of stock-based
compensation............ -- -- -- 66 -- 66
Net income................. -- -- -- -- 78 78
------- --- ---- ----- ---- ----
BALANCE AT DECEMBER 31,
1998....................... 109,569 1 227 (60) 154 322
Unearned stock-based
compensation
(unaudited)............. -- -- 261 (261) -- --
Amortization of stock-based
compensation
(unaudited)............. -- -- -- 65 -- 65
Net income (unaudited)..... -- -- -- -- 157 157
------- --- ---- ----- ---- ----
BALANCE AT SEPTEMBER 30, 1999
(UNAUDITED)................ 109,569 $ 1 $488 $(256) $311 $544
======= === ==== ===== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 105
PARTNET, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. ORGANIZATION AND BUSINESS
PartNET, Inc. (the "Company") was incorporated in the State of Utah in May
1993. The Company is a software developer that specializes in electronic
commerce systems that combine the Internet with instant access multiple
distributed databases designed for business-to-business buyers and sellers. The
Company's business consists of a single operating segment, and its operations
and customers are located solely in the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED FINANCIAL STATEMENTS
The interim financial statements as of September 30, 1999 and for the
periods ended September 30, 1998 and 1999 are unaudited and have been prepared
on the same basis as the audited financial statements and, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial information set forth
therein, in accordance with generally accepted accounting principles. Operating
results for interim periods are not necessarily indicative of operating results
for an entire year.
USE OF ESTIMATES
In the normal course of preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
financial statement date, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK
The Company derives a majority of its revenues from software development
and other services performed for the United States government, primarily under a
long-term contract which provides for the reimbursement of costs plus a fixed
percentage fee. Such revenues amounted to $1,552 and $1,628 for the years ended
December 31, 1997 and 1998, respectively. Revenue under long-term contracts is
recognized as services are performed using the percentage of completion method,
measured primarily by costs incurred to date compared with total estimated costs
at completion. The Company provides for anticipated losses on contracts by a
charge to income during the period in which they are first identified.
Contract costs, including indirect costs, are subject to audit and
negotiations with government representatives. These audits have been completed
and agreed upon through December 31, 1997. Contract revenues and accounts
receivable are stated at amounts which are expected to be realized upon final
settlement.
The remainder of the Company's revenues result primarily from consulting
contracts with commercial customers, which are recognized as revenue as the
services are performed.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity date of
three months or less from the date of purchase to be cash equivalents.
F-29
<PAGE> 106
PARTNET, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable, accrued compensation and related expenses and
income taxes payable approximate fair value due to the short-term nature of
these balances. The carrying amounts of the Company's bank line of credit,
capital lease obligations and note payable to stockholder approximate fair value
as the rates of interest for these instruments approximate market rates of
interest currently available to the Company for similar instruments.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is depreciated using the
straight-line method over the estimated useful lives of the assets ranging from
three to five years. Leasehold improvements and assets recorded under capital
leases are amortized over the shorter of the assets' useful lives or the related
lease terms. Additions to property and equipment together with major renewals
and betterments are capitalized. Expenditures for repairs, maintenance and minor
renewals and betterments are charged to expense as incurred.
LONG-LIVED ASSETS
The Company assesses potential impairments to its long-lived assets when
there is evidence that events or changes in circumstances indicate that the
carrying amount of an asset may not be recovered. An impairment loss is
recognized when an asset's fair value, determined based on undiscounted cash
flows, is less than its carrying amount. The Company has not identified any such
losses.
INCOME TAXES
The Company provides for income taxes utilizing the liability method. Under
the liability method, current income tax expense or benefit represents income
taxes expected to be payable or refundable for the current period. Deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax and financial reporting bases of assets and
liabilities. Tax rate changes are reflected in income in the period such changes
are enacted.
EMPLOYEE STOCK-BASED COMPENSATION
The Company measures compensation expense for its employee stock-based
compensation plans using the intrinsic value method and provides pro forma
disclosures of net income as if a fair value-based method had been applied in
measuring compensation expense. Accordingly, compensation cost for stock awards
are measured as the excess, if any, of the deemed fair value for financial
reporting purposes of the Company's Common Stock at the date of grant over the
amount an employee must pay to acquire the stock. Compensation cost is amortized
over the related vesting periods using an accelerated graded method in
accordance with Financial Accounting Standards Board Interpretation No. 28,
"Accounting for Stock Appreciation Rights and Other Variable Stock Option or
Award Plans." Accrued compensation costs for awards that are forfeited are
reversed against compensation expense in the period of forfeiture.
F-30
<PAGE> 107
PARTNET, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
COMPREHENSIVE INCOME
Comprehensive income for all periods presented consists solely of net
income.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 is effective for fiscal years beginning after June 15,
2000. SFAS No. 133 requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. The Company does not expect that
the adoption of SFAS No. 133 will have a material impact on its financial
statements because it does not currently hold any derivative instruments and
does not engage in any hedging activities.
3. PROPERTY AND EQUIPMENT
Property and equipment components are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1997 1998
---- -----
<S> <C> <C>
Computer and other equipment................................ $ 16 $ 19
Furniture and fixtures...................................... 53 63
Leasehold improvements...................................... 56 56
---- -----
125 138
Accumulated depreciation and amortization................... (50) (100)
---- -----
$ 75 $ 38
==== =====
</TABLE>
4. BANK LINE OF CREDIT
Under terms of a revolving bank credit agreement negotiated in 1996, the
Company may borrow up to $200. Borrowings under the credit line bear interest at
a variable rate of 1% above the bank's prime rate (8.75% at December 31, 1998).
The credit line is guaranteed by the Company's controlling stockholder. There
are no restrictive covenants. The credit line matures on December 1, 1999. At
December 31, 1998, $34 was outstanding under this facility. There were no
borrowings outstanding under this facility at December 31, 1997.
F-31
<PAGE> 108
PARTNET, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1997 1998
---- ----
<S> <C> <C>
Current
Federal................................................... $ 57 $ 70
State..................................................... 9 10
---- ----
66 80
---- ----
Deferred
Federal................................................... (11) (31)
State..................................................... (1) (4)
---- ----
(12) (35)
---- ----
$ 54 $ 45
==== ====
</TABLE>
The provision for income taxes differs from the amount computed by applying
the federal statutory income tax rate to income before income taxes as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1997 1998
---- ----
<S> <C> <C>
Federal income tax at statutory rate of 34%................. $ 60 $42
State income taxes, net of federal benefit.................. 4 6
Permanent differences and other............................. (10) (3)
---- ---
$ 54 $45
==== ===
</TABLE>
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1998
---- ----
<S> <C> <C>
Stock-based compensation.................................... $ 3 $28
Depreciation and amortization............................... 8 17
Other....................................................... 1 2
--- ---
$12 $47
=== ===
</TABLE>
6. STOCK OPTION PLAN
On December 1, 1995, the Company adopted a stock option plan (the "Plan")
which provides for the grant of non-qualified stock options to employees,
officers, directors, consultants and independent contractors. The Company
reserved 46,868 shares of Common Stock for issuance under the Plan. The
provisions for vesting and all other terms and conditions are determined by the
Board of Directors at the time of grant. Generally, no option is exercisable
after ten years from the date of grant. Options generally vest annually over
four-year periods. At December 31, 1998, there were 17,518 shares of Common
Stock available for future issuance under the Plan.
F-32
<PAGE> 109
PARTNET, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table summarizes employee stock option activity under the
Plan:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
--------- ---------
<S> <C> <C>
Outstanding at December 31, 1996............................ -- --
Granted................................................... 24,150 $5.16
------
Outstanding at December 31, 1997............................ 24,150 5.16
Granted................................................... 5,200 7.40
------
Outstanding at December 31, 1998............................ 29,350 5.55
======
</TABLE>
No stock options have been issued to non-employees (which include
consultants and independent contractors) during 1997 and 1998.
The following table summarizes information about employee stock options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
REMAINING
EXERCISE OPTIONS LIFE OPTIONS
PRICE OUTSTANDING (YEARS) EXERCISABLE
-------- ------------ --------- ------------
<S> <C> <C> <C>
$ 1.00...................... 14,500 8.93 4,843
10.00...................... 14,850 8.74 4,986
------ -----
29,350 9,829
====== =====
</TABLE>
Employee stock-based compensation is recognized using the intrinsic value
method. In connection with the grant of stock options to employees, the Company
recorded unearned stock-based compensation within stockholders' equity of $117
and $14 during 1997 and 1998, respectively. This represents the difference
between the deemed fair value of the Common Stock and the exercise price of
these options on the date of grant. Amortization of unearned stock-based
compensation, net of any charges reversed during the period for the forfeiture
of unvested options, was $5 and $66 for 1997 and 1998, respectively.
At December 31, 1998, the remaining unearned stock-based compensation of
$60 will be amortized as follows: $34 in 1999, $15 in 2000, $8 in 2001 and $3 in
2002. The amount of stock-based compensation expense to be recorded in future
periods could decrease if awards are forfeited for which accrued but unamortized
compensation expense has been recorded.
Had compensation expense for employee stock options been determined based
on the fair value of the options on the date of grant, the Company's net income
would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1997 1998
---- ----
<S> <C> <C>
Net income:
As reported............................................... $122 $78
Pro forma................................................. 117 63
</TABLE>
F-33
<PAGE> 110
PARTNET, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The weighted-average grant-date fair value per share of options granted
during 1997 and 1998 was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1997 1998
-------- -------
<S> <C> <C>
Weighted-average grant-date fair value of options granted:
Exercise price equal to deemed fair value of Common Stock
on the grant date:
Weighted-average exercise price...................... $ 10.00 $ 10.00
Per share fair value................................. 2.20 2.00
Exercise price less than deemed fair value of Common Stock
on the grant date:
Weighted-average exercise price...................... 1.00 1.00
Per share fair value................................. 9.21 9.20
</TABLE>
The fair value of the options was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for grants during 1997 and 1998:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1997 1998
------- -------
<S> <C> <C>
Expected life............................................... 4 years 4 years
Risk-free interest rate..................................... 6.0% 5.6%
Expected volatility......................................... 0% 0%
Expected dividend yield..................................... 0% 0%
</TABLE>
The volatility of the Company's Common Stock underlying the options was not
considered because the Company's equity was not publicly traded as of December
31, 1997 and 1998. For purposes of pro forma disclosures, the estimated fair
value of options is amortized to expense over the options' vesting periods using
an accelerated graded method.
7. COMMITMENTS
The Company leased its office facility under an operating lease that
terminated in March 1999. Rent expense was $40 for each of the years ended
December 31, 1997 and 1998.
The Company also leases certain equipment under capital lease agreements
that mature on various dates through July 2004 and have interest rates ranging
from 9.25% to 10.00%. As of December 31, 1997 and 1998, equipment held under
capital leases totaled $59 and $70, respectively, and related accumulated
amortization totaled $12 and $14, respectively.
F-34
<PAGE> 111
PARTNET, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Future minimum payments under the Company's lease agreements at December
31, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31,
1999...................................................... $ 23 $ 9
2000...................................................... 8 --
2001...................................................... 2 --
---- ----
33 $ 9
====
Less amount representing
interest............................................... (3)
----
Present value of minimum lease payments................... 30
Less current portion...................................... (23)
----
Long-term portion of capital lease obligations............ $ 7
====
</TABLE>
In April 1999, the Company entered into an operating lease agreement for
its office space under a noncancellable lease that expires in January 2004 and
has annual rentals of $100. The controlling stockholder of the Company is also a
limited partner of the lessor of the Company's office facility.
8. RELATED PARTY TRANSACTIONS
In 1996, the Company financed certain leasehold improvements with a loan
obtained from a significant stockholder in the amount of $53. The loan is due in
equal monthly installments of $2 and incurs interest at an annual rate of 10%.
At December 31, 1997 and 1998, $32 and $16 remained outstanding under this loan,
respectively.
9. 401(k) PLAN
In July 1997, the Company adopted the PartNET, Inc. 401(k) Profit Sharing
Plan (the "401(k) Plan"). The 401(k) Plan covers substantially all employees of
the Company who are at least 21 years of age. Employees may contribute up to 15%
of their annual pre-tax compensation per year, not to exceed the maximum limit
imposed by federal tax law. Company contributions to the 401(k) Plan are
determined at management's discretion. Participants vest to Company
contributions and related earnings after four years of continuous service with
the Company. To date, the Company has made no contributions to the 401(k) Plan.
10. SUBSEQUENT EVENTS (UNAUDITED)
In November 1999, the Company repurchased 15,000 shares of Common Stock
from a significant stockholder for an aggregate purchase price of $600.
In November 1999, the Company was acquired by medibuy.com, Inc., a company
engaged in business-to-business Internet commerce in the healthcare industry.
F-35
<PAGE> 112
- ----------------------------------------------------------
- ----------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN
OFFER TO SELL ONLY THE SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES WHERE
IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT
ONLY AS OF ITS DATE.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 8
Use of Proceeds......................... 23
Dividend Policy......................... 23
Capitalization.......................... 24
Dilution................................ 25
Selected Financial Information.......... 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 27
Business................................ 34
Management.............................. 50
Related Party Transactions.............. 62
Principal Stockholders.................. 64
Description of Capital Stock............ 67
Shares Eligible for Future Sale......... 70
Underwriting............................ 72
Validity of Common Stock................ 74
Experts................................. 74
Where You Can Find More Information..... 74
Index to Financial Statements........... F-1
</TABLE>
----------------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Shares
MEDIBUY.COM, INC.
Common Stock
----------------------
[MEDIBUY LOGO]
----------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
THOMAS WEISEL PARTNERS LLC
WIT CAPITAL CORPORATION
REPRESENTATIVES OF THE UNDERWRITERS
- ----------------------------------------------------------
- ----------------------------------------------------------
<PAGE> 113
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the common stock being registered. All the amounts
shown are estimates except for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration fee........................................ $19,800
-------
NASD filing fee............................................. $ 8,000
-------
Nasdaq Listing Application fee.............................. *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Transfer agent and registrar fees........................... *
Miscellaneous............................................... *
Total..................................................... *
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Bylaws require that directors and officers be indemnified to
the maximum extent permitted by Delaware law.
The Delaware General Corporation Law (the "Delaware GCL") provides that a
director or officer of a corporation (i) shall be indemnified by the corporation
for all expenses of litigation or other legal proceedings when he is successful
on the merits, (ii) may be indemnified by the corporation for the expenses,
judgments, fines and amounts paid in settlement of such litigation (other than a
derivative suit) even if he is not successful on the merits if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation (and, in the case of a criminal proceeding, had no
reason to believe his conduct was unlawful), and (iii) may be indemnified by the
corporation for expenses of a derivative suit (a suit by a stockholder alleging
a breach by a director or officer of a duty owed to the corporation), even if he
is not successful on the merits, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, provided that no such indemnification may be made in accordance
with this clause (iii) if the director or officer is adjudged liable to the
corporation, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. The indemnification described in clauses (ii) and (iii) above shall be
made upon order by a court or a determination by (i) a majority of disinterested
directors, (ii) if there are no such directors or if such directors so direct,
by independent legal counsel in a written opinion or (iii) the stockholders that
indemnification is proper because the applicable standard of conduct is met.
Expenses incurred by a director or officer in defending an action may be
advanced by the corporation prior to the final disposition of such action upon
receipt of an undertaking by such director or officer to repay such expenses if
it is ultimately determined that he is not entitled to be indemnified in
connection with the proceeding to which the expenses relate. The Registrant's
Amended and Restated Certificate of Incorporation includes a provision
eliminating, to the fullest extent permitted by Delaware law, director liability
for monetary damages for breaches of fiduciary duty.
The Registrant has entered into indemnity agreements (the "Indemnity
Agreements") with each director or officer designated by the Board of Directors.
The Indemnity Agreements require that
II-1
<PAGE> 114
the Registrant indemnify directors and officers who are parties thereto in all
cases to the fullest extent permitted by Delaware law. Under the Delaware GCL,
except in the case of litigation in which a director or officer is successful on
the merits, indemnification of a director or officer is discretionary rather
than mandatory. Consistent with the Registrant's Bylaw provision on the subject,
the Indemnity Agreements require the Registrant to make prompt payment of
litigation expenses at the request of the director or officer in advance of
indemnification provided that he undertakes to repay the amounts if it is
ultimately determined that he is not entitled to indemnification for such
expenses. The advance of litigation expenses is mandatory; under the Delaware
GCL such advance would be discretionary. Under the Indemnity Agreements, the
director or officer is permitted to bring suit to seek recovery of amounts due
under the Indemnity Agreements and is entitled to recover the expenses of
seeking such recovery unless a court determines that the action was not made in
good faith or was frivolous. Without the Indemnity Agreements, the Registrant
would not be required to pay the director or officer for his expenses in seeking
indemnification recovery against the Registrant. Under the Indemnity Agreements,
directors and officers are not entitled to indemnity or advancing of expenses
(i) if such director or officer has recovered payment under an insurance policy
for the subject claim, or has otherwise been indemnified against the subject
claim, (ii) for actions initiated or brought by the director or officer and not
by way of defense (except for actions seeking indemnity or expenses from the
Registrant), (iii) if the director or officer violated section 16(b) of the
Exchange Act or similar provisions of law or (iv) if a court of competent
jurisdiction determines that the director or officer failed to act in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the Registrant or, with respect to any proceeding which is of a
criminal nature, had reasonable cause to believe his conduct was unlawful.
Absent the Indemnity Agreements, indemnification that might be made available to
directors and officers could be changed by amendments to the Registrant's
Amended and Restated Certificate of Incorporation or Bylaws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since inception, August 18, 1998, the Registrant has sold and issued the
following unregistered securities:
(a) Between August 22, 1998 and September 26, 1998, the Registrant
issued and sold 10,110,000 shares of its common stock to 31 founding
employees and consultants in exchange for an aggregate purchase price of
$5,115.
(b) Between September 30, 1998 and January 31, 1999, the Registrant
sold and issued 1,362,000 shares of its common stock to 34 investors,
including certain initial founder employees and consultants, for an
aggregate purchase price of $681,000. The shares of common stock were
subsequently exchanged for 68,100 shares of Series A preferred stock.
(c) The Registrant issued two promissory notes dated January 15, 1999
and January 29, 1999, to two investors convertible into preferred stock of
the Registrant, and a warrant to purchase shares of common stock dated
January 29, 1999 to a single investor. The promissory notes and the warrant
were canceled upon the closing of the sale and issuance of the Series B
preferred stock. On March 17, 1999, the Registrant sold and issued 334,907
shares of its Series B preferred stock to three investors for an aggregate
purchase price of $5,023,605.
(d) On March 5, 1999, the Registrant granted Ridgewood Capital
Management, LLC the right to receive up to 141,280 shares of common stock
in exchange for financial management services.
(e) On June 11, 1999, the Registrant issued and sold 4,458,332 shares
of its Series C preferred stock to 9 investors for an aggregate purchase
price of $16,049,995.
II-2
<PAGE> 115
(f) On June 11, 1999, the Registrant granted to six of its existing
stockholders the right to purchase up to 1,819,865 shares of its Series D
preferred stock. If exercised, the stockholders would have been entitled to
purchase the shares for an aggregate purchase price of approximately $22
million.
(g) From August 31, 1999, to December 21, 1999, the Registrant issued
and sold 2,423,656 shares of its Series D preferred stock to 21 investors
for an aggregate purchase price of $29,302,001.
(h) Since March 1999, the Registrant has granted stock options to
purchase shares of its common stock to various employees, directors and
consultants pursuant to its 1999 Equity Incentive Plan and its 1999 Omnibus
Equity Plan, and pursuant to stock options not under any plan. As of
December 31, 1999, the Registrant had issued and sold, in the aggregate,
416,250 shares of its common stock for per share exercise prices ranging
from $0.08 to $5.44 to employees and consultants pursuant to their exercise
of stock options granted under the Registrant's 1999 Equity Incentive Plan
and its 1999 Omnibus Equity Plan.
(i) On November 30, 1999, the Registrant issued an aggregate of
1,170,098 shares of its common stock to the stockholders of PartNET, Inc.
upon the acquisition of PartNET. In addition, the Registrant granted the
optionholders of PartNET stock options to purchase up to an aggregate of
579,850 shares of the Registrant's common stock in substitution for the
outstanding stock options of PartNET. The exercise prices of the stock
options range from $0.08 to $0.81 per share, after giving effect of the
exchange ratio in the acquisition.
(j) From December 30, 1999 to January 11, 2000, the Registrant issued
and sold 3,281,515 shares of its Series E preferred stock to 13 investors
for an aggregate purchase price of $67,402,318.
(k) On January 11, 1999, the Registrant issued two warrants to
purchase up to an aggregate of 379,968 shares of the Registrant's common
stock to two investors.
The common stock amounts and per share exercise prices in the descriptions above
reflect an assumed two-for-one stock split of the Registrant's common stock
which is assumed to take place prior to effectiveness of this offering.
The exchange of securities described under Item 15(b) was exempt under Section
3(a)(9) of the Securities Act. The issuances of equity securities described in
Items 15(a), 15(c) through 15(g), 15(j) and 15(k) were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act and Regulation D promulgated thereunder as transactions by an
issuer not involving a public offering. The issuances of securities described in
Item 15(h) and the stock options issued in substitution for the stock options of
PartNET described in Item 15(i) were deemed to be exempt from registration under
the Securities Act in reliance on Section 4(2) of the Securities Act or on Rule
701 promulgated thereunder as transactions pursuant to compensatory benefit
plans approved by the Registrant's board of directors. The recipients of the
above-described securities represented their intention to acquire the securities
for investment only and not with a view to distribution thereof. Appropriate
legends were affixed to the stock certificates issued in such transactions. All
recipients had adequate access, through employment or other relationships, to
information about the Registrant.
II-3
<PAGE> 116
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Registrant's Amended and Restated Certification of
Incorporation, as currently in effect.
3.2 Registrant's Bylaws, as amended, as currently in effect.
3.3 Form of Registrant's Amended and Restated Certificate of
Incorporation, to be effective upon the closing of this
offering.
3.4 Form of Registrant's Amended and Restated Certificate of
Incorporation, to be filed after the closing of this
offering.
3.5 Form of Registrant's Amended and Restated Bylaws, to be
effective upon the closing of this offering.
4.1 Form of common stock Certificate of Registrant.*
5.1 Opinion of Cooley Godward LLP.*
10.1 Form of Indemnity Agreement entered into between the
Registrant and its directors and executive officers.
10.2 1999 Equity Incentive Plan, as amended.
10.3 Form of Stock Option Grant Notice and related Stock Option
Agreement under the 1999 Equity Incentive Plan.
10.4 1999 Omnibus Equity Plan.
10.5 Form of Stock Option Grant Notice and related Stock Option
Agreements under the 1999 Omnibus Equity Plan.
10.6 1999 Non-Employee Directors' Stock Option Plan.
10.7 Form of Stock Option Grant Notice and Related Stock Option
Agreement under the 1999 Non-Employee Directors' Stock
Option Plan.
10.8 1999 Employee Stock Purchase Plan.
10.9 Employee Stock Purchase Plan Offering.
10.10 Employment Agreement by and between the Registrant and
Dennis J. Murphy dated March 29, 1999, as amended effective
October 26, 1999.
10.11 Employment Agreement by and between the Registrant and James
L. Hersma dated May 26, 1999, as amended effective December
28, 1999.
10.12 Employment Agreement by and between the Registrant and
Charles R. Smith dated November 12, 1998, as amended
effective October 26, 1999.
10.13 Employment Agreement by and between the Registrant and
Norman R. Farquhar dated October 6, 1999.
10.14 Employment Agreement by and between the Registrant and
Robert B. Witt dated May 10, 1999.
10.15 Employment Agreement by and between the Registrant and Don
Brown dated November 22, 1999.
10.16 Consulting Agreement dated March 5, 1999, by and between the
Registrant and Ridgewood Capital, Inc.
10.17 Consulting Services Agreement between the Registrant and
Ernst & Young LLP dated October 28, 1999.
10.18 Common Stock Exchange Agreement by and between the
Registrant and John H. Stevens dated June 11, 1999.
</TABLE>
II-4
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.19 Second Amended and Restated Investors Rights Agreement by
and among the Registrant and the Investors identified
therein dated January 7, 2000.
10.20 Amended and Restated Stockholder Agreement by and among the
Registrant and certain of its Stockholders, as identified
therein dated January 7, 2000.
10.21 Lease Agreement by and between the Registrant and Kilroy
Realty, L.P. dated August 1, 1999.
10.22 Lease Agreement by and between the Registrant and PHL-OPCO,
LP dated April 1, 1999.
10.23 Lease Agreement by and between the Registrant and Twenty
First Properties, Inc. dated July 7, 1999.
10.24 Sublease by and between the Registrant and Southwall
Technologies, Inc. dated October 14, 1999 and Master Lease
by and between C&J Development Co., and Southwall
Technologies, Inc.
10.25 Lease by and between Paradigm Resources, L.C. and PartNET,
Inc. dated January 12, 1999.
10.26 Master Lease Agreement by and between the Registrant and Sun
Microsystems dated October 7, 1999.
10.27 Logistics Research and Development Program, BAA 95-25 by and
between PartNET, Inc., and the Defense Advanced Research
Projects Agency dated September 16, 1996, as amended.
10.28 System/Data License Agreement by and between the Registrant
and Healthdemographics, Inc. dated September 30, 1998, as
amended.
10.29 Supplyline License Agreement by and between the Registrant
and Owen Healthcare, Inc. dated October 13, 1999.
10.30 Web Content Agreement by and between the Registrant and
physiciansite.com, Inc. dated October 28, 1999.
10.31 Agreement and Plan of Merger and Reorganization by and among
the Registrant, Medibuy Acquisition Corporation, PartNET,
Inc. and the shareholders of PartNET, Inc. dated as of
October 29, 1999.
10.32 Software License and Services Agreement by and between the
Registrant and Vitria Technology, Inc. dated December 17,
1999.*
10.33 Strategic Relationship Agreement by and among the Registrant
and Allianz Capital Partners, Gmbh and Jochen Noelke dated
January 7, 2000.
10.34 Form of Warrant to purchase shares of Common Stock of the
Registrant issued to Allianz Capital Partners, Gmbh.
10.35 Form of Warrant to purchase shares of Common Stock of the
Registrant issued to Jochen Noelke.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.*
24.1 Power of Attorney. Reference is made to page II-7.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
II-5
<PAGE> 118
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the 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 Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-6
<PAGE> 119
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, in the City of San
Diego, County of San Diego, State of California, on the 13th day of January,
2000.
By: /s/ DENNIS J. MURPHY
------------------------------------
Dennis J. Murphy
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis J. Murphy and Norman R. Farquhar and each
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments, exhibits thereto and other documents in connection therewith) to
this Registration Statement and any subsequent registration statement filed by
the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as
amended, which relates to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, to their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DENNIS J. MURPHY Chief Executive Officer, January 13, 2000
------------------------------------------ President and Director
Dennis J. Murphy (Principal Executive Officer)
/s/ NORMAN R. FARQUHAR Executive Vice President, Chief January 13, 2000
------------------------------------------ Financial Officer and Secretary
Norman R. Farquhar (Principal Financial and
Accounting Officer)
/s/ JAMES L. HERSMA Executive Vice President, Market January 13, 2000
------------------------------------------ Development and Director
James L. Hersma
/s/ DOUGLAS C. ALLRED Director January 13, 2000
------------------------------------------
Douglas C. Allred
/s/ BROOK H. BYERS Director January 13, 2000
------------------------------------------
Brook H. Byers
/s/ ANN H. LAMONT Director January 13, 2000
- ---------------------------------------------
Ann H. Lamont
/s/ JOHN H. STEVENS Director January 13, 2000
- ---------------------------------------------
John H. Stevens
/s/ MARK A. STEVENS Director January 13, 2000
------------------------------------------
Mark A. Stevens
</TABLE>
II-7
<PAGE> 120
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Registrant's Amended and Restated Certification of
Incorporation, as currently in effect.
3.2 Registrant's Bylaws, as amended, as currently in effect.
3.3 Form of Registrant's Amended and Restated Certificate of
Incorporation, to be effective upon the closing of this
offering.
3.4 Form of Registrant's Amended and Restated Certificate of
Incorporation, to be filed after the closing of this
offering.
3.5 Form of Registrant's Amended and Restated Bylaws, to be
effective upon the closing of this offering.
4.1 Form of common stock Certificate of Registrant.*
5.1 Opinion of Cooley Godward LLP.*
10.1 Form of Indemnity Agreement entered into between the
Registrant and its directors and executive officers.
10.2 1999 Equity Incentive Plan, as amended.
10.3 Form of Stock Option Grant Notice and related Stock Option
Agreement under the 1999 Equity Incentive Plan.
10.4 1999 Omnibus Equity Plan.
10.5 Form of Stock Option Grant Notice and related Stock Option
Agreements under the 1999 Omnibus Equity Plan.
10.6 1999 Non-Employee Directors' Stock Option Plan.
10.7 Form of Stock Option Grant Notice and Related Stock Option
Agreement under the 1999 Non-Employee Directors' Stock
Option Plan.
10.8 1999 Employee Stock Purchase Plan.
10.9 Employee Stock Purchase Plan Offering.
10.10 Employment Agreement by and between the Registrant and
Dennis J. Murphy dated March 29, 1999, as amended effective
October 26, 1999.
10.11 Employment Agreement by and between the Registrant and James
L. Hersma dated May 26, 1999, as amended effective December
28, 1999.
10.12 Employment Agreement by and between the Registrant and
Charles R. Smith dated November 12, 1998, as amended
effective October 26, 1999.
10.13 Employment Agreement by and between the Registrant and
Norman R. Farquhar dated October 6, 1999.
10.14 Employment Agreement by and between the Registrant and
Robert B. Witt dated May 10, 1999.
10.15 Employment Agreement by and between the Registrant and Don
Brown dated November 22, 1999.
10.16 Consulting Agreement dated March 5, 1999, by and between the
Registrant and Ridgewood Capital, Inc.
10.17 Consulting Services Agreement between the Registrant and
Ernst & Young LLP dated October 28, 1999.
10.18 Common Stock Exchange Agreement by and between the
Registrant and John H. Stevens dated June 11, 1999.
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.19 Second Amended and Restated Investors Rights Agreement by
and among the Registrant and the Investors identified
therein dated January 7, 2000.
10.20 Amended and Restated Stockholder Agreement by and among the
Registrant and certain of its Stockholders, as identified
therein dated January 7, 2000.
10.21 Lease Agreement by and between the Registrant and Kilroy
Realty, L.P. dated August 1, 1999.
10.22 Lease Agreement by and between the Registrant and PHL-OPCO,
LP dated April 1, 1999.
10.23 Lease Agreement by and between the Registrant and Twenty
First Properties, Inc. dated July 7, 1999.
10.24 Sublease by and between the Registrant and Southwall
Technologies, Inc. dated October 14, 1999 and Master Lease
by and between C&J Development Co., and Southwall
Technologies, Inc.
10.25 Lease by and between Paradigm Resources, L.C. and PartNET,
Inc. dated January 12, 1999.
10.26 Master Lease Agreement by and between the Registrant and Sun
Microsystems dated October 7, 1999.
10.27 Logistics Research and Development Program, BAA 95-25 by and
between PartNET, Inc., and the Defense Advanced Research
Projects Agency dated September 16, 1996, as amended.
10.28 System/Data License Agreement by and between the Registrant
and Healthdemographics, Inc. dated September 30, 1998, as
amended.
10.29 Supplyline License Agreement by and between the Registrant
and Owen Healthcare, Inc. dated October 13, 1999.
10.30 Web Content Agreement by and between the Registrant and
physiciansite.com, Inc. dated October 28, 1999.
10.31 Agreement and Plan of Merger and Reorganization by and among
the Registrant, Medibuy Acquisition Corporation, PartNET,
Inc. and the shareholders of PartNET, Inc. dated as of
October 29, 1999.
10.32 Software License and Services Agreement by and between the
Registrant and Vitria Technology, Inc. dated December 17,
1999.*
10.33 Strategic Relationship Agreement by and among the Registrant
and Allianz Capital Partners, Gmbh and Jochen Noelke dated
January 7, 2000.
10.34 Form of Warrant to purchase shares of Common Stock of the
Registrant issued to Allianz Capital Partners, Gmbh.
10.35 Form of Warrant to purchase shares of Common Stock of the
Registrant issued to Jochen Noelke.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.*
24.1 Power of Attorney. Reference is made to page II-7.
27.1 Financial Data Schedule.
</TABLE>
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* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MEDIBUY.COM, INC.
Dennis J. Murphy hereby certifies that:
ONE: The original name of this corporation was HS.com, Inc. and the date
of filing the original Certificate of Incorporation of this corporation with the
Secretary of State of the State of Delaware was August 18, 1998. This
corporation changed its name to medibuy.com, inc. and filed an Amended and
Restated Certificate of Incorporation on January 29, 1999. This corporation also
filed an Amended and Restated Certificate of Incorporation on March 16, 1999,
filed an Amended and Restated Certificate of Incorporation on June 8, 1999,
filed a Certificate of Amendment to its Amended and Restated Certificate of
Incorporation on November 1, 1999 and filed a Certificate of Amendment to its
Amended and Restated Certificate of Incorporation on December 7, 1999.
TWO: He is the duly elected and acting Chief Executive Officer and
President of medibuy.com, inc., a Delaware corporation.
THREE: The Amended and Restated Certificate of Incorporation, as
amended, of this corporation is hereby amended and restated in its entirety to
read as follows:
I.
The name of the corporation is MEDIBUY.COM, INC. (hereinafter referred
to as the "Corporation" or the "Company").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
National Corporation Research, Ltd.
9 East Loockerman Street
Dover, DE 19901
County of Kent
The name of the Corporation's registered agent at said address is
National Corporation Research, Ltd.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
1.
<PAGE> 2
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is fifty five million
(55,000,000). Forty million (40,000,000) shares shall be Common Stock, each
having a par value of one-tenth of one cent ($0.001) (the "Common Stock").
Fifteen million (15,000,000) shares shall be Preferred Stock, each having a par
value of one-tenth of one cent ($0.001) (the "Preferred Stock").
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Amended and Restated Certificate of Incorporation,
to fix or alter the rights, preferences, privileges and restrictions granted to
or imposed upon any wholly unissued series of Preferred Stock, and the number of
shares constituting any such series and the designation thereof, or any of them;
and to increase or decrease the number of shares of any series prior or
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
C. Sixty-eight thousand one hundred (68,100) of the authorized shares of
Preferred Stock are hereby designated "Series A Preferred Stock" (the "Series A
Preferred"). Three hundred thirty-four thousand nine hundred seven (334,907) of
the authorized shares of Preferred Stock are hereby designated "Series B
Preferred Stock" (the "Series B Preferred"). Five million (5,000,000) of the
authorized shares of Preferred Stock are hereby designated "Series C Preferred
Stock" (the "Series C Preferred"). Two million eight hundred thousand
(2,800,000) of the authorized shares of Preferred Stock are hereby designated
"Series D Preferred Stock" (the "Series D Preferred"). Four million nine hundred
thousand (4,900,000) of the authorized shares of Preferred Stock are hereby
designated "Series E Preferred Stock" (the "Series E Preferred").
D. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred are as follows:
1. DIVIDEND RIGHTS.
The holders of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred, in preference to
the holders of any Common Stock or other class or series of capital stock of the
Company ("Junior Stock"), shall be entitled to receive dividends when, as and if
declared by the Board of Directors, but only out of funds legally available
therefor. So long as any shares of Preferred Stock shall be outstanding, no
dividend, whether in cash or property, shall be paid or declared, nor shall any
other distribution be made, on any Junior Stock, nor shall any shares of any
Junior Stock of the Company be purchased, redeemed, or otherwise acquired for
value by the Company (except for acquisitions of Common Stock by the Company
pursuant to agreements previously approved by the Company's Board of Directors
which permit the Company to repurchase such shares upon termination of services
to the Company or in exercise of the Company's right of first refusal pursuant
to agreements
2.
<PAGE> 3
previously approved by the Company's Board of Directors upon a proposed
transfer) unless a dividend is paid with respect to all outstanding shares of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred in an amount for each share of such Preferred Stock equal
to or greater than the aggregate amount of such dividends payable with respect
to the number of shares of Common Stock into which each such share of Preferred
Stock could then be converted. The rights to dividends on shares of Preferred
Stock shall not be cumulative. The provisions of this Section 1 shall not,
however, apply to (i) a dividend payable solely in Junior Stock, (ii) the
acquisition of shares of any Junior Stock in exchange for other shares of Junior
Stock, (iii) any redemption of shares pursuant to Section 5; or (iv) any
repurchase of any outstanding securities of the Company that is unanimously
approved by the Company's Board of Directors. The holders of Preferred Stock
expressly waive their rights, if any, as described in the California General
Corporation Law sections 502, 503 and 506 as they relate to repurchases of
shares upon termination of employment or service as a consultant or director.
2. VOTING RIGHTS.
(a) GENERAL RIGHTS. Except as otherwise provided herein or
as required by law, the Series A Preferred, the Series B Preferred, the Series C
Preferred, the Series D Preferred and the Series E Preferred shall be voted with
the Common Stock and not as a separate class, at any annual or special meeting
of stockholders of the Company, and may act by written consent in the same
manner as the Common Stock, in either case upon the following basis: each holder
of shares of Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred and Series E Preferred, respectively, shall be entitled to such
number of votes as shall be equal to the number of shares of Common Stock into
which such holder's aggregate number of shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred are
convertible (pursuant to Section 4 hereof) immediately after the close of
business on the record date fixed for such meeting (or if no such record date is
established, at the date such vote is taken) or the effective date of such
written consent. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of each series of Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward). Each holder of Common Stock shall be entitled to one (1)
vote for each share of Common Stock held.
(b) SEPARATE VOTE OF PREFERRED STOCK. In addition to the
rights of any series of Preferred Stock which may from time to time come into
existence, and in addition to any other vote or consent required herein or by
law, the prior affirmative vote or written consent of the holders of at least a
majority of the outstanding Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred, voting together as a
single class on an as-if-converted basis, shall be necessary for effecting or
validating the following actions:
(i) Any amendment, alteration, or repeal of any
provision of the Certificate of Incorporation of the Company (including any
filing of a Certificate of Designation) that alters or changes the voting
powers, preferences, rights, privileges or restrictions of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred, or that otherwise materially and adversely affects the voting
powers,
3.
<PAGE> 4
preferences, rights, privileges or restrictions of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred;
(ii) Any issuance, authorization or any
designation, whether by reclassification or otherwise, of any new class or
series of stock or any other securities convertible into or exchangeable for
equity securities of the Company with a ranking senior to or on a parity with
the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred in right of redemption, liquidation preference,
voting or dividends, or any increase in the authorized or designated number of
any such new class or series;
(iii) Any Asset Transfer or Acquisition (each as
defined in Section 3(c));
(iv) Any voluntary dissolution or liquidation of
the Company;
(v) Any sale of any subsidiary or equity
securities of any subsidiary;
(vi) Engaging in any business that is
substantially different from the Company's business as of the Original Issue
Date of the Series C Preferred (as defined below).
(vii) Any redemption or repurchase of Common Stock
or other equity securities of the Company except for (A) redemptions pursuant to
Section 5, (B) repurchases pursuant to agreements approved by the Board of
Directors which permit the Company to repurchase such shares upon termination of
an employee's or consultant's services to the Company or (C) acquisition upon
exercise of the Company's right of first refusal pursuant to agreements approved
by the Board of Directors upon a proposed transfer).
(c) BOARD OF DIRECTORS. The Company shall not, without the
written consent or affirmative vote of (i) the holders of at least a majority of
the then outstanding Common Stock consenting or voting (as the case may be) as a
single class and (ii) the holders of at least a majority of the then outstanding
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred, each consenting or voting (as the case may be) together
as a single class, increase or decrease the maximum number of directors
constituting the Board of Directors from ten (10). The holders of a majority of
Common Stock and Series A Preferred, voting together as a single class, shall be
entitled to elect four (4) members of the Company's Board of Directors (the
"Common and Series A Directors") at each meeting or pursuant to each consent of
the Company's stockholders for the election of directors, and to remove from
office such directors and to fill any vacancy caused by the resignation, death
or removal of such directors. For so long as the outstanding shares of Series B
Preferred represent 900,000 (subject to adjustments for stock dividends, stock
distributions, stock splits, reverse stock splits or combinations of shares) or
more shares of the voting stock of the Company on an as converted and fully
diluted basis, the holders of the Series B Preferred, voting as a single class,
shall be entitled to elect one (1) member of the Company's Board of Directors
(the "Series B Director") at each meeting or pursuant to each consent of the
Company's stockholders for the election of directors, and to remove from office
such director and to fill any vacancy
4.
<PAGE> 5
caused by the resignation, death or removal of such director. For so long as the
outstanding shares of Series C Preferred and Series D Preferred represent
900,000 (subject to adjustments for stock dividends, stock distributions, stock
splits, reverse stock splits or combinations of shares) or more shares of the
voting stock of the Company on an as converted and fully diluted basis, the
holders of Series C Preferred and Series D Preferred, voting together as a
single class, shall be entitled to elect three (3) members of the Company's
Board of Directors (the "Series C and D Directors") at each meeting or pursuant
to each consent of the Company's stockholders for the election of directors, and
to remove from such office such director and to fill any vacancy caused by the
resignation, death or removal of such director. All of the holders of Common
Stock and Preferred Stock of the Company, voting as a single class, shall elect
the remaining members of the Company's Board of Directors (the "Combined Class
Directors") at each meeting or pursuant to each consent of the Company's
Stockholders for the election of directors, and to remove from such office such
director and to fill any vacancy caused by the resignation, death or removal of
such director. No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the Company is subject to Section 2115 of the California General
Corporation Law ("CGCL").
3. LIQUIDATION RIGHTS.
(a) Upon any liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of Series A Preferred, Series B Preferred
or Common Stock, subject to the rights of any series of Preferred Stock that may
from time to time come into existence, the holders of Series C Preferred, Series
D Preferred and Series E Preferred shall be entitled to be first paid out of the
assets of the Company an amount per share of Series C Preferred, Series D
Preferred and Series E Preferred, respectively, equal to their respective
Original Issue Price (as defined below) plus all declared and unpaid dividends
on the Series C Preferred, Series D Preferred and Series E Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for each share of Series C Preferred,
Series D Preferred and Series E Preferred held by them. After the holders of
Series C Preferred, Series D Preferred and Series E Preferred receive an amount
equal to their Original Issue Prices plus all declared and unpaid dividends (if
any), subject to the rights of any series of Preferred Stock that may from time
to time come into existence, the holders of the Series A Preferred and the
Series B Preferred shall be entitled to be paid out of the assets of the Company
an amount per share of Series A Preferred and Series B Preferred, respectively,
equal to their respective Original Issue Price plus all declared and unpaid
dividends on the Series A Preferred and Series B Preferred (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares) for each share of Series A Preferred and Series B
Preferred held by them. If, upon any such liquidation, distribution, or winding
up, the assets of the Company shall be insufficient to make payment in full to
all holders of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred of the liquidation preference set
forth in this Section 3(a), subject to the rights of any series of Preferred
Stock that may from time to time come into existence, then such assets shall be
first distributed among the holders of Series C Preferred, Series D Preferred
and Series E Preferred ratably in proportion to the full amounts to which they
would otherwise be respectively entitled based on their respective liquidation
preferences and thereafter, if any assets are remaining, be distributed among
the holders of Series A and Series B Preferred at the time outstanding, ratably
in proportion to the full amounts to
5.
<PAGE> 6
which they would otherwise be respectively entitled based on their respective
liquidation preferences.
(b) After the payment of the full liquidation preference
of the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred as set forth in Section 3(a) above, and any
other distribution that may be required with respect to any series of Preferred
Stock that may from time to time come into existence, the remaining assets of
the Company legally available for distribution, if any, shall be distributed
ratably to the holders of the Common Stock.
(c) The following events shall be considered a liquidation
under this Section:
(i) any consolidation or merger of the Company
with or into any other corporation or other entity or person, or any other
transaction (including without limitation, a sale of stock or a
recapitalization) in which the stockholders of the Company immediately prior to
such consolidation, merger or other transaction own less than 50% of the
surviving entity's voting power immediately after such consolidation, merger or
other transaction excluding any consolidation or merger effected exclusively to
change the domicile of the Company (an "Acquisition"); or
(ii) a sale of all or substantially all of the
assets of the Company in a single transaction or series of related transactions
(an "Asset Transfer").
(d) In either of such events described in clause 3(c)(i)
or 3(c)(ii) above, if the consideration received by this Company is other than
cash, its value will be deemed its fair market value as determined in good faith
by the Board of Directors. Any securities shall be valued as follows:
(i) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (ii) below:
(A) If traded on a securities exchange or
through the Nasdaq National Market, the value shall be deemed to be the average
of the closing prices of the securities on such quotation system over the thirty
(30) day period ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
(C) If there is no active public market, the
value shall be the fair market value thereof, as determined by the Board of
Directors.
(ii) The method of valuation of securities subject
to investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount
6.
<PAGE> 7
from the market value determined as above in (i)(A), (B) or (C) to reflect the
approximate fair market value thereof, as determined by the Board of Directors.
(e) ORIGINAL ISSUE PRICE. The "Original Issue Price" of
(i) the Series A Preferred shall be ten dollars ($10.00) per share, (ii) the
Series B Preferred shall be fifteen dollars ($15.00) per share, (iii) the Series
C Preferred shall be three dollars and sixty cents ($3.60) per share, (iv) the
Series D Preferred shall be twelve dollars and nine cents ($12.09) per share and
(v) the Series E Preferred shall be twenty dollars and fifty-four cents ($20.54)
per share.
4. CONVERSION RIGHTS.
The holders of the Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred shall have the
following rights with respect to the conversion of such shares into shares of
Common Stock (the "Conversion Rights"):
(a) OPTIONAL CONVERSION. Subject to and in compliance with
the provisions of this Section 4, any shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred may, at
the option of the holder, be converted at any time and from time to time into
the number of fully-paid and nonassessable shares of Common Stock as is
determined by multiplying the "Series A Preferred Conversion Rate," the "Series
B Preferred Conversion Rate," "Series C Preferred Conversion Rate," the "Series
D Preferred Conversion Rate" or the "Series E Preferred Conversion Rate" as
applicable, then in effect (determined as provided in Section 4(b)) by the
respective number of shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred, respectively, being
converted.
(b) CONVERSION RATES. The conversion rate in effect at any
time for conversion of the Series A Preferred (the "Series A Preferred
Conversion Rate"), the Series B Preferred (the "Series B Preferred Conversion
Rate"), the Series C Preferred (the "Series C Preferred Conversion Rate"), the
Series D Preferred (the "Series D Preferred Conversion Rate"), and the Series E
Preferred (the "Series E Preferred Conversion Rate"), respectively, shall be the
quotient obtained by dividing the Original Issue Price of the Series A
Preferred, the Series B Preferred, the Series C Preferred, the Series D
Preferred and the Series E Preferred, respectively, by the "Series A Preferred
Conversion Price," the "Series B Preferred Conversion Price," the "Series C
Preferred Conversion Price," the "Series D Preferred Conversion Price," and the
"Series E Preferred Conversion Price" respectively, calculated as provided in
Section 4(c).
(c) CONVERSION PRICES. The conversion price for the Series
A Preferred, the Series B Preferred, the Series C Preferred, the Series D
Preferred and the Series E Preferred, respectively, shall initially be the
respective Original Issue Price of the Series A Preferred (the "Series A
Preferred Conversion Price"), the Series B Preferred (the "Series B Preferred
Conversion Price"), the Series C Preferred (the "Series C Preferred Conversion
Price"), the Series D Preferred (the "Series D Conversion Price") and the Series
E Preferred (the "Series E Preferred Conversion Price"). Such initial Series A
Preferred Conversion Price, Series B Preferred Conversion Price, Series C
Preferred Conversion Price, Series D Preferred Conversion Price and Series E
Preferred Conversion Price shall be adjusted from time to time in accordance
7.
<PAGE> 8
with this Section 4. Further, after giving effect to the ten-for-one (10-for-1)
stock split effected by the filing of the Amended and Restated Certificate of
Incorporation on June 8, 1999, the Series A Preferred Conversion Price is $1.00
per share and the Series B Preferred Conversion Price is $1.50 per share. All
references herein to the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price, Series D Preferred
Conversion Price and Series E Preferred Conversion Price shall mean the Series A
Preferred Conversion Price, Series B Preferred Conversion Price, Series C
Preferred Conversion Price, Series D Preferred Conversion Price and Series E
Preferred Conversion Price, respectively, as so adjusted and then in effect.
(d) MECHANICS OF CONVERSION. Each holder of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred who desires to convert the same into shares of Common Stock pursuant
to this Section 4 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred, and shall give written notice to the Company at such office that
such holder elects to convert the same. Such notice shall state the number of
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred being converted. Thereupon, the Company shall
promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled and shall promptly pay (i) in cash or, to the extent sufficient funds
are not then legally available therefor, in Common Stock (at the Common Stock's
fair market value determined by the Board of Directors as of the date of such
conversion), any declared and unpaid dividends on the shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred being converted and (ii) in cash (at the Common Stock's fair market
value determined by the Board of Directors as of the date of conversion) the
value of any fractional share of Common Stock otherwise issuable to any holder
of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred, as applicable. In the event less than all
shares represented by a surrendered certificate are converted, a new certificate
shall be issued to the holder representing the unconverted shares. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date. If the conversion
is in connection with an underwritten offering of securities registered pursuant
to the Securities Act of 1933, the conversion may, at the option of any holder
tendering Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred for conversion, be conditioned upon the closing
with the underwriters of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive Common Stock upon conversion of
such Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred shall not be deemed to have converted such
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred until immediately prior to the closing of such sale of
securities.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. The term
"Original Issue Date" shall mean (i) with respect to the Series A Preferred,
January 29, 1999, (ii)
8.
<PAGE> 9
with respect to the Series B Preferred, March 17, 1999, (iii) with respect to
the Series C Preferred, June 11, 1999, (iv) with respect to the Series D
Preferred, August 30, 1999, and (v) with respect to the Series E Preferred, the
date the first share of Series E Preferred is issued. If the Company shall at
any time or from time to time after the applicable Original Issue Date effect a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Preferred Stock, the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series C Preferred Conversion Price, the Series
D Preferred Conversion Price and the Series E Preferred Conversion Price, as
applicable, in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Company shall at any time or from
time to time after the Original Issue Date combine the outstanding shares of
Common Stock into a smaller number of shares without a corresponding combination
of the Preferred Stock, the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series C Preferred Conversion Price, Series D
Preferred Conversion Price and Series E Preferred Conversion Price, as
applicable, in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4(e) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND
DISTRIBUTIONS.
(i) If the Company at any time or from time to
time after the applicable Original Issue Date makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, in each such
event the Series A Preferred Conversion Price, the Series B Preferred Conversion
Price, the Series C Preferred Conversion Price, the Series D Preferred
Conversion Price or the Series E Preferred Conversion Price, as applicable, that
are then in effect shall be decreased as of the time of such issuance or, in the
event such record date is fixed, as of the close of business on such record
date, by multiplying the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series C Preferred Conversion Price, the Series
D Preferred Conversion Price or the Series E Preferred Conversion Price, as
applicable, then in effect by a fraction (i) the numerator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, and (ii) the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Series A Preferred Conversion
Price, the Series B Preferred Conversion Price, the Series C Preferred
Conversion Price, the Series D Preferred Conversion Price and the Series E
Preferred Conversion Price, as applicable, shall be recomputed accordingly as of
the close of business on such record date and thereafter the Series A Preferred
Conversion Price, the Series B Preferred Conversion Price, the Series C
Preferred Conversion Price, the Series D Preferred Conversion Price and the
Series E Preferred Conversion Price, as applicable, shall be adjusted pursuant
to this Section 4(f) to reflect the actual payment of such dividend or
distribution.
(ii) If the Company at any time or from time to
time after the applicable Original Issue Date makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive, any
distribution payable in securities or other property of the
9.
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Company other than Common Stock and other than as otherwise adjusted in this
Section 4, then and in each such event provision shall be made so that the
holders of 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 shall receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities and
other property which they would have received had their shares of 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 been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities and other property receivable by them as aforesaid
during such period, subject to all other adjustments called for during such
period under this Section 4 with respect to the rights of the holders of the
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.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the applicable Original
Issue Date, the Common Stock issuable upon the conversion of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than an Acquisition or Asset Transfer as defined in Section
3(c) as to which Section 3 applies or a subdivision or combination of shares or
stock dividend or a reorganization, merger, consolidation or sale of assets
provided for elsewhere in this Section 4), in any such event each holder of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred, as applicable, shall have the right thereafter to
convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other change
by holders of the maximum number of shares of Common Stock into which such
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred could have been converted immediately prior to
such recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities or
property by the terms thereof.
(h) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the applicable Original Issue
Date, there is a capital reorganization of the Common Stock (other than an
Acquisition or Asset Transfer as defined in Section 3(c) as to which Section 3
applies or a recapitalization, subdivision, combination, reclassification,
exchange or substitution of shares provided for elsewhere in this Section 4), as
a part of such capital reorganization, provision shall be made so that the
holders of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred, as applicable, shall thereafter be
entitled to receive upon conversion of the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred, as
applicable, the number of shares of stock or other securities or property of the
Company to which a holder of the number of shares of Common Stock deliverable
upon conversion would have been entitled on such capital reorganization, subject
to adjustment in respect of such stock or securities by the terms thereof. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred and
Series E Preferred, as applicable, after the capital reorganization such that
the provisions of this Section 4 (including adjustment of
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<PAGE> 11
the Series A Preferred Conversion Price, Series B Preferred Conversion Price,
Series C Preferred Conversion Price, Series D Preferred Conversion Price and
Series E Preferred Conversion Price then in effect and the number of shares
issuable upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred) shall be applicable after
that event and be as nearly equivalent as practicable.
(i) SALE OF SHARES BELOW APPLICABLE CONVERSION PRICE.
(i) If at any time or from time to time after the
applicable Original Issue Date, the Company issues or sells, or is deemed by the
express provisions of this Section 4(i) to have issued or sold, Additional
Shares of Common Stock (as defined in Section 4(i)(iv) below), other than as a
dividend or other distribution on any class of stock as provided in Section 4(f)
above, and other than a subdivision or combination of shares of Common Stock as
provided in Section 4(e) above, for an Effective Price (as defined in Section
4(i)(iv) below) less than the then effective Series A Preferred Conversion
Price, Series B Preferred Conversion Price, Series C Preferred Conversion Price,
Series D Preferred Conversion Price or Series E Preferred Conversion Price, as
applicable, then and in each such case the then existing Series A Preferred
Conversion Price, Series B Preferred Conversion Price, Series C Preferred
Conversion Price, Series D Preferred Conversion Price or Series E Preferred
Conversion Price, as applicable, shall be reduced, as of the opening of business
on the date of such issue or sale, to a price (calculated to the nearest tenth
of a cent) determined by multiplying the Series A Preferred Conversion Price,
Series B Preferred Conversion Price, Series C Preferred Conversion Price, Series
D Preferred Conversion Price or Series E Preferred Conversion Price, as
applicable, by a fraction (i) the numerator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale, plus (B) the number of shares of Common Stock which the
aggregate consideration received (as defined in Section 4(i)(ii)) by the Company
for the total number of Additional Shares of Common Stock so issued would
purchase at such Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price, Series D Preferred
Conversion Price or Series E Preferred Conversion Price, as applicable, and (ii)
the denominator of which shall be the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale plus the
total number of Additional Shares of Common Stock so issued. For the purposes of
the preceding sentence, the number of shares of Common Stock deemed to be
outstanding as of a given date shall be the sum of (A) the number of shares of
Common Stock issued and outstanding, (B) the number of shares of Common Stock
into which the then outstanding shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred could
be converted if fully converted on the day immediately preceding the given date,
and (C) the number of shares of Common Stock which could be obtained through the
exercise or conversion of all other rights, options and convertible securities
outstanding (including rights to acquire convertible securities and the
conversion of such securities into Common Stock) on the day immediately
preceding the given date.
(ii) For the purpose of making any adjustment
required under this Section 4(i), the consideration received by the Company for
any issue or sale of securities shall (A) to the extent it consists of cash, be
computed at the net amount of cash received by the Company after deduction of
any underwriting or similar commissions, compensation or concessions paid or
allowed by the Company in connection with such issue or sale but without
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<PAGE> 12
deduction of any expenses payable by the Company, (B) to the extent it consists
of property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Directors, and (C) if Additional Shares
of Common Stock, Convertible Securities (as defined in Section 4(i)(iii)) or
rights or options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration which covers both,
be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Additional Shares of Common Stock, Convertible Securities or rights or
options.
(iii) For the purpose of the adjustment required
under this Section 4(i), if the Company issues or sells (i) stock or other
securities convertible into, or exchangeable for, Additional Shares of Common
Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") or (ii) rights or options (including warrants) for the
purchase of Additional Shares of Common Stock or Convertible Securities and if
the Effective Price of such Additional Shares of Common Stock is less than the
Series A Preferred Conversion Price, Series B Preferred Conversion Price, Series
C Preferred Conversion Price, Series D Preferred Conversion Price or Series E
Preferred Conversion Price, as applicable, in each case the Company shall be
deemed to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares (for the purpose of computing the
"Effective Price") an amount equal to the total amount of the consideration, if
any, received by the Company for the issuance of such rights or options or
Convertible Securities, plus, in the case of such rights or options, the minimum
amounts of consideration, if any, payable to the Company upon the exercise of
such rights or options, plus, in the case of Convertible Securities, the minimum
amounts of consideration, if any, payable to the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof; provided that if in the case of
Convertible Securities the minimum amounts of such consideration cannot be
ascertained, but are a function of antidilution or similar protective clauses,
the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that if the minimum amount of consideration payable to the Company upon
the exercise or conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series C Preferred Conversion Price, the Series
D Preferred Conversion Price and the Series E Preferred Conversion Price, as
applicable, as adjusted upon the issuance of such rights, options or Convertible
Securities, shall be made as a result of the actual issuance of Additional
Shares of Common Stock on the exercise of any such rights or options or the
conversion of any such Convertible Securities. If any such rights or options or
the conversion privilege represented by any such Convertible Securities shall
expire without having been exercised, the Series A
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<PAGE> 13
Preferred Conversion Price, the Series B Preferred Conversion Price, the Series
C Preferred Conversion Price, the Series D Preferred Conversion Price or the
Series E Preferred Conversion Price, as applicable, as adjusted upon the
issuance of such rights, options or Convertible Securities shall be readjusted
to the Series A Preferred Conversion Price, the Series B Preferred Conversion
Price, the Series C Preferred Conversion Price, the Series D Preferred
Conversion Price and the Series E Preferred Conversion Price, as applicable,
which would have been in effect had an adjustment been made on the basis that
the only Additional Shares of Common Stock so issued were the Additional Shares
of Common Stock, if any, actually issued or sold on the exercise of such rights
or options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for (w) the
consideration actually received by the Company upon such exercise, plus (x) the
consideration, if any, actually received by the Company for the granting of all
such rights or options, whether or not exercised, plus (y) the consideration
received for issuing or selling the Convertible Securities, whether or not
converted, plus (z) the consideration, if any, actually received by the Company
(other than by cancellation of liabilities or obligations evidenced by such
Convertible Securities) on the conversion of such Convertible Securities,
provided that such readjustment shall not apply to prior conversions of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred.
(iv) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this Section 4(i), other than (A) shares of Common Stock issued upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred, (B) shares of Common Stock and/or
options, warrants or other Common Stock purchase rights, and the Common Stock
issued pursuant to such options, warrants or other rights after the Original
Issue Date to employees, officers or directors of, or consultants or advisors to
the Company or any subsidiary pursuant to stock purchase or stock option plans
or other arrangements that are approved by the Board of Directors, (C) shares of
Common Stock issued pursuant to the exercise of options, warrants or convertible
securities outstanding as of the Original Issue Date, (D) shares of Common Stock
and/or options, warrants or other Common Stock purchase rights, and the Common
Stock issued pursuant to such options, warrants or other rights, issued for
consideration other than cash pursuant to a merger, consolidation, acquisition
or similar business combination approved by the Board of Directors, (E) shares
of Common Stock issued pursuant to any equipment leasing or loan arrangement, or
debt financing from a bank or similar financial or lending institution approved
by the Board of Directors, and (F) shares of Common Stock issued in connection
with strategic transactions involving the Company and other entities, including
joint ventures, manufacturing, marketing or distribution arrangements or
technology transfer or development arrangements approved by the Board of
Directors. References to Common Stock in the subsections of this clause (iv)
above shall mean all shares of Common Stock issued by the Company or deemed to
be issued pursuant to this Section 4(i). The "Effective Price" of Additional
Shares of Common Stock shall mean the quotient determined by dividing the total
number of Additional Shares of Common Stock issued or sold, or deemed to have
been issued or sold by the Company under this Section 4(i), into the aggregate
consideration received, or deemed to have been received by the Company for such
issue under this Section 4(i), for such Additional Shares of Common Stock.
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<PAGE> 14
(j) CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price, the Series C Preferred Conversion Price,
the Series D Preferred Conversion Price or the Series E Preferred Conversion
Price for the number of shares of Common Stock or other securities issuable upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred, if such series of Preferred Stock is
then convertible pursuant to this Section 4, the Company, at its expense, shall
compute such adjustment or readjustment in accordance with the provisions hereof
and prepare a certificate showing such adjusted Conversion Price, and shall mail
such certificate, by first class mail, postage prepaid, to each registered
holder of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred, as applicable, at the holder's address as
shown in the Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or deemed to be received by the Company for any Additional Shares of Common
Stock issued or sold or deemed to have been issued or sold, (ii) the respective
Conversion Price at the time in effect, (iii) the number of Additional Shares of
Common Stock and (iv) the type and amount, if any, of other property which at
the time would be received upon conversion of the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred, as
applicable.
(k) NOTICES OF RECORD DATE. Upon (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or
other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail to
each holder of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred at least ten (10) days prior to the
record date specified therein (or such shorter period approved by a majority of
the outstanding Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred, voting together as a single class) a
notice specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up.
(l) AUTOMATIC CONVERSION.
(i) Each share of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series A Preferred Conversion Rate, Series B Preferred Conversion
Rate, Series C Preferred Conversion Rate, Series D Preferred
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<PAGE> 15
Conversion Rate and Series E Preferred Conversion Rate, respectively, (A) at any
time upon the affirmative election of the holders of at least a majority of the
then outstanding shares of such respective series of Preferred Stock, or (B)
immediately upon the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Company; provided that (i) with respect to the Series B Preferred, the
Series C Preferred and the Series D Preferred, the automatic conversion shall be
further conditioned upon the following minimum proceeds requirements: (1) the
per share price is at least $12.09 (as adjusted for stock splits, dividends,
recapitalizations and the like) and (2) the gross cash proceeds to the Company
(before underwriting discounts, commissions and fees) are at least $15,000,000;
and (ii) with respect to the Series E Preferred, the automatic conversion shall
be further conditioned upon the following minimum proceeds requirements: (1) the
per share price is at least $25.00 (as adjusted for stock splits, dividends,
recapitalizations and the like) and (2) the gross cash proceeds to the Company
(before underwriting discounts, commissions and fees) are at least $40,000,000.
Upon such automatic conversion, any declared and unpaid dividends shall be paid
in accordance with the provisions of Section 4(d). A public offering which
satisfies the proceeds requirement described in clauses (i) (with respect to
each of the Series B Preferred, the Series C Preferred and the Series D
Preferred) and (ii) (with respect to the Series E Preferred) are hereinafter
referred to as a "Designated Public Offering" with respect to such series of
Preferred Stock.
(ii) Upon the occurrence of either of the events
specified in Section 4(l)(i) above, the outstanding shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and/or
Series E Preferred, as applicable, shall be converted automatically without any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and/or Series E Preferred, as applicable,
are either delivered to the Company or its transfer agent as provided below, or
the holder notifies the Company or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Company to indemnify the Company from any loss incurred by it in connection
with such certificates. Upon the occurrence of such automatic conversion of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and/or Series E Preferred, the holders of shares of such respective series of
Preferred Stock shall surrender the certificates representing such shares at the
office of the Company or any transfer agent for the shares of such series of
Preferred Stock. Thereupon, there shall be issued and delivered to such holder
promptly at such office and in its name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and/or Series E Preferred, as applicable,
surrendered were convertible on the date on which such automatic conversion
occurred, and any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(d).
(m) FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon conversion of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred, Series B Preferred,
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<PAGE> 16
Series C Preferred, Series D Preferred or Series E Preferred by a holder thereof
shall be aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of any fractional
share, the Company shall, in lieu of issuing any fractional share, pay cash
equal to the product of such fraction multiplied by the Common Stock's fair
market value (as determined by the Board of Directors) on the date of
conversion.
(n) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred. If at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred, the Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(o) NOTICES. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
(p) PAYMENT OF TAXES. The Company will pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred, excluding any tax or other
charge imposed in connection with any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which such
shares of converted Preferred Stock were registered.
(q) NO DILUTION OR IMPAIRMENT. Without the consent of the
holders of then outstanding Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred as required under Section
2(b), the Company shall not amend its Restated Certificate of Incorporation or
participate in any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or take any other voluntary action, for
the purpose of avoiding or seeking to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company, but shall at
all times in good faith assist in carrying out all such action as may be
reasonably necessary or appropriate in order to protect the conversion rights of
the holders of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred against dilution or other impairment.
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<PAGE> 17
5. REDEMPTION.
(a) The Company shall be obligated to redeem the Series C
Preferred, Series D Preferred and Series E Preferred as follows:
(i) If a Designated Public Offering with respect
to the Series C Preferred (or other transaction providing the holders of Series
C Preferred with the opportunity for liquidity of their investment in the Series
C Preferred based on a valuation of the Company comparable to the valuation
required for a Series C Designated Public Offering) does not occur by the fifth
anniversary of the Original Issue Date of the Series C Preferred, the holders of
at least a majority of the then outstanding shares of Series C Preferred may
require the Company, to the extent funds are legally available therefor, to
redeem the Series C Preferred prior to any redemption of the Series A Preferred
or Series B Preferred in three (3) equal annual installments, with the first
installment for one-third (1/3) of the then outstanding shares of the Series C
Preferred being due and payable on the date not less than 90 days after the date
the holders of Series C Preferred notify the Company in writing of their
election to redeem the shares, the second installment for one-half (1/2) of the
then outstanding shares of the Series C Preferred being due and payable on the
first anniversary of the first redemption date and the third and final
installment for all remaining outstanding shares of Series C Preferred being due
and payable on the second anniversary of the first redemption date (the date for
each of such installments a "Redemption Date"). The Company shall effect such
redemptions on the applicable Redemption Date by paying in cash in exchange for
the shares of Series C Preferred to be redeemed a sum equal to the Fair Market
Value per share (as defined below) of Series C Preferred. The total amount to be
paid for the Series C Preferred is hereinafter referred to as the "Series C
Preferred Redemption Price." Shares subject to redemption pursuant to this
Section 5(a) shall be redeemed from each holder of Series C Preferred on a pro
rata basis.
(ii) If a Designated Public Offering with respect
to the Series D Preferred (or other transaction providing the holders of Series
D Preferred with the opportunity for liquidity of their investment in the Series
D Preferred based on a valuation of the Company comparable to the valuation
required for a Series D Designated Public Offering) does not occur by the fifth
anniversary of the Original Issue Date of the Series C Preferred, the holders of
at least a majority of the then outstanding shares of Series D Preferred may
require the Company, to the extent funds are legally available therefor, to
redeem the Series D Preferred prior to any redemption of the Series A Preferred
or Series B Preferred in three (3) equal annual installments with the first
installment for one-third (1/3) of the then outstanding shares of the Series D
Preferred being due and payable on the date not less than 90 days after the date
the holders of Series D Preferred notify the Company in writing of their
election to redeem the shares, the second installment for one-half (1/2) of the
then outstanding shares of the Series D Preferred being due and payable on the
first anniversary of the first redemption date and the third and final
installment for all remaining outstanding shares of Series D Preferred being due
and payable on the second anniversary of the first redemption date (the date for
each of such installments a "Redemption Date"). The Company shall effect such
redemptions on the applicable Redemption Date by paying in cash in exchange for
the shares of Series D Preferred to be redeemed a sum equal to the Fair Market
Value per share of Series D Preferred. The total amount to be paid for the
Series D Preferred is hereinafter referred to as the "Series D Preferred
Redemption Price."
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<PAGE> 18
Shares subject to redemption pursuant to this Section 5(a) shall be redeemed
from each holder of Series D Preferred on a pro rata basis.
(iii) If a Designated Public Offering with respect
to the Series E Preferred (or other transaction providing the holders of Series
E Preferred with the opportunity for liquidity of their investment in the Series
E Preferred based on a valuation of the Company comparable to the valuation
required for a Series E Designated Public Offering) does not occur by the fifth
anniversary of the Original Issue Date of the Series C Preferred, the holders of
at least a majority of the then outstanding shares of Series E Preferred may
require the Company, to the extent funds are legally available therefor, to
redeem the Series E Preferred prior to any redemption of the Series A Preferred
or Series B Preferred in three (3) equal annual installments with the first
installment for one-third (1/3) of the then outstanding shares of the Series E
Preferred being due and payable on the date not less than 90 days after the date
the holders of Series E Preferred notify the Company in writing of their
election to redeem the shares, the second installment for one-half (1/2) of the
then outstanding shares of the Series E Preferred being due and payable on the
first anniversary of the first redemption date and the third and final
installment for all remaining outstanding shares of Series E Preferred being due
and payable on the second anniversary of the first redemption date (the date for
each of such installments a "Redemption Date"). The Company shall effect such
redemptions on the applicable Redemption Date by paying in cash in exchange for
the shares of Series E Preferred to be redeemed a sum equal to the Fair Market
Value per share of Series E Preferred. The total amount to be paid for the
Series E Preferred is hereinafter referred to as the "Series E Preferred
Redemption Price." Shares subject to redemption pursuant to this Section 5(a)
shall be redeemed from each holder of Series E Preferred on a pro rata basis.
(iv) The "Fair Market Value" for purposes of
determining the applicable Redemption Price for the Series C Preferred, Series D
Preferred or Series E Preferred under this Section 5 shall be the greater of the
following amounts as of the date of the fifth anniversary of the Original Issue
Date of the Series C Preferred, (A) the fair market value of the shares of
Common Stock into which such series of Preferred Stock is then convertible
(exclusive of any discounts regarding liquidity and minority positions),
determined by agreement of the Board of Directors and the holders of a majority
of the then outstanding shares of such series of Preferred Stock or, if such
parties cannot agree upon the fair market value, as determined by an independent
investment banker selected by the Board of Directors and the holders of a
majority of the then outstanding shares of such series of Preferred Stock, or
(B) the value of the assets the holders of such series of Preferred Stock would
receive pursuant to a liquidation of the Company pursuant to Section 3 based
upon the fair market value of the Company as determined according to clause (A).
(v) At least thirty (30) days prior to the first
Redemption Date of any shares of Series C Preferred, Series D Preferred and/or
Series E Preferred, the Company shall send a notice (a "Redemption Notice") to
all holders of Series C Preferred, Series D Preferred and/or Series E Preferred
to be redeemed setting forth (A) the Redemption Price for the shares to be
redeemed; and (B) the place at which such holders may obtain payment of the
Redemption Price upon surrender of their share certificates. If the Company does
not have sufficient funds legally available to redeem all shares to be redeemed
at the Redemption Date, then it shall redeem such shares pro rata (based on the
relative portion of the Series C
18.
<PAGE> 19
Redemption Price, Series D Redemption Price and Series E Redemption Price
payable to them) to the extent possible and shall redeem the remaining shares to
be redeemed as soon as sufficient funds are legally available.
(b) On or prior to each Redemption Date, the Company shall
deposit the Redemption Price of all shares to be redeemed with a bank or trust
company, as a trust fund, with irrevocable instructions and authority to the
bank or trust company to pay, on and after such Redemption Date, the Redemption
Price of the shares to their respective holders upon the surrender of their
share certificates. Any moneys deposited by the Company pursuant to this Section
5(b) for the redemption of shares thereafter converted into shares of Common
Stock pursuant to Section 4 hereof prior to the Redemption Date shall be
returned to the Company forthwith upon such conversion. The balance of any funds
deposited by the Company pursuant to this Section 5(b) remaining unclaimed at
the expiration of one (1) year following such Redemption Date shall be returned
to the Company promptly upon its written request.
(c) On or after such Redemption Date, each holder of
shares of Series C Preferred, Series D Preferred and/or Series E Preferred to be
redeemed shall surrender such holder's certificates representing such shares to
the Company in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price of such shares shall be payable to the order
of the person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be canceled. In the event
less than all the shares represented by such certificates are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and after
such Redemption Date, unless there shall have been a default in payment of the
Redemption Price or the Company is unable to pay the Redemption Price due to not
having sufficient legally available funds, all rights of the holder of those
shares which are subject to redemption on the Redemption Date as holder of
Series C Preferred, Series D Preferred and/or Series E Preferred (except the
right to receive the Redemption Price without interest upon surrender of their
certificates), shall cease and terminate with respect to such shares; provided
that in the event that shares of Series C Preferred, Series D Preferred or
Series E Preferred are not redeemed due to a default in payment by the Company
or because the Company does not have sufficient legally available funds, such
shares of Series C Preferred, Series D Preferred or Series E Preferred shall
remain outstanding and shall be entitled to all of the rights and preferences
provided herein.
In the event of a call for redemption of any shares of
Series C Preferred, Series D Preferred and/or Series E Preferred, the Conversion
Rights (as described in Section 4) for such Series C Preferred, Series D
Preferred and/or Series E Preferred shall terminate as to the shares designated
for redemption at the close of business on the third (3rd) business day
preceding the Redemption Date, unless default is made in payment of the
Redemption Price.
(d) In the event that the Company fails to effect a
redemption as required under this Section 5 for the holders of Series C
Preferred, Series D Preferred or Series E Preferred upon the proper election of
such holders, then the holders of a majority of the then outstanding shares of
the Series C Preferred, Series D Preferred and Series E Preferred, voting
together as a single class, may cause the Company to enter into an Acquisition
or Asset Transfer transaction (as those terms are defined in Section 3(c)).
19.
<PAGE> 20
6. NO REISSUANCE OF PREFERRED STOCK.
No share or shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred acquired
by the Company by reason of redemption, purchase, conversion or otherwise shall
be reissued.
V.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the CGCL) for breach of duty to the
corporation and its stockholders through bylaw provisions or through agreements
with the agents, or through stockholder resolutions, or otherwise, in excess of
the indemnification otherwise permitted by Section 317 of the CGCL, subject, at
any time or times that the corporation is subject to Section 2115(b) of the
CGCL, to the limits on such excess indemnification set forth in Section 204 of
the CGCL.
C. Any repeal or modification of this Article V shall only be
prospective and shall not effect the rights under this Article V in effect at
the time of the alleged occurrence of any action or omission to act giving rise
to liability.
VI.
For the management of the business and for the conduct of the
affairs of the Company, and in further definition, limitation and regulation of
the powers of the Company, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs
of the Company shall be vested in its Board of Directors. Subject to Section
D.2(c) of Article IV above, the number of directors which shall constitute the
whole Board of Directors shall be fixed by the Board of Directors in the manner
provided in the Bylaws.
B. Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the stockholders
entitled to vote. The Board of Directors shall also have the power to adopt,
amend or repeal Bylaws without any action on the part of the Stockholders.
C. The directors of the Company need not be elected by written
ballot unless the Bylaws so provide.
VII.
The Company reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon the stockholders herein are granted subject to this reservation.
20.
<PAGE> 21
* * * *
FOUR: This Amended and Restated Certificate of Incorporation has been
duly approved by the Board of Directors of this Company.
FIVE: This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware by the Board of Directors
and the stockholders of the Company. The total number of outstanding shares
entitled to vote or act by written consent was six million three hundred
ninety-three thousand seventy four (6,393,074) shares of Common Stock and seven
million one hundred eighty-four thousand eight hundred ninety-nine (7,184,899)
shares of Preferred Stock. The holders of (i) a majority of the outstanding
shares of Common Stock and Preferred Stock (on an as-converted basis) voting
together as a single class, and (ii) , a majority of the outstanding shares of
Preferred Stock voting as a single class, approved this Amended and Restated
Certificate of Incorporation by written consent in accordance with Section 228
of the General Corporation Law of the State of Delaware and written notice of
such was given by the Company in accordance with said Section 228.
[THIS SPACE INTENTIONALLY LEFT BLANK]
21.
<PAGE> 22
IN WITNESS WHEREOF, MEDIBUY.COM, INC. has caused this Amended and
Restated Certificate of Incorporation to be signed by its Chief Executive
Officer and President in San Diego, California this 17th day of December 1999.
MEDIBUY.COM, INC.
/s/ Dennis J. Murphy
---------------------------------------
DENNIS J. MURPHY,
Chief Executive Officer and President
22.
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
MEDIBUY.COM, INC.
(A DELAWARE CORPORATION)
APPROVED BY THE BOARD OF DIRECTORS ON MARCH 31, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I OFFICES..............................................................................1
Section 1. Registered Office............................................................1
Section 2. Other Offices................................................................1
ARTICLE II CORPORATE SEAL........................................................................1
Section 3. Corporate Seal...............................................................1
ARTICLE III STOCKHOLDERS' MEETINGS..............................................................1
Section 4. Place of Meetings............................................................1
Section 5. Annual Meeting...............................................................1
Section 6. Special Meetings.............................................................2
Section 7. Notice of Meetings...........................................................3
Section 8. Quorum.......................................................................3
Section 9. Adjournment and Notice of Adjourned Meetings.................................4
Section 10. Voting Rights................................................................4
Section 11. Joint Owners of Stock........................................................4
Section 12. List of Stockholders.........................................................4
Section 13. Action Without Meeting.......................................................5
Section 14. Organization.................................................................5
ARTICLE IV DIRECTORS............................................................................6
Section 15. Number and Term of Office....................................................6
Section 16. Powers.......................................................................6
Section 17. Term of Directors............................................................6
Section 18. Vacancies....................................................................7
Section 19. Resignation..................................................................7
Section 20. Removal......................................................................8
Section 21. Meetings.....................................................................8
(a) Annual Meetings..............................................................8
(b) Regular Meetings.............................................................8
(c) Special Meetings.............................................................8
(d) Telephone Meetings...........................................................8
(e) Notice of Meetings...........................................................9
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
(f) Waiver of Notice.............................................................9
Section 22. Quorum and Voting............................................................9
Section 23. Action Without Meeting.......................................................9
Section 24. Fees and Compensation........................................................9
Section 25. Committees..................................................................10
(a) Executive Committee.........................................................10
(b) Other Committees............................................................10
(c) Term........................................................................10
(d) Meetings....................................................................10
Section 26. Organization................................................................11
ARTICLE V OFFICERS............................................................................11
Section 27. Officers Designated.........................................................11
Section 28. Tenure and Duties of Officers...............................................11
(a) General.....................................................................11
(b) Duties of Chairman of the Board of Directors................................11
(c) Duties of President.........................................................12
(d) Duties of Vice Presidents...................................................12
(e) Duties of Secretary.........................................................12
(f) Duties of Chief Financial Officer...........................................12
Section 29. Delegation of Authority.....................................................13
Section 30. Resignations................................................................13
Section 31. Removal.....................................................................13
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION..............................................13
Section 32. Execution of Corporate Instruments..........................................13
Section 33. Voting of Securities Owned by the Corporation...............................13
ARTICLE VII SHARES OF STOCK.....................................................................14
Section 34. Form and Execution of Certificates..........................................14
Section 35. Lost Certificates...........................................................14
Section 36. Transfers...................................................................14
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 37. Fixing Record Dates..................................................... ...15
Section 38. Registered Stockholders.....................................................16
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION.................................................16
Section 39. Execution of Other Securities...............................................16
ARTICLE IX DIVIDENDS...........................................................................16
Section 40. Declaration of Dividends....................................................16
Section 41. Dividend Reserve............................................................17
ARTICLE X FISCAL YEAR.........................................................................17
Section 42. Fiscal Year.................................................................17
ARTICLE XI INDEMNIFICATION.....................................................................17
Section 43. Indemnification of Directors, Executive Officers, Other Officers,
Employees and Other Agents..................................................17
(a) Directors, Executive Officers and Other Officers............................17
(b) Employees and Other Agents..................................................17
(c) Expenses....................................................................17
(d) Enforcement.................................................................18
(e) Non-Exclusivity of Rights...................................................19
(f) Survival of Rights..........................................................19
(g) Insurance...................................................................19
(h) Amendments..................................................................19
(i) Saving Clause...............................................................19
(j) Certain Definitions.........................................................19
ARTICLE XII NOTICES.............................................................................20
Section 44. Notices.....................................................................20
(a) Notice to Stockholders......................................................20
(b) Notice to Directors.........................................................20
(c) Affidavit of Mailing........................................................21
(d) Time Notices Deemed Given...................................................21
(e) Methods of Notice...........................................................21
(f) Failure to Receive Notice...................................................21
</TABLE>
ii.
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
(g) Notice to Person with Whom Communication Is Unlawful........................21
(h) Notice to Person with Undeliverable Address.................................21
ARTICLE XIII AMENDMENTS..........................................................................22
Section 45. Amendments..................................................................22
ARTICLE XIV REPEALED............................................................................22
Section 46. Repealed....................................................................22
ARTICLE XV LOANS TO OFFICERS...................................................................22
Section 47. Loans to Officers...........................................................22
ARTICLE XVI Miscellaneous.......................................................................22
Section 48. Annual Report...............................................................22
</TABLE>
iv.
<PAGE> 6
AMENDED AND RESTATED
BYLAWS
OF
MEDIBUY.COM, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent, National
Corporate Research, Ltd.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware, as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the principal office of the corporation required
to be maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any
1.
<PAGE> 7
supplement thereto) given by or at the direction of the Board of Directors, (B)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (C) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not later than the close of business on the sixtieth (60th) day nor
earlier than the close of business on the ninetieth (90th) day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that no annual meeting was held in the previous year or the
date of the annual meeting has been changed by more than thirty (30) days from
the date contemplated at the time of the previous year's proxy statement, notice
by the stockholder to be timely must be so received not earlier than the close
of business on the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the sixtieth (60th) day prior
to such annual meeting or, in the event public announcement of the date of such
annual meeting is first made by the corporation fewer than seventy (70) days
prior to the date of such annual meeting, the close of business on the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the corporation. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholders' meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he should
so determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
2.
<PAGE> 8
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors shall fix. At any time or times that the
corporation is subject to Section 2115(b) of the California General Corporation
Law ("CGCL"), stockholders holding five percent (5%) or more of the outstanding
shares shall have the right to call a special meeting of stockholders as set
forth in Section 18(c) herein.
(b) If a special meeting is properly called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons properly requesting the meeting may set the time and place of the
meeting and give the notice. Nothing contained in this paragraph (b) shall be
construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast in all matters other
than the election
3.
<PAGE> 9
of directors, the affirmative vote of a majority of shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders. Except as otherwise provided by statute,
the Certificate of Incorporation or these Bylaws, directors shall be elected by
a plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by statute or by the Certificate of Incorporation or
these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast by the holders of shares of such
class or classes or series shall be the act of such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the Delaware General Corporation Law, Section 217(b). If
the instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
4.
<PAGE> 10
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of Incorporation, any
action required by statute to be taken at any annual or special meeting of the
stockholders, or any action which may be taken at any annual or special meeting
of the stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written consent has been given in accordance with
Section 228 of the Delaware General Corporation Law.
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
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(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the corporation shall be fixed by the Board of Directors from time to time.
Directors need not be stockholders unless so required by the Certificate of
Incorporation. If for any cause, the directors shall not have been elected at an
annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. TERM OF DIRECTORS.
(a) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, directors
shall be elected at each annual meeting of stockholders for a term of one year.
Each director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(b) No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to Section 2115(b) of the CGCL. During such
time or times that the corporation is subject to Section 2115(b) of the CGCL,
every stockholder entitled to vote at an election for directors may cumulate
such stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
such stockholder's shares are otherwise entitled, or distribute the
stockholder's votes on the same principle among as many
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candidates as such stockholder thinks fit. No stockholder, however, shall be
entitled to so cumulate such stockholder's votes unless (a) the names of such
candidate or candidates have been placed in nomination prior to the voting and
(b) the stockholder has given notice at the meeting, prior to the voting, of
such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
SECTION 18. VACANCIES.
(a) Unless otherwise provided in the Certificate of Incorporation, any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Bylaw in the case of the death,
removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
Delaware General Corporation Law.
(c) At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy, the directors
then in office who have been elected by stockholders shall constitute less than
a majority of the directors then in office, then
(i) any holder or holders of an aggregate of five percent (5%) or
more of the total number of shares at the time outstanding having the right to
vote for those directors may call a special meeting of stockholders; or
(ii) the Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of the stockholders, to be held to elect the entire board, all in
accordance with Section 305(c) of the CGCL, the term of office of any director
shall terminate upon that election of a successor.
SECTION 19. RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no
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such specification is made, it shall be deemed effective at the pleasure of the
Board of Directors. When one or more directors shall resign from the Board of
Directors, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen shall hold
office for the unexpired portion of the term of the Director whose place shall
be vacated and until his successor shall have been duly elected and qualified.
SECTION 20. REMOVAL.
(a) Subject to any limitations imposed by applicable law (and assuming
the corporation is not subject to Section 2115 of the CGCL), the Board of
Directors or any director may be removed from office at any time (i) with cause
by the affirmative vote of the holders of a majority of the voting power of all
then-outstanding shares of voting stock of the corporation entitled to vote at
an election of directors or (ii) without cause by the affirmative vote of the
holders of a majority of the voting power of all then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors.
(b) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
SECTION 21. MEETINGS
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of Directors and publicized among all directors. No
formal notice shall be required for a regular meeting of the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
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(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, postage prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time, a quorum of the Board of Directors shall consist of a
majority of the exact number of directors fixed from time to time by the Board
of Directors in accordance with the Certificate of Incorporation; provided,
however, at any meeting, whether a quorum be present or otherwise, a majority of
the directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
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SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of Preferred Stock, the provisions of subsections (a) or (b)
of this Bylaw may at any time increase or decrease the number of members of a
committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this
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Section 25 shall be held at such times and places as are determined by the Board
of Directors, or by any such committee, and when notice thereof has been given
to each member of such committee, no further notice of such regular meetings
need be given thereafter. Special meetings of any such committee may be held at
any place which has been determined from time to time by such committee, and may
be called by any director who is a member of such committee, upon written notice
to the members of such committee of the time and place of such special meeting
given in the manner provided for the giving of written notice to members of the
Board of Directors of the time and place of special meetings of the Board of
Directors. Notice of any special meeting of any committee may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends such special
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, (if a director) or, in the absence of any such person, a chairman of
the meeting chosen by a majority of the directors present, shall preside over
the meeting. The Secretary, or in his absence, any Assistant Secretary directed
to do so by the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
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(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such
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other duties and have such other powers as the Board of Directors or the
President shall designate from time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
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ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
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(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten (10) days after the date
on which such a request is received, adopt a resolution fixing the record date.
If no record date has been fixed by the Board of Directors within ten (10) days
of the date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a
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record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty (60) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting.
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Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation and applicable
law.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS, EXECUTIVE OFFICERS AND OTHER OFFICERS. The corporation
shall indemnify its directors, executive officers (for the purposes of this
Article XI, "executive officers" shall have the meaning defined in Rule 3b-7
promulgated under the 1934 Act) and other officers to the fullest extent not
prohibited by the Delaware General Corporation Law or any other applicable law;
provided, however, that the corporation may modify the extent of such
indemnification by individual contracts with its directors, executive officers
and other officers; and, provided, further, that the corporation shall not be
required to indemnify any director, executive officer or other officer in
connection with any proceeding (or part thereof) initiated by such person unless
(i) such indemnification is expressly required to be made by law, (ii) the
proceeding was authorized by the Board of Directors of the corporation, (iii)
such indemnification is provided by the corporation, in its sole discretion,
pursuant to the powers vested in the corporation under the Delaware General
Corporation Law or any other applicable law or (iv) such indemnification is
required to be made under subsection (d).
(b) EMPLOYEES AND OTHER AGENTS. The corporation shall have power to
indemnify its employees and other agents as set forth in the Delaware General
Corporation Law or any other applicable law. The Board of Directors shall have
the power to delegate the determination of whether indemnification shall be
given to any such person except to such officers or other persons as the Board
of Directors shall determine.
(c) EXPENSES. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he
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is or was a director, executive officer or other officer of the corporation, or
is or was serving at the request of the corporation as a director, executive
officer or other officer of another corporation, partnership, joint venture,
trust or other enterprise, prior to the final disposition of the proceeding,
promptly following request therefor, all expenses incurred by any director,
executive officer or other officer in connection with such proceeding upon
receipt of an undertaking by or on behalf of such person to repay said amounts
if it should be determined ultimately that such person is not entitled to be
indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(e) of this Bylaw, no advance shall be made by the corporation to an executive
officer or other officer of the corporation (except by reason of the fact that
such executive officer or other officer is or was a director of the corporation,
in which event this paragraph shall not apply) in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, if a
determination is reasonably and promptly made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors, executive
officers or other officers under this Bylaw shall be deemed to be contractual
rights and be effective to the same extent and as if provided for in a contract
between the corporation and the director, executive officer or other officer.
Any right to indemnification or advances granted by this Bylaw to a director,
executive officer or other officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the Delaware General
Corporation Law or any other applicable law for the corporation to indemnify the
claimant for the amount claimed. In connection with any claim by an executive
officer or other officer of the corporation (except in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such executive officer or other officer is or was a director of
the corporation) for advances, the corporation shall be entitled to raise a
defense as to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation, or with respect to any
criminal action or proceeding that such person acted without reasonable cause to
believe that his conduct was lawful. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law or any other applicable law, nor an actual determination
by the corporation (including its Board of Directors, independent legal counsel
or its stockholders)
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that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that claimant has not met the
applicable standard of conduct. In any suit brought by a director, executive
officer or other officer to enforce a right to indemnification or to an
advancement of expenses hereunder, the burden of proving that the director,
executive officer or other officer is not entitled to be indemnified, or to such
advancement of expenses, under this Article XI or otherwise shall be on the
corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law or any
other applicable law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation or any other applicable law, upon approval by
the Board of Directors, may purchase insurance on behalf of any person required
or permitted to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director, executive officer or
other officer and to the full extent not prohibited by any applicable portion of
this Bylaw that shall not have been invalidated, or by any other applicable law.
If this Section 43 shall be invalid due to the application of the
indemnification provisions of another jurisdiction, then the corporation shall
indemnify each director, executive officer or other officer to the full extent
under applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or
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judgment and any other costs and expenses of any nature or kind incurred in
connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, other officer, employee, trustee or
agent of another corporation, partnership, joint venture, trust or other
enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
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(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action
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taken by the corporation is such as to require the filing of a certificate under
any provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, these Bylaws may be amended or repealed and new Bylaws adopted by the
stockholders entitled to vote. The Board of Directors shall also have the power,
if such power is conferred upon the Board of Directors by the Certificate of
Incorporation, to adopt, amend, or repeal Bylaws (including, without limitation,
the amendment of any Bylaw setting forth the number of Directors who shall
constitute the whole Board of Directors).
ARTICLE XIV
SECTION 46. INTENTIONALLY OMITTED.
ARTICLE XV
LOANS TO OFFICERS
SECTION 47. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE XVI
MISCELLANEOUS
SECTION 48. ANNUAL REPORT.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the CGCL, additional information as
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required by Section 1501(b) of the CGCL shall also be contained in such report,
provided that if the corporation has a class of securities registered under
Section 12 of the 1934 Act, that Act shall take precedence. Such report shall be
sent to stockholders at least fifteen (15) days prior to the next annual meeting
of stockholders after the end of the fiscal year to which it relates.
(b) If and so long as there are fewer than 100 holders of record of
the corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
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EXHIBIT 3.3
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MEDIBUY.COM, INC.
Dennis J. Murphy hereby certifies that:
ONE: The original name of this corporation was HS.com, Inc. and the date
of filing the original Certificate of Incorporation of this corporation with the
Secretary of State of the State of Delaware was August 18, 1998. This
corporation changed its name to medibuy.com, inc. and filed an Amended and
Restated Certificate of Incorporation on January 29, 1999. This corporation also
filed an Amended and Restated Certificate of Incorporation on March 16, 1999,
filed an Amended and Restated Certificate of Incorporation on June 8, 1999,
filed a Certificate of Amendment to its Amended and Restated Certificate of
Incorporation on November 1, 1999, filed a Certificate of Amendment to its
Amended and Restated Certificate of Incorporation on December 7, 1999 and filed
an Amended and Restated Certificate of Incorporation on December 21, 1999.
TWO: He is the duly elected and acting Chief Executive Officer and
President of MEDIBUY.COM, INC., a Delaware corporation.
THREE: The Amended and Restated Certificate of Incorporation, as
amended, of this corporation is hereby amended and restated in its entirety to
read as follows:
I.
The name of the corporation is MEDIBUY.COM, INC. (hereinafter referred
to as the "Company" or the "Corporation").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
National Corporate Research, Ltd.
9 East Loockerman Street
Dover, DE 19901
County of Kent
The name of the Corporation's registered agent at said address is
National Corporation Research, Ltd.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
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IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is one hundred fifteen
million (115,000,000). One hundred million (100,000,000) shares shall be Common
Stock, each having a par value of one-tenth of one cent ($0.001) (the "Common
Stock"). Fifteen million (15,000,000) shares shall be Preferred Stock, each
having a par value of one-tenth of one cent ($0.001) (the "Preferred Stock").
Effective at the time of filing with the Secretary of State of the State
of Delaware of this Amended and Restated Certificate of Incorporation, each
issued and outstanding share of the Corporation's Common Stock shall,
automatically and without any action on the part of the respective holders
thereof, be converted into two (2) shares of the Corporation's Common Stock. The
number of authorized shares of Common Stock may be increased or decreased (but
not below the number of shares of Common Stock then outstanding) by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock and Preferred Stock of the Corporation (voting together on an
as-if-converted basis, irrespective of the provisions of Section 242(b)(2) of
the Delaware General Corporation Law ("DGCL")).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the DGCL, to fix or alter from time
to time the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations or restrictions of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; and to increase or
decrease the number of shares of any series subsequent to the issuance of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be decreased in
accordance with the foregoing sentence, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
C. Sixty-eight thousand one hundred (68,100) of the authorized shares of
Preferred Stock are hereby designated "Series A Preferred Stock" (the "Series A
Preferred"). Three hundred thirty-four thousand nine hundred seven (334,907) of
the authorized shares of Preferred Stock are hereby designated "Series B
Preferred Stock" (the "Series B Preferred"). Five million (5,000,000) of the
authorized shares of Preferred Stock are hereby designated "Series C Preferred
Stock" (the "Series C Preferred"). Two million eight hundred thousand
(2,800,000) of the authorized shares of Preferred Stock are hereby designated
"Series D Preferred Stock" (the "Series D Preferred").
D. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred are as follows:
1. DIVIDEND RIGHTS.
The holders of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred, in preference to the holders of any
Common Stock or other class or series
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<PAGE> 3
of capital stock of the Corporation ("Junior Stock"), shall be entitled to
receive dividends when, as and if declared by the Board of Directors, but only
out of funds legally available therefor. So long as any shares of Preferred
Stock shall be outstanding, no dividend, whether in cash or property, shall be
paid or declared, nor shall any other distribution be made, on any Junior Stock,
nor shall any shares of any Junior Stock of the Corporation be purchased,
redeemed, or otherwise acquired for value by the Corporation (except for
acquisitions of Common Stock by the Corporation pursuant to agreements
previously approved by the Corporation's Board of Directors which permit the
Corporation to repurchase such shares upon termination of services to the
Corporation or in exercise of the Corporation's right of first refusal pursuant
to agreements previously approved by the Corporation's Board of Directors upon a
proposed transfer) unless a dividend is paid with respect to all outstanding
shares of Series A Preferred, Series B Preferred, Series C Preferred and Series
D Preferred in an amount for each share of such Preferred Stock equal to or
greater than the aggregate amount of such dividends payable with respect to the
number of shares of Common Stock into which each such share of Preferred Stock
could then be converted. The rights to dividends on shares of Preferred Stock
shall not be cumulative. The provisions of this Section 1 shall not, however,
apply to (i) a dividend payable solely in Junior Stock, (ii) the acquisition of
shares of any Junior Stock in exchange for other shares of Junior Stock, (iii)
any redemption of shares pursuant to Section 5; or (iv) any repurchase of any
outstanding securities of the Corporation that is unanimously approved by the
Corporation's Board of Directors. The holders of Preferred Stock expressly waive
their rights, if any, as described in the California General Corporation Law
sections 502, 503 and 506 as they relate to repurchases of shares upon
termination of employment or service as a consultant or director.
2. VOTING RIGHTS.
(a) GENERAL RIGHTS. Except as otherwise provided herein or
as required by law, the Series A Preferred, the Series B Preferred, the Series C
Preferred and the Series D Preferred shall be voted with the Common Stock and
not as a separate class, at any annual or special meeting of stockholders of the
Corporation, and may act by written consent in the same manner as the Common
Stock, in either case upon the following basis: each holder of shares of Series
A Preferred, Series B Preferred, Series C Preferred and Series D Preferred,
respectively, shall be entitled to such number of votes as shall be equal to the
number of shares of Common Stock into which such holder's aggregate number of
shares of Series A Preferred, Series B Preferred, Series C Preferred and Series
D Preferred are convertible (pursuant to Section 4 hereof) immediately after the
close of business on the record date fixed for such meeting (or if no such
record date is established, at the date such vote is taken) or the effective
date of such written consent. Fractional votes shall not, however, be permitted
and any fractional voting rights resulting from the above formula (after
aggregating all shares into which shares of each series of Preferred Stock held
by each holder could be converted) shall be rounded to the nearest whole number
(with one-half being rounded upward). Each holder of Common Stock shall be
entitled to one (1) vote for each share of Common Stock held.
(b) SEPARATE VOTE OF PREFERRED STOCK. In addition to the
rights of any series of Preferred Stock which may from time to time come into
existence, and in addition to any other vote or consent required herein or by
law, the prior affirmative vote or written consent of the holders of at least a
majority of the outstanding Series A Preferred, Series B Preferred,
3.
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Series C Preferred and Series D Preferred, voting together as a single class on
an as-if-converted basis, shall be necessary for effecting or validating the
following actions:
(i) Any amendment, alteration, or repeal of any
provision of the Certificate of Incorporation of the Corporation (including any
filing of a Certificate of Designation) that alters or changes the voting
powers, preferences, rights, privileges or restrictions of the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred, or that
otherwise materially and adversely affects the voting powers, preferences,
rights, privileges or restrictions of the Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred;
(ii) Any issuance, authorization or any
designation, whether by reclassification or otherwise, of any new class or
series of stock or any other securities convertible into or exchangeable for
equity securities of the Corporation with a ranking senior to or on a parity
with the Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred in right of redemption, liquidation preference, voting or dividends,
or any increase in the authorized or designated number of any such new class or
series;
(iii) Any Asset Transfer or Acquisition (each as
defined in Section 3(c));
(iv) Any voluntary dissolution or liquidation of
the Corporation;
(v) Any sale of any subsidiary or equity securities
of any subsidiary;
(vi) Engaging in any business that is substantially
different from the Corporation's business as of the Series C Preferred Original
Issue Date (as defined below).
(vii) Any redemption or repurchase of Common Stock
or other equity securities of the Corporation except for (A) redemptions
pursuant to Section 5, (B) repurchases pursuant to agreements approved by the
Board of Directors which permit the Corporation to repurchase such shares upon
termination of an employee's or consultant's services to the Corporation or (C)
acquisition upon exercise of the Corporation's right of first refusal pursuant
to agreements approved by the Board of Directors upon a proposed transfer).
(c) BOARD OF DIRECTORS. The Corporation shall not, without
the written consent or affirmative vote of (i) the holders of at least a
majority of the then outstanding Common Stock consenting or voting (as the case
may be) as a single class and (ii) the holders of at least a majority of the
then outstanding Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred, each consenting or voting (as the case may be) together as a
single class, increase or decrease the maximum number of directors constituting
the Board of Directors from ten (10). The holders of a majority of Common Stock
and Series A Preferred, voting together as a single class, shall be entitled to
elect four (4) members of the Corporation's Board of Directors (the "Common and
Series A Directors") at each meeting or pursuant to each consent of the
Corporation's stockholders for the election of directors, and to remove from
office
4.
<PAGE> 5
such directors and to fill any vacancy caused by the resignation, death or
removal of such directors. For so long as the outstanding shares of Series B
Preferred represent 900,000 (subject to adjustments for stock dividends, stock
distributions, stock splits, reverse stock splits or combinations of shares) or
more shares of the voting stock of the Corporation on an as converted and fully
diluted basis, the holders of the Series B Preferred, voting as a single class,
shall be entitled to elect one (1) member of the Corporation's Board of
Directors (the "Series B Director") at each meeting or pursuant to each consent
of the Corporation's stockholders for the election of directors, and to remove
from office such director and to fill any vacancy caused by the resignation,
death or removal of such director. For so long as the outstanding shares of
Series C Preferred and Series D Preferred represent 900,000 (subject to
adjustments for stock dividends, stock distributions, stock splits, reverse
stock splits or combinations of shares) or more shares of the voting stock of
the Corporation on an as converted and fully diluted basis, the holders of
Series C Preferred and Series D Preferred, voting together as a single class,
shall be entitled to elect three (3) members of the Corporation's Board of
Directors (the "Series C and D Directors") at each meeting or pursuant to each
consent of the Corporation's stockholders for the election of directors, and to
remove from such office such director and to fill any vacancy caused by the
resignation, death or removal of such director. All of the holders of Common
Stock and Preferred Stock of the Corporation, voting as a single class, shall
elect the remaining members of the Corporation's Board of Directors (the
"Combined Class Directors") at each meeting or pursuant to each consent of the
Corporation's Stockholders for the election of directors, and to remove from
such office such director and to fill any vacancy caused by the resignation,
death or removal of such director. No person entitled to vote at an election for
directors may cumulate votes to which such person is entitled, unless, at the
time of such election, the Corporation is subject to Section 2115 of the
California General Corporation Law ("CGCL").
3. LIQUIDATION RIGHTS.
(a) Upon any liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of Series A Preferred, Series B Preferred
or Common Stock, subject to the rights of any series of Preferred Stock that may
from time to time come into existence, the holders of Series C Preferred and
Series D Preferred shall be entitled to be first paid out of the assets of the
Corporation an amount per share of Series C Preferred and Series D Preferred,
respectively, equal to their respective Original Issue Price (as defined below)
plus all declared and unpaid dividends on the Series C Preferred and Series D
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
Series C Preferred and Series D Preferred held by them. After the holders of
Series C Preferred and Series D Preferred receive an amount equal to their
Original Issue Prices plus all declared and unpaid dividends (if any), subject
to the rights of any series of Preferred Stock that may from time to time come
into existence, the holders of the Series A Preferred and the Series B Preferred
shall be entitled to be paid out of the assets of the Corporation an amount per
share of Series A Preferred and Series B Preferred, respectively, equal to their
respective Original Issue Price plus all declared and unpaid dividends on the
Series A Preferred and Series B Preferred (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each share of Series A Preferred and Series B Preferred held by
them. If, upon any such liquidation, distribution, or winding up, the assets of
the Corporation shall be insufficient to make payment in full to all holders of
Series A Preferred, Series B Preferred, Series C Preferred
5.
<PAGE> 6
and Series D Preferred of the liquidation preference set forth in this Section
3(a), subject to the rights of any series of Preferred Stock that may from time
to time come into existence, then such assets shall be first distributed among
the holders of Series C Preferred and Series D Preferred ratably in proportion
to the full amounts to which they would otherwise be respectively entitled based
on their respective liquidation preferences and thereafter, if any assets are
remaining, be distributed among the holders of Series A and Series B Preferred
at the time outstanding, ratably in proportion to the full amounts to which they
would otherwise be respectively entitled based on their respective liquidation
preferences.
(b) After the payment of the full liquidation preference
of the Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred as set forth in Section 3(a) above, and any other distribution that
may be required with respect to any series of Preferred Stock that may from time
to time come into existence, the remaining assets of the Corporation legally
available for distribution, if any, shall be distributed ratably to the holders
of the Common Stock.
(c) The following events shall be considered a liquidation
under this Section:
(i) any consolidation or merger of the Corporation
with or into any other corporation or other entity or person, or any other
transaction (including without limitation, a sale of stock or a
recapitalization) in which the stockholders of the Corporation immediately prior
to such consolidation, merger or other transaction own less than 50% of the
surviving entity's voting power immediately after such consolidation, merger or
other transaction excluding any consolidation or merger effected exclusively to
change the domicile of the Corporation (an "Acquisition"); or
(ii) a sale of all or substantially all of the
assets of the Corporation in a single transaction or series of related
transactions (an "Asset Transfer").
(d) In either of such events described in clause 3(c)(i)
or 3(c)(ii) above, if the consideration received by this Corporation is other
than cash, its value will be deemed its fair market value as determined in good
faith by the Board of Directors. Any securities shall be valued as follows:
(i) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (ii) below:
(a) If traded on a securities exchange or
through the Nasdaq National Market, the value shall be deemed to be the average
of the closing prices of the securities on such quotation system over the thirty
(30) day period ending three (3) days prior to the closing;
(b) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
6.
<PAGE> 7
(c) If there is no active public market, the
value shall be the fair market value thereof, as determined by the Board of
Directors.
(ii) The method of valuation of securities subject
to investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (i) (A), (B) or (C) to reflect the approximate fair
market value thereof, as determined by the Board of Directors.
(e) ORIGINAL ISSUE PRICE. The "Original Issue Price" of
(i) the Series A Preferred shall be ten dollars ($10.00) per share, (ii) the
Series B Preferred shall be fifteen dollars ($15.00) per share, (iii) the Series
C Preferred shall be three dollars and sixty cents ($3.60) per share and (iv)
the Series D Preferred shall be twelve dollars and nine cents ($12.09) per
share.
4. CONVERSION RIGHTS.
The holders of the Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred shall have the following rights with
respect to the conversion of such shares into shares of Common Stock (the
"Conversion Rights"):
(a) OPTIONAL CONVERSION. Subject to and in compliance with
the provisions of this Section 4, any shares of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred may, at the option of the
holder, be converted at any time and from time to time into the number of
fully-paid and nonassessable shares of Common Stock as is determined by
multiplying the "Series A Preferred Conversion Rate," the "Series B Preferred
Conversion Rate," "Series C Preferred Conversion Rate" or the "Series D
Preferred Conversion Rate" as applicable, then in effect (determined as provided
in Section 4(b)) by the respective number of shares of Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred, respectively,
being converted.
(b) CONVERSION RATES. The conversion rate in effect at any
time for conversion of the Series A Preferred (the "Series A Preferred
Conversion Rate"), the Series B Preferred (the "Series B Preferred Conversion
Rate"), the Series C Preferred (the "Series C Preferred Conversion Rate") and
the Series D Preferred (the "Series D Preferred Conversion Rate"), respectively,
shall be the quotient obtained by dividing the Original Issue Price of the
Series A Preferred, the Series B Preferred, the Series C Preferred and the
Series D Preferred, respectively, by the "Series A Preferred Conversion Price,"
the "Series B Preferred Conversion Price," the "Series C Conversion Price," and
the "Series D Preferred Conversion Price" respectively, calculated as provided
in Section 4(c).
(c) CONVERSION PRICES. The conversion price for the Series
A Preferred, the Series B Preferred, the Series C Preferred and the Series D
Preferred, respectively, shall initially be the respective Original Issue Price
of the Series A Preferred (the "Series A Preferred Conversion Price"), the
Series B Preferred (the "Series B Preferred Conversion Price"), the Series C
Preferred (the "Series C Preferred Conversion Price") and the Series D Preferred
(the "Series D Conversion Price"). Such initial Series A Preferred Conversion
Price, Series B
7.
<PAGE> 8
Preferred Conversion Price, Series C Preferred Conversion Price and Series D
Preferred Conversion Price shall be adjusted from time to time in accordance
with this Section 4. Further, after giving effect to the ten-for-one
(____-for-____) stock split being effected by the filing of this Amended and
Restated Certificate of Incorporation, the Series A Preferred Conversion Price
is $_______ per share, the Series B Preferred Conversion Price is $_______ per
share, the Series C Preferred Conversion Price is $_______ per share and the
Series D Preferred Conversion Price is $_______ per share. All references herein
to the Series A Preferred Conversion Price, Series B Preferred Conversion Price,
Series C Preferred Conversion Price and Series D Preferred Conversion Price
shall mean the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price and Series D Preferred
Conversion Price, respectively, as so adjusted and then in effect.
(d) MECHANICS OF CONVERSION. Each holder of Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for the Series A Preferred,
Series B Preferred, Series C Preferred and Series D Preferred, and shall give
written notice to the Corporation at such office that such holder elects to
convert the same. Such notice shall state the number of shares of Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred being
converted. Thereupon, the Corporation shall promptly issue and deliver at such
office to such holder a certificate or certificates for the number of shares of
Common Stock to which such holder is entitled and shall promptly pay (i) in cash
or, to the extent sufficient funds are not then legally available therefor, in
Common Stock (at the Common Stock's fair market value determined by the Board of
Directors as of the date of such conversion), any declared and unpaid dividends
on the shares of Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred being converted and (ii) in cash (at the Common Stock's fair
market value determined by the Board of Directors as of the date of conversion)
the value of any fractional share of Common Stock otherwise issuable to any
holder of Series A Preferred, Series B Preferred, Series C Preferred and Series
D Preferred, as applicable. In the event less than all shares represented by a
surrendered certificate are converted, a new certificate shall be issued to the
holder representing the unconverted shares. Such conversion shall be deemed to
have been made at the close of business on the date of such surrender of the
certificates representing the shares of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date. If the conversion is in connection with an underwritten
offering of securities registered pursuant to the Securities Act of 1933, the
conversion may, at the option of any holder tendering Series A Preferred, Series
B Preferred, Series C Preferred or Series D Preferred for conversion, be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive
Common Stock upon conversion of such Series A Preferred, Series B Preferred,
Series C Preferred or Series D Preferred shall not be deemed to have converted
such Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred until immediately prior to the closing of such sale of securities.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. The term
"Original Issue Date" shall mean (i) with respect to the Series A Preferred,
January 29, 1999,
8.
<PAGE> 9
(ii) with respect to the Series B Preferred, March 17, 1999, (iii) with respect
to the Series C Preferred, the date the first share of Series C Preferred is
issued, and (iv) with respect to the Series D Preferred, [August ____, 1999]. If
the Corporation shall at any time or from time to time after the applicable
Original Issue Date effect a subdivision of the outstanding Common Stock without
a corresponding subdivision of the Preferred Stock, the Series A Preferred
Conversion Price, the Series B Preferred Conversion Price, the Series C
Preferred Conversion Price and the Series D Preferred Conversion Price, as
applicable, in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation shall at any time or
from time to time after the Original Issue Date combine the outstanding shares
of Common Stock into a smaller number of shares without a corresponding
combination of the Preferred Stock, the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price, the Series C Preferred Conversion Price and
Series D Preferred Conversion Price, as applicable, in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
Section 4(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(f) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND
DISTRIBUTIONS.
(i) If the Corporation at any time or from time to
time after the applicable Original Issue Date makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, in each such
event the Series A Preferred Conversion Price, the Series B Preferred Conversion
Price, the Series C Preferred Conversion Price or the Series D Preferred
Conversion Price, as applicable, that are then in effect shall be decreased as
of the time of such issuance or, in the event such record date is fixed, as of
the close of business on such record date, by multiplying the Series A Preferred
Conversion Price, the Series B Preferred Conversion Price, the Series C
Preferred Conversion Price or the Series D Preferred Conversion Price, as
applicable, then in effect by a fraction (i) the numerator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, and (ii) the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Series A Preferred Conversion
Price, the Series B Preferred Conversion Price, the Series C Preferred
Conversion Price and the Series D Preferred Conversion Price, as applicable,
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price, the Series C Preferred Conversion Price and the Series D
Preferred Conversion Price, as applicable, shall be adjusted pursuant to this
Section 4(f) to reflect the actual payment of such dividend or distribution.
(ii) If the Corporation at any time or from time to
time after the applicable Original Issue Date makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive, any
distribution payable in securities or other property of the Corporation other
than Common Stock and other than as otherwise adjusted in this Section 4, then
and in each such event provision shall be made so that the holders of the Series
A Preferred
9.
<PAGE> 10
Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series
D Preferred Stock shall receive upon conversion thereof, in addition to the
number of shares of Common Stock receivable thereupon, the amount of securities
and other property which they would have received had their shares of the Series
A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock been converted into Common Stock on the date of
such event and had they thereafter, during the period from the date of such
event to and including the date of conversion, retained such securities and
other property receivable by them as aforesaid during such period, subject to
all other adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Series A Preferred Stock, the Series
B Preferred Stock, the Series C Preferred Stock and the Series D Preferred
Stock.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the applicable Original
Issue Date, the Common Stock issuable upon the conversion of the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than an
Acquisition or Asset Transfer as defined in Section 3(c) as to which Section 3
applies or a subdivision or combination of shares or stock dividend or a
reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Section 4), in any such event each holder of Series A Preferred, Series
B Preferred, Series C Preferred and Series D Preferred, as applicable, shall
have the right thereafter to convert such stock into the kind and amount of
stock and other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred could have been converted immediately
prior to such recapitalization, reclassification or change, all subject to
further adjustment as provided herein or with respect to such other securities
or property by the terms thereof.
(h) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the applicable Original Issue
Date, there is a capital reorganization of the Common Stock (other than an
Acquisition or Asset Transfer as defined in Section 3(c) as to which Section 3
applies or a recapitalization, subdivision, combination, reclassification,
exchange or substitution of shares provided for elsewhere in this Section 4), as
a part of such capital reorganization, provision shall be made so that the
holders of the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred, as applicable, shall thereafter be entitled to receive upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred, as applicable, the number of shares of stock or other
securities or property of the Corporation to which a holder of the number of
shares of Common Stock deliverable upon conversion would have been entitled on
such capital reorganization, subject to adjustment in respect of such stock or
securities by the terms thereof. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Section 4 with respect to
the rights of the holders of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred, as applicable, after the capital
reorganization such that the provisions of this Section 4 (including adjustment
of the Series A Preferred Conversion Price, Series B Preferred Conversion Price,
Series C Preferred Conversion Price and Series D Preferred Conversion Price then
in effect and the number of shares issuable upon conversion of the Series
10.
<PAGE> 11
A Preferred, Series B Preferred, Series C Preferred and Series D Preferred)
shall be applicable after that event and be as nearly equivalent as practicable.
(i) SALE OF SHARES BELOW APPLICABLE CONVERSION PRICE.
(i) If at any time or from time to time after the
applicable Original Issue Date, the Corporation issues or sells, or is deemed by
the express provisions of this Section 4(i) to have issued or sold, Additional
Shares of Common Stock (as defined in Section 4(i)(iv) below), other than as a
dividend or other distribution on any class of stock as provided in Section 4(f)
above, and other than a subdivision or combination of shares of Common Stock as
provided in Section 4(e) above, for an Effective Price (as defined in Section
4(i)(iv) below) less than the then effective Series A Preferred Conversion
Price, Series B Preferred Conversion Price, Series C Preferred Conversion Price
or Series D Preferred Conversion Price, as applicable, then and in each such
case the then existing Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price or Series D Preferred
Conversion Price, as applicable, shall be reduced, as of the opening of business
on the date of such issue or sale, to a price (calculated to the nearest tenth
of a cent) determined by multiplying the Series A Preferred Conversion Price,
Series B Preferred Conversion Price, Series C Preferred Conversion Price or
Series D Preferred Conversion Price, as applicable, by a fraction (i) the
numerator of which shall be (A) the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale, plus (B)
the number of shares of Common Stock which the aggregate consideration received
(as defined in Section 4(i)(ii)) by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Series A
Preferred Conversion Price, Series B Preferred Conversion Price, Series C
Preferred Conversion Price or Series D Preferred Conversion Price, as
applicable, and (ii) the denominator of which shall be the number of shares of
Common Stock deemed outstanding (as defined below) immediately prior to such
issue or sale plus the total number of Additional Shares of Common Stock so
issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock issued and outstanding, (B) the number of
shares of Common Stock into which the then outstanding shares of Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred could
be converted if fully converted on the day immediately preceding the given date,
and (C) the number of shares of Common Stock which could be obtained through the
exercise or conversion of all other rights, options and convertible securities
outstanding (including rights to acquire convertible securities and the
conversion of such securities into Common Stock) on the day immediately
preceding the given date.
(ii) For the purpose of making any adjustment
required under this Section 4(i), the consideration received by the Corporation
for any issue or sale of securities shall (A) to the extent it consists of cash,
be computed at the net amount of cash received by the Corporation after
deduction of any underwriting or similar commissions, compensation or
concessions paid or allowed by the Corporation in connection with such issue or
sale but without deduction of any expenses payable by the Corporation, (B) to
the extent it consists of property other than cash, be computed at the fair
value of that property as determined in good faith by the Board of Directors,
and (C) if Additional Shares of Common Stock, Convertible Securities (as defined
in Section 4(i)(iii)) or rights or options to purchase either Additional Shares
of Common
11.
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Stock or Convertible Securities are issued or sold together with other stock or
securities or other assets of the Corporation for a consideration which covers
both, be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Additional Shares of Common Stock, Convertible Securities or rights or
options.
(iii) For the purpose of the adjustment required
under this Section 4(i), if the Corporation issues or sells (i) stock or other
securities convertible into, or exchangeable for, Additional Shares of Common
Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") or (ii) rights or options (including warrants) for the
purchase of Additional Shares of Common Stock or Convertible Securities and if
the Effective Price of such Additional Shares of Common Stock is less than the
Series A Preferred Conversion Price, Series B Preferred Conversion Price, Series
C Preferred Conversion Price or Series D Preferred Conversion Price, as
applicable, in each case the Corporation shall be deemed to have issued at the
time of the issuance of such rights or options or Convertible Securities the
maximum number of Additional Shares of Common Stock issuable upon exercise or
conversion thereof and to have received as consideration for the issuance of
such shares (for the purpose of computing the "Effective Price") an amount equal
to the total amount of the consideration, if any, received by the Corporation
for the issuance of such rights or options or Convertible Securities, plus, in
the case of such rights or options, the minimum amounts of consideration, if
any, payable to the Corporation upon the exercise of such rights or options,
plus, in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Corporation (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion thereof; provided that if in the case of Convertible Securities the
minimum amounts of such consideration cannot be ascertained, but are a function
of antidilution or similar protective clauses, the Corporation shall be deemed
to have received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further that if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities. No further
adjustment of the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price, the Series C Preferred Conversion Price and the Series D
Preferred Conversion Price, as applicable, as adjusted upon the issuance of such
rights, options or Convertible Securities, shall be made as a result of the
actual issuance of Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible Securities. If any
such rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series A
Preferred Conversion Price, the Series B Preferred Conversion Price, the Series
C Preferred Conversion Price or the Series D Preferred Conversion Price, as
applicable, as adjusted upon the issuance of such rights, options or Convertible
Securities shall be readjusted to the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price, the Series C Preferred Conversion Price and
the Series D Preferred Conversion Price, as applicable, which
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would have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for (w) the consideration
actually received by the Corporation upon such exercise, plus (x) the
consideration, if any, actually received by the Corporation for the granting of
all such rights or options, whether or not exercised, plus (y) the consideration
received for issuing or selling the Convertible Securities, whether or not
converted, plus (z) the consideration, if any, actually received by the
Corporation (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) on the conversion of such Convertible
Securities, provided that such readjustment shall not apply to prior conversions
of Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Corporation or deemed to be issued
pursuant to this Section 4(i), other than (A) shares of Common Stock issued upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred, (B) shares of Common Stock and/or options, warrants or other
Common Stock purchase rights, and the Common Stock issued pursuant to such
options, warrants or other rights after the Original Issue Date to employees,
officers or directors of, or consultants or advisors to the Corporation or any
subsidiary pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors, (C) shares of Common
Stock issued pursuant to the exercise of options, warrants or convertible
securities outstanding as of the Original Issue Date, (D) shares of Common Stock
and/or options, warrants or other Common Stock purchase rights, and the Common
Stock issued pursuant to such options, warrants or other rights, issued for
consideration other than cash pursuant to a merger, consolidation, acquisition
or similar business combination approved by the Board of Directors, (E) shares
of Common Stock issued pursuant to any equipment leasing or loan arrangement, or
debt financing from a bank or similar financial or lending institution approved
by the Board of Directors, and (F) shares of Common Stock issued in connection
with strategic transactions involving the Corporation and other entities,
including joint ventures, manufacturing, marketing or distribution arrangements
or technology transfer or development arrangements approved by the Board of
Directors. References to Common Stock in the subsections of this clause (iv)
above shall mean all shares of Common Stock issued by the Corporation or deemed
to be issued pursuant to this Section 4(i). The "Effective Price" of Additional
Shares of Common Stock shall mean the quotient determined by dividing the total
number of Additional Shares of Common Stock issued or sold, or deemed to have
been issued or sold by the Corporation under this Section 4(i), into the
aggregate consideration received, or deemed to have been received by the
Corporation for such issue under this Section 4(i), for such Additional Shares
of Common Stock.
(j) CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price, the Series C Preferred Conversion Price or
the Series D Preferred Conversion Price for the number of shares of Common Stock
or other securities issuable upon conversion of the Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred, if such series of Preferred
Stock is then convertible pursuant to this Section 4, the Corporation, at its
expense, shall compute such adjustment or readjustment in accordance with the
provisions hereof and prepare a
13.
<PAGE> 14
certificate showing such adjusted Conversion Price, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred, as applicable, at the holder's address as shown in the Corporation's
books. The certificate shall set forth such adjustment or readjustment, showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (i) the consideration received or deemed to be received
by the Corporation for any Additional Shares of Common Stock issued or sold or
deemed to have been issued or sold, (ii) the respective Conversion Price at the
time in effect, (iii) the number of Additional Shares of Common Stock and (iv)
the type and amount, if any, of other property which at the time would be
received upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred, as applicable.
(k) NOTICES OF RECORD DATE. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition (as defined in Section
3(c)) or other capital reorganization of the Corporation, any reclassification
or recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, or any
Asset Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred at least ten (10) days prior to the record date
specified therein (or such shorter period approved by a majority of the
outstanding Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred, voting together as a single class) a notice specifying (A)
the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution, (B)
the date on which any such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up is expected to become effective, and (C) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
(l) AUTOMATIC CONVERSION.
(i) Each share of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Rate, Series B Preferred Conversion Rate, Series C
Preferred Conversion Rate and Series D Preferred Conversion Rate, respectively,
(A) at any time upon the affirmative election of the holders of at least a
majority of the then outstanding shares of such respective series of Preferred
Stock, or (B) immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation; provided that with respect to the Series B
Preferred, the Series C Preferred and the Series D Preferred, the automatic
conversion shall be further conditioned upon the following minimum proceeds
requirements: (i) the per share price is at least $12.09 (as adjusted for stock
splits, dividends, recapitalizations and the like) and (ii) the gross cash
proceeds to the Corporation (before underwriting discounts, commissions and
fees)
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<PAGE> 15
are at least $15,000,000. Upon such automatic conversion, any declared and
unpaid dividends shall be paid in accordance with the provisions of Section
4(d). A public offering which satisfies the proceeds requirement described in
clauses (i) and (ii) with respect to each of the Series C Preferred and the
Series D Preferred are hereinafter referred to as a "Designated Public Offering"
with respect to such series of Preferred Stock.
(ii) Upon the occurrence of either of the events
specified in Section 4(l)(i) above, the outstanding shares of Series A
Preferred, Series B Preferred, Series C Preferred and/or Series D Preferred, as
applicable, shall be converted automatically without any further action by the
holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series A Preferred, Series B Preferred,
Series C Preferred and/or Series D Preferred, as applicable, are either
delivered to the Corporation or its transfer agent as provided below, or the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon the occurrence of such automatic
conversion of the Series A Preferred, Series B Preferred, Series C Preferred
and/or Series D Preferred, the holders of shares of such respective series of
Preferred Stock shall surrender the certificates representing such shares at the
office of the Corporation or any transfer agent for the shares of such series of
Preferred Stock. Thereupon, there shall be issued and delivered to such holder
promptly at such office and in its name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of Series A Preferred, Series B Preferred,
Series C Preferred and/or Series D Preferred, as applicable, surrendered were
convertible on the date on which such automatic conversion occurred, and any
declared and unpaid dividends shall be paid in accordance with the provisions of
Section 4(d).
(m) FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon conversion of Series A Preferred, Series B Preferred,
Series C Preferred or Series D Preferred. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred by a
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of any
fractional share, the Corporation shall, in lieu of issuing any fractional
share, pay cash equal to the product of such fraction multiplied by the Common
Stock's fair market value (as determined by the Board of Directors) on the date
of conversion.
(n) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred. If at any time the number of authorized but
unissued shares of Common Stock shall
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<PAGE> 16
not be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(o) NOTICES. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Corporation.
(p) PAYMENT OF TAXES. The Corporation will pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which such shares of converted
Preferred Stock were registered.
(q) NO DILUTION OR IMPAIRMENT. Without the consent of the
holders of then outstanding Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred as required under Section 2(b), the Corporation
shall not amend its Restated Certificate of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or take any other voluntary action, for the purpose of
avoiding or seeking to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Corporation, but shall at all times
in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
holders of the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred against dilution or other impairment.
5. REDEMPTION.
(a) The Corporation shall be obligated to redeem the
Series C Preferred and Series D Preferred as follows:
(i) If a Designated Public Offering with respect to
the Series C Preferred (or other transaction providing the holders of Series C
Preferred with the opportunity for liquidity of their investment in the Series C
Preferred based on a valuation of the Corporation comparable to the valuation
required for a Series C Designated Public Offering) does not occur by the fifth
anniversary of the Series C Original Issue Date, the holders of at least a
majority of the then outstanding shares of Series C Preferred may require the
Corporation, to the extent funds are legally available therefor, to redeem the
Series C Preferred prior to any redemption of the Series A Preferred or Series B
Preferred in three (3) equal annual installments, with the first
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<PAGE> 17
installment for one-third (1/3) of the then outstanding shares of the Series C
Preferred being due and payable on the date not less than 90 days after the date
the holders of Series C Preferred notify the Corporation in writing of their
election to redeem the shares, the second installment for one-half (1/2) of the
then outstanding shares of the Series C Preferred being due and payable on the
first anniversary of the first redemption date and the third and final
installment for all remaining outstanding shares of Series C Preferred being due
and payable on the second anniversary of the first redemption date (the date for
each of such installments a "Redemption Date"). The Corporation shall effect
such redemptions on the applicable Redemption Date by paying in cash in exchange
for the shares of Series C Preferred to be redeemed a sum equal to the Fair
Market Value per share (as defined below) of Series C Preferred. The total
amount to be paid for the Series C Preferred is hereinafter referred to as the
"Series C Preferred Redemption Price." Shares subject to redemption pursuant to
this Section 5(a) shall be redeemed from each holder of Series C Preferred on a
pro rata basis.
(ii) If a Designated Public Offering with respect
to the Series D Preferred (or other transaction providing the holders of Series
D Preferred with the opportunity for liquidity of their investment in the Series
D Preferred based on a valuation of the Corporation comparable to the valuation
required for a Series D Designated Public Offering) does not occur by the fifth
anniversary of the Series C Original Issue Date, the holders of at least a
majority of the then outstanding shares of Series D Preferred may require the
Corporation, to the extent funds are legally available therefor, to redeem the
Series D Preferred prior to any redemption of the Series A Preferred or Series B
Preferred in three (3) equal annual installments with the first installment for
one-third (1/3) of the then outstanding shares of the Series D Preferred being
due and payable on the date not less than 90 days after the date the holders of
Series D Preferred notify the Corporation in writing of their election to redeem
the shares, the second installment for one-half (1/2) of the then outstanding
shares of the Series D Preferred being due and payable on the first anniversary
of the first redemption date and the third and final installment for all
remaining outstanding shares of Series D Preferred being due and payable on the
second anniversary of the first redemption date (the date for each of such
installments a "Redemption Date"). The Corporation shall effect such redemptions
on the applicable Redemption Date by paying in cash in exchange for the shares
of Series D Preferred to be redeemed a sum equal to the Fair Market Value per
share of Series D Preferred. The total amount to be paid for the Series D
Preferred is hereinafter referred to as the "Series D Preferred Redemption
Price." Shares subject to redemption pursuant to this Section 5(a) shall be
redeemed from each holder of Series D Preferred on a pro rata basis.
(iii) The "Fair Market Value" for purposes of
determining the applicable Redemption Price for the Series C Preferred or Series
D Preferred under this Section 5 shall be the greater of the following amounts
as of the date of the fifth anniversary of the Original Issue Date of the Series
C Preferred, (A) the fair market value of the shares of Common Stock into which
such series of Preferred Stock is then convertible (exclusive of any discounts
regarding liquidity and minority positions), determined by agreement of the
Board of Directors and the holders of a majority of the then outstanding shares
of such series of Preferred Stock or, if such parties cannot agree upon the fair
market value, as determined by an independent investment banker selected by the
Board of Directors and the holders of a majority of the then outstanding shares
of such series of Preferred Stock, or (B) the value of the assets the holders of
such series of Preferred Stock would receive pursuant to a liquidation of the
Corporation
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<PAGE> 18
pursuant to Section 3 based upon the fair market value of the Corporation as
determined according to clause (A).
(iv) At least thirty (30) days prior to the first
Redemption Date of any shares of Series C Preferred and/or Series D Preferred,
the Corporation shall send a notice (a "Redemption Notice") to all holders of
Series C Preferred and/or Series D Preferred to be redeemed setting forth (A)
the Redemption Price for the shares to be redeemed; and (B) the place at which
such holders may obtain payment of the Redemption Price upon surrender of their
share certificates. If the Corporation does not have sufficient funds legally
available to redeem all shares to be redeemed at the Redemption Date, then it
shall redeem such shares pro rata (based on the relative portion of the Series C
Redemption Price and Series D Redemption Price payable to them) to the extent
possible and shall redeem the remaining shares to be redeemed as soon as
sufficient funds are legally available.
(b) On or prior to each Redemption Date, the Corporation
shall deposit the Redemption Price of all shares to be redeemed with a bank or
trust Corporation, as a trust fund, with irrevocable instructions and authority
to the bank or trust Corporation to pay, on and after such Redemption Date, the
Redemption Price of the shares to their respective holders upon the surrender of
their share certificates. Any moneys deposited by the Corporation pursuant to
this Section 5(b) for the redemption of shares thereafter converted into shares
of Common Stock pursuant to Section 4 hereof prior to the Redemption Date shall
be returned to the Corporation forthwith upon such conversion. The balance of
any funds deposited by the Corporation pursuant to this Section 5(b) remaining
unclaimed at the expiration of one (1) year following such Redemption Date shall
be returned to the Corporation promptly upon its written request.
(c) On or after such Redemption Date, each holder of
shares of Series C Preferred and/or Series D Preferred to be redeemed shall
surrender such holder's certificates representing such shares to the Corporation
in the manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price of such shares shall be payable to the order of
the person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. In the event less
than all the shares represented by such certificates are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and after
such Redemption Date, unless there shall have been a default in payment of the
Redemption Price or the Corporation is unable to pay the Redemption Price due to
not having sufficient legally available funds, all rights of the holder of those
shares which are subject to redemption on the Redemption Date as holder of
Series C Preferred and/or Series D Preferred (except the right to receive the
Redemption Price without interest upon surrender of their certificates), shall
cease and terminate with respect to such shares; provided that in the event that
shares of Series C Preferred or Series D Preferred are not redeemed due to a
default in payment by the Corporation or because the Corporation does not have
sufficient legally available funds, such shares of Series C Preferred or Series
D Preferred shall remain outstanding and shall be entitled to all of the rights
and preferences provided herein.
In the event of a call for redemption of any shares of Series C
Preferred and/or Series D Preferred, the Conversion Rights (as described in
Section 4) for such Series C Preferred and/or Series D Preferred shall terminate
as to the shares designated for redemption at the close
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<PAGE> 19
of business on the third (3rd) business day preceding the Redemption Date,
unless default is made in payment of the Redemption Price.
(d) In the event that the Corporation fails to effect a
redemption as required under this Section 5 for the holders of Series C
Preferred or Series D Preferred upon the proper election of such holders, then
the holders of a majority of the then outstanding shares of the Series C
Preferred and Series D Preferred, voting together as a single class, may cause
the Corporation to enter into an Acquisition or Asset Transfer transaction (as
those terms are defined in Section 3(c)).
6. NO REISSUANCE OF PREFERRED STOCK.
No share or shares of Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred acquired by the Corporation
by reason of redemption, purchase, conversion or otherwise shall be reissued.
V.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. BOARD OF DIRECTORS.
1. The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors. Subject to the
rights of the holders of any series of Preferred Stock, the number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
19.
<PAGE> 20
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. REMOVAL OF DIRECTORS.
a. Neither the Board of Directors nor any individual
director may be removed without cause.
b. Subject to any limitation imposed by law, any
individual director or directors may be removed with cause by the holders of a
majority of the voting power of the Corporation entitled to vote at an election
of directors.
4. VACANCIES.
(a) Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
(b) If at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the directors chosen by the directors
then in offices as aforesaid, which election shall be governed by Section 211 of
the DGCL.
B. BYLAWS.
1. Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the voting stock of the Corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
2. The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
20.
<PAGE> 21
3. No action shall be taken by the stockholders of the
Corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws or by written consent of stockholders in accordance
with the Bylaws prior to the closing of the Initial Public Offering and
following the closing of the Initial Public Offering no action shall be taken by
the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, except as
provided in paragraph B. of this Article VII, and all rights conferred upon the
stockholders herein are granted subject to this reservation.
Notwithstanding any other provisions of this Amended and Restated Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Amended and
Restated Certificate of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
voting stock, voting together as a single class, shall be required to alter,
amend or repeal Articles V, VI, and VII.
* * * *
FOUR: This Amended and Restated Certificate of Incorporation has been
duly approved by the Board of Directors of this Corporation.
FIVE: This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware by the Board of Directors
and the stockholders of the Corporation. The total number of outstanding shares
entitled to vote or act by written consent was six million three hundred ninety
three thousand seventy-four (6,393,074) shares of Common Stock, sixty eight
thousand one hundred (68,100) shares of Series A Preferred Stock and three
hundred thirty-four thousand nine hundred seven (334,907) shares of Series B
Preferred Stock, four million four hundred fifty-eight thousand three hundred
thirty-two (4,458,332) shares of Series C Preferred Stock and two million three
hundred sixty four thousand nine hundred
21.
<PAGE> 22
seventeen (2,364,917) shares of Series D Preferred Stock. The holders of a
majority of the outstanding shares of Common Stock, a majority of the
outstanding shares of Series A Preferred Stock and a majority of the outstanding
shares of Series B Preferred Stock approved this Amended and Restated
Certificate of Incorporation by written consent in accordance with Section 228
of the General Corporation Law of the State of Delaware and written notice of
such was given by the Corporation in accordance with said Section 228.
IN WITNESS WHEREOF, MEDIBUY.COM, INC. has caused this Amended and
Restated Certificate of Incorporation to be signed by its Chief Executive
Officer and President in San Diego, California this ____ day of _____________,
2000.
MEDIBUY.COM, INC.
----------------------------------------
DENNIS J. MURPHY,
Chief Executive Officer and President
22.
<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MEDIBUY.COM, INC.
Dennis J. Murphy hereby certifies that:
ONE: The original name of this corporation was HS.com, Inc. and the date
of filing the original Certificate of Incorporation of this corporation with the
Secretary of State of the State of Delaware was August 18, 1998. This
corporation changed its name to medibuy.com, inc. and filed an Amended and
Restated Certificate of Incorporation on January 29, 1999. This corporation also
filed an Amended and Restated Certificate of Incorporation on March 16, 1999,
filed an Amended and Restated Certificate of Incorporation on June 8, 1999,
filed a Certificate of Amendment to its Amended and Restated Certificate of
Incorporation on November 1, 1999, filed a Certificate of Amendment to its
Amended and Restated Certificate of Incorporation on December 7, 1999, filed an
Amended and Restated Certificate of Incorporation on December 21, 1999 and filed
an Amended and Restated Certificate of Incorporation on ________.
TWO: He is the duly elected and acting Chief Executive Officer and
President of medibuy.com, inc., a Delaware corporation.
THREE: The Amended and Restated Certificate of Incorporation, as
amended, of this corporation is hereby amended and restated in its entirety to
read as follows:
I.
The name of the corporation is MEDIBUY.COM, INC. (hereinafter referred
to as the "Corporation" or the "Corporation").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
National Corporation Research, Ltd.
9 East Loockerman Street
Dover, DE 19901
County of Kent
The name of the Corporation's registered agent at said address is
National Corporation Research, Ltd.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
1.
<PAGE> 2
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is one hundred fifteen
million (115,000,000). One hundred million (100,000,000) shares shall be Common
Stock, each having a par value of one-tenth of one cent ($0.001) (the "Common
Stock"). Fifteen million (15,000,000) shares shall be Preferred Stock, each
having a par value of one-tenth of one cent ($0.001) (the "Preferred Stock").
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the DGCL, to fix or alter from time
to time the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations or restrictions of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; and to increase or
decrease the number of shares of any series subsequent to the issuance of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be decreased in
accordance with the foregoing sentence, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. BOARD OF DIRECTORS.
1. The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors. Subject to the
rights of the holders of any series of Preferred Stock, the number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full
2.
<PAGE> 3
term of three years. At the third annual meeting of stockholders following the
closing of the Initial Public Offering, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full term
of three years. At each succeeding annual meeting of stockholders, directors
shall be elected for a full term of three years to succeed the directors of the
class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. REMOVAL OF DIRECTORS.
a. Neither the Board of Directors nor any individual
director may be removed without cause.
b. Subject to any limitation imposed by law, any
individual director or directors may be removed with cause by the holders of a
majority of the voting power of the Corporation entitled to vote at an election
of directors.
4. VACANCIES.
(a) Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
(b) If at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the directors chosen by the directors
then in offices as aforesaid, which election shall be governed by Section 211 of
the DGCL.
B. BYLAWS.
1. Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the voting
3.
<PAGE> 4
stock of the Corporation entitled to vote. The Board of Directors shall also
have the power to adopt, amend, or repeal Bylaws.
2. The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the
Corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws or by written consent of stockholders in accordance
with the Bylaws prior to the closing of the Initial Public Offering and
following the closing of the Initial Public Offering no action shall be taken by
the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, except as
provided in paragraph B. of this Article VII, and all rights conferred upon the
stockholders herein are granted subject to this reservation.
Notwithstanding any other provisions of this Amended and Restated Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Amended and
Restated Certificate of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
voting stock, voting together as a single class, shall be required to alter,
amend or repeal Articles V, VI, and VII.
* * * *
FOUR: This Amended and Restated Certificate of Incorporation has been
duly approved by the Board of Directors of this Corporation.
FIVE: This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware by the Board of Directors
and the stockholders of the
4.
<PAGE> 5
Corporation. The total number of outstanding shares entitled to vote or act by
written consent was six million three hundred ninety three thousand seventy-four
[(6,393,074) shares of Common Stock], sixty eight thousand one hundred (68,100)
shares of Series A Preferred Stock and three hundred thirty-four thousand nine
hundred seven (334,907) shares of Series B Preferred Stock, four million four
hundred fifty-eight thousand three hundred thirty-two (4,458,332) shares of
Series C Preferred Stock and two million three hundred sixty four thousand nine
hundred seventeen (2,364,917) shares of Series D Preferred Stock. The holders of
a majority of the outstanding shares of Common Stock, a majority of the
outstanding shares of Series A Preferred Stock and a majority of the outstanding
shares of Series B Preferred Stock approved this Amended and Restated
Certificate of Incorporation by written consent in accordance with Section 228
of the General Corporation Law of the State of Delaware and written notice of
such was given by the Corporation in accordance with said Section 228.
IN WITNESS WHEREOF, MEDIBUY.COM, INC. has caused this Amended and
Restated Certificate of Incorporation to be signed by its Chief Executive
Officer and President in San Diego, California this ____ day of _____________,
2000.
MEDIBUY.COM, INC.
_______________________________________
DENNIS J. MURPHY,
Chief Executive Officer and President
5.
<PAGE> 1
EXHIBIT 3.5
AMENDED AND RESTATED
BYLAWS
OF
MEDIBUY.COM, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
Article I. Offices................................................................1
Section 1. Registered Office......................................................1
Section 2. Other Offices..........................................................1
Article II. Corporate Seal.........................................................1
Section 3. Corporate Seal.........................................................1
Article III. Stockholders' Meetings.................................................1
Section 4. Place Of Meetings......................................................1
Section 5. Annual Meetings........................................................1
Section 6. Special Meetings.......................................................3
Section 7. Notice Of Meetings.....................................................4
Section 8. Quorum.................................................................5
Section 9. Adjournment And Notice Of Adjourned Meetings...........................5
Section 10. Voting Rights..........................................................5
Section 11. Joint Owners Of Stock..................................................5
Section 12. List Of Stockholders...................................................6
Section 13. Action Without Meeting.................................................6
Section 14. Organization...........................................................7
Article IV. Directors..............................................................7
Section 15. Number And Term Of Office..............................................7
Section 16. Powers.................................................................8
Section 17. Classes of Directors...................................................8
Section 18. Vacancies..............................................................8
Section 19. Resignation............................................................9
Section 20. Removal................................................................9
Section 21. Meetings...............................................................9
Section 22. Quorum And Voting.....................................................10
Section 23. Action Without Meeting................................................10
Section 24. Fees And Compensation.................................................11
Section 25. Committees............................................................11
Section 26. Organization..........................................................12
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
Article V. Officers..............................................................12
Section 27. Officers Designated...................................................12
Section 28. Tenure And Duties Of Officers.........................................12
Section 29. Delegation Of Authority...............................................14
Section 30. Resignations..........................................................14
Section 31. Removal...............................................................14
Article VI. Execution Of Corporate Instruments And Voting Of Securities
Owned By The Corporation..............................................14
Section 32. Execution Of Corporate Instruments....................................14
Section 33. Voting Of Securities Owned By The Corporation.........................15
Article VII. Shares Of Stock.......................................................15
Section 34. Form And Execution Of Certificates....................................15
Section 35. Lost Certificates.....................................................15
Section 36. Transfers.............................................................16
Section 37. Fixing Record Dates...................................................16
Section 38. Registered Stockholders...............................................17
Article VIII. Other Securities Of The Corporation...................................17
Section 39. Execution Of Other Securities.........................................17
Article IX. Dividends.............................................................18
Section 40. Declaration Of Dividends..............................................18
Section 41. Dividend Reserve......................................................18
Article X. Fiscal Year...........................................................18
Section 42. Fiscal Year...........................................................18
Article XI. Indemnification.......................................................18
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents..................................18
Article XII. Notices...............................................................22
Section 44. Notices...............................................................22
Article XIII. Amendments............................................................23
Section 45. Amendments............................................................23
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
Article XIV. Loans To Officers.....................................................23
Section 46. Loans To Officers.....................................................23
</TABLE>
iii.
<PAGE> 5
AMENDED AND RESTATED
BYLAWS
OF
MEDIBUY.COM, INC.
(A DELAWARE CORPORATION)
ARTICLE I.
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in the
State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an office
or principal place of business at such place as may be fixed by the Board of
Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II.
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die bearing the
name of the corporation and the inscription, "Corporate Seal-Delaware." Said
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise.
ARTICLE III.
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the corporation
shall be held at such place, either within or without the State of Delaware, as
may be designated from time to time by the Board of Directors, or, if not so
designated, then at the office of the corporation required to be maintained
pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors. Nominations of persons
for election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by
any stockholder of the corporation who was a stockholder of record at the time
of giving of notice provided for in the following paragraph, who is entitled to
vote at the meeting and who complied with the notice procedures set forth in
Section 5.
1.
<PAGE> 6
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. 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 ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) 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 advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) 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: (A) as to each person whom the stockholder proposed 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 "1934 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); (B) 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 proposal is made; and (C) 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, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii) whether either such stockholder or beneficial owner intends to deliver a
proxy statement and
2.
<PAGE> 7
form of proxy to holders of, in the case of the proposal, at least the
percentage of the corporation's voting shares required under applicable law to
carry the proposal or, in the case of a nomination or nominations, a sufficient
number of holders of the corporation's voting shares to elect such nominee or
nominees (an affirmative statement of such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 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 tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 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 Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine 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 these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5,
in order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption).
3.
<PAGE> 8
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, 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 Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) 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 of Directors 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.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
4.
<PAGE> 9
SECTION 8. QUORUM. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those stockholders
entitled to vote at any meeting of the stockholders, except as otherwise
provided by law, only persons in whose names shares stand on the stock records
of the corporation on the record date, as provided in Section 12 of these
Bylaws, shall be entitled to vote at any meeting of stockholders. Every person
entitled to vote or execute consents shall have the right to do so either in
person or by an agent or agents authorized by a proxy granted in accordance with
Delaware law. An agent so appointed need not be a stockholder. No proxy shall be
voted after three (3) years from its date of creation unless the proxy provides
for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having voting
power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership,
5.
<PAGE> 10
joint tenants, tenants in common, tenants by the entirety, or otherwise, or if
two (2) or more persons have the same fiduciary relationship respecting the same
shares, unless the Secretary is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect: (a) if only one (1) votes, his act binds all; (b) if
more than one (1) votes, the act of the majority so voting binds all; (c) if
more than one (1) votes, but the vote is evenly split on any particular matter,
each faction may vote the securities in question proportionally, or may apply to
the Delaware Court of Chancery for relief as provided in the DGCL, Section
217(b). If the instrument filed with the Secretary shows that any such tenancy
is held in unequal interests, a majority or even-split for the purpose of
subsection (c) shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented
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in writing. If the action which is consented to is such as would have required
the filing of a certificate under any section of the DGCL if such action had
been voted on by stockholders at a meeting thereof, then the certificate filed
under such section shall state, in lieu of any statement required by such
section concerning any vote of stockholders, that written consent has been given
in accordance with Section 228 of the DGCL.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV.
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors of the
corporation shall be fixed in accordance with the Certificate of Incorporation.
Directors need not be stockholders unless so required by the Certificate of
Incorporation. If for any cause, the directors shall not have been elected at an
annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws.
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SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
(Del. Code Ann., tit. 8, Section 141(a))
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
SECTION 18. VACANCIES.
(a) Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 18 in the
case of the death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the
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directors chosen by the directors then in offices as aforesaid, which election
shall be governed by Section 211 of the DGCL.
SECTION 19. RESIGNATION. Any director may resign at any time by delivering his
written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
SECTION 20. REMOVAL.
(a) Neither the Board of Directors nor any individual director
may be removed without cause.
(b) Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the affirmative vote of a
majority of the voting power of the corporation entitled to vote at an election
of directors.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear
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each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
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SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
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(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman of the
Board of Directors, or, if a Chairman has not been appointed or is absent, the
President (if a director), or if the President is absent, the most senior Vice
President (if a director), or, in the absence of any such person, a chairman of
the meeting chosen by a majority of the directors present, shall preside over
the meeting. The Secretary, or in his absence, any Assistant Secretary directed
to do so by the President, shall act as secretary of the meeting.
ARTICLE V.
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall include,
if and when designated by the Board of Directors, the Chairman of the Board of
Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any
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time by the Board of Directors. If the office of any officer becomes vacant for
any reason, the vacancy may be filled by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of
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Directors or the President shall designate from time to time. The President may
direct the Treasurer or any Assistant Treasurer, or the Controller or any
Assistant Controller to assume and perform the duties of the Chief Financial
Officer in the absence or disability of the Chief Financial Officer, and each
Treasurer and Assistant Treasurer and each Controller and Assistant Controller
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time to
time delegate the powers or duties of any officer to any other officer or agent,
notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving written
notice to the Board of Directors or to the President or to the Secretary. Any
such resignation shall be effective when received by the person or persons to
whom such notice is given, unless a later time is specified therein, in which
event the resignation shall become effective at such later time. Unless
otherwise specified in such notice, the acceptance of any such resignation shall
not be necessary to make it effective. Any resignation shall be without
prejudice to the rights, if any, of the corporation under any contract with the
resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time, either
with or without cause, by the affirmative vote of a majority of the directors in
office at the time, or by the unanimous written consent of the directors in
office at the time, or by any committee or superior officers upon whom such
power of removal may have been conferred by the Board of Directors.
ARTICLE VI.
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors may, in
its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
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SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and other
securities of other corporations owned or held by the corporation for itself, or
for other parties in any capacity, shall be voted, and all proxies with respect
thereto shall be executed, by the person authorized so to do by resolution of
the Board of Directors, or, in the absence of such authorization, by the
Chairman of the Board of Directors, the Chief Executive Officer, the President,
or any Vice President.
ARTICLE VII.
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares of
stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be issued
in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
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SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the DGCL.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) Prior to the Initial Public Offering in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of
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Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII.
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
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ARTICLE IX.
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation and
applicable law, if any, may be declared by the Board of Directors pursuant to
law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interests of the corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ARTICLE X.
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
ARTICLE XI.
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER OFFICERS,
EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND OFFICERS. The corporation shall indemnify its
directors, executive officers (for the purposes of this Article XI, "executive
officers" shall have the meaning defined in Rule 3b-7 promulgated under the 1934
Act) and officers to the fullest extent not prohibited by the DGCL or any other
applicable law; provided, however, that the corporation may modify the extent of
such indemnification by individual contracts with its directors, executive
officers and officers; and, provided, further, that the corporation shall not be
required to indemnify any director, executive officer or officer in connection
with any proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the corporation, (iii) such
indemnification is provided by the corporation, in its sole discretion, pursuant
to the powers vested in the corporation under the DGCL or any other applicable
law or (iv) such indemnification is required to be made under subsection (d).
(b) EMPLOYEES AND OTHER AGENTS. The corporation shall have power
to indemnify its employees and other agents as set forth in the DGCL or any
other applicable law. The Board of Directors shall have the power to delegate
the determination of whether
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indemnification shall be given to any such person or other persons as the Board
of Directors shall determine.
(c) EXPENSES. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, executive
officer or officer, of the corporation, or is or was serving at the request of
the corporation as a director, executive officer or officer of another
corporation, partnership, joint venture, trust or other enterprise, prior to the
final disposition of the proceeding, promptly following request therefor, all
expenses incurred by any director, executive officer or officer in connection
with such proceeding upon receipt of an undertaking by or on behalf of such
person to repay said amounts if it should be determined ultimately that such
person is not entitled to be indemnified under this Section 43 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an officer of the corporation (except by reason of the fact that such officer is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors,
executive officers and officers under this Bylaw shall be deemed to be
contractual rights and be effective to the same extent and as if provided for in
a contract between the corporation and the director, executive officer or
officer. Any right to indemnification or advances granted by this Section 43 to
a director, executive officer or officer shall be enforceable by or on behalf of
the person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the DGCL or any other
applicable law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such officer is or was a director of
the corporation) for advances, the corporation shall be entitled to raise a
defense as to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation, or with respect to any
criminal action or proceeding that such person
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acted without reasonable cause to believe that his conduct was lawful. Neither
the failure of the corporation (including its Board of Directors, independent
legal counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in the DGCL or any other applicable law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct. In any suit brought by a
director or officer to enforce a right to indemnification or to an advancement
of expenses hereunder, the burden of proving that the director or officer is not
entitled to be indemnified, or to such advancement of expenses, under this
Section 43 or otherwise shall be on the corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.
(h) AMENDMENTS. Any repeal or modification of this Section 43
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Section 43 that shall
not have been invalidated, or by any other applicable law. If this Section 43
shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
officer to the full extent under any other applicable law.
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(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section 43 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
21.
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ARTICLE XII.
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such
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notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII.
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the Bylaws,
the Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power
of all of the then-outstanding shares of the voting stock of the corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
ARTICLE XIV.
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or guarantee
any obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiaries, including any officer or employee who is a
Director of the corporation or its subsidiaries, whenever, in the judgment of
the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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EXHIBIT 10.1
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this __________ day of
__________, ____ by and between __________, a Delaware corporation (the
"Corporation"), and __________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in
__________ capacity as __________ of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as
_______________ of the Corporation, the Corporation has determined and agreed to
enter into this Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as
_______________ after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
_______________ of the Corporation or as a director, officer or other fiduciary
of an affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1.
<PAGE> 2
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent
by the Corporation under the non-exclusivity provisions of the Code and Section
43 of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an
accounting of profits made from the purchase or sale by Agent of securities of
the Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(b) on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;
(c) on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the Corporation
or resulting in any personal profit or advantage to which Agent was not legally
entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both
the Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated
by Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Corporation, (iii) such indemnification is provided by
the Corporation, in its sole discretion, pursuant to the powers
2.
<PAGE> 3
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at
its own expense;
(b) except as otherwise provided below, the Corporation may, at
its option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded, and so notified the Corporation, that
there is an actual conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of Agent's separate counsel shall be at the expense
of the Corporation. The Corporation shall not be entitled to assume the defense
of any action, suit or proceeding brought by or on behalf of the Corporation or
as to which Agent shall have made the conclusion provided for in clause (ii)
above; and
3.
<PAGE> 4
(c) the Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof (other than an action brought to
enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.
4.
<PAGE> 5
(b) The Corporation shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
(b) If to the Corporation, to:
MEDIBUY.COM, INC.
10120 Pacific Heights Boulevard, Suite 100
San Diego, California 92121
or to such other address as may have been furnished to Agent by the Corporation.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
MEDIBUY.COM, INC.
By:______________________________
Title:___________________________
AGENT
_________________________________
___________
Address:
_________________________________
_________________________________
6.
<PAGE> 1
EXHIBIT 10.2
MEDIBUY.COM, INC.
1999 EQUITY INCENTIVE PLAN
ADOPTED MARCH 12, 1999
APPROVED BY STOCKHOLDERS ON MARCH 12, 1999
TERMINATION DATE: MARCH 11, 2009
AMENDED ON MARCH 26, 1999 TO INCREASE AUTHORIZED SHARES
TO 165,000.
AMENDED ON JUNE 4, 1999 TO INCREASE AUTHORIZED SHARES TO
2,885,640 (REFLECTING A 10 FOR 1 STOCK SPLIT OF CONVERSION STOCK)
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "ACQUISITION" means (i) a dissolution, liquidation, or sale of all
or substantially all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving corporation; (iii) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; (iv) after the Listing Date, an acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act, as hereafter amended or succeeded, excluding any employee benefit
plan, or related trust, sponsored or maintained by the Company or an affiliate
of the Company, of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of securities of the Company or its
successor representing at least fifty percent (50%) of the combined voting power
entitled to vote in the election of directors; or (v) after the Listing Date, if
individuals who, as of the date of the adoption of this
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Plan, are members of the Board (the "Incumbent Board"), cease for any reason to
constitute at least fifty percent (50%) of the Board, provided that, if the
election, or nomination for, election, by the Company's stockholders of any new
director was approved by a vote of at least fifty percent (50%) of the Incumbent
Board, such new director shall be considered as a member of the Incumbent Board,
notwithstanding the foregoing, in the case of (ii) and (iii) above, such
transactions shall only be deemed an "Acquisition" if the stockholders of the
Company or its successor immediately prior to such merger, consolidation or
reverse merger: (A) hold less then 50% of the outstanding securities of the
surviving company following the merger or consolidation, or (B) in the event
that the securities of an affiliated entity are issued to the stockholders of
the Company in the transaction, hold less then 50% of the outstanding securities
of such entity corporation.
(b) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CAUSE" means (i) conviction of any felony or any crime, or entry of
a plea of nolo contendere, involving moral turpitude or dishonesty; (ii)
participation in a fraud or act of dishonesty against the Company or the
surviving corporation; (iii) willful misfeasance or nonfeasance of duty that
materially injures the reputation, business or business relationships of the
Company, the surviving corporation or any of their respective officers,
directors or affiliates, (iv) material breach of any applicable employment or
consulting agreement or Proprietary Information and Inventions Agreement with
the Company, or any of the Company's or the surviving corporation's policies and
procedures, or (v) conduct by the Optionholder which in the good faith and
reasonable determination of the surviving corporation's Board of Directors
demonstrates gross unfitness to serve, provided that physical or mental
disability shall not constitute "Cause."
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c).
(g) "COMMON STOCK" means the common stock of the Company.
(h) "COMPANY" means Medibuy.com, Inc., a Delaware corporation.
(i) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are merely paid a
director's fee by the Company for their services as Directors.
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(j) "CONTINUING EMPLOYEE" means a Participant who was an Employee
immediately prior to an Acquisition.
(k) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(l) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(m) "DIRECTOR" means a member of the Board of Directors of the Company.
(n) "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(o) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(p) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(q) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable.
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<PAGE> 4
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock
shall be determined in a manner consistent with Section 260.140.50 of Title 10
of the California Code of Regulations.
(r) "GOOD REASON" means (i) a reduction in compensation, (ii) a
relocation of the Continuing Employee's principal worksite to a location more
than 40 miles from the Continuing Employee's pre-Acquisition principal worksite,
or (iii) for an executive officer, a material reduction in responsibilities,
title or authority as in effect immediately prior to the Acquisition.
(s) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(t) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(u) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who either
(i) is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(v) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(w) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(x) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
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<PAGE> 5
(y) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(z) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(aa) "OUTSIDE DIRECTOR" means a Director of the Company who either (i)
is not a current employee of the Company or an "affiliated corporation" (within
the meaning of Treasury Regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in any
capacity other than as a Director or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.
(bb) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(cc) "PLAN" means this MEDIBUY.COM, INC. 1999 Equity Incentive Plan.
(dd) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(ee) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(ff) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(gg) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(hh) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what
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<PAGE> 6
type or combination of types of Stock Award shall be granted; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which a Stock Award shall be
granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan to
a Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED.
At such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (1) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (2) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (ii)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
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<PAGE> 7
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate two million eight hundred
eighty-five thousand six hundred forty (2,885,640) shares of Common Stock.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of Restricted Stock), the
stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. If any Common Stock acquired pursuant to
the exercise of an Option shall for any reason be repurchased by the Company
under an unvested share repurchase option provided under the Plan, the stock
repurchased by the Company under such repurchase option shall not revert to and
again become available for issuance under the Plan.
(c) SOURCE OF SHARES. The stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.
(d) SHARE RESERVE LIMITATION. Prior to the Listing Date, at no time
shall the total number of shares issuable upon exercise of all outstanding
Options and the total number of shares provided for under any stock bonus or
similar plan of the Company exceed the applicable percentage as calculated in
accordance with the conditions and exclusions of Section 260.140.45 of Title 10
of the California Code of Regulations, based on the shares of the Company which
are outstanding at the time the calculation is made.(1)
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT STOCKHOLDERS. No Ten Percent Stockholder shall be
eligible for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
Prior to the Listing Date, no Ten Percent Stockholder shall be
eligible for the grant of a Nonstatutory Stock Option unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant.
- --------
(1) Section 260.140.45 generally provides that the total number of shares
issuable upon exercise of all outstanding options (exclusive of certain rights)
and the total number of shares called for under any stock bonus or similar plan
shall not exceed a number of shares which is equal to 30% of the then
outstanding shares of the issuer (convertible preferred or convertible senior
common shares counted on an as if converted basis), exclusive of shares subject
to promotional waivers under Section 260.141, unless a percentage higher than
30% is approved by at least two-thirds of the outstanding shares entitled to
vote.
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Prior to the Listing Date, no Ten Percent Stockholder shall be
eligible for a restricted stock award unless the purchase price of the
restricted stock is at least one hundred percent (100%) of the Fair Market Value
of the Common Stock at the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no employee shall be eligible to
be granted Options covering more than five thousand (5,000) shares of the Common
Stock during any calendar year. This subsection 5(c) shall not apply prior to
the Listing Date and, following the Listing Date, this subsection 5(c) shall not
apply until (i) the earliest of: (1) the first material modification of the Plan
(including any increase in the number of shares reserved for issuance under the
Plan in accordance with Section 4); (2) the issuance of all of the shares of
Common Stock reserved for issuance under the Plan; (3) the expiration of the
Plan; or (4) the first meeting of stockholders at which Directors of the Company
are to be elected that occurs after the close of the third calendar year
following the calendar year in which occurred the first registration of an
equity security under Section 12 of the Exchange Act; or (ii) such other date
required by Section 162(m) of the Code and the rules and regulations promulgated
thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate Options
need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option granted on or after the Listing Date shall be not
less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option
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<PAGE> 9
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(d) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by (1) delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or (3) in any
other form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option granted prior to the Listing Date shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable during
the lifetime of the Optionholder only by the Optionholder. A Nonstatutory Stock
Option granted on or after the Listing Date shall be transferable to the extent
provided in the Option Agreement. If the Nonstatutory Stock Option does not
provide for transferability, then the Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
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<PAGE> 10
(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), Options granted prior to the Listing Date shall
provide for vesting of the total number of shares at a rate of at least twenty
percent (20%) per year over five (5) years from the date the Option was granted,
subject to reasonable conditions such as continued employment. However, in the
case of such Options granted to Officers, Directors or Consultants, the Option
may become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company; for
example, the vesting provision of the Option may provide for vesting of less
than twenty percent (20%) per year of the total number of shares subject to the
Option.
(i) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement, which, for
Options granted prior to the Listing Date, shall not be less than thirty (30)
days, unless such termination is for cause), or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate.
(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(k) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, which, for Options granted prior to the Listing Date, shall
not be less than six (6) months) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
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<PAGE> 11
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement, which, for Options granted prior to the Listing Date, shall not be
less than six (6) months) or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
(m) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option.
Subject to the "Repurchase Limitation" in subsection 10(h), any unvested shares
so purchased may be subject to an unvested share repurchase option in favor of
the Company or to any other restriction the Board determines to be appropriate.
(n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares acquired by the Optionholder pursuant to the exercise of the
Option.
(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this subsection 6(o), such right of
first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company.
(p) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the exercise of which gave rise to such Re-Load Option; and (iii)
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option
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shall be subject to the one hundred thousand dollars ($100,000) annual
limitation on exercisability of Incentive Stock Options described in subsection
10(d) and in Section 422(d) of the Code. There shall be no Re-Load Options on a
Re-Load Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subsection 4(a) and the "Section 162(m) Limitation" on
the grants of Options under subsection 5(c) and shall be subject to such other
terms and conditions as the Board may determine which are not inconsistent with
the express provisions of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) CONSIDERATION. A stock bonus shall be awarded in
consideration for past services actually rendered to the Company for its
benefit.
(ii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus agreement
may, but need not, be subject to a share repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.
(iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares under the stock bonus agreement shall not
be transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant. For a stock bonus award made on or after the Listing Date, rights
to acquire shares under the stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the stock
bonus agreement, as the Board shall determine in its discretion, so long as
stock awarded under the stock bonus agreement remains subject to the terms of
the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
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<PAGE> 13
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted stock
awards made prior to the Listing Date, the purchase price shall not be less than
eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated. For restricted stock
awards made on or after the Listing Date, the purchase price shall not be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of stock acquired pursuant
to the restricted stock purchase agreement shall be paid either: (i) in cash at
the time of purchase; (ii) at the discretion of the Board, according to a
deferred payment or other arrangement with the Participant; or (iii) in any
other form of legal consideration that may be acceptable to the Board in its
discretion; provided, however, that at any time that the Company is incorporated
in Delaware, then payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
(iii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.
(v) TRANSFERABILITY. For a restricted stock award made before the
Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a restricted stock award made on or after the
Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the restricted stock purchase agreement, as the
Board shall determine in its discretion, so long as stock awarded under the
restricted stock purchase agreement remains subject to the terms of the
restricted stock purchase agreement.
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8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.
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(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.
(h) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section
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<PAGE> 16
260.140.42 of Title 10 of the California Code of Regulations, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:
(i) FAIR MARKET VALUE. If the repurchase option gives the Company
the right to repurchase the shares upon termination of employment at not less
than the Fair Market Value of the shares to be purchased on the date of
termination of Continuous Service, then (i) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares
within ninety (90) days of termination of Continuous Service (or in the case of
shares issued upon exercise of Stock Awards after such date of termination,
within ninety (90) days after the date of the exercise) or such longer period as
may be agreed to by the Company and the Participant (for example, for purposes
of satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
become publicly traded.
(ii) ORIGINAL PURCHASE PRICE. If the repurchase option gives the
Company the right to repurchase the shares upon termination of Continuous
Service at the original purchase price, then (i) the right to repurchase at the
original purchase price shall lapse at the rate of at least twenty percent (20%)
of the shares per year over five (5) years from the date the Stock Award is
granted (without respect to the date the Stock Award was exercised or became
exercisable) and (ii) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of Continuous Service (or in the case of shares issued upon
exercise of Options after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company and the Participant (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code regarding "qualified small
business stock").
(i) CANCELLATION AND RE-GRANT OF OPTIONS.
(i) AUTHORITY TO REPRICE. The Board shall have the authority to
effect, at any time and from time to time, (i) the repricing of any outstanding
Options under the Plan and/or (ii) with the consent of any adversely affected
holders of Options, the cancellation of any outstanding Options under the Plan
and the grant in substitution therefor of new Options under the Plan covering
the same or different numbers of shares of Common Stock. The exercise price per
share shall be not less than that specified under the Plan for newly granted
Stock Awards. Notwithstanding the foregoing, the Board may grant an Option with
an exercise price lower than that set forth above if such Option is granted as
part of a transaction to which Section 424(a) of the Code applies.
(ii) EFFECT OF REPRICING UNDER SECTION 162(m) OF THE CODE. Shares
subject to an Option which is amended or canceled in order to set a lower
exercise price per share shall continue to be counted against the maximum award
of Options permitted to be granted pursuant to subsection 5(c). The repricing of
an Option under this subsection 10(i) resulting in a reduction of the exercise
price shall be deemed to be a cancellation of the original Option and the grant
of a substitute Option; in the event of such repricing, both the original and
the substituted Options shall be counted against the maximum awards of Options
permitted to be granted pursuant to
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subsection 5(c). The provisions of this subsection 10(i)(b) shall be applicable
only to the extent required by Section 162(m) of the Code.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of stock subject to such outstanding Stock Awards. The
Board, the determination of which shall be final, binding and conclusive, shall
make such adjustments. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) SALE OF ASSETS, DISSOLUTION OR LIQUIDATION. In the event of a sale
of all or substantially all of the Company's assets, dissolution or liquidation
of the Company, then such Stock Awards shall be terminated if not exercised (if
applicable) prior to such event.
(c) ACQUISITIONS. In the event of an Acquisition, then any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 11(c)) for those outstanding under the Plan. In the
event any surviving corporation or acquiring corporation refuses to assume such
Stock Awards or to substitute similar stock awards for those outstanding under
the Plan, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full. With respect to any other Stock Awards outstanding under
the Plan, such Stock Awards shall terminate if not exercised (if applicable)
prior to such event. In the event that the surviving or acquiring corporation in
an Acquisition assumes Stock Awards, the vesting schedule of all assumed Stock
Awards that were held by a Continuing Employee shall be fully vested and, if
such Stock Awards are Options, exercisable, if such Continuing Employee's
Continuous Service is involuntarily terminated other than for Cause or is
voluntarily terminated with Good Reason within twelve (12) months following the
consummation of the Acquisition.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to
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the extent stockholder approval is necessary to satisfy the requirements of
Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing
requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the March 11, 2009, the
day before the tenth (10th) anniversary of the date the Plan was adopted by the
Board. No Stock Awards may be granted under the Plan while the Plan is suspended
or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
<PAGE> 1
EXHIBIT 10.3
MEDIBUY.COM, INC.
1999 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
Medibuy.com, Inc. (the "Company"), pursuant to its 1999 Equity Incentive Plan
(the "Plan"), hereby grants to Optionholder an option to purchase the number of
shares of the Company's Common Stock set forth below. This option is subject to
all of the terms and conditions as set forth herein and in the Stock Option
Agreement, the Plan and the Notice of Exercise, all of which are attached hereto
and incorporated herein in their entirety.
Optionholder: _____________________________
Date of Grant: _____________________________
Vesting Commencement Date: _____________________________
Number of Shares Subject to Option: _____________________________
Exercise Price (Per Share): _____________________________
Total Exercise Price: _____________________________
Expiration Date: _____________________________
TYPE OF GRANT: [ ] Incentive Stock Option(1) [ ] Nonstatutory Stock Option
EXERCISE SCHEDULE: [ ] Same as Vesting Schedule [ ] Early Exercise Permitted
VESTING SCHEDULE: 1/4th of the shares vest on the first anniversary of the
Vesting Commencement Date. 1/48th of the shares vest monthly
thereafter over the next three years.
PAYMENT: By one or a combination of the following items (described in
the Stock Option Agreement):
By cash or check
Pursuant to a Regulation T Program if the Shares are
publicly traded
By delivery of already-owned shares if the Shares are
publicly traded
ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:
OTHER AGREEMENTS: ________________________________________
________________________________________
MEDIBUY.COM, INC. OPTIONHOLDER:
By: ________________________________ ________________________________
Signature Signature
Title: _____________________________ Date: __________________________
Date: ______________________________
ATTACHMENTS: Stock Option Agreement, 1999 Equity Incentive Plan and Notice of
Exercise
- ------------
(1) If this is an incentive stock option, it (plus your other outstanding
incentive stock options) cannot be first exercisable for more than $100,000
in any calendar year. Any excess over $100,000 is a nonstatutory stock
option.
<PAGE> 2
MEDIBUY.COM, INC.
1999 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, Medibuy.com, Inc. (the "Company") has granted you an
option under its 1999 Equity Incentive Plan (the "Plan") to purchase the number
of shares of the Company's Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option
will vest as provided in your Grant Notice, provided that vesting will cease
upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in your
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of your option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover
first vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments
that have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as
provided in the Plan, to the extent that the aggregate Fair Market Value
(determined at the time of grant) of the shares of Common Stock with respect to
which your option plus all other incentive stock options you hold are
exercisable for the first time by you during any calendar year (under all plans
of the
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<PAGE> 3
Company and its Affiliates) exceeds one hundred thousand dollars ($100,000),
your option(s) or portions thereof that exceed such limit (according to the
order in which they were granted) shall be treated as nonstatutory stock
options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or in any other manner PERMITTED BY YOUR
GRANT NOTICE, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
5. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.
7. TERM. The term of your option commences on the Date of Grant and
expires upon the EARLIEST of the following:
(a) immediately upon the termination of your Continuous Service
for Cause;
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<PAGE> 4
(b) three (3) months after the termination of your Continuous
Service for any reason other than Cause, Disability or death, provided that if
during any part of such three- (3-) month period you may not exercise your
option solely because of the condition set forth in the preceding paragraph
relating to "Securities Law Compliance," your option shall not expire until the
earlier of the Expiration Date or until it shall have been exercisable for an
aggregate period of three (3) months after the termination of your Continuous
Service;
(c) twelve (12) months after the termination of your Continuous
Service due to your Disability;
(d) eighteen (18) months after your death if you die either
during your Continuous Service or within three (3) months after your Continuous
Service terminates for reason other than Cause;
(e) the Expiration Date indicated in your Grant Notice; or
(f) the tenth (10th) anniversary of the Date of Grant.
For purposes of your option, "Cause" means your misconduct, including
but not limited to: (i) your conviction of any felony or any crime involving
moral turpitude or dishonesty, (ii) your participation in a fraud or act of
dishonesty against the Company, (iii) your conduct that, based upon a good faith
and reasonable factual investigation and determination by the Board,
demonstrates your gross unfitness to serve, or (iv) your intentional, material
violation of any contract between the Company and you or any statutory duty of
yours to the Company that you do not correct within thirty (30) days after
written notice to you thereof. Your physical or mental disability shall not
constitute "Cause."
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you continue to provide services to the Company or an Affiliate
as a Consultant or Director after your employment terminates or if you otherwise
exercise your option more than three (3) months after the date your employment
terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
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<PAGE> 5
(b) By exercising your option you agree that, as a condition to
any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an incentive stock option, by exercising
your option you agree that you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of your option that occurs within two (2) years after
the date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
(d) By exercising your option you agree that the Company (or a
representative of the underwriter(s)) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that you not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the underwriter(s) (not to exceed one hundred eighty (180)
days) following the effective date of the registration statement of the Company
filed under the Securities Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your shares of
Common Stock until the end of such period.
9. TRANSFERABILITY. Your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. RIGHT OF FIRST REFUSAL. Shares of Common Stock that you acquire upon
exercise of your option are subject to any right of first refusal that may be
described in the Company's bylaws in effect at such time the Company elects to
exercise its right. The Company's right of first refusal shall expire on the
Listing Date.
11. RIGHT OF REPURCHASE. To the extent provided in the Company's bylaws
as amended from time to time, the Company shall have the right to repurchase all
or any part of the shares of Common Stock you acquire pursuant to the exercise
of your option.
12. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers
4
<PAGE> 6
or Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
13. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, or
at any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in
its sole discretion, and compliance with any applicable conditions or
restrictions of law, the Company may withhold from fully vested shares of Common
Stock otherwise issuable to you upon the exercise of your option a number of
whole shares of Common Stock having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the minimum amount of tax
required to be withheld by law. If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of
your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of
the Code, covering the aggregate number of shares of Common Stock acquired upon
such exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.
14. NOTICES. Any notices provided for in your option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
15. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option and
those of the Plan, the provisions of the Plan shall control.
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<PAGE> 7
16. ISO EXERCISE LIMITATION.
(a) The aggregate Fair Market Value of the shares of Common Stock
with respect to which you may exercise your option for the first time during any
calendar year, when added to the aggregate Fair Market Value of the shares of
Common Stock subject to any other options designated as Incentive Stock Options
and granted to you under any stock option plan of the Company or an Affiliate
prior to the Date of Grant with respect to which such options are exercisable
for the first time during the same calendar year, shall not exceed $100,000 (the
"ISO Exercise Limitation").(1)
(b) If your Grant Notice permits early exercise of your option,
the ISO Exercise Limitation shall terminate, and you may exercise your option,
as to vested shares of Common Stock thirty (30) days after the shares of Common
Stock subject to your option vest. Upon such termination of the ISO Exercise
Limitation, your option shall be deemed a Nonstatutory Stock Option to the
extent of the number of vested shares of Common Stock subject to your option
that would otherwise exceed the ISO Exercise Limitation.
(c) The ISO Exercise Limitation shall terminate, and you may full
exercise your option, as to all shares of Common Stock subject to your option
upon the earlier of the following events:
(i) the termination of your Continuous Service,
(ii) the day immediately prior to the effective date of a
Change in Control as provided in the Plan in which your option is not assumed or
substituted for as provided in the Plan, or
(iii) the day that is ten (10) days prior to the
Expiration Date of your option.
Upon such termination of the ISO Exercise Limitation, your option shall be
deemed a Nonstatutory Stock Option to the extent of the number of shares of
Common Stock subject to your option that would otherwise exceed the ISO Exercise
Limitation.
* * * *
- --------
(1) For purposes of this provision, your options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted to
you, and the Fair Market Value of shares of Common Stock shall be determined as
of the time the option with respect to such shares of Common Stock is granted.
If Section 422 of the Code is amended to provide for a different limitation from
that set forth in this provision, the ISO Exercise Limitation shall be deemed
amended effective as of the date required or permitted by such amendment to the
Code.
6
<PAGE> 1
EXHIBIT 10.4
MEDIBUY.COM, INC.
1999 OMNIBUS EQUITY PLAN
ADOPTED JULY 27, 1999
APPROVED BY SHAREHOLDERS OCTOBER 29, 1999
TERMINATION DATE: JULY 26, 2009
AS AMENDED BY THE BOARD OF DIRECTORS ON DECEMBER 14, 1999
AMENDMENT APPROVED BY THE SHAREHOLDERS ON ________, 2000
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means medibuy.com, Inc., a Delaware corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for
1.
<PAGE> 2
such services or (ii) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include either Directors who are not
compensated by the Company for their services as Directors or Directors who are
merely paid a director's fee by the Company for their services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the Company.
(k) "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
2.
<PAGE> 3
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock
shall be determined in a manner consistent with Section 260.140.50 of Title 10
of the California Code of Regulations.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations
3.
<PAGE> 4
promulgated under Section 162(m) of the Code), is not a former employee of the
Company or an "affiliated corporation" receiving compensation for prior services
(other than benefits under a tax qualified pension plan), was not an officer of
the Company or an "affiliated corporation" at any time and is not currently
receiving direct or indirect remuneration from the Company or an "affiliated
corporation" for services in any capacity other than as a Director or (ii) is
otherwise considered an "outside director" for purposes of Section 162(m) of the
Code.
(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(y) "PLAN" means this medibuy.com, Inc. 1999 Omnibus Equity Plan.
(z) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(dd) "TEN PERCENT SHAREHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by
the Board under the Plan shall be final and binding on all persons.
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any
4.
<PAGE> 5
Stock Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan
to a Committee or Committees of one (1) or more members of the Board, and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the discretion
of the Board, a Committee may consist solely of two or more Outside Directors,
in accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate one million nine
hundred thirty thousand two hundred (1,930,200) shares of Common Stock
plus an annual increase to be added on the day of each Annual Stockholders
Meeting beginning with the Annual Stockholders Meeting in 2001, equal to the
least of (i) 2% of the Company's outstanding shares on each such date (rounded
to the nearest whole share and calculated on a fully diluted basis, that is
assuming the exercise of all outstanding stock options and warrants to purchase
common stock), (ii) 600,000 shares or (iii) an amount determined by the Board.
5.
<PAGE> 6
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.
(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.
(d) SHARE RESERVE LIMITATION. Prior to the Listing Date and to the
extent then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares of Common Stock issuable upon exercise
of all outstanding Options and the total number of shares of Common Stock
provided for under any stock bonus or similar plan of the Company shall not
exceed the applicable percentage as calculated in accordance with the conditions
and exclusions of Section 260.140.45 of Title 10 of the California Code of
Regulations, based on the shares of Common Stock of the Company that are
outstanding at the time the calculation is made.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT SHAREHOLDERS.
(i) A Ten Percent Shareholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant.
(ii) Prior to the Listing Date, a Ten Percent Shareholder
shall not be granted a Nonstatutory Stock Option unless the exercise price of
such Option is at least (i) one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.
(iii) Prior to the Listing Date, a Ten Percent Shareholder
shall not be granted a restricted stock award unless the purchase price of the
restricted stock is at least (i) one hundred percent (100%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than One Million
(1,000,000) shares of Common Stock during any calendar year. This subsection
5(c) shall not apply prior to the Listing Date and, following
6.
<PAGE> 7
the Listing Date, this subsection 5(c) shall not apply until (i) the earliest
of: (1) the first material modification of the Plan (including any increase in
the number of shares of Common Stock reserved for issuance under the Plan in
accordance with Section 4); (2) the issuance of all of the shares of Common
Stock reserved for issuance under the Plan; (3) the expiration of the Plan; or
(4) the first meeting of shareholders at which Directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.
(d) CONSULTANTS.
(i) Prior to the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, either the
offer or the sale of the Company's securities to such Consultant is not exempt
under Rule 701 of the Securities Act ("Rule 701") because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by Rule 701, unless
the Company determines that such grant need not comply with the requirements of
Rule 701 and will satisfy another exemption under the Securities Act as well as
comply with the securities laws of all other relevant jurisdictions.
(ii) From and after the Listing Date, a Consultant shall not
be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.
(iii) As of April 7, 1999 Rule 701 and Form S-8 generally are
available to consultants and advisors only if (i) they are natural persons; (ii)
they provide bona fide services to the issuer, its parents, its majority-owned
subsidiaries or majority-owned subsidiaries of the issuer's parent; and (iii)
the services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly promote or
maintain a market for the issuer's securities.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
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(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Incentive Stock Option granted on or after the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing
Date shall be not less than eighty-five percent (85%) of the Fair Market Value
of the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board; provided, however, that at
any time that the Company is incorporated in Delaware, payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
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(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option granted prior to the Listing Date shall not be transferable except
by will or by the laws of descent and distribution and, to the extent provided
in the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:
(i) Options granted prior to the Listing Date to an Employee
who is not an Officer, Director or Consultant shall provide for vesting of the
total number of shares of Common Stock at a rate of at least twenty percent
(20%) per year over five (5) years from the date the Option was granted, subject
to reasonable conditions such as continued employment; and
(ii) Options granted prior to the Listing Date to Officers,
Directors or Consultants may be made fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company.
(i) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than thirty (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.
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<PAGE> 10
(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(k) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (2) the expiration of the term of
such Option as set forth in the Option Agreement. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate.
(m) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Subject to the "Repurchase Limitation" in subsection 10(h), any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
(n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares of Common Stock acquired by the Optionholder pursuant to the
exercise of the Option.
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<PAGE> 11
(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(o), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.
(p) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares of Common Stock
equal to the number of shares of Common Stock surrendered as part or all of the
exercise price of such Option; (ii) have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (iii) have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option shall be subject to the same exercise price and
term provisions heretofore described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
(i) CONSIDERATION. A stock bonus may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit.
(ii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus agreement
may, but need not, be
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subject to a share repurchase option in favor of the Company in accordance with
a vesting schedule to be determined by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.
(iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares of Common Stock under the stock bonus
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a stock bonus award made on or after the Listing
Date, rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the stock bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. Subject to the provisions of subsection
5(b) regarding Ten Percent Shareholders, the purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. For
restricted stock awards made prior to the Listing Date, the purchase price shall
not be less than eighty-five percent (85%) of the Common Stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
For restricted stock awards made on or after the Listing Date, the purchase
price shall not be less than eighty-five percent (85%) of the Common Stock's
Fair Market Value on the date such award is made or at the time the purchase is
consummated.
(ii) CONSIDERATION. The purchase price of Common Stock
acquired pursuant to the restricted stock purchase agreement shall be paid
either: (i) in cash at the time of purchase; (ii) at the discretion of the
Board, according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, then payment of the Common Stock's
"par value," as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.
(iii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need
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not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.
(v) TRANSFERABILITY. For a restricted stock award made before
the Listing Date, rights to acquire shares of Common Stock under the restricted
stock purchase agreement shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a restricted stock award made on or
after the Listing Date, rights to acquire shares of Common Stock under the
restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
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(b) SHAREHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash
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payment; (ii) authorizing the Company to withhold shares of Common Stock from
the shares of Common Stock otherwise issuable to the Participant as a result of
the exercise or acquisition of Common Stock under the Stock Award; provided,
however, that no shares are withheld with a value exceeding the minimum amount
of tax required to be withheld by law; or (iii) delivering to the Company owned
and unencumbered shares of Common Stock.
(g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.
(h) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:
(i) FAIR MARKET VALUE. If the repurchase option gives the
Company the right to repurchase the shares of Common Stock upon termination of
employment at not less than the Fair Market Value of the shares of Common Stock
to be purchased on the date of termination of Continuous Service, then (i) the
right to repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Service (or in the case of shares of Common Stock
issued upon exercise of Stock Awards after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.
(ii) ORIGINAL PURCHASE PRICE. If the repurchase option gives
the Company the right to repurchase the shares of Common Stock upon termination
of Continuous Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of at least
twenty percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock
Award was exercised or became exercisable) and (ii) the right to repurchase
shall be exercised for cash or cancellation of purchase money indebtedness for
the shares of Common Stock within ninety (90) days of termination of Continuous
Service (or in the case of shares of Common Stock issued upon exercise of
Options after such date of termination, within ninety (90) days after the date
of the exercise) or such longer period as may be agreed to by the Company and
the Participant (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code regarding "qualified small business stock").
11. ADJUSTMENTS UPON CHANGES IN STOCK.
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(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this subsection 11(c)) for those
outstanding under the Plan. In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.
(d) CHANGE IN CONTROL--SECURITIES ACQUISITION. After the Listing Date,
in the event of an acquisition by any person, entity or group within the meaning
of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or an Affiliate) of the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
Directors, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full.
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(e) CHANGE IN CONTROL--CHANGE IN INCUMBENT BOARD. After the Listing
Date, in the event that the individuals who, as of the Listing Date, are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least fifty percent (50%) of the Board, then with respect to Stock Awards held
by persons whose Continuous Service has not terminated, the vesting of such
Stock Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full. If the election, or nomination for
election, by the Company's shareholders of any new Director was approved by a
vote of at least fifty percent (50%) of the Incumbent Board, such new Director
shall be considered as a member of the Incumbent Board.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) SHAREHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the shareholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
17.
<PAGE> 18
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Award shall be exercised (or, in the case of a stock bonus, shall be
granted) unless and until the Plan has been approved by the shareholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
15. CHOICE OF LAW.
The law of the State of California shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state's conflict of laws rules.
18.
<PAGE> 1
EXHIBIT 10.5
MEDIBUY.COM, INC.
STOCK OPTION GRANT NOTICE
(1999 OMNIBUS EQUITY PLAN)
medibuy.com, Inc. (the "Company"), pursuant to its 1999 Omnibus Equity Plan (the
"Plan"), hereby grants to Optionholder an option to purchase the number of
shares of the Company's Common Stock set forth below. This option is subject to
all of the terms and conditions as set forth herein and in the Stock Option
Agreement, the Plan and the Notice of Exercise, all of which are attached hereto
and incorporated herein in their entirety.
Optionholder: _____________________________________
Date of Grant: _____________________________________
Vesting Commencement Date: _____________________________________
Number of Shares Subject to Option: _____________________________________
Exercise Price (Per Share): _____________________________________
Total Exercise Price: _____________________________________
Expiration Date: _____________________________________
TYPE OF GRANT: [ ] Incentive Stock Option [ ] Nonstatutory Stock Option
EXERCISE SCHEDULE: [ ] Same as Vesting Schedule [ ] Early Exercise Permitted
VESTING SCHEDULE: 1/4th of the shares vest one year after the Vesting
Commencement Date.
1/48th of the shares vest monthly thereafter over the next
three years.
PAYMENT: By one or a combination of the following items
(described in the Stock Option Agreement):
By cash or check
Pursuant to a Regulation T Program if the Shares are
publicly traded
By delivery of already-owned shares if the Shares are
publicly traded
ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:
OTHER AGREEMENTS: ________________________________________
________________________________________
MEDIBUY.COM, INC. OPTIONHOLDER:
By:________________________________ ________________________________________
Signature Signature
Title:_____________________________ Date:___________________________________
Date:______________________________
ATTACHMENTS: Stock Option Agreement, 1999 Omnibus Equity Plan and Notice of
Exercise
<PAGE> 2
MEDIBUY.COM, INC.
1999 OMNIBUS EQUITY PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, medibuy.com, Inc. (the "Company") has granted you an
option under its 1999 Omnibus Equity Plan (the "Plan") to purchase the number of
shares of the Company's Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option
will vest as provided in your Grant Notice, provided that vesting will cease
upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in your
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of your option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover first
vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that
have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise Stock
Purchase Agreement with a vesting schedule that will result in the same vesting
as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as provided in
the Plan, to the extent that the aggregate Fair Market Value (determined at the
time of grant) of the shares of Common Stock with respect to which your option
plus all other incentive stock options you hold are exercisable for the first
time by you during any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s) or
1.
<PAGE> 3
portions thereof that exceed such limit (according to the order in which they
were granted) shall be treated as nonstatutory stock options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or in any other manner PERMITTED BY YOUR
GRANT NOTICE, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
(c) Pursuant to the following deferred payment alternative:
(i) Not less than one hundred percent (100%) of the aggregate
exercise price, plus accrued interest, shall be due four (4) years from date of
exercise or, at the Company's election, upon termination of your Continuous
Service.
(ii) Interest shall be compounded at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any portion of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(iii) At any time that the Company is incorporated in Delaware,
payment of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall be made in cash and not by deferred payment.
(iv) In order to elect the deferred payment alternative, you
must, as a part of your written notice of exercise, give notice of the election
of this payment alternative and, in order to secure the payment of the deferred
exercise price to the Company hereunder, if the Company so requests, you must
tender to the Company a promissory note and a security agreement covering the
purchased shares of Common Stock, both in form and substance
2.
<PAGE> 4
satisfactory to the Company, or such other or additional documentation as the
Company may request.
5. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.
7. TERM. The term of your option commences on the Date of Grant and
expires upon the EARLIEST of the following:
(a) three (3) months after the termination of your Continuous Service
for any reason other than your Disability or death, provided that if during any
part of such three- (3-) month period your option is not exercisable solely
because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous
Service due to your Disability;
(c) eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the tenth (10th) anniversary of the Date of Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you continue to provide services to the Company or an Affiliate
as a Consultant or Director after your employment terminates or if you otherwise
exercise your option more than three (3) months after the date your employment
terminates.
3.
<PAGE> 5
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an incentive stock option, by exercising your
option you agree that you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of your option that occurs within two (2) years after the
date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
(d) By exercising your option you agree that the Company (or a
representative of the underwriter(s)) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that you not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the underwriter(s) (not to exceed one hundred eighty (180)
days) following the effective date of the registration statement of the Company
filed under the Securities Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your shares of
Common Stock until the end of such period.
9. TRANSFERABILITY. Your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. RIGHT OF FIRST REFUSAL. Shares of Common Stock that you acquire upon
exercise of your option are subject to any right of first refusal that may be
described in the Company's bylaws in effect at such time the Company elects to
exercise its right. The Company's right of first refusal shall expire on the
Listing Date.
4.
<PAGE> 6
11. RIGHT OF REPURCHASE. To the extent provided in the Company's bylaws
as amended from time to time, the Company shall have the right to repurchase all
or any part of the shares of Common Stock you acquire pursuant to the exercise
of your option.
12. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
13. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law. If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your option,
share withholding pursuant to the preceding sentence shall not be permitted
unless you make a proper and timely election under Section 83(b) of the Code,
covering the aggregate number of shares of Common Stock acquired upon such
exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.
14. NOTICES. Any notices provided for in your option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by
5.
<PAGE> 7
mail by the Company to you, five (5) days after deposit in the United States
mail, postage prepaid, addressed to you at the last address you provided to the
Company.
15. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option and
those of the Plan, the provisions of the Plan shall control.
6.
<PAGE> 1
EXHIBIT 10.6
MEDIBUY.COM, INC.
1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED DECEMBER 14, 1999
APPROVED BY STOCKHOLDERS _______________, _____
EFFECTIVE DATE: DECEMBER 14, 1999
TERMINATION DATE: NONE
1. PURPOSES.
(a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options
are the Non-Employee Directors of the Company.
(b) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of its Non-Employee Directors, to secure and retain the services of
new Non-Employee Directors and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "ANNUAL GRANT" means an Option granted annually to all Non-Employee
Directors who meet the criteria specified in subsection 6(b) of the Plan.
(c) "ANNUAL MEETING" means the annual meeting of the stockholders of
the Company.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMMON STOCK" means the common stock of the Company.
(g) "COMPANY" means MEDIBUY.COM, INC., a Delaware corporation.
(h) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for
1.
<PAGE> 2
such services or (ii) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include either Directors of the Company
who are not compensated by the Company for their services as Directors or
Directors of the Company who are merely paid a director's fee by the Company for
their services as Directors.
(i) "CONTINUOUS SERVICE" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Optionholder's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
(j) "DIRECTOR" means a member of the Board of Directors of the Company.
(k) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(iii) On the IPO Date, the Fair Market Value of a share of
Common Stock shall be the price offered to the public without taking into
account any underwriters' commissions or discounts.
2.
<PAGE> 3
(o) "INITIAL GRANT" means an Option granted to a Non-Employee Director
who meets the criteria specified in subsection 6(a) of the Plan.
(p) "IPO DATE" means the effective date of the initial public offering
of the Common Stock.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who is not an Employee.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(s) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) "OPTION" means a Nonstatutory Stock Option granted pursuant to the
Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(w) "PLAN" means this MEDIBUY.COM, INC. 1999 Non-Employee Directors'
Stock Option Plan.
(x) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(y) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan. The
Board may not delegate administration of the Plan to a committee.
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine the provisions of each Option to the extent
not specified in the Plan.
(ii) To construe and interpret the Plan and Options granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any
3.
<PAGE> 4
Option Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(iii) To amend the Plan or an Option as provided in Section
12.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company that are not in conflict with the provisions of the Plan.
(c) EFFECT OF BOARD'S DECISION. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in the Common Stock, the Common Stock that may be
issued pursuant to Options shall not exceed in the aggregate One Hundred Fifty
Thousand (150,000) shares of Common Stock plus an annual increase to be added on
the day of each Annual Stockholders Meeting beginning with the Annual
Stockholders Meeting in 2001, equal to the least of (i) one-tenth of one percent
(.1%) of the Company's outstanding shares on each such date (rounded to the
nearest whole share and calculated on a fully diluted basis, that is assuming
the exercise of all outstanding stock options and warrants to purchase common
stock), (ii) 25,000 shares or (iii) an amount determined by the Board. If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such
Option shall revert to and again become available for issuance under the Plan.
(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
The Options as set forth in section 6 automatically shall be granted
under the Plan to all Non-Employee Directors.
6. NON-DISCRETIONARY GRANTS.
(a) INITIAL GRANTS. Without any further action of the Board,
and subject to the provisions of Section 11 relating to adjustments upon
changes in the Common Stock, a Non-Employee Director shall be granted the an
Initial Grant as follows:
4.
<PAGE> 5
(i) After the IPO Date, each person who is elected or
appointed for the first time to be a Non-Employee Director automatically shall,
upon the date of his or her initial election or appointment to be a Non-Employee
Director by the Board or stockholders of the Company, be granted an Initial
Grant to purchase Seven Thousand Five Hundred (7,500) shares of Common Stock on
the terms and conditions set forth herein.
(b) ANNUAL GRANTS. Without any further action of the Board, and subject
to the provisions of Section 11 relating to adjustments upon changes in the
Common Stock, a Non-Employee Director shall be granted an Annual Grant as
follows: On the day following each Annual Meeting commencing with the Annual
Meeting in 2001, each person who is then a Non-Employee Director automatically
shall be granted an Annual Grant to purchase Two Thousand Five Hundred (2,500)
shares of Common Stock on the terms and conditions set forth herein; provided,
however, that if the person has not been serving as a Non-Employee Director for
the entire period since the preceding Annual Meeting, then the number of shares
subject to the Annual Grant shall be reduced pro rata for each full quarter
prior to the date of grant during which such person did not serve as a
Non-Employee Director.
7. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) EXERCISE PRICE. The exercise price of each Option shall be one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option may be paid, to the extent permitted by applicable statutes and
regulations, in any combination of the following methods:
(i) By cash or check.
5.
<PAGE> 6
(ii) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that the Optionholder has held for
the period required to avoid a charge to the Company's reported earnings
(generally six months) or that the Optionholder did not acquire, directly or
indirectly from the Company, that are owned free and clear of any liens, claims,
encumbrances or security interests, and that are valued at Fair Market Value on
the date of exercise. "Delivery" for these purposes shall include delivery to
the Company of the Optionholder's attestation of ownership of such shares of
Common Stock in a form approved by the Company. Notwithstanding the foregoing,
the Optionholder may not exercise the Option by tender to the Company of Common
Stock to the extent such tender would violate the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
(iii) Provided that at the time of exercise the Common Stock
is publicly traded and quoted regularly in The Wall Street Journal, pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the receipt
of cash (or check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales proceeds.
(d) TRANSFERABILITY. An Option is transferable by will or by the laws
of descent and distribution. An Option also is transferable (i) by instrument to
an inter vivos or testamentary trust, in a form accepted by the Company, in
which the Option is to be passed to beneficiaries upon the death of the trustor
(settlor) and (ii) by gift, in a form accepted by the Company, to a member of
the "immediate family" of the Optionholder as that term is defined in 17 C.F.R.
240.16a-1(e). An Option shall be exercisable during the lifetime of the
Optionholder only by the Optionholder and a permitted transferee as provided
herein. However, the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.
(e) Exercise Schedule. The Option shall be exercisable as the shares of
Common Stock subject to the Option vest.
(f) VESTING SCHEDULE. Options shall vest as follows:
(i) Initial Grants shall provide for vesting of 1/36th of the
shares of Common Stock subject to the Option each month after the date of the
grant of the Option over a period of three (3) years.
(ii) Annual Grants shall provide for vesting of 1/36th of the
shares of Common Stock subject to the Option each month after the date of the
grant of the Option over a period of three (3) years.
(g) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as
6.
<PAGE> 7
of the date of termination) but only within such period of time ending on the
earlier of (i) the date three (3) months following the termination of the
Optionholder's Continuous Service, or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate.
(h) EXTENSION OF TERMINATION DATE. If the exercise of the Option
following the termination of the Optionholder's Continuous Service (other than
upon the Optionholder's death or Disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in subsection
7(a) or (ii) the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.
(i) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option
shall terminate.
(j) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the three-month period after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise the
Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionholder's death, but only
within the period ending on the earlier of (1) the date eighteen (18) months
following the date of death or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Options, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Options.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Options and to issue and sell shares of
Common Stock upon exercise of the Options; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Option or any stock issued or issuable pursuant to any such
Option. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary
7.
<PAGE> 8
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Options unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Option unless and until such Optionholder has satisfied all
requirements for exercise of the Option pursuant to its terms.
(b) NO SERVICE RIGHTS. Nothing in the Plan or any instrument executed
or Option granted pursuant thereto shall confer upon any Optionholder any right
to continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(c) INVESTMENT ASSURANCES. The Company may require an Optionholder, as
a condition of exercising or acquiring stock under any Option, (i) to give
written assurances satisfactory to the Company as to the Optionholder's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; and (ii) to give
written assurances satisfactory to the Company stating that the Optionholder is
acquiring the stock subject to the Option for the Optionholder's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (iii) the issuance of the shares upon the
exercise or acquisition of stock under the Option has been registered under a
then currently effective registration statement under the Securities Act or (iv)
as to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(d) WITHHOLDING OBLIGATIONS. The Optionholder may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option
8.
<PAGE> 9
by any of the following means (in addition to the Company's right to
withhold from any compensation paid to the Optionholder by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common
Stock otherwise issuable to the Optionholder as a result of the exercise or
acquisition of stock under the Option, provided, however, that no shares of
Common Stock are withheld with a value exceeding the minimum amount of tax
required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Option, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject both to the
Plan pursuant to subsection 4(a) and to the nondiscretionary Options specified
in Section 5, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of stock subject to such
outstanding Options. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Options shall
terminate immediately prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Options outstanding under the Plan or shall substitute similar Options
(including an option to acquire the same consideration paid to the stockholders
in the transaction described in this subsection 11(c) for those outstanding
under the Plan). In the event any surviving corporation or acquiring corporation
refuses to assume such Options or to substitute similar Options for those
outstanding under the Plan, then with respect to Options held by Optionholders
whose Continuous Service has not terminated, the vesting of such Options (and
the time during which such Options may be exercised) shall be accelerated in
full, and the Options shall terminate if not exercised at or prior to such
event. With respect to any other Options outstanding under the Plan, such
Options shall terminate if not exercised prior to such event.
9.
<PAGE> 10
12. AMENDMENT OF THE PLAN AND OPTIONS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval.
(c) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.
(d) AMENDMENT OF OPTIONS. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
No Options may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Option granted while the Plan
is in effect except with the written consent of the Optionholder.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
15. CHOICE OF LAW.
All questions concerning the construction, validity and interpretation
of this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.
10.
<PAGE> 1
EXHIBIT 10.7
MEDIBUY.COM, INC.
NONSTATUTORY STOCK OPTION
(1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN)
____________ [Name], Optionee:
MEDIBUY.COM, INC. (the "Company"), pursuant to its 1999 Non-Employee
Directors' Stock Option Plan (the "Plan") has on ___________, 1999 granted to
you, the optionee named above, an option to purchase shares of the common stock
of the Company ("Common Stock"). This option is not intended to qualify and will
not be treated as an "incentive stock option" within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's
Non-Employee Directors (as defined in the Plan).
The details of your option are as follows:
1. The TOTAL number of shares of Common Stock subject to this option is
__________ (______). Subject to the limitations contained herein, this option
shall be exercisable in accordance with the Plan.
2. The exercise price of this option is _________ ($____) per share,
being the Fair Market Value (as defined in the Plan) of the Common Stock on the
date of grant of this option.
3. (a) This option may be exercised, to the extent specified in
the Plan, by delivering a notice of exercise (in a form designated by the
Company) together with the exercise price to the Secretary of the Company, or to
such other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to paragraph 6 of the Plan. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
(b) By exercising this option you agree that the Company may
require you to enter an arrangement providing for the cash payment by you to the
Company of any tax withholding obligation of the Company arising by reason of
the exercise of this option or the lapse of any substantial risk of forfeiture
to which the shares are subject at the time of exercise.
4. Any notices provided for in this option or the Plan shall be given
in writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed
1.
<PAGE> 2
to you at the address specified below or at such other address as you hereafter
designate by written notice to the Company.
5. This option is subject to all the PROVISIONS of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of paragraph 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Dated the _______ day of ________, 1999.
Very truly yours,
MEDIBUY.COM, INC.
By:
------------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
1999 Non-Employee Directors' Stock Option Plan
2.
<PAGE> 3
The undersigned:
(a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan;
(b) Acknowledges that as of the date of grant of this option,
it sets forth the entire understanding between the undersigned optionee and the
Company and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock options plans of the Company, and (ii) the following agreements
only:
NONE
------------------------------------------
(Initial)
OTHER
------------------------------------------
------------------------------------------
------------------------------------------
----------------------------------------
OPTIONEE
----------------------------------------
Address
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----------------------------------------
3.
<PAGE> 1
EXHIBIT 10.8
MEDIBUY.COM, INC.
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS ON DECEMBER 14, 1999
APPROVED BY THE STOCKHOLDERS ON _________, ______
ADJUSTED FOR _________ FOR ________ STOCK SPLIT ON ________
EFFECTIVE DATE DECEMBER 14, 1999
1. PURPOSE.
(a) The purpose of this Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of MEDIBUY.COM, INC., a Delaware corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the
1.
<PAGE> 2
exercise of this power, may correct any defect, omission or inconsistency in the
Plan, in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of one (1) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(d) Any interpretation of the Plan by the Board of any decision made
by it under the Plan shall be final and binding on all persons.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate Five Hundred Thousand (500,000)
shares of the Company's common stock (the "Common Stock") plus an annual
increase to be added on the day of each Annual Stockholders Meeting beginning
with the Annual Stockholders Meeting in 2001, equal to the lesser of (i) 200,000
shares or (ii) an amount determined by the Board. If any right granted under the
Plan shall for any reason terminate without having been exercised, the Common
Stock not purchased under such right shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the Plan
to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all employees granted rights to purchase stock under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-
2.
<PAGE> 3
seven (27) months beginning with the Offering Date, and the substance of the
provisions contained in paragraphs 5 through 8, inclusive.
(b) If an employee has more than one (1) right outstanding under the
Plan, unless he or she otherwise indicates in agreements or notices delivered
hereunder, a right with a lower exercise price (or an earlier-granted right if
two (2) rights have identical exercise prices), will be exercised to the fullest
possible extent before a right with a higher exercise price (or a later-granted
right if two (2) rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such
3.
<PAGE> 4
employee may purchase under all outstanding rights and options shall be treated
as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan; provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in subparagraph 7(a)) during the period
which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one (1) or more dates during an Offering
(the "Purchase Date(s)") on which rights granted under the Plan shall be
exercised and purchases of Common Stock carried out in accordance with such
Offering.
(b) In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one (1) Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
4.
<PAGE> 5
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant to an
Offering by delivering an enrollment agreement to the Company within the time
specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company that
is intended to comply with Section 125, Section 401(k), Section 402(e)(3),
Section 402(h) or section 403(b) of the Code, and also including any deferrals
under a non-qualified deferred compensation plan or arrangement established by
the Company), and also, if determined by the Board or the Committee and set
forth in the terms of the Offering, may include any or all of the following: (i)
overtime pay, (ii) commissions, (iii) bonuses, incentive pay, profit sharing and
other remuneration paid directly to the employee, and/or (iv) other items of
remuneration not specifically excluded pursuant to the Plan. Earnings shall
not include the cost of employee benefits paid for by the Company or an
Affiliate, education or tuition reimbursements, imputed income arising
under any group insurance or benefit program, traveling expenses, business
and moving expense reimbursements, income received in connection with stock
options, contributions made by the Company or an Affiliate under any employee
benefit plan, and similar items of compensation, as determined by the
Board or the Committee. Notwithstanding the foregoing, the Board or
Committee may modify the definition of "Earnings" with respect to one or more
Offerings as the Board or Committee determines appropriate. The payroll
deductions made for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds of
the Company. A participant may reduce (including to zero) or increase
such payroll deductions, and an eligible employee may begin such payroll
deductions, after the beginning of any Offering only as provided for in the
Offering. A participant may make additional payments into his or her account
only if specifically provided for in the Offering and only if the participant
has not had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new enrollment agreement in order to
participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated
5.
<PAGE> 6
employee all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
terminated employee), under the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of Common Stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase one or more whole shares of
Common Stock on the final Purchase Date of an Offering shall be distributed in
full to the participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered and in such compliance,
no rights granted under the Plan or any Offering shall be exercised and all
payroll deductions accumulated during the Offering (reduced to the extent, if
any, such deductions have been used to acquire stock) shall be distributed to
the participants, without interest.
6.
<PAGE> 7
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company (or
its transfer agent).
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a sale of all or substantially all of the assets of the Company; (3) a
merger or consolidation in which the Company is not the surviving corporation;
(4) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; (5) the acquisition by any person, entity
or group within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or any Affiliate of the Company) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
7.
<PAGE> 8
Act, or comparable successor rule) of securities of the Company representing at
least fifty percent (50%) of the combined voting power entitled to vote in the
election of directors; or (6) the individuals who, as of the date of
the adoption of this Plan, are members of the Board (the "Incumbent Board"; (if
the election, or nomination for election by the Company's stockholders, of a
new director was approved by a vote of at least fifty percent (50%) of the
members of the Board then comprising the Incumbent Board, such new director
shall upon his or her election be considered a member of the Incumbent Board)
cease for any reason to constitute at least fifty percent (50%) of the Board;
then the Board in its sole discretion may take any action or arrange for
the taking of any action among the following: (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar rights for
those under the Plan, (ii) such rights may continue in full force and
effect, or (iii) all participants' accumulated payroll deductions may be
used to purchase Common Stock immediately prior to or within a reasonable
period of time following the transaction described above and the
participants' rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN OR OFFERINGS.
(a) The Board at any time, and from time to time, may amend the Plan or
the terms of one or more Offerings. However, except as provided in paragraph 12
relating to adjustments upon changes in stock, no amendment shall be effective
unless approved by the stockholders of the Company within twelve (12) months
before or after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under
the Plan;
(ii) Modify the provisions as to eligibility for participation
in the Plan or an Offering (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act, or any comparable successor rule ("Rule
16b-3"); or
(iii) Modify the Plan or an Offering in any other way if such
modification requires stockholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan or an Offering in
any respect the Board deems necessary or advisable to provide eligible employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under an Offering
into compliance therewith.
(b) The Board may, in its sole discretion, submit any amendment to the
Plan or an Offering for stockholder approval.
(c) Rights and obligations under any rights granted before amendment of
the Plan or Offering shall not be impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or
8.
<PAGE> 9
governmental regulations, or except as necessary to ensure that the Plan and/or
rights granted under an Offering comply with the requirements of Section 423 of
the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if applicable, from the participant's account
under the Plan in the event of such participant's death subsequent to the end of
an Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice in the form prescribed by the Company. In the
event of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living (or if an entity, is otherwise in
existence) at the time of such participant's death, the Company shall deliver
such shares and/or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its sole discretion, may deliver such
shares and/or cash to the spouse or to any one (1) or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may determine.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at
any time. The Plan shall automatically terminate if all the shares subject to
the Plan pursuant to subparagraph 3(a) are issued. No rights may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
as expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under an Offering comply with the requirements of Section 423 of
the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day on which the Company's
registration statement under the Securities Act with respect to the initial
public offering of shares of the Company's Common Stock becomes effective (the
"Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan had been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board or the Committee, which date may be prior to the Effective Date.
17. CHOICE OF LAW.
All questions concerning the construction, validity and interpretation
of this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.
9.
<PAGE> 1
EXHIBIT 10.9
MEDIBUY.COM, INC.
EMPLOYEE STOCK PURCHASE PLAN OFFERING
ADOPTED BY THE BOARD OF DIRECTORS ON DECEMBER 14, 1999
1. GRANT; OFFERING DATE.
(a) The Board of Directors (the "Board") of MEDIBUY.COM, INC. (the
"Company"), pursuant to the Company's Employee Stock Purchase Plan (the "Plan"),
hereby authorizes the grant of rights to purchase shares of the common stock of
the Company ("Common Stock") to all Eligible Employees (an "Offering"). The
first Offering shall begin on the effective date of the initial public offering
of the Company's Common Stock and end on January 31, 2002 (the "Initial
Offering"). Thereafter, an Offering shall begin on February 1, 2002 and on each
February 1 every second year thereafter, and each such offering shall end on the
day prior to the second anniversary of its Offering Date. The first day of an
Offering is that Offering's "Offering Date."
(b) Notwithstanding the foregoing: (i) if any Offering Date falls on a
day that is not a Trading Day (as defined herein), then such Offering Date shall
instead fall on the next subsequent Trading Day and (ii) if any Purchase Date
(as defined in Section 6, below) Date falls on a day that is not a Trading Day,
then such Purchase Date shall instead fall on the immediately preceding Trading
Day. "Trading Day" shall mean any day the exchange(s) or market(s) on which the
Common Stock is listed, whether it be any established stock exchange, The Nasdaq
National Market, The Nasdaq SmallCap Market or otherwise, is open for trading.
(c) Notwithstanding anything to the contrary, in the event that the
Fair Market Value (as defined herein) of a share of Common Stock on any Purchase
Date during an Offering is less than the Fair Market Value of a share of Common
Stock on the Offering Date of such Offering, then following the purchase of
Common Stock on such Purchase Date: (i) the Offering shall terminate and (ii)
all participants in the just-terminated Offering shall automatically be enrolled
in a new Offering that shall commence on the next Trading Day following the
Purchase Date and end on the day prior to the second anniversary of such new
offering's Offering Date. Except as provided in paragraph 4, "Fair Market Value"
shall mean the closing sales price for the Common Stock (or the closing bid
price, if no sales were reported) as quoted on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market and as
reported in The Wall Street Journal or such other source as the Board deems
reliable.
(d) Prior to the commencement of any Offering, the Board (or the
Committee described in subparagraph 2(c) of the Plan, if any) may change any or
all terms of such Offering and any subsequent Offerings. The granting of rights
pursuant to each Offering hereunder shall occur on each respective Offering Date
unless, prior to such date (a) the Board (or the Committee) determines that such
Offering shall not occur, or (b) no shares remain available for issuance under
the Plan in connection with the Offering.
(e) Notwithstanding any other provisions of an Offering, if the terms
of an Offering as previously established by the Board would, as a result of a
change to applicable accounting standards, as a result of obtaining shareholder
approval during such Offering for shares of
1.
<PAGE> 2
Common Stock that would be issued under such Offering (but for the provisions
of this Section 1(e)), or otherwise, generate a charge to earnings, such
Offering shall terminate effective as of the earlier of (1) the day prior to
the date such change of accounting standards would otherwise first apply to the
Offering or (2) the day prior to the date upon which the maximum aggregate
number of shares of Common Stock available to be purchased by all Eligible
Employees under such Offering (excluding any additional shares of Common
Stock made available for issuance under the Plan by approval of the
shareholders of the Company during the Offering) exceeds the aggregate number
of whole shares purchasable by all Eligible Employees based upon the
aggregate of such Employees' payroll deductions accumulated pursuant to such
Offering (the "Offering Termination Date"), and such Offering Termination
Date shall be the final Purchase Date of such Offering. A subsequent Offering
shall commence on such date and on such terms as shall be provided by the Board
of Directors of the Company.
2. ELIGIBLE EMPLOYEES.
(a) All employees of the Company and each of its Affiliates (as defined
in the Plan) incorporated in the United States, shall be granted rights to
purchase Common Stock under each Offering on the Offering Date of such Offering,
provided that each such employee otherwise meets the employment requirements of
subparagraph 5(a) of the Plan and has been continuously employed by the Company
or an Affiliate for at least one (1) month (an "Eligible Employee") and that
each Eligible Employee may only contribute to one Offering at any given point in
time. Notwithstanding the foregoing, the following employees shall not be
Eligible Employees or be granted rights under an Offering: (i) part-time or
seasonal employees whose customary employment is less than twenty (20) hours per
week or five (5) months per calendar year and (ii) 5% stockholders (including
ownership through unexercised and/or unvested stock options) described in
subparagraph 5(c) of the Plan.
(b) Notwithstanding the foregoing, each person who first becomes an
Eligible Employee during any Offering and at least six (6) months prior to the
final Purchase Date (as defined in paragraph 6 hereof) of the Offering will, on
the next February 1 or August 1 during that Offering following the date that
person first becomes an Eligible Employee, receive a right under such Offering,
which right shall thereafter be deemed to be a part of the Offering. Such right
shall have the same characteristics as any rights originally granted under the
Offering except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right; and
(ii) the Offering for such right shall begin on its Offering
Date and end coincident with the end of the ongoing Offering.
3. RIGHTS.
(a) Subject to the limitations contained herein and in the Plan, on
each Offering Date each Eligible Employee shall be granted the right to purchase
the number of shares of Common Stock purchasable with up to fifteen percent
(15%) of such employee's Earnings paid during the period of such Offering
beginning after such Eligible Employee first commences participation;
2.
<PAGE> 3
provided, however, that no employee may purchase Common Stock on a particular
Purchase Date that would result in more than fifteen percent (15%) of such
employee's Earnings in the period from the Offering Date to such Purchase Date
having been applied to purchase shares under all ongoing Offerings under the
Plan and all other plans of the Company intended to qualify as "employee stock
purchase plans" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). For this Offering, "Earnings" means the base salary paid
to an employee (including all amounts elected to be deferred by the employee,
that would otherwise have been paid, under any cash or deferred arrangement
established by the Company) and overtime pay, but excludes commissions, bonuses,
other remuneration paid directly to the employee, profit sharing, the cost of
employee benefits paid for by the Company, education or tuition reimbursements,
imputed income arising under any Company group insurance or benefit program,
traveling expenses, business and moving expense reimbursements, income received
in connection with stock options, contributions made by the Company under any
employee benefit plan, and similar items of compensation.
(b) Notwithstanding the foregoing, the maximum number of shares of
Common Stock an Eligible Employee may purchase on any Purchase Date in an
Offering shall be such number of shares as has a Fair Market Value (determined
as of the Offering Date for such Offering) equal to (x) $25,000 multiplied by
the number of calendar years in which the right under such Offering has been
outstanding at any time, minus (y) the Fair Market Value of any other shares of
Common Stock (determined as of the relevant Offering Date with respect to such
shares) which, for purposes of the limitation of Section 423(b)(8) of the Code,
are attributed to any of such calendar years in which the right is outstanding.
The amount in clause (y) of the previous sentence shall be determined in
accordance with regulations applicable under Section 423(b)(8) of the Code based
on (i) the number of shares previously purchased with respect to such calendar
years pursuant to such Offering or any other Offering under the Plan, or
pursuant to any other Company plans intended to qualify as "employee stock
purchase plans" under Section 423 of the Code, and (ii) the number of shares
subject to other rights outstanding on the Offering Date for such Offering
pursuant to the Plan or any other such Company plan.
(c) The maximum aggregate number of shares available to be purchased by
all Eligible Employees under an Offering shall be the number of shares remaining
available under the Plan on the Offering Date. If the aggregate purchase of
shares of Common Stock upon exercise of rights granted under the Offering would
exceed the maximum aggregate number of shares available, the Board shall make a
pro rata allocation of the shares available in a uniform and equitable manner.
4. PURCHASE PRICE.
The purchase price of the Common Stock under the Offering shall be the
lesser of: (i) eighty-five percent (85%) of the Fair Market Value of the Common
Stock on the Offering Date or (ii) or eighty-five percent (85%) of the Fair
Market Value of the Common Stock on the Purchase Date, in each case rounded up
to the nearest whole cent per share. For the Initial Offering, the "Fair Market
Value" of the Common Stock at the time when the Offering commences shall be the
price per share at which shares of Common Stock are first sold to the public in
the Company's initial public offering as specified in the final prospectus with
respect to that public offering.
3.
<PAGE> 4
5. PARTICIPATION.
(a) An Eligible Employee may elect to participate in an Offering at the
beginning of the Offering or at such later date specified in 2(b). An Eligible
Employee shall become a participant in an Offering by delivering an enrollment
form authorizing payroll deductions. Such deductions must be either a fixed
dollar amount per pay period, up to a maximum dollar amount which is less than
or equal to fifteen percent (15%) of Earnings, or in whole percentages of
Earnings, with a minimum percentage of one percent (1%) and a maximum percentage
of fifteen percent (15%). A participant may not make additional payments into
his or her account. The agreement shall be made on such enrollment form as the
Company provides, and must be delivered to the Company prior to the date
participation is to be effective, unless a later time for filing the enrollment
form is set by the Company for all Eligible Employees with respect to a given
Offering. For the Initial Offering, the time for filing an enrollment form and
commencing participation for individuals who are Eligible Employees on the
Offering Date for the Initial Offering shall be determined by the Company and
communicated to such Eligible Employees.
(b) A participant may decrease his or her participation level during
the course of a six (6) month purchase interval one (1) time, and only by
delivering notice to the Company at least ten (10) days in advance of the
Purchase Date in such form as the Company prescribes; provided that a
participant may (i) reduce his or her deductions to zero percent (0%) upon ten
(10) days' prior notice, or within such shorter period as determined by the
Board and communicated to the participants, by delivering a notice in such form
as the Company provides, (ii) may increase or decrease his or her participation
level at any time to become effective on the day following the next subsequent
Purchase Date, or (iii) may withdraw from an Offering and receive his or her
accumulated payroll deductions from the Offering (reduced to the extent, if any,
such deductions have been used to acquire Common Stock for the participant on
any prior Purchase Dates) without interest, at any time prior to the end of the
Offering, excluding only each ten (10) day period immediately preceding a
Purchase Date, by delivering a withdrawal notice to the Company in such form as
the Company provides. A participant who has withdrawn from an Offering shall not
again participate in such Offering, but may participate in subsequent Offerings
under the Plan in accordance with the terms thereof.
6. PURCHASES.
Subject to the limitations contained herein, on each Purchase Date,
each participant's accumulated payroll deductions (without any increase for
interest) shall be applied to the purchase of whole shares of Common Stock, up
to the maximum number of shares permitted under the Plan and the Offering.
"Purchase Date" shall be defined as each July 31 and January 31. The first
Purchase Date under the Initial Offering shall be July 31, 2000. Notwithstanding
the foregoing, if any Purchase Date falls on a day that is not a Trading Day,
then such Purchase Date shall instead fall on the immediately preceding Trading
Day.
7. NOTICES AND AGREEMENTS.
Any notices or agreements provided for in an Offering or the Plan shall
be given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering, shall be deemed effectively given
upon receipt or, in the case of notices and
4.
<PAGE> 5
agreements delivered by the Company, five (5) days after deposit in the United
States mail, postage prepaid.
8. EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.
The rights granted under an Offering are subject to the approval of the
Plan by the stockholders as required for the Plan to obtain treatment as a
tax-qualified employee stock purchase plan under Section 423 of the Code and to
comply with the requirements of an available exemption from potential liability
under Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") set forth in Rule 16b-3 promulgated under the Exchange Act.
9. OFFERING SUBJECT TO PLAN.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan), the provisions of the Plan
shall control.
5.
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of March 29, 1999 between
medibuy.com, a Delaware Corporation with a principal place of business at 7777
Alvarado Road, Suite 401, La Mesa, California, 91941 ("COMPANY") and Dennis J.
Murphy of 4385 Canyon Crest West Road, San Ramon, California, 94583
("EXECUTIVE").
1. Employment.
COMPANY hereby employs EXECUTIVE, and EXECUTIVE hereby agrees to accept
employment from COMPANY, as Chief Executive Officer ("CEO") of COMPANY.
EXECUTIVE agrees during the term of his employment under this Agreement and in
his capacity as Chief Executive Officer to perform the duties and
responsibilities of the office of CEO as set forth in COMPANY's bylaws and as
required under Delaware corporation law. EXECUTIVE agrees to perform such
services as shall be determined from time to time by the Board of Directors.
EXECUTIVE further agrees to use his best efforts to promote the interests of
COMPANY and to devote his full business time and energies to the business and
affairs of COMPANY, unless otherwise authorized by a vote of the Board of
Directors. EXECUTIVE may, however, engage in civic and not-for-profit activities
so long as such activities do not materially interfere with the performance of
his duties to COMPANY hereunder.
2. Term of Employment.
The employment under this Agreement shall commence on March 29, 1999,
and shall end on March 29, 2000, provided that the term of the Agreement shall
be extended automatically for successive periods of one year unless otherwise
terminated under Paragraph 5 of this Agreement.
3. Compensation.
<PAGE> 2
(a) Base Salary. As compensation for services provided to COMPANY,
EXECUTIVE shall receive a salary at the annual rate of $195,000, less such
payroll and withholding taxes as required by law to be deducted and such other
amounts as EXECUTIVE shall authorize in writing. The salary shall be payable in
semi-monthly installments. Such salary may be increased, but not decreased, from
time to time as decided in the discretion of the Board of Directors of COMPANY.
(b) Bonus. As additional compensation for services rendered by
EXECUTIVE, EXECUTIVE shall be entitled to participate in any incentive bonus
program that COMPANY's Board of Directors may establish for its executive
employees. Such bonus program shall provide a maximum bonus of fifty percent
(50%) of the salary paid during the year in which the bonus is earned, based
upon factors established by the Board of Directors,
(c) Equity Compensation. As further compensation for the services
rendered by EXECUTIVE, upon his commencement of employment with COMPANY pursuant
to this Agreement, EXECUTIVE will be granted an incentive stock option to
purchase Fifty-Eight Thousand Five Hundred (58,500) shares of Common Stock of
COMPANY at an exercise price per share of $1.50 per share, the fair market
value of the Common Stock as determined by the Board of Directors as of the date
of this Agreement. Such options shall be issued pursuant to, and their exercise
and the issuance of shares upon exercise shall be subject to, the conditions of
the COMPANY's 1999 Equity Incentive Plan. In addition, the 4,000 shares of
COMPANY'S Common Stock previously purchased by EXECUTIVE (1,000 shares at $0.01
per share and 3000 shares at $1.50 per share) shall be free of any right of
repurchase in favor of the COMPANY, but shall be subject to the same
restrictions and obligations (including restrictions upon transfer under
applicable securities laws) as will apply to Common Stock issued to
<PAGE> 3
EXECUTIVE upon his exercise of the stock options described above.
(i) Vesting of Options. EXECUTIVE'S incentive stock options
shall vest according to the following schedule:
8,500 option shares shall vest and be subject to exercise immediately
upon EXECUTIVE'S commencing employment under this Agreement;
50,000 option shares shall vest and be subject to exercise at the rate
of 1041.67 shares for each full month that EXECUTIVE'S
employment continues under this Agreement after the first
anniversary hereunder.
(ii) Change in Control of Company. Anything in Subparagraph
3(c)(i) to the contrary notwithstanding, any agreement, including, but not
limited to, a letter of intent, entered into by COMPANY which ultimately results
in a "change in control" of COMPANY, as defined below, shall cause to vest that
number of option shares (the "Accelerated Options") equal to sixty percent (60%)
of that portion of the options shares granted by this Agreement that have not
otherwise vested as of the date of the change in control.* Subject to provisions
regarding termination of EXECUTIVE'S employment for cause hereunder, the
remaining 40% of such unvested share options shall vest at the rate of 1/12 upon
the completion of each full month of employment thereafter, unless such share
options would vest sooner pursuant to some other provision of this Agreement, in
which event the schedule which results in the earlier vesting shall apply. In
the event that, within the first twelve (12) months from the effective date of a
change in control, EXECUTIVE's employment is terminated without cause or
EXECUTIVE's duties as Chief Executive Officer are significantly changed, the
balance of the option
- -----------
For example, if as of the date of a change in control 21,000 of the 58,500
option shares have already vested, then upon the change in control an additional
60% of the remaining 37,500, or another 22,500 shares, will vest.
-3-
<PAGE> 4
shares granted to EXECUTIVE under this Agreement that have not vested as of the
date of such termination or significant change in duties shall vest immediately.
"Change in control" shall mean the first to occur of; 1) a merger of COMPANY
into, or a consolidation or other reorganization of COMPANY with, another person
or business entity with the result that less than fifty percent (50%) of the
directors of the resulting business entity immediately following the merger,
consolidation or other reorganization were directors of COMPANY immediately
prior to the merger, consolidation or other reorganization; or 2) a sale by
COMPANY of more than fifty percent (50%) of its assets (as measured at the time
of the agreement to sell); or 3) any event or events following the
reconstitution of the Board of Directors of COMPANY in connection with the sale
of Series C and/or Series D Preferred Stock of COMPANY (the "Preferred Stock
Placement") as a result of which the persons constituting the Board of Directors
as a result of such Preferred Stock Placement reconstitution cease to be at
least 50% of the directors of COMPANY, provided, however, that any member of the
Board of Directors of COMPANY whose election or nomination for election by the
shareholders of COMPANY was approved by the vote of at least a majority of the
individuals then constituting the Board of Directors shall be considered to have
been a member of the Board of Directors immediately after the reconstitution of
the Board following the Preferred Stock Placement; or 4) a transaction or series
of transactions by which more than 50% of the voting equity securities of
COMPANY come to be under the control of a single entity or a group of entities
acting in concert to acquire control of COMPANY, but specifically excluding any
change in ownership that results from an initial public offering
-4-
<PAGE> 5
of COMPANY'S voting equity securities that is authorized or approved by COMPANYs
Board of Directors.
(iii) Protection against Dilution. The number of options granted
to EXECUTIVE under this Agreement shall be adjusted, if necessary, so that the
number is equal to 3.4% of the Company's outstanding common stock on a fully
diluted, as converted basis (the "Minimum Percentage"). The Minimum Percentage
shall be determined prior to, and without regard to, the Company's issuance of
any shares in connection with an initial public offering of its stock or a
change in control as described in the preceding paragraph, including any shares
that are issued as compensation to brokers, underwriters or other persons
involved, directly or indirectly, in arranging such public offering or change in
control. Any additional options granted to EXECUTIVE pursuant to this provision
shall have an exercise price equal to the fair market value of the Common Stock
of Company at the date of the grant, taking into consideration the effect of the
stock issuance(s), if any, that trigger application of this provision.
4. Participation in Benefit Plans, Reimbursement of Business Expenses
and Moving Expenses
(a) Benefit Plans. During the term of this Agreement, EXECUTIVE shall be
provided with medical insurance, vacation benefits, sick leave benefits, and
holidays which are not less than, and on terms no less favorable than, COMPANY
provides to its other executive employees.
(b) Reimbursement of Business Expenses. During the term of this
Agreement, COMPANY shall reimburse EXECUTIVE promptly for all expenditures,
including travel, entertainment, parking, business meetings, and the monthly
costs (including dues) of
-5-
<PAGE> 6
maintaining memberships at appropriate clubs which are incurred and submitted
for reimbursement in accordance with the policies established from time to time
by the Board of Directors.
(c) Moving Expenses. COMPANY shall reimburse EXECUTIVE for all actual
relocation expenses, up to a maximum of fifty thousand and 00/100 dollars
($50,000.00), for EXECUTIVE's relocation from San Ramon to the San Diego area in
accordance with the terms of the Relocation Benefits Agreement, which Agreement
is attached hereto as Appendix A.
5. Termination of Employment.
(a) Automatic Termination. This Agreement will automatically terminate
in the event of EXECUTIVE's death, or EXECUTIVE's disability which prevents
EXECUTIVE from performing substantially all of his duties and responsibilities
for a continuous period of ninety (90) days. COMPANY shall have no further
obligations to EXECUTIVE or his estate upon such automatic termination, except
to honor the exercise of any stock options that have vested prior to the date of
such termination, subject to the applicable conditions of the 1999 Equity
Incentive Plan.
(b) Termination Not for Cause. In the event that COMPANY terminates this
Agreement without cause, COMPANY shall, subject to the conditions set forth in
Section 6(b), below, continue to pay EXECUTIVE his salary at the level in effect
at the time of termination for a period of one (1) year, plus any accrued, but
unused vacation, and less any applicable payroll and withholding taxes or other
legally required deductions. The one-year salary continuation for EXECUTIVE
shall be paid in the same manner and at the same
-6-
<PAGE> 7
intervals as if EXECUTIVE continued his employment during that one year period.
COMPANY reserves the right to pay the one-year salary continuation amount in a
lump sum. No other compensation or benefits shall be due to EXECUTIVE.
(c) Termination for Cause. Notwithstanding the provisions of
Sub-paragraph 5(b), COMPANY may terminate EXECUTIVE's employment for cause. For
purposes of this Agreement, COMPANY shall have "cause" to terminate EXECUTIVE's
employment in the event of the following:
1) EXECUTIVE commits a criminal act of dishonesty;
2) EXECUTIVE commits a repeated violation of a written COMPANY Policy
after being provided with written notice by COMPANY which specifies the initial
Policy violation;
3) Continued failure by EXECUTIVE to perform the material aspects of
EXECUTIVE's duties and responsibilities after written warning from the Board of
Directors specifying the duties or responsibilities which EXECUTIVE has failed
to perform;
4) A material breach by EXECUTIVE of any provision of this Agreement.
EXECUTIVE shall not be deemed to have been terminated for cause unless
and until there has been delivered to him, in writing, a certification that the
majority of the non-officer members of the Board have found in good faith that
EXECUTIVE has engaged in conduct constituting cause within the meaning of this
Paragraph, which certification shall specify the particulars upon which the
decision is based. The Board of Directors shall notify EXECUTIVE if it intends
to consider termination of this Agreement for cause, and upon his request the
EXECUTIVE shall have the right to present to the Board such information as he
believes is relevant to the Board's decision. However, as in the case of any
matter which
-7-
<PAGE> 8
involves a conflict of interest for EXECUTIVE, the EXECUTIVE shall not have, and
he hereby expressly waives, any right to be present at or participate in the
deliberations of the Board of Directors with respect to a vote to terminate this
Agreement for cause. The vote set forth in this provision shall be adequate for
the purpose described herein, notwithstanding that the bylaws of the COMPANY or
the Corporation Law of the State of Delaware specifies other procedures for
votes of the Board of Directors, and EXECUTIVE waives any rights that he may
have to challenge the procedural validity of any vote to terminate his
employment taken in accordance with this provision. Such waiver shall not extend
to the right of EXECUTIVE to challenge the legality or validity of his
termination for any other reason.
In the event EXECUTIVE's employment is terminated for cause, he will not
be entitled to receive any severance pay or any other severance compensation.
(d) Resignation. EXECUTIVE retains the right to resign or otherwise
voluntarily terminate his employment with COMPANY upon ninety (90) days' written
notice to the Board of Directors. In the event EXECUTIVE resigns or otherwise
voluntarily terminates his employment with COMPANY, EXECUTIVE shall not be
entitled to any compensation, including benefits, beyond the effective date of
his resignation.
(e) Board Membership. In the event of EXECUTIVE's resignation from or
the termination of his employment for any reason, he shall submit a letter of
resignation from his seat on the Board of Directors.
(f) Stock Options. Subject to the Change in Control provisions of
Section 3(c)(ii), above, only the shares subject to the stock options granted to
EXECUTIVE above
<PAGE> 9
that have vested up to the date of the termination of or his resignation
from his employment under this Agreement may be exercised by EXECUTIVE,
such exercise to be subject to the conditions set forth in the COMPANY's
1999 Equity Incentive Plan, as it may be amended from time to time. Any
stock options that are unvested as of the date of EXECUTIVES's
termination shall be null and void.
6. Noncompetition, Confidentiality and Conflicts of Interest.
(a) EXECUTIVE agrees and understands that, as the CEO of COMPANY, he
will gain possession of confidential information about COMPANY and the way it
conducts its business. In conjunction with the execution of, and as part of the
consideration given for, this Agreement, EXECUTIVE will execute the Proprietary
Information and Inventions Agreement that is attached to this Agreement as
Appendix B. EXECUTIVE's duties and obligations under Appendix B shall survive
termination of his employment with COMPANY. EXECUTIVE acknowledges that a remedy
at law for any breach or threatened breach by him of the provisions of Appendix
B would be inadequate to protect COMPANY against the consequences of such
breach, and he therefore agrees that the COMPANY shall be entitled to injunctive
relief in case of any such breach or threatened breach.
(b) Restrictive Covenant. During any period that EXECUTIVE is receiving
severance compensation from COMPANY following the termination date of
EXECUTIVE's employment under this Agreement, EXECUTIVE shall not, without first
obtaining the prior written approval of COMPANY, directly or indirectly engage
in any activities in competition with COMPANY, or accept employment or establish
a business relationship with a business engaged in competition with COMPANY
(specifically, promoting and receiving revenue for the marketing, sale and
distribution
<PAGE> 10
of goods, equipment and services in the "Healthcare Field" via the Internet, as
that term is defined in the license agreement between COMPANY and among others,
iBO$, Inc. dated March 25, 1999, and such other businesses as COMPANY comes to
be actively engaged in during the term of this Agreement), in any geographical
area in which COMPANY, as of the termination date, either conducts or plans to
conduct business. In the event that EXECUTIVE undertakes any such activities
without written permission from COMPANY, COMPANY'S obligation to pay EXECUTIVE
severance compensation under this provision shall cease.
(c) Conflicts of Interest. EXECUTIVE agrees not to acquire, assume or
participate in, directly or indirectly, any position, investment or interest
known by him to be adverse or antagonistic to COMPANY, its business or
prospects, financial or otherwise. However, EXECUTIVE may own, as a passive
investor, securities of any publicly traded companies, provided his beneficial
ownership of the stock of any one such corporation does not exceed 1% of such
corporation's voting stock.
(d) Non-interference. While employed by COMPANY, and for a period of one
(1) year immediately following the termination of his employment, EXECUTIVE will
not interfere with the business of COMPANY by:
(i) soliciting, attempting to solicit, inducing or otherwise causing any
employee of COMPANY to terminate his or her employment in order to become an
employee, consultant or contractor to or for any competitor of COMPANY;
(ii) directly or indirectly soliciting the business of any customer of
COMPANY which at the time of termination or one year prior thereto was listed on
COMPANY's customer list, which solicitation, if successful, would result in the
loss of business or potential business for COMPANY.
<PAGE> 11
7. Notices.
For purposes of this Agreement, notices and other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States Registered or
Certified Mail, return receipt requested, postage prepaid, addressed as follows:
If to EXECUTIVE: Dennis J. Murphy
4385 Canyon Crest West Road
San Ramon, California, 94583
If to COMPANY: medibuy.com
7777 Alvarado Road, Suite 401
LaMesa, California 91941
Attn: The President
or at such other address as any party may have furnished to the other in writing
subsequent to the execution of this Agreement or, in the case of EXECUTIVE, to
the address listed for him in COMPANY's records and in the case of COMPANY, to
the address known by him to be where the office of the President of COMPANY is
located.
8. Modification, Waiver.
No provision in this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing, signed by
EXECUTIVE and a person duly authorized by the Board of Directors of COMPANY so
to act.
9. Severability.
If any provision of this Agreement is determined to be invalid or is in
any way modified by any governmental agency, tribunal, or court of competent
jurisdiction, such determination shall be
<PAGE> 12
considered as a separate, distinct, and independent part of this Agreement and
shall not affect the validity or enforceability of any of the remaining
provisions of this Agreement.
10. Successor Rights and Assignment.
This Agreement shall bind, inure to the benefit of and be enforceable by
EXECUTIVE's personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees. The rights and obligations of
COMPANY under this Agreement may be assigned by COMPANY, in which event it shall
be binding upon, and inure to the benefit of, the person(s) or entity(ies) to
whom it is assigned. EXECUTIVE may not assign his duties hereunder and he may
not assign any of his rights hereunder without the written consent of COMPANY.
IN WITNESS WHEREOF, EXECUTIVE and COMPANY have entered into this
Agreement as of the date first above written.
EXECUTIVE:
/s/ DENNIS J. MURPHY
-----------------------------
Dennis J. Murphy
MEDIBUY.COM, INC.
By: /s/ MICHAEL CHERMAK
--------------------------
Its:
-------------------------
<PAGE> 13
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is
entered into as of October 26, 1999 (the "Effective Date"), by and between
MEDIBUY.COM, INC., a Delaware corporation (the "Company") and DENNIS J. MURPHY
("Executive").
WHEREAS, the Company and Executive previously entered into an Employment
Agreement, dated March 29, 1999 (the "Employment Agreement"); and
WHEREAS, the parties desire to amend the Employment Agreement as set
forth in this Amendment.
NOW THEREFORE, in consideration of the mutual benefits contained herein,
the parties, intending to be legally bound, hereby agree as follows:
1. Except as otherwise defined herein, capitalized terms used but
not defined herein shall have the meanings given to them in the Employment
Agreement.
2. The Employment Agreement is hereby amended as follows:
(a) In addition to serving as the Chief Executive Officer of
the Company, Executive has been appointed by the Company's Board of Directors to
serve as President of the Company. The Employment Agreement is hereby amended to
include Executive's employment with the Company as Chief Executive Officer and
President.
(b) Executive's annual salary under Section 3(a) of the
Employment Agreement is hereby agreed to be $250,000, less applicable payroll
and withholding taxes and other authorized deductions.
(c) Section 3(c)(iii) ("Protection Against Dilution") is
deleted in its entirety. In addition, in consideration of such deletion the
Company shall grant to Executive a fully vested, immediately exercisable
incentive stock option to purchase 150,000 shares of Common Stock under the
Company's 1999 Omnibus Equity Plan.
(d) The following provision is hereby added as Section
3(c)(iv) of the Employment Agreement:
"Section 3(c)(iv) Securities Registration. COMPANY shall
cause all of EXECUTIVE's share options, and the issuance of
shares upon exercise thereof, to be included in an effective
registration statement on Form S-8 (or any successor form) under
the Securities Act of 1933, as amended, within 180 days after
the initial registered public offering of COMPANY's Common Stock
or other equity securities convertible into Common Stock."
(e) The following provision is hereby added at the end of
Section 4(a):
"COMPANY agrees that it shall reimburse EXECUTIVE for insurance
premiums for disability insurance not to exceed an amount of
$5,000 in any 1 year."
1.
<PAGE> 14
(f) The following provision is hereby added at the end of
Section 4(c) of the Employment Agreement:
"To the extent relocation expenses reimbursed under this
Section 4(c) will are subject to state or federal taxation,
COMPANY will pay an additional amount (the "Gross-Up Payment")
such that after payment of all state and federal taxes on the
reimbursement and the Gross-Up payment, EXECUTIVE will retain an
amount equal to the reimbursement. COMPANY will expect EXECUTIVE
to fully and completely cooperate with COMPANY with respect to
all matters associated with the taxation or potential taxation
of such reimbursement. EXECUTIVE has consulted with EXECUTIVE's
own tax advisor with respect to tax implications related to the
reimbursement of relocation expenses."
(g) The following provision is hereby added as Section 4(d)
of the Employment Agreement:
"Section 4(d) Legal Expenses. COMPANY will reimburse EXECUTIVE
for actual fees and expenses incurred by him in connection with
the review and negotiation of this Agreement, up to a maximum of
$3,000."
3. For purposes of clarification, the parties agree that the
vesting schedule of the stock option granted to Executive by the Company on
November 17, 1999 is as follows:
25% of the shares (or 26,250 shares) subject to the
option are fully vested and immediately exercisable upon grant,
and the remaining shares subject to the option are fully vested
and immediately exercisable upon grant, and the remaining shares
subject to the option will vest in equal monthly portions over
36 months beginning on April 29, 2000.
4. This Amendment shall be governed by and construed in accordance
with the laws of the State of California as such laws are applied to contracts
entered into and performed entirely within California by California residents.
5. This Amendment may be signed in any number of counterparts, each
of which will be deemed an original, and all of which taken together shall
constitute one and the same instrument.
6. Except as specifically amended hereby, the Employment Agreement
shall remain in full force and effect. This Amendment together with the
Employment Agreement constitutes the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and thereof and
supersedes all prior agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect to the
subject matter hereof or thereof.
2.
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
MEDIBUY.COM, INC.
By: /s/ NORMAN FARQUHAR
/s/ DENNIS J. MURPHY -------------------------------------
- --------------------------------
DENNIS J. MURPHY Name: Norman Farquhar
-----------------------------------
Title: Executive Vice President and
Chief Financial Officer
----------------------------------
3.
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into between medibuy.com, Inc. a
Delaware Corporation with a principal place of business at 7777 Alvarado Road,
Suite 401, La Mesa, California, 91941 ("COMPANY"), and James L. Hersma, whose
principal residence is at 4100 West 86th St., Tulsa, OK, 74132 ("EXECUTIVE").
1. Employment.
a) Executive Responsibilities. COMPANY hereby employs EXECUTIVE, and
EXECUTIVE hereby agrees to accept employment from COMPANY, as Executive Vice-
President of Market Development of COMPANY. EXECUTIVE shall report directly to
COMPANY's Chief Executive Officer. EXECUTIVE agrees during the term of his
employment under this Agreement to perform the duties and responsibilities
customarily required of such position, as reasonably directed by COMPANY's Chief
Executive Officer, and in accordance with COMPANY's bylaws and Delaware
corporation law. EXECUTIVE further agrees to use his best efforts to promote the
interests of COMPANY and to devote his full business time and energies to the
business and affairs of COMPANY, unless otherwise authorized by the Chief
Executive Officer of COMPANY. EXECUTIVE may, however, engage in civic and
not-for-profit activities so long as such activities do not materially interfere
with the performance of his duties to COMPANY hereunder.
b) Director Responsibilities. Subject to the approval of this Agreement
by a majority of the current directors of COMPANY, EXECUTIVE shall be elected a
member of the Board of Directors, to serve in such position until the next
regular meeting of COMPANY's shareholders. EXECUTIVE's continued service on
COMPANY's Board of Directors thereafter shall be subject to his election by vote
of the shareholders, but COMPANY will include
<PAGE> 2
EXECUTIVE in its recommended slate of __ candidates for membership on the Board.
In the event that EXECUTIVE's employment with COMPANY under this Agreement is
terminated for any reason, EXECUTIVE shall submit to the Chairman of the Board
his resignation as a Director.
2. Term of Employment.
The employment under this Agreement shall commence on May 26, 1999 and
shall end at the end of the day on May 25, 2000, provided that the term of
EXECUTIVE's employment under this Agreement shall thereupon and thereafter be
extended automatically for successive periods of one year unless otherwise
terminated under Paragraph 5 of this Agreement.
3. Compensation.
(a) Base Salary. As compensation for services provided to COMPANY,
EXECUTIVE shall receive a salary at the annual rate of $185,000.00, less such
payroll and withholding taxes as required by law to be deducted and such other
amounts as EXECUTIVE shall authorize in writing. Salary shall begin to accrue
under this Agreement as of June 14, 1999. Provided EXECUTIVE remains employed
under this Agreement beyond the first anniversary date of his employment
hereunder, his salary shall be increased to an annual rate of $300,000 effective
as of that first anniversary date. The salary shall be payable in semi-monthly
installments. Such salary may be increased, but not decreased, from time to time
as decided in the discretion of the Board of Directors of COMPANY.
(b) Bonus. As additional compensation for services rendered by
EXECUTIVE, EXECUTIVE shall be entitled to participate in each incentive bonus
program (if any) that COMPANY's Board of Directors may establish for its
executive employees. Such bonus program shall provide a maximum bonus of fifty
percent (50%) of the salary paid during the year in which the bonus is earned,
based upon factors established by the Chief Executive Officer and approved by
the Board of Directors.
<PAGE> 3
(c) Equity Compensation. As further compensation for the services
rendered by EXECUTIVE, upon his commencement of employment with COMPANY pursuant
to this Agreement and approval by COMPANY's Board of Directors, EXECUTIVE will
be granted an incentive stock option to purchase 31,500 shares of Common Stock
of COMPANY, subject to increase as provided below, at an exercise price per
share of $1.50 per share. Such options shall be issued pursuant to, and their
exercise and the issuance of shares upon exercise shall be subject to, the
conditions of the COMPANY's 1999 Equity Incentive Plan (the "Plan") and the
corresponding Stock Option Agreement contemplated by the Plan (the "Option
Agreement"), as well as paragraphs 3 (d) and 5 (f), below.
(i) Vesting of Options. EXECUTIVE'S incentive stock options described
above shall vest according to the following schedule:
25% (7,812.5) of the option shares shall vest and be subject to exercise
immediately upon EXECUTIVE's commencement of employment under this
Agreement, provided, however, that if EXECUTIVE voluntarily resigns or
is terminated for cause under this Agreement prior to his completion of
one year of service pursuant to this Agreement, COMPANY shall have the
right, for ninety (90) days immediately following the effective date of
such resignation or termination, to repurchase any shares acquired by
EXECUTIVE through the exercise of such options at the price EXECUTIVE
paid for such shares, and any such options that EXECUTIVE has not yet
exercised shall be null and void. EXECUTIVE agrees to execute such
documents as are necessary to effect COMPANY's repurchase of those
shares.
The remaining 23,437.5 option shares shall vest and be subject to
exercise at the rate of 651 shares for each full month that EXECUTIVE'S
employment continues under this Agreement after the first anniversary
hereunder. The number of shares
<PAGE> 4
to vest each month and the maximum number of shares that may vest
hereunder is subject to adjustment pursuant to subparagraph (iv) of this
paragraph 3 (d).
(ii) Change in control. Upon a "change in control" (as defined
below), 50% of the total share options granted to EXECUTIVE under paragraph 3
(c), above, that have not yet vested as of the effective date of such change in
control shall vest on the effective date of the change in control. Subject to
provisions regarding termination of EXECUTIVE'S employment for cause hereunder,
the remaining 50% of such unvested share options shall vest at the rate of 1/12
upon the completion of each full month of employment thereafter, unless such
share options would vest sooner pursuant to some other provision of this
Agreement, in which event the schedule which results in the earlier vesting
shall apply. In the event that, within the first twelve (12) months from the
effective date of a change in control, EXECUTIVE's employment is terminated
without cause or EXECUTIVE's duties as Executive Vice President are
significantly changed, the balance of the option shares granted to EXECUTIVE
under this Agreement that have not vested as of the date of such termination or
significant change in duties shall vest immediately. "Change in control" shall
mean the first to occur of: 1) a merger of COMPANY into, or a consolidation or
other reorganization of COMPANY with, another person or business entity with the
result that less than fifty percent (50%) of the directors of the resulting
business entity immediately following the merger, consolidation or other
reorganization were directors of COMPANY immediately prior to the merger,
consolidation or other reorganization; or 2) a sale by COMPANY of more than
fifty
<PAGE> 5
percent (50%) of its assets (as measured at the time of the agreement to sell);
or 3) any event or events following the reconstitution of the Board of Directors
of COMPANY in connection with the sale of Series C and/or Series D Preferred
Stock of COMPANY (the "Preferred Stock Placement") as a result of which the
persons constituting the Board of Directors as a result of such Preferred Stock
Placement reconstitution cease to be at least 50% of the directors of COMPANY,
provided, however, that any member of the Board of Directors of COMPANY whose
election or nomination for election by the shareholders of COMPANY was approved
by the vote of at least a majority of the individuals then constituting the
Board of Directors shall be considered to have been a member of the Board of
Directors immediately after the reconstitution of the Board following the
Preferred Stock Placement; or 4) a transaction or series of transactions by
which more than 50% of the voting equity securities of COMPANY come to be under
the control of a single entity or a group of entities acting in concert to
acquire control of COMPANY, but specifically excluding any change in ownership
that results from an initial public offering of COMPANY'S voting equity
securities that is authorized or approved by COMPANY's Board of Directors.
(iii) Other Acceleration of Vesting; Other Terms. The
acceleration of vesting provided for in the preceding paragraph is in addition
to, and not in lieu of, the acceleration of vesting of stock options provided
for under the Plan or the Option Agreement under the circumstances described in
the Plan or the Option
<PAGE> 6
Agreement. In addition, the Option Agreement shall 1) provide for incentive
stock options to the extent consistent with the terms of the options, 2) provide
for a ten-year term, 3) afford the option holder the maximum period permitted by
the Plan after termination of EXECUTIVE's employment to exercise options, 4)
afford the option holder the greatest latitude in manner of exercise permitted
by the Plan, 5) not grant COMPANY repurchase rights other than as set forth in
this Agreement, and 6) otherwise be in substantially the form of the standard
form of stock option agreement under the Plan, subject to the terms set forth in
this Agreement.
(iv) Protection against Dilution. The number of options granted to
EXECUTIVE under this Agreement shall be adjusted, if necessary, so that the
number is equal to 1.7% of COMPANY's outstanding Common Stock on a fully
diluted, as exercised and as converted basis, taking into account all rights and
options to acquire (by exercise, conversion or otherwise) shares of Common Stock
(the "Minimum Percentage"). The number of shares of Common Stock equaling the
Minimum Percentage shall be determined prior to, and without regard to,
COMPANY's issuance of any shares, options, warrants or other rights convertible
into shares of Common Stock in, or in connection with, either a) an initial
public offering of its Common Stock or other equity securities of COMPANY
convertible into Common Stock or b) a change in control as described in
subparagraph 3(d)(ii), above, including as to both of the foregoing events any
shares, options, warrants or other rights convertible into shares of Common
Stock that are issued as compensation to brokers, underwriters or other persons
involved, directly or indirectly, in arranging such public offering or change in
control. COMPANY represents to EXECUTIVE that the share options granted to the
Chief Executive Officer of COMPANY equal 3.4% of COMPANY's outstanding Common
Stock on a fully diluted, as exercised and as converted basis, taking into
account all rights and options to acquire (by exercise, conversion or otherwise)
shares of Common Stock. Any options granted to EXECUTIVE pursuant to this
subparagraph 3(c)(iv) shall be subject to the same provisions as those
originally granted under paragraph 3(c), above, except that the
<PAGE> 7
exercise price of any additional options granted to EXECUTIVE pursuant to this
provision shall be equal to the fair market value of the Common Stock of Company
at the date of the grant, taking into consideration the effect of the stock
issuance(s), if any, that trigger application of this provision.
(v) Additional Options. In the event that, prior to the initial public
offering of COMPANY's Common Stock, COMPANY's Board of Directors authorizes an
increase in the options granted to the executive officers of COMPANY generally,
EXECUTIVE shall receive additional options at least equal to 50% of such
additional options granted, if any, to the Chief Executive Officer of COMPANY,
such options to be subject to the vesting requirements and other terms and
conditions as the Board of Directors may apply. This subparagraph 3(d)(v) shall
not apply to any grant of additional options to EXECUTIVE under subparagraph
3(d)(iv), above; in that circumstance, those additional options shall have the
same terms as the share options originally granted under paragraph 3(c), above,
as though granted with those original options.
(vi) Securities Registration. COMPANY shall cause all of EXECUTIVE's
share options, and the issuance of shares upon exercise thereof, to be included
in an effective registration statement on Form S-8 (or any successor form) under
the Securities Act of 1933, as amended, within 180 days after the initial
registered public offering of COMPANY's. Common Stock or other equity securities
convertible into Common Stock.
4. Participation in Benefit Plans, Reimbursement of Business Expenses and
Moving Expenses.
(a) Benefit Plans. During the term of this Agreement, EXECUTIVE shall be
provided with medical insurance, vacation benefits, sick leave benefits, and
holidays
<PAGE> 8
which are not less than, and on terms no less favorable than, COMPANY provides
to its other executive employees.
(b) Reimbursement of Business Expenses. COMPANY shall reimburse
EXECUTIVE promptly for all expenditures made by him during the term of this
Agreement, which expenses are incurred to further the business and interests of
COMPANY, including, but not limited to, travel, entertainment, parking and
expenses incurred in connection with business meetings (including, but not
limited to, the dues and business related expenses of memberships at appropriate
business clubs, provided such memberships are approved in writing by the Chief
Executive Officer of COMPANY), provided such expenses are incurred and submitted
for reimbursement in accordance with the policies established by the Board of
Directors in effect as of the date the expenses are incurred.
(c) Moving Expenses. If EXECUTIVE relocates, COMPANY shall reimburse
EXECUTIVE for all actual relocation expenses, up to a maximum of $130,000.00
for EXECUTIVE's relocation to the San Diego area in accordance with the terms of
the Relocation Benefits Agreement, which Agreement is attached hereto as
Appendix A. Any amounts paid to EXECUTIVE to compensate him for taxes on amounts
received by him hereunder which are not tax deductible shall be subject to, not
in addition to, the limit of $130,000 set forth in the preceding sentence.
(d) Legal Expenses. COMPANY will reimburse EXECUTIVE for actual legal
fees and expenses incurred by him in connection with the review and negotiation
of this Agreement, up to a maximum of $2,000.
(e) Indemnification. EXECUTIVE shall be entitled to indemnification and
advancement of expenses to the fullest extent provided, in COMPANY's bylaws or
-8-
<PAGE> 9
otherwise, to any other director or executive officer of COMPANY, unless
prohibited by law. EXECUTIVE shall also be entitled to coverage under each
directors' and officers' liability insurance policy, if any, maintained by or on
behalf COMPANY's directors and officers.
5. Termination of Employment.
(a) Automatic Termination. This Agreement will automatically terminate
in the event of EXECUTIVE's death, or EXECUTIVE's disability which has prevented
EXECUTIVE from performing substantially all of his duties and responsibilities
for a continuous period of ninety (90) days. COMPANY shall have no further
obligations to EXECUTIVE or his estate upon such automatic termination, except
(i) to honor the exercise of any stock options that have vested prior to or as
of the date of such termination, subject to the applicable conditions of the
Plan and (ii) as provided by law or under the terms of any applicable benefit
plan in which EXECUTIVE participated immediately prior to the termination of his
employment.
(b) Termination other than for Cause. COMPANY may terminate or elect not
to renew this Agreement other than for cause at any time, provided it gives at
least ten (10) days' prior written notice to EXECUTIVE of such termination or
non-renewal. In the event that COMPANY terminates EXECUTIVE's employment under
this Agreement other than for cause during the first year of this Agreement or
COMPANY elects not to renew this Agreement for a second year, COMPANY shall,
subject to the conditions set forth in paragraph 6(b), below, continue to pay
EXECUTIVE his base salary and continue to provide EXECUTIVE (and his covered
dependents, if any), at COMPANY's
<PAGE> 10
expense, medical insurance or benefits, in each case, at the level in effect at
the time COMPANY gives EXECUTIVE notice of termination or non-renewal, for a
period of 18 months following the effective date of the termination or
non-renewal. If COMPANY terminates this Agreement without cause after EXECUTIVE
has reached his second anniversary date of employment or fails to renew this
Agreement for a third or subsequent year, COMPANY shall, subject to the
conditions set forth in paragraph 6(b), below, continue to pay EXECUTIVE his
base salary, and continue to provide EXECUTIVE (and his covered dependents, if
any), at COMPANY's expense, medical insurance or benefits, in each case, at the
level in effect at the time COMPANY gives EXECUTIVE notice of termination or
non-renewal, for a period of twelve (12) months following the effective date of
termination or non-renewal. In addition to the foregoing salary and benefits
continuation, EXECUTIVE shall also receive any unpaid salary and accrued (but
unused) vacation through the effective date of termination of employment or
non-renewal, reimbursement for any expenses incurred by him prior to the
effective date of his termination that are otherwise subject to reimbursement
under paragraph 3(b), above, and any accrued but unpaid benefits to which
EXECUTIVE is then entitled under the terms of COMPANY's benefit plans and
policies in which EXECUTIVE is enrolled, to be payable in accordance with the
terms of such plans and policies. All salary continuation and other termination
benefits paid hereunder shall be less any applicable payroll and withholding
taxes or other legally required deductions. As a condition to his receipt of any
salary continuation provided for in this paragraph, EXECUTIVE must first execute
the Waiver and Release that is attached to this Agreement as Appendix B. The
salary continuation for EXECUTIVE shall be paid in the same manner and at the
same intervals as if EXECUTIVE continued his employment during the applicable
period.
<PAGE> 11
COMPANY reserves the right to pay the applicable salary continuation amount in a
lump sum, discounted to present value using a discount factor of 6%. In the
event of any termination or non-renewal under this paragraph, EXECUTIVE shall
have no obligation to mitigate his damages or to seek other employment as a
condition to receiving his salary continuation and other termination benefits,
and (except as provided for in paragraphs 6(b), below), there shall be no
deduction or offset against amounts due to EXECUTIVE hereunder on account of any
remuneration from any subsequent employment (or self-employment) that he may
obtain.
(c) Termination for Cause. Notwithstanding the provisions of
sub-paragraph 5(b), COMPANY may terminate EXECUTIVE's employment for cause. For
purposes of this Agreement, COMPANY shall have "cause" to terminate EXECUTIVE's
employment in the event of any of the following:
(i) conviction of EXECUTIVE for any felony or any crime, or entry of
a plea of nolo contendere, involving moral turpitude or
dishonesty;
(ii) EXECUTIVE's participation in a fraud or act of dishonesty
against COMPANY;
(iii) EXECUTIVE's willful misfeasance or nonfeasance of duty that
materially injures the reputation, business or business
relationships of COMPANY or any of its officers, directors or
affiliates;
(iv) a material breach by EXECUTIVE of any term of this Agreement or
the Proprietary Information and Inventions Agreement that
EXECUTIVE has entered into with the Company, or any of the
Company's written policies and procedures; or
(v) conduct by EXECUTIVE that in the good faith and reasonable
determination of the COMPANY's Board of Directors demonstrates
gross unfitness to
<PAGE> 12
serve. Physical of mental disability or conduct resulting from
physical or mental disability of EXECUTIVE shall not constitute
"cause."
In the event EXECUTIVE's employment is terminated for cause, he will not be
entitled to receive any severance pay or any other severance compensation,
except that EXECUTIVE shall be entitled to receive unpaid salary and accrued
(but unused) vacation through the effective date of termination, reimbursement
for any expenses incurred by him prior to the effective date of his termination
that are otherwise subject to reimbursement under paragraph 3(b), above, and any
accrued but unpaid benefits to which EXECUTIVE is then entitled under the terms
of COMPANY's benefit plans and policies in which EXECUTIVE is enrolled, to be
payable in accordance with the terms of such plans and policies.
(d) Resignation. EXECUTIVE retains the right to resign or otherwise
voluntarily terminate his employment with COMPANY upon ninety (90) days' written
notice to the Chief Executive Officer. In the event EXECUTIVE resigns or
otherwise voluntarily terminates his employment with COMPANY, EXECUTIVE shall
not be entitled to any compensation, including benefits, beyond the effective
date of his resignation, except that EXECUTIVE shall be entitled to receive
salary and accrued vacation through the effective date of termination of
employment, reimbursement for any expenses incurred by him prior to the
effective date of his termination that are otherwise subject to reimbursement
under paragraph 3(b), above, and any accrued but unpaid benefits to which
EXECUTIVE is then entitled under the terms of COMPANY's benefit plans and
policies in which EXECUTIVE is enrolled, to be payable in accordance with the
terms of such plans and policies.
<PAGE> 13
(e) Stock Options. Subject to the previsions of paragraph 3(c), above,
only the shares subject to the stock options granted to EXECUTIVE under this
Agreement that have vested up to the date of the termination of or his
resignation from his employment under this Agreement may be exercised by
EXECUTIVE, such exercise to be subject to the conditions set forth in the Plan,
provided, however, that in the event of termination by COMPANY other than for
cause or any annual non-renewal by COMPANY, those options that would have vested
over the twelve (12) months subsequent to the termination had EXECUTIVE's
employment continued will be deemed to have vested as of the date of the
termination. Any stock options that are unvested (and not deemed vested under
some provision of this Agreement, the Plan or the Option Agreement as of the
date of EXECUTIVE's termination) shall be null and void.
(f) No Restriction on COBRA Rights. Nothing in this paragraph 5 shall be
deemed to impair or limit any of EXECUTIVE's rights under the Consolidated
Omnibus Benefits Reconciliation Act.
(g) Deemed Termination. EXECUTIVE may elect to deem (i) any material
decrease in his authority or responsibility; (ii) elimination of his reporting
directly to the Chief Executive Officer of COMPANY; or (iii) any obligation that
EXECUTIVE relocate his residence away from Tulsa, Oklahoma as a condition of his
continuing his employment with COMPANY (in any case, whether or not Executive's
position is changed) to be a termination of EXECUTIVE's employment by COMPANY
other than for cause for all purposes under this Agreement, provided EXECUTIVE
so notifies the Chief Executive Officer of COMPANY of his election to do so
within ninety
<PAGE> 14
(90) days of EXECUTIVE's receipt of notice from COMPANY or other
knowledge of EXECUTIVE of such change or event.
6. Noncompetition, Confidentiality, Freedom to Enter into and Perform and
Conflicts of Interest.
(a) Confidential Information. EXECUTIVE agrees and understands that, due
to the nature of his position with COMPANY, he will gain possession of
confidential information about COMPANY and the way it conducts its business. In
conjunction with the execution of, and as part of the consideration given for,
this Agreement, EXECUTIVE will execute the Proprietary Information and
Inventions Agreement that is attached to this Agreement as Appendix C.
EXECUTIVE's duties and obligations under Appendix C shall survive termination of
his employment with COMPANY. EXECUTIVE acknowledges that a remedy at law for any
breach or overtly threatened breach by him of the provisions of Appendix C would
be inadequate to protect COMPANY against the consequences of such breach, and he
therefore agrees that the COMPANY shall be entitled to injunctive relief in case
of any such breach or overtly threatened breach.
(b) Restrictive Covenant. During any period that EXECUTIVE is receiving
severance compensation from COMPANY following the termination date of
EXECUTIVE's employment under this Agreement, EXECUTIVE shall not, without first
obtaining the prior written approval of COMPANY, directly or indirectly engage
in any activities in competition with COMPANY, or become an officer, director or
employee of, or consultant to, a business engaged in competition with COMPANY's
current business (specifically, any person or entity whose principal business is
promoting and facilitating via the Internet transactions between third parties
for the wholesale sale and distribution of goods, equipment and services in the
healthcare field)
<PAGE> 15
and such other business or businesses in which COMPANY comes to be actively
engaged during the term of EXECUTIVE'S employment under this Agreement. In the
event that EXECUTIVE undertakes any such activities without written permission
from COMPANY, COMPANY'S obligation to pay EXECUTIVE severance compensation shall
cease. For purposes of this Agreement, "healthcare field" means the provision of
goods and/or services to any person, firm, corporation, business, partnership,
limited liability company, association or other entity involved directly in the
healthcare industry and/or to any person with respect to their medical or
healthcare needs, including, without limitation, hospital, surgical centers,
medical clinics, outpatient facilities, medical groups, managed care
organizations, health maintenance organizations, medical or health related
associations, nursing homes, extended care facilities, doctors, physicians,
dentists, chiropractors, veterinarians and other healthcare providers,
practitioners, suppliers, patients or any other person providing or receiving
healthcare service of any nature whatsoever.
(c) Freedom to Enter into and Perform this Agreement. EXECUTIVE
represents and warrants to Company that he is subject to no restrictions, either
by virtue of any agreement made by him or for his benefit, or by operation of
law, that would prohibit, prevent or interfere with in any way his entering
into, or his performing fully and without restriction, his obligations under
this Agreement, or which would render COMPANY liable to a third party as a
result of EXECUTIVE's entering into or performing his obligations under this
Agreement.
(d) Conflicts of Interest. During EXECUTIVE's employment under this
Agreement EXECUTIVE agrees not to acquire, assume or participate in, directly or
indirectly, any position, investment or interest known by him to be adverse or
antagonistic to COMPANY, its business or prospects, financial or otherwise.
However, EXECUTIVE may own, as a passive investor only,
<PAGE> 16
securities of any publicly traded companies, provided his beneficial ownership
of the stock of any one such corporation does not exceed 12.5% of such
corporation's voting stock.
(e) Non-interference. While employed by COMPANY, and for a period of one
(1) year immediately following the termination of his employment, EXECUTIVE will
not interfere with the business of COMPANY by soliciting, attempting to solicit,
inducing or otherwise deliberately causing any employee of COMPANY to terminate
his or her employment in order to become an employee, consultant or contractor
to or for any competitor of COMPANY.
7. Notices.
For purposes of this Agreement, all notices and other communications
required or permitted by this Agreement shall be in writing and shall be deemed
to have been duly given when delivered in person or by courier or on the earlier
of delivery or the fourth business day after mailing by United States Registered
or Certified Mail, return receipt requested, postage prepaid, addressed as
follows:
If to EXECUTIVE: Mr. James L. Hersma
4100 West 86th Street
Tulsa, Oklahoma 74132
If to COMPANY: medibuy.com, Inc.
7777 Alvarado Road, Suite 401
LaMesa, California 91941
Attn: The Chief Executive Officer
or at such other address as the addressee may have furnished to the other party
in writing subsequent to the execution of this Agreement or, in the case of
EXECUTIVE, to any other permanent address listed for him in COMPANY's records,
or, in the case of COMPANY, to the
<PAGE> 17
address known by EXECUTIVE to be where the office of the Chief Executive Officer
of COMPANY is located.
8. Modifications; Waivers; Applicable Law.
No provision in this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in a writing, signed
by EXECUTIVE and by the Chief Executive Officer of COMPANY. This Agreement and
the employment relationship hereunder shall be governed by, construed in
accordance with and enforced under the laws of the State of California and
applicable federal law.
9. Severability.
If any provision of this Agreement is determined to be invalid or is in
any way modified by any governmental agency, tribunal, or court of competent
jurisdiction, such determination shall be considered as a separate, distinct,
and independent part of this Agreement and shall not affect the validity or
enforceability of any of the remaining provisions of this Agreement.
10. Successor Rights and Assignment.
This Agreement shall bind, inure to the benefit of and be enforceable by
EXECUTIVE's personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees. The rights and obligations of
COMPANY under this Agreement may be assigned by COMPANY as part of the
assignment or transfer (including, without limitation, by merger or other event
resulting in such assignment by operation of law) of all or substantially all of
COMPANY'S assets and business, provided that at the time of such assignment the
assignee has the ability to meet the obligations to EXECUTIVE set forth in this
Agreement, in which event this Agreement shall be binding upon, and inure to the
benefit of, the person(s) or entity(ies) to
<PAGE> 18
whom it is assigned. EXECUTIVE may not assign his duties hereunder and he may
not assign any of his rights hereunder without the written consent of COMPANY.
IN WITNESS WHEREOF, EXECUTIVE and COMPANY have signed this Agreement to
be dated and effective on May 26, 1999.
EXECUTIVE:
Dated: /s/ JAMES L. HERSMA
MEDIBUY.COM, INC.
Dated: By: /s/ DENNIS J. MURPHY
Its: CEO
<PAGE> 19
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is
entered into as of December 28, 1999 (the "Effective Date"), by and between
MEDIBUY.COM, INC., a Delaware corporation (the "Company") and JAMES L. HERSMA
("Executive").
WHEREAS, the Company and Executive previously entered into an
Employment Agreement, dated May 26, 1999 (the "Employment Agreement"); and
WHEREAS, the parties desire to amend the Employment Agreement as set
forth in this Amendment.
NOW THEREFORE, in consideration of the mutual benefits contained
herein, the parties, intending to be legally bound, hereby agree as follows:
1. Except as otherwise defined herein, capitalized terms used but not
defined herein shall have the meanings given to them in the Employment
Agreement.
2. The Employment Agreement is hereby amended as follows:
(a) Section 3(c)(iv) ("Protection Against Dilution") is
deleted in its entirety. In addition, in consideration of such deletion the
Company shall grant to Executive a fully vested, immediately exercisable
incentive stock option to purchase 75,000 shares of Common Stock under the
Company's 1999 Omnibus Equity Plan.
3. For purposes of clarification, the parties agree that the vesting
schedule of the stock option granted to Executive by the Company on November 17,
1999 is as follows:
25% of the shares (or 8,125 shares) are fully vested and
immediately exercisable upon grant (provided that the Company
will have the right to repurchase from Mr. Hersma if his
employment is terminated for cause or if he voluntarily
terminates his employment, within his first year of
employment, as more fully described in Section 3(c)(i) of the
Agreement, and the remaining shares subject to the option will
vest in equal monthly portions over 36 months beginning on
June 26, 2000.
4. This Amendment shall be governed by and construed in accordance with
the laws of the State of California as such laws are applied to contracts
entered into and performed entirely within California by California residents.
5. This Amendment may be signed in any number of counterparts, each of
which will be deemed an original, and all of which taken together shall
constitute one and the same instrument.
6. Except as specifically amended hereby, the Employment Agreement
shall remain in full force and effect. This Amendment together with the
Employment Agreement constitutes the entire understanding and agreement of the
parties hereto with respect to the subject matter
1.
<PAGE> 20
hereof and thereof and supersedes all prior agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect to the subject matter hereof or thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
MEDIBUY.COM, INC.
/s/ JAMES L. HERSMA
- ---------------------- By: /s/ DENNIS J. MURPHY
JAMES L. HERSMA --------------------------------
Name: Dennis J. Murphy
-------------------------------
Title: President & Chief Executive
Officer
-------------------------------
2.
<PAGE> 1
EXHIBIT 10.12
TERMS OF EMPLOYMENT WITH HS.COM, INC.
This document (the Agreement) outlines the terms of employment between Charles
Smith, of 380 Vista Abierta, El Cajon, California, 92019 (Smith), and hs.com,
Inc. a Delaware corporation with a principal place of business at 7777 Alvarado
Road, Suite 401, La Mesa, CA 91941 (the Company).
Position: Smith's position will be President of the Company.
Responsibilities: Smith will discharge faithfully and to the best of his ability
the duties of the office of President as they are set forth in the Company's
bylaws and as required under Delaware Corporation law. Smith will serve at the
direction and pleasure of the Board of Directors of the Company, and he will
devote substantially all of his working time and effort to performing his duties
and responsibilities on behalf of the Company.
Term: The term of Smith's employment is one (1) year, commencing on September
26, 1998, and this agreement will be renewed for successive periods of one (1)
year unless notice of termination is given by either party no fewer than
thirty (30) days prior to the expiration of any such one year employment period.
Salary: Smith's regular salary rate will be $150,000. Payments will be
made twice each month in the amount of $6,250.00, less applicable payroll taxes
and other deductions required by law or that Smith authorizes in writing.
Smith's annual salary will be subject to review and increase, but not decrease,
from time to time as decided by the Board of Directors, provided that Smith's
annual salary rate will increase to $216,000 upon the occurrence of any of the
following events: the registration of the securities of the Company in a public
offering; the merger of the Company with a publicly traded corporation; or the
investment of a cumulative total of $3,000,000 in the capital stock of the
Company on or after November 1, 1998.
Bonus: Smith will be eligible to participate in any incentive bonus program that
the Company's Board of Directors may establish for its executive employees. The
expected terms of the bonus program will be a maximum bonus of 50% of the salary
paid during the year in which the bonus is earned, based on achievement of
company-wide financial and other success objectives.
Equity Compensation: In addition to the cash compensation to be paid as set
forth above, the Company will issue to Smith 42,000 shares of the Company's
common stock (the "Shares"). Three-fourths of the Shares, (including any
additional shares issued to Smith in respect of such Shares as a result of a
stock split, stock dividend or other event) are subject to divestiture on the
following condition:
If Smith completes twelve (12) or more months of continuous employment
with the Company under this Agreement but less than forty-eight (48)
consecutive months, for each full month and any partial month less than
forty-eight (48) months of such continuous employment, 2.0833% of the
Shares shall be divested.
<PAGE> 2
Divested shares shall revert to the Company, and Smith shall receive no
compensation for them or have any rights whatever in regard to them.
The certificates representing the Shares shall bear a legend stating that the
Shares: 1) are not registered under federal or state securities laws; and 2) may
not be transferred until registered or the Company's legal counsel issues an
opinion stating that such restrictions need no longer apply. The legend shall
contain any other restrictions as are required by law. The Company will hold in
escrow the certificates representing the Shares that are subject to divestiture.
At Smith's request, the Company will deliver to him certificates representing
any Shares held in escrow by the Company that are no longer subject to
divestiture. During the period that the Shares or any part of them are subject
to being divested under this provision, Smith shall be deemed the record owner
and shall have all other rights incident to ownership of such Shares, including
the right to notice of meetings and the right to vote on any matters on which
holders of the Company's common stock are entitled to vote.
Anything in this provision to the contrary notwithstanding, upon a change in
control of the Company (as defined below), the divestiture conditions set forth
in this provision shall be of no further force and effect on the date such
change in control becomes effective. As used here, the term change in control
shall mean either: 1) a merger of the Company into or consolidation of the
Company with another corporation, and less than 50% of the directors of the
resulting corporation immediately following the merger or consolidation were
directors of the Company immediately prior to the merger or consolidation, or 2)
a sale by the Company of all or substantially all of its assets.
Benefits: The Company does not yet have a benefit program in place for its
executives and employees. When it establishes one, Smith and his dependents will
be eligible to participate in that program on the terms of eligibility
established by the Company.
Termination: Events that will automatically terminate this agreement will be
Smith's death or a disability that prevents him from performing substantially
all of his duties and responsibilities for a period of 90 days.
Severance Compensation: In the event that the Company terminates or elects not
to renew Smith's employment without cause, as defined below, he will be entitled
to continue to receive his regular salary only for the period of one year
following the effective date of termination. That salary continuation shall be
payable at the Company's election in either a lump sum or on the same basis as
his regular salary. The Company will withhold from such severance payment or
payments those payroll taxes and other amounts required by law or authorized by
Smith in writing. If Smith's employment is terminated for cause, he will not be
entitled to receive any severance pay or any other severance compensation. For
purposes of this provision, cause is defined as any of the following: 1)
material acts of dishonesty; 2) a repeated violation of Company policy (whether
or not written) after receiving written notice of such policy; 3) failure by
Smith to perform any material aspect of his duties after written warning
received from the Board of Directors; or 4) the breach by Smith of any term of
this Agreement.
<PAGE> 3
Non-Competition and Confidentiality: By virtue of Smith's position as President
of the Company, he will come to possess significant amounts of confidential
information about the Company and the way that it conducts its business. Even if
some or all of that information is available from other or public sources, Smith
will have been exposed to it in a way such that his use of that information
after termination of his employment would enable him to compete unfairly against
the Company. For that reason, for one (1) year following the termination of
Smith's employment with the Company, he will not engage, directly or indirectly,
in any activity that is competitive with the business of Company as and where it
was conducted or planned to be conducted at the time of Smith's termination,
regardless of the reason for or circumstances of his termination. Smith will be
obligated to maintain the confidentiality of any trade secret or confidential
business information that he acquires about the Company during his employment,
and Smith will refrain from using any such information until it becomes publicly
available through lawful means. These restrictions are in addition to, not in
place of, any protection provided to trade secret information under California
law.
Assignment: The Company may assign its rights and obligations under this
agreement, in which event it shall be binding upon, and inure to the benefit of,
the person or entity to whom it is assigned.
Entire Agreement: This Agreement contains the entire understanding and agreement
reached between Smith and the Company, and it supersedes any discussions or
agreements that have been had or made prior to its execution. It may only be
modified by a writing signed by the party against which the modification is to
be enforced.
Governing Law: This Agreement will be enforce in accordance with the laws of the
State of California.
hs.com, Inc. Charles Smith
By: /s/ MICHAEL D. CHERMAK /s/ CHARLES SMITH
--------------------------- --------------------------
Michael D. Chermak
Chairman
Date: 11/12/98 Date: 11/12/98
Per M. Chermak at signing on 11/12/98. The interpretation of employment is one
year guaranteed, and then one year roll-overs automatically unless the 30 day
notice is given by either party. There is no "at will" clause or intent in this
agreement.
/s/ LORI O'BRIEN 11/17/98
- ------------------------------
LORI O'BRIEN
<PAGE> 4
[MEDIBUY.COM LETTERHEAD]
May 14,1999
Mr. Charlie Smith
President
Medibuy.com
7777 Alvarado Road
Suite 401
La Mesa, CA 91941
Dear Charlie:
Per your original employment agreement, the level of compensation promised in
the agreement exceeds your current compensation by $18,000. This decision was
required to maintain executive salaries at a consistent level during company
financing negotiations.
To ensure the terms of your original agreement remain intact, you will be
granted a single cash bonus of $18,000 to accommodate this difference in salary
structure. This payment will be made no later than June 15th, 1999.
Sincerely,
/s/ MICHAEL D. CHERMAK
- ------------------------
Michael D. Chermak
Chairman
<PAGE> 5
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is
entered into as of October 26, 1999 (the "Effective Date"), by and between
MEDIBUY.COM, INC., a Delaware corporation (the "Company") and CHARLES R. SMITH
("Executive").
WHEREAS, the Company and Executive previously entered into an Employment
Agreement, dated November 12, 1998 (the "Employment Agreement"); and
WHEREAS, the parties desire to amend the Employment Agreement as set
forth in this Amendment.
NOW THEREFORE, in consideration of the mutual benefits contained herein,
the parties, intending to be legally bound, hereby agree as follows:
1. Except as otherwise defined herein, capitalized terms used but
not defined herein shall have the meanings given to them in the Employment
Agreement.
2. The Employment Agreement is hereby amended as follows:
(a) Executive will hold the position of Executive Vice
President of Customer Advocacy and no longer hold the position of President of
the Company.
(b) For purposes of clarification, the parties agree that
Executive was entitled to receive 36,000 pre-stock split shares of the Company's
common stock rather than 42,000 pre-stock split shares; and
(c) The following provision hereby amends and restates the
last paragraph under the heading "Equity Compensation" in its entirety:
In the event of (i) a sale, lease or other disposition
of all or substantially all of the assets of the Company, (ii) a
merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the
Company is the surviving corporation but the shares of Common
Stock outstanding immediately preceding the merger are converted
by virtue of the merger into other property, whether in the form
of securities, cash or otherwise, then any surviving corporation
or acquiring corporation shall assume the Shares or shall
substitute similar stock awards for the Shares. In the event any
surviving corporation or acquiring corporation refuses to assume
the Shares or to substitute similar stock awards for the Shares
and Executive employment has not been terminated, then with
respect to the Shares held by Executive, the vesting of Shares
subject to divesting shall be accelerated in full at or prior to
such event.
After the first date upon which any security of the
Company is listed (or approved for listing) upon notice of
issuance on any securities exchange or designated (or approved
for designation) upon notice of issuance as a national market
security on an interdealer quotation system if such securities
exchange or interdealer quotation system has been certified in
accordance with the provisions
1.
<PAGE> 6
of Section 25100(o) of the California Corporate Securities Law
of 1968 (the "Listing Date") and in the event of an acquisition
by any person, entity or group within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), as amended, or any comparable successor
provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of
the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of the
Board of Directors of the Company (the "Board"), then with
respect to the Shares held by Executive, if Executive's
continuous service has not terminated, the vesting of the Shares
subject to the divesting shall be accelerated in full.
After the Listing Date, in the event that the
individuals who, as of the Listing Date, are members of the
Board (the "Incumbent Board"), cease for any reason to
constitute at least fifty percent (50%) of the Board, then with
respect to the Shares subject to divesting held by Executive, if
Executive's continuous service has not terminated, the vesting
of the Shares subject to divesting shall be accelerated in full.
If the election, or nomination for election, by the Company's
shareholders of any new director of the Board was approved by a
vote of at least fifty percent (50%) of the Incumbent Board,
such new director shall be considered as a member of the
Incumbent Board.
3. This Amendment shall be governed by and construed in accordance
with the laws of the State of California as such laws are applied to contracts
entered into and performed entirely within California by California residents.
4. This Amendment may be signed in any number of counterparts, each
of which will be deemed an original, and all of which taken together shall
constitute one and the same instrument.
5. Except as specifically amended hereby, the Employment Agreement
shall remain in full force and effect. This Amendment constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements or understandings, inducements
or conditions, express or implied, written or oral, between the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
MEDIBUY.COM, INC.
/s/ CHARLES R. SMITH By: /s/ DENNIS J. MURPHY
- ----------------------------------- --------------------------------------
CHARLES R. SMITH Name: Dennis J. Murphy
-------------------------------------
Title: President & Chief Executive
Officer
-----------------------------------
2.
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into between medibuy.com, a
Delaware Corporation with a principal place of business at 7777 Alvarado Road,
Suite 401, La Mesa, California, 91941 ("COMPANY") and Norman R. Farquhar of 9
Marbella, Dana Point, California 92629 ("EXECUTIVE").
1. Employment.
COMPANY hereby employs EXECUTIVE, and EXECUTIVE hereby agrees to accept
employment from COMPANY, as Executive Vice President and Chief Financial Officer
of COMPANY. EXECUTIVE agrees during the term of his employment under this
Agreement to perform the duties and responsibilities customarily required of
such position, and to be subject to COMPANY's bylaws and Delaware corporation
law. EXECUTIVE agrees to perform such services consistent with his position as
shall be reasonably determined from time to time by the Board of Directors.
EXECUTIVE further agrees to use his best efforts to promote the interests of
COMPANY and to devote his full business time and energies to the business and
affairs of COMPANY, unless otherwise authorized by the Chief Executive Officer
of COMPANY. EXECUTIVE may, however, engage in civic and not-for-profit
activities so long as such activities do not materially interfere with the
performance of his duties to COMPANY hereunder.
2. Term of Employment.
The employment under this Agreement shall commence on October 25, 1999
and shall end on October 25, 2000, provided that the term of the Agreement shall
be extended automatically for successive periods of one year unless otherwise
terminated under Paragraph 5 of this Agreement.
-1-
<PAGE> 2
3. Compensation.
(a) Base Salary. As compensation for services provided to COMPANY,
EXECUTIVE shall receive a salary at the annual rate of $225,000, less such
payroll and withholding taxes as required by law to be deducted and such other
amounts as EXECUTIVE shall authorize in writing. The salary shall be payable in
semi-monthly installments. Such salary may be increased, but not decreased, from
time to time as decided in the discretion of the Board of Directors of COMPANY.
(b) Bonus. As additional compensation for services rendered by
EXECUTIVE, EXECUTIVE shall be entitled to participate in any incentive bonus
program that COMPANY's Board of Directors may establish for its executive
employees. Such bonus program shall provide a maximum bonus of fifty percent
(50%) of the salary paid during the year in which the bonus is earned, based
upon factors established by the Board of Directors or COMPANY's Chief Executive
Officer.
(c) Equity Compensation. As further compensation for the services
rendered by EXECUTIVE, upon his commencement of employment with COMPANY pursuant
to this Agreement and approval by COMPANY's Board of Directors, EXECUTIVE will
be granted an incentive stock option to purchase 300,000 shares of Common Stock
of COMPANY at an exercise price not to exceed $3.60 per share. Such options
shall be issued pursuant to, and their exercise and the issuance of shares upon
exercise shall be subject to, the conditions of the COMPANY's 1999 Omnibus
Equity Plan (the "Plan").
(i) Vesting of Options. EXECUTIVE'S incentive stock options
shall vest according to the following schedule:
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<PAGE> 3
Upon EXECUTIVE's completion of 6 full months of employment
pursuant to this Agreement, 13% of the option shares, or
39,000 shall vest and be subject to exercise immediately,
and upon EXECUTIVE's completion of one full year of
employment pursuant to this Agreement, an additional 12% of
the option shares, or 36,000, shall vest and be subject to
exercise immediately, provided, however, that in the event
EXECUTIVE resigns his employment with Company prior to the
completion of one full year of employment under this
Agreement, any shares of COMPANY'S Common Stock that
EXECUTIVE has acquired by virtue of the exercise of such
options shall be subject to COMPANY's right to repurchase at
the price EXECUTIVE paid for them, and any options that have
vested but which EXECUTIVE has not yet exercised shall
become null and void.
The remaining 225,000 option shares shall vest and be subject to
exercise at the rate of 6,250 shares for each full month
that EXECUTIVE'S employment continues under this Agreement
after the first anniversary hereunder, up to a maximum of
225,000 shares.
(ii) In the event that within two years following the effective
date of a Change in control" (as defined below) EXECUTIVE's
employment is terminated without cause, or EXECUTIVE's
duties as Executive Vice President and Chief Financial
Officer are significantly changed, the balance of the
options for 300,000 shares granted to EXECUTIVE under this
Agreement that have not vested as of the date of such
termination or significant change in duties shall vest
immediately. "Change in control" shall mean either (i) a
dissolution, liquidation, or sale of all or substantially
all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving
corporation; (iii) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's
common stock outstanding immediately
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<PAGE> 4
preceding the merger are converted by virtue of the merger
into other property, whether in the form of securities, cash
or otherwise; (iv) after the Listing Date, an acquisition by
any person, entity or group within the meaning of Section
13(d) or 14(d) of the Exchange Act, as hereafter amended or
succeeded, excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or an
affiliate of the Company, of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of securities of the Company or its successor
representing at least fifty percent (50%) of the combined
voting power entitled to vote in the election of directors;
or (v) after the Listing Date, if individuals who, as of the
date of the adoption of this Plan, are members of the Board
(the "Incumbent Board"), cease for any reason to constitute
at least fifty percent (50%) of the Board, provided that, if
the election, or nomination for, election, by the Company's
stockholders of any new director was approved by a vote of
at least fifty percent (50%) of the Incumbent Board, such
new director shall be considered as a member of the
Incumbent Board, notwithstanding the foregoing, in the case
of (ii) and (iii) above, such transactions shall only be
deemed a "change in control" if the stockholders of the
Company or its successor immediately prior to such merger,
consolidation or reverse merger: (A) hold less then 50% of
the outstanding securities of the
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<PAGE> 5
surviving company following the merger or consolidation, or
(B) in the event that the securities of an affiliated entity
are issued to the stockholders of the Company in the
transaction, hold less then 50% of the outstanding
securities of such entity corporation.
For purposes of this section "Listing Date" shall mean the
first date upon which any security of the COMPANY is listed
(or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for
designation) upon notice of issuance as a national market
security on an interdealer quotation system if such
securities exchange or interdealer quotation system has been
certified in accordance with the provisions of Section
25100(o) of the California Corporate Securities Law of 1968.
(d) Additional Compensation. In addition to the other forms of
compensation to be paid to EXECUTIVE under this Agreement,
COMPANY shall pay to EXECUTIVE a signing bonus in the sum of
$150,000 (gross amount).
4. Participation in Benefit Plans, Reimbursement of Business
Expenses and Moving Expenses.
(a) Benefit Plans. During the term of this Agreement, EXECUTIVE shall
be provided with medical insurance, vacation benefits, sick leave benefits, and
holidays which
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<PAGE> 6
are not less than, and on terms no less favorable than, COMPANY provides to its
other executive employees.
(b) Reimbursement of Business Expenses. During the term of this
Agreement, COMPANY shall reimburse EXECUTIVE promptly for all expenditures,
including travel, entertainment, parking and business meetings (including the
dues and business related expenses of memberships at appropriate business clubs,
provided such memberships are approved in writing by the Chief Executive Officer
of COMPANY), provided such expenses are incurred and submitted for reimbursement
in accordance with the policies then in effect, as established from time to time
by the Board of Directors.
5. Termination of Employment.
(a) Automatic Termination. This Agreement will automatically
terminate in the event of EXECUTIVE's death, or EXECUTIVE's disability which has
prevented EXECUTIVE from performing substantially all of his duties and
responsibilities for a continuous period of ninety (90) days. COMPANY shall have
no further obligations to EXECUTIVE or her estate upon such automatic
termination, except to honor the exercise of any stock options that have vested
prior to the date of such termination, subject to the applicable conditions of
the Plan.
(b) Termination Not for Cause. In the event that COMPANY terminates
this Agreement without cause, COMPANY shall, subject to the conditions set forth
in Section 6(b), below, continue to pay EXECUTIVE his salary at the level in
effect at the time of
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<PAGE> 7
termination for a period of twelve (12) months, plus any accrued, but unused
vacation, and less any applicable payroll and withholding taxes or other legally
required deductions, provided EXECUTIVE first executes the Waiver and Release,
attached to this Agreement as Appendix B. The salary continuation for EXECUTIVE
shall be paid in the same manner and at the same intervals as if EXECUTIVE
continued his employment during that one year period. COMPANY reserves the right
to pay the one-year salary continuation amount in a lump sum, discounted to
present value using a discount factor or 6%. No other compensation or benefits
shall be due to EXECUTIVE.
(c) Termination for Cause. Notwithstanding the provisions of
sub-paragraph 5(b), COMPANY may terminate EXECUTIVE's employment for cause. For
purposes of this Agreement, COMPANY shall have "cause" to terminate EXECUTIVE's
employment in the event of the following: (i) conviction of EXECUTIVE for any
crime, or entry of a plea of nolo contendere for any crime involving moral
turpitude or dishonesty;
(ii) EXECUTIVE's participation in a fraud or act of dishonesty against COMPANY;
(iii) EXECUTIVE's willful misfeasance or nonfeasance of duty that materially
injures the reputation, business or business relationships of COMPANY or any of
its officers, directors or affiliates, or
(iv) a material breach by EXECUTIVE of any term of this Agreement or the
Proprietary Information and Inventions Agreement that EXECUTIVE has entered into
with the Company, or any of the Company's written policies and procedures.
-7-
<PAGE> 8
In the event EXECUTIVE's employment is terminated for cause, he will not be
entitled to receive any severance pay or any other severance compensation.
(e) Resignation. EXECUTIVE retains the right to resign or otherwise
voluntarily terminate his employment with COMPANY upon ninety (90) days' written
notice to the Chief Executive Officer. In the event EXECUTIVE resigns or
otherwise voluntarily terminates his employment with COMPANY, EXECUTIVE shall
not be entitled to any compensation, including benefits, beyond the effective
date of his resignation.
(f) Stock Options. Subject to the Change in Control provisions of
Section 3(c)(ii), above, only the shares subject to the stock options granted to
EXECUTIVE above that have vested up to the date of the termination of or his
resignation from his employment under this Agreement may be exercised by
EXECUTIVE, such exercise to be subject to the conditions set forth in the Plan.
Any stock options that are unvested as of the date of EXECUTIVES's termination,
for whatever reason, shall be null and void.
6. Noncompetition, Confidentiality and Conflicts of Interest.
(a) EXECUTIVE agrees and understands that, due to the nature of his
position with COMPANY, he will gain possession of confidential information about
COMPANY and the way it conducts its business. In conjunction with the execution
of, and as part of the consideration given for, this Agreement, EXECUTIVE will
execute the Proprietary Information and Inventions Agreement that is attached to
this Agreement as Appendix C. EXECUTIVE's duties and obligations under Appendix
C shall survive termination of his employment with COMPANY. EXECUTIVE
acknowledges that a remedy at law for any breach or threatened breach by him of
the provisions of
-8-
<PAGE> 9
Appendix C would be inadequate to protect COMPANY against the consequences of
such breach, and he therefore agrees that the COMPANY shall be entitled to
injunctive relief in case of any such breach or threatened breach.
(b) Restrictive Covenant. During any period that EXECUTIVE is
receiving severance compensation from COMPANY following the termination date of
EXECUTIVE's employment under this Agreement, EXECUTIVE shall not, without first
obtaining the prior written approval of COMPANY, directly or indirectly engage
in any activities in competition with COMPANY, or become an officer, director or
employee of, or consultant to, a business engaged in competition with COMPANY's
current business (specifically, any person or entity whose principal business is
promoting and facilitating via the Internet transactions between third parties
for the wholesale sale and distribution of goods, equipment and services in the
healthcare field and such other business or businesses in which COMPANY comes to
be actively engaged during the term of EXECUTIVE'S employment under this
Agreement. In the event that EXECUTIVE undertakes any such activities without
written permission from COMPANY, COMPANY'S obligation to pay EXECUTIVE severance
compensation shall cease. For purposes of this Agreement, "healthcare field"
means the provision of goods and/or services to any person, firm, corporation,
business, partnership, limited liability company, association or other entity
involved directly in the healthcare industry and/or to any person with respect
to their medical or healthcare needs, including, without limitation, hospital,
surgical centers, medical clinics, outpatient facilities, medical groups,
managed care organizations, health maintenance organizations, medical or health
related associations, nursing homes, extended care facilities, doctors,
physicians, dentists, chiropractors, veterinarians and other healthcare
providers, practitioners, suppliers, patients or any other person providing or
receiving healthcare service of any nature whatsoever.
-9-
<PAGE> 10
(c) Conflicts of Interest. EXECUTIVE agrees not to acquire, assume or
participate in, directly or indirectly, any position, investment or interest
known by him to be adverse or antagonistic to COMPANY, its business or
prospects, financial or otherwise. However, EXECUTIVE may own, as a passive
investor, securities of any publicly traded companies, provided his beneficial
ownership of the stock of any one such corporation does not exceed 1% of such
corporation's voting stock.
(d) Non-interference. While employed by COMPANY, and for a period of
one (1) year immediately following the termination of his employment, EXECUTIVE
will not interfere with the business of COMPANY by:
(i) soliciting, attempting to solicit, inducing or otherwise
causing any employee of COMPANY to terminate his or his employment in order to
become an employee, consultant or contractor to or for any competitor of
COMPANY;
(ii) directly or indirectly soliciting the business of any
customer of COMPANY which at the time of termination or one year prior thereto
was listed on COMPANY's customer list, which solicitation, if successful, would
result in the loss of business or potential business for COMPANY.
7. Notices.
For purposes of this Agreement, notices and other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States Registered or
Certified Mail, return receipt requested, postage prepaid, addressed as follows:
If to EXECUTIVE: Norman R. Farquhar
9 Marbella
Dana Point, CA 92629
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<PAGE> 11
If to COMPANY: medibuy.com
7777 Alvarado Road, Suite 401
LaMesa, California 91941
Attn: The Chief Executive Officer
or at such other address as any party may have furnished to the other in
writing subsequent to the execution of this Agreement or, in the case of
EXECUTIVE, to the address listed for him in COMPANY's records, and in the case
of COMPANY, to the address known by him to be where the office of the Chief
Executive Officer of COMPANY is located.
8. Modifications; Waivers; Applicable Law. No provision in this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by EXECUTIVE and by the Chief
Executive Officer of COMPANY.
9. Severability.
If any provision of this Employment Agreement is determined to be
invalid or is in any way modified by any governmental agency, tribunal, or court
of competent jurisdiction, such determination shall be considered as a separate,
distinct, and independent part of this Agreement and shall not affect the
validity or enforceability of any of the remaining provisions of this Agreement.
10. Successor Rights and Assignment.
This Agreement shall bind, inure to the benefit of and be enforceable by
EXECUTIVE's personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees. The rights and obligations of
COMPANY under this Agreement may be assigned by
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<PAGE> 12
COMPANY, in which event it shall be binding upon, and inure to the benefit of,
the person(s) or entity(ies) to whom it is assigned. EXECUTIVE may not assign
his duties hereunder and he may not assign any of his rights hereunder without
the written consent of COMPANY.
IN WITNESS WHEREOF, EXECUTIVE and COMPANY have signed this Agreement on
the dates indicated below.
EXECUTIVE:
Dated: 10/6/99 /s/ Norman R. Farquhar
----------------------------------------
Norman R. Farquhar
MEDIBUY.COM, INC.
Dated: 10/6/99 /s/ Dennis J. Murphy
----------------------------------------
Dennis J. Murphy
Chairman and Chief Executive Officer
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<PAGE> 13
WAIVER AND RELEASE OF CLAIMS
In exchange for payment to me of amounts pursuant to Section 5 (and for
the other benefits provided therein) of my Employment Agreement (the
"Agreement"), to which this form is attached, I hereby furnish medibuy.com, Inc.
(the "Company") with the following release and waiver.
I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns and affiliates,
of and from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys' fees, damages, indemnities and obligations of every kind
and nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising at any time prior to and
including my employment termination date with respect to any claims relating to
my employment and the termination of my employment, including but not limited
to, claims pursuant to any federal, state or local law relating to employment
including, but not limited to, discrimination claims, claims under the
California Fair Employment and Housing Act, and the Federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"), or claims for wrongful
termination, breach of the covenant of good faith, contract claims, tort claims,
and wage or benefit claims, including but not limited to, claims for salary,
bonuses, commissions, stock, stock options, vacation pay, fringe benefits,
severance pay or any form of compensation.
I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against the
Company.
I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this waiver and release is knowing and
voluntary, and that the consideration given for this waiver and release is in
addition to anything of value to which I was already entitled as an employee of
the Company. I further acknowledge that if I am over 40 I have been advised, as
required by the Older Workers Benefit Protection Act, that: (a) the waiver and
release granted herein does not relate to claims which may arise after this
agreement is executed; (b) I have the right to consult with an attorney prior to
executing this agreement (although I may choose voluntarily not to do so); (c) I
have twenty-one (21) days from the date I receive this agreement, in which to
consider this agreement (although I may choose voluntarily to execute this
agreement earlier); (d) I have seven (7) days following the execution of this
agreement to revoke my consent to the agreement; and (e) this agreement shall
not be effective until the seven (7) day revocation period has expired.
This release shall not extend to the Company's obligations which survive the
termination of my employment agreement, such as severance pay due me, if any,
and any other benefit plan or program, such as the Company's Stock Option Plan.
Date: 10-6-99 By: /s/ N. Farquhar
----------------------------
[Employee]
1.
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into between medibuy.com, a
Delaware Corporation with a principal place of business at 7777 Alvarado Road,
Suite 401, La Mesa, California, 91941 ("COMPANY") and Bob Witt of 1331 Cotton
St., Menlo Park, CA 94025 ("EXECUTIVE").
1. Employment.
COMPANY hereby employs EXECUTIVE, and EXECUTIVE hereby agrees to accept
employment from COMPANY, as Executive Vice President of Web Technology for
COMPANY. EXECUTIVE agrees during the term of his employment under this Agreement
to perform the duties and responsibilities customarily required of such
position, and to be subject to COMPANY's bylaws and Delaware Corporation law.
EXECUTIVE agrees to perform such services as shall be determined from time to
time by the Chief Executive Officer of COMPANY and its Board of Directors.
EXECUTIVE further agrees to use his best efforts to promote the interests of
COMPANY and to devote his full business time and energies to the business and
affairs of COMPANY, unless otherwise authorized by the Chief Executive Officer
of COMPANY. EXECUTIVE may, however, engage in civic and not-for-profit
activities so long as such activities do not materially interfere with the
performance of his duties to COMPANY hereunder.
2. Term of Employment.
The employment under this Agreement shall commence on May 10,1999 and
shall end on March 29, 2000, provided that the term of the Agreement shall be
extended automatically for successive periods of one year unless otherwise
terminated under Paragraph 5 of this Agreement.
3. Compensation.
<PAGE> 2
(a) Base Salary. As compensation for services provided to COMPANY,
EXECUTIVE shall receive a salary at the annual rate of $185,000, less such
payroll and withholding taxes as required by law to be deducted and such other
amounts as EXECUTIVE shall authorize in writing. The salary shall be payable in
semi-monthly installments. Such salary may be increased, but not decreased, from
time to time as decided in the discretion of the Board of Directors of COMPANY.
(b) Bonus. As additional compensation for services rendered by
EXECUTIVE, EXECUTIVE shall be entitled to participate in any incentive bonus
program that COMPANY's Board of Directors may establish for its executive
employees. Such bonus program shall provide a maximum bonus of fifty percent
(50%) of the salary paid during the year in which the bonus is earned, based
upon factors established by the Board of Directors.
(c) Equity Compensation. As further compensation for the services
rendered by EXECUTIVE, upon his commencement of employment with COMPANY pursuant
to this Agreement and approval by COMPANY's Board of Directors, EXECUTIVE will
be granted an incentive stock option to purchase shares of Common Stock of
COMPANY at an exercise price per share equal to the fair market value of the
Common Stock (as determined by the Board of Directors) as of the date of this
Agreement. Such options shall be issued pursuant to, and their exercise and the
issuance of shares upon exercise shall be subject to, the conditions of the
COMPANY's 1999 Equity Incentive Plan (the "Plan").
(i) Vesting of Options. EXECUTIVE'S incentive stock options shall vest
according to the following schedule:
Upon EXECUTIVE's completion of the first six (6) months of employment
under this Agreement, 13% of the option shares shall vest and be
subject to exercise immediately.
<PAGE> 3
Upon EXECUTIVE's completion of the second six (6) months of employment
under this Agreement, 12% of the option shares shall vest and be
subject to exercise immediately.
EXECUTIVE's 15,000 remaining option shares shall vest and be subject to
exercise at the rate of 416.67 shares for each full month that
EXECUTIVE'S employment continues under this Agreement after the
first anniversary hereunder.
In the event that COMPANY undergoes a "change in control" (as
defined below) and EXECUTIVE's employment is terminated without cause or
EXECUTIVE's duties are significantly changed within twelve (12) months
thereafter (measured from the effective date of the change in control),
the balance of the options for 20,000 shares granted to EXECUTIVE under
this Agreement that have not vested as of the date of such termination
or significant change in duties shall vest immediately. "Change in
control" shall mean either 1) a merger of COMPANY into, or a
consolidation of COMPANY with, another person or business entity with
the result that less than fifty percent (50%) of the directors of the
resulting business entity immediately following the merger or
consolidation were directors of COMPANY immediately prior to the merger
or consolidation; 2) a sale by COMPANY of more than fifty percent (50%)
of its assets at the time of the agreement to sell or 3) a transaction
or series of transactions by which more than 50% of the voting equity
securities of COMPANY come to be under the control of a single entity or
a group of entities acting in concert to acquire control of COMPANY.
4. Participation in Benefit Plans, Reimbursement of Business Expenses and
Moving Expenses.
(a) Benefit Plans. During the term of this Agreement, EXECUTIVE shall
be provided with medical insurance, vacation benefits, sick leave benefits, and
holidays which
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<PAGE> 4
are not less than, and on terms no less favorable than, COMPANY provides to its
other executive employees.
(b) Reimbursement of Business Expenses. During the term of this
Agreement, COMPANY shall reimburse EXECUTIVE promptly for all expenditures,
including travel, entertainment, parking, business meetings, including the dues
and business related expenses of memberships at appropriate business clubs,
provided such memberships are approved in writing by the Chief Executive Officer
of COMPANY, and such expenses are incurred and submitted for reimbursement in
accordance with the policies established from time to time by the Board of
Directors.
(c) Moving Expenses. COMPANY shall reimburse EXECUTIVE for all actual
relocation expenses, up to a maximum of $130,000 for EXECUTIVE's relocation to
the San Diego area in accordance with the terms of the Relocation Benefits
Agreement, which Agreement is attached hereto as Appendix A. Any amounts paid to
EXECUTIVE to compensate him for taxes on amounts received by him hereunder which
are not tax deductible shall be subject to, not in addition to, the limit of
$130,000 set forth in the preceding sentence.
5. Termination of Employment.
(a) Automatic Termination. This Agreement will automatically terminate
in the event of EXECUTIVE's death, or EXECUTIVE's disability which prevents
EXECUTIVE from performing substantially all of his duties and responsibilities
for a continuous period of ninety (90) days. COMPANY shall have no further
obligations to EXECUTIVE or his estate upon such automatic termination, except
to honor the exercise of any stock options that have vested prior to the date of
such termination, subject to the applicable conditions of
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<PAGE> 5
the Plan. (b) Termination Not for Cause. In the event that COMPANY terminates
this Agreement without cause, COMPANY shall, subject to the conditions set forth
in Section 6(b), below, continue to pay EXECUTIVE his salary at the level in
effect at the time of termination for a period of twelve (12) months, plus any
accrued, but unused vacation, and less any applicable payroll and withholding
taxes or other legally required deductions, provided EXECUTIVE first executes
the Waiver and Release, attached to this Agreement as Appendix B. The salary
continuation for EXECUTIVE shall be paid in the same manner and at the same
intervals as if EXECUTIVE continued his employment during that one year period.
COMPANY reserves the right to pay the one-year salary continuation amount in a
lump sum, discounted to present value using a discount factor or 6%. No other
compensation or benefits shall be due to EXECUTIVE.
(c) Termination for Cause. Notwithstanding the provisions of
Sub-paragraph 5(b), COMPANY may terminate EXECUTIVE's employment for cause. For
purposes of this Agreement, COMPANY shall have "cause" to terminate EXECUTIVE's
employment in the event of the following:
1) EXECUTIVE commits a criminal act of dishonesty;
2) EXECUTIVE commits a repeated violation of a written COMPANY
Policy after being provided with written notice by COMPANY which
specifies the initial Policy violation;
3) Continued failure by EXECUTIVE to perform the material aspects
of EXECUTIVE's duties and responsibilities after written warning
from the Board of Directors specifying the duties or
responsibilities which EXECUTIVE has failed to perform;
4) A material breach by EXECUTIVE of any provision of this
Agreement.
-5-
<PAGE> 6
In the event EXECUTIVE's employment is terminated for cause, he will not
be entitled to receive any severance pay or any other severance
compensation.
(d) Resignation. EXECUTIVE retains the right to resign or
otherwise voluntarily terminate his employment with COMPANY upon ninety
(90) days' written notice to the Chief Executive Officer. In the event
EXECUTIVE resigns or otherwise voluntarily terminates his employment
with COMPANY, EXECUTIVE shall not be entitled to any compensation,
including benefits, beyond the effective date of his resignation.
(e) Stock Options. Subject to the Change in Control provisions
of Section 3(c)(ii), above, only the shares subject to the stock options
granted to EXECUTIVE above that have vested up to the date of the
termination of or his resignation from his employment under this
agreement may be exercised by EXECUTIVE, such exercise to be subject to
the conditions set forth in the Plan. Any stock options that are
unvested as of the date of EXECUTIVE's termination shall be null and
void.
6. Noncompetition, Confidentiality and Conflicts of Interest.
(a) EXECUTIVE agrees and understands that, due to the nature of his
position with the COMPANY, he will gain possession of confidential information
about COMPANY and the way it conducts its business. In conjunction with the
execution of, and as part of the consideration given for, this Agreement,
EXECUTIVE will execute the Proprietary Information and Inventions Agreement that
is attached to this Agreement as Appendix C. EXECUTIVE's duties and obligations
under Appendix C shall survive termination of his employment with COMPANY.
EXECUTIVE acknowledges that a remedy at law for any breach or threatened breach
by him of the provisions of Appendix C would be inadequate to protect COMPANY
against the consequences of such breach,
<PAGE> 7
and he therefore agrees that the COMPANY shall be entitled to injunctive relief
in case of any such breach or threatened breach.
(b) Restrictive Covenant. During any period that EXECUTIVE is receiving
severance compensation from COMPANY following the termination date of
EXECUTIVE's employment under this Agreement, EXECUTIVE shall not, without first
obtaining the prior written approval of COMPANY, directly or indirectly engage
in any activities in competition with COMPANY, or accept employment or establish
a business relationship with a business engaged in competition with COMPANY
(specifically, promoting and receiving revenue for the marketing, sale and
distribution of goods, equipment and services in the "Healthcare Field" via the
Internet, as that term is defined in the license agreement between COMPANY and
among others, iBO$, Inc. dated March 25, 1999), and such other businesses as
COMPANY comes to be actively engaged in during the term of this Agreement, in
any geographical area in which COMPANY, as of the termination date, either
conducts or plans to conduct business. In the event that EXECUTIVE undertakes
any such activities without written permission from COMPANY, COMPANY'S
obligation to pay EXECUTIVE severance compensation under this provision shall
cease.
(c) Conflicts of Interest. EXECUTIVE agrees not to acquire, assume or
participate in, directly or indirectly, any position, investment or interest
known by him to be adverse or antagonistic to COMPANY, its business or
prospects, financial or otherwise. However, EXECUTIVE may own, as a passive
investor, securities of any publicly traded companies, provided his beneficial
ownership of the stock of any one such corporation does not exceed 1% of such
corporation's voting stock.
<PAGE> 8
(d) Non-interference. While employed by COMPANY, and for a period of one
(1) year immediately following the termination of his employment, EXECUTIVE
will not interfere with the business of COMPANY by:
(i) soliciting, attempting to solicit, inducing or otherwise
causing any employee of COMPANY to terminate his or her employment in
order to become an employee, consultant or contractor to or for any
competitor of COMPANY;
(ii) directly or indirectly soliciting the business of any
customer of COMPANY which at the time of termination or one year prior
thereto was listed on COMPANY's customer list, which solicitation, if
successful, would result in the loss of business or potential business
for COMPANY.
7. Notices.
For purposes of this Agreement, notices and other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States Registered or
Certified Mail, return receipt requested, postage prepaid, addressed as follows:
If to EXECUTIVE:
If to COMPANY: medibuy.com, Inc.
777 Alvarado Road, Suite 401
La Mesa, California 91941
Attn: The Chief Executive Officer
or at such other address as any party may have furnished to the other in writing
subsequent to the execution of this Agreement or, in the case of EXECUTIVE, to
the address listed for him in
<PAGE> 9
COMPANY's records, and in the case of COMPANY, to the address known by EXECUTIVE
to be where the office of the Chief Executive Officer of COMPANY is located.
8. Modifications; Waivers; Applicable Law.
No provision in this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing, signed by
EXECUTIVE and by the Chief Executive Officer of COMPANY.
9. Severability.
If any provision of this Employment Agreement is determined to be
invalid or is in any way modified by any governmental agency, tribunal, or court
of competent jurisdiction, such determination shall be considered as a separate,
distinct, and independent part of this Agreement and shall not affect the
validity or enforceability of any of the remaining provisions of this Agreement.
10. Successor Rights and Assignment.
This Agreement shall bind, inure to the benefit of and be enforceable by
EXECUTIVE's personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees. The rights and obligations of
COMPANY under this Agreement may be assigned by COMPANY, in which event it shall
be binding upon, and inure to the benefit of, the person(s) or entity(ies) to
whom it is assigned. EXECUTIVE may not assign his duties hereunder and he may
not assign any of his rights hereunder without the written consent of COMPANY.
IN WITNESS WHEREOF, EXECUTIVE and COMPANY have signed this Agreement on
the dates indicated below.
<PAGE> 10
EXECUTIVE:
Dated: 5/15/99 /s/ Bob Witt
------------------------- ----------------------------
MEDIBUY.COM, INC.
Dated: 5/10/99 By: /s/ DENNIS J. MURPHY
------------------------- --------------------------
Its:
-------------------------
-10-
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into by and
among medibuy.com, Inc., a Delaware corporation ("MEDIBUY"), PartNET, Inc., a
Utah corporation and a wholly-owned subsidiary of MEDIBUY ("COMPANY") and Don
Brown ("EXECUTIVE").
1. EMPLOYMENT.
COMPANY hereby employs EXECUTIVE, and EXECUTIVE hereby agrees to accept
employment from COMPANY, as President of COMPANY. EXECUTIVE agrees during the
term of his employment under this Agreement to perform the duties and
responsibilities customarily required of such position, and to be subject to
COMPANY's bylaws and Utah corporation law. EXECUTIVE agrees to perform such
services consistent with his position as shall be reasonably determined from
time to time by COMPANY's or MEDIBUY's Board of Directors. EXECUTIVE further
agrees to use his best efforts to promote the interests of COMPANY and MEDIBUY
and to devote substantially all of his normal business time and energies to the
business and affairs of COMPANY, unless otherwise authorized by the Chief
Executive Officer of COMPANY or the Chief Executive Officer of MEDIBUY.
EXECUTIVE may, however, engage in other business matters as well as civic and
not-for-profit activities so long as such activities do not materially interfere
with the performance of his duties to COMPANY hereunder.
2. TERM OF EMPLOYMENT.
The employment under this Agreement shall commence on November 22, 1999 and
shall end on November 22, 2001, provided that the term of the Agreement shall be
extended
1.
<PAGE> 2
automatically for successive periods of one year unless otherwise terminated
under Paragraph 5 of this Agreement.
3. COMPENSATION
(a) BASE SALARY. As compensation for services provided to
COMPANY, EXECUTIVE shall receive a salary at the annual rate of $193,000 less
such payroll and withholding taxes as required by law to be deducted and such
other amounts as EXECUTIVE shall authorize in writing. The salary shall be
payable in semi-monthly installments. Such salary may be increased, but not
decreased, from time to time as decided in the good faith discretion of the
Board of Directors of COMPANY.
(b) BONUS. As additional compensation for services rendered by
EXECUTIVE, EXECUTIVE shall be entitled to participate in any incentive bonus
program that COMPANY's or MEDIBUY's Board of Directors may establish for its
executive employees. Such bonus program shall provide a maximum bonus of fifty
percent (50%) of the salary paid during the year in which the bonus is earned,
based upon factors established by COMPANY's or MEDIBUY's Board of Directors or
COMPANY's or MEDIBUY's Chief Executive Officer.
(c) EQUITY COMPENSATION. As further compensation for the services
rendered by EXECUTIVE, upon his commencement of employment with the COMPANY
pursuant to this Agreement and approval by MEDIBUY's Board of Directors,
EXECUTIVE will be granted an incentive stock option (the "Option") (to the
extent such Option qualifies as an incentive stock option under applicable laws
and regulations) to purchase 100,000 shares of Common Stock of MEDIBUY at an
exercise price equal to the fair market value of MEDIBUY Common Stock (as
determined by the Board of Directors) as of the date of this Agreement.
2.
<PAGE> 3
The issuance and exercise of the Option and the issuance of shares subject to
the Option shall be subject to the conditions of the MEDIBUY's 1999 Omnibus
Equity Plan (the "Plan").
(i) VESTING OF OPTIONS. The shares subject to the Option
shall vest according to the following schedule:
Upon EXECUTIVE's completion of 6 full months of employment pursuant to
this Agreement, 13% of the shares subject to the Option, or 13,000 shares, shall
vest and be subject to exercise immediately, and upon EXECUTIVE's completion of
one full year of employment pursuant to this Agreement, an additional 12% of the
shares subject to the Option, or 12,000 shares, shall vest and be subject to
exercise immediately, provided, however, that in the event EXECUTIVE resigns his
employment with COMPANY without Good Reason (as defined in Section 5(d) below)
prior to the completion of one full year of employment under this Agreement, any
shares of COMPANY'S Common Stock that EXECUTIVE has acquired by virtue of the
exercise of such Option shall be subject to COMPANY's right to repurchase at the
price EXECUTIVE paid for them, and any shares subject to the Option that have
vested but which EXECUTIVE has not yet exercised shall become null and void.
The remaining 75,000 shares subject to the Option shall vest and be
subject to exercise at the rate of 2,083.33 shares for each full month that
EXECUTIVE'S employment continues under this Agreement after the first
anniversary hereunder, such that all of the shares shall be vested and
exercisable as of the fourth anniversary of the date of this Agreement.
(ii) CHANGE IN CONTROL. Upon a "Change in Control" (as
defined below), 35% of the total shares subject to the Option granted to
EXECUTIVE under Section 3(c), above, that have not yet vested as of the
effective date of such Change in Control, shall vest
3.
<PAGE> 4
on the effective date of the Change in Control. Subject to provisions regarding
termination of EXECUTIVE'S employment for Cause hereunder, the remaining 65% of
such unvested shares subject to the Option shall vest monthly pro rata over the
remaining original vesting schedule, unless such shares subject to the Option
would vest sooner pursuant to some other provision of this Agreement, in which
event the schedule which results in the earlier vesting shall apply. In the
event that, within the first twelve (12) months from the effective date of a
Change in Control, EXECUTIVE's employment is terminated without Cause or
EXECUTIVE resigns for Good Reason, then the balance of the shares subject to the
Option granted to EXECUTIVE under this Agreement that have not vested as of the
effective date of such termination or resignation for Good Reason shall vest and
become exercisable immediately. "Change in Control" shall mean either (i) a
dissolution, liquidation, or sale of all or substantially all of the assets of
MEDIBUY; (ii) a merger or consolidation in which MEDIBUY is not the surviving
corporation; (iii) a reverse merger in which MEDIBUY is the surviving
corporation but the shares of MEDIBUY's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; (iv) after the Listing
Date (as defined in the Plan), an acquisition by any person, entity or group
within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as hereafter amended or succeeded (excluding any employee benefit plan, or
related trust, sponsored or maintained by MEDIBUY or an affiliate of MEDIBUY) of
the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of securities of MEDIBUY or its successor representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors; or (v) after the Listing Date, if individuals who, as of
the date of the adoption of the Plan, are members of the MEDIBUY Board (the
"Incumbent Board"), cease for
4.
<PAGE> 5
any reason to constitute at least fifty percent (50%) of the Board, provided
that, if the election, or nomination for, election, by MEDIBUY's stockholders of
any new director was approved by a vote of at least fifty percent (50%) of the
Incumbent Board, such new director shall be considered as a member of the
Incumbent Board. Notwithstanding the foregoing, in the case of (ii) and (iii)
above, such transactions shall only be deemed a "Change in Control" if the
stockholders of MEDIBUY or its successor immediately prior to such merger,
consolidation or reverse merger: (A) hold less then 50% of the outstanding
securities of the surviving company following the merger or consolidation, or
(B) in the event that the securities of an affiliated entity are issued to the
stockholders of MEDIBUY in the transaction, hold less then 50% of the
outstanding securities of such entity corporation.
(d) SECURITIES REGISTRATION. MEDIBUY shall cause all of
EXECUTIVE's shares subject to the Option to be included in an effective
registration statement on Form S-8 (or any successor form) under the Securities
Act of 1933, as amended, within 180 days after the initial registered public
offering of MEDIBUY's Common Stock
With respect to any Common Stock of MEDIBUY that EXECUTIVE receives in
connection with the acquisition of COMPANY by MEDIBUY ("Merger Shares"), MEDIBUY
will grant EXECUTIVE piggy back registration rights for such Merger Shares that
entitle EXECUTIVE to include in a registration of MEDIBUY's Common Stock the
same proportionate number of his Merger Shares which is equal in proportion to
the number of any executive's shares of Common Stock which may be included in
such registration (not including any rights as may exist or be granted with
respect to any of MEDIBUY's stock option plans). For purposes of the
registration rights under this paragraph (d), an "executive" is defined as an
individual holding the office of executive vice president of MEDIBUY or above.
5.
<PAGE> 6
4. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT OF BUSINESS EXPENSES
AND MOVING EXPENSES.
(a) BENEFIT PLANS. During the term of this Agreement, EXECUTIVE
shall be provided with medical insurance, vacation benefits, sick leave
benefits, holidays and all other benefits which MEDIBUY makes available
generally to its executive employees from time to time, subject to the terms of
the plans, and such benefits will not be less than, and will be on terms no less
favorable than, MEDIBUY provides to its executive employees generally.
(b) REIMBURSEMENT OF BUSINESS EXPENSES. During the term of this
Agreement, MEDIBUY or COMPANY shall reimburse EXECUTIVE promptly for all
expenditures, including travel, entertainment, parking and business meetings
(including the dues and business related expenses of memberships at appropriate
business clubs, provided such memberships are approved in writing by the Chief
Executive Officer of MEDIBUY), provided such expenses are incurred and submitted
for reimbursement in accordance with the policies then in effect, as established
from time to time by MEDIBUY's Board of Directors.
5. TERMINATION OF EMPLOYMENT.
(a) AUTOMATIC TERMINATION. This Agreement will automatically
terminate in the event of EXECUTIVE's death, or EXECUTIVE's disability which has
prevented EXECUTIVE from performing substantially all of his duties and
responsibilities for a continuous period of ninety (90) days ("Disability"). In
the event of EXECUTIVE's death or Disability, MEDIBUY agrees: (i) to honor the
exercise of any stock options that have vested prior to the date of such
termination, subject to the applicable conditions of this Agreement and the
Plan, (ii) to pay all salary due or accrued as of the date of EXECUTIVE's death
or determination of
6.
<PAGE> 7
disability all accrued and unused vacation pay and bonuses, and (iii) to
continue to pay EXECUTIVE's salary for the lesser of (1) the remaining term of
this Agreement or (3) three months following the date of death or determination
of Disability, less any payments made to EXECUTIVE pursuant to MEDIBUY or
COMPANY-sponsored disability insurance.
(b) TERMINATION WITHOUT CAUSE. In the event that MEDIBUY
terminates this Agreement without Cause as defined herein, MEDIBUY shall,
subject to the conditions set forth in Section 6 herein, continue to pay
EXECUTIVE his salary for a period of twelve (12) months plus any accrued, but
unused vacation, and less any applicable payroll and withholding taxes or other
legally required deductions, provided EXECUTIVE first executes the Waiver and
Release, attached to this Agreement as Appendix A. The salary continuation for
EXECUTIVE shall be at the higher of (i) his salary level in effect at the time
of termination or (ii) his salary level in effect on the date six months prior
to the date of his notice of termination, and shall be paid in the same manner
and at the same intervals as if EXECUTIVE continued his employment during that
one year period. MEDIBUY reserves the right to pay the twelve (12) months salary
continuation amount in a lump sum, discounted to present value using a discount
factor or 6%.
In the event EXECUTIVE elects continued health insurance coverage under COBRA,
MEDIBUY agrees to reimburse EXECUTIVE for the same portion of EXECUTIVE's COBRA
health insurance premium that it paid during EXECUTIVE's employment. In the
event EXECUTIVE elects to obtain life and/or disability insurance coverage,
MEDIBUY agrees to reimburse EXECUTIVE in an amount not to exceed the amount that
MEDIBUY paid for EXECUTIVE's MEDIBUY-sponsored life and disability insurance
coverage during EXECUTIVE's employment. MEDIBUY will provide such reimbursements
up until the earlier of: (i) twelve (12) months from the termination of
EXECUTIVE's employment with the
7.
<PAGE> 8
COMPANY; or (ii) the date on which EXECUTIVE begins full-time employment with
another company or business entity. No other compensation or benefits shall be
due to EXECUTIVE. In the event that EXECUTIVE undertakes any activities in
violation of Section 6 herein without written permission from MEDIBUY's Chief
Executive Officer, MEDIBUY's and COMPANY's obligation to pay EXECUTIVE severance
compensation and/or reimbursement for benefit payments pursuant to this Section
5(b) shall cease.
(c) TERMINATION FOR CAUSE. Notwithstanding the provisions of
sub-section 5(b), MEDIBUY may terminate EXECUTIVE's employment for Cause, as
defined herein. For purposes of this Agreement, MEDIBUY shall have "Cause" to
terminate EXECUTIVE's employment in the event of the following:
(i) conviction of EXECUTIVE for any crime, or entry of a
plea of nolo contendere for any crime involving moral turpitude or dishonesty;
(ii) EXECUTIVE's participation in a fraud or act of
dishonesty against COMPANY or MEDIBUY;
(iii) EXECUTIVE's willful misfeasance or nonfeasance of duty
that materially injures the reputation, business or business relationships of
COMPANY or MEDIBUY or any of their officers, directors or affiliates,
(iv) a material breach by EXECUTIVE of any term of this
Agreement or the Proprietary Information and Inventions Agreement that EXECUTIVE
has entered into with MEDIBUY, or any of MEDIBUY's or COMPANY's written policies
and procedures, or
8.
<PAGE> 9
(v) conduct by EXECUTIVE that in the good faith and
reasonable determination of MEDIBUY's Board of Directors demonstrates gross
unfitness to serve, but not including conduct resulting from physical or mental
disability.
In the event EXECUTIVE's employment is terminated for Cause, he
will not be entitled to receive any severance pay or any other severance
compensation.
(d) TERMINATION FOR GOOD REASON. For purposes of this Agreement,
"Good Reason" shall mean:
(i) Any material decrease in EXECUTIVE's authority or
responsibility; or
(ii) any action by MEDIBUY (including the elimination of
benefit plans without providing substitutes thereof or the reduction of
EXECUTIVE's benefits thereunder) that would substantially diminish the aggregate
value of EXECUTIVE's compensation package as they exist at such time.
(e) RESIGNATION. EXECUTIVE retains the right to resign or
otherwise voluntarily terminate his employment with COMPANY upon ninety (90)
days' written notice to the Chief Executive Officer of MEDIBUY. In the event
EXECUTIVE resigns or otherwise voluntarily terminates his employment with
COMPANY (other than for Good Reason as defined above), EXECUTIVE shall not be
entitled to any compensation, including benefits, beyond the effective date of
his resignation.
9.
<PAGE> 10
(f) STOCK OPTIONS. Except as provided in Section 3(c)(ii) herein,
any shares subject to the Option that are unvested as of the date of
EXECUTIVES's termination, for whatever reason or no reason, shall be null and
void.
6. RESTRICTIVE COVENANTS: NONCOMPETITION, CONFIDENTIALITY AND CONFLICTS
OF INTEREST.
(a) CONFIDENTIAL INFORMATION: EXECUTIVE agrees and understands
that, due to the nature of his position with COMPANY, he will gain possession of
confidential information about MEDIBUY and COMPANY and the way each conducts its
business. In conjunction with the execution of, and as part of the consideration
given for, this Agreement, EXECUTIVE will execute the Proprietary Information
and Inventions Agreement that is attached to this Agreement as Appendix B.
EXECUTIVE's duties and obligations under Appendix B shall survive termination of
his employment with COMPANY.
(b) NON-COMPETITION. During the Noncompetition Period (defined in
Section 6(g) herein), EXECUTIVE shall not, and shall not permit any of
EXECUTIVE's Affiliates (defined in Section 6(g) herein) to, without first
obtaining the prior written approval of MEDIBUY's Chief Executive Officer or
Board of Directors:
(i) directly or indirectly engage in any activities in
Competition (defined in Section 6(g) herein) in any Restricted Territory
(defined in Section 6(g) herein); or
(ii) become an employee, officer, director, stockholder,
owner, co-owner, affiliate, partner, promoter, employee, agent, representative,
designer, consultant, advisor, manager, licensor, sublicensor, licensee or
sublicensee of, for or to, or otherwise be or become
10.
<PAGE> 11
associated with or acquire or hold (of record, beneficially or otherwise) any
direct or indirect interest in, any entity or person that engages directly or
indirectly in Competition in any Restricted Territory.
Notwithstanding the foregoing, EXECUTIVE may own, as a passive investor,
securities of any publicly traded companies, provided his beneficial ownership
of the stock of any one such corporation does not exceed 1% of such
corporation's voting stock.
(c) CONFLICTS OF INTEREST. During the Noncompetition Period,
EXECUTIVE agrees not to acquire, assume or participate in, directly or
indirectly, any position, investment or interest known by him to be adverse or
antagonistic to MEDIBUY's, COMPANY's, and/or any of their Affiliates', business
or prospects, financial or otherwise. However, EXECUTIVE may own, as a passive
investor, securities of any publicly traded companies, provided his beneficial
ownership of the stock of any one such corporation does not exceed 1% of such
corporation's voting stock.
(d) NON-INTERFERENCE. During the Noncompetition Period, EXECUTIVE
will not interfere with the business of MEDIBUY or COMPANY, or any of their
Affiliates by:
(i) directly or indirectly, personally or through others,
encouraging, inducing, soliciting, attempting to solicit on EXECUTIVE's behalf
or on behalf of any other Person, induce, or otherwise cause any employee of
MEDIBUY, COMPANY or any of their Affiliates to terminate his or her employment
with MEDIBUY, COMPANY or any of their Affiliates.
11.
<PAGE> 12
(ii) directly or indirectly, personally or through others,
encouraging, inducing, soliciting, attempting to solicit on EXECUTIVE's own
behalf or on behalf of any other Person the business of any customer of MEDIBUY,
COMPANY or any of their Affiliates, which at the time of termination or one year
prior thereto was listed on COMPANY's, MEDIBUY's and/or any of their Affiliates'
customer list.
(e) SPECIFIC PERFORMANCE. EXECUTIVE agrees that in the event of
any breach or threatened breach by EXECUTIVE of any covenant or obligation
contained in this Section 6, MEDIBUY and/or COMPANY shall be entitled (in
addition to seeking any other remedy which may be available to it, including
monetary damages) to seek and obtain: (a) a decree or order of specific
performance to enforce the observance and performance of such covenant or
obligation, and (b) an injunction restraining such breach or threatened breach.
EXECUTIVE further agrees that neither MEDIBUY nor COMPANY shall be required to
obtain, furnish or post any bond or similar instrument in connection with or as
a condition to obtaining any remedy referred to in this Section 6(e), and
EXECUTIVE irrevocably waives any right he may have to require MEDIBUY or COMPANY
to obtain furnish or post any such bond or similar instrument.
(f) INDEMNIFICATION. Without in any way limiting any of the
rights or remedies otherwise available to the COMPANY, EXECUTIVE shall indemnify
and hold harmless MEDIBUY and COMPANY and their Affiliates against and from any
loss, damage, injury, harm, detriment, lost opportunity, liability, exposure,
claim, demand, settlement, judgment, award, fine, penalty, tax, fee (including
attorneys' fees) , charge or expense (whether or not relating to a third party
claim) that is directly or indirectly suffered or incurred at any time by
MEDIBUY or COMPANY, or to which MEDIBUY or COMPANY otherwise becomes
12.
<PAGE> 13
subject at any time and that arises directly or indirectly out of or by virtue
of, or relates directly or indirectly to, (a) any inaccuracy in or breach of any
representation or warranty contained in this Section 6, or (b) any failure on
the part of EXECUTIVE to observe, perform or abide by, or any other breach of,
any restriction, covenant, obligation or other provision contained in this
Section 6.
(g) DEFINED TERMS. For purposes of this Section 6 of this
Agreement:
(i) "Affiliate" means, with respect to any specified Person,
any other Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
specified Person.
(ii) "Competition." An activity is deemed to be in
"Competition" if it is similar to or competitive with any business in which
MEDIBUY, COMPANY or any of their Affiliates is engaged during EXECUTIVE's
employment with COMPANY, including as of the date on which EXECUTIVE's
employment with COMPANY terminates.
(iii) "Noncompetition Period" shall mean the period
commencing on the date of this Agreement and ending on the date one year
following the date of the termination of EXECUTIVE's employment with COMPANY for
any reason.
(iv) "Person" means any: (i) individual; (ii) corporation,
general partnership, limited partnership, limited liability partnership, trust,
company (including any limited liability company or joint stock company) or
other organization or entity; or (iii) governmental body or authority.
13.
<PAGE> 14
(v) "Restricted Territory" means each county or similar
political subdivision of each State of the United States of America (including
each of the counties in the State of California), and each State, territory or
possession of the United States of America.
7. NOTICES.
For purposes of this Agreement, notices and other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States Registered or
Certified Mail, return receipt requested, postage prepaid, addressed as follows:
If to EXECUTIVE: Don Brown
2009 East Herbert Avenue
Salt Lake City, UT 84108
If to MEDIBUY or COMPANY: medibuy.com, Inc.
10120 Pacific Heights Boulevard, Suite 100
San Diego, CA 92121
Attn: Chief Executive Officer
or at such other address as any party may have furnished to the other in writing
subsequent to the execution of this Agreement or, in the case of EXECUTIVE, to
the address listed for him in COMPANY's records, and in the case of COMPANY or
MEDIBUY, to the address known by him to be where the office of the Chief
Executive Officer of MEDIBUY is located.
8. ATTENDANCE AT BOARD OF DIRECTOR'S MEETINGS.
EXECUTIVE shall be entitled to attend Board of Directors' meetings of
the COMPANY and MEDIBUY (subject to the Board of Directors' exclusion of
EXECUTIVE as the Board may deem necessary to preserve the confidentiality of
sensitive information) and, in connection therewith, to receive timely notice of
meetings and all written materials provided to Directors in
14.
<PAGE> 15
advance of and during the meetings. EXECUTIVE's attendance and notice rights
under this section shall terminate effective upon the initial public offering of
MEDIBUY's or COMPANY's securities.
9. MODIFICATIONS; WAIVERS; APPLICABLE LAW.
No provision in this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing, signed by
EXECUTIVE and by the Chief Executive Officer of MEDIBUY. This Agreement shall be
construed and interpreted in accordance with the laws of the State of Utah.
10. INDEMNIFICATION.
As an officer of COMPANY, EXECUTIVE shall be fully indemnified by
COMPANY and MEDIBUY to the fullest extent permitted by Utah law and COMPANY's
and MEDIBUY's bylaws, as they may be amended from time to time. EXECUTIVE will
be designated as an insured under MEDIBUY's Director's and Officer's liability
insurance policy.
11. SEVERABILITY.
If any provision of this Agreement or any part of any such provision is
held under any circumstances to be invalid or unenforceable in any jurisdiction,
then (a) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
15.
<PAGE> 16
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Agreement. Each provision of this
Agreement is separable from every other provision of this Agreement, and each
part of each provision of this Agreement is separable from every other part of
such provision.
12. SUCCESSOR RIGHTS AND ASSIGNMENT.
This Agreement shall bind, inure to the benefit of and be enforceable by
EXECUTIVE's personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees. The rights and obligations of
COMPANY or MEDIBUY under this Agreement may be assigned by MEDIBUY, in which
event it shall be binding upon, and inure to the benefit of, the person(s) or
entity(ies) to whom it is assigned. EXECUTIVE may not assign his duties
hereunder and he may not assign any of his rights hereunder without the written
consent of MEDIBUY.
[This space intentionally left blank.]
16.
<PAGE> 17
IN WITNESS WHEREOF, EXECUTIVE , MEDIBUY and COMPANY have executed this
Agreement on the dates indicated below.
EXECUTIVE:
Dated:11/15/99 /s/ Don R. Brown
-------------------------- --------------------------------
DON BROWN
MEDIBUY:
MEDIBUY.COM, INC.
Dated:11/22/99 By:/s/ Dennis J. Murphy
-------------------------- -----------------------------
Dennis J. Murphy
Chief Executive Officer
COMPANY:
PARTNET, INC.
Dated:11/22/99 By:/s/ Don R. Brown
-------------------------- -----------------------------
Name: Don Brown
Title: President
17.
<PAGE> 18
APPENDIX A
RELEASE AND WAIVER OF CLAIMS
In consideration of the payments and other benefits set forth in Section
__ of the Employment Agreement dated ___________, to which this form is
attached, I, DON BROWN, hereby furnish MEDIBUY AND/OR ITS AFFILIATES (the
"Company"), with the following release and waiver ("Release and Waiver").
I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns affiliates and
Benefit Plans, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys' fees, damages, indemnities and obligations
of every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising at any time prior
to and including my employment Termination Date with respect to any claims
relating to my employment and the termination of my employment, including but
not limited to, claims pursuant to any federal, state or local law relating to
employment, including, but not limited to, discrimination claims, claims under
the California Fair Employment and Housing Act, and the Federal Age
Discrimination in Employment Act of 1967, as amended ("ADEA"), or claims for
wrongful termination, breach of the covenant of good faith, contract claims,
tort claims, and wage or benefit claims, including but not limited to, claims
for salary, bonuses, commissions, stock, stock options, vacation pay, fringe
benefits, severance pay or any form of compensation.
I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against the
Company.
I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this Release and Waiver is knowing and
voluntary, and that the consideration given for this Release and Waiver is in
addition to anything of value to which I was already entitled as an executive of
the Company. I further acknowledge that I have been advised, as required by the
Older Workers Benefit Protection Act, that: (a) the Release and Waiver granted
herein does not relate to claims which may arise after this Release and Waiver
is executed; (b) I have the right to consult with an attorney prior to executing
this Release and Waiver (although I may choose voluntarily not to do so); and if
I am over 40 years of age upon execution of this Release and Waiver: (c) I have
twenty-one (21) days from the date of termination of my employment with the
Company in which to consider this Release and Waiver (although I may choose
voluntarily to execute this Release and Waiver earlier); (d) I have seven (7)
days following the execution of this Release and Waiver to revoke my consent to
this Release and Waiver; and (e) this Release and Waiver shall not be effective
until the seven (7) day revocation period has expired.
Date: December 22, 1999 By: /s/ Don Brown
-------------------------------
DON BROWN
<PAGE> 19
APPENDIX B
MEDIBUY
EMPLOYEE PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by MEDIBUY
AND/OR ITS AFFILIATES (the "COMPANY"), and the compensation now and hereafter
paid to me, I hereby agree as follows:
1. NONDISCLOSURE.
1.1 RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times during
my employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.
1.2 PROPRIETARY INFORMATION. The term "PROPRIETARY INFORMATION" shall
mean any and all confidential and/or proprietary knowledge, data or information
of the Company. By way of illustration but not limitation, "PROPRIETARY
INFORMATION" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "INVENTIONS"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.
1.3 THIRD PARTY INFORMATION. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("THIRD PARTY INFORMATION") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.
1.4 NO IMPROPER USE OF INFORMATION OF PRIOR EMPLOYERS AND OTHERS. During
my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.
2. ASSIGNMENT OF INVENTIONS.
2.1 PROPRIETARY RIGHTS. The term "PROPRIETARY RIGHTS" shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.
2.2 PRIOR INVENTIONS. Inventions, if any, patented or unpatented, which
I made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit A (Previous Inventions) attached hereto a complete list of
all Inventions that I have, alone or jointly with others, conceived, developed
or reduced to practice or caused to be conceived, developed or reduced to
practice prior to the commencement of my employment with the Company, that I
consider to be my property or the property of third parties and that I wish to
have excluded from the scope of this Agreement (collectively referred to as
"PRIOR INVENTIONS"). If disclosure of any such Prior Invention would cause me to
violate any prior confidentiality agreement, I understand that I am not to list
such Prior Inventions in Exhibit A but am only to disclose a cursory name for
each such invention, a listing of the party(ies) to whom it belongs and the fact
that full disclosure as to such inventions has not been made for that reason. A
space is provided on Exhibit A for such purpose. If no such
<PAGE> 20
disclosure is attached, I represent that there are no Prior Inventions. If, in
the course of my employment with the Company, I incorporate a Prior Invention
into a Company product, process or machine, the Company is hereby granted and
shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide
license (with rights to sublicense through multiple tiers of sublicensees) to
make, have made, modify, use and sell such Prior Invention. Notwithstanding the
foregoing, I agree that I will not incorporate, or permit to be incorporated,
Prior Inventions in any Company Inventions without the Company's prior written
consent.
2.3 ASSIGNMENT OF INVENTIONS. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "COMPANY INVENTIONS."
2.4 NONASSIGNABLE INVENTIONS. I recognize that, in the event of a
specifically applicable state law, regulation, rule, or public policy ("SPECIFIC
INVENTIONS LAW"), this Agreement will not be deemed to require assignment of any
invention which qualifies fully for protection under a Specific Inventions Law
by virtue of the fact that any such invention was, for example, developed
entirely on my own time without using the Company's equipment, supplies,
facilities, or trade secrets and neither related to the Company's actual or
anticipated business, research or development, nor resulted from work performed
by me for the Company. In the absence of a Specific Inventions Law, the
preceding sentence will not apply.
2.5 OBLIGATION TO KEEP COMPANY INFORMED. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under the
provisions of a Specific Inventions Law; and I will at that time provide to the
Company in writing all evidence necessary to substantiate that belief. The
Company will keep in confidence and will not use for any purpose or disclose to
third parties without my consent any confidential information disclosed in
writing to the Company pursuant to this Agreement relating to Inventions that
qualify fully for protection under a Specific Inventions Law. I will preserve
the confidentiality of any Invention that does not fully qualify for protection
under a Specific Inventions Law.
2.6 GOVERNMENT OR THIRD PARTY. I also agree to assign all my right,
title and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.
2.7 WORKS FOR HIRE. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).
2.8 ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in
every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries. To that end I will execute, verify and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify and deliver assignments of such Proprietary
Rights to the Company or its designee. My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and all
countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company's request on such assistance.
In the event the Company is unable for any reason, after reasonable
effort, to secure my signature on any document needed in connection with the
actions specified in the preceding paragraph, I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as my agent and
attorney in fact, which appointment is coupled with an interest, to act for and
in my behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.
3. RECORDS. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.
4. ADDITIONAL ACTIVITIES. I agree that during the period of my employment by the
Company I will not, without the Company's express written consent, engage in any
employment or business activity which is competitive with, or would otherwise
conflict with, my employment by the
<PAGE> 21
Company. I agree further that for the period of my employment by the Company and
for one (l) year after the date of termination of my employment by the Company I
will not induce any employee of the Company to leave the employ of the Company.
5. NO CONFLICTING OBLIGATION. I represent that my performance of all the terms
of this Agreement and as an employee of the Company does not and will not breach
any agreement to keep in confidence information acquired by me in confidence or
in trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any agreement either written or oral in conflict
herewith.
6. RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I will
deliver to the Company any and all drawings, notes, memoranda, specifications,
devices, formulas, and documents, together with all copies thereof, and any
other material containing or disclosing any Company Inventions, Third Party
Information or Proprietary Information of the Company. I further agree that any
property situated on the Company's premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice. Prior to
leaving, I will cooperate with the Company in completing and signing the
Company's termination statement.
7. LEGAL AND EQUITABLE REMEDIES. Because my services are personal and unique and
because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other rights and
remedies that the Company may have for a breach of this Agreement.
8. NOTICES. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent by certified or registered mail,
three (3) days after the date of mailing.
9. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.
10. GENERAL PROVISIONS.
10.1 GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement
will be governed by and construed according to the laws of the State of Utah, as
such laws are applied to agreements entered into and to be performed entirely
within Utah between Utah residents. I hereby expressly consent to the personal
jurisdiction of the state and federal courts located in Utah for any lawsuit
filed there against me by Company arising from or related to this Agreement.
10.2 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.
10.3 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.
10.4 SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
10.5 EMPLOYMENT. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.
10.6 WAIVER. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
10.7 ENTIRE AGREEMENT. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such period.
This Agreement is the final, complete and exclusive agreement of the parties
with respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.
<PAGE> 22
This Agreement shall be effective as of the first day of my employment
with the Company, namely: November 22 1999.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Dated: November, 15, 1999
Don R. Brown
- ----------------------------
(SIGNATURE)
Don R. Brown
- ----------------------------
DON BROWN
ACCEPTED AND AGREED TO:
MEDIBUY.COM, INC.
By: Dennis J. Murphy
-------------------------
Title: President & CEO
----------------------
10120 Pacific Heights Blvd.
- ----------------------------
(Address)
San Diego, CA 92121
- ----------------------------
Dated:
--------------
PARTNET, INC.
By: Don R. Brown
-------------------------
Title: President
----------------------
615 Arapren Dr. #204
- ----------------------------
(Address)
SLC, Ut 84108
- ----------------------------
Dated: 11/15/99
--------------
<PAGE> 23
EXHIBIT A
TO: MEDIBUY AND/OR ITS AFFILIATES
FROM: DON BROWN
DATE: _____________________
SUBJECT: PREVIOUS INVENTIONS
1. Except as listed in Section 2 below, the following is a complete list
of all inventions or improvements relevant to the subject matter of my
employment by MEDIBUY AND/OR ITS AFFILIATES (the "COMPANY") that have been made
or conceived or first reduced to practice by me alone or jointly with others
prior to my engagement by the Company:
[ ] No inventions or improvements.
[ ] See below:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
[ ] Additional sheets attached.
2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):
<TABLE>
<CAPTION>
INVENTION OR IMPROVEMENT PARTY(ies) RELATIONSHIP
<S> <C> <C>
1. ________________________ _____________________ __________________________________
2. ________________________ _____________________ __________________________________
3. ________________________ _____________________ __________________________________
</TABLE>
[ ] Additional sheets attached.
<PAGE> 1
EXHIBIT 10.16
CONSULTING AGREEMENT
This agreement is made and entered into this 5th day of March, 1999, by and
between medibuy.com, Inc. (medibuy), a Delaware Corporation with a principal
place of business at 7777 Alvardo Road, La Mesa, California, and Ridgewood
Capital, Inc., a Delaware corporation with a principal place of business at 947
Linwood Ave., Ridgewood, NJ 07450.
WHEREAS, as a result of the departure of its chief financial officer, medibuy
would benefit from temporary assistance with the management of its financial
management during the period that medibuy conducts a search for a replacement;
and
WHEREAS, Ridgewood has available, and is willing to make available to medibuy
on the terms set forth herein, the financial management services that would be
of benefit to medibuy, and medibuy is willing to acquire those services from
Ridgewood;
NOW THEREFORE, the parties agree as follows:
1. Services to be Rendered. Ridgewood will supply, and medibuy will accept,
such financial management services as medibuy may reasonably require (the
Services). The Services are to be rendered on behalf of Ridgewood by
Jeffrey Strasberg ("Strasberg").
2. Duration of Services. The Services shall be rendered commencing March 15,
1999 and continue through September 15, 1999.
3. Schedule for Delivering Services. The Services are to be rendered by
Strasberg for four days per week, on average, at the offices of medibuy
or at such other place as it may direct. Strasberg may provide additional
services while traveling or from other locations.
4. Compensation. In consideration of Ridgewood's delivery of the Services to
medibuy for the period of March 15, 1999 to September 15, 1999, medibuy
shall issue to Ridgewood 7064 shares of medibuy common stock. Fifty
percent (50%), or 3532, of such shares shall be issued as of the date of
the completion by Strasberg of the first month of services hereunder. An
additional ten percent (10%), or 706.4, of such shares shall issue as of
the date of the completion by Strasberg of each month of service
thereafter. Such stock shall be fully paid and non-assessable upon
issuance, but is shall be subject to the investment representation
letter attached to this agreement as Appendix A. Ridgewood shall execute
and deliver a copy of Appendix A at the time that it begins to deliver
services to medibuy. No other compensation shall be due to Ridgewood or
Strasberg in respect of the delivery of the Services.
5. Expenses. Ridgewood shall absorb and be responsible for paying all of the
expenses incurred by Strasberg in connection with his delivery of the
Services
<PAGE> 2
6. Confidential Information. Any and all information that Strasberg acquires
about medibuy, including its finances, business practices, business plans
and operations during the delivery of the Services shall be deemed
confidential, and Strasberg shall not share such information with anyone,
including Ridgewood or any of its members, employees or representatives,
except at the request of, or on the written authorization of, any officer
of medibuy or the Chairman of its Board of Directors. Strasberg will
execute the proprietary information and inventions agreement that is
attached hereto as Appendix B, the terms of which shall be incorporated
into this agreement.
7. Nature of Relationship. It is expressly intended by the parties hereto
that the relationship of Ridgewood to medibuy created hereby is strictly
that of independent contractor. Neither Ridgewood nor Strasberg is, and
nothing in this agreement shall be construed to make either of them, an
employee of medibuy. To the extent required by law, the compensation paid
to Ridgewood hereunder shall be reported on a form 1099 MISC. Ridgewood
shall be responsible for payment of all taxes payable as a result of the
compensation furnished to it under this agreement.
8. Termination. Either party may terminate this agreement in the event of a
breach by the other party. Such termination shall be effective upon the
delivery of notice of termination by the party declaring the breach on
the party alleged to have breached this agreement. In the event that
Ridgewood materially breaches this Agreement, medibuy shall be
responsible to issue to Ridgewood only that number of shares to have been
issued up to the date of the breach, buy medibuy will have a right to set
off against any such amounts owed any damages it has sustained as a
result of the breach by Ridgewood. In the event that medibuy breaches
this Agreement, Ridgewood shall be entitled to receive all shares
provided for as compensation to it under this Agreement.
9. Indemnification. Ridgewood shall indemnify and defend medibuy against,
and hold it harmless from, any and all loss, cost, liability, claims,
suits and actions, which arise out of or are incurred in connection with,
Ridgewood's delivery of the Services and Strasberg's performance of the
Services, to the extent caused by such delivery or performance of the
Services. This indemnity shall not extend to any liability arising from
medibuy's own negligence.
10. Notices. For purposes of this Agreement, notices and other communications
provided for in the Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States Registered
or Certified Mail, return receipt requested, postage prepaid, addressed
as follows:
If to Ridgewood: Ridgewood Capital, Inc.
947 Linwood Ave.
Ridgewood, NJ 07450
Attn: Robert Gold
<PAGE> 3
If to medibuy: medibuy.com, Inc.
777 Alvarado Road, Suite 401
La Mesa, California 91941
Attn: The President
or at such other address as either party may have furnished to the other in
writing subsequent to the execution of this Agreement.
11. Modifications; Waivers; Applicable Law. No provision in this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing, signed by an authorized representative of each party.
12. Severability. If any provision of this Agreement is determined to be
invalid or is in any way modified by any governmental agency, tribunal, or
court of competent jurisdiction, such determination shall be considered as a
separate, distinct, and independent part of this Agreement and shall not
affect the validity or enforceability of any of the remaining provisions of
this Agreement.
13. Successor Rights and Assignment.
This Agreement shall bind, inure to the benefit of and be enforceable by
Ridgewood's legal representatives, administrators, successors, and assigns. The
rights and obligations of medibuy under this Agreement may be assigned by
medibuy, in which event it shall be binding upon, and inure to the benefit of,
the person(s) or entity(ies) to whom it is assigned. Ridgewood may not assign
its duties hereunder and may not assign any of its rights hereunder without the
written consent of medibuy.
IN WITNESS WHEREOF, Ridgewood and medibuy have signed this Agreement on the
dates indicated below.
RIDGEWOOD CAPITAL, INC.
Dated: 4/21/99 By: /s/ ROBERT GOLD
--------------------- ------------------------------------
MEDIBUY.COM, INC.
Dated: 4-21-99 By: /s/ C. R. SMITH
--------------------- ------------------------------------
<PAGE> 1
EXHIBIT 10.17
October 28, 1999
Ms. Kathleen Harris Pena
Vice President
MEDIBUY.COM
7777 Alvarado Road
Suite 401
La Mesa, California 91941
Dear Ms. Pena:
MEDIBUY.COM and Ernst & Young LLP (E&Y) began discussions in September 1999 to
explore ways in which we could work together to impact the success of
MEDIBUY.COM's business plan as it prepares for its Initial Public Offering.
Through these efforts we have jointly identified two critical projects where
MEDIBUY.COM is interested in obtaining E&Y's professional assistance.
The purpose of this letter is to authorize the immediate deployment of E&Y's
resources to these specific projects. This letter outlines the scope of services
for the projects requiring immediate launch, professional fees, and other terms
of our engagement.
SCOPE OF SERVICES
As a result of our discussions we have jointly determined the immediate need for
the following two projects in which E&Y will provide professional services
assistance:
- Buyer Implementation
- Supplier Implementation
As a result of our ongoing relationship and collaboration, E&Y began Buyer
Implementation planning in September 1999. The work completed by E&Y for
MEDIBUY.COM prior to this letter will be included in the deliverables and fees.
<PAGE> 2
MS. KATHLEEN PENA OCTOBER 25, 1999
MEDIBUY.COM PAGE 2
BUYER IMPLEMENTATION
E&Y's assistance includes developing the implementation approach for the rollout
of eRFP and eAuction to MEDIBUY.COM buyer sites, coordinating and deploying
resources to implement the tools and educate buyers, and providing buyer
assistance/coaching to begin utilization of the tools.
MEDIBUY.COM has identified a number of sites where eRFP and eAuction will be
implemented. To expedite this process, E&Y will provide staffing assistance to
support the deployment to 50 sites by December 15th, 1999. Our ability to
accomplish this objective is dependent upon MEDIBUY.COM identifying target
sites, obtaining buyer commitments and scheduling 10 to 15 sites per week
beginning on November 1st, 1999. E&Y will assign eight dedicated staff to
provide training support in the activation and use of the above MEDIBUY.COM
products. The deliverables for this project will include:
- Completion of the eRFP/eAuction Buyer Implementation Strategy; and
- Hospital site visits and physical implementation at sites identified
by MEDIBUY.COM.
SUPPLIER IMPLEMENTATION
Our work effort will consist of developing an implementation strategy for
suppliers to use eRFP in responding to purchasing department requests,
providing staffing support to register suppliers based upon criteria specified
by MEDIBUY.COM, and assisting in the deployment of MEDIBUY.COM to the supplier
communities.
We understand that MEDIBUY.COM has identified approximately 18,000 suppliers of
which 1,500 are registered to use the eRFP and related products. E&Y will assign
four dedicated staff to provide logistical and staffing support in order to
register as many additional vendors as possible by December 15th, 1999. Our
ability to achieve this objective will be dependent upon MEDIBUY.COM providing
supplier lists that are relevant to their customers as well as technical and
training support required to activate the suppliers.
The deliverables for this project will include:
- Completion of the Supplier Implementation Strategy; and
- High-level implementation script initially for current and prospective
suppliers.
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MS. KATHLEEN PENA OCTOBER 25, 1999
MEDIBUY.COM PAGE 3
PROJECT TEAM
This is a significant project for both MEDIBUY.COM and E&Y. It is important that
the appropriate focus and direction be provided at both the project and
relationship levels. We will staff this engagement immediately by complementing
our existing team with additional E&Y staff. To ensure your continued
satisfaction with our service, we have established the leadership team
consisting of the following individuals.
GARY DOWLING, SENIOR MANAGER, will be the Alliance Executive for E&Y. Gary has
extensive knowledge of supply chain, health care and eCommerce. In addition he
has a strong existing knowledge of MEDIBUY.COM's executives and their goals.
BOB SKOK, PRINCIPAL, will serve as Engagement Executive for this project and
will be responsible for the overall conduct of our services under this
agreement. Bob will work closely with all members of our leadership team to
monitor the progress and quality of our assistance.
MICHAEL BROOKS, SENIOR MANAGER, will serve as Engagement Director. In this role,
he will have overall responsibility for E&Y's engagement execution, work closely
with MEDIBUY.COM's leadership, monitor progress toward project objectives and
actively participate in project design and execution.
ANGELA CHEUNG, MANAGER, and RICHARD PHILLIPS, MANAGER, will serve as Project
Managers for the Buyer and Supplier implementations, respectively. They will be
responsible for overall project management of E&Y's day-to-day project
activities. They will also be aligned closely with MEDIBUY.COM's project
leadership to help facilitate progress toward project objectives.
PROJECT TIMING AND FEES
As previously discussed, we have already initiated components of this work in
September and October. We are prepared to begin this project immediately upon
MEDIBUY.COM's approval to proceed as indicated by returning a signed copy of
this letter. Our assistance will continue through December l5th 1999.
Based on our proposed scope and anticipated level of participation, our
professional fees for buyer and supplier implementation will be $ 875,000 for
work performed between October 16th and December 15th. Our professional fees are
based on a time and materials basis driven by the actual time spent by the
assigned consultants. In the event changes in scope are identified or if
scheduling difficulties beyond our control impact the buyer & seller
implementations, we will notify you as soon as possible to discuss the impact on
the projects success and related professional fees and expenses. In addition to
our professional fees, it is our practice to bill for project related expenses
such as transportation, meals and lodging at our actual costs. Professional fees
for the buyer and
<PAGE> 4
MS. KATHLEEN PENA OCTOBER 25, 1999
MEDIBUY.COM PAGE 4
supplier implementations will be invoiced in two equal amounts of $437,500 on
the November 1st and December 1st. Expenses will be invoiced, monthly. All
invoices are due and payable by the fifteenth of the month.
Lastly, upon signing this agreement we will invoice MEDIBUY.COM for $270,000 in
professional fees and expenses related to work E&Y performed prior to October
15th at your request.
EXCLUSIVITY OF RELATIONSHIP
During the term of this agreement, E&Y agrees to not consult with the following
named competitors, related to the health provider supply/procurement ecommerce
market space, Neoforma and Global Village. Should the relationship between
MEDIBUY.COM and E&Y continue beyond the term of this agreement, at a substantial
and increasing level, E&Y also agrees to not consult with the previously named
competitors.
At the conclusion of this Agreement, or any extensions of the Agreement, E&Y
agrees to not consult with the named competitors previously mentioned for a
period of time equal to the duration of this Agreement, or any extensions, not
to exceed six (6) months.
This engagement will be governed by the Terms and Conditions specified in
Exhibit A included with this agreement.
* * * * * * *
We look forward to working with MEDIBUY.COM on these important projects. To
indicate your acceptance of this engagement letter and authorization to proceed,
please sign below and return an original to Gary Dowling. Should any questions
arise, please contact Gary at (404) 817-5446.
Very truly yours,
[ ] [ ]
AGREED TO AND ACCEPTED BY MEDIBUY.COM:
NAME: /s/ KATHLEEN HARRIS PENA
------------------------------
KATHLEEN HARRIS PENA
TITLE: Vice President DATE: 10-29-99
-----------------------------
VICE PRESIDENT
<PAGE> 5
EXHIBIT A TERMS AND CONDITIONS
I. Agreement. It is agreed that ERNST & YOUNG LLP ("E&Y") will provide the
consulting services (the "Services") described in the accompanying Letter to
which this Exhibit A is attached (such accompanying Letter and this Exhibit A,
collectively, this "Agreement"), to the client named in this Agreement (the
"Client"), as an independent contractor and for the fees set forth in this
Agreement. This Agreement constitutes the entire and sole agreement between
Client and E&Y, and merges all prior and contemporaneous communications with
respect to the subject matter hereof This Agreement shall not be modified or
assigned except by later written agreement signed by both parties. Nothing
contained herein shall be construed to create an employment or principal-agent
relationship or joint venture between E&Y and Client, and neither party shall
have the right, power or authority to obligate or bind the other in any manner
whatsoever.
II. Changes and Delays.
A. Changes in scope of the Services dictated by Client and changing
conditions of law or schedule delays or other events beyond E&Y's reasonable
control, including events described below, may require contract price and/or
date of performance revisions to be agreed upon by both parties. In the event
that performance on the part of either party is delayed or suspended as a result
of circumstances beyond its reasonable control such as Acts of God or other
force majeure event, and without its fault or negligence, then the period of
performance and term of this Agreement shall be extended to the extent of any
such delay and neither party shall incur any liability to the other party as a
result of such delay or suspension.
B. E&Y's performance hereunder is contingent upon the cooperation of
Client, including the supply to E&Y of adequate resources and accurate
information in connection with this Agreement. If any delays in E&Y's
performance occur as a result of failure or untimely performance by Client
and/or suppliers, the term of this Agreement shall be extended to the extent of
any such delay and E&Y shall not incur any liability to Client as a result of
such delay. If such delays last for thirty days or more, E&Y shall be entitled
to terminate this Agreement by giving written notice to Client, such termination
to be effective on the date indicated in said notice. E&Y's entitlement to
payment of fees and reimbursement of expenses in the event of termination under
this provision shall be governed by Paragraph VII below.
III. Warranty and Liability.
A. E&Y will exercise due professional care and competence in the
performance of the Services.
B. To the maximum extent permitted by law, E&Y's liability, regardless
of whether such liability is based on breach of contract, tort, strict
liability, breach of
<PAGE> 6
MS. KATHLEEN PENA OCTOBER 25, 1999
MEDIBUY.COM PAGE 6
warranties, failure of essential purpose or otherwise, under this Agreement or
with respect to the Services shall be limited to the amount of fees actually
paid by Client to E&Y under this Agreement. The foregoing limitation shall not
apply to the extent damages are directly caused by E&Y's willful misconduct or
gross negligence. If E&Y is working on a multi-phase engagement for Client,
E&Y's liability shall be limited to the amount actually paid to E&Y for that
particular phase that gives rise to the liability.
C. Neither party shall be liable for consequential, incidental,
indirect, punitive or special damages (including loss of profits, data, business
or goodwill), regardless of whether such liability is based on breach of
contract, tort, strict liability, breach of warranties, failure of essential
purpose or otherwise, and even if advised of the likelihood of such damages.
Client's recourse with respect to any liability or obligation of E&Y hereunder
shall be limited to the assets of E&Y, and Client shall have no recourse
against, and shall bring no claim against, any partner of E&Y or any of the
assets thereof.
D. EXCEPT AS OTHERWISE STATED ABOVE, E&Y MAKES NO WARRANTIES, OF ANY
KIND OR NATURE, WHETHER EXPRESS OR IMPLIED INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, OR
WARRANTIES OF ANY PRODUCTS OR SERVICES PROVIDED BY A THIRD PARTY VENDOR.
IV. Client Cooperation. Client agrees to provide E&Y, in a timely fashion, with
all information reasonably required for the performance of the Services, with
any new information that may be necessary to E&Y's understanding of the
Services, and with adequate resources and personnel to facilitate the
performance of the Services.
V. Confidentiality.
A. Neither party shall disclose Confidential Information (as hereinafter
defined) of the other party. The receiving party shall use the same degree of
care as it uses to protect its own confidential information of like nature, but
no less than a reasonable degree of care, to maintain in confidence the
confidential information of the disclosing party. The foregoing obligations
shall not apply to any information that (i) is at the time of disclosure, or
thereafter becomes, part of the public domain through a source other the
receiving party, (ii) is subsequently learned from a third party that does not
impose an obligation of confidentiality on the receiving party, (iii) was known
to the receiving party at the time of disclosure, (iv) was generated
independently by the receiving party without reference to Confidential
Information, or (v) is required to be disclosed by law, subpoena or other
process.
B. For the purpose of this Section V, Confidential Information shall
mean any information identified by either party as "Confidential" and/or
"Proprietary", or which,
<PAGE> 7
MS. KATHLEEN PENA OCTOBER 25, 1999
MEDIBUY.COM PAGE 7
B. For the purpose of this Section V, Confidential Information shall mean
any information identified by either party as "Confidential" and/or
"Proprietary", or which, under all of the circumstances, ought reasonably to be
treated as confidential and/or proprietary, including this Agreement.
VI. Approval. Deliverables and reports provided to Client by E&Y will be
reviewed and approved by the representatives appointed by Client. Client shall
accept or reject each deliverable or report within seven (7) days of receipt.
Each such deliverable and report shall be conclusively deemed accepted unless
rejected in writing within seven (7) days following delivery thereof. Acceptance
shall not be unreasonably withheld. Any rejection shall be in writing and
specifically state the matter in which the deliverable or report is materially
defective. For purposes of this Agreement, seven (7) days shall constitute a
reasonable period for the Client to determine acceptance of E&Y's performance.
E&Y shall use commercially reasonable efforts to make the modifications
necessary to correct such material defects.
VII. Term and Termination. This Agreement will terminate when the Services have
been completed. Either party may terminate this Agreement in the event of the
breach by the other party of this Agreement, which breach is not cured within
thirty (30) days after notice by the non-breaching party. Client shall pay E&Y
for work-in-progress, Services and expenses incurred prior to the effective date
of termination. Upon termination of this Agreement, the parties shall return
Confidential Information received from the other, except that E&Y may retain a
set of its working papers even if they contain Confidential Information.
VIII. Taxes and Payment. Any applicable taxes incurred in connection with the
Services or Deliverables (except for taxes imposed on income) will be billed to,
and paid by, Client, in addition to fees and expenses. Payment by Client of
E&Y's fees, expenses and any applicable taxes shall be due upon receipt of E&Y's
invoice.
IX. Conflict and Survival. In the event of any conflict, ambiguity or
inconsistency between this Exhibit A and any other document to which this
Exhibit A may be annexed or which may be annexed to this Exhibit A, including
any terms and conditions on Client's purchase orders or otherwise, the terms and
conditions of this Exhibit A shall govern. The provisions of this Agreement
which give the parties rights beyond termination of this Agreement will survive
any termination of this Agreement.
X. Non-Solicitation of Personnel. Client shall not solicit for employment or
hire any E&Y employee who is involved in the performance of this Agreement
during the term of this Agreement and for a period of six (6) months following
its termination except as may be agreed to in writing by both parties.
<PAGE> 8
MS. KATHLEEN PENA OCTOBER 25, 1999
MEDIBUY.COM PAGE 4
XI. Severability. If any portion of this Agreement is held to be void, invalid,
or otherwise unenforceable, in whole or part, the remaining portions of this
Agreement shall remain in effect.
XII. Mediation/Arbitration. Any controversy or claim arising out of or relating
to this Agreement or the Services (including any such matter involving any
parent, subsidiary, affiliate, successor in interest, or agent of the Client or
of E&Y) shall be submitted first to voluntary mediation, and if mediation is not
successful, then to binding arbitration, in accordance with the dispute
resolution procedures set forth in Annex 1 attached hereto. Judgment on any
arbitration award may be entered in any court having proper jurisdiction.
XIII. Third Party Beneficiaries. This Agreement and all services to be provided
hereunder are for the sole benefit of the parties hereto and nothing herein
expressed or implied shall give or be construed to give to any person or entity,
other than the parties hereto, any legal or equitable rights whatsoever. E&Y
does not assume and shall not have any duty or obligation to any other person or
entity.
ANNEX 1
Dispute Resolution Procedures
The following procedures shall be used to resolve any controversy or claim
("dispute") as provided in this Agreement. If any of these provisions are
determined to be invalid or unenforceable, the remaining provisions shall remain
in effect and binding on the parties to the fullest extent permitted by law.
Mediation
A dispute shall be submitted to mediation by written notice to the other party
or parties. In the mediation process, the parties will try to resolve their
differences voluntarily with the aid of an impartial mediator, who will attempt
to facilitate negotiations. The mediator will be selected by agreement of the
parties. If the parties cannot agree on a mediator, a mediator will be
designated by the American Arbitration Association ("AAA") or JAMS/Endispute at
the request of a party. Any mediator so designated must be acceptable to all
parties.
The mediation will be conducted as specified by the mediator and agreed upon by
the parties. The parties agree to discuss their differences in good faith and to
attempt, with the assistance of the mediator, to reach an amicable resolution of
the dispute.
The mediation will be treated as a settlement discussion and therefore will be
confidential. The mediator may not testify for either party in any later
proceeding relating to the dispute. No recording or transcript shall be made of
the mediation proceedings.
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MS. KATHLEEN PENA OCTOBER 25, 1999
MEDIBUY.COM PAGE 9
Each party will bear its own costs in the mediation. The fees and expenses of
the mediator will be shared equally by the parties.
<PAGE> 10
MS. KATHLEEN PENA OCTOBER 25, 1999
MEDIBUY.COM PAGE 10
Arbitration
If a dispute has not been resolved within 90 days after the written notice
beginning the mediation process (or a longer period, if the parties agree to
extend the mediation), the mediation shall terminate and the dispute will be
settled by arbitration. The arbitration will be conducted in accordance with the
procedures in this document and the Arbitration Rules for Professional
Accounting and Related Services Disputes of the AAA ("AAA Rules"). In the event
of a conflict, the provisions of this document will control.
The arbitration will be conducted before a panel of three arbitrators,
regardless of the size of the dispute, to be selected as provided in the AAA
Rules. Any issue concerning the extent to which any dispute is subject to
arbitration, or concerning the applicability, interpretation, or enforceability
of these procedures, including any contention that all or part of these
procedures are invalid or unenforceable, shall be governed by the Federal
Arbitration Act and resolved by the arbitrators. No potential arbitrator may
serve on the panel unless he or she has agreed in writing to abide and be bound
by these procedures.
Unless provided otherwise in the Agreement, the arbitrators may not award
non-monetary or equitable relief of any sort. They shall have no power to award
(i) damages inconsistent with the Agreement or (ii) punitive damages or any
other damages not measured by the prevailing party's actual damages, and the
parties expressly waive their right to obtain such damages in arbitration or in
any other forum. In no event, even if any other portion of these provisions is
held to be invalid or unenforceable, shall the arbitrators have power to make an
award or impose a remedy that could not be made or imposed by a court deciding
the matter in the same jurisdiction.
No discovery will be permitted in connection with the arbitration unless it is
expressly authorized by the arbitration panel upon a showing of substantial need
by the party seeking discovery.
All aspects of the arbitration shall be treated as confidential. Neither the
parties nor the arbitrators may disclose the existence, content or results of
the arbitration, except as necessary to comply with legal or regulatory
requirements. Before making any such disclosure, a party shall give written
notice to all other parties and shall afford such parties a reasonable
opportunity to protect their interests.
The result of the arbitration will be binding on the parties, and judgment on
the arbitrators' award may be entered in any court having jurisdiction.
<PAGE> 1
EXHIBIT 10.18
COMMON STOCK EXCHANGE AGREEMENT
THIS COMMON STOCK EXCHANGE AGREEMENT (this "Agreement") is entered into as
of June 11, 1999, by and among MEDIBUY.COM, INC., a Delaware corporation having
its principal place of business at 7777 Alvarado Road, Suite 401, La Mesa,
California 91940 ("Medibuy"), and John Stevens ("Stevens"), the sole stockholder
of Hippo.com, Inc., a Delaware corporation ("Hippo"), residing at 1107 Cowper
Street, Palo Alto, California 94301.
WHEREAS, Stevens owns 4,500,000 shares of common stock of Hippo, which
constitute all the outstanding capital stock of Hippo ("Hippo Shares");
WHEREAS, Medibuy desires to acquire all of the Hippo Shares and Stevens
desires to acquire shares of Medibuy Common Stock on the terms and conditions
set forth herein; and
WHEREAS, the parties intend that the exchange of shares contemplated by
this Agreement shall be considered a reorganization within the meaning of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO EXCHANGE SHARES.
1.1 AGREEMENT. At the Closing (defined below), Medibuy shall issue to
Stevens four hundred thousand (400,000) shares of Common Stock of Medibuy (the
"Medibuy Shares") and Stevens shall assign and transfer to Medibuy all of the
Hippo Shares.
1.2 CLOSING. The closing of the sale and issuance of the Medibuy
Shares and the transfer and assignment of the Hippo Shares under this Agreement
(the "Closing") shall take place at 5:00 p.m. on the date hereof, at the offices
of Cooley Godward LLP, 4365 Executive Drive, Suite 1100, San Diego, California
92121 or at such other time or place as Medibuy and Stevens may mutually agree
(such date is hereinafter referred to as the "Closing Date").
1.3 DELIVERY. At the Closing, subject to the terms and conditions
hereof, (i) Stevens will deliver to Medibuy one or more certificates
representing all of the Hippo Shares; duly endorsed for transfer to Medibuy, and
(ii) Medibuy will deliver to Stevens a certificate representing the Medibuy
Shares.
2. REPRESENTATIONS AND WARRANTIES.
2.1 Each of Medibuy and Stevens (each a "Party") makes the following
certifications and representations with respect to its acquisition of the
Medibuy Shares and the Hippo Shares, respectively:
1.
<PAGE> 2
(a) It is acquiring the shares solely for its account for
investment and not with a view to or for sale or distribution of the shares.
Each Party also represents that the entire legal and beneficial interests of the
securities it is acquiring is being acquired for, and will be held for its
account only.
(b) The parties have determined that the value of the shares
being exchanged pursuant to this Agreement are equivalent.
(c) It understands that the shares have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), on the basis that
no distribution or public offering of the shares is to be effected. Each Party
realizes that the basis for the exemption may not be present if, notwithstanding
its representations, it has in mind merely acquiring the shares for a fixed or
determinable period in the future, or for a market rise, or for sale if the
market does not rise. Neither Party has such intention.
2.2 POWER AND AUTHORITY.
(a) Medibuy represents and warrants to Stevens that it has all
requisite legal and corporate power to execute and deliver this Agreement, to
issue and sell the Medibuy Shares under this Agreement, and to perform its
obligations under the terms of this Agreement, including all exhibits and
schedules hereto.
(b) Stevens represents and warrants to Medibuy that he has all
requisite legal power to execute and deliver this Agreement, to transfer and
assign the Hippo Shares under this Agreement, and to carry out and perform his
obligations under the terms of this Agreement, including all exhibits and
schedules hereto.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF STEVENS.
Stevens hereby represents and warrants to Medibuy as follows:
3.1 TITLE TO SHARES.
(a) Stevens (i) is the record and beneficial owner of all of the
Hippo Shares, representing 100% of the issued and outstanding capital stock of
Hippo, (ii) has good and valid title to all of such shares and (iii) has the
absolute right, power and the authority to sell, transfer and deliver all such
shares, in each case free and clear of all liens, security interests, judgments
or any other encumbrances. There are no options, warrants, rights, calls,
commitments or other rights related to the issuance of capital stock or other
securities of Hippo.
(b) Stevens has not, at any time, (i) made a general assignment
for the benefit of creditors, (ii) filed, or had filed against Stevens, any
bankruptcy petition or similar filing, (iii) suffered the attachment or other
judicial seizure of all or a substantial portion of Stevens' assets, (iv)
admitted in writing Stevens' inability to pay Stevens' debts as they become due,
(v) been convicted of, or pleaded guilty to, any felony, (vi) taken or been the
subject of any action that may have an adverse effect on Stevens' ability to
comply with or perform any of
2.
<PAGE> 3
Stevens' covenants or obligations under this Agreement or any of the agreements
contemplated by this Agreement, (vii) been subject to any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality that may have an adverse effect on Stevens' ability to comply
with or perform any of Stevens' covenants or obligations under this Agreement or
any of the agreements contemplated by this Agreement or (viii) obtained any
loans or incurred any indebtedness for which any property, assets or securities
of Hippo is pledged as collateral and there are no liens, security interests,
judgments or any other encumbrances on any of the properties, assets or
securities of Hippo imposed in connection with any indebtedness or other
obligations of Stevens.
(c) There is no action, suit, proceeding or investigation
pending, and no person has threatened to commence any action, suit, proceeding
or investigation, that would reasonably be expected to have an adverse effect on
the ability of Stevens to comply with or perform any of Stevens' covenants or
obligations under this Agreement or any of the agreements contemplated by this
Agreement. No event has occurred, and no claim, dispute or other condition or
circumstance exists, that would reasonably be expected to directly or indirectly
give rise to or serve as a basis for the commencement of any such action, suit,
proceeding or investigation.
3.2 NO LIABILITIES. Except for ordinary course of business liabilities
and legal fees incurred in connection with the organization of Hippo or this
transaction, which in the aggregate shall not exceed $10,000 at the Closing,
Hippo has no outstanding liabilities, whether known, unknown or contingent or of
any nature whatsoever, and Stevens' proposed purchase of shares hereunder will
not violate or cause a default under any agreement or other instrument or
obligation of Hippo or Stevens.
3.3 PROPRIETARY ASSETS.
(a) Exhibit A contains a list of all registered patents,
trademarks, service marks, trade names and copyrights ("Registered Proprietary
Assets") that are owned by or licensed to Hippo or that are otherwise used by
Hippo in Hippo's business.
(b) Hippo has taken all measures and precautions reasonably
necessary to protect the confidentiality and value of each Registered
Proprietary Asset identified or required to be identified in Exhibit A and each
other unregistered patent, trademark, service mark, tradename, copyrights, trade
secret and other proprietary rights ("Additional Proprietary Assets"). Hippo has
good and valid title to all of the Registered Proprietary Assets and Additional
Proprietary Assets (collectively the "Proprietary Assets") owned by it, free and
clear of all liens, security interests, judgments or any other encumbrances, and
has a valid right to use and otherwise exploit, and to license others to use and
otherwise exploit, all Proprietary Assets licensed to or used by it. Such
Proprietary Assets consist of all Proprietary Assets necessary to enable Hippo
to conduct its business as presently conducted.
(c) Hippo is not infringing, and has not at any time infringed,
or received any written notice of any actual, alleged, possible or potential
infringement of any Proprietary Asset owned or used by any other person. No
other person is infringing, and no
3.
<PAGE> 4
Proprietary Asset owned or used by any other person infringes or conflicts with,
any Proprietary Asset owned or used by or licensed to Hippo.
3.4 ADDITIONAL INVESTMENT REPRESENTATIONS.
(a) Stevens recognizes that the Medibuy Shares being acquired by
him must be held indefinitely unless the Medibuy Shares are subsequently
registered under the Securities Act or an exemption from such registration is
available. Stevens recognizes that Medibuy has no obligation to register the
Medibuy Shares or to comply with any exemption from such registration.
(b) Stevens is aware that the Medibuy Shares may not be sold
pursuant to Rule 144 adopted under the Securities Act ("Rule 144") unless
certain conditions are met and until Stevens has held the Medibuy Shares for at
least one year. Among the conditions for use of the Rule is the availability of
current information to the public about Medibuy. Stevens understands that there
is no such information available and Medibuy will likely have no plans to make
such information available.
(c) Stevens further agrees not to make any disposition of all or
any part of the Medibuy Shares being acquired in any event unless and until: (i)
the Medibuy Shares are transferred pursuant to Rule 144, and Medibuy shall have
received from Stevens documentation acceptable to Medibuy that a sale of the
Medibuy Shares has occurred in accordance with all of the provisions of Rule
144, as in effect from time to time; or (ii) there is then in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with said registration
statement; or (iii) (A) Stevens shall have notified Medibuy of the proposed
disposition and shall have furnished Medibuy with a detailed statement of the
circumstances surrounding the proposed disposition, (B) Stevens shall have
furnished Medibuy with an opinion of counsel for Stevens to the effect that such
disposition will not require registration of such Medibuy Shares under the
Securities Act, and (C) such opinion of counsel for Stevens shall have been
concurred in by Medibuy's counsel and Medibuy shall have advised Stevens of such
concurrence.
(d) Stevens understands and agrees that all certificates
evidencing the Medibuy Shares to be issued to Stevens shall bear a legend
substantially in the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED."
4.
<PAGE> 5
3.5 PRE-CLOSING COVENANTS. Prior to the Closing, Stevens has:
(a) caused Hippo to conduct its business in the ordinary course
and has refrained from taking any action that would cause any representation or
warranty made herein to be untrue or materially misleading;
(b) complied with, and has caused Hippo to comply with,
contractual obligations of Hippo and legal requirements applicable to Hippo;
(c) permitted Medibuy and any of its employees, agents and
representatives to have reasonable access to Hippo's books and records of
account;
(d) permitted Medibuy and any of its employees, agents and
representatives to contact Hippo's accountants and key employees of Hippo for
the purpose of completing its due diligence;
(e) provided Medibuy with copies of all documents related to the
business of Hippo;
(f) provided Medibuy with such other instruments, agreements and
documents as Medibuy may reasonably request in order to complete its due
diligence review of Hippo; and
(g) obtained any and all consents, permits and waivers necessary
or appropriate for consummation of the transactions contemplated by this
Agreement.
4. STOCK RESTRICTION.
4.1 RESTRICTED SHARES AND VESTING. Subject to the limitations
contained herein, two hundred thirty six thousand (236,000) of the Medibuy
Shares (the "Restricted Shares") acquired by Stevens will be subject to a
Repurchase Option in favor of Medibuy as described in Section 4.2 below. The
Repurchase Option will lapse (and the Restricted Shares will become vested) at
the following rate: shares shall be released from the Repurchase Option in equal
monthly installments of 6,555.56 shares beginning on June 1, 1999 and on the 1st
day of each month thereafter, until all the stock is released from the
Repurchase Option as of June 1, 2002.
4.2 REPURCHASE OPTION. The Restricted Shares shall be subject to the
following repurchase option:
(a) In the event that Stevens' service as an employee, director
or consultant with Medibuy ceases for any reason (including his death), or no
reason, with or without cause, then Medibuy shall have an irrevocable option for
a period of ninety (90) days after said cessation of such service as an
employee, director or consultant with Medibuy to repurchase from Stevens, as the
case may be, for a purchase price of $0.1125 (the "Purchase Price"), up to but
not exceeding the number of shares of the Restricted Shares that have not
5.
<PAGE> 6
vested as of such cessation date in accordance with the provisions of the Notice
as of such termination date (the "Repurchase Option").
(b) In addition, and without limiting the foregoing Repurchase
Option, if at any time during the term of the Repurchase Option, if both of the
following occur: (i) there is a Change in Control, which is defined as any of
the following: (a) a dissolution or liquidation of Medibuy; (b) a merger or
consolidation involving Medibuy in which Medibuy is not the surviving
corporation; (c) a reverse merger in which Medibuy is the surviving corporation
but the shares of Medibuy's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of other securities, cash or otherwise; or (d) any other capital
reorganization in which more than fifty percent (50%) of the shares of Medibuy
entitled to vote are exchanged; and (ii) Stevens' service as an employee,
director or consultant of Medibuy is terminated without Cause (as defined below)
or is voluntarily terminated for Good Reason (as defined below) within one (1)
month before or twelve (12) months after a Change in Control, then the
Repurchase Option shall terminate and all of the Restricted Shares subject to
the Repurchase Option shall fully vest. The Repurchase Option may be assigned to
any successor of Medibuy in a Change of Control, and the Repurchase Option shall
apply if Stevens' service as an employee, director or consultant with Medibuy
had ceased with such successor on the same basis as set forth above subject only
to the acceleration provisions set forth in the preceding sentence. In that
case, references herein to the "Company" shall be deemed to refer to such
successor. For purposes of this Section 4, the following definitions apply:
(i) "Cause" means, with respect to the involuntary
termination of Stevens' service with Medibuy, misconduct, including: (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against Medibuy or an
affiliate; (iii) conduct that, based upon a good faith and reasonable factual
investigation and determination by Medibuy, demonstrates gross unfitness to
serve; or (iv) intentional, material violation of any agreement with Medibuy, or
of any statutory duty to Medibuy, that is not corrected within thirty (30) days
after written notice thereof. Physical or mental disability shall not constitute
"Cause." For purposes of this definition, "Company" shall include an affiliate
of Medibuy and a successor to Medibuy.
(ii) "Good Reason" means, with respect to the voluntary
termination of service of Stevens in connection with a Change in Control, (i)
reduction of Stevens' rate of compensation as in effect immediately prior to the
Change in Control by greater than ten percent (10%), except to the extent the
compensation of other similarly situated persons are accordingly reduced, (ii)
failure to provide a package of benefit/compensation plans that, taken as a
whole, provide substantially similar benefits to those in which Stevens is
entitled to participate immediately prior to the Change in Control (except that
such person's contributions for participation in such benefits may be raised to
the extent of any cost increases imposed by third parties) or any action by
Medibuy that would adversely affect Stevens' participation or reduce Stevens'
benefits under any of such plans, (iii) a change in Stevens' responsibilities,
authority, titles or offices resulting in diminution of position, excluding for
this purpose an isolated, insubstantial and inadvertent action not taken in bad
faith that is remedied by Medibuy
6.
<PAGE> 7
promptly after notice thereof is given by such person, (iv) if Stevens' services
require proximity to Medibuy's offices, a request that Stevens relocate to a
worksite that is more than fifty (50) miles from Stevens' prior worksite, unless
Stevens accepts such relocation opportunity, (v) a material reduction in
Stevens' duties, (vi) a failure or refusal of any successor company to assume
the obligations of Medibuy under an agreement with Stevens or (vii) a material
breach by Medibuy of any of the material provisions of an agreement with
Stevens. For purposes of this definition, "Company" shall include an affiliate
of Medibuy and a successor to Medibuy.
(c) This Agreement is not an employment contract and nothing in
this Agreement shall be deemed to create in any way whatsoever any obligation on
the part of Stevens to continue in the employment or other service of Medibuy,
or of Medibuy to continue Stevens in the employment or other service of Medibuy.
(d) Stevens acknowledges that in the event that the Restricted
Shares' fair market value, as determined in good faith by the Board of Directors
of Medibuy, is equal to or exceeds the Purchase Price on the date that Stevens'
service as an employee, director or consultant with Medibuy or with an Affiliate
ceases, Medibuy shall have the right to exercise its Repurchase Option to the
extent permitted by law.
4.3 EXERCISE OF REPURCHASE OPTION. The Repurchase Option shall be
exercised by giving written notice of exercise delivered or mailed as provided
in Section 5.8. Upon providing such notice and payment or tender of the purchase
price, Medibuy shall become the legal and beneficial owner of the Restricted
Shares being purchased and all rights and interests therein or related thereto.
4.4 ADJUSTMENTS TO SHARES. If from time to time during the term of the
Repurchase Option there is any stock dividend or liquidating dividend or
distribution of cash and/or property, stock split or other change in the
character or amount of any of the outstanding securities of Medibuy, then, in
such event, any and all new, substituted or additional securities or other
property to which Stevens is entitled by reason of his ownership of Restricted
Shares will be immediately subject to the Repurchase Option and be included in
the word "Shares" for all purposes of the Repurchase Option with the same force
and effect as the shares of Restricted Shares then subject to the Repurchase
Option. While the total Purchase Price shall remain the same after each such
event, the Purchase Price per share of Restricted Shares upon exercise of the
Repurchase Option shall be appropriately adjusted to reflect such change in
Medibuy's securities.
4.5 RESTRICTIVE LEGENDS. Stevens acknowledges that in addition to the
legend required under Section 3.4(d), all certificates representing Restricted
Shares subject to the provisions of the Repurchase Option shall bear a legend
thereon in substantially the following form:
"THE RESTRICTED SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND
THE REGISTERED HOLDER, OR ANY PREDECESSOR IN INTEREST, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION. ANY TRANSFER
7.
<PAGE> 8
OR ATTEMPTED TRANSFER OF ANY RESTRICTED SHARES SUBJECT TO SUCH OPTION IS
VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE ISSUER OF THESE
SHARES."
4.6 SECTION 83(b) ELECTION. Stevens understands that Section 83(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the amount paid for the Restricted Shares and the
fair market value of the Restricted Shares as of the date any restrictions on
the Restricted Shares lapse. In this context, "restriction" includes the right
of Medibuy to buy back the Restricted Shares pursuant to the Repurchase Option
set forth in this Section 4 above. Stevens understands that he may elect to be
taxed at the time the Restricted Shares were purchased, rather than when and as
the Repurchase Option expires, by filing an election under Section 83(b) (an
"83(b) Election") of the Code with the Internal Revenue Service within thirty
(30) days from the date of the effectiveness of the Repurchase Option. Even if
the fair market value of the Restricted Shares at the time of the execution of
this Agreement equals the amount paid for the Restricted Shares, the 83(b)
Election must be made to avoid income under Section 83(b) in the future. Stevens
understands that failure to file such an 83(b) Election in a timely manner may
result in adverse tax consequences for Stevens. Stevens further understands that
an additional copy of such 83(b) Election is required to be filed with his
federal income tax return for the calendar year in which the date of this
Agreement falls. Stevens acknowledges that the foregoing is only a summary of
the effect of United States federal income taxation with respect to purchase of
the Restricted Shares hereunder, and does not purport to be complete. Stevens
further acknowledges that Medibuy has directed Stevens to seek independent
advice regarding the applicable provisions of the Code, the income tax laws of
any municipality, state or foreign country in which Stevens may reside, and the
tax consequences of Stevens' death. Stevens assumes all responsibility for
filing an 83(b) Election and paying all taxes resulting from such election or
the lapse of the restrictions on the Restricted Shares.
4.7 ESCROW OF UNVESTED RESTRICTED SHARES. As security for Stevens'
faithful performance of the terms of this Agreement and to insure the
availability for delivery of Stevens' Restricted Shares upon exercise of the
Repurchase Option herein provided for, Stevens agrees, at the closing hereunder
(or as soon thereafter as practicable) to deliver (or have Medibuy deliver on
Stevens' behalf) to and deposit with the Secretary of Medibuy, as escrow agent
in this transaction (the "Escrow Agent"), the assignment separate from the
certificate duly endorsed (with date and number of shares left blank) in the
form attached hereto as Exhibit B, together with a certificate or certificates
evidencing all of the Restricted Shares subject to the Repurchase Option; said
documents are to be held by the Escrow Agent and delivered by said Escrow Agent
pursuant to the Joint Escrow Instructions of Medibuy and Stevens set forth in
Exhibit C attached hereto and incorporated herein by this reference, which
instructions shall also be delivered to the Escrow Agent at the closing
hereunder (or as soon thereafter as practicable).
4.8 LIMITATIONS ON TRANSFER. In addition to any other restrictions set
forth herein or that may exist relating to a proposed transfer of Restricted
Shares, Stevens shall not sell or transfer any of the Restricted Shares subject
to the Repurchase Option or any interest therein so long as such Restricted
Shares are subject to the Repurchase Option.
8.
<PAGE> 9
4.9 REFUSAL TO TRANSFER. Medibuy shall not be required (i) to transfer
on its books any Restricted Shares of Medibuy which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement or
(ii) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.
4.10 RIGHTS OF STEVENS. Subject to the provisions of Sections 4.7,
4.8, 4.9 and 4.10 above, Stevens (but not any unapproved transferee) shall,
during the term of this Agreement, exercise all rights and privileges of a
stockholder with respect to the Restricted Shares deposited in escrow. Stevens
shall be deemed to be the holder for purposes of receiving any dividends that
may be paid with respect to such Restricted Shares and for the purpose of
exercising any voting rights relating to such Restricted Shares, even if some or
all of such Restricted Shares have not yet vested and been released from the
Repurchase Option.
4.11 FURTHER EXECUTION. The parties agree to execute such further
instruments and to take such further action as reasonably may be necessary to
carry out the intent of this Agreement.
5. ESCROW AND INDEMNIFICATION
5.1 SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. All of
Stevens' covenants, representations and warranties contained in Section 3 of
this Agreement shall survive the Closing and continue until the first
anniversary of the Closing Date.
5.2 SATISFACTION AND INDEMNIFICATION BY STEVENS. Stevens will be
responsible for all liabilities incurred by Hippo prior to the Closing Date
which exceed the cash assets of Hippo at the Closing, provided that existing
cash accounts of Hippo as of the Closing Date are first applied in full to
satisfy such liabilities. Stevens shall satisfy all remaining liabilities of
Hippo outstanding at the Closing by the three-month anniversary of the Closing
Date. Stevens shall indemnify and hold Medibuy harmless from all liabilities,
including all costs and damages related to satisfaction of the liabilities that
are outstanding at the Closing. Subject to the other provisions of this Section
5, during the period beginning on the Closing Date and ending one year following
the Closing Date, Stevens shall indemnify and hold harmless Medibuy from and
against any and all claims, expenses and losses, including without limitation,
reasonable attorneys' fees and legal expenses, suffered or incurred by Medibuy
resulting from any breach or inaccuracy of any of Stevens' covenants,
representations and warranties contained in Section 3 of this Agreement.
5.3 ESCROW FUND FOR INDEMNITY CLAIMS. As security for Steven's
faithful performance of obligations under this Section 5 and to insure the
availability for delivery of the Medibuy Shares upon the assertion of an Escrow
Claim (as defined below), Stevens hereby pledges 80,000 Medibuy Shares which are
not subject to the Repurchase Option (the "Pledged Shares"), and all dividends,
cash instruments, and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Shares against claims arising under Section 5.2 (the "Escrow
Fund"). Stevens agrees, at the Closing hereunder (or as soon as practicable
thereafter) to deliver (or have Medibuy deliver
9.
<PAGE> 10
on Stevens' behalf) to and deposit with the Secretary of Medibuy an assignment
separate from certificate duly endorsed (with the date and number of shares left
blank) in the form attached hereto as Exhibit B, together with a certificate or
certificates representing the Pledged Shares; said documents are to be held by
Medibuy pending release of the Pledged Shares.
5.4 METHOD OF ASSERTING INDEMNITY CLAIM. In the event Medibuy becomes
aware of a third-party claim which Medibuy believes may result in a demand
against the Escrow Fund or if Medibuy incurs any costs or liabilities for which
it is entitled to indemnity, Medibuy shall promptly notify Stevens in writing of
such claim or liability pursuant to Section 7.8 of this Agreement, and Stevens
shall be entitled to immediately satisfy such liability or participate in any
defense of such claim. Medibuy and Stevens shall in good faith to defend or
settle any third-party claim. Medibuy shall have the right in its sole
discretion to settle any third party claim; provided, however, that except with
the consent of Stevens, no settlement of any claim with third-party claimants
shall be determinative of the amount of any claim against the Escrow Fund (the
"Escrow Claim"). The failure by Medibuy to give written notice to Stevens of a
third-party claim and claim against the Escrow Fund which is prejudice to
Stevens' ability to defend against a claim shall not impair Medibuy's right to
settle the third-party claim, but shall prevent a claim against the Escrow Fund
relating to the claim. Medibuy and Stevens shall endeavor to agree in good faith
upon the Escrow Claim, and in the absence of such agreement, shall seek
arbitration pursuant to Section 7.16 of this Agreement.
5.5 CLAIMS AGAINST ESCROW FUND. Upon determination of the amount
claimed against the Escrow Fund, Stevens may, at his sole option, settle the
Escrow Claim by (a) written notification to Medibuy within seven (7) calendar
days (the "Option Period") of the later of (i) notification given to Stevens
pursuant to Section 5.4 above or (ii) settlement of the third-party claim and
(b) payment to Medibuy in immediately available funds of the amount of the
Escrow Claim. Upon expiration of the Option Period, Medibuy shall be entitled to
receive out of the Escrow Fund such number of the Pledged Shares as shall be
obtained by dividing the Escrow Claim by the then fair market value of the
Pledged Shares as determined by the Medibuy Board of Directors in good faith.
5.6 LIMITATION OF LIABILITY AND INDEMNIFICATION. In no event shall the
aggregate liability of Stevens under this Section 5 exceed the amount of the
Escrow Fund plus $50,000. The remedies provided in this Section 5 shall
constitute the sole and exclusive remedies and recourse of Medibuy against
Stevens available for any liabilities arising under Section 5.2.
5.7 TERMINATION OF ESCROW FUND. The Escrow Fund shall terminate
immediately on the first day following the first anniversary of the Closing
Date, provided, however, the Escrow Fund shall continue past the scheduled
termination if at such time there exists an Escrow Claim or outstanding
liability that has not been satisfied by Stevens. Release of the Pledged Shares
shall not result in the release of any Restricted Shares from the provisions of
the Joint Escrow Instructions.
10.
<PAGE> 11
6. CONDITIONS TO CLOSING.
6.1 MEDIBUY COUNSEL LEGAL OPINION. Stevens' obligations to transfer
and assign the Hippo Shares and perform his obligations under this Agreement
shall be conditioned upon his receipt at the Closing from legal counsel to the
Company an opinion addressed to him, dated as of the Closing Date, in a form
reasonably acceptable to Stevens and his legal counsel.
6.2 STEVENS' AND HIPPO' COUNSEL LEGAL OPINION. Medibuy's obligations
to issue the Medibuy Shares and perform its obligations under this Agreement
shall be conditioned upon its receipt at the Closing from legal counsel to
Stevens and Hippo an opinion addressed to Medibuy, dated as of the Closing Date,
in a form reasonably acceptable to Medibuy and its legal counsel.
7. MISCELLANEOUS.
7.1 MARKET STAND-OFF AGREEMENT. Stevens acknowledges and agrees that
Medibuy (or a representative of the underwriters) may, in connection with the
first underwritten registration of the offering of any securities of Medibuy
under the Securities Act, require that Stevens not sell or otherwise transfer or
dispose of any Common Stock or any other stock or other securities of Medibuy
during such period (not to exceed one hundred eighty (180) days) following the
effective date of the registration statement of Medibuy filed under the
Securities Act as may be requested by Medibuy or the representative of the
underwriters; provided that all officers and directors of Medibuy who then hold
common stock (or other securities of Medibuy) enter into similar agreements.
Stevens further agrees that Medibuy may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such period.
7.2 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Securities from time to time.
7.4 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto, any
related agreements and the other documents delivered pursuant hereto, constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
7.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
11.
<PAGE> 12
7.6 AMENDMENT AND WAIVER. This Agreement may be amended or modified
only upon the written consent of both parties.
7.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or any related
agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character on any party's part of any breach, default or
noncompliance under this Agreement or any related agreements or any waiver on
such party's part of any provisions or conditions of the Agreement or any
related agreements must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, or any related agreements, by law, or otherwise afforded to any
party, shall be cumulative and not alternative.
7.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to Medibuy and Stevens
at the addresses as set forth in the first introductory paragraph of this
Agreement or at such other address as such party may designate by ten (10) days
advance written notice to the other party hereto.
7.9 ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
7.10 TAX TREATMENT. The parties hereto agree that the exchange
contemplated under this Agreement shall be treated as a tax-free exchange of
shares of equal value pursuant to a reorganization under Section 368(a)(1)(B)
and the parties shall take no position inconsistent with such treatment.
7.11 TITLES AND SUBTITLES. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12.
<PAGE> 13
7.13 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.13 being untrue.
7.14 CONFIDENTIALITY. Each party hereto agrees that, except with the
prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement or any related agreements,
discussions or negotiations relating to this Agreement or any related
agreements, the performance of its obligations hereunder or the ownership of the
Securities purchased hereunder. The provisions of this Section 5.14 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto.
7.15 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
7.16 ARBITRATION. Medibuy and Stevens agree that any dispute or
controversy arising out of, relating to or in connection with the
interpretation, validity, construction, performance, breach or termination of
this Agreement shall be settled by binding arbitration to be held in San Diego
County, California, in accordance with rules established by the American
Arbitration Association as then in effect (the "Rules"). The parties shall agree
in good faith upon the selection of an arbitrator pursuant to the Rules. The
arbitrator may grant injunctions or other relief in such dispute or controversy.
The decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgment may be entered on the arbitrator's decision
in any court of competent jurisdiction. Costs of arbitration are to be borne
equally by both parties.
[THIS SPACE INTENTIONALLY LEFT BLANK]
13.
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed the COMMON STOCK
EXCHANGE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY:
MEDIBUY.COM, INC.
By: /s/ DENNIS MURPHY
------------------------------------
Name: Dennis Murphy
----------------------------------
Title: Chief Executive Officer
---------------------------------
/s/ JOHN STEVENS
---------------------------------------
JOHN STEVENS
EXECUTION PAGE TO
COMMON STOCK EXCHANGE AGREEMENT
<PAGE> 15
LIST OF EXHIBITS
Exhibit A Hippo Proprietary Assets
Exhibit B Assignment Separate From Certificate
Exhibit C Joint Escrow Instructions
2.
<PAGE> 16
EXHIBIT A
HIPPO PROPRIETARY ASSETS
3.
<PAGE> 17
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, JOHN STEVENS hereby sells, assigns and transfers unto
MEDIBUY.COM, INC. (the "Company"), _______ (______) shares of the Common Stock
of the Company standing in John Stevens' name on the books of the Company
represented by Certificate No.(s) ____________, herewith and does hereby
irrevocably constitute and appoint the Secretary of the Company attorney to
transfer the said stock on the books of the Company with full power of
substitution in the premises.
Dated: ______________
/s/ JOHN STEVENS
---------------------------------------
John Stevens
1.
<PAGE> 18
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
Corporate Secretary
MEDIBUY.COM, INC.
7777 Alvarado Road
Suite 401
La Mesa, CA 91941
Dear Sir or Madam:
As Escrow Agent for both MEDIBUY.COM, INC., a Delaware corporation
("Medibuy"), and the undersigned John Stevens ("Stevens") of Restricted Shares
of Medibuy, you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Common Stock Exchange
Agreement (together, "Agreement"), dated as of June 11, 1999, to which a copy of
these Joint Escrow Instructions is attached as Exhibit C, in accordance with the
following instructions (all capitalized terms used but not defined herein shall
have the same meanings given them in the Agreement):
1. In the event Medibuy or an assignee shall elect to exercise the
Repurchase Option set forth in the Agreement, Medibuy or its assignee will give
to Stevens and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of Medibuy. Stevens and Medibuy hereby irrevocably authorize
and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to Medibuy against the
simultaneous delivery to you of the purchase price (which may include suitable
acknowledgment of cancellation of indebtedness) of the number of shares of stock
being purchased pursuant to the exercise of the Repurchase Option.
3. Stevens irrevocably authorizes Medibuy to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Stevens does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities and other property all documents of assignment and/or
transfer and all stock certificates necessary or appropriate to make all
securities negotiable and complete any transaction herein contemplated.
<PAGE> 19
4. This escrow shall terminate upon expiration or exercise in full of the
Repurchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Stevens,
you shall deliver all of same to Stevens and shall be discharged of all further
obligations hereunder; provided, however, that if at the time of termination of
this escrow you are advised by Medibuy that the property subject to this escrow
is the subject of a pledge or other security agreement, you shall deliver all
such property to the pledgeholder or other person designated by Medibuy.
6. Except as otherwise provided in these Joint Escrow Instructions, your
duties hereunder may be altered, amended, modified or revoked only by a writing
signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties or
their assignees. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Stevens while
acting in good faith and any act done or omitted by you pursuant to the advice
of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel (including without
limitation the firm of Cooley Godward LLP) and other experts as you may deem
necessary to properly advise you in connection with your obligations hereunder,
may rely upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of Medibuy or if you shall resign by written notice
to each party. In the event of any such termination, Medibuy may appoint any
officer or assistant officer of Medibuy as
<PAGE> 20
successor Escrow Agent and Stevens hereby confirms the appointment of such
successor or successors as his attorney-in-fact and agent to the full extent of
your appointment.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities, you
may (but are not obligated to) retain in your possession without liability to
anyone all or any part of said securities until such dispute shall have been
settled either by mutual written agreement of the parties concerned or by a
final order, decree or judgment of a court of competent jurisdiction after the
time for appeal has expired and no appeal has been perfected, but you shall be
under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
any United States Post Box, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties hereunto entitled at the
following addresses, or at such other addresses as a party may designate by five
(5) days' written notice to each of the other parties hereto:
COMPANY: MEDIBUY.COM, INC.
7777 Alvarado Road
Suite 401
La Mesa, CA 91941
STEVENS: John Stevens
1107 Cowper Street
Palo Alto, CA 94301
With a copy to:
Judith M. O'Brien
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1005
SECRETARY: Corporate Secretary
MEDIBUY.COM, INC.
7777 Alvarado Road
Suite 401
La Mesa, CA 91941
16. By signing these Joint Escrow Instructions you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
<PAGE> 21
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that Medibuy may at any time or from time to time assign
its rights under the Agreement and these Joint Escrow Instructions in whole or
in part.
Very truly yours,
MEDIBUY.COM, INC.
Signature: /s/ DENNIS MURPHY
-----------------------------
Printed Name: Dennis Murphy
--------------------------
Title: Chief Executive Officer
---------------------------------
STEVENS:
/s/ JOHN STEVENS
----------------------------------------
John Stevens
ESCROW AGENT:
/s/ DANIEL BEHARRY
- -------------------------------------
Corporate Secretary
<PAGE> 1
EXHIBIT 10.19
MEDIBUY.COM, INC.
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"Agreement") made and entered into as of January 7, 2000, by and among
MEDIBUY.COM, INC., a Delaware corporation having its principal place of business
at 10120 Pacific Heights Boulevard, Suite 100, San Diego, California 92121 (the
"Company"), and the investors named on Exhibit A hereto. Each of the investors
named on Exhibit A is referred to herein as an "Investor" and they are
collectively referred to as the "Investors."
WHEREAS, the Company entered into an Amended and Restated Investors'
Rights Agreement dated as of June 11, 1999, with certain purchasers of its
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock,
subsequently amended the agreement to include certain purchasers of Series E
Preferred Stock as of December 30, 1999 (collectively, the "Prior Agreement");
and
WHEREAS, in connection with the Company's issuance and sale of
additional shares of its Series E Preferred Stock under a Stock Purchase
Agreement of even date herewith (the "Purchase Agreement"), the parties hereto
desire to amend and restate the Prior Agreement to include the additional
purchasers of the Series E Preferred Stock and to amend and restate certain
other terms of the agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, and other good and valuable consideration the sufficiency of
which is hereby acknowledged, the Investors who are parties to the Prior
Agreement hereby agree that the Prior Agreement shall be superseded and replaced
in its entirety by this Agreement, and the parties hereto further agree as
follows:
1. DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Common Shares" means shares of the Common Stock of the
Company.
(c) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(d) "Form S-3" means such form under the Securities Act, as
amended, as in effect on the date hereof or any successor registration form
under the Securities Act subsequently
1.
<PAGE> 2
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(e) "Holder" shall mean an Investor (to the extent that the
Investor holds Registrable Securities), and any other holder of Registrable
Securities that have not been sold to the public or sold pursuant to Rule 144 to
whom the registration rights conferred by this Agreement have been transferred
by Holder in accordance with Section 2.11 hereof.
(f) "Indemnified Party" and "Indemnifying Party" shall have the
meanings ascribed hereto in Section 2.7(c) hereof.
(g) "Initial Public Offering" shall mean the first sale of Common
Stock of the Company to the public effected pursuant to a registration statement
filed with, and declared effective by, the Securities and Exchange Commission
(the "Commission") under the Securities Act, with gross proceeds (before
underwriting discounts, commissions and fees) to the Company of at least
$15,000,000.
(h) "Initiating Holders" shall mean any Holder or Holders who in
the aggregate hold not less than thirty percent (30%) of the outstanding
Registrable Securities.
(i) "Investors" shall have the meaning set forth in the preamble
of this Agreement.
(j) "Other Stockholders" shall mean any holder of Common Shares
having registration rights pursuant to an agreement other than this Agreement.
(k) "Purchase Agreement" shall have the meaning set forth in the
recitals of this Agreement.
(l) "Registrable Securities" shall mean (i) Common Shares issued
or issuable by the Company to a Holder upon conversion of Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, and (ii) any Common Shares issued as a dividend or other distribution
with respect to or in exchange for or in replacement of shares described in
clause (i) of this subsection; provided, however, that Registrable Securities
shall not include any Common Shares which have previously been registered or
which have been sold to the public and shall not include any Registrable
Securities sold by a person in a transaction in which rights under Section 2 are
not assigned in accordance with this Agreement.
(m) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
(n) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expenses of any regular or special audits
2.
<PAGE> 3
incident to or required by any such registration (and shall include reasonable
fees and expenses of one counsel for all selling stockholders), but shall not
include Selling Expenses .
(o) "Rule 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(p) "Rule 145" shall mean Rule 145 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(q) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(r) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Common Shares and fees and
disbursements of counsel for any Holder (other than the fees and disbursements
of counsel included in Registration Expenses).
(s) "Significant Holder" shall have the meaning given in Section
3.2(a) hereof.
2. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
2.1 RESTRICTIONS ON TRANSFER
(a) Each Holder agrees not to make any disposition of all or any
portion of the Holder's Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock or Registrable Securities
unless and until:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, unless such transfer was made pursuant to Rule 144,
(B) such Holder shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (C) if reasonably requested by the
Company, such Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Securities Act. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances; or
(iii) Such shares are eligible for sale under Rule 144 under
the Securities Act.
3.
<PAGE> 4
(iv) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners, to the estates thereof or a trust for the benefit thereof
(including a liquidation trust), (B) a limited liability company to its members
or former members in accordance with their interest in the limited liability
company, or (C) to the Holder's family member or trust for the benefit of an
individual Holder; provided that in each case the transferee will be subject to
the terms of this Agreement to the same extent as if he were an original Holder
hereunder.
(b) All certificates representing Registrable Securities shall
(unless otherwise permitted by the provisions of the Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the Holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend and upon submission of surrendering certificates and
representations by the holder acceptable to the Company's legal counsel.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal and upon submission of
surrendering certificates and representations by the holder acceptable to the
Company's legal counsel.
2.2 DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. If the Company shall receive at any
time after the earlier of (i) June 11, 2002 or (ii) six (6) months after the
effective date of the Company's Initial Public Offering, written demand from the
Initiating Holders that the Company effect a registration with respect to all or
a part of the Registrable Securities, the Company shall:
(i) within twenty (20) days after the receipt of such
request, give written notice of the proposed registration to all other Holders;
and
(ii) as soon as practicable after receipt of such demand,
use its best efforts to effect the registration (including, without limitation,
filing post-effective amendments,
4.
<PAGE> 5
appropriate qualifications under applicable blue sky or other state securities
laws, and appropriate compliance with the Securities Act) of such Registrable
Securities as would permit or facilitate the sale and distribution of all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within twenty (20) days after the Company's written notice described in
paragraph (i) above is mailed or delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 2.2:
(A) After the Company has initiated two such registrations pursuant to
this Section 2.2(a) (counting for these purposes only registrations
which have been declared or ordered effective); provided, however, that
any registration pursuant to this Section 2.2 in which the Company
registers its Common Stock and in which the Holders participating in the
registration are subject to a full market limitation and entirely
excluded from the registration, shall not be counted as a registration
for purposes of this Section 2.2(a);
(B) During the period starting with the date sixty (60) days prior to
the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the effective date of, a
Company initiated registration (other than registrations on form S-4,
S-8 or successor forms); provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration
statement to become effective; provided, further, that the Company shall
not be entitled to utilize this clause (B) more than once in any
12-month period nor more than twice in the aggregate and the Company
shall not be entitled to use any combination of this clause and Section
2.2(b) to delay any registration for more than 6 months in any 12-month
period;
(C) If the Initiating Holders propose to dispose of Registrable
Securities which may be immediately registered on Form S-3 pursuant to a
request made under Section 2.5 hereof; or
(D) If the Initiating Holders do not request that such offering be
firmly underwritten by underwriters selected by the Initiating Holders
(subject to the consent of the Company, which consent will not be
unreasonably withheld) or the Company and the Initiating Holders are
unable to obtain the commitment of such underwriter to firmly underwrite
such offering.
(b) DEFERRAL BY COMPANY. Subject to the foregoing clauses (A)
through (D), the Company shall file a registration statement covering the
Registrable Securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Initiating Holders; provided,
however, that if (i) in the good faith judgment of the Board of Directors of the
Company, such registration would be seriously detrimental to the Company and the
Board of Directors of the Company concludes, as a result, that it is essential
to defer the filing of such registration statement at such time, and (ii) the
Company shall furnish to such Holders a certificate signed by either the
President or Chief Executive Officer of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would be seriously
5.
<PAGE> 6
detrimental to the Company for such registration statement to be filed in the
near future and that it is, therefore, essential to defer the filing of such
registration statement, then the Company shall have the right to defer such
filing for the period during which such disclosure would be seriously
detrimental, provided that (except as provided in clause (B) above) the Company
may not defer the filing for a period of more than one hundred eighty (180) days
after receipt of the request of the Initiating Holders, and, provided further,
that the Company shall not defer its obligation in this manner more than once in
any 12-month period nor more than twice in the aggregate and the Company shall
not be entitled to use any combination of this Section 2.2(b) and clause
2.2(a)(ii)(B) to delay any registration for more than 6 months in any 12-month
period.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 2.2(d) hereof,
include other securities of the Company with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company; provided, however, that if the shares being sold
for the account of the Company are included in an underwriting and such shares
are not limited by the representative of the underwriters, then the registration
shall not be counted as a registration pursuant to this Section 2.2 for purposes
of clause (C) above.
(c) UNDERWRITING. The right of any Holder to registration
pursuant to this Section 2.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. A
Holder may elect to include in such underwritings all or a part of the
Registrable Securities he holds.
(d) PROCEDURE. If the Company shall request inclusion in any
registration pursuant to Section 2.2 of securities being sold for its own
account, or if other persons shall request inclusion in any registration
pursuant to Section 2.2, the Initiating Holders shall, on behalf of all Holders,
offer to include such securities in the underwriting and may condition such
offer on the acceptance of and compliance with the further applicable provisions
of this Agreement by the Company and such other persons. The Company shall
(together with all Holders and other persons proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected by a majority in interest of the Initiating Holders, which underwriters
are reasonably acceptable to the Company. Notwithstanding any other provision of
this Section 2.2, if the representative of the underwriters advises the
Initiating Holders in writing that marketing factors require a limitation on the
number of shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as follows: (i) if the
registration is the Company's Initial Public Offering, the Company may limit, to
the extent so advised by the managing underwriter(s), the amount of securities
(including Registrable Securities) to be included in the registration by the
Company's stockholders (including the Holders), or may exclude, to the extent so
advised by the underwriter(s), such Registrable Securities entirely from the
registration; (ii) if such registration follows the Initial Public Offering and
sale of the Company's securities to the general public, the Company may limit,
to the extent so advised by the managing underwriter(s), the amount of
securities to be included in the registration by the Company's stockholders
(including the Holders); provided, however, that the aggregate value of
Registrable Securities to be included in such registration by the Holders may
not be so reduced to less than seventy percent (70%) of the total value of all
6.
<PAGE> 7
securities included in such registration. In the case of either clause (i) or
clause (ii) to above, the number of Registrable Securities to be included in the
registration shall not be reduced until all shares of other stockholders of the
Company have been excluded from the registration. The Company shall so advise
all holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration. If a person who
has requested inclusion in such registration as provided herein does not agree
to the terms of any such underwriting, such person shall be excluded therefrom
by written notice from the Company, the underwriter or the Initiating Holders.
The securities so excluded shall also be withdrawn from registration. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall also be withdrawn from such registration. If any securities
are so withdrawn from the registration and if the number of Registrable
Securities to be included in such registration was previously reduced as a
result of marketing factors pursuant to this Section 2.2(d), then the Company
shall offer to all Holders who have retained rights to include Registrable
Securities in the registration the right to include additional Registrable
Securities in the registration in an aggregate amount equal to the number of
securities so withdrawn, with such Registrable Securities to be allocated among
such Holders requesting additional inclusion in accordance with the provisions
set forth in this paragraph.
2.3 COMPANY REGISTRATION.
(a) PIGGYBACK RIGHTS. If the Company shall determine to register
any of its securities either for its own account or for the account of a
security holder or holders exercising their respective demand registration
rights (other than pursuant to this Agreement), other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a Rule 145 (or its successor rule under the Securities Act) transaction, or a
registration on any registration form that does not permit secondary sales, the
Company will:
(i) at least thirty (30) days prior to filing any such
registration statement under the Securities Act, give to each Holder written
notice thereof; and
(ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance), and
except as set forth in Section 2.3(b) below) in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder and received by the Company within twenty (20) days
after the written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify all or a
part of a Holder's Registrable Securities.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders of securities of the Company
with registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
7.
<PAGE> 8
form for offerings of the type proposed with the representative of the
underwriter or underwriters selected by the Company.
(c) PROCEDURES. Notwithstanding any other provision of this
Section 2.3, if the managing underwriter(s) advises the Company in writing that
marketing factors require a limitation on the number of Common Shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated (i) first, to the Company; (ii) second, to the Holders and
the holders of similar piggyback registration rights outstanding as of the date
of this Agreement on a pro rata basis based on the total number of Registrable
Securities and other shares of Common Stock issued or issuable upon conversion
of the Company's Series A Preferred Stock proposed to be included in the
registration by the Holders and such other stockholders; and (iii) third, to any
stockholder of the Company (other than a Holder) on a pro rata basis; provided,
however, that the aggregate value of the securities to be included in the
registration by stockholders under clause (ii) above shall not be reduced to
less than thirty percent (30%) of the total value of all securities included in
the registration. The Company shall advise all holders of securities requesting
registration of the number of securities that are entitled to be included in the
registration pursuant to the preceding sentence. If any Holder does not agree to
the terms of any such underwriting, he shall be excluded therefrom by written
notice from the Company or the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration. If securities are so withdrawn from the registration or if
the number of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with the allocation provisions of this paragraph.
2.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 2.2, 2.3 and 2.5 hereof, and reasonable fees of a single firm of
counsel for the selling stockholders for each registration, shall be borne by
the Company (but excluding underwriter(s) and banker's discounts and
commissions); provided, however, that unless the Holders bear the registration
expenses for any registration proceeding begun pursuant to Section 2.2 and
subsequently withdrawn by the Holders registering Common Shares therein, such
registration proceeding shall be counted as a requested registration pursuant to
Section 2.2 hereof for all Holders, except in the event that such withdrawal is
based upon material adverse information relating to the Company that is
different from the information known or available (upon request from the Company
or otherwise) to the Holders requesting registration at the time of their
request for registration under Section 2.2 and have withdrawn their request for
registration with reasonable promptness after learning of such material adverse
information, in which event such registration shall not be treated as a counted
registration for purposes of Section 2.2 hereof, even though the Holders do not
bear the registration expenses for such registration. All Selling Expenses
relating to securities so registered shall be borne by the Holders of such
securities pro rata on the basis of the number of Common Shares so registered on
their behalf.
8.
<PAGE> 9
2.5 REGISTRATION ON FORM S-3.
(a) After closing its Initial Public Offering, the Company shall
use its best efforts to qualify for the use of Form S-3 to register its shares
or any comparable or successor form or forms. After the Company has qualified
for the use of Form S-3 to register its shares, in addition to the rights
contained in the foregoing provisions of this Section 2, the Holders of
Registrable Securities shall have the right to request registrations on Form S-3
(such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of disposition
of such shares by such Holder or Holders), provided, however, that the Company
shall not be obligated to effect any such registration if (i) the Holders
requesting such registration propose to sell Registrable Securities in the
registration at an aggregate price to the public of less than $2,000,000, or
(ii) in the event that the Company shall furnish the certification described in
Section 2.2(b)(ii) (but subject to the limitations set forth therein) or (iii)
in a given twelve-month period, the Company has effected one (1) such
registration in such period or (iv) it is to be effected more than three (3)
years after the Initial Public Offering or (v) in any particular jurisdiction in
which the Company would be required to do business or execute a general consent
to service of process in effecting such registration, qualification or
compliance or (vi) Form S-3 is not available for such offering.
(b) If a request complying with the requirements of Section
2.5(a) hereof is delivered to the Company, the provisions of Sections 2.2(a)(i)
and (ii) and hereof shall apply to such registration. If the registration is for
an underwritten offering, the provisions of Sections 2.2(c) and 2.2(d) hereof
shall apply to such registration.
(c) Form S-3 registrations shall not be deemed to be demand
registrations as described in Section 2.2.
2.6 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to Section 2, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Shares (or other securities) of the Company; and (ii) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, up to an additional 180 days, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Securities Act, permits an offering on a
continuous or delayed basis, and provided further that applicable rules under
the Securities Act governing the obligation to file a post-effective amendment
permit, in lieu of filing a post-effective amendment that (x) includes any
prospectus required by Section l0(a)(3) of the Securities Act or (y) reflects
facts or events representing a material or fundamental change in the information
set forth in the registration statement, the incorporation by reference of
information required to be included in
9.
<PAGE> 10
(x) and (y) above to be contained in periodic reports filed pursuant to Section
13 or 15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration;
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement 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,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(h) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2.2 hereof, the Company and the
Holders registering Registrable Securities will enter into an underwriting
agreement in form reasonably necessary to effect the offer and sale of Common
Shares, provided such underwriting agreement contains customary underwriting
provisions and provided further that if the underwriter so requests the
underwriting agreement will contain customary contribution provisions.
10.
<PAGE> 11
2.7 INDEMNIFICATION.
(a) To the extent permitted by law, the Company will indemnify
each Holder, each of its officers, directors and partners, legal counsel, and
accountants and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification, or compliance has been effected pursuant to this Section 2, and
each underwriter (as defined in the Securities Act) for such Holder, if any, and
each person who controls within the meaning of Section 15 of the Securities Act
any such underwriter, against all expenses, claims, losses, damages, and
liabilities (or actions, proceedings, or settlements in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular, or other document
(including any related registration statement, notification, or the like)
incident to any such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act, Exchange Act or any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification, or compliance, and will reimburse each such Holder, each of its
officers, directors, partners, legal counsel, and accountants and each person
controlling such Holder, each such underwriter, and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, proceeding, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue statement (or
alleged untrue statement) or omission (or alleged omission) based upon written
information furnished to the Company by such Holder, officer, director, partner,
underwriter for such Holder, or controlling person of such Holder and stated to
be specifically for use therein. It is agreed that the indemnity agreement
contained in this Section 2.7(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent has not been
unreasonably withheld).
(b) To the extent permitted by law, each Holder, severally and
not jointly, will, if Registrable Securities held by him are included in the
securities as to which such registration, qualification, or compliance is being
effected, indemnify the Company, each of its directors, officers, partners,
legal counsel, and accountants and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, each other such Holder and Other Stockholder, and each of their
officers, directors, and partners, and each person controlling such Holder or
Other Stockholder, against all expenses, claims, losses, damages and liabilities
(or actions, proceedings or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or any violation, by the
Company of the Securities Act or Exchange Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such
11.
<PAGE> 12
registration, qualification, or compliance, and will reimburse the Company and
such Holders, Other Stockholders, directors, officers, partners, legal counsel,
and accountants, persons, underwriters, or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability, proceeding, or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular, or other document or such other
alleged violation by the Company of the Securities Act or Exchange Act is
committed in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holder hereunder shall not apply
to amounts paid in settlement of any such claims, losses, damages, or
liabilities (or actions in respect thereof) if such settlement is effected
without the consent of such Holder, which consent shall not be unreasonably
withheld; provided, further, that the obligations of a Holder hereunder shall be
limited to the net proceeds to such Holder from the sale of such securities.
(c) Each party entitled to indemnification under this Section 2.7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, provided that such expense shall be borne by
the Indemnifying Party if representation of the Indemnified Party by counsel to
the Indemnifying Party would be inappropriate due to any actual or potential
conflicts. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 2 to the extent such failure is not prejudicial. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 2.7 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
12.
<PAGE> 13
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. No Holder shall be required to contribute any amount
under this Section 2.7(d) in excess of the net proceeds to such Holder of all
sales of Registrable Securities under the registration in question.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The foregoing indemnity agreements of the Company and each
Holder are subject to the condition that, insofar as they relate to any untrue
statement of a material fact or an omission of a material fact made in a
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any person if a copy of the Final Prospectus was furnished to the
indemnified party and was not furnished by the indemnified person to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act.
(g) The obligations of the Company and the Holder under this
Section 2.7 shall survive the completion of any offering of Registrable
Securities in a registration statement and the termination of registration
rights under this Agreement.
2.8 INFORMATION BY HOLDER. It is a condition precedent to the Company's
obligations under Sections 2.2, 2.3 and 2.5 that each Holder of Registrable
Securities shall furnish to the Company such information regarding such Holder
and the distribution proposed by such Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Section 2.
2.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of Holders holding at least 66 2/3% in interest of the then outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company giving such holder or prospective holder
any registration rights which are senior to or on parity with those granted to
the Holders hereunder.
2.10 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, after such time as a
public market exists for the Common Shares, the Company agrees to use its best
efforts to:
(a) Make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after ninety (90) days following the
effective date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public;
13.
<PAGE> 14
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements;
(c) So long as a Holder owns any Registrable Securities, furnish
to the Holder forthwith upon written request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration (at any time after the Company has become
subject to the reporting requirements of the 1934 Act).
2.11 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted to a Holder by the Company under this
Section 2 may be transferred or assigned by a Holder only to (i) with respect to
the transfer of Registrable Securities issued or issuable upon conversion of
Series B Preferred Stock, a transferee or assignee of Registrable Securities
which constitute not less than 5% of the voting stock of the Company, on a fully
diluted basis, (ii) with respect to the transfer of Registrable Securities
issued or issuable upon conversion of Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock, a transferee or assignee of
Registrable Securities or of such Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock with at least $250,000 in value based upon the
fair market value of such shares on the date of transfer; provided that the
Company is given written notice prior to the time of such transfer or
assignment, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned; provided further, that the transferee or assignee
of such rights assumes in writing prior to such transfer or assignment, the
obligations of such Holder under this Section 2; and provided, further, that
such Holder may transfer such rights without satisfying the thresholds
established above, but otherwise giving written notice and agreeing in writing
to assume the obligations of a Holder under this section, to any parent,
subsidiary, general partner, limited partner, retired partner, member, retired
member or a liquidating trust for such Holder (or any person or entity in a
substantially similar capacity with respect to a Holder organized under the laws
of a foreign jurisdiction).
2.12 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Shares (or other securities) of the Company, each Holder
shall not sell or otherwise transfer or dispose of any Common Shares (or other
securities) of the Company then owned by such Holder (other than those included
in the registration) during the one hundred eighty (180) day period (or such
lessor period as is permitted by the underwriter) following the effective date
of a registration statement of the Company filed under the Securities Act,
provided that:
(a) such agreement shall only apply to the first such
registration statement of the Company which covers securities to be sold on its
behalf to the public in an underwritten offering; and
14.
<PAGE> 15
(b) all officers and directors of the Company then holding
securities of the Company are bound by and have entered into similar agreements.
The obligations described in this Section 2.12 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. In order to enforce the above
covenant, the Company shall have the right to place restrictive legends on the
certificates representing the Common Shares subject to this Section 2.12 and to
impose stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restriction until the end of such one hundred eighty
(180) day period.
2.13 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
2.14 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request registration or inclusion in any registration pursuant to Section 2.2,
2.3 or 2.5 shall terminate and be of no further force and effect upon the
earlier of (i) five (5) years after the date of the closing of the Company's
Initial Public Offering or (ii) Common Shares issuable upon conversion of all
Registrable Securities held by and issuable to such Holder (and its affiliates,
partners, former partners, members and former members) may be sold under Rule
144 during any ninety (90) day period.
3. FINANCIAL INFORMATION
3.1 BASIC FINANCIAL INFORMATION. The Company hereby covenants and agrees
that upon request of a Holder, it will furnish the following reports to such
Holder:
(a) As soon as practicable after the end of each fiscal year of
the Company, and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as at the end of such
fiscal year, and consolidated statements of income and cash flows of the Company
and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the previous fiscal year (if
any), all in reasonable detail and certified by independent public accountants
of recognized national standing selected by the Company.
(b) From the date the Company becomes subject to the reporting
requirements of the Exchange Act (which shall include any successor federal
statute), and in lieu of the financial information required pursuant to Sections
3.1(a) and (b), copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively.
3.2 ADDITIONAL INFORMATION AND RIGHTS.
(a) The Company will permit any Holder, so long as such Holder
(or its representative) owns at least 4% of the voting stock of the Company, on
a fully diluted basis (adjusted for stock splits, stock dividends, reverse stock
splits, recapitalizations and the like) and
15.
<PAGE> 16
to each Holder which represents that it is a "venture capital operating company"
for purposes of Department of Labor Regulation Section 2510.3-101, who requests
them (any such holder of 4% of voting stock or venture capital operating company
shall be referred to as a "Significant Holder") (or a representative of any
Significant Holder) to visit and inspect any of the properties of the Company,
including its books of account and other records, and to discuss its affairs,
finances and accounts with the Company's officers and its independent public
accountants, all at such reasonable times and as often as any such person may
reasonably request.
(b) The Company will deliver the reports described below in this
Section 3.2 to each Significant Holder:
(i) As soon as practical after the end of each month and in
any event within thirty (30) days thereafter, a consolidated balance sheet of
the Company and its subsidiaries, if any, as at the end of such month and fiscal
quarter, and consolidated statements of income and cash flows of the Company and
its subsidiaries, for each month and fiscal quarter, and for the current fiscal
year of the Company to date, all subject to normal year-end audit adjustments,
prepared in accordance with generally accepted accounting principles
consistently applied and certified by the principal financial or accounting
officer of the Company, together with a comparison of such statements to the
corresponding periods of the prior fiscal year and to the Company's operating
plan then in effect and approved by its Board of Directors.
(ii) Annually (but in any event at least thirty (30) days
prior to the commencement of each fiscal year of the Company) the financial plan
of the Company, in such manner and form as approved by the Board of Directors of
the Company, which financial plan shall include a projection of income and a
projected cash flow statement for such fiscal year and a projected balance sheet
as of the end of such fiscal year. Any material changes in such business plan
shall be submitted as promptly as practicable after such changes have been
approved by the Board of Directors of the Company.
(iii) With reasonable promptness, such other information and
data with respect to the Company and its subsidiaries as any such person may
from time to time reasonably request.
(iv) Within 30 days of receipt by the Company, a copy of the
annual management review letter of the Company's independent public accountants.
(v) As soon as practicable after transmission or occurrence
and in any event within ten days thereof, copies of any reports or
communications delivered to any class of the Company's security holders or
broadly to the financial community, including any filings by the Company with
any securities exchange, the Securities and Exchange Commission or the National
Association of Securities Dealers, Inc.
(c) The provisions of Section 3.1 and this Section 3.2 shall not
be in limitation of any rights which any Holder or Significant Holder may have
with respect to the books and records of the Company, or to inspect its
properties or discuss its affairs, finances and accounts, under the laws of the
jurisdiction in which it is incorporated.
16.
<PAGE> 17
(d) Anything in Section 3 to the contrary notwithstanding, no
Holder or Significant Holder by reason of this Agreement shall have access to
any trade secrets or classified information of the Company. Each Significant
Holder hereby agrees to hold in confidence and trust and not to disclose any
confidential information provided pursuant to this Section 3.2 and to use such
confidential information only in connection with its rights hereunder. The
Company shall not be required to comply with this Section 3.2 in respect of any
Holder whom the Company reasonably determines to be a competitor or an officer,
employee, director or greater than 10% stockholder of a competitor. In addition,
the Company shall not be required to comply with this Section 3.2 in respect of
any information the disclosure of which would jeopardize any evidentiary
privilege available under federal, state or local law, as determined by the
Company's counsel.
(e) Each Holder who represents to the Company that it is a
"venture capital operating company" for purposes of Department of Labor
Regulation Section 2510.3-101 shall in addition have the right to consult with
and advise the officers of the Company as to the management of the Company (in
addition to any other consultation rights such Holder may have under any other
agreement with the Company).
(f) The rights granted under Sections 3.1 and 3.2 shall expire
upon the earliest to occur of (i) the closing of the Initial Public Offering or
(ii) (A) the acquisition of all or substantially all the assets of the Company
or (B) an acquisition of the Company by another corporation or entity by
consolidation, merger or other reorganization in which the holders of the
Company's outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) or more of the voting power of the corporation or other entity
surviving such transaction.
(g) The rights granted under this Section 3.2 may be transferred
or assigned by a Holder only to a transferee or assignee of not less than 4% of
the voting stock of the Company, on a fully diluted basis, provided that the
Company is given written notice prior to the time of such transfer or
assignment, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned; provided further, that the transferee or assignee
of such rights assumes in writing, prior to such transfer or assignment, the
obligations of such Holder under this Section 3.2; and provided, further, that
such Holder may transfer such rights without satisfying the thresholds
established above, but otherwise giving written notice and agreeing in writing
to assume the obligations of a Holder under this section, to any parent,
subsidiary, general partner, limited partner, retired partner, member, retired
member or a liquidating trust for such Holder.
4. RIGHT OF FIRST REFUSAL
4.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to each Holder who
owns any Common Shares or any Common Shares issuable or to be issued upon
conversion of other securities of the Company held by such Holder, the right of
first refusal to purchase a pro rata share of Equity Securities (as defined in
this Section 4) which the Company may, from time to time, propose to sell and
issue. A Holder's pro rata share, for purposes of this right of first refusal,
is the ratio of the number of Common Shares owned by such Holder immediately
prior to the issuance of Equity Securities, assuming full conversion of the
Preferred Stock of the
17.
<PAGE> 18
Company held by such Holder, to the total number of Common Shares outstanding
immediately prior to the issuance of Equity Securities, assuming full conversion
of the outstanding Preferred Stock of the Company, including those held by such
Holder. This right of first refusal shall be subject to the following
provisions:
(a) "Equity Securities" shall mean any capital stock (including
Common Shares and/or any preferred stock) of the Company whether now authorized
or not, and rights, options or warrants to purchase such capital stock, and
securities of any type whatsoever that are, or may become, convertible into
capital stock; provided that the term "Equity Securities" does not include the
following:
(i) Common Shares (and/or options, warrants or other Common
Stock purchase rights issued pursuant to such options, warrants or other rights)
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like) issued or to be issued after the date hereof to employees,
officers or directors of, or consultants or advisors to the Company or any
subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors;
(ii) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement including, without limitation,
stock issuable pursuant to the Purchase Agreement, and options and warrants
outstanding as of the date of this Agreement;
(iii) up to one million eight hundred nineteen thousand six
hundred eighty six (1,819,686) shares of Series D Preferred Stock pursuant to
the Company's Call Option Agreement dated as of June 11, 1999 (the Company
hereby represents that all of such shares have been issued pursuant to such Call
Option Agreement);
(iv) any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or similar business
combination approved by the Board of Directors;
(v) Common Shares issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(vi) Common Shares issued upon conversion of Preferred Stock
of the Company;
(vii) any Equity Securities issued pursuant to any equipment
leasing or loan arrangement, or debt financing from a bank or similar financial
or lending institution approved by the Board of Directors;
(viii) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and
(ix) Common Shares or Preferred Stock issued in connection
with strategic transactions involving the Company and other entities, including
(i) joint ventures, manufacturing, marketing or distribution arrangements or
(ii) technology transfer or
18.
<PAGE> 19
development arrangements; provided that such strategic transactions and the
issuance of shares therein, has been approved by the Company's Board of
Directors.
(b) In the event the Company proposes to undertake an issuance of
Equity Securities, it shall give each Holder written notice of its intention,
describing the type of Equity Securities, and the price and the general terms
upon which the Company proposes to issue the same. Each Holder shall have ten
(10) days after any such notice is given to agree to purchase such Holder's pro
rata share of such Equity Securities for the price and upon the terms specified
in the notice by giving written notice to the Company and stating therein the
quantity of Equity Securities to be purchased.
(c) In the event the Holders fail to exercise fully the right of
first refusal within such ten (10) day period and after the expiration of the
five-day period for the exercise of the over-allotment provisions of this
Section 4, the Company shall have one hundred twenty (120) days thereafter to
sell or enter into an agreement (pursuant to which the sale of Equity Securities
covered thereby shall be closed, if at all, within one hundred twenty (120) days
from the date of such agreement) to sell the Equity Securities respecting which
the Holders' right of first refusal option set forth in this Section 4.1 was not
exercised, at a price and upon terms no more favorable to the purchasers thereof
than specified in the Company's notice to Holders pursuant to Section 4.1(b). In
the event the Company has not sold within such 120-day period or entered into an
agreement to sell the Equity Securities in accordance with the foregoing within
one hundred twenty (120) days from the date of such agreement, the Company shall
not thereafter issue or sell any Equity Securities, without first again offering
such securities to the Holders in the manner provided in Section 4.1(b) above.
(d) The rights granted under Section 4 of this Agreement shall
expire upon the earliest of, and shall not be applicable to (i) the closing of
the Initial Public Offering, (ii) seven (7) years from the date of this
Agreement, and (iii) (A) the acquisition of all or substantially all the assets
of the Company or (B) an acquisition of the Company by another corporation or
entity by consolidation, merger or other reorganization in which the holders of
the Company's outstanding voting stock immediately prior to such transaction
own, immediately after such transaction, securities representing less than fifty
percent (50%) or more of the voting power of the corporation or other entity
surviving such transaction.
(e) The right of first refusal set forth in this Section 4 may be
assigned or transferred by any Holder only to a transferee or assignee of not
less than 4% of the voting stock of the Company, on a fully diluted basis,
provided that the Company is given written notice prior to the time of such
transfer or assignment, stating the name and address of the transferee or
assignee identifying the securities with respect to which rights of first
refusal are being transferred or assigned; provided further that the transferee
or assignee of such rights assumes, in writing, prior to such transfer or
assignment, the obligation of such Holder under Section 4; and provided,
further, that such Holder may transfer such rights without satisfying the
thresholds established above, but otherwise giving written notice and agreeing
in writing to assume the obligations of a Holder under this section, to any
parent, subsidiary, general partner, limited partner, retired partner, member,
retired member or a liquidating trust for such Holder.
19.
<PAGE> 20
5. MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
5.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements with respect to the
subjects hereof except as specifically set forth herein.
5.4 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the Holders
in interest of at least 66 2/3% of the Registrable Securities; provided,
however, that so long as Investors who hold Series B Preferred Stock hold shares
of Series B Preferred Stock convertible into at least 900,000 shares of Common
Stock (as adjusted for stock splits, combinations, stock distributions, share
combinations and stock dividends), the written consent of Investors holding at
least a majority in interest of such Series B Preferred Stock shall be required
for any amendment which would have affect on their rights as Investors in a
manner that is different than the effect of such amendment on other Investors'
rights generally.
(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived as
to all Holders only with the written consent of the Holders in interest of at
least 66 2/3% of the Registrable Securities; provided, however, that so long as
Investors who hold Series B Preferred Stock hold shares of Series B Preferred
Stock convertible into at least 900,000 shares of Common Stock (as adjusted for
stock splits, combinations, stock distributions, share combinations and stock
dividends), the written consent of Investors holding at least a majority in
interest of such Series B Preferred Stock shall be required for any waiver which
would have affect on their rights as Investors in a manner that is different
than the effect of such waiver on other Investors' rights generally.
(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
Series D Preferred Stock (not to exceed an aggregate of 4,135 shares) as
"Investors," "Holders" and parties hereto. In
20.
<PAGE> 21
addition, this Agreement may be amended by the Company to include holders of the
Company's Series A Preferred Stock pursuant to Section 5.18.
5.5 NOTICES, ETC. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five (5) days (or with respect to notice to any party whose address of
record with the Company is located outside of the United States, ten (10) days)
after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day (or with respect to notice to any
party whose address of record with the Company is located outside of the United
States, four (4) business days) after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Company at the address as set
forth in the first introductory paragraph of this Agreement and to Holder at the
address set forth on Exhibit A attached hereto or at such other address as the
Company or Holder may designate by ten (10) days advance written notice to the
other parties hereto.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under this Agreement
or any waiver on such party's part of any provisions or conditions of the
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to any party, shall be cumulative and
not alternative.
5.7 RIGHTS. Unless otherwise expressly provided herein, a Holder's
rights hereunder are several rights, not rights jointly held with any of the
other Holders.
5.8 CONFIDENTIALITY. Each party hereto agrees that, except with the
prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of any party's obligations
hereunder; provided, however, that no obligation shall exist with regard to (i)
information that is generally known or publicly available at the date hereof and
(ii) information that becomes generally known or publicly available through no
action or inaction of the party. The provisions of this Section 5.8 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto.
5.9 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
21.
<PAGE> 22
5.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.11 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
5.12 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
5.13 ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.14 ADJUSTMENT FOR STOCK SPLITS, ETC. Wherever in this Agreement there
is a reference to a specific number of shares of Common Stock or Preferred Stock
of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the affect on the outstanding shares of such
class or series of stock by such subdivision, combination or stock dividend.
5.15 AGGREGATION OF STOCK. All shares held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
5.16 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
5.17 PREVIOUS WAIVERS OF RIGHT OF FIRST REFUSAL. The parties acknowledge
that certain Investors previously waived certain rights of first refusal under
the Prior Agreement in connection with the Company's issuance of Series C,
Series D and Series E Preferred Stock. The parties acknowledge that the effect
or validity of those waivers is in no way modified or affected by this
Agreement.
5.18 SERIES A PREFERRED STOCK REGISTRATION RIGHTS. The Company shall use
commercially reasonable efforts to cause the holders of its Series A Preferred
Stock to become parties to this Agreement only with respect to the provisions of
Sections 2.3 and 2.5 (and all related supplemental and restrictive provisions of
Section 2) or other terms in a form acceptable to legal counsel for the
Investors, which provisions shall amend and supercede the registration rights
provisions of those certain subscription agreements between the Series A
Preferred Stockholders and the Company.
22.
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTORS' RIGHTS AGREEMENT effective as of the day and year first
above written.
MEDIBUY.COM, INC.
By: /s/ DENNIS J. MURPHY
-------------------------------------
Name: Dennis J. Murphy
-----------------------------------
Title: President & CEO
-----------------------------------
RIDGEWOOD MEDIBUY, LLC
By: /s/ ROBERT GOLD
-------------------------------------
Name: Robert Gold
-----------------------------------
Title: President
-----------------------------------
ACORN TECHNOLOGY FUND, L.P.
By: /s/ JOHN B. TORKELSON
-------------------------------------
Name: John B. Torkelson
-----------------------------------
Title: Manager
-----------------------------------
OAK INVESTMENT PARTNERS VIII, L.P.
By: /s/ ANN H. LAMONT
-------------------------------------
Name: Ann H. LaMont
-----------------------------------
Title: Managing Member of Oak Associates
VIII, LLC, The General Partner of
Oak Investment Partners VIII
Limited Partnership
-----------------------------------
OAK VIII AFFILIATES FUND, L.P.
By: /s/ ANN H. LAMONT
-------------------------------------
Name: Ann H. LaMont
-----------------------------------
Title: Managing Member of Oak Associates
VIII, LLC, The General Partner of
Oak Investment Partners VIII
Limited Partnership
-----------------------------------
KPCB HOLDINGS, INC. AS NOMINEE
By: /s/ BROOK BUYERS
-------------------------------------
Name: Brook Buyers
-----------------------------------
Title: Vice President
-----------------------------------
EXECUTION PAGE TO
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 24
SEQUOIA CAPITAL VIII
SEQUOIA INTERNATIONAL TECHNOLOGY
PARTNERS VIII
SEQUOIA INTERNATIONAL TECHNOLOGY
PARTNERS VIII(Q)
By: SC VIII MANAGEMENT, LLC
a California limited liability
company its General Partner
By: /s/ Mark Stevens
--------------------------------
Managing Member
CMS PARTNERS LLC
SEQUOIA 1997
By: /s/ Mark Stevens
--------------------------------
STANFORD UNIVERSITY
By: /s/ Carol Gilmer
--------------------------------
Carol Gilmer
Gift Administrator, Stanford
Management Co. On behalf of the
Board of Trustees of the Leland
Stanford Junior University
/s/ John Stevens
------------------------------------
JOHN STEVENS
EPARTNERS,
a Delaware general partnership
BY NEWS AMERICA INCORPORATED,
its general partner
By: /s/ Lawrence A. Jacobs
--------------------------------
Name: Lawrence A. Jacobs
------------------------------
Title: Senior Vice President
-----------------------------
DLJ PRIVATE EQUITY PARTNERS FUND, L.P.
By: WSW Capital, Inc.
--------------------------------
By: /s/ Ivy Dodes
--------------------------------
Name: Ivy Dodes
------------------------------
Title: Vice President
-----------------------------
EXECUTION PAGE TO
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 25
DLJ FUND INVESTMENT PARTNERS II, L.P.
By: DLJ LBO Plans Management
Corporation
By: /s/ IVY DODES
--------------------------------
Name: Ivy Dodes
------------------------------
Title: Vice President
-----------------------------
DLJ CAPITAL CORPORATION
By: /s/ IVY DODES
--------------------------------
Name: Ivy Dodes
------------------------------
Title: Vice President
-----------------------------
DLJ ESC II L.P.
By: DLJ LBO Plans Management
Corporation
By: /s/ IVY DODES
--------------------------------
Name: Ivy Dodes
------------------------------
Title: Vice President
-----------------------------
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
By: DLJ LBO Plans Management
Corporation
By: /s/ IVY DODES
--------------------------------
Name: Ivy Dodes
------------------------------
Title: Vice President
-----------------------------
GOLDMAN SACHS GROUP, INC.
By: /s/ JOSEPH GLEBERMAN
--------------------------------
Name: Joseph Gleberman
------------------------------
Title: Vice President
-----------------------------
EXECUTION PAGE TO
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 26
TAILWIND CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners, LLC
General Partner
By: /s/ DAVID BAYLOR
---------------------------------
Name: David Baylor
------------------------------
Title: General Counsel
------------------------------
TWP MEDIBUY INVESTORS
By: /s/ DAVID BAYLOR
---------------------------------
Name: David Baylor
------------------------------
Title: General Partner
------------------------------
ALLIANZ CAPITAL PARTNERS GMBH
By: /s/ THOMAS PEUTTER /s/ M. ARNOLD
---------------------------------
Name: Thomas Putter/M. Arnold
------------------------------
Title: CEO/Senior Financial Manager
------------------------------
/s/ Jochen Noelke
-----------------------------
JOCHEN NOELKE
MERITECH CAPITAL PARTNERS L.P.
By: Meritech Capital Associates
L.L.C.
Its General Partner
By: Meritech Management Associates
L.L.C.
a managing member
By: /s/ PAUL S. MADERA
---------------------------------
Paul S. Madera, a managing member
EXECUTION PAGE TO
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 27
MERITECH CAPITAL AFFILIATES L.P.
By: Meritech Capital Associates L.L.C.
Its General Partner
By: Meritech Management Associates L.L.C.
a managing member
By: /s/ PAUL S. MADERA
--------------------------------
Paul S. Madera, a managing member
EXECUTION PAGE TO
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 28
EXHIBIT A
INVESTORS
ACORN TECHNOLOGY FUND, L.P.
5 Vaughn Drive
Princeton, NJ 08540
OAK INVESTMENT PARTNERS VIII, L.P.
OAK VIII AFFILIATES FUND, L.P.
1 Gorham Island
Westport, CT 06880
Attn: Ann Lamont
RIDGEWOOD MEDIBUY, LLC
Ridgewood Commons
947 Linwood Avenue
Ridgewood, NJ 07450
JOHN STEVENS
1107 Cowper Street
Palo Alto, CA 94301
SEQUOIA CAPITAL VIII
SEQUOIA INTERNATIONAL TECHNOLOGY PARTNERS VIII
SEQUOIA INTERNATIONAL TECHNOLOGY PARTNERS VIII(Q)
CMS PARTNERS LLC
SEQUOIA 1997
3000 Sand Hill Road, Bldg. 4, Suite 280
Menlo Park, CA 94025
Attn: Mark Stevens
KPCB HOLDINGS, INC., AS NOMINEE
2750 Sand Hill Road
Menlo Park, CA 94025
STANFORD UNIVERSITY
c/o Stanford Management Company
2770 Sand Hill Road
Menlo Park, CA 94025
Attn: Carol Gilmer
<PAGE> 29
EPARTNERS
Address:________________________________
________________________________________
GOLDMAN SACHS GROUP, INC.
Address:________________________________
________________________________________
DLJ FUND INVESTMENT PARTNERS II, L.P.
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
DLJ PRIVATE EQUITY PARTNERS FUND, L.P.
DLJ ESC II L.P.
DLJ CAPITAL CORPORATION
Address:________________________________
________________________________________
TAILWIND CAPITAL PARTNERS, L.P.
TWP MEDIBUY INVESTORS
Address:________________________________
________________________________________
GC&H INVESTMENTS
Address: One Maritime Plaza, 20th Floor, San Francisco, CA 94111-3580
MERITECH CAPITAL PARTNERS L.P.
MERITECH CAPITAL AFFILIATES L.P.
Address:
ALLIANZ CAPITAL PARTNERS GMBH
Address: Theresienstrase 1-5, 80333 Munich, Germany
Fax No.: 4989 38 0075 86
JOCHEN NOELKE
Address: Kimming 22, 25348 Glueckstadt, Germany
Tel. No.: 4941 24 97127
<PAGE> 1
EXHIBIT 10.20
MEDIBUY.COM, INC.
AMENDED AND RESTATED STOCKHOLDER AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDER AGREEMENT (this "Agreement") is
made and entered into as of January 7, 2000, by and among MEDIBUY.COM, INC., a
Delaware corporation (the "Company"), each of the persons and entities listed on
EXHIBIT A hereto (the "Investors") and the stockholders listed on EXHIBIT B
hereto (each referred to herein as a "Founder" and collectively as the
"Founders").
WHEREAS, the Company previously entered into a Stockholder Agreement
dated as of June 11, 1999 with certain of its stockholders and subsequently
amended the Prior Agreement in connection with the issuance and sale of shares
of its Series E Preferred Stock as of December 30, 1999 (collectively, the
"Prior Agreement");
WHEREAS, the parties desire to further amend the Prior Agreement and
enter into this Agreement in connection with the issuance of additional shares
of its Series E Preferred Stock.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company, the Founders and the Investors who are parties to the
Prior Agreement hereby agree that the Prior Agreement shall be superceded and
replaced in its entirety by this Agreement, and the parties hereto further agree
as follows:
1. DEFINITIONS.
1.1 "Founder Stock" shall mean common stock of the Company ("Common
Stock") now owned or subsequently acquired by the Founders by gift, purchase,
dividend, option exercise or any other means whether or not such securities are
only registered in a Founder's name or beneficially or legally owned by such
Founder, including any interest of a spouse in any of the Founder Stock, whether
that interest is asserted pursuant to marital property laws or otherwise. The
number of shares of Founder Stock owned by the Founders as of the date hereof
are set forth on EXHIBIT B, which Exhibit may be amended from time to time by
the Company to reflect changes in the number of shares owned by the Founders,
but the failure to so amend shall have no effect on such Founder Stock being
subject to this Agreement.
1.2 "Investor Stock" shall mean Common Shares now owned or subsequently
acquired by the Investors whether or not such securities are only registered in
an Investor's name or the name of a beneficiary or otherwise legally owned by
such Investor.
1.3 "Common Shares" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon conversion of the Company's outstanding
shares of Preferred Stock ("Preferred Stock") or exercise of any option, warrant
or other security or right of any kind convertible into or exchangeable for
Common Stock.
1
<PAGE> 2
1.4 "Transfer" shall mean any sale, assignment, encumbrance,
hypothecation, pledge, conveyance in trust, gift, transfer by bequest, devise or
descent, or other transfer or disposition of any kind, including, but not
limited to, transfers to receivers, levying creditors, trustees or receivers in
bankruptcy proceedings or general assignees for the benefit of creditors,
whether voluntary or by operation of law, directly or indirectly, of any of the
Founder Stock.
1.5 "Stockholder" shall mean each holder of Founder's Stock and/or
Investor Stock.
1.6 "Shares" shall mean shares of voting capital stock of the Company.
2. TRANSFERS BY A FOUNDER.
2.1 NOTICE OF TRANSFER. If a Founder proposes to Transfer any shares of
Founder Stock then the Founder shall promptly give written notice (the "Notice
of Transfer") simultaneously to each of the Investors and the Company at least
sixty (60) days prior to the closing of such Transfer. The Notice of Transfer
shall describe in reasonable detail the proposed Transfer including, without
limitation, the number of shares of Founder Stock to be transferred, the nature
of such Transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the Transfer is being
made pursuant to the provisions of Section 3.1, the Founder shall only be
required to give Notice of Transfer to the Company, and the Notice of Transfer
shall state under which section the Transfer is being made.
2.2 INVESTOR RIGHT OF FIRST REFUSAL.
(a) Each Investor shall have the right, exercisable upon written
notice to the Founder (the "Investor Notice") within twenty (20) days after the
receipt of the Notice of Transfer, to purchase its pro rata share of the Founder
Stock subject to the Notice of Transfer and on the same terms and conditions as
set forth therein. The Investors who so exercise their rights (the
"Participating Investors") shall effect the purchase of the Founder Stock,
including payment of the purchase price, not more then ten (10) days after
delivery of the Investor Notice (the "Right of First Refusal Period"), and at
such time the Founder shall deliver to the Investors the certificate(s)
representing the Founder Stock to be purchased by the Participating Investors,
each certificate to be properly endorsed for transfer.
(b) Each Participating Investor's pro rata share shall be equal
to the product obtained by multiplying (x) the aggregate number of shares of
Founder Stock covered by the Notice of Transfer and (y) a fraction, the
numerator of which is the number of Common Shares owned by the Participating
Investor at the time of the Transfer and the denominator of which is the total
number of Common Shares owned by all of the Participating Investors at the time
of the Transfer.
(c) Notwithstanding any other provision of this Agreement, the
selling Founder shall be under no obligation to sell shares as described in this
Section 2.2 unless the aggregate number of shares of Founder Stock purchased by
the Participating Investors as a result of the exercise of rights pursuant to
this Section 2.2 shall constitute all of the Founder Stock described in the
Notice of Transfer issued by the selling Founder pursuant to Section 2.1.
2
<PAGE> 3
2.3 RIGHT OF CO-SALE.
(a) In the event the Investors fail to exercise their rights to
purchase all of the Founder Stock subject to Section 2.2 hereof, following
expiration of the rights of purchase set forth in Section 2.2, then the Founder
shall deliver within five (5) days of the expiration of the Right of First
Refusal Period to the Company and each Investor written notice (the "Co-Sale
Notice") that each Investor shall have the right, exercisable upon written
notice to such Founder within fifteen (15) days after receipt of the Co-Sale
Notice, to participate in such Transfer of Founder Stock on the same terms and
conditions. The Investors' written notice of election to participate shall
indicate the number of shares of Investor Stock such Investor wishes to sell
under his or her right to participate. To the extent one or more of the
Investors exercise such right of participation in accordance with the terms and
conditions set forth below, the number of shares of Founder Stock that such
Founder may sell in the transaction shall be correspondingly reduced.
(b) Each Investor may sell all or any part of that number of
shares equal to the product obtained by multiplying (i) the aggregate number of
shares of Founder Stock covered by the Co-Sale Notice by (ii) a fraction the
numerator of which is the number of Common Shares owned by such Investor at the
time of the Transfer and the denominator of which is the total number of Common
Shares owned by such Founder and all of the Co-Sale Participants (defined below)
who elect to sell Investor Shares in the Transfer pursuant to the co-sale right
under this Section 2.3.
(c) Each Investor who elects to participate in the Transfer
pursuant to this Section 2.3 (a "Co-Sale Participant") shall effect its
participation in the Transfer by promptly delivering to such Founder for
transfer to the prospective purchaser one or more certificates, properly
endorsed for transfer, which represent:
(i) the type and number of shares of Common Stock which
such Co-Sale Participant elects to sell; or
(ii) that number of shares of Preferred Stock which is at
such timeconvertible into the number of shares of Common Stock which such
Co-Sale Participant elects to sell; provided, however, that if the prospective
purchaser objects to the delivery of Preferred Stock in lieu of Common Stock,
such Participant shall convert such Preferred Stock into Common Stock and
deliver Common Stock as provided in Section 2.3(c)(i) above. The Company agrees
to make any such conversion concurrent with the actual transfer of such shares
to the prospective purchaser.
(d) The stock certificate or certificates that the Co-Sale
Participant delivers to such Founder pursuant to Section 2.3(c) shall be
transferred to the prospective purchaser in consummation of the sale of the
Common Shares pursuant to the terms and conditions specified in the Co-Sale
Notice, and the Founder shall concurrently therewith remit to such Co-Sale
Participant that portion of the sale proceeds to which such Co-Sale Participant
is entitled by reason of its participation in such sale. To the extent that any
prospective purchaser or purchasers prohibits such assignment or otherwise
refuses to purchase shares or other securities from a Co-Sale Participant
exercising its rights of co-sale hereunder, such Founder shall not sell
3
<PAGE> 4
to such prospective purchaser or purchasers any Founder Stock unless and until,
simultaneously with such sale, such Founder shall purchase such shares or other
securities from such Co-Sale Participant on the same terms and conditions
specified in the Co-Sale Notice.
(e) The exercise or non-exercise of the rights of the Investors
hereunder to participate in one or more Transfers of Founder Stock made by such
Founder shall not adversely affect their rights to participate in subsequent
Transfers of Founder Stock subject to Section 2.1.
(f) If none of the Investors elects to participate in the co-sale
of the Founder Stock subject to the Co-Sale Notice, such Founder may, not later
than ninety (90) days following delivery to the Company of the Co-Sale Notice,
enter into an agreement providing for the closing of the Transfer of the Founder
Stock covered by the Co-Sale Notice within thirty (30) days of such agreement at
the price and on terms and conditions not materially more favorable to the
transferor than those described in the Co-Sale Notice. Any proposed Transfer on
terms and conditions materially more favorable than those described in the
Co-Sale Notice, as well as any subsequent proposed Transfer of any of the
Founder Stock by a Founder, shall again be subject to the first refusal and
co-sale rights of the Investors and shall require compliance by a Founder with
the procedures described in this Section 2.
3. EXEMPT TRANSFERS.
3.1 Notwithstanding the foregoing, the first refusal rights of the
Investors set forth in Section 2.2 and co-sale rights of the Investors set forth
in Section 2.3 shall not apply to (i) any transfer or transfers by a Founder
which in the aggregate, over the term of this Agreement, amount to no more than
.05% of the outstanding capital stock, (ii) any transfer without consideration
therefor to the ancestors, descendants or spouse or to trusts for the benefit of
such persons or the Founder, (iii) any transfer or transfers by a Founder to
another Founder (the "Transferee-Founder") so long as the Transferee-Founder is,
at the time of the transfer, employed by or acting as a consultant or director
of the Company, (iv) any pledge of Founder Stock made pursuant to a bona fide
loan transaction that creates a mere security interest, (v) any bona fide gift,
or (vi) any transfer or transfers in connection with that certain letter
agreement dated June 11, 1999, among Richard Propper, the Company, Oak
Investment Partners and Sequoia Capital; provided that in the event of any
transfer made pursuant to one of the exemptions provided by clauses (ii), (iii),
(iv) and (v), (A) the Founder shall inform the Investors of such pledge,
transfer or gift prior to effecting it and (B) the pledgee, transferee or donee
shall furnish the Investors with a written agreement to be bound by and comply
with all provisions of Section 2. Except with respect to Founder Stock
transferred under clauses (i) and (vi) above (which Founder Stock shall no
longer be subject to the right of first refusal and co-sale rights of the
Investors), such transferred Founder Stock shall remain "Founder Stock"
hereunder, and such pledgee, transferee or donee shall be treated as the
"Founder" for purposes of this Agreement.
3.2 Notwithstanding the foregoing, the provisions of Section 2 shall not
apply to the sale of any Founder Stock pursuant to a registration statement
filed with, and declared effective by, the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act").
4
<PAGE> 5
3.3 This Agreement is subject to and shall in no manner limit the right
which the Company may have to repurchase securities from the Founder pursuant to
a stock restriction agreement or other agreement between the Company and the
Founder.
4. PROHIBITED TRANSFERS.
4.1 In the event that a Founder should Transfer any Founder Stock in
contravention of the co-sale rights of each Investor under this Agreement (a
"Prohibited Transfer"), each Investor, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
below, and such Founder shall be bound by the applicable provisions of such
option.
4.2 In the event of a Prohibited Transfer, each Investor shall have the
right to sell to such Founder the type and number of Common Shares equal to the
number of shares each Investor would have been entitled to transfer to the
purchaser under Section 2.3 hereof had the Prohibited Transfer been effected
pursuant to and in compliance with the terms hereof. Such sale shall be made on
the following terms and conditions:
(a) The price per share at which the shares are to be sold to the
Founder shall be equal to the price per share paid by the purchaser to such
Founder in such Prohibited Transfer. The Founder shall also reimburse each
Investor for any and all fees and expenses, including reasonable legal fees and
expenses, incurred pursuant to the exercise or the attempted exercise of the
Investor's rights under Section 2.3.
(b) Within sixty (60) days after the date on which an Investor
received notice of the Prohibited Transfer or otherwise became aware of the
Prohibited Transfer, such Investor shall, if exercising the option created
hereby, deliver to the Founder the certificate or certificates representing
shares to be sold, each certificate to be properly endorsed for transfer.
(c) Such Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by an Investor, pursuant to this Section
4.2, pay the aggregate purchase price therefor and the amount of reimbursable
fees and expenses, as specified in Section 4.2(a), in cash or by other means
acceptable to the Investor.
(d) Notwithstanding the foregoing, any attempt by a Founder to
transfer Founder Stock in violation of Section 2.2 or 2.3 hereof shall be
voidable at the option of Investors holding at least 66 2/3% in interest of the
Common Shares held by Investors and with regard to the co-sale right only, if
the Investors do not elect to exercise the put option set forth in this Section
4. The Company agrees it will not effect any transfer of Founder Stock nor will
it treat any alleged transferee as the holder of such shares without (and it
will instruct its transfer agent and registrar not to transfer any shares of
Founder Stock without notification by the Company of its receipt of) the written
consent of Investors holding at least 66 2/3% in interest of the Common Shares
held by Investors.
5
<PAGE> 6
5. ADDITIONAL TRANSFER LIMITATIONS.
5.1 LEGEND. Each certificate representing shares of Founder Stock now or
hereafter owned by the Founder or issued to any person in connection with a
transfer pursuant to Section 3.1 hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE
AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE COMPANY AND CERTAIN
HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
5.2 STOP TRANSFER. The Founders agree that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in Section 5.1 above to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
6. MISCELLANEOUS.
6.1 CONDITIONS TO EXERCISE OF RIGHTS. Exercise of the Investors' rights
under this Agreement shall be subject to and conditioned upon, and the Founders
and the Company shall use their best efforts to assist each Investor in,
compliance with applicable laws.
6.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
6.3 AMENDMENT. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), subject to the termination
provisions of Section 6.5(c), only by the written consent of (i) as to the
Company, by the Company, (ii) as to the Investors, by Investors holding at least
66 2/3% in interest of the Common Shares held by the Investors and their
assignees, pursuant to Section 6.4 hereof; provided, however, that so long as
Investors who hold Series B Preferred Stock hold shares of Series B Preferred
Stock convertible into at least 900,000 Common Shares (on a fully diluted basis
and as adjusted for stock splits, share combinations, stock distributions and
stock dividends), the written consent of Investors holding at least a majority
in interest of such Series B Preferred Stock shall also be required if any such
amendment or waiver would affect their rights as Series B Preferred Stockholders
in a manner different than the effect of such amendment or waiver on other
Investors' rights generally, and (iii) as to the Founders, only by each of the
Founders; provided, that no consent of any Founder shall be necessary for any
amendment and/or restatement which includes additional holders of Preferred
Stock or other preferred stock of the Company as "Investors" and parties hereto.
Any amendment or waiver effected in accordance with clauses (i), (ii) and (iii)
of this Section 6.3 shall be binding upon each Investor, its successors and
assigns, the Company and the Founders.
6
<PAGE> 7
6.4 ASSIGNMENT OF RIGHTS. This Agreement and the rights and obligations
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives.
6.5 TERM. This Agreement shall continue in full force and effect from
the date hereof through the earliest of the following dates, on which date it
shall terminate in its entirety:
(a) the date of the closing of a firmly underwritten public
offering of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission (the "SEC"), and declared effective under the
Securities Act, provided that (i) the per share price is at least $25.00 (as
adjusted for stock splits, dividends, recapitalizations and the like) and (ii)
the gross cash proceeds to the Company (before underwriting discounts,
commissions and fees) are at least $40,000,000 (a "Qualified Public Offering");
(b) the date of the closing of a sale, lease or other disposition
of all or substantially all of the Company's assets or the Company's merger into
or consolidation with any other corporation or other entity, or any other
corporate reorganization, in which the holders of the Company's outstanding
voting stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the corporation or other entity surviving such transaction, provided
that this Section 6.5(b) shall not apply to a merger effected exclusively for
the purpose of changing the domicile of the Company; or
(c) the date as of which the parties hereto terminate this
Agreement by written consent of Investors holding at least 66 2/3% in interest
of the Common Shares held by Investors and a majority in interest of the
Founders; provided, however, that for so long as Investors who hold Series B
Preferred Stock hold shares of Series B Preferred Stock convertible into at
least 900,000 Common Shares (on a fully diluted basis and as adjusted for stock
splits, combinations, stock dividends and stock distributions), the provisions
of Section 6.13(c) shall not be terminated without the written consent of the
Investors holding at least a majority in interest of such Series B Preferred
Stock.
6.6 OWNERSHIP. The Founders represent and warrant that each is the sole
legal and beneficial owner of those shares of Founder Stock he or she currently
holds subject to this Agreement and that no other person has any interest (other
than a community property interest) in such shares.
6.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed facsimile if sent during
normal business hours of the recipient; if not, then on the next business day,
(iii) five (5) days (or with respect to notice to any party whose address of
record with the Company is located outside of the United States, ten (10) days)
after having been sent by certified mail, return receipt requested, postage
prepaid, or (iv) one (1) day (or with respect to notice to any party whose
address of record with the Company is located outside of the United States, four
(4) business days) after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All
communications shall be sent to the party to be notified at the address as set
forth on the signature page hereof or
7
<PAGE> 8
at such other address as such party may designate by ten (10) days advance
written notice to the other parties hereto.
6.8 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
6.9 ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.10 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
6.11 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.13 BOARD OF DIRECTORS.
(a) From and after the date of this Agreement and until the
provisions of this Section 6.13 cease to be effective, each Stockholder shall
vote all Shares over which such Stockholder has voting control, and will take
all other necessary or desirable actions within his or its control (whether in
his or its capacity as a Stockholder, director, member of a board of directors'
committee or officer of the Company or otherwise), and the Company will take all
necessary and desirable actions within its control, in order to cause:
(i) the authorized number of directors on the Company's
Board of Directors (the "Board") to be established at ten (10) directors and
meetings of the Board shall be scheduled at least once each calendar quarter;
(ii) each of the Common and Series A Directors, the Series
B Director, the Series C and D Directors and the Combined Class Director (all as
defined in the Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate")) to be elected to the Board as follows:
(A) The Series C and D Directors. So long as the
holders of Series C Preferred Stock and Series D Preferred Stock are entitled to
elect the Series C and D
8
<PAGE> 9
Directors, Stockholders shall vote their shares of Series C Preferred Stock and
Series D Preferred Stock to elect as the Series C and Series D Directors three
(3) representatives designated as follows: one (1) member designated by Oak
Investment Partners VIII, L.P. ("Oak"), one (1) member designated by KPCB
Holdings, Inc. ("KPCB"), and one (1) member designated by Sequoia Capital
("Sequoia"). Ann H. Lamont shall be the initial Oak designee, Mark Stevens shall
be the initial Sequoia designee and Brook H. Byers shall be the initial KPCB
designee;
(B) The Series B Director. So long as the holders
of Series B Preferred Stock are entitled to elect the Series B Director,
Stockholders shall vote their shares of Series B Preferred Stock to elect as the
Series B Director one (1) representative designated by the holders of a majority
in interest of the outstanding Series B Shares, who shall initially be Robert
Gold;
(C) The Common and Series A Directors. Stockholders
shall vote their shares of Series A Preferred Stock and Common Stock to elect as
the Common and Series A Directors four (4) representatives designated by the
holders of a majority in interest of the Common Stock and Series A Preferred
Stock, voting together on an as converted basis, who shall initially be Dennis
Murphy, Jim Hersma, Richard D. Propper and John Stevens;
(D) The Combined Class Director. Two (2)
representatives designated by the holders of a majority in interest of the
Preferred Stock andCommon Stock, voting together on an as-converted basis, who
shall initially be Charles Smith and Douglas Allred.
(iii) any committees or subcommittees of the Board or any
of the Company's subsidiary board of directors must be determined by the Board
including the Series C and D Directors.
(iv) the removal from the board (with or without cause)
of any representative at the written request of the Stockholder(s) entitled to
designate such representative under clause (ii) above, but only upon such
written request and under no other circumstances; and
(v) in the event that any representative designated
hereunder forany reason ceases to serve as a member of the Board during his or
her term of office, the resulting vacancy on the Board to be filled by a
representative designated as provided in clause (ii) above by the Stockholder(s)
entitled to designate such representative under clause (ii) above.
(b) Robert Gold, Richard Propper and Charles Smith agree to
resign effective immediately prior to the filing of the Registration Statement
for a Qualified Public Offering. Their successors shall be nominated by the
Board of Directors and each Stockholder agrees to vote Shares over which such
Stockholder has voting control to elect such nominated successors. The parties
hereby also agree that following the filing of the Registration Statement and
until such time as the Registration Statement becomes effective, each of the
foregoing resigning directors shall have the right to attend meetings of the
Board of Directors in a non-voting, observer capacity. If the Registration
Statement has not been declared effective by the SEC within four (4) months from
the date of its filing with the SEC, then each of such resigning
9
<PAGE> 10
directors shall be re-elected to the Board of Directors; provided, however, that
if the Company is diligently attempting to cause the Registration Statement to
become effective, then such directors shall be re-elected upon the date six (6)
months (instead of four (4) months) following the filing date (but only if the
Registration Statement has still not been declared effective as of such date);
provided further, that if the Registration Statement thereafter becomes
effective, such directors shall resign upon the effectiveness of the
Registration Statement.
(c) No Stockholder shall vote to approve any amendment of the
Restated Certificate that will have the effect of modifying or eliminating the
ability of the holders of Series B Preferred Stock to appoint a Series B
Director without the written consent of the holders of at least a majority
interest of the outstanding Series B Preferred Stock.
(d) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
and any committee thereof and in connection with any projects assigned to such
director by the Board and any committee thereof.
(e) The provisions of this Section 6.13 will terminate
automatically and be of no further force and effect upon the earlier of the
occurrence of a Qualified Public Offering or, with respect to each Investor,
such time as such Investor ceases to own, legally or beneficially, any Shares.
6.14 SALE OF THE COMPANY IN THE EVENT REDEMPTION NOT CONSUMMATED.
(a) If any Shares subject to the redemption provided for in
Section IV.D.5 of the Restated Certificate remain outstanding after the third
Redemption Date (as defined therein) following the completion of the procedures
set forth in such Section 5, due solely to the Company's failure to redeem the
Shares as required thereby, then the Investors requesting such redemption
(acting by a majority of the Shares held by such Investors) may instead request,
by delivering a written notice to the Company (a "Sale Notice"), that the
Company effect a Sale of the Company (as defined below) yielding consideration
to the Company or its Stockholders consisting of at least 90% cash or readily
marketable securities, whereupon the primary mandate and duty of the Company's
Board and Stockholders shall be to effect a Sale of the Company to an
independent third party or other person or entity reasonably acceptable to such
Investors (acting by a majority of the Shares held by the Investors) requesting
redemption.
(b) In exercising its obligation to effect a Sale of the Company,
the Company and the Company's Board shall have full and plenary power and
authority, subject to the limitations of Section 6.14(a), to enter into a
transaction providing for a Sale of the Company (an "Exit Transaction") and to
take any and all such further action in connection therewith as the Board may
deem necessary or appropriate in order to consummate any such Exit Transaction.
Subject only to the cash and marketable securities requirements of Section
6.14(a) and subject to its fiduciary obligations, the Company's Board, in
exercising its obligations under this Section, shall have complete discretion
over the terms and conditions of any Exit Transaction effected thereby,
including, without limitation, price, nature of consideration, payment terms,
conditions to closing, representations, warranties, affirmative covenants,
negative covenants, indemnification, holdbacks and escrows.
10
<PAGE> 11
(c) In conducting an Exit Transaction, the Company's Board shall
be guided by corporate law principles and decisions governing the sale of a
Delaware corporation or its assets with a goal of maximizing such corporation's
value at a sale or liquidation for its Stockholders' benefit. Without limiting
the foregoing, the Company's Board shall enjoy the benefit of the business
judgment rule and other protections afforded directors under Delaware law with
respect to all of their decisions and actions in connection with any Exit
Transaction to the maximum extent permitted by law.
(d) The Company and each Founder hereby agrees, (i) to consent
to, vote for, or otherwise not dissent from the approval of such Sale of the
Company approved by a majority of the Board of Directors pursuant to Section
6.14 and by the Investors requesting redemption (acting by a majority in
interest (on an as-converted basis) of the Shares held by such Investors) in any
Stockholders' action to be taken with respect to such transaction and (ii) to
take any and all action and to do and perform any and all acts and things
necessary (including executing stock powers, purchase agreements and/or other
agreements and instruments) for the Company to effect such Sale of the Company.
(e) As used in this Section 6.14, a "Sale of the Company" shall
mean a sale of all or substantially all of the capital stock or assets of the
Company or a merger of the Company with another entity on terms and conditions
which are determined by the Board of Directors in good faith to be in the best
interests of the Company's Stockholders and providing for the payment in cash,
readily marketable securities or in such other form of consideration at closing
as shall be acceptable to the Board of Directors, all as approved by the
Company's Stockholders (if necessary) under applicable law.
[THIS SPACE INTENTIONALLY LEFT BLANK]
11
<PAGE> 12
The foregoing AMENDED AND RESTATED STOCKHOLDER AGREEMENT is hereby
executed as of the date first above written.
COMPANY:
MEDIBUY.COM, INC.
By: /s/ NORMAN FARQUHOR
----------------------------------
Name: Norman Farquhor
--------------------------------
Title: EVP & CFO
-------------------------------
FOUNDERS:
/s/ RICHARD D. PROPPER
--------------------------------------
Richard D. Propper
/s/ MICHAEL E. CHERMAK
--------------------------------------
Michael D. Chermak
/s/ JIM HERSMA
--------------------------------------
Jim Hersma
/s/ DENNIS MURPHY
--------------------------------------
Dennis Murphy
/s/ CHARLES SMITH
--------------------------------------
Charles Smith
/s/ JOHN STEVENS
--------------------------------------
John Stevens
EXECUTION PAGE TO AMENDED AND RESTATED STOCKHOLDER AGREEMENT
<PAGE> 13
INVESTORS:
ACORN TECHNOLOGY FUND, L.P.
By: Acorn Technology Partners, LLC
General Partner
By: /s/ JOHN B. TORKELSEN
----------------------------------
Name: John B. Torkelsen
--------------------------------
Title: Manager
-------------------------------
KPCB HOLDINGS, INC., AS NOMINEE
By: /s/ BROOK BYERS
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
OAK INVESTMENT PARTNERS VIII, L.P.
By: /s/ ANN H. LAMONT
----------------------------------
Name: Ann H. Lamont
--------------------------------
Title: Managing Member of Oak
Associates VII, LLC, the
General Partner of Oak
Investment Partners VIII
Limited Partnership
-------------------------------
OAK VIII AFFILIATES FUND, L.P.
By: /s/ ANN H. LAMONT
----------------------------------
Name: Ann H. Lamont
--------------------------------
Title: Managing Member of Oak VIII
Affiliates, LLC, the General
Partner of Oak VIII Affiliates
Fund, Limited Partnership
-------------------------------
RIDGEWOOD MEDIBUY, LLC
By: /s/ ROBERT L. GOLD
----------------------------------
Name: Robert L. Gold
--------------------------------
Title: President
-------------------------------
EXECUTION PAGE TO AMENDED AND RESTATED STOCKHOLDER AGREEMENT
<PAGE> 14
SEQUOIACAPITAL VIII SEQUOIA
INTERNATIONAL TECHNOLOGY PARTNERS VIII
SEQUOIA INTERNATIONAL TECHNOLOGY
PARTNERS VIII (Q)
By: SC VIII MANAGEMENT, LLC a
California limited liability
company its General Partner
By: /s/ MARK STEVENS
----------------------------------
Managing Member
CMS PARTNERS LLC
SEQUOIA 1997
By: /s/ MARK STEVENS
----------------------------------
STANFORD UNIVERSITY
By: /s/ CAROL GILMER
----------------------------------
Carol Gilmer, Gift Administrator,
Stanford Management Co.
On Behalf of the Board of
Trustees of the Leland
Stanford Junior University
/s/ JOHN STEVENS
--------------------------------------
John Stevens
EPARTNERS, a Delaware general
partnership
BY NEWS AMERICA INCORPORATED, its
general partner
By: /s/ LAWRENCE A. JACOBS
----------------------------------
Name: Lawrence A. Jacobs
--------------------------------
Title: Senior Vice President
-------------------------------
DLJ PRIVATE EQUITY PARTNERS FUND, L.P.
By: WSW Capital, Inc.
----------------------------------
By: /s/ IVY DODES
----------------------------------
Name: Ivy Dodes
--------------------------------
Title: Vice President
-------------------------------
EXECUTION PAGE TO AMENDED AND RESTATED STOCKHOLDER AGREEMENT
<PAGE> 15
DLJ FUND INVESTMENT PARTNERS II, L.P.
By: DLJ LBO Plans Management Corporation
By: /s/ IVY DODES
----------------------------------
Name: Ivy Dodes
--------------------------------
Title: Vice President
-------------------------------
DLJ CAPITAL CORPORATION
By: /s/ IVY DODES
----------------------------------
Name: Ivy Dodes
--------------------------------
Title: Vice President
-------------------------------
DLJ ESC II L.P.
By: DLJ LBO Plans Management Corporation
BY: IVY DODES
----------------------------------
Name: /s/ IVY DODES
--------------------------------
Title: Vice President
-------------------------------
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
By: DLJ LBO Plans Management Corporation
----------------------------------
By: /s/ IVY DODES
----------------------------------
Name: Ivy Dodes
--------------------------------
Title: Vice President
-------------------------------
GOLDMAN SACHS GROUP, INC.
By: /s/ JOSEPH GLEBERMAN
----------------------------------
Name: Joseph Gleberman, V.P.
--------------------------------
Title:
-------------------------------
TAILWIND CAPITAL PARTNERS, L.P.
By: Thomas Weisel Capital Partners LLC
General Partner
By: /s/ DAVID BAYLOR
----------------------------------
Name: David Baylor
--------------------------------
Title: General Counsel
-------------------------------
EXECUTION PAGE TO AMENDED AND RESTATED STOCKHOLDER AGREEMENT
<PAGE> 16
TWP MEDIBUY INVESTORS
By: /s/ DAVID BAYLOR
----------------------------------
Name: David Baylor
--------------------------------
Title: General Partner
-------------------------------
ALLIANZ CAPITAL PARTNERS GMBH
By: /s/ THOMAS POTTER/MARTIN ARNOLD
----------------------------------
Name: Thomas Potter/Martin Arnold
--------------------------------
Title: CEO/Sen. Inv. Manager
-------------------------------
/s/ JOCHEN NOELKE
--------------------------------------
JOCHEN NOELKE
MERITECH CAPITAL PARTNERS L.P.
By: Meritech Capital Associates L.L.C.
Its General Partner
By: Meritech Management Associates
L.L.C. a managing member
By: /s/ PAUL S. MADERA
-----------------------------------
Paul S. Madera, a managing member
EXECUTION PAGE TO AMENDED AND RESTATED STOCKHOLDER AGREEMENT
<PAGE> 17
MERITECH CAPITAL AFFILIATES L.P.
By: Meritech Capital Associates L.L.C.
Its General Partner
By: Meritech Management Associates
L.L.C. a managing member
By: /s/ PAUL S. MADERA
----------------------------------
Paul S. Madera, a managing member
Acknowledged and agreed with
respect to the provisions of Section
6.13(b).
- --------------------------------------
Robert Gold
EXECUTION PAGE TO AMENDED AND RESTATED STOCKHOLDER AGREEMENT
<PAGE> 18
EXHIBIT A
LIST OF INVESTORS
ACORN TECHNOLOGY FUND, L.P.
OAK INVESTMENT PARTNERS VIII, L.P.
OAK VIII AFFILIATES FUND, L.P.
RIDGEWOOD MEDIBUY, LLC
SEQUOIA CAPITAL VIII
SEQUOIA INTERNATIONAL TECHNOLOGY PARTNERS VIII
SEQUOIA INTERNATIONAL TECHNOLOGY PARTNERS VIII (Q)
CMS PARTNERS LLC
SEQUOIA 1997
KPCB HOLDINGS, INC., AS NOMINEE
JOHN STEVENS
STANFORD UNIVERSITY
EPARTNERS
GOLDMAN SACHS GROUP, INC.
DLJ FUND INVESTMENT PARTNERS II, L.P.
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
DLJ PRIVATE EQUITY PARTNERS FUND, L.P.
DLJ ESC II L.P.
DLJ CAPITAL CORPORATION
TAILWIND CAPITAL PARTNERS, L.P.
TWP MEDIBUY INVESTORS
GC&H INVESTMENTS
MERITECH CAPITAL PARTNERS L.P.
MERITECH CAPITAL AFFILIATES L.P.
ALLIANZ CAPITAL PARTNERS GMBH
JOCHEN NOELKE
<PAGE> 19
EXHIBIT B
LIST OF FOUNDERS
<TABLE>
<CAPTION>
SHARES OF
NAME OF FOUNDER COMMON STOCK
--------------- ------------
<S> <C>
Michael D. Chermak 661,670
Richard D. Propper 726,660
Jim Hersma 78,125
Dennis Murphy 75,000*
Charles Smith 315,000
John Stevens 400,000
---------
Total 2,256,455
=========
</TABLE>
----------
*Includes shares held by permitted transferees of Founder
<PAGE> 1
EXHIBIT 10.21
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE -- MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
August 1, 1999, is made by and between KILROY REALTY, L.P., a Delaware Limited
Partnership, KILROY REALTY CORPORATION, a Maryland Corporation, General Partner
("LESSOR") and MEDIBUY.com, INC., a Delaware Corporation ("LESSEE"),
(collectively the "PARTIES," or individually a "PARTY").
1.2(a) PREMISES: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 10120 Pacific Heights Boulevard, Suite
100, located in the City of San Diego, County of San Diego, State of California,
with zip code 92121, as outlined on Exhibit "A" attached hereto ("PREMISES").
The "BUILDING" is that certain building containing the Premises and generally
described as (describe briefly the nature of the Building): a single story
office/commercial building containing approximately 52,540 rentable square feet,
a plot plan of which is attached hereto as Exhibit "B," located in an
industrial center comprised of two (2) buildings containing a total of
approximately 90,558 rentable square feet, a plot plan of which is attached
hereto as Exhibit "C." The Premises contain approximately 36,091 rentable square
feet. In addition to Lessee's rights to use and occupy the Premises as
hereinafter specified, Lessee shall have non-exclusive rights to the Common
Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall
not have any rights to the roof, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements thereon, are herein collectively referred to as
the "INDUSTRIAL CENTER." (Also see Paragraph 2.)
1.2(b) PARKING: one hundred twenty-six (126) unreserved vehicle parking
spaces ("UNRESERVED PARKING SPACES"); and -0- reserved vehicle parking spaces
("RESERVED PARKING SPACES"). (Also see Paragraph 2.6 and paragraph 60 of the
Addendum to Lease.)
1.3 TERM: approximately five (5) years and three (3) months ("ORIGINAL
TERM") commencing August 1, 1999 (the "Lease Term Commencement Date"). Lessee
shall commence payment of Base Rent upon substantial completion of Lessee
Improvements by Lessor, as set forth in paragraph 51 of the Addendum to Lease,
estimated to be November 1, 1999, but in no event prior to November 1, 1999
("COMMENCEMENT DATE") and ending on the last day of the calendar month five (5)
years after the Commencement Date, estimated to be October 31, 2004, subject to
one (1) five-year option to renew ("EXPIRATION DATE"). (Also see Paragraph 3 and
paragraph 62 of the Addendum to Lease.)
1.4 EARLY POSSESSION: Lessee may obtain early possession of the Premises
as more particularly described in paragraph 50 of the Addendum to Lease ("EARLY
POSSESSION DATE"). (Also see Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: $36,091.00 per month ("BASE RENT"), payable on the first
day of each month commencing on the Commencement Date. (Also see Paragraph 4.)
[x] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum 49, attached hereto.
1.6(a) BASE RENT PAID UPON EXECUTION: $36,091.00 as Base Rent for the
period first full month of the Lease Term. Base Rent for any partial month at
the Commencement Date of the Term shall be prorated as provided in paragraph 4.1
of this Lease and shall be based upon the later of the first day of the first
full month of the Lease Term or ten (10) days following Lessee's receipt of an
invoice from Lessor.
1.6(b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: sixty-eight and
69/100 percent (68.69%) of the Building, and the Building is fifty-eight and
02/100 percent (58.02%) of the Industrial Center ("LESSEE'S SHARE") as
determined by [x] pro rata square footage of the Premises as compared to the
total square footage of the Building and the prorata square footage of the
Building as compared to the total square footage of the Industrial Center,
respectively or [ ] other criteria as described in Addendum ________.
1.7 SECURITY DEPOSIT: $36,091.00 (equivalent to 1st month's rent)
("SECURITY DEPOSIT"). (Also see Paragraph 5.)
1.8 PERMITTED USE: General office, customer support and other permitted
uses per the MIB zoning of the City of San Diego. Lessee shall have access to
and may use the Premises 7 days per week, 365 days per year ("PERMITTED USE")
(Also see Paragraph 6.)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY." (Also see Paragraph
8.)
1.10(a) REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
[x] CB Richard Ellis, Inc. (Doug Lozier) represents Lessor exclusively
("LESSOR'S BROKER");
[x] CB Richard Ellis, Inc. (Christopher Pascale) represents Lessee exclusively
("LESSEE'S BROKER"); or
[ ] _____________________ represents both Lessor and Lessee ("DUAL AGENCY").
(Also see Paragraph 15.)
1.10(b) PAYMENT TO BROKERS. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker.
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by N/A ("GUARANTOR"). (Also see Paragraph 37.)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 70, and Exhibits "A" through "E", all of
which constitute a part of this Lease.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area Operating Expenses, is
an approximation which Lessor and Lessee agree is reasonable and the rental and
Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or
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<PAGE> 2
less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be
reasonable or appropriate to rectify the non-compliance. Lessor makes no
warranty that the Permitted Use in Paragraph 1.8 is permitted for the Premises
under Applicable Laws (as defined in Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including, but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations, and any
covenants or restrictions of record (collectively, "APPLICABLE LAWS") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties. Provided, however, that if
non-compliance is latent in nature, the time period for notice to lessor shall
be within ninety (90) days from the Commencement Date.
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "PERMITTED SIZE
VEHICLES." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
reasonable prior notice to Lessee, or no notice in the event of an emergency, in
addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide the
parking facilities required by Applicable Law.
(d) Unreserved parking spaces shall be provided to Lessee at no cost
during the Term of the Lease, including any extension to the Lease Term.
Reserved parking spaces shall be provided to Lessee at the current rate therefor
as established by Lessor from time to time and shall be subject to availability.
2.7 COMMON AREAS -- DEFINITION. The term "COMMON AREAS" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
nonexclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 COMMON AREAS -- LESSEE'S RIGHTS. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.
2.9 COMMON AREAS -- RULES AND REGULATIONS. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable Rules and Regulations, as set forth in Exhibit "D,"
attached hereto with respect thereto in accordance with Paragraph 40. Lessee
agrees to abide by and conform to all such Rules and Regulations, and to cause
its employees, suppliers, shippers, customers, contractors and invitees to so
abide and conform. Lessor shall use commercially reasonable efforts to enforce
said Rules and Regulations against all tenants occupying the Building, however,
Lessor shall not be responsible to Lessee for the non-compliance with said rules
and regulations by other lessees of the Industrial Center.
2.10 COMMON AREAS -- CHANGES. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land adjacent to but now outside the
boundaries of the Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas
provided that Lessee's use and occupancy of the Premises Common Areas and
parking facilities is not materially, adversely affected;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may, in
the exercise of sound business judgment, deem to be appropriate.
3. TERM.
3.1 TERM. The Lease Term Commencement Date, Commencement Date, Expiration
Date and Original Term of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the
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<PAGE> 3
Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten after the end of
said sixty (60) day period, cancel this Lease, in which event the Parties shall
be discharged from all obligations hereunder. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee. See
also paragraphs ?? and 53 of the Addendum to Lease.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes of
this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
(i) The operation, repair and maintenance, in neat, clean,
good order and condition, of the following:
(aa) The Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to service
the Common Areas.
(iii) Trash disposal, property management and security services
and the costs of any environmental inspections.
(iv) Real Property Taxes (as defined in Paragraph 10.2) to be
paid by Lessor for the Building and the Common Areas under Paragraph 10 hereof.
(v) The costs of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.
(vi) Any deductible portion of an insured loss concerning the
Building or the Common Areas.
(vii) Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes
that are specifically attributable to the Building or to any other building in
the Industrial Center or to the operation, repair and maintenance thereof, shall
be allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services
set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation
upon Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be
payable by Lessee within ten (10) days after a reasonably detailed statement of
actual expenses is presented to Lessee by Lessor. At Lessor's option, however,
an amount may be estimated by Lessor from time to time of Lessee's Share of
annual Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessee shall be credited the amount of such
overpayment against Lessee's Share of Common Area Operating Expenses next
becoming due. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said statement,
Lessee shall pay to Lessor the amount of the deficiency within ten (10) days
after delivery by Lessor to Lessee of said statement.
(e) Lessee's Share of Common Area Operating Expenses is
established to be $0.20 per rentable square foot per $7,218.20 per month.
Lessor agrees that Common Area Operating Expenses which are controllable by
Lessor shall not exceed a ?//???
of greater than five percent (5%) per year, compounded. Controllable Common
Area Expenses are all costs and ??//?????
constituting Common Area Operating Expense, except as set forth in paragraph 54
of the Addendum excluding the following ??/?????
utilities, including services performed by governmental agencies such as trash
and rubbish collection; (ii) Real Property ???///???
Insurance premiums; (IV) service performed b y employees of Lessor who are
members of a union and who have a union ??//????
Lessor (Operating Engineers are the only employees now so included); (v)
services performed by independent contractors of Less?? ??//?????
independent contractors have union employees and a union contract (janitorial
contractors may meet this definition in the futu?? ??//????
costs or expenses required by Applicable Laws or added or Interpreted to apply
to the Building subsequent to the date of this ???????;
(vii) costs and expenses specifically permitted by this Lease.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth in Paragraph 1.7 as security for
Lessee's faithful performance of Lessee's obligations under this Lease. If
Lessee fails to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor may
use, apply or retain all or any portion of said Security Deposit for the payment
of any amount due Lessor or to reimburse or compensate Lessor for any liability,
cost, expense, loss or damage (including attorneys' fees) which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefore deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is reasonably
Page 3 of 14
<PAGE> 4
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful, creates waste or a nuisance,
or that disturbs owners and/or occupants of, or causes damage to the Premises or
neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lessor's reasonable objections to
the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS SUBSTANCE"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity in or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Requirements (as defined in
Paragraph 6.3). "REPORTABLE USE" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage,
use, transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and (iii) the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but in compliance with all Applicable
Requirements, use any ordinary and customary materials reasonably required to be
used by Lessee in the normal course of the Permitted Use, so long as such use is
not a Reportable Use and does not expose the Premises or neighboring properties
to any meaningful risk of contamination or damage or expose Lessor to any
liability therefor. In addition, Lessor may (but without any obligation to do
so) condition its consent to any Reportable Use of any Hazardous Substance by
Lessee upon Lessee's giving Lessor such additional assurances as Lessor, in its
reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environment against damage, contamination or injury and/or
liability therefor, including but not limited to the installation (and, at
Lessor's option, removal on or before Lease expiration or earlier termination)
of reasonably necessary protective modifications to the Premises (such as
concrete encasements) and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"APPLICABLE REQUIREMENTS," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene; (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions; and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("LENDERS") shall have the right
to enter the Premises at any time in the case of an emergency, except that in an
emergency, Lessor shall use its best efforts to provide reasonable notice, and
otherwise at reasonable times, with at least forty-eight (48) hours prior notice
to Lessee, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease and all Applicable Requirements
(as defined in Paragraph 6.3), and Lessor shall be entitled to employ experts
and/or consultants in connection therewith to advise Lessor with respect to
Lessee's activities, including but not limited to Lessee's installation,
operation, use, monitoring, maintenance, or removal of any Hazardous Substance
on or from the Premises. The costs and expenses of any such inspections shall be
paid by the party requesting same, unless a Default or Breach of this Lease by
Lessee or a violation of Applicable Requirements or a contamination, caused or
materially contributed to by Lessee, is found to exist or to be imminent, or
unless the inspection is requested or ordered by a governmental authority as the
result of any such existing or imminent violation or contamination. In such
case, Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case
may be, for the costs and expenses of such inspections. In the event of any
entry by Lessor onto the Premises pursuant to this paragraph 6.4, Lessor shall
use its best efforts not to interfere with Lessee's business operations.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) Lessor shall, at Lessee's sole cost and expense, procure and maintain
a contract in customary form and substance for and with a contractor
specializing and experienced in the inspection, maintenance and service of the
heating, air conditioning and ventilation system for the Premises. However,
Lessee shall not be obligated for any heating, ventilation or air conditioning
system maintenance, repair, inspection service or contractor costs on the first
six (6) months of the Lease Term, unless the necessity therefore was caused by
the negligence or willful act of Lessee. Lessee shall contract for electrical
energy service directly from the electric utility provider and Lessee shall
perform its own Premises janitorial services. However
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(c) If Lessee fails to perform Lessee's obligations under this Paragraph
7.1, Lessor may enter upon the Premises after ten (10) days' prior written
notice to Lessee (except in the case of an emergency, in which case no notice
shall be required), perform such obligations on Lessee's behalf, and put the
Premises in good order, condition and repair, in accordance with Paragraph 13.2
below.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to terminate this Lease because of Lessor's failure to
keep the Building, Industrial Center or Common Areas in good order, condition
and repair. Notwithstanding the provisions of this paragraph 7.2, if Lessor
fails to commence any necessary maintenance or repair pursuant to this paragraph
within five (5) business days of Lessee's written request regarding same, Lessee
shall have the right to cause such repair or maintenance to be performed at
Lessor's expense, and to deduct the reasonable cost thereof, with interest
thereon at the highest rate permitted by law, from Lessee's Base Rent.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS" is
used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "TRADE FIXTURES"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "ALTERATIONS" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "LESSEE-OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent, unless (a) the cost of said
Alteration or Utility Installation does not exceed $5,000.00; and (b) said
Alteration or Utility Installation does not affect any structural or exterior
portions of the Building or Industrial Center, or adversely affect the Building
or Industrial Center's electrical, plumbing or HVAC systems. Lessee may make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, so long as they
are not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.
(b) CONSENT. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor, which consent shall
not be unreasonably withheld, shall be presented to Lessor in written form with
detailed plans. All consents given by Lessor, whether by virtue of Paragraph
7.3(a) or by subsequent specific consent, shall be deemed conditioned upon: (i)
Lessee's acquiring all applicable permits required by governmental authorities;
(ii) the furnishing of copies of such permits together with a copy of the plans
and specifications for the Alteration or Utility Installation to Lessor prior to
commencement of the work thereon; and (iii) the compliance by Lessee with all
conditions of said permits in a prompt and expeditious manner. Any Alterations
or Utility Installations by Lessee during the term of this Lease shall be done
in a good and workmanlike manner, with good and sufficient materials, and be in
compliance with all Applicable Requirements. Lessee shall promptly upon
completion thereof furnish Lessor with as-built plans and specifications
therefor. Lessor may (but without obligation to do so) condition its consent to
any requested Alteration or Utility Installation that costs $2,500.00 or more
upon Lessee's providing Lessor with a lien and completion bond in an amount
equal to one and one-half times the estimated cost of such Alteration or Utility
Installation.
(c) LIEN PROTECTION. Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor, in an amount equal to
one and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal and to
cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require that
any or all Lessee-Owned Alterations or Utility Installations be removed by the
expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the end
of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUMS. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Commencement Date or Expiration
Date.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during the
term of this Lease a Commercial General Liability policy of insurance protecting
Lessee, Lessor and any Lender(s) whose names have been provided to Lessee in
writing (as additional insureds) against claims for bodily injury, personal
injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than ???? $2,000,000 per occurrence
with an "Additional Insured-Managers or Lessors of Premises" endorsement and
contain the "Amendment of the Pollution Exclusion" endorsement for damage caused
by heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "INSURED CONTRACT"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of
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Lessee nor relieve Lessee of any obligation hereunder. All insurance to be
carried by Lessee shall be primary to and not contributory with any similar
insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 PROPERTY INSURANCE -- BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor's policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), including coverage for any additional
costs resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Building required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered loss, but not including plate glass insurance. Said
policy or policies shall also contain an agreed valuation provision in lieu of
any co-insurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in force during the
term of this Lease a policy or policies in the name of Lessor, with loss payable
to Lessor and any Lender(s), insuring the loss of the full rental and other
charges payable by all lessees of the Building to Lessor for one year (including
all Real Property Taxes, insurance costs, all Common Area Operating Expenses and
any scheduled rental increases). Said insurance may provide that in the event
the Lease is terminated by reason of an insured loss, the period of indemnity
for such coverage shall be extended beyond the date of the completion of repairs
or replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any co-insurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income, Real
Property Taxes, insurance premium costs and other expenses, if any, otherwise
payable, for the next 12-month period. Common Area Operating Expenses shall
include any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. Lessee shall pay for any increase in the premiums
for the property insurance of the Building and for the Common Areas or other
buildings in the Industrial Center if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property and the restoration of Trade Fixtures and
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor,
Lessee shall provide Lessor with written evidence that such insurance is in
force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V, or such other rating as may be required by a Lender, as set forth
in the most current issue of "Best's Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Lessor. Lessee shall, at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other, for loss or damage to their property arising out of or incident to the
perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 INDEMNITY.
(a) Except for Lessor's negligence and/or breach of express warranties,
Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor
and its agents, Lessor's master or ground lessor, partners and Lenders, from and
against any and all claims, loss of rents and/or damages, costs, liens,
judgments, penalties, loss of permits, attorneys' and consultants' fees,
expenses and/or liabilities arising out of, involving, or in connection with,
the occupancy of the Premises by Lessee, the conduct of Lessee's business, any
act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee, upon notice from Lessor, shall defend
the same at Lessee's expense by counsel reasonably satisfactory to Lessor and
Lessor shall cooperate with Lessee in such defense. Lessor need not have first
paid any such claim in order to be so indemnified.
(b) Lessor shall protect, defend and hold harmless Lessee and Lessee's
employees, officers, agents, directors and shareholders, and their respective
successors and assigns, from and against any and all claims, demands, losses,
liabilities, damages, costs and expenses, including, without limitation,
attorneys and consultants' fees and the costs and expenses of defense arising
out of or resulting from (i) Lessor's or Lessor's Agents' breach of any covenant
representation or warranty under the Lease; and (ii) Lessor's or Lessor's
Agents' negligence or willful misconduct.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
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(c) "INSURED LOSS" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PREMISES PARTIAL DAMAGE -- INSURED LOSS. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, Lessor shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If Lessor does not receive such funds or assurance within such
ten (10) day period, and if Lessor does not so elect to restore and repair, then
this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 PARTIAL DAMAGE -- UNINSURED LOSS. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may, at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one month's Base Rent, whether or not an Insured Loss, Lessor may, at Lessor's
option, terminate this Lease effective sixty (60) days following the date of
occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense, repair such damage as soon as reasonably possible
and this Lease shall continue in full force and effect. If Lessee fails to
exercise such option and provide such funds or assurance during such period,
then this Lease shall terminate as of the date set forth in the first sentence
of this Paragraph 9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired. Except for abatement
of Base Rent, Common Area Operating Expenses and other charges, if any, as
aforesaid, all other obligations of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "COMMENCE" as used in this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may, at
Lessor's option, either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000, whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the excess costs of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount equal to twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater. Lessee shall provide Lessor with the funds
required of Lessee or satisfactory assurance thereof within thirty (30) days
following said commitment by Lessee. In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.8 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. REAL PROPERTY TAXES.
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10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as defined
in Paragraph 10.2, applicable to the Industrial Center, and except as otherwise
provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITION. As used herein, the term "REAL PROPERTY
TAXES" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "REAL PROPERTY TAXES" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this Lease,
or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties. In calculating Real Property Taxes for any calendar
year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including, but not limited to, electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon. If
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly metered or
billed with other premises in the Building, in the manner and within the time
periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, unless such assignment or
subletting is permitted pursuant to paragraph 63 of the Addendum.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, and after the first sublease or
assignment, together with a non-refundable deposit of $1,000 as reasonable
consideration for Lessor's considering and processing the request for consent.
Lessee agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed,
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<PAGE> 9
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "DEFAULT" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"BREACH" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common Area
Operating Expenses, or any other monetary payment required to be made by Lessee
hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially
false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency in Lessor's reasonable discretion),
without notice (except that in an emergency Lessor shall use its best efforts to
provide reasonable notice), Lessor may at its option (but without obligation to
do so), perform such duty or obligation on Lessee's behalf, including, but not
limited to, the obtaining of reasonably required bonds, insurance policies, or
governmental licenses, permits or approvals. The costs and expenses of any such
performance by Lessor shall be due and payable by Lessee to Lessor upon invoice
therefor. If any check given to Lessor by Lessee shall not be honored by the
bank upon which it is drawn, Lessor, at its own option, may require all future
payments to be made under this Lease by Lessee to be made only by cashier's
check. In the event of a Breach of this Lease by Lessee (as defined in Paragraph
13.1), with or without further notice or demand, and without limiting Lessor in
the exercise of any right or remedy which Lessor may have by reason of such
Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
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unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, the cost of
recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and that portion of any leasing commission paid by Lessor in connection with
this Lease applicable to the unexpired term of this Lease. The worth at the time
of award of the amount referred to in provision (iii) of the immediately
preceding sentence shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco or the Federal Reserve Bank
District in which the Premises are located at the time of award plus one percent
(1%). Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach
of this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any part thereof in a separate suit for such
rent and/or damages. If a notice and grace period required under Subparagraphs
13.1(b), (c) or (d) was not previously given, a notice to pay rent or quit, or
to perform or quit, as the case may be, given to Lessee under any statute
authorizing the forfeiture of leases for unlawful detainer shall also constitute
the applicable notice for grace period purposes required by Subparagraph
13.1(b), (c) or (d). In such case, the applicable grace period under the
unlawful detainer statute shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two (2) such grace periods shall constitute both an unlawful detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in this Lease
and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The Parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any Lender(s) whose name and address shall have been furnished to Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be
entitled to any compensation, separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above Lessee's share of
the legal and other expenses incurred by Lessor in the condemnation matter,
repair any damage to the Premises caused by such condemnation authority. Lessee
shall be responsible for the payment of any amount in excess of such net
severance damages required to complete such repair.
15. BROKERS' FEES
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
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16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each Party (as "RESPONDING PARTY") shall within ten
(10) days after written notice from the other Party (the "REQUESTING PARTY")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "TENANCY STATEMENT" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance, or sell
the Premises or the Building, or any part thereof, Lessee and all Guarantors
shall deliver to any potential lender or purchaser designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably required
by such lender or purchaser, including, but not limited to, Lessee's financial
statements for the past three (3) years. All such financial statements shall be
received by Lessor and such lender or purchaser in confidence and shall be used
only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises. In the event
of a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may by written notice to the other
specify a different address for notice purposes, except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for the purpose of mailing or delivering notices to Lessee. A copy of
all notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the state in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
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hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "PREVAILING PARTY" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, but in the event of an emergency, Lessor shall use its best efforts
to provide reasonable notice to Lessee and otherwise at reasonable times, with
at least forty-eight (48) hours prior notice, for the purpose of showing the
same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
Building, as Lessor may reasonably deem necessary. Lessor may at any time place
on or about the Premises or Building any ordinary "For Sale" signs and Lessor
may at any time during the last one hundred eighty (180) days of the term hereof
place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessor's consent shall not preclude the impositions
by Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 FORM OF GUARANTY. If there are to be any Guarantors of this Lease per
Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this Lease, including but not limited to the obligation to
provide the Tenancy Statement and information required in Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a Default of
the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. QUIET POSSESSION. Upon payment by Lessee of the Rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Lease, the word "OPTION" has the following
meaning: (a) the right to extend the term of this Lease or to renew this Lease
or to extend or renew any lease that Lessee has on other property of Lessor; (b)
the right of first refusal to lease the Premises or the right of first offer to
lease the Premises or the right of first refusal to lease other property of
Lessor or the right of first offer to lease other property of Lessor; (c) the
right to purchase the Premises, or the right of first refusal to purchase the
Premises, or the right of first offer to purchase the Premises, or the right to
purchase other property of Lessor, or the right of first refusal to purchase
other property of Lessor, or the right of first offer to purchase other property
of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be voluntarily or involuntarily assigned or exercised by any person or
entity other than said original Lessee while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later option cannot be exercised unless the prior
Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate Default under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("RULES AND REGULATIONS") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
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preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
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<PAGE> 14
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS,
UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS
TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON
THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The Parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: _________________________ Executed at: _________________________
on: __________________________________ on: __________________________________
BY LESSOR: BY LESSEE:
KILROY REALTY, L.P. MEDIBUY.com,INC.,
a Delaware Limited Partnership A Delaware Corporation
By: KILROY REALTY CORPORATION,
A Maryland Corporation,
General Partner
By:___________________________________ By:___________________________________
Name Printed:_________________________ Name Printed:_________________________
Title:________________________________ Title:________________________________
By:___________________________________ By:___________________________________
Name Printed:_________________________ Name Printed:_________________________
Title:________________________________ Title:________________________________
Address: 2250 E. Imperial Highway Address:______________________________
Suite 360
El Segundo, CA 90245
Telephone: (310)563-5500 Telephone: (___)______________________
Facsimile: (310)416-9113 Facsimile: (___)______________________
BROKER: BROKER:
Executed at:__________________________ Executed at:__________________________
on:___________________________________ on:___________________________________
By:___________________________________ By:___________________________________
Name Printed:_________________________ Name Printed:_________________________
Title:________________________________ Title:________________________________
Address:______________________________ Address:______________________________
______________________________________ ______________________________________
Telephone: (___)______________________ Telephone: (___)______________________
Facsimile: (___)______________________ Facsimile: (___)______________________
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing
the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700
South Flower Street, Suite 600, Los Angeles, California 90017. (213)
687-8777.
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ADDENDUM TO THAT CERTAIN LEASE DATED
AUGUST 1, 1999
BY AND BETWEEN
KILROY REALTY, L.P.,
A DELAWARE LIMITED PARTNERSHIP
KILROY REALTY CORPORATION,
A MARYLAND CORPORATION,
GENERAL PARTNER
("LESSOR")
- AND -
MEDIBUY.COM, INC.,
("LESSEE")
FOR THAT REAL PROPERTY COMMONLY KNOWN AS:
10120 PACIFIC HEIGHTS BOULEVARD, SUITE 100, SAN DIEGO, CA 92121
49. RENT ADJUSTMENT. Upon each twelfth (12th) month anniversary date of the
term Commencement Date of the Premises, during each year of the Lease
Term, Lessee's monthly Base Rent shall increase by three and one-half
percent (3.50%) over the monthly Base Rent paid during the immediately
preceding twelve (12) month period.
50. EARLY POSSESSION. Pursuant to paragraph 1.4 of the Lease, Lessee may take
early possession of the Premises, prior to the completion of Lessor's
construction of the Lessee Improvements, as more particularly described in
Exhibit "E", attached hereto, for the purpose of installing Lessee's
furniture, fixtures and equipment, provided, however, that Lessee's early
possession shall not interfere with or in any way delay completion of the
Lessee Improvements. If Lessee's early possession results in a delay in
completion of the Lessee Improvements, and a subsequent delay in the Lease
Commencement Date, the Lease Term shall commence and Base Rent shall be
paid effective on the date on which the Premises would have been delivered
to Lessee ready for occupancy but for the delay caused by Lessee's early
possession. If the substantial completion of the Lessee Improvement Work
occurs prior to November 1, 1999, then Lessee shall have the right to
occupy the Premises prior to November 1, 1999, provided that (A) Lessee
shall give Lessor at least ten (10) days' prior notice of any such
occupancy of the Premises, (B) a temporary certificate of occupancy shall
have been issued by the appropriate governmental authorities (or Lessee
shall have obtained the appropriate permit or approval allowing Lessee to
legally occupy the Premises) for each such portion to be occupied, and (C)
all of the terms and conditions of the Lease shall apply, other than
Lessee's obligation to pay Base Rent and Lessee's Share of Common Area
Operating Expenses, as though the Commencement Date had occurred (although
the Commencement Date shall not actually occur until the occurrence of the
same pursuant to the terms of paragraph 3 of the Lease) upon such
occupancy of a portion of the Premises by Lessee.
51. CONDITION OF PREMISES; LESSEE IMPROVEMENTS. Except as otherwise set forth
in the Lease, Lessee acknowledges that it has made a thorough inspection
of the Premises and Lessee has and shall accept the Premises in the
present "as is" condition thereof at the Commencement Date of the Lease,
as more particularly described in Exhibit "E", attached hereto, subject to
the obligation of Lessor to complete the Allowance Work, as more
particularly described in said Exhibit "E."
52. RENTABLE SQUARE FEET OF PREMISES; ADJUSTMENTS.
52.1 Standard of Calculation. For purposes of the Lease, "Rentable Area,"
"Rentable Square Feet," "Rentable Square Footage" and "Usable
Square Feet" shall be calculated under the American National
Standard Method for Measuring Floor Area in Buildings, ANSI/BOMA
Z65.1-1996 or successor standard(s), adopted by the Building Owners
and Managers Association International ("BOMA").
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52.2 Verification of Rentable Area of Premises, Building and Industrial
Center. The Rentable Area of the Premises and the Building is
subject to verification from time to time by Lessor's architect or
consultant specializing in such calculations (e.g. computer modeling
and calculation specialists); provided that the determination of the
Rentable Square Feet of the Premises shall be made following the
completion of all of Lessor's Work to the Premises and shall not
thereafter be changed except for discovery of an error in the
measurement of the Premises or the calculation of the Rentable or
Usable Square Feet contained in the Building or the Premises. Lessor
agrees to use its reasonable best efforts to cause the Determination
to be made and completed prior to Lease Commencement Date. That
verification shall be made in accordance with this paragraph.
Lessee's architect and/or consultant may consult with Lessor and
Lessor's architect and/or consultant. The determination of Lessor's
architect and/or consultant shall be conclusive and binding on the
parties.
52.3 Adjustment of Base Rent. If Lessor's architect and/or consultant
determines that the Rentable Area or the Usable Area of the Premises
or the Building is different from that stated in the Lease (the
"Determination"), all Rent, Lessee's Security Deposit and Lessee's
Share of Common Area Operating Expenses that is based on that
incorrect Rentable Area or Usable Area shall be modified in
accordance with that Determination. PROVIDED, HOWEVER, that in no
event shall the Determination result in a change from the rentable
or usable square footage set forth in paragraph 1.2(a) of the Lease,
of greater than fifteen percent (15%). If the Determination is made,
it shall be confirmed in writing by Lessor to Lessee. Any over
payment or under payment of Base Rent or Additional Rent resulting
from such Determination shall be adjusted and paid by Lessee to
Lessor or credited to Lessee by Lessor, as the case may be, at the
next Base Rent payment date.
52.4 Amendment to Lease. In the event of any such Determination, Lessor
and Lessee shall execute an amendment to the Lease in the reasonable
form prepared by Lessor incorporating the results of such
Determination and other matters thus known affecting the provisions
and covenants of the Lease by reason of the Determination.
53. COMMENCEMENT DATE GUARANTY/DELAY IN DELIVERY OF PREMISES. If Lessor is
unable to substantially complete the Lessee Improvement Work pursuant to
the provisions of Exhibit "E" and deliver possession of the Premises to
Lessee on or before November 1, 1999 (which time period shall be extended
to the extent of any "Lessee Delay," as that term is defined in paragraph
5.1 of the Work Letter Agreement attached hereto as Exhibit "E," as
described therein Lessor shall not be subject to any liability for its
failure to do so, except that Lessee shall be entitled to a rent credit of
$250.00 per day until such date as Lessor obtains a temporary Certificate
of Occupancy. Said rent credit shall appear as reduced rent and applied to
the Base Rent due Lessor during the second full month of the Lease Term.
This failure shall not affect the validity of the Lease or the obligations
of Lessee under it, but the Term shall commence on the date on which
Lessor delivers possession of the Premises to Lessee with the Lessee
Improvement Work substantially completed. The Expiration Date of the Term
of the Lease shall be extended for a like period plus any additional
period required to make the Expiration Date the last day of the calendar
month. Promptly following the delivery of the Premises to Lessee, Lessor
and Lessee shall execute a written confirmation of the Commencement Date
and Expiration Date of the Term.
54. COMMON AREA OPERATING EXPENSES. Except as set forth in this paragraph 54,
Lessee shall pay Common Area Operating Expenses in accordance with the
provisions of paragraph 4.2 of the Lease.
54.1 Exclusions from Common Area Operating Expenses. The following are
excluded from the definition of Common Area Operating Expenses:
(i) capital costs and improvements, except as otherwise set
forth herein and except for capital improvements made by Lessor as a
replacement or
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labor saving measure primarily for the benefit of lessees of the
Building, or that reduce Operating Expenses (to the extent of the
reduction received or to be received over the anticipated useful
life thereof), or that are required under any governmental law or
regulation for energy conservation, fire, life or safety purposes,
such costs to be amortized over the anticipated useful life thereof;
(ii) costs of special services rendered to individual
lessees (including Lessee) for which a special charge is made or
customarily is made for which Lessor is entitled to be reimbursed as
additional rent or other charge not included in said tenant's base
rent, including any escalations payable under said tenant's lease;
(iii) principal, interest, points and fees on debt or
amortization payments on any real property mortgages or deeds of
trust, or ground lease payments, including refinancing fees and late
payment penalties;
(iv) costs of improvements for Lessee or other lessees of
the Building or for preparing vacant space;
(v) costs of services or other benefits of a type which are
not available to Lessee but which are available to other lessees or
occupants;
(vi) costs for which Lessor is reimbursed by other lessees of
the Building other than through payment of lessees' shares of
Common Area Operating Expenses and Real Property Taxes, except that
in no event shall Lessor collect more than 100% of any actual cost;
(vii) leasing commissions, attorneys' fees, disbursements and
other expenses incurred in connection with leasing space in the
Building or enforcing such leases;
(viii) depreciation or amortization, other than as specifically
enumerated in the definition of Operating Expenses herein, and as
determined by Lessor in accordance with generally accepted
accounting and management practices of Lessor consistently applied;
(ix) costs, fines or penalties incurred due to Lessor's
violation of any Applicable Laws or any late payment;
(x) The costs of repair to the Building or Industrial
Center, including the Premises and other costs and expenses (which
would otherwise be included as part of Operating Expenses), to the
extent such costs are reimbursed by insurance or under warranty
provided to Lessor by a manufacturer, contractor or supplier or, to
the extent such costs are reimbursed pursuant to a service contract;
(xi) The cost of alterations/improvements, painting or
decorating the interior of the Premises or premises of other
lessees;
(xii) Legal and other related expenses associated with the
initial leasing, enforcement of leases disputes with tenants, or the
defense of Lessor's title to the Industrial Center, the Building or
other portions of the Industrial Center;
(xiii) Advertising and marketing costs incurred with respect
to the Building or other portions of the Industrial Center;
(xiv) Lessor's general corporate overhead and general
administrative expenses not related to the operation of the
Industrial Center;
(xv) Any compensation paid to clerks, attendants or other
persons in commercial concessions operated by or on behalf of
Lessor;
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(xvi) Costs of capital alterations, improvements, replacements,
capital repairs to the Building and other portions of the Industrial Center
or other capital items which, in accordance with generally accepted
accounting and management practices of Lessor, consistently applied, are
not to be expensed;
(xvii) Costs, fees and compensation paid to Lessor or to affiliates or
subsidiaries of Lessor for services and materials to the extent the same
exceeds the charges for comparable services and materials performed or
provided by unaffiliated entities of comparable stature and reputation and
on a competitive basis;
(xviii) Costs resulting from the active negligence or intentional acts
of Lessor, its employees, or its agents, or any other lessee, or any
vendors, contractors, subcontractors or providers of materials or services
selected, hired or engaged by Lessor or its agents to the extent Lessor
receives reimbursement therefrom;
(xix) All amounts which would otherwise be included in Operating
Expenses which are paid to Lessor or which exceed the amount which would
have been paid in the absence of such relationship for similar services of
comparable quality rendered by persons or entities of similar skill,
competence and experience;
(xx) Costs of complying with laws, codes, regulations, or ordinances
relating to hazardous materials which are incurred (A) as a result of
Lessor's negligence or intentional acts in the course of construction of
the Industrial Center, including the selection and use of building
materials which Lessor should have known were hazardous substances at the
time of their installation or (B) as a result of the presence of hazardous
substances in the soil or groundwater under the Industrial Center on or
before the date of execution of the Lease (which substances were considered
to be hazardous as of the date of execution of the Lease). The parties
agree that the clean-up of hazardous substances required because of the use
or selection of building materials for the Premises (other than those known
to be hazardous at the time of the installation) shall be either an
Operating Expense, or to the extent that such clean-up constitutes an
improvement to the Industrial Center, a Capital Improvement pursuant to the
Lease. To the extent that such clean-up of hazardous substances is a
Capital Improvement, the cost thereof shall be payable by Lessee to Lessor
amortized over the remaining useful life of the Capital Improvement (such
useful life to be for the life of the Building, if of a structural nature,
or for its useful life if other than of a structural nature).
(xxi) Except for making repairs or keeping permanent systems in
operation while repairs are being made, rentals and other related expenses
incurred in leasing air-conditioning systems, elevators or other equipment
ordinarily considered to be of a capital nature, except equipment not
affixed to the Building which is used in providing janitorial or similar
services;
(xxii) Any bad debt loss, rent loss or reserves for bad debts or rent
loss;
(xxiii) Costs incurred by Lessor due to the violation by Lessor or any
lessee (other than Lessee) of the terms and conditions of any lease of
space in the Project;
(xxiv) Costs (including in connection therewith all attorneys' fees
and costs of settlement judgment and payments in lieu thereof) arising from
claims, disputes and potential disputes in connection with claims,
litigation or arbitrations pertaining to Lessor or the Industrial Center;
(xxv) Depreciation, amortization and interest payments, except as
provided herein and except on materials, tools, supplies and vendor-type
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<PAGE> 19
equipment purchased by Lessor to enable Lessor to supply services Lessor
might otherwise contract for with a third party where such depreciation,
amortization, and interest payments would otherwise have been included in
the charge for such third party's services, all as determined in accordance
with generally accepted accounting and management practices of Lessor,
consistently applied, and when depreciation or amortization is permitted or
required, the item shall be amortized over its reasonably anticipated
useful life;
(xxvi) Electric power costs for which any lessee directly contracts
with the local public service company;
(xxvii) Costs incurred in connection with Lessor's upgrading the
Building to comply with handicap, life, fire and safety codes shall be
amortized over the anticipated useful life of the upgrade;
(xxviii) Costs of defending any lawsuits with any mortgagee (except as
the actions of Lessee may be in issue), costs of selling, syndicating,
financing, mortgaging or hypothecating any of Lessor's interest in the
Building, or outside fees paid in connection with disputes with other
lessees;
(xxix) The wages and salaries of supervisor and executive personnel
over and above the level of the property manager;
(xxx) Any payments under a ground lease or master lease relating to
the Industrial Center; and
(xxxi) Any other expenses which, in accordance with generally accepted
accounting and management practices of Lessor, consistently applied, would
not normally be treated as Operating Expenses by lessors of other
comparable buildings.
54.2 Lessee's Right to Audit. If Lessee shall so request, Lessor shall permit
Lessee to review Lessor's books and records relating to Common Area
Operating Expenses and any other reimbursables by Lessee to Lessor for any
year, such review to be made, if at all, within twelve (12) months after
the date Lessee receives a statement of Common Area Operating Expenses or
reimbursable for any year, for the purpose of Lessee's verification of any
accounting and statement that Lessor is required or elects to give
hereunder. During the pendency of any such examination, Lessee shall make
all payments claimed by Lessor to be due, such payments to be without
prejudice to Lessee's position. If as a result of such review, Lessee
disputes Lessor's accounting or statement, Lessee shall give Lessor notice
thereof and, if such dispute has not been resolved by agreement within
sixty (60) days after Lessee's notice of such dispute, then either party
may submit the matter to arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, except that
there shall be only one arbitrator, who shall have had at least ten (10)
years' experience as a certified property manager or certified public
accountant in properties similar to the Industrial Center and in the same
general location and market. If neither party submits the matter to
arbitration within sixty (60) days after Lessee's notice of such dispute,
then Lessor's accounting and statement shall be deemed to be correct. Any
decision by an arbitrator shall be final and binding on the parties. If the
dispute shall be resolved in Lessee's favor, Lessor shall forthwith refund
to Lessee the amount overpaid by Lessee, and Lessor shall reimburse Lessee
for the reasonable cost of such examination and arbitrator. If such dispute
shall be resolved in Lessor's favor, Lessee shall reimburse Lessor for the
reasonable cost of such arbitrator and Lessor's reasonable cost of such
examination. Lessee shall not be liable for any amounts not billed to
Lessee within two (2) years of being incurred by Lessor and all statements
received by Lessee shall be final and conclusive unless Lessee shall audit
the same within the one (1) year period after received, as provided above.
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55. SECURITY DEPOSIT AND ADVANCE RENT. Upon execution of the Lease, Lessee
shall pay a security deposit of $36,091.00 and advance rent of $36,091.00
for a total of $72,182.00. The amounts set forth in this paragraph 55 may
be adjusted pursuant to the provisions of paragraph 52 of this Addendum to
Lease.
56. LESSEE'S LETTER OF CREDIT. As an inducement to Lessor to construct the
Lessee Improvements, as more particularly described in Exhibit "E",
attached hereto, Lessee shall deliver to Lessor an irrevocable Letter of
Credit ("LOC"), composed of the following:
56.1 Form of LOC. An LOC in the amount of Five Hundred Thousand Dollars
($500,000.00), plus leasing commissions in the amount of One Hundred
Sixty-Two Thousand Five Hundred Seventy-One Dollars ($162,571.00), for
a total of Six Hundred Sixty-Two Thousand Five Hundred Seventy-One
Dollars ($662,571.00) ("LOC Amount") to be deposited by Lessee with
Lessor within five (5) business days of the date of execution of the
Lease by Lessee, and thereafter to be replaced annually during the
original Term of the Lease ("LOC Period") (as such LOC Period may be
extended pursuant to paragraph 62 of this Addendum to Lease), each
such LOC to be issued by a Bank as may be designated by Lessee,
subject to Lessor's approval of such issuing Bank, said approval not
to be unreasonably withheld, each of which LOC's shall not expire
before the last day of the first through fifth, respectively, year of
the original Term and the option term thereafter if exercised, so
that, during the LOC Period (except as provided below), Lessor shall
always be in possession and the beneficiary of an LOC, in full force
and effect, in the LOC Amount. The LOC shall be in a form subject to
the Uniform Customs and Practice for Documentary Credits (1993
Revision) and reasonably approved by Lessor. On or before thirty (30)
days prior to the first anniversary of the Commencement Date,
estimated to be September 20, 2000 (in which event the replacement
must be delivered to Lessor on or before August 20, 2000), the
replacement LOC to be delivered to Lessor shall be in an amount equal
to the LOC Amount currently in effect (the first LOC to expire on the
last day of the first year of the LOC Period, estimated to be
September 30, 2000). In the event of a material breach under paragraph
13.1(b) of the Lease by reason of Lessee's failure to pay Rent or
other charges due hereunder, after the notice period provided for in
said paragraph 13.1(b), Lessor may draw upon the currently issued LOC
for the payment of such Rent or any other charges which are then
payable under the terms of the Lease. If Lessor so uses and draws upon
such LOC, Lessor shall give written notice to Lessee of such draw, and
Lessee shall have ten (10) business days after receipt of such notice
to deliver and deposit with Lessor a replacement or amended LOC (in
substantially the same form and substance as the LOC drawn upon),
restoring the amount of the LOC to the full original LOC Amount upon
which Lessor shall be entitled to continue to draw as set forth above
and as further set forth herein. On or before the later of ten (10)
business days after delivery of the notice pursuant to this paragraph
56, or thirty (30) days before the expiration of each LOC held by
Lessor, Lessee shall deliver and deposit with Lessor a new LOC in the
same form and substance as the form of LOC being replaced, which new
LOC shall not expire prior to the last day of the first through the
fifth year, as applicable, of the LOC Period (or 6th through 10th
year, as such LOC Period may be extended pursuant to paragraph 62 of
this Addendum to Lease), and concurrently Lessor shall return the
prior LOC to Lessee. Lessee's failure to replace an LOC on or before
the later of ten (10) business days after delivery of the notice
pursuant to this paragraph 56 or thirty (30) days prior to the
expiration of the then existing LOC, or to replace or amend an LOC
which has been drawn upon within ten (10) business days after receipt
of Lessor's notice to Lessee that it has been drawn upon, as provided
above, shall be a Default, with respect of which the only remedy shall
be the replacement of the LOC by a cash deposit with Lessor by Lessee
in an amount equal to the then remaining balance of the LOC which may
be drawn upon by Lessor at that time, partially, or in full, as then
applicable. Should any LOC not be replaced in any year by thirty (30)
days prior to its expiration, then Lessor may draw upon said LOC in
full and thereafter hold the
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cash received as a part of the Security Deposit under the Lease. The
failure of Lessee to comply with the provisions of this paragraph 56,
or a breach of Lessee's affirmative obligations hereunder, shall
constitute a Default of Lessee under the Lease entitling Lessor to the
remedies provided by paragraph 13.2 of the Lease. In the event a
Breach has occurred under the covenants and conditions of the Lease
during the LOC Period, then the LOC Period, and Lessee's obligation to
provide such LOC, shall be extended for a period equal to the length
of time of such Breach.
56.2 Permitted Lapse of Letter of Credit. Notwithstanding the provisions of
paragraph 56.1, above, the LOC shall be allowed to lapse at any time
during the initial Lease Term or option term thereafter and an LOC
shall no longer be required under the Lease, upon either of the
following occurrences:
56.2.1 Lessee completes an initial public offering whereby Lessee nets
in excess of $25,000,000.00 in cash; or
56.2.2 Lessee completes an initial public offering and thereafter
Lessee remains profitable for three consecutive quarters.
56.3 Increase in Amount. The LOC shall increase by $0.50 for every $1.00 of
additional Lessee Improvement Allowance above the initial allowance of
$15.00 per usable square foot.
57. RIGHT OF FIRST REFUSAL. Throughout the Lease Term, including during any
option period, Lessee shall have a continuing Right of First Refusal to
lease the balance of space available in the Industrial Center. The terms of
said Right of First Refusal shall be based on the actual terms and
conditions of any proposal to lease received by Lessor from any bona fide
third party. Said terms and conditions of the Right of First Refusal shall
be equal to or greater than that received by Lessor from said bona fide
third party. Lessor shall offer the proposed lease space to Lessee in
writing, to the address specified in paragraph 23 of the Lease. Lessee
shall have three (3) business days in which to agree to exercise its Right
of First Refusal. Lessee's failure to exercise said Right of First Refusal
within three (3) business days from the date of receipt of Lessor's written
offer shall constitute a rejection of Lessor's written offer to lease.
58. SIGNAGE. As a supplement to paragraph 34 of the Lease, Lessor and Lessee
have agreed that Lessee may, at Lessee's sole cost and expense, install
Building signage on the exterior of the Building signage adjacent to
Lessee's main suite entrance and monument signage, subject to the
compliance by Lessee with paragraphs 7.3 and 7.4 of the Lease as if such
sign or signs were an Alteration. All such signage shall be subject to
availability and Lessor's approval.
59. INTENTIONALLY DELETED
60. PARKING. The Unreserved Parking Spaces set forth in paragraph 1.2(b) of the
Lease have been established on the basis of 3.5 unreserved parking spaces
per 1,000 square feet leased, which shall be undesignated and unreserved.
Such parking shall be free of charge during the Original Term of the Lease,
as the same may be extended, and shall be taken into account in the
determination of Fair Market Rental Rate during any option term.
61. OPTION TO EXPAND.
61.1 No Default: Expansion Premises. Provided that the Lease is in full
force and effect and Lessee is not then in default hereunder, Lessor
hereby grants to Lessee an option to expand the Premises at any time
during the first twelve (12) months of the Term of the Lease and prior
to receiving a Notice from Lessor regarding Lessee's right of first
refusal, subject to availability of space, upon the terms and
conditions set forth in this paragraph 61.
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61.2 Terms and Conditions. If Lessee shall have a requirement to expand
its Premises, Lessee shall exercise this option to expand by giving
a minimum of ninety (90) days written notice to Lessor ("Lessor's
Expansion Notice") in which Lessee shall advise Lessor of Lessee's
desire to expand its Premises which expansion premises shall,
subject to availability, be leased to Lessee at the then current
rental rate being paid by Lessee for the Premises, and shall
include a pro rata Lessee Improvement Allowance as calculated below:
15.00 x Expansion Square Footage x No. of Months Remaining =
Term 60 months where "Number of Months Remaining Term is
calculated from the Lease Commencement Date.
If Lessee exercises such option, the Expansion Premises shall be
added to the Premises demised by the Lease and an amendment to the
Lease shall be executed by Lessor and Lessee incorporating the
Expansion Premises as a part of the Premises, confirming the
Expansion Premises Commencement Date, the square footage of the
Expansion Premises and the new total square footage of the
Premises, increased Basic Rent and the increased Lessee's Pro Rata
Share.
61.3 Expansion Increments. Should Lessee exercise its option to expand
the Premises pursuant to this paragraph 61, Lessee shall be
required to increase the size of the premises in the following
increments.
Approximate Rentable
Expansion Space Square Feet
--------------- --------------------
A 4,766
A&B 8,925
A,B&C 16,828
61.4 Lessee Improvements. Should Lessee exercise its option to expand
the Premises pursuant to this paragraph 61, Lessee shall, as part
of the Lessee Improvement Allowance described in paragraph 61.1,
above, pay for one-half of any demising partition costs, and all
costs associated with the demolition of any existing demising
partitions required to accommodate Lessee's expansion.
61.5 Option for Benefit of Lessee. The option to expand set forth in
this paragraph 61 is solely for the benefit of Lessee or any
"Permitted Transferee," as that term is defined in paragraph 63.2,
below, and such right shall not be exercised by any other sublessee
or assignee of Lessee.
62. OPTION TO RENEW.
62.1 Option: Exercise. Provided Lessee is not in default beyond any
applicable notice and cure period set forth in the Lease of any
terms and conditions of the Lease, Lessee shall have an option to
renew the Lease for an additional five (5) years, Lessee shall
notify Lessor in writing no earlier than 210 days and no later than
180 days prior to the termination of the Lease as to its intent to
exercise the option to renew the Lease. If notification is not
given and received, this option shall automatically expire.
62.2 Adjustment of Rent. Base rent for the Option Period will be based
on the then current Fair Market Rental Rate ("FMRR") for five year
leases of space comparable to the Premises located in the Sorrento
Mesa, California area. The FMRR shall be determined as follows:
62.2.1 The FMRR shall be the effective annual rental rate a
space would bring if the space were offered on the
open market for lease for a reasonable period of time.
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<PAGE> 23
62.2.2 Lessor and Lessee shall review and negotiate in good faith
such FMRR, and if mutual agreement is reached as to the FMRR,
a Lease Amendment setting forth the new monthly Base Rent to
be paid for the Premises and the renewal period shall be
prepared and executed.
62.2.3 If mutual agreement is not reached regarding the FMRR to be
paid by Lessee within thirty (30) days from the date which
Lessee notifies Lessor of its exercise of the option to renew
the Lease, then the FMRR to be paid by the Lessee shall be
determined as follows:
62.2.3.1 One (1) independent third party (licensed
California Commercial Real Estate Broker or
Appraiser), as provided below, shall be employed to
determine the FMRR. As used herein the term FMRR
shall mean that Base Rent to be effective during
the period, which the Premises would bring if
exposed for lease in the open market under all the
covenants, terms and conditions contained in the
Lease.
62.2.3.2 The parties shall agree on the independent third
party appraiser. If the parties cannot agree,
either party may submit the matter arbitration to
make the selection. The independent third party
appraiser shall be familiar with the market in
Sorrento Mesa, California area.
62.2.3.3 The appraiser shall receive written instruments
with regard to a value determination as set forth
in paragraph 62.2.4, below.
62.2.4 The value determination of the FMRR for the Premises shall be
made by taking into consideration the following factors:
62.2.4.1 Quoted and actual rental rates, Lessee's credit
rating and the size of the Premises.
62.2.4.2 The duration of the Lease term and FMRR in Sorento
Mesa, California buildings of size, age,
conditions, quality, tenant mix, and tenant
improvements similar to the Building.
62.2.4.3 The locations, accessibility and amenities of the
Building as it relates to the comparative
buildings.
62.2.4.4 The method of area measurement shall be determined
to insure that appropriate adjustments are made to
reflect rental rates quoted on a similar method of
measurement.
62.2.4.5 The appraisal must be completed and submitted
within thirty (30) days from the date the appraiser
is selected.
62.2.5 The total costs of the report shall be divided equally by the
Lessor and by the Lessee.
62.2.6 The FMRR determined in accordance herewith shall be final and
binding upon the Lessor and Lessee and shall be enforceable
by any court of competent jurisdiction.
63. ASSIGNMENT AND SUBLETTING.
63.1 Transfer Premium Payment Relative to an Assignment or Sublease. As a
reasonable condition to Lessor's consent to any assignment or
sublease (a "Transfer" to a "Transferee" for purposes of this
paragraph 63), Lessee shall pay to Lessor fifty percent (50%) of any
Transfer Premium, as defined below. Despite this provision, no
Transfer Premium is payable for any Transfer by
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Lessee to an Affiliate of Lessee. An "Affiliate" means any entity
that controls, is controlled by, or is under common control with
Lessee. "Control" means the direct or indirect ownership of more
than fifty percent (50%) of the voting securities of an entity or
possession of the right to vote more than fifty percent (50%) of the
voting interest in the ordinary direction of the entity's affairs. A
"Transfer Premium" means all Rent and other consideration actually
received by Lessee from a Transferee after deducting:
63.1.1 The Base Rent payable by Lessee under the Lease for the
Premises.
63.1.2 Reasonable leasing commissions paid by Lessee for the
procurement of the Transferee.
63.1.3 Other reasonable out-of-pocket costs paid by Lessee
(including attorneys' fees, advertising costs and expenses
of readying the Premises for occupancy by a Transferee).
63.1.4 Lessee shall pay the Transfer Premium on a monthly basis to
Lessor together with Lessee's payment of Rent required by
the Lease.
63.2 Sublease Not Requiring Lessor's Approval. Notwithstanding anything
to the contrary contained in the Lease, neither (i) an assignment to
a transferee of all or substantially all of the assets of Lessee,
(ii) an assignment of the Premises to a transferee which is the
resulting entity of a merger or consolidation of Lessee with another
entity, (iii) an assignment or subletting of all or a portion of the
Premises to an affiliate of lessee an entity which is controlled by,
controls, or is under common control with, Lessee), nor (iv) a
public offering of stock by Lessee, shall be deemed an "assignment"
under paragraph 12 of the Lease, provided that Lessee notifies
lessor of any such assignment or sublease and promptly supplies
lessor with any documents or information reasonably requested by
Lessor regarding such transfer to transferee as set forth in items
(i) through (iii) above, that such assignment or sublease is not a
subterfuge by Lessee to avoid its obligations under the Lease (each
of the foregoing shall be deemed a "Permitted Transferee").
"Control," as used in this paragraph 63.2, shall mean the ownership
directly or indirectly, of at least fifty-one percent (51%) of the
voting securities of, or possession of the right to vote, in the
ordinary directions of its affairs, of at least fifty-one percent
(51%) of the voting interest in, any person or entity. Any other
assignment or subletting of the Premises shall require Lessor's
written consent, as set forth in paragraph 12 of the Lease, and
shall be subject to the provisions of this paragraph 63. All other
provisions of paragraph 12 of the Lease remain in full force and
effect.
64. ROOF SPACE LICENSE. Lessor shall grant to Lessee a non-exclusive right to
install, operate and maintain a satellite dish, antenna devices and related
equipment (the "Equipment"), including the right to run necessary cabling
from the Equipment location to the Premises. Such right shall be granted to
Lessee free of charge. The right granted hereunder shall be exclusively for
the benefit of Lessee and such right shall not be available to any
sublessee or assignee of Lessee. Lessee's exercise of its right hereunder
shall not interfere with the rights of other tenants in the Building or
Industrial Center.
65. HAZARDOUS SUBSTANCES. Lessor warrants and representatives to Lessee that,
to the best of Lessor's actual knowledge without independent investigation
or inquiry (Lessor acquired the subject property in 1998), as of the
effective date of the Lease;
65.1 There has been no release onto or under the Premises or the Building
of any Hazardous Material in violation of any Environmental Law; and
Lessor, its agents, entities, employees, representatives, tenants
and its predecessors-in-interest in the Premises being leased did
not discharge, release or dispose of in any form any Hazardous
Materials into or onto the Premises that may result in any violation
of any federal, state or local laws, regulations or ordinances
relating to the protection of the environment or the public health
and welfare.
-10-
<PAGE> 25
65.2 Lessor has received no notice that the Premises or the Building is in
violation of any Environmental Law; Lessor has no liability and there are
no outstanding claims against Lessor for the clean up of any material
substances deposited in the environment, either directly on the Premises
or elsewhere in the Office Building Project that resulted from or were in
connection with Lessor's occupation or ownership of the Premises.
65.3 If, during the Lease Term (including any extensions), either Lessor or
Lessee becomes aware of (a) any actual or threatened release of any
Hazardous Material on, under, or about the Premises of the Building or
(b) any inquiry, investigation, proceeding, or claim by any government
agency or other person regarding the presence of Hazardous Material on,
under, or about the Premises or the Building, that party shall give the
other party written notice of the release or investigation within five
(5) days after learning of it and shall simultaneously furnish to the
other party copies of any claims, notices of violation, reports, or other
writings received by the party providing notice that concern the release
or investigation.
65.4 Lessor and Lessee shall, at that party's sole expense, indemnify, defend
and hold harmless the other party and the other party's shareholders,
directors, officers, employees, partners, affiliates and agents with
respect to all losses arising out of or resulting from the release of any
Hazardous Material in or about the Premises or the Building, or the
violation of any Environmental Law, by that party or that party's agents,
contractors or invitees. This indemnification includes all losses,
liabilities, obligations, penalties, fines, claims, actions (including
remedial or enforcement actions of any kind and administrative or
judicial proceedings, orders or judgments), damages (excluding all
consequential, special and punitive damages) and costs (including
attorney, consultants and expert fees and expenses) resulting from the
release or violation. This indemnification shall survive the expiration
or termination of the Lease.
65.5 If the presence of any Hazardous Material brought onto the Premises or
the Building by either Lessor or Lessee or by Lessor's or Lessee's
employees, agents, contractors or invitees results in contamination of
the Premises or the Building, that party shall promptly take all
necessary actions, at that party's sole expense to return the Premises or
the Building to the condition that existed before the introduction of
such Hazardous Material. Lessee shall first obtain Lessor's approval of
the proposed remedial action, which may not be unreasonably withheld or
delayed. This provision does not limit the indemnification obligations
set forth in paragraph 65.4, above.
65.6 If Lessor undertakes any cleanup, detoxification or similar action,
whether or not required by any government or quasi-government agency, as
a result of the presence, release or disposal in or about the Building of
any Hazardous Material, and that action requires that Lessee be denied
access to the Premises or Lessee is otherwise unable to conduct its
business on the Premises for a period of greater than 24 hours, the Base
Rent payable by Lessee shall be abated ratably for the period that Lessee
is unable to conduct does not conduct its business on the Premises. The
costs of any Hazardous Material cleanup or remediation undertaken by
Lessor during the Lease Term shall be borne by Lessor, but subject to the
terms of paragraph 54.1(xx), above, may be included in Operating Expenses
defined in paragraph 4.2(d) of the Lease.
65.7 As used in this paragraph 66 and the Lease, the term "Hazardous Material"
shall mean any hazardous or toxic substance, material or waste that is or
becomes regulated by the United States, the State of California, or any
local government authority having jurisdiction over the Building.
Hazardous Material includes:
65.7.1 Any "hazardous substance," as that term is defined in the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (CERCLA) (42 United States Code sections 9601-9675).
-11-
<PAGE> 26
65.7.2 "Hazardous waste," as that term is defined in the Resource
Conservation and Recovery Act of 1978 (RCRA)(42 United States
Code sections 6901-6992k).
65.7.3 Any pollutant, contaminant or hazardous, dangerous or toxic
chemical, material or substance, within the meaning of any
other applicable federal, state or local law, regulation,
ordinance or requirement (including consent decrees and
administrative orders imposing liability or standards of
conduct concerning any hazardous, dangerous or toxic waste,
substance or material, now or hereafter in effect).
65.7.4 Petroleum products.
66. OWNERSHIP; REMOVAL; SURRENDER; RESTORATION.
66.1 Notwithstanding the provisions of paragraph 7.4 of the Lease, Lessor
agrees that upon the expiration or earlier termination of the Lease
Term, Lessee may elect, but shall not be required (except as set
forth below and in paragraph 3.2 of the Work Letter Agreement), to
remove: (a) any improvements installed by Lessee in, on or about the
Premises pursuant to Lessee's obligation to repair the Premises
hereunder; (b) any of the initial Lessee Improvements constructed by
Lessor as a condition and prior to the commencement of the Lease
Term; and (c) any Alterations or Utility Installations for which
Lessee has obtained Lessor's prior consent. Notwithstanding the
foregoing, Lessor shall have the right, upon Lessor's approval of the
"Final Plans," as that term is defined in the Work Letter Agreement,
or of any Alterations or Utility Installations, to require Lessee to
remove the same upon the expiration or earlier termination of the
Lease, and Lessee shall repair any damage to the Premises or Building
caused by such removal.
66.2 Lessee shall, at Lessee's sole cost, repair any damage to the
Premises and/or the Common Areas caused by Lessee's removal of any
personal property, equipment, fixtures and/or Alterations and Utility
Installations at the expiration or earlier termination of the Lease
Term.
67. BROKERS. Each party warrants that it has had no dealing with any real
estate broker or agent in connection with the negotiation of the Lease
except Chris Pascale of CB Richard Ellis, Inc. ("Lessee's Broker"), and
Doug Lozier of CB Richard Ellis ("Lessor's Broker"). In the event any claim
is made for brokerage commissions in connection with the Lease by any
person other than Brokers, the party whose actions, omissions or
representations give rise to the claim hereby agrees to indemnify and hold
harmless the other party from and against, without limitation, all claims,
damages, liabilities, judgments, attorneys fees, costs or expenses incurred
by said party in connection with such claim. This paragraph shall inure to
the benefit of each party, its successor and assigns.
68. LESSOR'S WARRANTY. Lessor hereby warrants that it is the fee Owner of the
Premises, that it has authority to enter into the Lease, and that it shall
take all actions reasonably necessary, at Lessor's sole expense, to defend
Lessee's rights of possession of the Premises.
69. ESTOPPEL CERTIFICATE. The Tenancy Statement referred to in paragraph 16.1
and the "further writings" referred to in line 3 of paragraph 30.4 of the
Lease each shall be, at the option of the Lessor or a lender or purchaser
from Lessor, in the customary form of the requesting lender or a purchaser
of all or a potion of the Building.
-12-
<PAGE> 27
70. NOTICES. Copies of any notices given to Lessor pursuant to the provisions
of paragraph 23.1 of the Lease also shall be given to the local office of
Lessor within the county in which the Building is located and to Lessor's
attorney, as follows:
Kilroy Realty, L.P.,
12348 High Bluff Drive, Suite 110
San Diego, California 92130
Tel. No. (619) 546-4766
Fax No. (619) 546-4767
with a copy to:
Kilroy Realty, L.P.,
2250 E. Imperial Highway, Suite 1200
El Segundo, California 90245
Attention: Legal Department
Tel. No. (310) 563-5500
Fax No. (310) 322-8790
-13-
<PAGE> 28
EXHIBIT A
PREMISES
10120 Pacific Heights Boulevard
San Diego, California
[PREMISES GRAPH]
Exhibit A - Page 1
<PAGE> 29
EXHIBIT B
BUILDING
[BUILDING GRAPH]
Exhibit B - Page 1
<PAGE> 30
EXHIBIT C
INDUSTRIAL CENTER
[INDUSTRIAL CENTER GRAPH]
Exhibit C - Page 1
<PAGE> 31
EXHIBIT D
RULES AND REGULATIONS
1. Nuisances - No rubbish or debris of any kind shall be placed or permitted
to accumulate upon or adjacent to the Premises, and no odors shall be
permitted to arise therefrom, so as to be offensive or detrimental to any
of the property in the vicinity thereof or to the occupants thereof. No
nuisance shall be permitted to exist or operate upon or in the Premises so
as to be offensive or detrimental.
1.1 Without limiting any of the foregoing, no exterior speakers, horns,
whistles/bells or other sound devices, except security devices used
exclusively for security purposes, shall be used or located or placed
in the Premises.
1.2 No Lessee shall install or operate any phonograph, musical instrument,
radio receiver or similar device in the Premises in such manner as to
disturb or annoy other lessees of the building or the neighborhood.
2. Trash Containers - All garbage or trash shall be placed and kept in the
trash and rubbish receptacles maintained by Lessee.
3. Exterior Storage - No machinery, equipment, material, or supplies shall be
placed, stored or operated at the exterior or adjacent to any leasehold
space, so as to be visible from outside the Premises.
4. Lessee must, upon termination of Lessee's tenancy, return to Lessor all
keys to stores, offices and toilet rooms, either furnished or to otherwise
procured by Lessee.
5. Damage - The toilets and urinals shall not be used for any purpose other
than those for which they were constructed, and no rubbish, newspapers or
other substance of any kind shall be thrown into them. Waste and excessive
or unusual use of water shall not be allowed.
6. Window Shades - No Lessee shall install blinds, shades, awnings, or other
forms of inside or outside window coverings, or window ventilators or
similar devices without the prior written consent of Lessor.
7. Wiring - Electric wiring of every kind shall be introduced and connected
as directed by Lessor and no boring or cutting for wires will be allowed
except with the prior consent of Lessor. Lessee shall not install any
antennae, aerial wires or other equipment outside the Premises without
prior written approval of Lessor.
8. Installation of Floor Coverings - Lessee shall not lay vinyl tile or other
similar floor covering so that the same shall be affixed to the floor of
the Premises in any manner except by a paste, or other material, which may
easily be removed with water, the use of cement or other similar adhesive
materials being expressly prohibited. The method of affixing any such
vinyl tile or similar flooring covering to the floor, as well as the method
of affixing carpets or rugs to the Premises, shall be subject to approval
by Lessor. The expense of repairing any damage resulting from a violation
of this rule, shall be borne by Lessee.
EXHIBIT D - Page 1
<PAGE> 32
KILROY REALTY, L.P.,
2250 EAST IMPERIAL HIGHWAY, SUITE 1200
EL SEGUNDO, CALIFORNIA 90245
(310) 563-5500
August 1, 1999
Medibuy.com, Inc.
10120 Pacific Heights Boulevard
San Diego, California 92121
"LESSEE"
REFERENCE: Work Letter Agreement
In accordance with the provisions of paragraph 1.3 of your Lease, dated
August 1, 1999, with the undersigned Lessor, the "Lessee Improvement Work" (as
hereinafter defined) to the Premises shall be completed by Lessor substantially
in accordance with the following:
1. GENERAL INTENT
1.1 It is the intent of this Work Letter Agreement that Lessee shall be
permitted freedom in the interior design and layout of Lessee's Premises so
long as the same is consistent with Lessor's policies, Building Standards (as
hereinafter defined) and structural requirements, applicable City of San Diego
building codes, and with sound architectural and construction practice, and
provided further that no interference is caused to the operation of the
Building's mechanical heating, cooling, electrical systems or structure or
other Building operations or functions, and that no increase in maintenance,
insurance, taxes, fees or utility charges will be incurred by Lessor as a
result thereof. Any additional cost of design, construction, operation,
insurance premiums, maintenance, taxes, fees or utilities which results from
"Above Standard Lessee Improvement Work" (as hereinafter defined) shall be
charged to Lessee and paid for by Lessee in accordance with the provisions
hereof and of the Lease.
2. PREPARATION OF LESSEE'S PLANS
2.1 Space Planner; Lessee Plans
Lessor has provided the services of Lessor's space planner who, in
consultation with Lessee, prepared a space layout for the Premises ("Lessee's
Plans"). The cost of the Lessee's Plans, including revisions, shall be deducted
from Lessor's Lessee Improvement Allowance (as hereinafter defined). The
Lessee's Plans for the Improvements to the Premises ("Lessee Improvement Work")
shall:
2.1.1 be compatible with the design, construction and equipment of
the Building;
2.1.2 comply with all applicable laws and ordinances and the rules
and regulations of all governmental authorities having jurisdiction;
2.1.3 include locations and complete dimensions; and
2.1.4 contain all such information as may be required for the
preparation of the "Engineering Drawings" (as hereinafter defined), if required
for the remodel.
EXHIBIT "E"
Page 1 of 6 Pages
<PAGE> 33
2.2 Time Limits
Lessee shall devote such time in consultation with Lessor's space planner
as shall be necessary to enable the planner to prepare the complete working
drawings which shall constitute the Lessee's Plans. The following maximum time
periods shall be allowed for the preparation of the Lessee's Plans:
<TABLE>
<CAPTION>
TIME LIMIT AFTER
COMPLETION OF
ACTION PRECEDING ITEM
------ ----------------
<S> <C> <C>
2.2.1 Lessee approved Space Plan Completed
No. 99260, dated July 8, 1999, (approved by Lessee
prepared by Smith Consulting on July 12, 1999)
Architects ("Approved Space Plan"),
a copy of which is attached hereto
as Exhibit "E-1."
2.2.2 Lessee furnishes complete working 15 working days
drawing information to Lessor's
space planner
2.2.3 Lessor's space planner submits 5 working days
working drawings to Lessee for
review and approval
2.2.4 Lessee gives Lessor its approval of 5 working days
working drawings with any required
changes in detail (and this shall
constitute approval by Lessee).
</TABLE>
2.3 Preparation of Engineering Drawings
Lessor shall prepare from Lessee's Plans complete mechanical and
engineering working drawings (the "Engineering Drawings"), including the layout
for complete electrical and plumbing work and for air conditioning (Lessee's
Plans and the Engineering Drawings are herein collectively called the "Final
Plans") on a design-build basis performed by the "TI Contractor," as that term
is defined in paragraph 6.1, below.
2.4 Changes at Lessee's Expense
If the Final Plans or any amendment thereof or supplement thereto shall
require alterations in the Building (as contrasted with the Lessee Improvement
Work), and if Lessor in its sole and exclusive discretion agrees to any such
alterations, and notifies Lessee of the need and cost for such alterations,
then Lessee shall have the option to revise the Final Plans or pay the cost of
such required changes upon receipt of bills therefor. Lessee shall pay all
direct architectural and/or engineering fees in connection therewith.
3. LESSEE IMPROVEMENT WORK
3.1 Definition of Work
"Above Standard Lessee Improvement Work" means (a) any part of the Lessee
Improvement Work which does not constitute Building standard Lessee
Improvements, including, but not limited to, plumbing and millwork; (b) any
changes in or additions to the Lessee Improvement Work made at the request of
Lessee or due to any other act or omission on the part of Lessee; and (c) a
configuration of the Lessee Improvement Work which is not usual and customary
for normal occupancy. Lessor shall not be obligated to furnish or install any
item not included in the Lessee Improvement Work.
EXHIBIT "E"
Page 2 of 6 Pages
<PAGE> 34
3.2 Removal of Building Nonstandard Lessee Improvement Work
If directed so to do by Lessor at the time of approval of the Final Plans,
Lessee at its costs and expense shall remove any Above Standard Lessee
Improvement Work from the Premises designated by Lessor, and shall replace such
designated Above Standard Lessee Improvement Work to be removed with Building
standard Lessee Improvement Work. Such replacement of Above Standard Lessee
Improvement Work shall be performed promptly and shall be completed by Lessee
on or before the end of the Term of the Lease.
4. COST OF THE WORK
4.1 Definition of Work Cost
"Work Cost means, as to any part of the Lessee Improvement Work, the total
of all actual costs and charges incurred by Lessor in doing such part of the
Lessee Improvement Work and/or in having it done by a contractor or contractors
under the supervision of Lessor (including in such costs and charges the
reasonable fees of any engineers whose services may be required because of the
nature of the Lessee Improvement Work), plus two percent (2%) of such actual
hard costs and charges for Lessor's supervision and overhead if the Lessee
Improvement Work is performed by an independent general contractor. The total
Work Cost shall be set forth in a construction budget which shall be approved
by Lessee prior to the commencement of the Lessee Improvement Work.
4.2 Lessor's Lessee Improvement Allowance
Lessor shall provide an allowance to construct the Lessee Improvement
Work included within the Premises, as shown on the Approved Space Plan, in an
amount not to exceed Five Hundred Forty-One Thousand and Three Hundred
Sixty-Five Dollars ($541,365.00) ("Lessor's Lessee Improvement Allowance"),
i.e., Fifteen Dollars ($15.00) per usable square foot contained in the
Premises, except as set forth in paragraph 4.3, below. Lessee shall be
responsible for and Lessee shall pay for any items shown on the approved space
plan as "Not Included" ("NIC"), "Lessee to Install," "Lessee to Provide," or
"Lessee to Provide and Install." All costs of the Lessee Improvement Work in
excess of Lessor's Lessee Improvement Allowance, except as set forth in
paragraph 4.3, below, shall be paid for by Lessee within thirty (30) days after
receipt of an invoice therefor from Lessor. Lessor's Lessee Improvement
Allowance shall be increased or decreased in the event the square feet of the
Premises shall be increased or decreased, and upon the occurrence of such event
an amendment to the Lease shall be executed by Lessor and Lessee confirming
such new Lessor's Lessee Improvement Allowance. Any costs incurred due to the
remediation of Hazardous Materials which were not brought onto the Premises,
Building or Industrial Center by Lessee or its agents shall not be included in
the Work Cost and shall instead be the responsibility of Lessor.
4.3 Lessor's Excess Tenant Improvement Allowance
Lessor shall provide an additional allowance at Lessee's request to
construct additional Lessee Improvement Work included within the Premises, as
shown on the Approved Space Plan ("Lessor's Additional Lessee Improvement
Allowance"), in an amount not to exceed One Hundred Eighty Thousand and Four
Hundred Fifty-Five Dollars ($180,455.00), i.e., Five Dollars ($5.00) per usable
square foot contained in the Premises. Lessee shall continue to be responsible
for and Lessee shall pay for any items shown on the approved space plan as
"Lessee to Install," "Lessee to Provide," or "Lessee to Provide and Install."
The Lessee Improvement Allowance shall be amortized over the initial Term of
the Lease, with interest thereof at a rate of ten percent (10%) per annum,
compounded annually ("Amortized Work Cost") and such Amortized Work Cost shall
be payable monthly in advance as Additional Rent pursuant to the Lease. All
costs of the Additional Lessee Improvement Allowance in excess of the
Amortized Work Cost shall be paid for by Lessee within thirty (30) days after
receipt of an invoice therefor from Lessor.
4.4 Cost of Lessee Improvement Work
Prior to Lessor's commencement of any Lessee Improvement Work not included
as part of the Final Plans, or shown thereon as NIC or Lessee to Install,
Lessee to Provide, or Lessee to Provide and Install, or any cost above
Lessor's Lessee Improvement Allowance or Additional Lessee Improvement
Allowance ("Extra Work"), Lessor, or its contractor or architect, shall submit
to Lessee a written estimate of the cost thereof, in excess of Lessor's Lessee
Improvement
EXHIBIT "E"
Page 3 of 6 Pages
<PAGE> 35
Allowance or Additional Lessee Improvement Allowance, to be determined as
provided in paragraph 4.1. If Lessee approves such estimate it shall notify
Lessor in writing within ten (10) days, pay to Lessor the full amount of such
estimate in excess of Lessor's Lessee Improvement Allowance or Additional
Lessee Improvement Allowance within thirty (30) days, and Lessor's contractor
shall proceed with such work. If Lessee fails to provide to Lessor written
notice of its approval of such costs within ten (10) days after submission
thereof to Lessee, such failure shall be deemed a disapproval thereof, and
Lessor's contractor shall not be required to proceed with such Extra Work. It
is understood by the parties hereto that Lessee shall thereupon be liable for
any delay and any increased cost in completing the Lessee Improvement Work
caused thereby. Notwithstanding any such estimate or sum delivered to Lessor,
Lessee shall nevertheless be responsible for and pay the actual Work Cost of
the Extra Work in excess of Lessor's Lessee Improvement Allowance, immediately
upon receipt of bills therefor showing the actual cost of the Lessee
Improvement Work prior to Lessee taking occupancy of the Premises.
5. COMPLETION, TERM AND RENTAL COMMENCEMENT DATE
5.1 Delays in Completion
Pursuant to the provisions of paragraphs 3.3 and 4.1 of the Lease the Term
and Lessee's obligation for the payment of rent under the Lease commences when
Lessor has substantially completed the Lessee Improvement Work; provided,
however, that if Lessor shall be delayed in substantially completing the Lessee
Improvement Work as a result of:
5.1.1 Lessee's failure to meet the time limits set forth in
paragraph 2.2 hereof;
5.1.2 Lessee's request for materials, finishes, or installations
other than Lessor's Building Standard Lessee Improvements, as described in
Exhibit "E-1" to this Work Letter agreement; or
5.1.3 Lessee's changes in the Lessee's Plans after their submission
to Lessor in accordance with the provisions of paragraph 2.2.4 of this Work
Letter Agreement; or
5.1.4 Delays in performance or completion caused by Lessee or a party
employed by Lessee; or
5.1.5 Building Code problems inherent from special or unusual
improvements included as a part of the Lessee Improvement Work;
(each of the foregoing shall be individually referred to as a "Lessee Delay")
then in any such events the scheduled date that the Premises are to be Ready
for Occupancy shall be extended by the number of days of such delay(s) and the
commencement of the Term of the Lease and the obligation to pay rent shall be
accelerated by the number of days of such delay(s).
5.2 Punch List Items
Lessor and Lessee agree that the substantial completion of the Lessee
Improvement Work shall not include items of work and adjustment of equipment
and fixtures which can be completed after occupancy has been taken without
causing substantial interference with Lessee's use of the Premises (i.e.,
so-called "punch list items"). It is expressly understood by the parties that
Ready for Occupancy does not include the completion of a telephone system in
the Premises.
5.3 Lessee's Acceptance of the Premises
Subject to the terms and conditions of the Lease, Lessee will inspect the
Building and the Premises prior to the delivery of possession of the Premises
and will be thoroughly acquainted with their condition, and, subsequent to the
completion by Lessor of the Lessee Improvement Work, Lessee agrees to take the
same "as is." Subject to the terms and conditions of the Lease, Lessee
acknowledges that the taking of possession of the Premises by Leases shall be
conclusive evidence that the Premises and the Building were in good and
satisfactory condition at the time such possession was so taken, subject to the
obligation of Lessor to complete punch list obligations.
EXHIBIT "E"
Page 4 of 6 Pages
<PAGE> 36
6. CONSTRUCTION BY LESSOR'S CONTRACTOR
6.1 Lessee agrees that, unless otherwise agreed in writing in this Work
Letter Agreement, all construction work in the Premises including Above
Standard Lessee Improvement Work shall be performed by Kilroy Services, Inc.
("TI Contractor") retained by Lessor. The TI Contractor shall perform such work
in a good and workmanlike manner and shall construct the improvements in the
Premises substantially in accordance with the Final Plans.
7. LESSEE COORDINATOR
7.1 Lessor has designated a "Project Manager" who shall be responsible
for the implementation of all Lessee Improvement Work to be performed by Lessor
in the Premises. With regard to all matters involving such Lessee Improvement
Work, Lessee shall communicate with the Project Manager rather than with the TI
Contractor. Lessor shall not be responsible for any statement, representation
or agreement made between Lessee and the TI Contractor or any subcontractor. It
is hereby expressly acknowledged by Lessee that such TI Contractor is not
Lessor's agent and has no authority whatsoever to enter into agreement on
Lessor's behalf or otherwise bind Lessor. The Project Manager will furnish
Lessee with notices of substantial completion, cost estimates for Above
Standard Lessee Improvement Work, Lessor's approvals or disapprovals of Plans
and changes thereto.
8. CHANGES
8.1 If Lessee requests or necessitates any change, addition or deletion
to the Premises after approval of the Lessee Plans pursuant to paragraph 2.2, a
request for the change shall be submitted to the Project Manager accompanied by
revised plans prepared by Lessor's space planner or architect at Lessee's sole
expense. The Project Manager shall thereafter notify Lessee's authorized
representative in writing of the estimated cost which will be chargeable to
Lessee by reason of such change, addition or deletion. Such estimated cost
shall include Lessor's cost of any delay in completion of the Premises
resulting from such change (including loss of rent, additional interest, and
extra labor costs incurred in order to minimize further delay). Lessee shall
within five (5) business days thereafter notify the Project Manager in writing
if it desires to proceed with such change. In the absence of such written
authorization, Lessor shall not be obligated to perform such change and shall
be deemed to have been authorized by Lessee to proceed without making such
change. All Costs of the Lessee Improvement Work in excess of Lessor's Lessee
Improvement Allowance shall be paid for by Lessee immediately upon receipt of
an invoice therefor from Lessor, but in any event prior to Lessee taking
occupancy of the Premises.
9. SUBSIDIARY OF LESSOR AS TI CONTRACTOR
9.1 Lessor may cause the Lessee Improvement Work to be performed by a
subsidiary or affiliate of Lessor. In such event Lessor shall so notify Lessee
and such TI Contractor shall be responsible as an agent of Lessor and shall
bind Lessor notwithstanding any contrary provision of paragraph 6.1, above.
10. INTENTIONALLY DELETED
11. NOTICES; DEFAULT
11.1 Any notice, statement, advice, approval, consent or other
communication required or permitted to be given by either party to the other
pursuant to this Work Letter Agreement shall be given in the manner set forth
in paragraph 23 of the Lease. Upon default of Lessee in payment of any sum to
be paid by Lessee pursuant to this Work Letter Agreement, Lessor shall (in
addition to all other remedies) have all the rights as in the case of default
by Lessee in payment of rent under the Lease.
EXHIBIT "E"
Page 5 of 6 Pages
<PAGE> 37
If the foregoing correctly sets forth our understanding, kindly sign
copies of this Work Letter Agreement where indicated.
The foregoing Work Letter Agreement correctly sets forth our understanding
as of the date first hereinabove set forth.
KILROY REALTY, L.P.,
A Delaware Limited Partnership
By: KILROY REALTY CORPORATION,
A Maryland Corporation,
General Partner
By:
--------------------------------
Title:
-----------------------------
By:
--------------------------------
Title:
-----------------------------
"LESSOR"
MEDIBUY.com, INC.,
A Delaware Corporation
By:
------------------------------------
Title:
---------------------------------
By:
------------------------------------
Title:
---------------------------------
"LESSEE"
EXHIBIT "E"
Page 6 of 6 Pages
<PAGE> 1
EXHIBIT 10.22
LEASE AGREEMENT
BETWEEN
PHL-OPCO, LP,
AS LANDLORD
AND
MEDIBUY.COM, INC.,
AS TENANT
KINGS MILL CENTER
MASON, OHIO
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. BASIC LEASE DEFINITIONS, EXHIBITS AND ADDITIONAL DEFINITIONS........... 1
1.1 BASIC LEASE DEFINITIONS........................................... 1
1.2 EXHIBITS.......................................................... 3
1.3 ADDITIONAL DEFINITIONS............................................ 3
2. GRANT OF LEASE......................................................... 6
2.1 DEMISE............................................................ 6
2.2 QUIET ENJOYMENT................................................... 6
2.3 LANDLORD AND TENANT COVENANTS..................................... 6
3. RENT................................................................... 6
3.1 BASE RENT......................................................... 6
3.2 ADDITIONAL RENT................................................... 6
3.3 OTHER TAXES....................................................... 7
3.4 TERMS OF PAYMENT.................................................. 8
3.5 LATE PAYMENTS..................................................... 8
3.6 RIGHT TO ACCEPT PAYMENTS.......................................... 8
4. USE AND OCCUPANCY...................................................... 8
4.1 USE............................................................... 8
4.2 COMPLIANCE........................................................ 8
4.3 OCCUPANCY......................................................... 9
5. SERVICES AND UTILITIES................................................. 10
5.1 LANDLORD'S STANDARD SERVICES...................................... 10
5.2 ADDITIONAL SERVICES............................................... 11
5.3 INTERRUPTION OF SERVICE........................................... 11
6. REPAIRS................................................................ 12
6.1 REPAIRS WITHIN THE PREMISES....................................... 12
6.2 FAILURE TO MAINTAIN PREMISES...................................... 12
6.3 NOTICE OF DAMAGE.................................................. 13
7. ALTERATIONS............................................................ 13
7.1 ALTERATIONS BY TENANT............................................. 13
7.2 ALTERATIONS BY LANDLORD........................................... 13
8. LIENS.................................................................. 14
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. BASIC LEASE DEFINITIONS, EXHIBITS AND ADDITIONAL DEFINITIONS..... 1
1.1 Basic Lease Definitions.................................... 1
1.2 Exhibits................................................... 3
1.3 Additional Definitions..................................... 3
2. GRANT OF LEASE................................................... 6
2.1 Demise..................................................... 6
2.2 Quiet Enjoyment............................................ 6
2.3 Landlord and Tenant Covenants.............................. 6
3. RENT............................................................. 6
3.1 Base Rent.................................................. 6
3.2 Additional Rent............................................ 6
3.3 Other Taxes................................................ 7
3.4 Terms of Payment........................................... 8
3.5 Late Payments.............................................. 8
3.6 Right to Accept Payments................................... 8
4. USE AND OCCUPANCY................................................ 8
4.1 Use........................................................ 8
4.2 Compliance................................................. 8
4.3 Occupancy.................................................. 9
5. SERVICES AND UTILITIES........................................... 10
5.1 Landlord's Standard Services............................... 10
5.2 Additional Services........................................ 11
5.3 Interruption of Services................................... 11
6. REPAIRS.......................................................... 12
6.1 Repairs Within the Premises................................ 12
6.2 Failure to Maintain Premises............................... 12
6.3 Notice of Damage........................................... 13
7. ALTERATIONS...................................................... 13
7.1 Alterations by Tenant...................................... 13
7.2 Alterations by Landlord.................................... 13
8. LIENS............................................................ 14
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9. INSURANCE.......................................................... 14
9.1 LANDLORD'S INSURANCE......................................... 14
9.2 TENANT'S INSURANCE........................................... 15
10. DAMAGE OR DESTRUCTION.............................................. 15
10.1 TERMINATION OPTIONS.......................................... 15
10.2 REPAIR OBLIGATIONS........................................... 16
10.3 RENT ABATEMENT............................................... 16
11. WAIVERS AND INDEMNITIES............................................ 16
11.1 LANDLORD'S WAIVERS........................................... 16
11.2 TENANT'S WAIVERS............................................. 17
11.3 LANDLORD'S INDEMNITY......................................... 17
11.4 TENANT'S INDEMNITY........................................... 17
12. CONDEMNATION....................................................... 17
12.1 FULL TAKING.................................................. 17
12.2 PARTIAL TAKING............................................... 17
12.3 AWARDS....................................................... 18
13. ASSIGNMENT AND SUBLETTING.......................................... 18
13.1 LIMITATION................................................... 18
13.2 NOTICE OF PROPOSED TRANSFER; LANDLORD'S OPTIONS.............. 18
13.3 CONSENT NOT TO BE UNREASONABLY WITHHELD...................... 19
13.4 FORM OF TRANSFER............................................. 19
13.5 PAYMENTS TO LANDLORD......................................... 19
13.6 CHANGE OF OWNERSHIP.......................................... 20
13.7 PERMITTED TRANSFERS.......................................... 20
13.8 EFFECT OF TRANSFERS.......................................... 20
14. PERSONAL PROPERTY.................................................. 20
14.1 INSTALLATION AND REMOVAL..................................... 20
14.2 RESPONSIBILITY............................................... 21
14.3 ????????..................................................... 21
15. END OF TERM........................................................ 21
15.1 SURRENDER.................................................... 21
15.2 HOLDING OVER................................................. 21
16. ESTOPPEL CERTIFICATES.............................................. 22
</TABLE>
-ii-
<PAGE> 5
TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
17. TRANSFERS OF LANDLORD'S INTEREST.................................... 22
17.1 SALE, CONVEYANCE AND ASSIGNMENT............................... 22
17.2 EFFECT OF SALE, CONVEYANCE OR ASSIGNMENT...................... 22
17.3 SUBORDINATION AND NONDISTURBANCE.............................. 22
17.4 ATTORNMENT.................................................... 23
18. RULES AND REGULATIONS............................................... 23
19. PARKING............................................................. 23
20. TENANT'S DEFAULT AND LANDLORD'S REMEDIES............................ 24
20.1 DEFAULT....................................................... 24
20.2 REMEDIES...................................................... 25
21. LANDLORD'S DEFAULT AND TENANT'S REMEDIES............................ 27
21.1 DEFAULT....................................................... 27
21.2 REMEDIES...................................................... 27
22. SECURITY DEPOSIT.................................................... 27
22.1 AMOUNT........................................................ 27
22.2 USE AND RESTORATION........................................... 27
22.3 TRANSFERS..................................................... 28
22.4 REFUND........................................................ 28
23. BROKERS............................................................. 28
24. LIMITATIONS ON LANDLORD'S LIABILITY................................. 28
25. NOTICES............................................................. 29
26. MISCELLANEOUS....................................................... 29
26.1 BINDING EFFECT................................................ 29
26.2 COMPLETE AGREEMENT; MODIFICATION.............................. 29
26.3 DELIVERY FOR EXAMINATION...................................... 29
26.4 NO AIR RIGHTS................................................. 29
26.5 ENFORCEMENT EXPENSES.......................................... 29
26.7 BUILDING NAME................................................. 30
26.8 NO WAIVER..................................................... 30
26.9 RECORDING; CONFIDENTIALITY
26.10 CAPTIONS...................................................... 30
26.11 INVOICES...................................................... 30
26.12 SEVERABILITY.................................................. 30
26.13 JURY TRIAL.................................................... 30
</TABLE>
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<PAGE> 6
TABLE OF CONTENTS
(cont'd)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
26.14 AUTHORITY TO BIND...........................................
26.15 ONLY LANDLORD/TENANT RELATIONSHIP...........................
26.16 COVENANTS INDEPENDENT.......................................
26.17 GOVERNING LAW...............................................
27. ADDITIONAL PROVISIONS.............................................
27.1 CERTIFICATE OF DEPOSIT......................................
27.2 OPTION TO TERMINATE.........................................
27.3 EARLY OCCUPANCY.............................................
</TABLE>
Exhibit A Plan Delineating the Premises
Exhibit B Possession and Leasehold Improvements Agreement
Exhibit C Occupancy Estoppel Certificate
Exhibit D Rules and Regulations
-iv-
<PAGE> 7
LEASE AGREEMENT
KINGS MILL CENTER
MASON, OHIO
THIS LEASE AGREEMENT ("Lease") is entered into as of the Date, and by and
between the Landlord and Tenant, identified in Section 1.1 below.
1. BASIC LEASE DEFINITIONS, EXHIBITS AND ADDITIONAL DEFINITIONS.
1.1 BASIC LEASE DEFINITIONS
In this Lease, the following defined terms have the meanings indicated:
(a) "Date" means APRIL 1, 1999.
(b) "Landlord" means PHL-OPCO, LP, a Delaware limited partnership.
(c) "Tenant" means MEDIBUY.COM, INC., a _________________________.
(d) "Premises" means those premises known as Suite 400 located on
the fourth floor of the Building and identified on Exhibit A, which
contain approximately 5,000 square feet (SUBJECT TO ADJUSTMENT AFTER
BUILD-OUT OF THE LEASEHOLD IMPROVEMENTS). The Premises do not include any
areas above the finished ceiling or below the finished floor covering
installed in the Premises or any other areas not shown on Exhibit A as
being part of the Premises. Landlord reserves, for Landlord's exclusive
use, any of the following (other than those installed for Tenant's
exclusive use) that may be located in the Premises: janitor closets,
stairways and stairwells; fan, mechanical, electrical, telephone and
similar rooms; and elevator, pipe and other vertical shafts, flues and
ducts.
(e) "Use" means general office use only.
(f) "Term" means the duration of this Lease, which will be
approximately five (5) years, beginning on the "Commencement Date" (as
defined in Exhibit B) and ending on the "Expiration Date" (as defined
below), unless terminated earlier or extended further as provided in this
Lease. The "Expiration Date" means (i) if the Commencement Date is the
first day of a month, the five-year anniversary of the day immediately
preceding the Commencement Date; or (ii) if the Commencement Date is not
the first day of a month, the five-year anniversary of the last day of the
month in which the Commencement Date occurs.
(g) "Base Rent" means the Rent payable according to Section 3.1,
which will be in an amount per month applicable during each Lease Year as
follows:
<TABLE>
<CAPTION>
Amount of Base Rent Payable
Lease Year(s) Per Annum Per Square Foot
------------- ---------------------------
<S> <C>
1 $14.50
2 $14.80
3 $15.10
4 $15.40
5 $15.70
</TABLE>
<PAGE> 8
(h) "Tenant's Share" means, with respect to the calculation of
Additional Rent according to Section 3.2, 5.9%, based on square footage
of 5,000 square feet divided by the Building square footage of 84,508,
subject to adjustment and confirmation upon build-out of the Premises.
(i) "Base Year" means the calendar year ending December 31, 1999.
(j) "Security Deposit" means $100,000, subject to Section 27.1.
(k) "Landlord's Rent Address" means:
PHL-OPCO, LP/6049
c/o Receipt 9
Newark Post Office
PO Box 35359
Newark, New Jersey 01793-5359
(l) "Landlord's Notice Address" means:
PHL-OPCO, LP
c/o DLJ Real Estate Capital Partners
277 Park Avenue
New York, New York 10172
Attention: Sean P. Sullivan
and
PHL-OPCO, LP
c/o BetaWest, Ltd.
1050 17th Street, Suite 1000
Denver, Colorado 80265
Attention: Asset Management
and
PHL-OPCO, LP
c/o PM Realty Group
7300 Turfway Road, Suite 440
Florence, KY 41042
Attention: Cynthia Collura
(m) "Tenant's Notice Address" means:
for notices given before the Commencement Date:
_______________________________________________
_______________________________________________
_______________________________________________
Attention: ____________________________________
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<PAGE> 9
and for notices given after the Commencement Date:
_________________________________________________
_________________________________________________
_________________________________________________
Attention: ______________________________________
(n) "Tenant's Invoice Address" means:
_________________________________________________
_________________________________________________
_________________________________________________
Attention: ______________________________________
(o) "Tenant's Parking Spaces" means TENANT'S PRO RATA SHARE of
unassigned, non-reserved parking spaces in the Building's parking facilities.
(p) "Parking Rent" means $-NONE-per month.
(q) "Brokers" means the following brokers who will be paid by
Landlord: INVESTMENT DEVELOPMENT SERVICES, INC., GRUBB & ELLIS COMPANY, AND CB
RICHARD ELLIS; and the following brokers who will be paid by Tenant: NONE.
1.2 EXHIBITS.
The Exhibits listed below are attached to and incorporated in this Lease.
In the event of any inconsistency between such Exhibits and the terms and
provisions of this Lease, the terms and provisions of the Exhibits will
control. The Exhibits to this Lease are:
Exhibit A - Plan Delineating the Premises
Exhibit B - Possession and Leasehold Improvements Agreement
Exhibit C - Occupancy Estoppel Certificate
Exhibit D - Rules and Regulations
1.3 ADDITIONAL DEFINITIONS.
In addition to those terms defined in Section 1.1 and other sections of
this Lease, the following defined terms when used in this Lease have the
meanings indicated:
(a) "Additional Rent" means the Rent payable according to Section
3.2.
(b) "Affiliates" means, with respect to any party, any persons or
entities that own or control, are owned or controlled by, or are under common
ownership or control with, such party and such party's and each of such other
person's or entity's respective officers, directors, shareholders, partners,
venturers, members, managers, agents and employees. For purposes of this
definition, a party is "owned" by anyone that owns more than 50% of the equity
interests in such party and a party is "controlled" by anyone that owns
sufficient voting interests to control the management decisions of such party.
(c) "Building" means the office building, parking facilities and
other improvements commonly known as the KINGS MILL CENTER, located on the Land
and in which the Premises are located.
-3-
<PAGE> 10
(d) "Building Standard" means the scope and quality of leasehold
improvements, Building systems and Building services, as the context may
require, which are reasonably determined by Landlord from time to time for the
Building generally.
(e) "Business Hours" means the hours from 8:00 a.m. to 6:00 p.m. on
Monday through Friday and from 8:00 a.m. to 12:00 noon on Saturday, excluding
statutory or legal holidays.
(f) "Common Areas" means certain interior and exterior common and public
areas located on the Land and in the Building as may be designated by Landlord
for the nonexclusive use in common by Tenant, Landlord and other tenants, and
their employees, agents and invitees. If the Building is connected to other
buildings by underground tunnels or elevated bridges over public streets,
Common Areas will include such bridges and tunnels; provided, however, that
Landlord and owners of such other buildings will have the right in their sole
discretion to adopt rules and regulations relating to bridge and tunnel use.
(g) "Encumbrance" means any ground lease, first mortgage or first deed of
trust now or later encumbering the Building or Land, and all their renewals,
modifications, supplements, consolidations and replacements.
(h) "Expenses" means the aggregate of any and all costs (other than those
expressly excluded below) incurred or accrued during each calendar year
according to generally accepted accounting principles for operating, managing,
administering, equipping, securing, protecting, insuring, heating, cooling,
ventilating, lighting, repairing, replacing, renewing, cleaning, maintaining,
decorating, inspecting, and providing water, sewer and other energy and
utilities to, the Land, Building and Common Areas; management fees calculated
according to the management agreement between Landlord and its managing agent
(reasonable and customary for the type of building and area in which the
building is located, and provided that if Landlord elects to discontinue the
services of a managing agent, Expenses will include, instead of management
fees, administrative fees calculated in the same manner as management fees were
calculated under the management agreement in effect for the Building for the
last year such agreement was in effect); fees and expenses (including
reasonable attorneys' fees) incurred in contesting the validity of any Laws that
would cause an increase in Expenses; depreciation on the personal property and
moveable equipment used in the operation and/or maintenance of the building
which is or should be capitalized on Landlord's books; and costs (whether
capital or not) that are incurred in order to conform to changes subsequent to
the Date in any Laws, or that are intended to reduce Expenses or the rate of
increase in Expenses (the amortized installment of such costs will be included
in the Expenses for the Base Year and will continue to be charged to Expenses
in annual installments over the useful life of the items for which such costs
are incurred [in the case of items required by changes in Laws] or over the
period Landlord reasonably estimates that it will take for the savings in
Expenses achieved by such items to equal their cost [in the case of items
intended to reduce Expenses or their rate of increase], and in either case
together with interest, each calendar year such costs are charged to Expenses,
on the unamortized balance at the average Prime Rate in effect during such
calendar year). Expenses will not include (1) mortgage principal or interest;
(2) ground lease payments; (3) leasing commissions; (4) costs of advertising
space for lease in the Building; (5) costs for which Landlord is reimbursed by
insurance proceeds or from tenants of the Building (other than such tenants'
regular contributions to Expenses); (6) any depreciation or capital
expenditures (except as expressly provided above); (7) legal fees incurred for
negotiating leases or collecting rents or ARISING FROM DISPUTES WITH TENANTS;
(8) costs directly and solely related to the maintenance and operation of the
entity that constitutes the Landlord, such as accounting fees incurred solely
-4-
<PAGE> 11
for the purpose of reporting Landlord's financial condition; (9) costs,
expenses, or charges for leasehold improvements made in connection with the
preparation of any portion of the Building for occupancy by a new or existing
tenant which is not generally beneficial to all tenants of the Building; (10)
costs, expenses, fines, penalties, judgments, or charges from Landlord's or
Landlord's managing agent's breach or violation of a law, lease, or other
obligation, including, but not limited to, attorneys' fees; (11) fees for
licenses, permits or inspections that are not part of routine maintenance of the
Building or result from acts of negligence of Landlord, Landlord's managing
agent, or any other tenant of the Building; (12) costs, expenses, or charges for
any repairs necessary to cure defects in the original construction of any
portion or component of the Building, Common Areas, or any other improvements on
the Land; and (13) costs, expenses, or charges for sculptures or other art work.
For each calendar year during the Term, the amount by which those Expenses that
vary with occupancy (such as cleaning costs and utilities) would have increased
had Building been 95% occupied and operational and had all Building services
been provided to all tenants will be reasonably determined and the amount of
such increase will be included in Expenses for such calendar year.
(i) "Land" means the real property located at Kings Mill Center,
Courseview Drive, Mason, Ohio, less any portions that may be conveyed separately
from the Building by Landlord from time to time, plus any additional real
property located proximate to the Land that may be operated by Landlord from
time to time in conjunction with the Land.
(j) "Laws" means any and all present or future federal, state or local
laws, statutes, ordinances, rules, regulations or orders of any and all
governmental or quasi-governmental authorities having jurisdiction.
(k) "Lease Year" means each successive period of 12 calendar months
during the Term, ending on the same day and month (but not year, except in the
case of the last Lease Year) as the day and month on which the Expiration Date
will occur. If the Commencement Date is the first day of a month, the first
Lease Year will be greater than 12 months by the number of days from the
Commencement Date to the last day of the month in which the Commencement Date
occurs.
(l) "Lender" means the ground lessor of any ground lease, the mortgagee
of any mortgage or the beneficiary of any deed of trust, that constitutes an
Encumbrance.
(m) "Prime Rate" means the rate of interest announced from time to time
by the Chase Manhattan Bank, or any successor to it, as its prime rate. If The
Chase Manhattan Bank, or any successor to it, ceases to announce a prime rate,
Landlord will designate a reasonably comparable financial institution for
purposes of determining the Prime Rate.
(n) "Rent" means the Base Rent, Additional Rent and all other amounts
required to be paid by Tenant under this Lease.
(o) "Taxes" means the amount incurred or accrued during each calendar
year according to generally accepted accounting principles for that portion of
the following items that is allocable to the Land and Building: all ad valorem
real and personal property taxes and assessments, special or otherwise, levied
upon or with respect to the Land or Building, the personal property used in
operating the Building, and the rents and additional charges payable by tenants
of the Building, and imposed by any taxing authority having jurisdiction; all
taxes, levies and charges which may be assessed, levied or imposed in
replacement of, or in addition to, all or
-5-
<PAGE> 12
any part of ad valorem real or personal property taxes or assessments as
revenue sources, and which in whole or in part are measured or calculated
by or based upon the Land or Building, the leasehold estate of Landlord or
the tenants of the Building, or the rents and other charges payable by such
tenants; capital and place-of-business taxes, and other similar taxes
assessed relating to the Common Areas; and any reasonable expenses incurred
by Landlord in attempting to reduce or avoid an increase in Taxes,
including, without limitation, reasonable legal fees and costs. Taxes will
not include any net income taxes of Landlord. Tenant acknowledges that
Taxes may increase during the Term and that if the Building or Land, or
both, are currently subject to a Taxes abatement program and such program
ceases to benefit the Building or Land, or both, during the Term, Taxes
will increase.
2. GRANT OF LEASE.
2.1 DEMISE.
Subject to the terms, covenants, conditions and provisions of this Lease,
Landlord leases to Tenant and Tenant leases from Landlord the Premises, together
with the nonexclusive right to use the Common Areas, for the Term.
2.2 QUIET ENJOYMENT.
Landlord covenants that during the Term Tenant will have quiet and
peaceable possession of the Premises, subject to the terms, covenants,
conditions and provisions of this Lease, and Landlord will not disturb such
possession except as expressly provided in this Lease.
2.3 LANDLORD AND TENANT COVENANTS.
Landlord covenants to observe and perform all of the terms, covenants and
conditions applicable to Landlord in this Lease. Tenant covenants to pay the
Rent when due, and to observe and perform all of the terms, covenants and
conditions applicable to Tenant in this Lease.
3. RENT.
3.1 BASE RENT.
Commencing on the Commencement Date and then throughout the Term, Tenant
agrees to pay Landlord Base Rent according to the following provisions. Base
Rent during each Lease Year (or portion of a Lease Year) described in Section
1.1(g) will be payable in monthly installments in the amount specified for such
Lease Year (or portion) in Section 1.1(g), in advance, on or before the first
day of each and every month during the Term. However, if the Term commences on
other than the first day of a month or ends on other than the last day of a
month, Base Rent for such month will be appropriately prorated.
3.2 ADDITIONAL RENT.
Tenant agrees to pay Landlord, as Additional Rent, in the manner provided
below for each calendar year subsequent to the Base Year that contains any part
of the Term, Tenant's share of (i) the amount by which Expenses for such
calendar year exceed Expenses for the Base Year ("Additional Expenses"); and
(ii) the amount by which Taxes for such calendar year exceed Taxes for the Base
Year ("Additional Taxes"); provided that Tenant's Share for each successive
calendar year in the Term shall not exceed Tenant's Share for the prior year by
more than six percent (6%).
-6-
<PAGE> 13
(a) Estimated Payments. Prior to or as soon as practicable after the
beginning of each calendar year subsequent to the Base Year, Landlord will
notify Tenant of Landlord's estimate of Tenant's Share of Additional Expenses
and Additional Taxes for the ensuing calendar year. On or before the first day
of each month during the ensuing calendar year, Tenant will pay to Landlord, in
advance, 1/12 of such estimated amounts, provided that until such notice is
given with respect to the ensuing calendar year, Tenant will continue to pay on
the basis of the prior calendar years's estimate until the month after the
month in which such notice is given. In the month Tenant first pays based on
Landlord's new estimate, Tenant will pay to Landlord 1/12 of the difference
between the new estimate and the prior year's estimate for each month which has
elapsed since the beginning of the current calendar year. If at any time or
times it appears to Landlord that Tenant's Share of Additional Expenses or
Tenant's Share of Additional Taxes for the then-current calendar year will
vary from Landlord's estimate by more than 5%, Landlord may, by notice to
Tenant, revise its estimate for such year and subsequent payments by Tenant for
such year will be based upon the revised estimate.
(b) Annual Settlement. As soon as practicable after the close of each
calendar year subsequent to the Base Year, Landlord will deliver to Tenant its
statement of Tenant's Share of Additional Expenses and Additional Taxes for
such calendar year. If on the basis of such statement Tenant owes an amount
that is less than the estimated payments previously made by Tenant for such
calendar year, Landlord will either refund such excess amount to Tenant or
credit such excess amount against the next payment(s), if any, due from Tenant
to Landlord. If on the basis of such statement Tenant owes an amount that is
more than the estimated payments previously made by Tenant for such calendar
year, Tenant will pay the deficiency to Landlord within 30 days after the
delivery of such statement. If this Lease commences on a day other than the
first day of a calendar year or terminates on a day other than the last day of
a calendar year, Tenant's Share of Additional Expenses and Additional Taxes
applicable to the calendar year in which such commencement or termination
occurs will be prorated on the basis of the number of days within such calendar
year that are within the Term.
(c) Final Payment. Tenant's obligation to pay the Additional Rent
provided for in this Section 3.2 which is accrued but not paid for periods
prior to the expiration or early termination of the Term will survive such
expiration or early termination. Prior to or as soon as practicable after the
expiration or early termination of the Term, Landlord may submit an invoice to
Tenant stating Landlord's estimate of the amount by which Tenant's Share of
Additional Expenses and Additional Taxes through the date of such expiration or
early termination will exceed Tenant's estimated payments of Additional Rent
for the calendar year in which such expiration or termination has occurred or
will occur. Tenant will pay the amount of any such excess to Landlord within 30
days after the date of Landlord's invoice.
(d) INSPECTION. LANDLORD SHALL MAKE ALL OF ITS RECORDS RELATING TO THE
CALCULATION OF ADDITIONAL RENT AND THE TENANT'S SHARE THEREOF AVAILABLE TO
TENANT OR ITS AGENT AT REASONABLE TIMES AFTER REASONABLE NOTICE AT THE
LANDLORD'S MANAGEMENT OFFICE IN THE BUILDING. TENANT MAY TAKE EXCEPTION TO SUCH
MATTERS INCLUDED IN ADDITIONAL RENT OR TENANT'S SHARE THEREOF AS ARE NOT
PROPERLY INCLUDED THEREIN PURSUANT TO THE TERMS OF THIS LEASE, AND LANDLORD
SHALL PROMPTLY REFUND TENANT THE AMOUNT FOR WHICH TENANT HAS BEEN IMPROPERLY
CHARGED.
3.3 OTHER TAXES.
Tenant will reimburse Landlord upon demand for any and all taxes payable
by Landlord (other than net income taxes and taxes included in Taxes) whether
or not now customary or within the
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<PAGE> 14
contemplation of Landlord and Tenant: (a) upon, measured by or reasonably
attributable to the cost or value of Tenant's equipment, furniture, fixtures
and other personal property located in the Premises; (b) upon or measured by
Rent; (c) upon or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises or any portion of the Premises; and (d) upon this transaction or any
document to which Tenant is a party creating or transferring an interest or an
estate in the Premises. If it is not lawful for Tenant to reimburse Landlord,
the Base Rent payable to Landlord under this Lease will be revised to yield to
Landlord the same net rental after the imposition of any such tax upon Landlord
as would have been payable to Landlord prior to the imposition of any such tax.
3.4 TERMS OF PAYMENT.
All Base Rent, Additional Rent and other Rent will be paid to Landlord in
lawful money of the United States of America, at Landlord's Rent Address or to
such other person or at such other place as Landlord may from time to time
designate in writing, without notice or demand and without right of deduction,
abatement or setoff, except as otherwise expressly provided in this Lease.
3.5 LATE PAYMENTS.
To compensate Landlord for its additional cost of processing late
payments, for any payment of Rent which is not received within 5 days after it
is due, Tenant will pay a late charge of 2% of the late payment, but not less
than $100 or more than $1,500. In addition, all amounts payable under this
Lease by Tenant to Landlord, if not paid when due, will bear interest from the
due date until paid at the lesser of the highest interest rate permitted by law
or 5% in excess of the then-current Prime Rate.
3.6 RIGHT TO ACCEPT PAYMENTS.
No receipt by Landlord of an amount less than Tenant's full amount due
will be deemed to be other than payment "on account," nor will any endorsement
or statement on any check or any accompanying letter effect or evidence an
accord and satisfaction. Landlord may accept such check or any payment without
prejudice to Landlord's right to recover the balance or pursue any right of
Landlord. No payments by Tenant to Landlord after the expiration or other
termination of the Term, or after the giving of any notice (other than a demand
for payment of money) by Landlord to Tenant, will reinstate, continue or extend
the Term or make ineffective any notice given to Tenant prior to such payment.
After notice or commencement of a suit, or after final judgment granting
Landlord possession of the Premises, Landlord may receive and collect any sums
of Rent due under this Lease, and such receipt will not void any notice or in
any manner affect any pending suit or any judgment obtained.
4. USE AND OCCUPANCY.
4.1 USE.
Tenant agrees to use and occupy the Premises only for the Use described
in Section 1.1(e), or for such other purpose as Landlord expressly authorizes
in writing.
4.2 COMPLIANCE.
(a) Tenant agrees to use the Premises in a safe, careful and proper
manner, and to comply, at Tenant's expense, with all Laws applicable to
Tenant's use, occupancy or alteration of the Premises. If, due to the nature
or manner of any use or occupancy of the Premises
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by Tenant that is other than normal office use and occupancy, any improvements
or alterations to the Premises by Tenant are required to comply with any Laws,
or with requirements of Landlord's insurers, then Tenant will pay all costs of
the required improvements, alterations or changes in services. NOTWITHSTANDING
THE FOREGOING OR ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE, TENANT SHALL
NOT BE RESPONSIBLE FOR COMPLIANCE WITH ANY LAWS, CODES, ORDINANCES, OR OTHER
GOVERNMENTAL DIRECTIVES WHERE SUCH IS TRIGGERED BY TENANT'S USE OF THE PREMISES
FOR OTHER THAN GENERAL OFFICE USE OR TRIGGERED BY TENANT'S ALTERATIONS OR
ADDITIONS TO THE PREMISES. FOR EXAMPLE, IF ANY GOVERNMENTAL AUTHORITY SHOULD
REQUIRE THE REMOVAL OF ASBESTOS FROM THE PREMISES, SUCH WORK SHALL BE PERFORMED
BY AND AT THE SOLE COST OF LANDLORD.
(b) Landlord and Tenant agree that, during the term, each will comply
with all Laws governing, and all REASONABLE procedures established by Landlord
for, the use, abatement, removal, storage, disposal or transport of any
substances, chemicals or materials declared to be, or regulated as, hazardous
or toxic under any applicable Laws ("Hazardous Substances") and any required or
permitted alteration, repair, maintenance, restoration, removal or other work
in or about the Premises, Building or Land that involves or affects any
Hazardous Substances. No Hazardous Substances will be stored, used, released,
produced, processed or disposed in, on or about, or transported to or from, the
Premises, Building or Land by Tenant or its subtenants, or any of their
respective agents, employees, contractors or invitees, without first obtaining
Landlord's express written consent (any Hazardous Substances which are stored,
used, released, produced, processed or disposed in, on or about, or transported
to or from, the Premises, Building or Land by any of such persons or entities
are called "Tenant's Hazardous Substances"). However, normal quantities of
Tenant's Hazardous Substances customarily used in general office activities
(such as copier and cleaning chemicals) may be stored and used at the Premises
without Landlord's prior written consent. IN THE CASE OF A RELEASE OF TENANT'S
HAZARDOUS SUBSTANCES, THEN Tenant, at its expense, will take all action
necessary to restore the Land, Building and Premises to the condition existing
prior to the introduction of Tenant's Hazardous Substances, whether such action
is required by any governmental authority in order to comply with applicable
Laws or by Landlord in order for Landlord to make the same economic use of the
Land, Building and Premises as Landlord could have made prior to the
introduction of Tenant's Hazardous Substances. Such action may include, without
limitation, the investigation of the environmental condition of the Land,
Building or Premises, the preparation of remediation plans or feasibility
studies and the performance of cleanup, remedial, removal or restoration work.
Tenant will obtain Landlord's written approval before undertaking any action
required by this Section 4.2(b), which approval will not be unreasonably
withheld so long as the proposed actions will not have an avoidable material and
adverse affect. Each party will indemnify and hold the other and the other's
Affiliates harmless from and against any and all claims, costs and liabilities
(including reasonable attorneys' fees) arising out of in connection with any
breach by such party of its covenants under this Section 4.2(b). The parties'
obligations under this Section 4.2(b) will survive the expiration or early
termination of the Term.
4.3 OCCUPANCY.
Tenant will not do or permit anything which obstructs or interferes with
other tenants' rights or with Landlord's providing Building services, or which
injures or annoys other tenants. Tenant will not cause, maintain or permit any
nuisance or waste in or about the Premises and will keep the Premises free of
debris, and anything of a dangerous, noxious, toxic or offensive nature or
which could create a fire hazard or undue vibration, heat, noise, fumes, vapors
or odors. Tenant will not increase on an ongoing basis the number of persons
occupying the Premises or the pedestrian traffic in and out of the Premises or
the Building above an ordinary level for general office tenants in comparable
office buildings (by, for
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example, instituting multiple shifts). Tenant will not do or permit anything
which interferes with the transmission or reception of microwave, television,
radio, telephone or other communication signals from antennae or other
facilities on the Building or Land. If any item of equipment, building material
or other property brought into the Building by Tenant or on Tenant's request
causes a dangerous, noxious, toxic or offensive effect (including an
environmental effect) and in Landlord's reasonable opinion such effect will not
be permanent but will only be temporary and is able to be eliminated, then
Tenant will not be required to remove such item, provided that Tenant promptly
and diligently causes such effect to be eliminated, pays for all costs of
elimination and indemnifies Landlord against all liabilities arising from such
effect. Tenant will not make or permit any use of the Premises which may
jeopardize any insurance coverage, increase the cost of insurance or require
additional insurance coverage. If by reason of Tenant's failure to comply with
the provisions of this Section 4.3, (a) any insurance coverage is jeopardized,
then Landlord will have the option to terminate this Lease; or (b) insurance
premiums are increased, then Landlord may require Tenant to immediately pay
Landlord as Rent the amount of the increase in insurance premiums.
5. SERVICES AND UTILITIES.
5.1 LANDLORD'S STANDARD SERVICES.
During the Term, Landlord will operate and maintain the Building in
compliance with all applicable Laws and according to those standards from time
to time prevailing for similar office buildings in the area in which the
Building is located. Landlord will provide the following services according to
such standards, the costs of which will be included in Expenses to the extent
provided in Section 1.3(h).
(a) repair, maintenance and replacement of all structural elements of
the Building and all mechanical, plumbing and electrical systems installed in
the Building, but excluding any mechanical, plumbing or electrical equipment
that is not Building Standard, exclusively serves a tenant's premises and is
installed or operated to accommodate such tenant's special requirements (such as
supplementary air conditioning unit installed to cool a tenant's computer room).
(b) heating, ventilating and air conditioning the Premises and Common
Areas during Business Hours, at temperatures and in amounts consistent with
those the mechanical serving the Premises is designed to provide and otherwise
as may be reasonably required for comfortable use and occupancy under normal
business operations with "Customer Equipment" (as used in this Lease, "Customary
Office Equipment" will include desktop personal computers and printers, small
reproduction machines and similar devices and equipment; but will not include
any machines, devices or equipment that adversely affect the temperature
otherwise maintained in the Premises such as, e.g., data processing or
heavy-duty computer or reproduction equipment);
(c) electricity for lighting the Premises and operating Customary
Office Equipment during Business Hours and in amounts not exceeding the demand
the electrical system serving the Premises is designed to provide;
(d) water for small kitchens, washrooms and drinking fountains;
(e) janitorial services to the Premises and Common Areas;
(f) passenger elevators for access to and from any floor(s) on which
the Premises are located above the Building's first floor;
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(g) toilet facilities, including necessary washroom supplies
sufficient for Tenant's normal use;
(h) electric lighting for all Common Areas that require electric
light during the day or are open at night, including replacement of tubes and
ballasts in lighting fixtures; and
(i) replacement of tubes and ballasts in those Building Standard
lighting fixtures installed in the Premises.
5.2 ADDITIONAL SERVICES.
(a) If Tenant requires heating, ventilating or air conditioning for
the Premises outside Business Hours, Landlord will furnish the same for the
hours specified in a request from Tenant (which request will be made at the
time and in the manner reasonably designated by Landlord for such requests from
time to time), and fort his service Tenant will pay Landlord the hourly rate
reasonably determined by Landlord from time to time.
(b) If Tenant requires electric current, water or any other energy
in excess of the amounts provided by Landlord according to Section 5.1, such
excess electric, water or other energy requirements will be supplied only with
Landlord's consent, which consent will not be unreasonably withheld. If
Landlord grants such consent, Tenant will pay all costs of meter service and
installation of facilities or professional services necessary to measure and/or
furnish the required excess capacity. Tenant will also pay the entire cost of
such additional electricity, water or other energy so required.
(c) If Tenant installs any machines, equipment or devices in the
Premises that do not constitute Customary Office Equipment and such machines,
equipment or devices cause the temperature in any part of the Premises to
exceed the temperature the Building's mechanical system would be able to
maintain in the Premises were it not for such machines, equipment or devices,
then Landlord reserves the right to install supplementary air conditioning
units in the Premises, and Tenant will pay Landlord all costs of installing,
operating and maintaining such supplementary units.
(d) If Tenant requires any janitorial or cleaning services in excess
of the amounts provided by Landlord according to Section 5.1 (such as cleaning
services beyond normal office janitorial services for kitchens, computer rooms
or other special use areas), Landlord will provide such excess services to
Tenant within a reasonable period after Tenant's request made to Landlord's
Building manager, provided that such excess services are available from
Landlord's regular janitorial or cleaning contractor. Tenant will pay the cost
of such excess services. Landlord will also provide, within a reasonable period
after Tenant's request made to Landlord's Building manager, at Tenant's cost and
to the extent available to Landlord, replacement of bulbs, tubes or ballasts in
any non-Building Standard lighting fixtures in the Premises.
(e) Tenant will pay as Rent, within 10 days after the date of
Landlord's invoice, all costs which may become payable by Tenant to Landlord
under this Section 5.2.
5.3 INTERRUPTION OF SERVICES.
If any of the services provided for in this Section 5 are interrupted or
stopped, Landlord will use due diligence to resume the service; provided,
however, no irregularity or stoppage of any of these services will create any
liability for Landlord (including, without limitation, any liability for
damages to
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Tenant's personal property caused by any such irregularity or stoppage),
constitute an actual or constructive eviction or, except as expressly provided
below, cause any abatement of the Rent payable under this Lease or in any manner
or for any purpose relieve Tenant from any of its obligations under this Lease.
If, due to reasons within Landlord's reasonable control, any of the services
required to be provided by Landlord under this Section 5 should become
unavailable and should remain unavailable for a continuous period in excess of 5
business days after notice of such unavailability from Tenant to Landlord, and
if such unavailability should render all or any portion of the Premises
untenantable, then commencing upon the expiration of such continuous 5 business
day period, Tenant's Rent will equitably abate in proportion to the portion of
the Premises so rendered untenantable for so long as such services remain
unavailable for such reasons. Without limiting those reasons for an irregularity
or stoppage of services that may be beyond Landlord's control, any such
irregularity or stoppage that is required in order to comply with any Laws will
be deemed caused by a reason beyond Landlord's control.
6. REPAIRS.
6.1 REPAIRS WITHIN THE PREMISES.
Subject to the terms of Sections 4, 5.1(a), 5.1(e), 5.1(i), 10 and 12,
and except to the extent Landlord is required or elects to perform or pay for
certain maintenance or repairs according to those sections, Tenant will, at
Tenant's own expense and at all times during the Term, maintain the Premises and
Tenant's equipment, personal property and trade fixtures in the Premises, and
any mechanical, plumbing or electrical equipment that is not Building Standard,
exclusively serves the Premises and is installed or operated to accommodate
Tenant's special requirements (such as a supplementary air conditioning unit
installed to cool a computer room in the Premises), in good order and repair and
in a condition that complies with all applicable Laws. Subject to Section 11.1,
Tenant will also be responsible for the cost of repairing all damage to the
Premises, Building or Common Areas (or any equipment or fixtures in or serving
the same) caused by the negligence or willful misconduct of Tenant or its
subtenants, or any of their respective agents, employees, contractors or
invitees. Any such damages may be repaired by Landlord, in which case Tenant
will pay as Rent to Landlord the cost of such repairs, including an amount
sufficient to reimburse Landlord for overhead and supervision, within 10 days
after the date of Landlord's invoice. Alternatively, at Landlord's option Tenant
will promptly and adequately repair all such damage under the supervision and
subject to the prior reasonable approval of Landlord. All work done by Tenant or
its contractors (which contractors will be subject to Landlord's reasonable
approval) will be done in a first-class workmanlike manner using only grades of
materials at least equal in quality to Building Standard materials and will
comply with all insurance requirements and all applicable laws.
6.2 FAILURE TO MAINTAIN PREMISES.
If Tenant fails to perform any of its obligations under Section 6.1, then
Landlord may perform such obligations and Tenant will pay as Rent to Landlord
the cost of such performance, including an amount sufficient to reimburse
Landlord for overhead and supervision, within 10 days after the date of
Landlord's invoice. For purposes of performing such obligations, or to inspect
the Premises, Landlord may enter the Premises upon not less than 10 days' prior
notice to Tenant (except in cases of actual or suspected emergency, in which
case no prior notice will be required) without liability to Tenant for any loss
or damage incurred as a result of such entry, provided that Landlord will take
reasonable steps in connection with such entry to minimize any disruption to
Tenant's business or its use of the Premises.
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6.3 NOTICE OF DAMAGE.
Tenant will notify Landlord promptly after Tenant learns of (a) any fire or
other casualty in the Premises; (b) any damage to or defect in the Premises,
Building of Common Areas, including any fixtures or equipment in or serving the
same, which was caused by Tenant or its subtenants, or their respective agents,
employees, contractors or invitees, or for the repair of which Landlord might
be responsible; and (c) any damage to or defect in any parts or appurtenances
of the Building's sanitary, electrical, heating, ventilating, air conditioning,
elevator or other systems located in or passing through the Premises.
7. ALTERATIONS.
7.1 ALTERATIONS BY TENANT.
Tenant may from time to time at its own expense make changes, additions
and improvements to the Premises to better adapt the same to its business,
provided that any such change, addition or improvement will (a) comply with all
applicable Laws; (b) be made only with the prior written consent of Landlord,
which consent will not be unreasonably withheld; (c) equal or exceed Building
Standard; and (d) be carried out only by persons selected by Tenant and
approved in writing by Landlord (WHICH APPROVAL SHALL NOT BE UNREASONABLY
WITHHELD OR DELAYED), who will if required by Landlord deliver to Landlord
before commencement of the work performance and payment bonds. Tenant will
maintain, or will cause the persons performing any such work to maintain,
worker's compensation insurance and public liability and property damage
insurance (with Landlord named as an additional insured), in amounts, with
companies and in a form reasonably satisfactory to Landlord, which insurance
will remain in effect during the entire period in which the work will be
carried out. If requested by Landlord, Tenant will deliver to Landlord proof of
all such insurance. Tenant will promptly pay, when due, the cost of all such
work and, upon completion, Tenant will deliver to Landlord, to the extent not
previously received by Landlord, evidence of payment, contractors' affidavits
and full and final waivers of all liens for labor, services or materials.
Tenant will also pay any increase in property taxes on, or fire or casualty
insurance premiums for, the Building attributable to such change, addition or
improvement and the cost of any modifications to the Building outside the
Premises that are required to be made in order to make the change, addition or
improvement to the Premises. Tenant, at its expense, will have promptly
prepared and submitted to Landlord reproducible as-built plans of any such
change, addition or improvement upon its completion. All changes, additions and
improvements to the Premises, whether temporary or permanent in character, made
or paid for by Landlord or Tenant will, without compensation to Tenant, become
Landlord's property upon EXPIRATION OR EARLIER TERMINATION OF THIS LEASE. If
at the time Landlord consents to their installation, Landlord requests or
approves the removal by Tenant of any such changes, additions or improvements
upon termination of this Lease, Tenant will remove the same upon termination of
this Lease as provided in Section 15.1. All other changes, additions and
improvements will remain Landlord's property upon termination of this Lease and
will be relinquished to Landlord in good condition, ordinary wear and tear
excepted. DURING THE TERM, TENANT SHALL BE ENTITLED TO REMOVE ALTERATIONS,
CHANGES, OR IMPROVEMENTS, PROVIDED THAT TENANT REPAIRS ANY DAMAGE CAUSED BY
SUCH REMOVAL. TENANT SHALL NOT BE REQUIRED TO REMOVE ANY ALTERATIONS,
ADDITIONS, IMPROVEMENTS, OR UTILITY INSTALLATIONS FOR WHICH TENANT HAS OBTAINED
LANDLORD'S CONSENT, UNLESS LANDLORD HAS INDICATED AT THE TIME OF GRANTING SUCH
CONSENT THAT SUCH REMOVAL WILL BE REQUIRED AT THE END OF THE LEASE TERM.
7.2 ALTERATIONS BY LANDLORD.
Landlord may from time to time make repairs, changes, additions and
improvements to the Building, Common Areas and those Building systems necessary
to provide the services described in Section 5, and for such purposes Landlord
may enter the Premises upon not less than 10 days' prior
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notice to Tenant (except in cases of actual or suspected emergency, in which
case no prior notice will be required) without liability to Tenant for any loss
or damage incurred as a result of such entry, provided that in doing so Landlord
will not disturb or interfere with Tenant's use of the Premises and operation of
its business any more than is reasonably necessary in the circumstances and will
repair any damage to the Premises caused by such entry. No permanent change,
addition or improvement made by Landlord will materially impair access to the
Premises.
8. LIENS.
Tenant agrees to pay before delinquency all costs for work, services or
materials furnished to Tenant for the Premises, the nonpayment of which could
result in any lien against the Land or Building. Tenant will keep title to the
Land and Building free and clear of any such lien. Tenant will immediately
notify Landlord of the filing of any such lien or any pending claims or
proceedings relating to any such lien and will indemnify and hold Landlord
harmless from and against all loss, damages and expenses (including reasonable
attorneys' fees) suffered or incurred by Landlord as a result of such lien,
claims and proceedings. In case any such lien attaches, Tenant agrees to cause
it to be immediately released and removed of record (failing which Landlord may
do so at Tenant's sole expense), unless Tenant has a good faith dispute as to
such lien in which case Tenant may contest such lien by appropriate proceedings
so long as Tenant deposits with Landlord a bond or other security in an amount
reasonably acceptable to Landlord and any Lender which may be used by Landlord
to release such lien if Tenant's contest is abandoned or is unsuccessful. Upon
final determination of any permitted contest, Tenant will immediately pay any
judgment rendered and cause the lien to be released.
9. INSURANCE.
9.1 LANDLORD'S INSURANCE.
During the Term, Landlord will provide and keep in force the following
insurance:
(a) commercial general liability insurance relating to Landlord's
operation of the Building, for personal and bodily injury and death, and
damage to others' property;
(b) all risk or fire insurance (including standard extended coverage
endorsement perils, leakage from fire protective devices and other water
damage) relating to the Land and Building (but excluding Tenant's fixtures,
furnishings, equipment, personal property, documents, files and work
products);
(c) loss of rental income insurance or loss of insurable gross
profits; and
(d) such other insurance (including boiler and machinery, earthquake
and flood insurance) as Landlord reasonably elects to obtain or any Lender
requires.
(e) Insurance effected by Landlord under this Section 9.1 will be in
amounts which Landlord from time to time reasonably determines sufficient
or any Lender requires; will be subject to such deductibles and exclusions
as Landlord reasonably determines; will, in the case of insurance under
Sections 9.1(b), (c) and (d), permit the release of Tenant from certain
liability under Section 11.1; and will otherwise be on such terms and
conditions as Landlord from time to time reasonably determines sufficient.
Tenant acknowledges that Landlord's loss of rental income insurance policy
provides that payments by the insurer may be limited to a period of one
year following the date of any damage or destruction and that no insurance
proceeds will be
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payable in the case of damage or destruction caused by an occurrence not
included in the policies described in Sections 9.1(b), (c) and (d).
9.2 TENANT'S INSURANCE.
During the Term, Tenant will provide and keep in force the following insurance:
(a) commercial general liability insurance relating to Tenant's business
(carried on, in or from the Premises) and Tenant's use and occupancy, for
personal and bodily injury and death, and damage to others' property, with
limits of not less than $1,000,000 for any one accident or occurrence;
(b) all risk or fire insurance (including standard extended endorsement
perils, leakage from fire protective devices and other water damage) relating to
Tenant's fixtures, furnishings, equipment, personal property, inventory and
stock-in-trade on a full replacement basis in amounts sufficient to prevent
Tenant from becoming a coinsurer and subject only to such deductibles and
exclusions as Landlord may reasonably approve;
(c) if any boiler or machinery is operated in the Premises, boiler and
machinery insurance;
(d) if Tenant operates owned, hired or nonowned vehicles on the Land,
automobile liability insurance with limits of not less than $1,000,000 combined
bodily injury and property damage; and
(e) worker's compensation and employer's liability insurance in any
amounts required to comply with applicable Laws.
Landlord, Landlord's Building manager, Landlord's asset manager and any Lender
will be named as an additional insureds in the policy described in Section
9.2(a), which will include cross liability and severability of interests clauses
and will be on an "occurrence" (and not a "claims made") form. The policies
described in Sections 9.2(b) and (c) will permit the release of Landlord from
certain liability under Section 11.2. Tenant's insurance policies will be
written by insurers that are rated A-IX or better by Best's Rating Guide and
licensed in the state in which the Building is located, will be written as
primary policies, not contributing with and not supplemental to the coverage
that Landlord may carry, and will otherwise be upon such terms and conditions as
Landlord from time to time reasonably requires Tenant will file with Landlord,
on or before the Commencement Date and at least 10 days before expiration date
of expiring policies, such copies of either current policies or certificates, or
other proofs, as may be reasonably required to establish Tenant's insurance
coverage in effect from time to time and payment of premiums. Tenant's insurers
will agree to give Landlord and all other additional insured at least 30 days'
prior notice of any non-renewal, and at least 10 days's prior notice of any
cancellation, of any insurance coverage required by this Section 9.2. If Tenant
fails to insure or pay premiums, or to file satisfactory proof as required,
Landlord may, upon a minimum of 24-hours' notice, effect such insurance and
recover from Tenant on demand any premiums paid.
10. DAMAGE OR DESTRUCTION.
10.1 TERMINATION OPTIONS.
If the Premises or the Building are damaged by fire or other casualty
Landlord will, promptly after learning of such damage, notify Tenant in writing
of the time necessary to repair or restore such
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damage, as estimated by Landlord's architect, engineer or contractor. If such
estimate states that repair or restoration of all of such damage that was
caused to the Premises or to any other portion of the Building necessary for
Tenant's occupancy cannot be completed within 180 days from the date of such
damage (or within 30 days from the date of such damage if such damage occurred
within the last 12 months of the Term), then Tenant will have the option to
terminate this Lease. If such estimate states that repair or restoration of all
of such damage that was caused to the Building cannot be completed within 180
days from the date of such damage, or if such damage occurred within the last
12 months of the Term and such estimate states that repair or restoration of
all such damage that was caused to the Premises or to any other portion of the
Building necessary for Tenant's occupancy cannot be completed within 30 days
from the date of such damage, or if such damage is not insured against by the
insurance policies required to be maintained by Landlord according to Section
9.1, then Landlord will have the option to terminate this Lease. Any option to
terminate granted above must be exercised by written notice to the other party
given within 10 days after Landlord delivers to Tenant the notice of estimated
repair time. If either party exercises its option to terminate this Lease, the
Term will expire and this Lease will terminate 10 days after notice of
termination is delivered; provided, however, that Rent for the period
commencing on the date of such damage until the date this Lease terminates will
be reduced to the reasonable value of any use or occupation of the Premises by
Tenant during such period.
10.2 REPAIR OBLIGATIONS.
If the Premises or the Building are damaged by fire or other casualty and
neither party terminates this Lease according to Section 10.1, then Landlord
will repair and restore such damage with reasonable promptness, subject to
delays for insurance adjustments and delays caused by matters beyond Landlord's
control. However, Landlord will not be required to spend more for such repair
and restoration than the insurance proceeds available to Landlord as a result
of the fire or other casualty. Landlord will have no liability to Tenant and
Tenant will not be entitled to terminate this Lease if such repairs and
restoration are not in fact completed within the estimated time period,
provided that Landlord promptly commences and diligently pursues such repairs
and restoration to completion. In no event will Landlord be obligated to
repair, restore or replace any of the property required to be insured by Tenant
according to Section 9.2.
10.3 RENT ABATEMENT.
If any fire or casualty damage renders the Premises untenantable and if
this Lease is not terminated according to Section 10.1, then Rent will abate
beginning on the date of such damage. Such abatement will end on the date
Landlord has substantially completed the repairs and restoration Landlord is
required to perform according to Section 10.2. Such abatement will be in an
amount bearing the same ratio to the total amount of Rent for such period as
the untenantable portion of the Premises bears to the entire Premises. In no
event will Landlord be liable for any inconvenience or annoyance to Tenant or
injury to the business of Tenant resulting in any way from damage caused by
fire or other casualty or the repair of such damage, provided however that, to
the extent Tenant remains in possession of a portion of the Premises, Landlord
will take all reasonable steps to minimize the disruption to Tenant's business
and use of such portion of the Premises during the period of repair.
11. WAIVERS AND INDEMNITIES.
11.1 LANDLORD'S WAIVERS.
Tenant and its Affiliates will not be liable or in any way responsible to
Landlord for, and Landlord waives all claims against Tenant and its Affiliates
for, any loss, injury or damage that is insured or required to be insured by
Landlord under Sections 9.1(b), (c) or (d), so long as such loss, injury or
damage results from or in connection with this Lease or Tenant's use and
occupancy of the Premises.
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11.2 TENANT'S WAIVERS.
Except to the extent caused by the willful or negligent act or omission
or breach of this Lease by Landlord or its agents or employees, Landlord and
its Affiliates will not be liable or in any way responsible for, and Tenant
waives all claims against Landlord and its Affiliates for, any loss, injury or
damage suffered by Tenant or others relating to (a) loss or theft of, or damage
to, property of Tenant or others; (b) injury or damage to persons or property
resulting from fire, explosion, falling plaster, escaping steam or gas,
electricity, water, rain or snow, or leaks from any part of the Building or
from any pipes, appliances or plumbing, or from dampness; or (c) damage caused
by other tenants, occupants or persons in the Premises or other premises in the
Building, or caused by the public or by construction of any private or public
work. Landlord and its Affiliates will not be liable or in any way responsible
to Tenant for, and Tenant waives all claims against Landlord and its Affiliates
for, any loss, injury or damage that is insured or required to be insured by
Tenant under Sections 9.2(b) or (c), so long as such loss, injury or damage
results from or in connection with this Lease or Landlord's operation of the
Building.
11.3 LANDLORD'S INDEMNITY.
Subject to Sections 5.3 and 11.2 and except to the extent caused by the
willful or negligent act or omission or breach of this Lease by Tenant, its
subtenants or licensees, or any of their respective agents, employees or
invitees, Landlord will indemnify and hold Tenant harmless from and against any
and all liability, loss, claims, demands, damages or expenses (including
reasonable attorneys' fees) due to or arising out of any willful or negligent
act or omission or breach of this Lease by Landlord or its agents or
employees. Landlord's obligations under this Section 11.3 will survive the
expiration or early termination of the Term.
11.4 TENANT'S INDEMNITY.
Subject to Section 11.1 and except to the extent caused by the willful or
negligent act or omission or breach of this Lease by Landlord or its agents or
employees, Tenant will indemnify and hold Landlord harmless from and against any
and all liability, loss, claims, demands, damages or expenses (including
reasonable attorneys' fees) due to or arising out of any accident or occurrence
on or about the Premises (including without limitation, accidents or
occurrences resulting in injury, death, property damage or theft) or any
willful or negligent act or omission of or breach of this Lease by Tenant, its
subtenants or licensees, or any of their respective agents, employees or
invitees. Tenant's obligations under this Section 11.4 will survive the
expiration or early termination of the Term.
12. CONDEMNATION.
12.1 FULL TAKING.
If all or substantially all of the Building or Premises are taken for any
public or quasi-public use under any applicable Laws or by right of eminent
domain, or are sold to the condemning authority in lieu of condemnation, then
this Lease will terminate as of the date when the condemning authority takes
physical possession of the Building or Premises.
12.2 PARTIAL TAKING.
(a) Landlord's Termination of Lease. If only part of the Building
or Premises is thus taken or sold, and if after such partial taking, in
Landlord's reasonable judgment, alteration or reconstruction is not
economically justified, then Landlord (whether or not the Premises are
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affected) may terminate this Lease by giving written notice to Tenant
within 60 days after the taking.
(b) Tenant's Termination of Lease. If over 20% of the Premises is
thus taken or sold and Landlord is unable to provide Tenant with
comparable replacement premises in the Building, Tenant may terminate
this Lease if in Tenant's reasonable judgment the Premises cannot be
operated by Tenant is an economically viable fashion because of such
partial taking. Such termination by Tenant must be exercised by written
notice to Landlord given not later than 60 days after Tenant is notified
of the taking of the Premises.
(c) Effective Date of Termination. Termination by Landlord or
Tenant will be effective as of the date when physical possession of the
applicable portion of the Building or Premises is taken by the condemning
authority.
(d) Election to Continue Lease. If neither Landlord nor Tenant
elects to terminate this Lease upon a partial taking of a portion of the
Premises, the Rent payable under this Lease will be diminished by an
amount allocable to the portion of the Premises which was so taken or
sold. If this Lease is not terminated upon a partial taking of the
Building or Premises, Landlord will, at Landlord's sole expense, promptly
restore and reconstruct the Building and Premises to substantially their
former condition to the extent the same is feasible. However, Landlord
will not be required to spend for such restoration or reconstruction an
amount in excess of the net amount received by Landlord as compensation
or damages for the part of the Building or Premises so taken.
12.3 AWARDS.
As between the parties to this Lease, Landlord will be entitled to
receive, and Tenant assigns to Landlord, all of the compensation awarded upon
taking of any part or all of the Building or Premises, including any award for
the value of the unexpired Term. However, Tenant may assert a claim in a
separate proceeding against the condemning authority for any damages resulting
from the taking of Tenant's trade fixtures or personal property, or for moving
expenses, business relocation expenses or damages to Tenant's business incurred
as a result of such condemnation.
13. ASSIGNMENT AND SUBLETTING.
13.1 LIMITATION.
Without Landlord's prior written consent, Tenant will not assign all or
any of its interest under this Lease, sublet all or any part of the Premises or
permit the Premises to be used by any parties other than Tenant and its
employees.
13.2 NOTICE OF PROPOSED TRANSFER; LANDLORD'S OPTIONS.
If Tenant desires to enter into any assignment of this Lease or a
sublease of all or any part of the Premises, Tenant will first give Landlord
written notice of the proposed assignment or sublease, which notice will
contain the name and address of the proposed transferee, the proposed use of
the Premises, statements reflecting the proposed transferee's current financial
condition and income and expenses for the past 2 years, if available, and the
principal terms of the proposed assignment or sublease.
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13.3 CONSENT NOT TO BE UNREASONABLY WITHHELD.
If Landlord does not exercise its applicable option under Section 13.2,
then Landlord will not unreasonably withhold or delay its consent to the
proposed assignment or subletting if each of the following conditions is
satisfied.
(a) the proposed transferee, in Landlord's reasonable opinion, has
sufficient financial capacity and business experience to perform Tenant's
obligations under this Lease;
(b) the proposed transferee will make use of the Premises which in
Landlord's reasonable opinion (i) is lawful, (ii) is consistent with the
permitted Use of the Premises under this Lease, (iii) is consistent with
the general character of business carried on by tenants of similar office
buildings, (iv) does not conflict with any exclusive rights or covenants
not to compete in favor of any other tenant or proposed tenant of the
Building, (v) will not increase the likelihood of damage or destruction to
the Building, (vi) will not increase the rate of wear and tear to the
Premises or Common Areas, (vii) will not cause an increase in insurance
premiums for insurance policies applicable to the Building, and (viii)
will not require new tenant improvements incompatible with then-existing
Building systems and components;
(c) the proposed transferee does not have a poor reputation in the
general business community (such as a reputation for engaging in illegal
or unethical business practices);
(d) the proposed transferee, at the time of the proposed transfer,
is not a party with whom Landlord is then negotiating for the lease of
space in the Building;
(e) if the proposed transfer is a sublease, the rent which the
proposed transferee will be required to pay will be equal to at least 90%
of the then-current market rent for the portion of the Premises being
sublet; and
(f) at the time of the proposed transfer no "Default" (as defined
in Section 20.1) exists under this Lease.
13.4 FORM OF TRANSFER.
If Landlord consents to a proposed assignment or sublease, Landlord's
consent will not be effective unless and until Tenant delivers to Landlord an
original duly executed assignment or sublease, as the case may be, that
provides, in the case of a sublease, that the subtenant will comply with all
applicable terms and conditions of this Lease and, in the case of an assignment,
an assumption by the assignee of all of the terms, covenants and conditions
which this Lease requires Tenant to perform.
13.5 PAYMENT TO LANDLORD.
If Tenant effects an assignment or sublease, then Landlord will be
entitled to receive and collect, either from Tenant or directly from the
transferee, 50% of the amount by which the consideration required to be paid by
the transferee for the use and enjoyment of Tenant's rights under this Lease
(after deducting from such
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consideration Tenant's reasonable costs incurred in effecting the assignment or
sublease) exceeds the Rent payable by Tenant to Landlord allocable to the
transferred space. Such percentage of such amount will be payable to Landlord
at the time(s) Tenant receives the same from its transferee (whether in monthly
installments, in a lump sum, or otherwise).
13.6 CHANGE OF OWNERSHIP.
Any change by Tenant in the form of its legal organization (such as, for
example, a change from a general to a limited partnership), any transfer of 51%
or more of Tenant's assets, and any other transfer of interest effecting a
change in identity of persons exercising effective control of Tenant will be
deemed as "assignment" of this Lease requiring Landlord's prior written
consent. The transfer of any outstanding capital stock of a corporation whose
stock is publicly-traded will not, however, be deemed a "transfer of interest"
under this Section 13.6.
13.7 PERMITTED TRANSFERS.
Tenant may, upon notice to Landlord but without obtaining Landlord's
consent, assign this Lease or sublease all or any part of the Premises to a
wholly-owned subsidiary of Tenant or the parent of Tenant.
13.8 EFFECT OF TRANSFERS.
No subletting or assignment will release Tenant from any of its
obligations under this Lease unless Landlord agrees to the contrary in writing.
Acceptance of Rent by Landlord from any person other than Tenant will not be
deemed a waiver by Landlord of any provision of this Section 13. Consent to one
assignment or subletting will not be deemed a consent to any subsequent
assignment or subletting. In the event of any default by any assignee or
subtenant or any successor of Tenant in the performance of any Lease
obligation, Landlord may proceed directly against Tenant without exhausting
remedies against such assignee, subtenant or successor. The voluntary or other
surrender of this Lease by Tenant or the cancellation of this Lease by mutual
agreement of Tenant and Landlord will not work a merger and will, at Landlord's
option, terminate all or any subleases or operate as an assignment to Landlord
of all or any subleases; such option will be exercised by notice to Tenant and
all known subtenants in the Premises.
14. PERSONAL PROPERTY.
14.1 INSTALLATION AND REMOVAL.
Tenant may install in the Premises its personal property (including
Tenant's usual trade fixtures) in a proper manner, provided that no such
installation will interfere with or damage the mechanical, plumbing or
electrical systems or the structure of the Building, and provided further that
if such installation would require any change, addition or improvement to the
Premises, such installation will be subject to Section 7.1. If no Default then
exists, any such personal property installed in the Premises by Tenant (a) may
be removed from the Premises from time to time in the ordinary course of
Tenant's business or in the course of making any changes, additions or
improvements to the Premises permitted under Section 7.1, and (b) will be
removed by Tenant at the end of the Term according to Section 15.1. Tenant will
promptly repair at its expense any damage to the Building resulting from such
installation or removal.
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14.2 RESPONSIBILITY.
Tenant will be solely responsible for all costs and expenses related to
personal property used or stored in the Premises. Tenant will pay any taxes or
other governmental impositions levied upon or assessed against such personal
property, or upon Tenant for the ownership or use of such personal property, on
or before the due date for payment. Such personal property taxes or impositions
are not included in Taxes.
14.3 [Intentionally Omitted]
15. END OF TERM.
15.1 SURRENDER.
Upon the expiration or other termination of the Term, Tenant will
immediately vacate and surrender possession of the Premises in good order,
repair and condition, except for ordinary wear and tear and damage due to
casualty or condemnation. Upon the expiration or other termination of the Term,
Tenant agrees to remove (a) all changes, additions and improvements to the
Premises the removal of which Landlord requested or approved according to
Section 7.1 at the time Landlord consented to their installation, and (b) all of
Tenant's trade fixtures, office furniture, office equipment and other personal
property. Tenant will pay Landlord on demand the cost of repairing any damage to
the Premises or Building caused by the installation or removal of any such
items. Any of Tenant's property remaining in the Premises will be conclusively
deemed to have been abandoned by Tenant and may be appropriated, stored, sold,
destroyed or otherwise disposed of by Landlord without notice or obligation to
account to or compensate Tenant, and Tenant will pay Landlord on demand all
costs incurred by Landlord relating to such abandoned property.
15.2 HOLDING OVER.
Tenant understands that it does not have the right to hold over at any time
and Landlord may exercise any and all remedies at law or in equity to recover
possession of the Premises, as well as any damages incurred by Landlord, due to
Tenant's failure to vacate the Premises and deliver possession to Landlord as
required by this Lease. If Tenant holds over after the Expiration Date with
Landlord's prior written consent, Tenant will be deemed to be a tenant from
month to month, at a monthly Base Rent, payable in advance, equal to 125% of
monthly Base Rent payable during the last year of the Term, and Tenant will be
bound by all of the other terms, covenants and agreements of this Lease as the
same may apply to a month-to-month tenancy. If Tenant holds over after the
Expiration Date without Landlord's prior written consent, Tenant will be deemed
a tenant at sufferance, at a daily Base Rent,
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payable in advance, equal to 150% of the Base Rent per day payable during the
last year of the Term, and Tenant will be bound by all of the other terms,
covenants and agreements of this Lease as the same may apply to a tenancy at
sufferance.
16. ESTOPPEL CERTIFICATES.
Promptly upon Landlord's request after Tenant has occupied the Premises,
Tenant will execute and deliver to Landlord an Occupancy Estoppel Certificate in
the form of Exhibit C. In addition, Tenant agrees that at any time and form time
to time (but on not less than 10 days' prior request by Landlord), Tenant will
execute, acknowledge and deliver to Landlord a certificate indicating any or all
of the following: (a) the Commencement Date and Expiration Date; (b) that this
Lease is unmodified and in full force and effect (or, if there have been
modifications, that this Lease is in full force and effect, as modified, and
stating the date and nature of each modification); (c) the date, if any, through
which Base Rent, Additional Rent and any other Rent payable have been paid; (d)
that no default by Landlord or Tenant exists which has not been cured, except as
to defaults stated in such certificate; (e) that Tenant has no existing defenses
or set-offs to enforcement of this Lease, except as specifically stated in such
certificate; (f) provided such events have occurred, that Tenant has accepted
the Premises and that all improvements required to be made to the Premises by
Landlord have been completed according to this Lease; (g) that, except as
specifically stated in such certificate, Tenant and only Tenant, currently
occupies the Premises; and (h) such other matters as may be reasonably requested
by Landlord. Any such certificate may be relied upon by Landlord and any
prospective purchaser or present or prospective mortgagee, deed of trust
beneficiary or ground lessor of all or a portion of the Building.
17. TRANSFERS OF LANDLORD'S INTEREST.
17.1 SALE, CONVEYANCE AND ASSIGNMENT.
Subject only to Tenant's rights under this Lease, nothing in this Lease
will restrict Landlord's right to sell, convey, assign or otherwise deal with
the Land, Building or Landlord's interest under this Lease.
17.2 EFFECT OF SALE, CONVEYANCE OR ASSIGNMENT.
A sale, conveyance or assignment of the Building will automatically
release Landlord from liability under this Lease from and after the effective
date of the transfer, except for any liability relating to the period prior to
such effective date; and Tenant will look solely to Landlord's transferee for
performance of Landlord's obligations relating to the period after such
effective date. This Lease will not be affected by any such sale, conveyance or
assignment and Tenant will attorn to Landlord's transferee.
17.3 SUBORDINATION AND NONDISTURBANCE.
This Lease is and will be subject and subordinate in all respects to any
Encumbrance. With respect to any Encumbrance first encumbering the Building or
Land subsequent to the Date of this Lease, Landlord will use its good faith
efforts to cause the Lender to agree (either in the Encumbrance or in a separate
agreement with Tenant) that so long as Tenant is not in default of its
obligations under this Lease, this Lease will not be terminated and Tenant's
possession of the Premises will not be disturbed by the termination or
foreclosure, or proceedings for enforcement, of such Encumbrance. While such
subordination will occur automatically, Tenant agrees, upon request by and
without cost to Landlord or any successor in interest, promptly execute and
deliver to Landlord or any Lender such instrument(s) as may be reasonably
required to evidence such subordination. In the alternative, however, any Lender
may unilaterally elect to subordinate its Encumbrance to this Lease.
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17.4 ATTORNMENT.
If the interest of Landlord is transferred to any person (a "Transferee")
by reason of the termination or foreclosure, or proceedings for enforcement, of
an Encumbrance, or by delivery of a deed in lieu of such foreclosure or
proceedings, Tenant will immediately and automatically attorn to the
Transferee. Upon attornment, this Lease will continue in full force and effect
as a direct lease between the Transferee and Tenant, upon all of the same
terms, conditions and covenants as stated in this Lease, except that the
Transferee will not be: (a) liable for any act or omission of any prior
landlord, including Landlord (but such exemption will not excuse the Transferee
from the performance of any obligations of the landlord under this Lease
required to be performed subsequent to the transfer to the Transferee); (b)
subject to any offsets or defenses which Tenant might have against any prior
landlord, including Landlord (excluding any express right of abatement granted
under this Lease, provided that the Lender who held the Encumbrance the
enforcement of which result in the transfer to the Transferee (the "Foreclosing
Lender") was afforded any notice and cure rights to which it was entitled under
Section 21.1 with respect to the matter that gave rise to such express right of
abatement); (c) bound by any Rent or advance Rent which Tenant might have paid
for more than the current month or the next succeeding month to any prior
landlord, including Landlord, and all such Rent will remain due and owing,
regardless of such advance payment; (d) obligated for repayment to Tenant of
the Security Deposit or any other security or advance rental deposit made by
Tenant, except to the extent the same is paid over to the Transferee, or (e)
bound by any termination, amendment, or modification of this Lease (other than
one expressly contemplated by the terms of this Lease and effected according to
such express terms, such as a termination by Landlord due to a Default by
Tenant) made without the written consent of the Foreclosure Lender. Tenant
agrees, upon request by and without cost to the Transferee, to promptly execute
and deliver to the Transferee such instrument(s) as may be reasonably required
to evidence such attornment.
18. RULES AND REGULATIONS.
Tenant agrees to faithfully observe and comply with the Rules and
Regulations set forth on Exhibit D and with all reasonable modifications and
additions to such Rules and Regulations (which will be applicable to all
Building tenants) from time to time adopted by Landlord and of which Tenant is
notified in writing. No such modification or addition will contradict or
abrogate any right expressly granted to Tenant under this Lease. Landlord's
enforcement of the Rules and Regulations will be uniform and nondiscriminatory,
but Landlord will not be responsible to Tenant for failure of any person to
comply with the Rules and Regulations.
19. PARKING.
Landlord grants Tenant the right to use Tenant's Parking Space for the
temporary or daily parking of automobiles or similarly sized light trucks or
utility vehicles during the Term of this Lease. Tenant will pay Parking Rent
for the use of Tenant's Parking Spaces. Tenant's rights to use Tenant's Parking
Spaces and the Building's parking facilities in which they are located are
nonexclusive, will be deemed a license only and are conditioned upon this Lease
being in full force and effect and there being no Default. Tenant will not
abuse its privileges with respect to Tenant's Parking Spaces and will use the
same and the Building's parking facilities in accordance with Landlord's
reasonable directions, including any reasonable Rules and Regulations adopted by
Landlord with respect to such use and any signage posted in the Building's
parking facilities. In no event will Tenant use more than the number of
Tenant's Parking Spaces in the Building's parking facilities for the parking of
vehicles by Tenant or any of its agents or employees. However, Tenant's
invitees may use any visitor parking spaces available in the Building's parking
facilities on an occasional and reasonable basis.
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Landlord's inability to make any of Tenant's Parking Spaces available at any
time during the Term for reasons beyond Landlord's control will not be deemed
a default by Landlord giving rise to any claim by Tenant, except that Tenant
will be entitled to an equitable abatement of Parking Rent for any such spaces
during the period of unavailability and such abatement will be in full
settlement of claims that Tenant might otherwise have had for such
unavailability. Landlord reserves the right (but will have no obligation) from
time to time to change the number, size, location, shape or arrangement of the
Building's parking facilities, designate visitor, handicapped, reserved or
loading areas and change the level or grade of parking. Landlord will have no
liability to Tenant with respect to Tenant's use of Tenant's Parking Spaces,
including any liability for any property that is lost, stolen, damaged or
destroyed as a result of or in connection with such use.
20. TENANT'S DEFAULT AND LANDLORD'S REMEDIES.
20.1 DEFAULT
Each of the following events will constitute a material breach by Tenant
and a "Default" under this Lease:
(a) Failure to Pay Rent. Tenant fails to pay Base Rent, Additional
Rent or any other Rent payable by Tenant under the terms of this Lease
when due, and such failure continues for 5 days after written notice from
Landlord to Tenant of such failure; provided that with respect to Base
Rent and Additional Rent, Tenant will be entitled to only 2 notices of
such failure during any Lease Year and if, after 2 such notices are given
in any Lease Year, Tenant fails, during such Lease Year, to pay any such
amounts when due, such failure will constitute a Default without further
notice by Landlord or additional cure period.
(b) Failure to Perform Other Obligations. Tenant breaches or fails
to comply with any other provision of this Lease applicable to Tenant, and
such breach or noncompliance continues for a period of 20 days after
notice by Landlord to Tenant; or, if such breach or noncompliance cannot
be reasonably cured within such 20-day period, Tenant does not in good
faith commence to cure such breach or noncompliance within such 20-day
period or does not diligently complete such cure within 60 days after such
notice from Landlord. However, if such breach or noncompliance causes or
results in (i) a dangerous condition on the Premises or Building, (ii) any
insurance coverage carried by Landlord or Tenant with respect to the
Premises or Building being jeopardized, or (iii) a material disturbance to
another tenant, then a Default will exist if such breach or noncompliance
is not cured as soon as reasonably possible after notice by Landlord to
Tenant, and in any event is not cured within 30 days after such notice.
For purposes of this Section 20.1(b), financial inability will not be
deemed a reasonable ground for failure to immediately cure any breach of,
or failure to comply with, the provisions of this Lease.
(c) Nonoccupancy of Premises. Tenant fails to occupy and use the
Premises within 30 days after the Commencement Date or leaves
substantially all of the Premises unoccupied for 30 consecutive days or
vacates and abandons substantially all of the Premises.
(d) Transfer of Interest Without Consent. Tenant's interest under
this Lease or in the Premises is transferred or passes to, or devolves
upon, any other party in violation of Section 13.
(e) Execution and Attachment Against Tenant. Tenant's interest under
this Lease or in the Premises is taken upon execution or by other process
of law directed against Tenant, or is subject to any attachment by any
creditor or claimant against Tenant and such attachment is not discharged
or disposed of within 15 days after levy.
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(f) Bankruptcy or Related Proceedings. Tenant files a petition in
bankruptcy or insolvency, or for reorganization or arrangement under any
bankruptcy or insolvency Laws, or voluntarily takes advantage of any such
Laws by answer or otherwise, or dissolves or makes an assignment for the
benefit of creditors, or involuntary proceedings under any such Laws or
for the dissolution of Tenant are instituted against Tenant, or a receiver
or trustee is appointed for the Premises or for all or substantially all
of Tenant's property, and such proceedings are not dismissed or such
receivership or trusteeship vacated within 60 days after such institution
or appointment.
20.2 REMEDIES.
Time is of the essence. If any Default occurs, Landlord will have the
right, at Landlord's election, then or at any later time, to exercise any one
or more of the remedies described below. Exercise of any of such remedies will
not prevent the concurrent or subsequent exercise of any other remedy provided
for in this Lease or otherwise available to Landlord at law or in equity.
(a) Cure by Landlord. Landlord may, at Landlord's option but without
obligation to do so, and without releasing Tenant from any obligations
under this Lease, make any payment or take any action as Landlord deems
necessary or desirable to cure any Default in such manner and to such
extent as Landlord deems necessary or desirable. Landlord may do so
without additional demand on, or additional written notice to, Tenant and
without giving Tenant an additional opportunity to cure such Default.
Tenant covenants and agrees to pay Landlord, upon demand, all advances,
costs and expenses of Landlord in connection with making any such payment
or taking any such action, including reasonable attorney's fees, together
with interest at the rate described in Section 3.5, from the date of
payment of any such advances, costs and expenses by Landlord.
(b) Termination of Lease and Damages. Landlord may terminate this
Lease, effective at such time as may be specified by written notice to
Tenant, and demand (and, if such demand is refused, recover) possession of
the Premises from Tenant. Tenant will remain liable to Landlord for
damages in an amount equal to the Base Rent, Additional Rent and other
Rent which would have been owing by Tenant for the balance of the Term had
this Lease not been terminated, less the net proceeds, if any, of any
reletting of the Premises by Landlord subsequent to such termination,
after deducting all Landlord's expenses in connection with such recovery
of possession or reletting. Landlord will be entitled to collect and
receive such damages from Tenant on the days on which the Base Rent,
Additional Rent and other Rent would have been payable if this Lease and
had not been terminated. Alternatively, at Landlord's option, Landlord
will be entitled to recover from Tenant, as damages for loss of the
bargain and not as a penalty, an aggregate sum equal to (i) all unpaid
Base Rent, Additional Rent and other Rent for any period prior to the
termination date of this Lease (including interest from the due date to
the date of the award at the rate described in Section 3.5), plus any
other sum of money and damages owed by Tenant to Landlord for events or
actions occurring prior to the termination date; plus (ii) the present
value at the time of termination (calculated at the rate commonly called
the discount rate in effect at the Federal Reserve Bank of New York on the
termination date) of the amount, if any, by which (A) the aggregate of the
Base Rent, Additional Rent and all other Rent payable by Tenant under this
Lease that would have accrued for the balance of the Term after
termination (with respect to Additional Rent, such aggregate will be
calculated by assuming that Expenses and Taxes for the calendar year in
which termination occurs and for each subsequent calendar year remaining
in the Term if this Lease had not been terminated will increase by 8% per
year over the amount of Expenses and Taxes for the prior calendar year),
exceeds (B) the amount of such Base Rent, Additional Rent and other Rent
which Landlord will receive for the remainder of
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the Term from any reletting of the Premises occurring prior to the date of the
award, or if the Premises have not been relet prior to the date of the award,
the amount, if any, of such Base Rent, Additional Rent and other Rent which
could reasonably be recovered by reletting the Premises for the remainder of
the Term at the then-current fair rental value, in either case taking into
consideration loss of rent while finding a new tenant, tenant improvements and
rent abatements necessary to secure a new tenant, leasing brokers' commissions
and other costs which Landlord has incurred or might incur in leasing the
Premises to a new tenant; plus (iii) interest on the amount described in (ii)
above from the termination date to the date of the award at the rate described
in Section 3.5.
(c) Repossession and Reletting. Landlord may reenter and take possession
of all or any part of the Premises, without additional demand or notice, and
repossess the same and expel Tenant and any party claiming by, through or under
Tenant, and remove the effects of both using such force for such purposes as may
be necessary, without being liable for prosecution for such action or being
deemed guilty of any manner of trespass, and without prejudice to any remedies
for arrears of Rent or right to bring any proceeding for breach of covenants or
conditions. No such reentry or taking possession of the Premises by Landlord
will be construed as an election by Landlord to terminate this Lease unless a
written notice of such intention is given to Tenant. No notice from Landlord or
notice given under a forcible entry and detainer statute or similar Laws will
constitute an election by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right, following any reentry or
reletting, to exercise its right to terminate this Lease by giving Tenant such
written notice, in which event the Lease will terminate as specified in such
notice. After recovering possession of the Premises, Landlord may, from time to
time, but will not be obligated to, relet all or any part of the Premises for
Tenant's account, for such term or terms and on such conditions and other terms
as Landlord, in its discretion, determines. Landlord may make such repairs,
alterations or improvements as Landlord considers appropriate to accomplish such
reletting, and Tenant will reimburse Landlord upon demand for all costs and
expenses, including attorneys' fees, which Landlord may incur in connection with
such reletting. Landlord may collect and receive the rents for such reletting
but Landlord will in no way be responsible or liable for any failure to relet
the Premises or for any inability to collect any rent due upon such reletting.
Regardless of Landlord's recovery of possession of the Premises, Tenant will
continue to pay on the dates specified in this Lease, the Base Rent, Additional
Rent and other Rent which would be payable if such repossession had not
occurred, less a credit for the net amounts, if any, actually received by
Landlord through any reletting of the Premises. Alternatively, at Landlord's
option, Landlord will be entitled to recover from Tenant, as damages for loss of
the bargain and not as a penalty, an aggregate sum equal to (i) all unpaid Base
Rent, Additional Rent and other Rent for any period prior to the repossession
date (including interest from the due date to the date of the award at the rate
described in Section 3.5), plus any other sum of money and damages owed by
Tenant to Landlord for events or actions occurring prior to the repossession
date; plus (ii) the present value at the time of repossession (calculated at the
rate commonly called the discount rate in effect at the Federal Reserve Bank of
New York on the repossession date) of the amount, if any, by which (A) the
aggregate of the Base Rent, Additional Rent and all other Rent payable by Tenant
under this Lease that would have accrued for the balance of the Term after
repossession (with respect to Additional Rent, such aggregate will be calculated
by assuming that Expenses and Taxes for the calendar year in which repossession
occurs and for each subsequent calendar year remaining in the Term if Landlord
had not repossessed the Premises will increase by 8% per year over the amount of
Expenses and Taxes for the prior calendar year), exceeds (B) the amount of such
Base Rent, Additional Rent and other Rent which Landlord will receive for the
remainder of the Term from any reletting of the Premises occurring prior to the
date of the award, or if the Premises have not been relet prior to the date of
the award, the amount, if any, of such Base Rent,
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Additional Rent and other Rent which could reasonably be recovered by
reletting the Premises for the remainder of the Term at the then-current
fair rental value, in either case taking into consideration loss of rent
while finding a new tenant, tenant improvements and rent abatements
necessary to secure a new tenant, leasing brokers' commissions and other
costs which Landlord has incurred or might incur in leasing the Premises
to a new tenant, plus (iii) interest on the amount described in (ii) above
from the repossession date to the date of the award at the rate described
in Section 3.5.
(d) Bankruptcy Relief. Nothing contained in this Lease will limit
or prejudice Landlord's right to prove and obtain as liquidated damages in
any bankruptcy, insolvency, receivership, reorganization or dissolution
proceeding, an amount equal to the maximum allowable by any Laws governing
such proceeding in effect at the time when such damages are to be proved,
whether or not such amount be greater, equal or less than the amounts
recoverable, either as damages or Rent, under this Lease.
21. LANDLORD'S DEFAULT AND TENANT'S REMEDIES.
21.1 DEFAULT.
If Tenant believes that Landlord has breached or failed to comply with
any provision of this Lease applicable to Landlord, Tenant will give written
notice to Landlord describing the alleged breach or noncompliance. Landlord
will not be deemed in default under this Lease if Landlord cures the breach or
noncompliance within 20 days after receipt of Tenant's notice or, if the same
cannot reasonably be cured within such 20-day period, if Landlord in good faith
commences to cure such breach or noncompliance within such period and then
diligently pursues the cure to completion. Tenant will also send a copy of such
notice to any Lender of whom Tenant has been notified in writing, and such
Lender will also have the right to cure the breach or noncompliance within the
period of time described above.
21.2 REMEDIES.
If Landlord breaches or fails to comply with any provision of this Lease
applicable to Landlord, and such breach or noncompliance is not cured within
the period of time described in Section 21.1, then Tenant may exercise any
right or remedy available to Tenant at law or in equity, except to the extent
expressly waived or limited by the terms of this Lease.
22. SECURITY DEPOSIT.
22.1 AMOUNT.
Upon execution of this Lease, Tenant will deposit the Security Deposit
with Landlord in the amount described in Section 1.1(j). Landlord and Tenant
intend the Security Deposit to be used solely as security for Tenant's faithful
and diligent performance of all of Tenant's obligations under this Lease. The
Security Deposit will remain in Landlord's possession for the entire Term, and
Landlord will not be required to segregate it from Landlord's general funds.
Tenant will not be entitled to any interest on the Security Deposit.
22.2 USE AND RESTORATION.
If Tenant fails to perform any of its obligations under this Lease,
Landlord may, at its option, use, apply or retain all or any part of the
Security Deposit for the payment of (1) any Rent in arrears; (2) any expenses
Landlord may incur as a direct or indirect result of Tenant's failure to
perform; and (3) any
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other losses or damages Landlord may suffer as a direct or indirect result of
Tenant's failure to perform. If Landlord so uses or applies all or any
portion of the Security Deposit, Landlord will notify Tenant of such use or
application and Tenant will, within 10 days after the date of Landlord's
notice, deposit with Landlord a sum sufficient to restore the Security Deposit
to the amount held by Landlord immediately prior to such use or application.
Tenant's failure to so restore the Security Deposit will constitute a Default.
22.3 TRANSFERS.
Tenant will not assign or encumber the Security Deposit without Landlord's
express written consent. Neither Landlord nor its successors or assigns will be
bound by any assignment or encumbrance unless Landlord has given its consent.
Landlord will have the right, at any time and from time to time, to transfer
the Security Deposit to any purchaser or lessee of the entire Building. Upon
any such transfer, Tenant agrees to look solely to the new owner or lessee for
the return of the Security Deposit.
22.4 REFUND.
Provided that Tenant has fully and faithfully performed all of its
obligations under this Lease, Landlord will refund the Security Deposit, or any
balance remaining, to Tenant or, at Landlord's option, to the latest assignee
of Tenant's interest under this Lease, within 60 days after the expiration or
early termination of the Term and Tenant's vacation and surrender of the
Premises to Landlord in the condition required by Section 15.1. If Tenant fails
to make any final estimated payment of Additional Rent required by Landlord
according to Section 3.2(c), Landlord may withhold such final payment from the
amount of the Security Deposit refund.
23. BROKERS.
Landlord and Tenant represent and warrant that no broker or agent
negotiated or was instrumental in negotiating or consummating this Lease except
the Brokers. Neither party knows of any other real estate broker or agent who
is or might be entitled to a commission or compensation in connection with this
Lease. Landlord will pay all fees, commissions or other compensation payable to
the Brokers to be paid by Landlord according to Section 1.1(o) and Tenant will
pay all fees, commissions or other compensation payable to the Brokers to be
paid by Tenant according to Section 1.1(o). Tenant and Landlord will indemnify
and hold each harmless from all damages paid or incurred by the other resulting
from any claims asserted against either party by brokers or agents claiming
through the other party.
24. LIMITATIONS ON LANDLORD'S LIABILITY.
Any liability for damages, breach or nonperformance by Landlord, or
arising out of the subject matter of, or the relationship created by, this
Lease, will be collectible only out of Landlord's interest in the Building and
no personal liability is assumed by, or will at any time be asserted against,
Landlord, its Affiliates, Building manager or asset manager, or any of its or
their successors or assigns; all such liability, if any, being expressly waived
and released by Tenant. Landlord's review, supervision, commenting on or
approval of any aspect of work to be done by or for Tenant (under Section 7,
Exhibit B or otherwise) are solely for Landlord's protection and, except as
expressly provided, create no warranties or duties to Tenant or to third
parties.
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25. NOTICES.
All notices required or permitted under this Lease must be in writing and
will only be deemed properly given and received (a) when actually given and
received, if delivered in person to a party who acknowledges receipt in
writing; or (b) one business day after the deposit with a private courier or
overnight delivery service, if such courier or service obtains a written
acknowledgement of receipt; or (c) 2 business days after deposit in the United
States mails, certified or registered mail with return receipt requested and
postage prepaid. All such notices must be transmitted by one of the methods
described above to the party to receive the notice at, in the case of notices
to Landlord, both Landlord's Rent Address and Landlord's Notice Address, and in
the case of notices to Tenant, the applicable Tenant's Notice Address, or, in
either case, at such other address(es) as either party may notify the other of
according to this Section 25.
26. MISCELLANEOUS.
26.1 BINDING EFFECT.
Each of the provisions of this Lease will extend to bind or inure to the
benefit of, as the case may be, Landlord and Tenant, and their respective
heirs, successors and assigns, provided this clause will not permit any
transfer by Tenant contrary to the provisions of Section 13.
26.2 COMPLETE AGREEMENT; MODIFICATION.
All of the representations and obligations of the parties are contained
in this Lease and no modification, waiver or amendment of this Lease or any of
its conditions or provisions will be binding upon a party unless in writing
signed by such party.
26.3 DELIVERY FOR EXAMINATION.
Submission of the form of the Lease for examination will not bind
Landlord in any manner, and no obligations will arise under this Lease until it
is signed by both Landlord and Tenant and delivery is made to each.
26.4 NO AIR RIGHTS.
This Lease does not grant any easements or rights for light, air or view.
Any diminution or blockage of light, air or view by any structure or condition
now or later erected will not affect this Lease or impose any liability on
Landlord.
26.5 ENFORCEMENT EXPENSES.
Each party agrees to pay, upon demand, all of the other party's costs,
charges and expenses, including the fees and out-of-pocket expenses of counsel,
agents, and others retained, incurred in successfully enforcing the other
party's obligations under this Lease.
26.6 [Intentionally Omitted]
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26.7 BUILDING NAME.
Tenant will not, without Landlord's consent, use Landlord's or the
Building's name, or any facsimile or reproduction of the Building, for any
purpose; except that Tenant may use the Building's name in the address of the
business to be conducted by Tenant in the Premises. Landlord reserves the
right, upon reasonable prior notice to Tenant, to change the name or address of
the Building.
26.8 NO WAIVER.
No waiver of any provision of this Lease will be implied by any failure of
either party to enforce any remedy upon the violation of such provision, even
if such violation is continued or repeated subsequently. No express waiver will
affect any provision other than the one specified in such waiver, and that only
for the time and in the manner specifically stated.
26.9 RECORDING; CONFIDENTIALITY.
Tenant will not record this Lease, or a short form memorandum, without
Landlord's written consent and any such recording without Landlord's written
consent will be a Default. Tenant agrees to keep the Lease terms, provisions
and conditions confidential and will not disclose them to any other person
without Landlord's prior written consent. However, Tenant may disclose Lease
terms, provisions and conditions to Tenant's accountants, attorneys, managing
employees and others in privity with Tenant, as reasonably necessary for
Tenant's business purposes, without such prior consent.
26.10 CAPTIONS.
The captions of sections are for convenience only and will not be deemed
to limit, construe, affect or alter the meaning of such sections.
26.11 INVOICES.
All bills or invoices to be given by Landlord to Tenant will be sent to
Tenant's Invoice Address. Tenant may change Tenant's Invoice Address by notice
to Landlord given according to Section 25. If Tenant fails to give Landlord
specific written notice of its objections within 60 days after receipt of any
bill or invoice from Landlord, such bill or invoice will be deemed true and
correct and Tenant may not later question the validity of such bill or invoice
or the underlying information or computations used to determine the amount
stated.
26.12 SEVERABILITY.
If any provision of this Lease is declared void or unenforceable by a
final judicial or administrative order, this Lease will continue in full force
and effect, except that the void or unenforceable provision will be deemed
deleted and replaced with a provision as similar in terms to such void or
unenforceable provision as may be possible and be valid and enforceable.
26.13 JURY TRIAL.
LANDLORD AND TENANT WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY LANDLORD OR TENANT AGAINST THE OTHER WITH RESPECT TO
ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE,
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<PAGE> 37
TENANT'S USE AND OCCUPANCY OF THE PREMISES, OR THE RELATIONSHIP OF LANDLORD AND
TENANT. HOWEVER, SUCH WAIVER OF JURY TRIAL WILL NOT APPLY TO ANY CLAIMS FOR
PERSONAL INJURY.
26.14 AUTHORITY TO BIND.
The individuals signing this Lease on behalf of Landlord and Tenant
represent and warrant that they are empowered and duly authorized to bind
Landlord or Tenant, as the case may be, to this Lease according to its terms.
26.15 ONLY LANDLORD/TENANT RELATIONSHIP.
Landlord and Tenant agree that neither any provision of this Lease nor any
act of the parties will be deemed to create any relationship between Landlord
and Tenant other than the relationship of landlord and tenant.
26.16 COVENANTS INDEPENDENT.
The parties intend that this Lease be construed as if the covenants
between Landlord and Tenant are independent and not dependent and that the Rent
will be payable without offset, reduction or abatement for any cause except as
otherwise specifically provided in this Lease.
26.17 GOVERNING LAW.
This Lease will be governed by and construed according to the laws of the
state in which the Building is located.
27. ADDITIONAL PROVISIONS.
27.1 CERTIFICATE OF DEPOSIT.
(a) Tenant will transfer, assign, and deliver to Landlord all of
Tenant's right, title, and interest in and to a six-month certificate of
deposit in the amount of $100,000 issued by a federally insured financial
institution acceptable to Landlord ("Certificate of Deposit"), which will be
automatically renewed and maintained in full force and effect as required
hereunder. Replacement Certificates of Deposit shall be delivered by Tenant to
Landlord no later than the date the prior Certificate of Deposit expires. It
will be an event of default hereunder if Tenant fails to deliver such
replacement Certificate of Deposit, without requirement of any further demand
or notice by Landlord. If Tenant defaults in its payment of Rent or the
performance of any of its other obligations under this Lease, Landlord will
have the right to redeem all or part of the Certificate of Deposit for the
payment of Rent or any other amount in default, or for the payment of any other
amount that Landlord may spend or become obligated to spend by reason of
Tenant's default, or for the payment to Landlord of any other loss or damage
that Landlord may suffer by reason of Tenant's default. If Landlord so uses any
portion of the Certificate of Deposit, Tenant will restore the Certificate of
Deposit to its original amount within five days after written demand by
Landlord. The Certificate of Deposit will not be a limitation on Landlord's
damages or an advance payment of Rent.
(b) If Tenant pays the Rent and timely performs all of its
obligations under this Lease, Landlord will return the unused portion of the
Certificate of Deposit as set forth below:
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(1) Six months after the Commencement Date, Landlord shall
calculate its costs associated with leasing the Premises to the Tenant ("Leasing
Costs"). The Leasing Costs shall include, but are not limited to, the costs of
Leasehold Improvements, leasing commissions, and any other amounts incurred by
Landlord, including reasonable attorneys' fees. Tenant shall be entitled to a
refund of 50% of the amount on deposit in the Certificate of Deposit which is in
excess of Leasing Costs.
(2) On the first anniversary of the Commencement Date,
Tenant shall be entitled to a refund of the amount on deposit in the Certificate
of Deposit which is in excess of the Leasing Costs plus and amount equal to 20%
of the Leasing Costs.
(3) On each anniversary of the Commencement Date after the
first anniversary, the balance of the Certificate of Deposit shall be reduced
by 20% of the total Leasing Costs.
So long as Tenant is not in default, all interest on the Certificate of Deposit
will be paid to Tenant by Landlord within 30 days after Landlord receives it, or
interest may be paid directly to Tenant.
(c) All references in the Lease to "Security Deposit" shall refer
to the Certificate of Deposit.
27.2 OPTION TO TERMINATE.
So long as Tenant is not in default hereunder, Tenant will have a one-time
option to terminate this Lease upon six months' prior written notice given on or
before the 36-month anniversary of the Commencement Date, together with delivery
of a cashier's check in full payment of the termination fee equal to the amount
of the then unamortized balance of the cost of Leasehold Improvements and
brokerage commission, determined by amortizing the total cost of Leasehold
Improvements and brokerage commission incurred by Landlord over the five-year
term of the Lease at a rate of 10% per annum. Landlord will advise Tenant of the
actual termination fee upon completion of the Leasehold Improvements.
27.3 EARLY OCCUPANCY.
Upon Tenant's execution of this Lease and delivery to Landlord of the
Certificate of Deposit, Landlord will permit Tenant and its employees to use
Suite 122, comprised of 2,454 square feet (the "Early Occupancy Premises") as-is
and otherwise on the terms and conditions of this Lease until the Premises are
delivered to Tenant. Tenant agrees to pay Rent at the rate of $14.50 per square
foot of the Early Occupancy premises prorated per day for each day Tenant
occupies the Early Occupancy Premises. Tenant shall have no right to alter the
Early Occupancy Premises without the prior written consent of Landlord. If
Tenant fails to cooperate to permit Landlord to complete the Leasehold
Improvements, Tenant's right to use the Early Occupancy Premises will terminate
upon 15 days' prior written notice from Landlord.
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Having read and intending to be bound by the terms and provisions of this
Lease, Landlord and Tenant have signed it as of the Date.
TENANT: LANDLORD:
MEDIBUY.COM, INC., a ____________ PHL-OPCO, LP, a Delaware limited partnership
By: PHL-GP, LLC, a Delaware limited
liability company, its general partner
By: _____________________________
Printed Name: ___________________
Title: __________________________ By: PHL-HOLDCO, LLC, a Delaware limited
liability company, its authorized member
And By: _________________________
Printed Name: ___________________ By: ______________________________________
Title: __________________________ Printed Name: ____________________________
Title: authorized member
STATE OF _________________
)ss.
COUNTY OF ________________ )
This Lease Agreement was acknowledged before me this ____ day of _________,
______ by ___________________________________ as _______________________________
and _____________________________________ as ________________________________ of
MEDIBUY.COM, INC. a ________________________________________________.
WITNESS my hand and official seal.
_________________________________
Notary Public
My commission expires: _______________________.
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EXHIBIT A
KINGS MILL CENTER
PLAN DELINEATING THE PREMISES
[TO BE ATTACHED]
A-1
<PAGE> 41
EXHIBIT B
KINGS MILL CENTER
POSSESSION AND LEASEHOLD IMPROVEMENTS AGREEMENT
1. CONFLICT; TERMS. If there is any conflict or inconsistency between
the provisions of the Lease and those of this Exhibit B ("Work Letter"), the
provisions of this Work Letter will control. Except for those terms expressly
defined in this Work Letter, all initially capitalized terms will have the
meanings stated for such terms in the Lease. The following terms, which are not
defined in the Lease, have the meanings indicated:
(a) "Scheduled Commencement Date" means May 1, 1999.
(b) "Commencement Date" means the first day of the Term, which
will be the Scheduled Commencement Date, unless the Commencement Date is
extended according to Paragraph 4 below.
(c) "Landlord's Representative" means PM Realty Group.
(d) "Tenant's Representative" means _____________________________.
(e) "Submission Date" means SUBMITTED.
(f) "Landlord's Allowance" means up to $14.00 per square foot.
Tenant will not be entitled to any refund if the cost of Leasehold
Improvements is less than Landlord's Allowance.
(g) "Leasehold Improvements" means all alterations, leasehold
improvements and installations to be constructed or installed by Landlord
for Tenant in the Premises according to this Work Letter.
(h) "Preliminary Plans" means space plans and general
specifications for the Leasehold Improvements.
(i) "Construction Documents" means complete construction plans and
specifications for the Leasehold Improvements.
(j) "Total Cost" means the total cost of preparing the Preliminary
Plans and Construction Documents, obtaining all necessary permits,
constructing and installing the Leasehold Improvements in the Premises,
and providing any Building services required during construction (such as
electricity and other utilities, refuse removal and housekeeping), plus an
amount equal to 15% of the total of the above to compensate Landlord for
its construction administration services which will include providing
Landlord's personnel to coordinate the design and construction process,
assist in obtaining any approvals required from Landlord and any
governmental agencies, and assist in scheduling deliveries.
2. LANDLORD'S OBLIGATIONS. Landlord will proceed to complete the
Premises according to this Work Letter and tender possession of the Premises to
Tenant when the Leasehold Improvements have been completed to the extent that
only minor construction details, which would not materially interfere with
Tenant's use and enjoyment of the Premises, require completion or correction.
Tenant will accept the Premises when Landlord tenders possession, provided that
the Leasehold Improvements have been substantially completed as described above,
and provided further that Tenant will not be required to
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accept possession prior to the Scheduled Commencement Date. Landlord and Tenant
agree that all alterations, improvements and additions made to the Premises
according to this Work Letter, whether paid for by Landlord or Tenant, will,
without compensation to Tenant, become Landlord's property upon installation
and will remain Landlord's property at the expiration or earlier termination of
the Term.
3. EARLY OCCUPANCY. Tenant has no right to enter the Premises until
Landlord tenders possession, unless Tenant's entry is for purposes relating to
construction work in the Premises according to the terms of this Work Letter.
With Landlord's express written consent, Tenant may occupy the Premises for
regular conduct of Tenant's business prior to the Schedule Commencement Date.
If Tenant takes possession of any part of the Premises for business purposes
prior to the Scheduled Commencement Date with Landlord's prior written consent,
all of the covenants and conditions of the Lease will bind both parties with
respect to such portion of the Premises, and Tenant will pay Landlord Rent for
the period of such occupancy according to Section 3 of the Lease at the rates
applicable to the first Lease Year, prorated for the time and portion of the
Premises so occupied. No early occupancy under this Paragraph 3 will change the
Commencement Date or the Expiration Date.
4. DELAYED OCCUPANCY. If Landlord fails to tender possession of the
Premises to Tenant according to Paragraph 2 above on or before the Scheduled
Commencement Date, Landlord will not be in default or liable in damages to
Tenant, nor will the obligations of Tenant be affected, provided, however, that:
(a) the Commencement Date will be extended automatically by one day
for each day of the period after the Scheduled Commencement Date to the
day on which Landlord tenders possession of the Premises to Tenant
according to Paragraph 2 above, less any portion of that period
attributable to Tenant's delays as more particularly described in
Paragraph 14 below; and
(b) if Landlord does not tender possession of the Premises to Tenant
according to Paragraph 2 above on or before the date 60 days after the
Scheduled Commencement Date (plus any period of delay caused by Tenant's
delays as described in Paragraph 14 below), Tenant will have the right to
terminate the Lease by delivering written notice of termination to
Landlord not more than 30 days after such tender deadline date.
Upon a termination under Paragraph 4(b) above, each party will, upon the other's
request, execute and deliver an agreement in recordable form containing a
release and surrender of all right, title and interest in and to the Lease;
neither Landlord nor Tenant will have any further obligations to each other,
including, without limitation, any obligations to pay for work previously
performed in the Premises; all improvements to the Premises will become and
remain the property of Landlord; and Landlord will refund to Tenant any sums
paid to Landlord by Tenant in connection with the Lease, including, without
limitation, any payments to Landlord of construction costs for the Premises.
Such postponement of the commencement of the Term and such termination and
refund right will be in full settlement of all claims that Tenant might
otherwise have against Landlord by reason of Landlord's failure to
substantially complete its obligations under this Work Letter by the Scheduled
Commencement Date.
5. PUNCH LIST. Tenant's taking possession of any portion of the
Premises will be conclusive evidence that such portion of the Premises was in
good order and satisfactory condition when Tenant took possession, except as to
any patent defects identified on a punch list prepared and signed by Landlord's
Representative and Tenant's Representatives after an inspection of the Premises
by both such parties when Tenant takes possession, and except as to any latent
defects of which Tenant notifies Landlord in writing within one year after the
Commencement Date. Landlord will not be responsible for any items of damage
caused by Tenant, its agents, independent contractors or suppliers. No promises
to alter, remodel or improve the Premises or Building and no representations
concerning the condition of the
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Premises or Building have been made by Landlord to Tenant other than as may be
expressly stated in the Lease (including this Work Letter).
6. REPRESENTATIVES. Landlord appoints Landlord's Representative to act
for Landlord in all matters covered by this Work Letter. Tenant appoints
Tenant's Representative to act for Tenant in all matters covered by this Work
Letter. All inquiries, requests, instructions, authorizations and other
communications with respect to the matters covered by this Work Letter will be
made to Landlord's Representative or Tenant's Representative, as the case may
be. Tenant will not make any inquiries of or requests to, and will not give any
instructions to, any other employee or agent of Landlord, including Landlord's
architect, engineers and contractors or any of their agents or employees, with
regard to matters covered by this Work Letter. Either party may change its
Representative under this Work Letter at any time by 3 days' prior written
notice to the other party.
7. PRELIMINARY PLANS. On or before the Submission Date, Tenant will
cooperate with Landlord and submit all information necessary for preparation of
the Preliminary Plans ("Design Information"). Each day after the Submission
Date until Tenant has provided all Design Information will be a day of Tenant's
delay. Promptly after receipt of all Design Information, Landlord will cause
its architect to prepare the Preliminary Plans based on the submitted Design
Information. Within 5 business days after receipt of the proposed Preliminary
Plans, Tenant will either approve the same in writing or notify Landlord in
writing of how the proposed Preliminary Plans are inconsistent with the Design
Information and how the Preliminary Plans must be changed in order to overcome
Tenant's objections. Each day following the 5th business day after the proposed
Preliminary Plans are submitted to Tenant until Tenant either approves them or
delivers such notice of objections will be a day of Tenant's delay. Upon
receipt of Tenant's notice of objections, Landlord will cause its architect to
prepare revised Preliminary Plans according to such notice and submit the
revised Preliminary Plans to Tenant. Upon submittal to Tenant of the revised
Preliminary Plans, and upon submittal of any further revisions, the procedures
described above will be repeated. If the revised Preliminary Plans, or any
further revisions, are consistent with the Design Information and all
requirements identified in Tenant's prior notice(s) of objections, then each
day following Landlord's receipt of Tenant's notice of any additional
objections until the day on which Landlord receives Tenant's approval of the
Preliminary Plans will be a day of Tenant's delay.
8. COST ESTIMATE. At such time as Preliminary Plans have been approved
in writing by both Landlord and Tenant have been prepared, Landlord will
obtain, and notify Tenant of, an estimate of the Total Cost based on the
approved Preliminary Plans ("Cost Estimate"). If the Cost Estimate is less than
or equal to Landlord's Allowance, then Tenant will be deemed to have approved
the Cost Estimate. If the Cost Estimate is greater than Landlord's Allowance,
then Tenant, at Tenant's option, may either approve the Cost Estimate in
writing or elect to revise one or more items shown on the Preliminary Plans so
as to reduce the Cost Estimate and then approve in writing the reduced Cost
Estimate (based on the revised Preliminary Plans). If the original Cost
Estimate is greater than Landlord's Allowance, then each day following the 5th
business day after Tenant's receipt of such Cost Estimate until the day
Landlord receives Tenant's written approval of the Cost Estimate (as the same
may have been revised) will be a day of Tenant's delay.
9. CONSTRUCTION DOCUMENTS; COST PROPOSAL. At such time as the Cost
Estimate has been approved (or deemed approved) by Tenant, Landlord will cause
its architect and engineer to prepare the Construction Documents based strictly
on the Preliminary Plans. The Construction Documents will be subject to
Landlord's approval and Tenant will be given an opportunity to review the
Construction Documents to confirm that they conform to the Preliminary Plans.
At such time as the Construction Documents have been so approved, reviewed and
confirmed, Landlord will obtain bids for the construction or installation of
the Leasehold Improvements according to the Construction Documents and
B-3
<PAGE> 44
will notify Tenant of the proposed Total Cost based on such bids ("Cost
Proposal"). If the Cost Proposal is less than or equal to the Cost Estimate
approved by Tenant, then Tenant will be deemed to have approved the Cost
Proposal. If the Cost Proposal is greater than the Cost Estimate approved by
Tenant, then Tenant, at Tenant's option, may either approve the Cost Proposal
in writing or elect to eliminate or revise one or more items shown on the
Construction Documents so as to reduce the Cost Proposal and then approve in
writing the reduced Cost Proposal (based on the revised Construction
Documents). If the Cost Proposal approved or deemed approved by Tenant is
greater than Landlord's Allowance, then Tenant will immediately deposit with
Landlord an amount ("Construction Deposit") equal to one-half of the difference
between Landlord's Allowance and the approved Cost Proposal. Each day following
the 5th business day after Tenant's receipt of the Cost Proposal until the day
on which Landlord has received Tenant's written approval of the Cost Proposal
(if required) and Landlord has received the Construction Deposit (if required)
will be a day of Tenant's delay.
10. CONSTRUCTION OF LEASEHOLD IMPROVEMENTS. At such time as Tenant has
approved (or is deemed to have approved) the Cost Proposal and has made any
required Construction Deposit, Landlord will cause the Leasehold Improvements
to be constructed or installed in the Premises in a good and workmanlike manner
and according to the Construction Documents and all applicable laws. Upon
substantial completion of the construction and installation of the Leasehold
Improvements and prior to Tenant's occupancy of the Premises, Tenant will pay
to Landlord the amount, if any, by which the Total Cost exceeds the sum of the
Landlord's Allowance and the Construction Deposit. Tenant will not be entitled
to any credit if Landlord's Allowance exceeds the Total Cost.
11. CHANGE ORDERS. Tenant's Representative may authorize changes in the
work during construction only by written instructions to Landlord's
Representative on a form approved by Landlord. All such changes will be subject
to Landlord's prior written approval according to Paragraph 13 below. Prior to
commencing any change, Landlord will prepare and deliver to Tenant, for
Tenant's approval, a change order ("Change Order") identifying the total cost
of such change, which will include associated architectural, engineering and
construction contractor's fees, and an amount sufficient to reimburse Landlord
for overhead and related expenses incurred in connection with the Change Order.
If Tenant fails to approve and pay for such Change Order within 10 business
days after delivery by Landlord, Tenant will be deemed to have withdrawn the
proposed change and Landlord will not proceed to perform the change. Upon
Landlord's receipt of Tenant's approval and payment, Landlord will proceed to
perform the change.
12. ADDITIONAL TENANT WORK. If Tenant desires any work in addition to the
Leasehold Improvements to be performed in the Premises ("Additional Tenant
Work"), Tenant, at Tenant's expense, will cause plans and specifications for
such work to be prepared either by Landlord's architect or engineer or by
consultants of Tenant's own selection. All plans and specifications for
Additional Tenant Work will be subject to Landlord's approval according to
Paragraph 13 below. If Landlord approves Tenant's plans and specifications for
any Additional Tenant Work, Landlord will, subject to the following terms and
conditions, grant to Tenant and Tenant's agents a license to enter the Premises
prior to the Commencement Date in order that Tenant may perform or cause to be
performed the Additional Tenant Work according to the plans and specifications
previously approved by Landlord:
(a) Tenant will give Landlord not less than 5 days prior written
notice of the request to have such access to the Premises, which notice
must contain or be accompanied by: (i) a description and schedule for the
work to be performed by those persons and entities for whom such early
access is being requested; (ii) the names and addresses of all
contractors, subcontractors and material suppliers for whom such access is
being requested; (iii) the approximate number of individuals, itemized by
trade, who will be present in the Premises; (iv) copies of all contracts
pertaining to the performance of the work for which such early access
B-4
<PAGE> 1
EXHIBIT 10.23
LEASE
STATE OF OKLAHOMA
COUNTY OF TULSA
THIS LEASE AGREEMENT (this "Lease") is made and entered into this 7th day of
July, 1999, by and between the Landlord and Tenant hereinafter named.
DEFINITIONS AND BANK PROVISIONS
The following definitions and basic provisions shall be consulted in
conjunction with and limited by the references thereto in other provisions of
this Lease:
(a) "Landlord": Twenty First Properties, Inc., an Oklahoma
corporation
(b) "Landlord's Address": 2121 South Columbia Avenue
Suite 650
Tulsa, Oklahoma 74114-3505
(c) "Tenant": medibuy.com, a Delaware Corporation
(d) "Tenant's Address": 777 Alvarado Road, Suite 401
La Mesa, California 91941
(e) "Tenant's Representative": Charlie Smith
(f) "Building": Atlanta South Office Park
(g) "Building's Address": 2526 East 71st Street, Suite C
Tulsa, Oklahoma 74136
(h) "Premises": Approximately 1,326 rentable square feet in
the Building, such Premises being shown and
outlined on the plan attached hereto as
Exhibit "A" and being part of the Project
situated on the real property described in
Exhibit "B" attached hereto.
(i) "Project": The term "Project" shall refer to the real
property described in Exhibit "B" together
with Building and all other improvements and
appurtenances thereon, together with any
such additions or changes as Landlord may
from time to time designate as included
within the Project.
(j) "Environmental Law": The term "Environmental Law" shall mean any
federal, state, county, municipal, law,
statute, code, rule, ordinance, regulation,
order, judgment, decree, injunction or common
law relating to any Hazardous Substances,
pollution or protection of health and/or the
environment now or at any time hereinafter in
effect, as the same may be amended from time
to time.
(k) "Total Rentable Square Feet of Building": 81,450
(l) "Commencement Date": August 1, 1999
(m) "Expiration Date": July 31, 2002
(n) "Term": Three (3) years
(o) "Rent" or "rent": Rent or rent as used herein shall be deemed
to consist collectively of (i) base rent as
hereinafter scheduled; and (b) Additional
Rent or additional rent as hereinafter
defined.
(p) "Schedule of Base Rent":
<TABLE>
<CAPTION>
Months Monthly Installment Total Period Base Rent
- ------ ------------------- ----------------------
<S> <C> <C>
1-36 $1,270.75 $45,747.00
- ------- -------------------- -----------------------
- ------- -------------------- -----------------------
- ------- -------------------- -----------------------
- ------- -------------------- -----------------------
- ------- -------------------- -----------------------
</TABLE>
1
<PAGE> 2
(q) "TOTAL SCHEDULED BASE RENT": $45,747.00
(r) "SECURITY DEPOSIT": $1,270.73
(s) "GUARANTOR": N/A
(EXHIBIT "C" ATTACHED)
(t) "PREPAID RENTAL": $1,270.75
(u) "PERMITTED USES": General Office Use
-------------------------------------
(v) "SPECIAL PROVISIONS": See Exhibit "A" Tenant Improvements
See Exhibit "B" Rules and Regulations
-------------------------------------
GRANTING
CLAUSE In consideration of the obligation of Tenant to pay rent as
herein provided and in consideration of the other terms,
covenants and conditions hereof, Landlord hereby demises and
issues to Tenant, and Tenant hereby takes from Landlord, the
Premises to have and to hold the same for the Term specified
herein, all upon the terms and conditions set forth in this
Lease.
SERVICES
BY LANDLORD Landlord agrees to furnish Tenant during Tenant's occupancy of
the Premises the following services:
(a) Hot and cold water at those points of supply provided
for general use of tenant.
(b) Air conditioning, heat and electric current (for
lighting and fractional horsepower machines only)
during reasonable hours of generally recognized
business days, as determined by Landlord at such
quantity and of such quality as Landlord determines in
its sole judgement is reasonably necessary for Tenant's
comfortable use and enjoyment of the Premises.
(c) Elevator service is common with other tenants for
ingress to and egress from the Premises.
(d) Industrial cleaning services, five (5) days per week.
(e) Electrical lighting for public areas and special
service areas of the Project in the manner and to the
extent deemed by Landlord to be standard.
Failure to any extent to furnish, or any stoppage of, such
services, resulting from causes beyond control of Landlord or
from any cause, shall not render Landlord liable in any respect
for damages to either person or property, nor be construed as to
evictions of Tenant or work as abatement of rent, not relieve
Tenant from fulfillment of any covenant or agreement hereunder.
Should any equipment or machinery break down, or for any cause
cease to function properly, Landlord shall use reasonable
diligence to repair same promptly, but Tenant shall have no claim
for rebate of rent or damages on account of any interruptions in
services occasioned thereby or resulting therefrom.
This Lease is conditioned upon faithful performance by Tenant of
the following agreements, covenants, rules and regulations,
herein set out and agreed to by Tenant.
PAYMENTS (A) All rent payments are due in advance on the first day of each
and every month, during the Term, and should be payable at the
place designated for the delivery of notices in Landlord at the
time of payment, without abatement, deduction setoff,
courier-claim, suspension, determined or reduction of any kind or
for any reason. The obligation of Tenant to pay Base Rent is an
independent covenant, and so act as circumstance whether
constituting breach of covenant by Landlord or not, shall release
Tenant of the obligation to pay rent.
(B) Tenant shall pay as additional rent any sums of money or
other charges required to be paid by Tenant under this Lease,
whether or not the same be designated specifically as "additional
fees".
(C) Any amount due from tenant to Landlord hereunder which is not
paid when due shall bear interest at the maximum lawful rate from
the due date until paid, unless otherwise specifically provided
herein, but the payment of such interest shall not excuse or cure
any default by Tenant under this Lease. In addition to such
interest, if the monthly rental provided herein is not paid
within five (5) days after the time is due, a late charge equal
to ten percent (10%) of the amount overdue of One Hundred Dollars
($100.00), whichever is greater, which late charge Tenant hereby
agrees is a reasonable estimate of the damages Landlord shall
suffer as a result of Tenant's Due payment, which damages include
Landlord's activities administrative and other costs associated
with such late payment and the parties agree that it would be
impracticable or extremely difficult to fix Landlord's actual
damages in such event. Such interest and late payment penalties
are separate and cumulative and are in addition to and shall not
diminish or represent a substitute for any or all of Landlord's
rights or remedies under any other provision of this Lease.
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<PAGE> 3
COMMON AREA
2. The "Common Area" is the part of the Project designated by Landlord from
time to time for the common use of all tenants, including, without limitation,
the parking area, sidewalks, landscaping, curbs, loading areas, private streets
and alleys, lighting facilities, enclosed mall, corridors, hallways, stairs and
public bathrooms, if any, all of which shall be subject to Landlord's sole
management and control and shall be operated and maintained in such manner as
Landlord shall designate. Landlord reserves the right to change from time to
time the dimensions and location of the Common Area, as well as the location,
dimensions, identity and type of any improvements currently a part of, or
planned to be a part of the Project, and to construct additional buildings or
additional stories on existing buildings or other improvements on the Project,
and to eliminate improvements currently a part of the Project. Tenant and its
agents, employees, servants, licensees and invitees shall have the non-exclusive
license to use the Common Area in common with Landlord, other tenants and other
persons permitted by Landlord to use the Common Area subject to the Rules and
Regulations which are attached as Exhibit '3'. Without limiting the foregoing,
Landlord reserves the right to designate parking areas within the Common Area or
in reasonable proximity thereto, for Tenant and Landlord's agents, servants,
employees, contractors, licensees and/or invitees. Tenant shall not solicit
business or display merchandise within the Common Area, or distribute hardbills
therein, or take any action which would interfere with the rights of other
persons to use the Common Area. Landlord may temporarily close the Project (or
part thereof) as a result of disastrous acts of nature, and Landlord shall not
be liable to Tenant for any interruption of Tenant's business during such
periods.
REPAIRS BY TENANT
3. Tenant will, at Tenant's own cost and expense, keep the Premises and all
other improvements to the extent covered by this Lease in sound condition and
good repair, and shall repair or replace any damage or injury done to the
Premises or any other part of the Project by Tenant or Tenant's agents,
employees, licensees, contractors, invitees and visitors, and if Tenant fails to
make such repair or replacements promptly, or within 15 days of occurrence, to
the satisfaction of Landlord, Landlord may at its option make such repair or
replacement, and Tenant shall pay to Landlord immediately upon demand as
additional rent the costs of such repairs and replacements plus fifteen percent
(15%) of such costs. Tenant will not commit or allow any waste or damage to be
committed on any portion of the Premises, and shall at the expiration or earlier
termination of this Lease by lapse of time or otherwise, deliver up the said
Premises to Landlord in as good condition as at time of possession, ordinary
wear and tear excepted, and upon such termination of this Lease Landlord shall
have the right to re-enter and resume possession of the Premises. Upon move out
by Tenant, should the Premises require any repairs or replacement which are the
responsibility of Tenant hereunder, Landlord shall have the right to make such
repairs or replacements at Tenant's cost and expense.
ASSIGNMENTS OR SUBLETTING
4. Tenant shall not sell, mortgage, transfer, or assign this Lease, or any
assets or interest therein, or allow same to be assigned by operation of law or
otherwise, or sublet the Premises, or any part thereof, or use permit same to be
used for any other purpose than stated in the use clause hereof without the
written consent of Landlord, which consent will not be unreasonably withheld.
Notwithstanding the foregoing, in the event the Tenant desires to assign or
sublet the Premises, Tenant shall provide Landlord with not less than one
hundred twenty (120) days written notice of Tenant's request, specifying in
detail any and all terms of such assignment or sublease. Landlord reserves the
right to cancel and terminate this Lease within thirty (30) days upon receipt
of such notice from Tenant of its request to assign or sublet the Premises. In
the event Landlord consents to an assignment or sublease of the Premises, which
assignment or sublease results in rental payments in excess of the monthly
payments due and owing under the terms of this Lease, such excess rental
payments shall be deemed to be rental payments due and owing Landlord. Any
sale, hypothecation, transfer, assignment or subletting which is not in
compliance with the provisions of this Lease shall be voidable by Landlord and
shall, at the option of Landlord, constitute a default under this Lease.
Landlord's acceptance of rent directly from any subtenant, assignee or other
transferee shall not be construed as Landlord's approval or consent thereto nor
Landlord's agreement to accept the attornment of any subtenant in the event of
any termination of this Lease. In no event shall Landlord's consent to any
further assignment or subletting be construed as (i) relieving Tenant from the
obligation to obtain Landlord's express written consent to any further
assignment or subletting or (ii) releasing Tenant from any liability or
obligation hereunder whether or not then accrued, and Tenant shall continue to
be fully, jointly and severally liable hereunder. As a further condition to
Landlord's consent to any subletting, assignment or other transfer of part or
all of Tenant's interest in the Premises (i) Tenant shall be required to pay
Landlord's reasonable attorney's fees and other costs incurred in connection
with the review and execution thereof, (ii) any sublessee of part or all of
Tenant's interest in the Premises shall agree that in the event Landlord gives
such sublessee notice that Tenant is in default under this Lease, such
sublessee shall thereafter make all sublease or other payments directly to
Landlord, which payments will be received by Landlord without any liability
whether to honor the sublease or otherwise (except to credit such payments
against same due under this Lease, and such sublessee shall agree to attorn
to Landlord, or its successors and assigns, at its request should this Lease be
terminated for any reason, except that in no event shall Landlord or its
successors or assigns be obligated to accept such attornment; and (iii)
Landlord may require that Tenant not then be in default under this Lease in any
respect. In the event that Tenant files any type of petition in bankruptcy or
has same filed against it and Landlord does not elect to terminate this Lease
is deemed to have waived its right to terminate this Lease, and in the event
that the trustee or receiver appointed by the bankruptcy court attempts to
assume this Lease and thereupon assign it to a third party, then Landlord
shall have the right to terminate this Lease within thirty (30) days upon
gaining knowledge of such attempted assumption and assignment, or upon being
given written notice of same by Tenant, whichever is later. Upon any subletting
or assignment by Tenant any renewal options, expansion options, rights of first
refusal and/or exclusivity provisions shall become null and void.
If Tenant is a corporation, partnership, limited liability company, or other
entity and if, at any time during this Term, any part or all of the corporate
shares or ownership interests, as the case may be, Tenant shall be transferred
by sale, assignment, bequest, inheritance, operation of law, or other
disposition so as to result in a change in the present effective voting control
of Tenant by the person or persons owning a majority of such shares or interest
on the date of this Lease, Tenant shall properly notifying Landlord in writing
of such change, and Landlord may terminate this Lease at any time after such
change in control by giving Tenant thirty (30) days prior written notice of
such termination.
3
<PAGE> 4
ALTERATIONS ADDITIONS, AND IMPROVEMENTS
5. Tenants shall not make or allow to be made any alterations, additions, or
improvements in or to the Premises without the prior written consent of
Landlord; such consent will not be unreasonably withheld, but Landlord may
impose, as a condition of such consent, such requirements as Landlord in its
sole discretion may deem reasonable or desirable, including without limiting the
generality of the foregoing, requirements as to the manner in which, the time or
times at which, and the contractor by whom such work shall be done. Such
alterations, additions, or improvements when made to the Premises by Tenant
shall be surrendered to Landlord and become the property of Landlord upon
termination in any manner of this Lease, but this clause shall not apply to
movable non-attached fixtures or furniture of Tenant, provided, however, if
prior to termination of this Lease, or within thirty (30) days thereafter,
Landlord so directs by written notice to Tenant, Tenant shall promptly remove
such alterations, additions, or improvements, which were placed in or on the
Premises by Tenant and which are designated in said notice and shall repair any
damage occasioned by such removal and in default thereof Landlord may affect
said removals and repairs at Tenant's expense. All work with respect to
alterations, additions, and improvements shall be done in a good and workmanlike
manner and diligently prosecuted to completion to the end that the improvements
on the Premises shall at all times be a complete unit except during the period
of work. Any such alterations, additions and improvements shall be performed and
done strictly in accordance with the laws and ordinances relating thereto, and
with the requirements of all carriers of insurance on the Premises and the Board
of Underwriters, Fire Rating Bureau, or similar organization. Tenant shall
obtain at its sole cost and expense all required licenses and permits. In
performing the work of any such alterations, additions or improvements, Tenant
shall have the work performed in such a manner so as not to obstruct the access
to or within the Building of any other tenant. Before commanding any such work
or construction in or about the Premises, Tenant shall notify Landlord in
writing of the expected date of commencement thereof. Landlord shall have the
right at any time and from time to time to post and maintain on the Premises
such notices as Landlord deems necessary to protect the Premises or the Project,
and Landlord from the liens of mechanic, laborers, materialman, suppliers or
vendors. If any liens are filed against Landlord or any part the Project as a
result of Tenant's work, Tenant shall cause same to be discharged by payment or
bonding within ten (10) days after such lien is filed.
LEGAL AND VIOLATIONS OF INSURANCE COVERAGE
6. Tenant shall not occupy or use, nor permit any portion of the Premises or any
other part of the project to be occupied or used for any business or purpose
which is unlawful in part or in whole or deemed to be disreputable in any
manner, or ??? hazardous on account of fire, nor permit anything to be done
which will in any way increase the rate of fire insurance on the Project or
contents, and in the event that, by reason of acts of Tenant, there shall be any
increase in rate of insurance on the Project or contents created by Tenant's
acts or conduct of business, then Tenant hereby agrees to pay such increase.
Tenant shall not use or occupy the Premises or permit the same to be used for
any purpose whatsoever other than the Permitted Use. Tenant shall procure, at
its sole expense, any permits and licenses required for the transaction of
business in the Premises and otherwise comply and cause the Premises to comply
with all applicable laws, ordinances and governmental regulations, as amended,
including, but not limited to the Americans With Disabilities Act and any
Environmental Laws.
Tenant acknowledges and understands that the proper tenant mix of the Building
is essential to the successful operation of the Building and that the
restriction against the unauthorized use of the Premises is not amended to act
as a restraint on trade but to protect and insure the correct tenant mix.
LAWS AND REGULATIONS
7. Tenant shall maintain the Premises in a clean and healthful condition and
comply with all laws, ordinances, orders, rules, and regulations (state,
federal, municipal, and other agencies or bodies having any jurisdiction
thereof) with reference to conditions, or occupancy of the Premises.
INDEMNITY, LIABILITY AND LOSS OR DAMAGE
8. By moving into the Premises or taking possession thereof, Tenant accepts the
Premises as suitable for the purpose for which the same are leased and accepts
the Project and each and every appurtenance thereof, and Tenant by said acts
waives any and all defects therein. Landlord shall not be liable to Tenant or
Tenant's officers, agents, employees, contractors, guests, invitees, licensees
or to any person claiming by, through or under Tenant for any injury to person,
loss or damage to property, or for loss or damage to Tenant's business,
occasioned by or through the acts or omissions of Landlord or any other person,
or by any other cause whatsoever except Landlord's gross negligence or willful
wrong to the extent Landlord is not prevented by law from contracting against
such liability, Tenant shall indemnify Landlord and save it harmless from all
suits, actions, damages, judgements, liability and expense in connection with
loss of life, bodily or personal injury or property damage arising from or out
of any occurrence in, upon, at or from the Project or the occupancy or use
thereof by Tenant, its officers, agents, contractors, employees, servants,
invitees, licensees or any other person claiming by, through or under Tenant. If
Landlord shall without fault on its part, be made a party to any action
commenced by or against Tenant, Tenant shall indemnify, defend and hold Landlord
harmless from any ????, expense, claims or actions arising out of any of the
foregoing (including, without limitation, any court costs and attorney's fees).
The provisions of this Paragraph "8" shall survive the expiration or earlier
termination of this Lease with respect to any claims or liability occurring
prior thereto.
BUILDING RULES AND REGULATIONS
9. Tenant and Tenant's officers, agents, employees, contractors and invitees
shall comply fully with all requirements of the Rules and Regulations which are
attached as Exhibit "B" and made a part hereof as fully set out herein. Landlord
shall at all times have the right to amend or supplement such Rules and
Regulations or to amend them in such reasonable manner as may be deemed
advisable for Premises and the Project. Such additional Rules and Regulations
shall be forwarded to Tenant in writing and shall be carried out and observed by
Tenant.
4
<PAGE> 5
ENTRY FOR REPAIRS AND INSPECTION
10. Tenant will permit Landlord or their officers, agents, contractors and
representatives, the right to enter into and upon all parts of the Premises, at
all reasonable hours to inspect same or clean or make repairs or alterations or
additions as Landlord may deem necessary or for making repairs, alterations or
additions to adjacent amenities or any other premises in the Building and
Tenant shall not be entitled to any abatement or reduction of rent by reason
thereof. In the event of an emergency, Tenant hereby grants to Landlord the
right to enter the Premises at any time. In addition, Tenant shall permit
Landlord or Landlord's agent and any other person authorized by the same to
enter the Premises during the last six months of the Term for the purpose of
exhibiting the Premises to prospective lessees.
NUISANCE
11. Tenant will conduct its business, and control its agents, employees,
invitees and visitors in such a manner as not to create any nuisance, interfere
with, annoy, or disturb other tenants or Landlord in the management of the
Building.
EMINENT DOMAIN AND FORCE MAJEURE
12. (A) If the whole of the Premises or so much thereof as to render the
balance unusable by Tenant is taken under power of eminent domain, or sold,
transferred or conveyed in lieu thereof, this Lease shall automatically
terminate as of the date of such condemnation, or as of the date possession
is taken by the condemning authority, whichever is later. No award for any
partial or entire taking shall be apportioned and Tenant hereby releases
any claim to and assigns to Landlord any award which may be made in such
taking or condemnation, together with any and all rights of Tenant now or
hereafter arising in or to the same or any part thereof, provided, however,
that nothing contained herein shall be deemed to give Landlord any interest
in, or to require Tenant to assign to Landlord, any award made to Tenant
for the taking of personal property and fixtures belonging to Tenant and
removable by Tenant at the expiration of the term hereof as provided
hereunder or for the interruption of, or damage to, Tenant's business. In
the event of a partial taking, or a sale, transfer or conveyance in lieu
thereof, which does not result in a termination of this Lease, pursuant to
the foregoing, the rent shall be reduced in proration of the area taken,
effective on the date physical possession is taken by the condemning
authority.
(B) Landlord shall not be liable or responsible for any loss or damage to
any property or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, requisition or
order of a government body or authority, or other matter beyond the
control of Landlord or for any damage or inconvenience which may arise
through repair or alteration of any part of the Project or failure to make
any such repairs, or from any cause whatever, unless caused solely by
Landlord's gross negligence.
LANDLORD'S LIEN
13. As security for the performance of the obligations of the Tenant under
this Lease, the Tenant hereby grants the Landlord a security interest to all of
the property now owned or hereafter acquired by the Tenant which is located in
the Premises and all proceeds and products thereof. The Tenant shall not remove
any of such personal property from the Premises until all of the Tenant's
obligations under this Lease have been satisfied in full. Without excluding any
other manner of notice, any requirement for reasonable service to the Tenant of
the Landlord's intention to dispense of any property pursuant to the
enforcement of such security interest will be met if such notice is given at
least ten days before the close of such disposition. Any sale made pursuant to
the enforcement of such security interest will be deemed to have been a public
sale conducted in a commercially reasonable manner if held at the Premises
after advertisement of the time, place, method of sale and a general
description of the property to be sold in a daily newspaper published in the
country in which the Premises is located, for five (5) consecutive days before
the date of sale. The Tenant agrees to execute and deliver to the Landlord such
financing statements, continuation statements and other instruments as Landlord
might reasonably require to perfect, protect or continue the foregoing security
interest within ten (10) days after written request therefor.
ABANDONMENT
14. If the Premises are abandoned or vacated by Tenant, Landlord shall have
the right, but not the obligation, to: (a) raise same for the remainder of the
period covered hereby; and if the rent is not received through such reletting
at least equal to the rent provided hereunder, Tenant shall pay and satisfy any
deficiencies between the amount of rent called for and that received through
reletting and all expenses incurred by any such reletting, including but not
limited to, the cost of renovating, altering and decorating for a new occupant,
and/or (b) provide for the storage of any personal property remaining in the
Premises without liability of any kind or nature for the cost of storage or the
return of the personal property to Tenant or take title to the abandoned
personal property which title shall pass to Landlord under this Lease as a Bill
of Sale without additional payments or credit from Landlord to Tenant.
Notwithstanding the foregoing, during the last ninety (90) days of the term of
this Lease if Tenant removes a substantial portion of Tenant's property or
Tenant has been in physical absence for ten (10) days it shall, at Landlord's
option constitute an abandonment and Landlord may enter the Premises for
purposes of renovating, altering and decorating the Premises for occupancy at
the end of the Term by a new tenant without in any way affecting Tenant's
obligation to pay rent and comply with all other terms and conditions of this
Lease. Nothing herein shall be construed as in any way denying Landlord the
right, in case of abandonment, of the Premises, or other breach of this Lease
by Tenant, to treat the same as an entire breach, and, at Landlord's option,
immediately sue for the entire breach of this Lease and any and all damages
occasioned Landlord thereby.
HOLDING OVER
15. In case of holding over by Tenant after expiration or termination of this
Lease, Tenant shall pay as liquidated damages double rent for the entire
holdover period, and shall pay all attorney's fees, and expenses incurred by
Landlord in enforcing its rights hereunder. No holding over by Tenant after the
terms of this Lease, either with or without the content and acquiescence of
Landlord, shall operate to extend this Lease for a longer period than one
month; and holding over with the consent of Landlord in writing shall
thereafter constitute a tenancy Agreement from month to month, subject to all
the terms and conditions of this Lease. The foregoing provisions of this
Paragraph 15 are in addition to and do not affect Landlord's right of re-entry
or any other rights of Landlord hereunder or as otherwise provided by law.
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ATTORNEY'S FEES
16. In case Tenant defaults in the performance of any of the terms, covenants,
agreements or conditions contained in this Lease, and Landlord places the
enforcement of this Lease, or any part thereof, or the collection of any rent
due, or to become due hereunder or recovery of the possession of the Premises in
the hands of an attorney or files upon the same, Tenant agrees to pay Landlord's
reasonable attorney's fees, and payment of the same shall be secured in like
manner as is herein provided, is to all remedies which may be invoked by
Landlord to secure payment of rent.
DAMAGE OR DESTRUCTION
17. If the Premises or the Building in which the Premises are located shall be
damaged by any cause or means whatsoever not caused or contributed to by the
negligence or fault of Tenant, its employees, agents, contractors, invitees or
visitors, and if insurance proceeds have been made available therefor, and if
said damage can be repaired within a period of ninety (90) working days by using
standard working methods and procedures, Landlord shall within a reasonable time
after the occurrences of said damage, and to the extent of the insurance
proceeds available therefor, enter and make repairs, and this Lease shall not be
affected but shall continue in full force and effect. However, if said damage
cannot be repaired within a period of ninety (90) working days by using standard
working methods and procedures, then this Lease shall cease and terminate as of
the date of such occurrence, and Tenant shall pay rent hereunder to such date
and immediately surrender the Premises to Landlord, unless within a period of
sixty (60) working days from the date of such occurrence Landlord shall elect to
keep this Lease in force and to restore the Premises to substantially the
condition as existed prior to the date of such occurrence by giving Tenant
written notice of such election within said sixty (60) working day period. If
Landlord so elects to continue the Lease and restore the Premises, Landlord
shall within a reasonable time after the date of the notice of said election
enter and make repairs, and this Lease shall not be affected, except that rents
hereunder shall be equitably abated while such repairs are being made for the
period of time and in the proportion that the Premises are untenable. If,
however, such damage is contributed to or results from the fault of Tenant,
Tenant's employees, agents, contractors, invitees or visitors, and if Landlord
does not have insurance covering such damage, such damage shall be repaired by
and at the expense of Tenant under the consent, direction and supervision of
Landlord, and the rent shall continue without abatement or reduction. The
completion of the repairs of all such damages is subject to reasonable delays
resulting from survey of such damage, obtaining plans and letting contracts for
repair, adjustment or insurance loss, strikes, labor difficulties,
unavailability of material, or other causes beyond the control of the party
obligated to make such repairs. Notwithstanding anything to the contrary
contained in this Paragraph 17, Landlord shall not have any obligation
whatsoever to repair, reconstruct or restore the Premises on account of the
damage resulting from any casualty covered under this Paragraph 17 which occurs
during the last twelve (12) months of the Term (or any extension thereof).
Landlord shall not be required to repair any injury or damage by any cause, or
to make any repairs or replacement of any property insured or required to be
insured under this Lease by Tenant.
INSURANCE
18. Tenant agrees during the Term (and any extension thereof) to carry: a broad
form comprehensive policy of public liability insurance (to include Premises/
Operations, Independent Contractors, Broad Form Contractual in support of
Tenant's indemnities in this Lease Agreement and Personal Injury Liability
Coverage) covering the Premises in an amount of not less than $1,000,000
combined single limit personal injury and property damage insurance; fire and
extended coverage insurance covering all alterations, additions, partitions,
improvements made or placed by Tenant in the Premises, and contents placed by
Tenant in the Premises; Workers' Compensation Insurance in an amount equal to
the minimum statutory limit (as the same hereafter may be amended): Employers
Liability Insurance in an amount of not less than $500,000; and, Automobile
Liability Insurance in an amount not less than $300,000, all with companies
satisfactory to Landlord in the name of Tenant (with Landlord and, if requested
by Landlord, any mortgages, trust deed holder, ground lessor or secured party
with a substantial interest in this Lease and/or the Project named as additional
insureds in the policy or by endorsement). Tenant also agrees to pay the
premiums therefor and to deliver copies of said policies and/or endorsement
thereto to Landlord, and the failure of Tenant to either obtain said insurance
or deliver copies of said policies or certificates thereof to Landlord shall
permit Landlord to procure said insurance and pay the requisite premiums
therefore, which premiums shall be repayable to Landlord with the next monthly
rental payment. Each insurer under the policies required hereunder shall agree
by endorsement on the policy issued by it or by independent insurance furnished
to Landlord that will give Landlord no less than thirty (30) days written notice
before the policy or policies in question shall be altered or canceled. All such
insurance policies shall be primary, noncontributable and shall contain
cross-liability coverage or an endorsement. The amounts of such insurance
required hereunder shall be subject to adjustment from time to time as requested
by Landlord or as requested by any ground lessor or lender with an interest in
the Project.
TRANSFER OF LANDLORD'S RIGHTS
19. Landlord shall have the right to transfer and assign, in whole or in part,
all and every feature of its rights and obligations hereunder and in the
Building and property referred to herein. Such transfers or assignments may be
either in a corporation, trust company, individual, or group of individuals, and
howsoever made are to be in all things respected and recognized by Tenant.
In the event of the transfer and assignment by Landlord of its interest in this
Lease to any person expressly assuming Landlord's obligation under this Lease,
Landlord shall thereby be released from any further obligations hereunder, and
Tenant agrees to look solely to such successor in interest of Landlord for
performance of such obligations. Any security given by Tenant to secure
performance of Tenant's obligations hereunder may be assigned and transferred by
Landlord to such successor in interest, and Landlord shall thereby be discharged
of any further obligation relaying thereto.
EVENTS OF DEFAULT AND REMEDIES
20. The following shall be deemed a default by Tenant under this Lease: (a) If
Tenant fails to pay when due any installment of rent or any other payment to
Landlord as herein provided; and if Tenant fails to comply with any term,
provision, condition, or covenant of this Lease other than the payment of rent,
or any of the Rules and Regulations new or hereafter established by Landlord;
(b) Tenant abandons, deserts or vacates the Premises; (c) any petition is filed
by or against Tenant under any section or chapter of the Bankruptcy Code, as
amended, or under any similar law or statute of the United States or of any
state thereof; (d) Tenant becomes insolvent or makes a transfer in fraud of
creditors; (e) Tenant makes an assignment for benefit of creditors, or (f) a
receiver is appointed for Tenant or any of the assets of Tenant. Upon the
occurrence of any such event or default, Landlord
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shall have the option to pursue any one or more of the following remedies or
any other remedy that it may serve at law or equity, without any notice or
demand whatever.
(1) Terminate this Lease in which event Tenant shall immediately surrender
the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which Landlord may have for
possession of the Premises and expel or remove Tenant and any other person
who may be occupying said Premises or any part thereof, by force if
necessary, without being liable for prosecution of any claim for damages
therefor.
(2) Take immediate possession of the Premises, but if Tenant shall fail to
vacate the Premises, Landlord may without notice and without prejudice to
any other remedy Landlord may have, enter upon and take possession of the
Premises and expel or remove Tenant and its effects, "by force if
necessary", without being liable to prosecution or any claim for damages
therefor, and Tenant agrees to indemnify Landlord for all loss, damage, and
expense including reasonable attorney's fees which Landlord may suffer by
reason of such termination.
(3) Declare the entire amount of the rent which would have become due and
payable during the remainder of the Term to be due and payable immediately,
in which event, Tenant agrees to pay the same at once, together with all
rents therefor due, to Landlord at the address specified herein or
hereunder, provided, however, that such payments shall not constitute a
penalty or forfeiture or liquidated damages, but shall actually constitute
payment in advance of the rent for the remainder of the Term. The
acceptance of such payment by Landlord shall not constitute a waiver or any
failure of Tenant thereafter occurring to comply with any term, provision,
condition or covenant of this Lease.
(4) Relet the Premises and receive the rent therefor, and in such event,
Tenant shall pay Landlord the cost of renovating, repairing and altering
the Premises for a new tenant or tenants and any deficiency that may arise
by reason of such reletting, on demand, at the address of Landlord
specified herein or hereunder provided, however, the failure or refusal of
Landlord to relet the Premises shall not release or affect Tenant's
liability for rent or for damages and such rent and damages shall be paid
by Tenant on the date specified herein.
(5) Landlord may, as agent of Tenant, do whatever Tenant is obligated to
do by the provisions of this Lease and may enter the Premises, "by force if
necessary", without being liable to prosecution or any claim or damages
therefor, in order to accomplish this purpose. Tenant agrees to reimburse
Landlord immediately upon demand for any expenses which Landlord may incur
in thus effecting compliance with this Lease on behalf of Tenant, and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to Tenant from such action, whether caused by the negligence of
Landlord or otherwise.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any of
the other remedies herein provided or any other remedies provided by law and/or
equity.
No act or thing done by Landlord or its agents during the Term hereof shall be
deemed an acceptance of a surrender of the Premises, and no agreement to accept
a surrender of the Premises shall be valid unless made in writing and signed by
Landlord. The mention in this Lease of any particular remedy shall not preclude
Landlord from any other remedy Landlord might have, either in law or in equity,
nor shall the waiver of or redress for any violation of any covenant or
condition in this Lease or any of the Rules and Regulations attached hereto or
hereafter adopted by Landlord, prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. The receipt by Landlord of rent with knowledge of the breach
of any covenant in this Lease contained shall not be deemed a waiver of such
breach. The failure of Landlord to enforce any of the Rules and Regulations
attached hereto, or hereafter adopted, against Tenant and/or any other tenant of
the Project shall not be deemed a waiver. Waiver of said Rules and Regulations
by Landlord shall be in writing and signed by Landlord. (In case it should be
necessary or proper for Landlord to bring any action under this Lease to consult
or place said Lease or any amounts payable by Tenant thereunder, with an
attorney ???? or for the enforcement of any of the Landlord's rights hereunder,
then Tenant agrees in each and any such case to pay to Landlord reasonable
attorney's fees.)
In the event of any default by Landlord, Tenant shall give Landlord written
notice specifying such default with particularity, and Landlord shall thereupon
have thirty (30) days (or such longer as may be required in the exercise of due
diligence) in which to cure any such default. Unless and until Landlord fails
to cure any default after such notice, Tenant shall not have any remedy or
cause of action or reason thereafter. All obligations of Landlord hereunder
shall be constructed as covenants, not conditions. The term "Landlord" shall
mean the owner, for the time being, of the Project, and in the event of
transfer by such owner of its interest in the Project, such owner shall
thereupon be released and discharged for all covenants and obligations of the
Landlord thereafter accruing, that such covenants and obligations shall be
binding during the Term upon such new owner for the duration of such owner's
ownership. Notwithstanding any other provision hereof, in the event of any
breach of default by Landlord any term or provision of this Lease, Tenant
agrees to look entirely to the equity or interest then owned by Landlord in the
Project; however, in no event shall any deficiency judgment or any money
judgment of any kind be sought or obtained against any party Landlord.
OTHER DEFAULTS
21. In the event Tenant, or Tenant's subsidiary or affiliate, shall have other
leases for other premises in the Project, any default by Tenant or Tenant's
subsidiary or affiliate under such other lease shall be deemed to be a default
herein and Landlord shall be entitled to enforce all rights and remedies as
provided for a default herein.
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BIND AND INURE
22. The obligations of this Lease shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
Landlord named herein and each successive owner of the Premises shall be liable
only for the obligations occurring during the period of its ownership. Whenever
the Project is owned by a trustee or trustees, the obligations of Landlord shall
be binding upon Landlord's trust estate, but not upon any trustee, beneficiary
or shareholder of the trust individually. In the event this Lease is executed by
two or more persons or entities as "Tenant", the liability of each shall be
joint and several.
QUIET POSSESSION
23. Landlord hereby covenants that Tenant, upon paying rent as herein reserved,
and performing all covenants and agreements herein contained on part of Tenancy,
may have the peaceable and quiet enjoyment and possession of the Premises.
POSSESSION
24. If for any reason the Premises shall not be ready for occupancy by Tenant at
the Commencement Date, this Lease shall not be affected thereby, nor shall
Tenant have any claim against Landlord by reason thereof, but no rent shall be
payable for the period during which the Premises shall not be ready for
occupancy. All claims for damages arising out of any such delay are waived and
released by Tenant. With respect to the foregoing, if delivery of possession of
the Premises shall be delayed beyond the Commencement Date, it is understood and
agreed that the Commencement Date shall be extended to the date that the
Premises are tendered to the Tenant in which event the Term shall be
correspondingly extended. In the event of such delay in tendering the Premises
to Tenant, Landlord shall not be liable to Tenant for any damage whatsoever
resulting from the delay in the delivery of possession of the Premises.
Notwithstanding the foregoing, it is understood that if and to the extent that
Landlord is unable to deliver timely possession of the Premises to Tenant due to
delays by Tenant, then the rent reserves shall commence to accrue on the date
possession of the Premises would have been delivered to Tenant but for the
delays of Tenant. If permission is given to Tenant to occupy the Premises prior
to the Commencement Date, such occupancy shall be subject to all the provisions
of this Lease (including the payment of rent) except those relating to the Term.
CONDITION OF PREMISES
25. Tenant acknowledges that neither Landlord nor any agent of Landlord have
made any representation or warranty with respect to the Premises or the Project
or with respect to the suitability of either for the conduct of Tenant's
business or profession. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the Project were at such time in
satisfactory condition.
ESTOPPEL CERTIFICATE
26. Within five (5) days after request thereof by Landlord, Tenant agrees to
execute and deliver in recordable form an estoppel certificate to any proposed
mortgagee or purchaser, or to Landlord, certifying that this lease is unmodified
and in full force and effect (or, if there has been any modification, that the
same is in full force and effect as modified, and stating the modification),
that there are no defenses or offsets thereto (or specifically stating those
claimed by Tenant), and the dates to which Rent and other charges have been
paid, and stating such other matters as Landlord may require concerning the
lease or the Premises. In the event Tenant shall fail to return a fully executed
copy of such certificate to Landlord within the referenced period, then Tenant
shall be deemed to have approved and confirmed all of the terms, certifications
and representations contained in such certificate. Tenant irrevocably appoints
Landlord as attorney-in-fact for the Tenant with full power and authority to
execute and deliver in the name of Tenant such certificate if Tenant fails to
deliver the same within such period and such certificate is signed by Landlord
shall be fully binding on Tenant.
SIGNS
27. Tenant will not place or suffer to be placed or maintained on any exterior
door, wall or window of the Premises any sign, awning or canopy, or advertising
matter or other thing of any kind, and will not place or maintain any
decoration, lettering or advertising matter on the glass of any window or door
of the Premises without first obtaining Landlord's prior written approval and
consent in such instance. Tenant further agrees to maintain any such sign,
awning, canopy, decoration, lettering, advertising matter or other thing as may
be approved, in good condition at all times.
PERSONAL PROPERTY TAXES
28. With respect to Tenant's fixtures, furnishings, equipment and all other
personal property located in the Premises, Tenant shall pay, prior to
delinquency all taxes assessed against or levied thereon and when possible,
shall cause same to be assessed and billed separately from the property of
Landlord, but if same shall be assessed and taxed with the property of Landlord,
Tenant shall pay to Landlord its share of such taxes within ten (10) days after
Landlord's delivery to Tenant of a statement in writing setting forth the amount
of such taxes applicable to Tenant's property. In addition Tenant shall pay
promptly when due all taxes imposed upon Tenant's rent, gross receipts, charges
and business operations.
SUBORDINATES
29. Tenant hereby subordinates this Lease and all rights of Tenant hereunder to
any mortgage or mortgages, or vendor's lien, or similar instruments which now
are or which may from time to time be placed upon the Project, and such mortgage
or mortgages or liens or other instruments shall be superior to and prior to
this Lease. Tenant further covenants and agrees that if the mortgage or other
lien holder acquires the Premises as a purchaser at any such foreclosure sale
(any such mortgagee or other lien-holder or purchaser of the foreclosure sale
being such hereunder referred to as the "Purchaser at Foreclosure"). Tenant
shall thereafter, but only at the option of the Purchaser at Foreclosure, as
evidenced by the written notice of its election given to Tenant within a
reasonable time thereafter, remain bound by ??? or otherwise to the same effect
as if a new and identical Lease between the Purchaser at Foreclosure, as
Landlord, and Tenant, as tenant, had been entered into for the remainder of the
Term in effect at the institution of the foreclosure proceedings. Tenant agrees
to execute any instrument or instruments which may be deemed necessary or
desirable further to effect the subordination of this Lease to each such
mortgage, lien or instrument or to confirm any election to continue the Lease in
effect in the event of foreclosure, as above provided. Tenant hereby irrevocably
appoints Landlord as its special attorney-in-fact to execute and deliver any
document or documents provided for herein for and in the name of Tenant. Such
power, being coupled with and interest, is irrevocable.
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SEVERABILITY CLAUSE
30. If any clause or provision of that is illegal, invalid, or unenforceable
under present or future laws effective during the Term, then and in that event,
it is the ?? of the parties hereto that the remainder of this Lease shall not be
affected thereby, and it is also the intention of the parties to this Lease that
is ?? of each clause or provision that is illegal, invalid, unenforceable, there
be added as a part of this Lease, a clause or provision as similar in terms to
such illegal, invalid or unenforceable clause or provision as may be possible
and be legal, valid and enforceable. The caption of each paragraph hereof is
added as a matter of convenience solely and shall be considered to be of no
effect on the construction of any provision or provisions of this Lease.
SECURITY DEPOSIT
31. Upon the occurrence of any event of default by Tenant, Landlord may, from
time to time, without prejudice to any other remedy use the Security Deposit
paid to Landlord by Tenant as herein provided to the extent necessary to make
good any arrears of rent and other damage, injury, expenses or liability caused
to Landlord by such event of default. If any portions of said deposit is so used
or applied, Tenant shall, within five (5) days after written demand therefor,
deposit cash with Landlord is an amount sufficient to restore the security
deposit to its original amount. Tenant shall not be entitled to interest on the
security deposit. Tenant shall not grant anyone a security interest of any kind
in such security deposit and no such security agreement shall be binding on
Landlord. If Tenant shall fully and faithfully perform every provision of this
Lease to be performed by it, the security deposit, or any balance thereof
remaining, shall be returned to Tenant at the expiration of the Term and upon
Tenant's vacation of the Premises. Such Security Deposit shall not be considered
as advance payment of rental or a measure of Landlord's damages in case of
default by Tenant.
WAIVER OF SUBROGATION
32. Tenant hereby waives all right of subrogation by any insurance company
issuing policies carried by Tenant including, without limitation, the Premises,
Tenant's fixtures, personal property, or leasehold improvements, or Tenant's
business.
ADJUSTMENT OF RENTAL
33. (A) Operating Expenses:
(1) The term "Operating Expenses" shall mean all costs of management,
operating and maintenance of the land, the Project and improvements
and appurtenances thereon, all accrued and based on a calendar year
insurance premiums period, as determined by generally accepted
accounting principles, including by way of illustration but not
limitation, real estate taxes, personal property taxes; other taxes,
assessments and governmental charges (including taxes on rents of
services); expenses for abatements, utilities, insurance premiums,
janitorial and cleaning services, licenses, permits and inspection
fees, heating and cooling, maintenance and repairs, general
administration costs and expenses, labor and supplies, capital
expenditures which result in a substantial labor or cost saving device
or operation in which case the capital expenditures shall be amortized
over ten years and included on an annual basis in the Operating
Expenses, whether such Operating Expenses, or any portion thereof, are
paid by the Landlord, directly by the Tenant, excluding, however,
depreciation, capital expenditures which do not result in a
substantial labor or cost saving device cost of Tenant improvements
and commissions paid for leasing.
(2) It is agreed that the Base Rent provided for herein includes the
Tenant's share of Operating Expenses during the first year of the
Term. If the amount of such Operating Expenses for the entire Project
exceed, in any calendar year, the actual base year operating expenses
for 1998, Tenant shall pay its share of the excess in the same manner
and with the same interest so stated throughout this Paragraph 33
within ten (10) days of billing, as additional rental the Tenant's
share of such excess.
(3) It is further agreed and understood that approximately January
1st of each calendar year or as soon thereafter as the information can
be obtained, Landlord shall notify Tenant of such calculations and (1)
effective each January 1st, during the Term and on the first (1st) day
of each of the succeeding eleven (11) months of each calendar year.
Tenant shall pay the Landlord one-twelfth (1/12) of its share of the
increase in annual Operating Expenses over and above actual base year
operating expenses.
(B) If the average occupancy in any calendar year is less than ninety
percent (90%), then the Operating Expenses for such year shall be
adjusted to reflect what the expenses would have been at an occupancy
of ninety-five percent (95%).
(C) It is further agreed that the provisions of Paragraph 33 shall
survive the expiration or earlier termination of this Lease and be
applicable to such portion of the calendar year as this Lease was in
effect.
(D) In no event shall any provision of this Paragraph 33 result in any
reduction in the Base Rent.
SALE OF ASSETS
36. Tenant shall not transfer any portion of its assets outside the ordinary
course of its business so that the effect causes the Tenant to default under
Paragraph 35 of this Lease.
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INTEREST ON PAST DUE OBLIGATIONS
37. Any interest due from Tenant hereunder which is not paid when due shall bear
interest at the rate of eighteen percent (18%) per annum from the due date until
paid, unless otherwise specifically provides herein, but the payment of such
interest shall not excuse or cure any default by Tenant under this Lease.
RELOCATION OF TENANT
38. At any time after Tenant's occupancy, upon at least thirty (30) days'
written notice to tenant, Landlord shall be entitled to relocate Tenant from the
Premises above to another space in the Building or to any other building in the
Project (Relocated Suite) provided that: (a) the Relocated Suite shall provide
Tenant with at least as much net rentable area as the Premises; (b) the
Relocated Suite shall provide Tenant with substantially the same improvements as
are provided to Tenant in the Premises at no additional cost to Tenant; and (c)
the reasonable expenses incurred by Tenant in relocation to the Relocated Suite
shall be borne by Landlord. Upon any such relocation, Landlord and Tenant shall
execute an addendum to amend this Lease to describe the Relocated Suite; and, in
any event, upon such or relocation being effected this Lease thereafter shall no
longer apply to the portion of the Building described in Section 4 above, but
shall be deemed to apply to the Relocated Suite.
INABILITY TO PERFORM
39. This Lease and the obligations of Tenant hereunder shall not be affected or
impaired because Landlord is unable to fulfill any of its obligations hereunder
or is delayed in doing so, if such inability or delay is caused by reason of
strike or other labor troubles, or act of God, or any other cause beyond the
control of Landlord.
INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS
40. This Lease contains all of the agreements of the parties hereto with respect
to any matter covered or mentioned in this Lease and no prior agreement or
understanding pertaining to any such matter shall be effective for any purpose.
No provision of this Lease may be amended or added to except by an agreement in
writing signed by the parties hereto or their respective successors in interest.
Any written addenda to this Lease, when signed or initialed by the contracting
parties shall be deemed a part of this Lease to the same full extent as if
incorporated herein.
ACCORD AND SATISFACTION
41. No payment by Tenant or receipt by Landlord of a lesser amount than that
stipulated herein for rent, additional rent or any other charge shall be deemed
to be other than on account of the partial stipulated rent, additional rent or
other charge then due, nor shall any endorsement or statement on a check or
letter accompanying any check or payment be deemed an accord and satisfaction
and Landlord may accept such check or payment without prejudice to Landlord's
rights to recover the balance of such rent, additional rent or other charges or
pursue any other remedy in this Lease, at law or in equity.
TIME OF ESSENCE
42. Time is of the essence with respect to the performance of every provision of
this Lease in which time of performance is a factor, except that whenever a
period of time as herein prescribed for action to be taken by Landlord, Landlord
shall not be liable or responsible for and there should be excluded from the
computation of any such period of time, any delays due to restrictions or any
other causes of any kind whatsoever which are beyond the reasonable control of
the Landlord.
NO BROKER OR AGENT OF TENANT
43. Tenant warrants that is has had no dealing with any broker or agent in
connection with the negotiation or execution of this Lease, other than: (a)
Landlord's broker or agent, if any, and, (b) a broker or agent authorized to act
as co-broker under a written co-brokerage agreement with Landlord, if any.
Tenant agrees to hold harmless and indemnify Landlord as to any claim which may
be asserted by any broker or agent which has acted for or on behalf of Tenant in
connection with the negotiation or execution of this Lease unless such claim
expressly and specifically has been authorized and is due under the terms of
such a written co-brokerage agreement.
LEASE EFFECTIVE UPON EXECUTION
44. Delivery of this Lease, duly executed by Tenant, constitutes an offer to
lease the Premises as herein set forth, and under no circumstances shall such
delivery be deemed to cause an option or reservation to lease the Premises for
the benefit of Tenant. This Lease shall only become effective and binding upon
execution hereof by Landlord and delivery of a signed copy to Tenant.
NOTICES
45. All other notices or communications which may be required or which may be
given under the terms of this lease shall be in writing and shall be deemed
sufficiently given or served if personally delivered to the other party, or if
sent by registered certified mail, return receipt requested, postage prepaid, or
by overnight delivery service such as Federal Express, Airborne, etc., in all
cases addressed to the parties hereto at the respective addresses set out in the
Basic Provisions above. The date of service by mail of any notice or other
communication required or which may be given under the terms of this lease shall
be two (2) dates after the date on which the same is deposited in the United
States mail by the party giving such notice. The date of service by personal
delivery shall be the date of such delivery. The date of service by overnight
delivery service shall be the day after the same is deposited with such
overnight delivery service. Any address or name specified for notices may be
changed by notice given in accordance with the provisions of this section. The
inability to deliver because of a changed address of which no notice was given
or the rejection or other refusal to accept a notice or other communication
shall not be deemed to affect the service of such notice.
EXECUTED and delivered as of the day and year first above written.
Tenant: medibuy.com LANDLORD: TWENTY FIRST PROPERTIES, INC.
----------------------------- an Oklahoma Corporation
a Delaware Corporation
By: /s/ CHARLIE SMITH By: /s/ PAUL D. WILSON
--------------------------------- ---------------------------------
Charlie Smith Paul D. Wilson
Title: President Title: President
------------------------------ ------------------------------
10
<PAGE> 11
EXHIBIT "A"
SPECIFICATIONS OF TENANT IMPROVEMENTS
Landlord agrees to provide Tenant with the following specific improvements
listed below. Any changes or upgrades in the items listed below will be paid
for by Tenant. These changes or requests must be made in writing to Landlord
and must be paid within one (1) week of the completion of work. Any
modifications desired by Tenant are to be approved by Landlord and carried out
by Landlord's general contractors.
[FLOOR PLAN]
SUITE 2526-C
1,324 RENTABLE SQUARE FEET
1. Landlord shall paint space with color to be selected by Tenant from
samples provided by Landlord including the exterior frame and door of
Suite 2526-C.
2. Landlord shall carpet space with color to be selected by Tenant from
samples provided by Landlord.
3. Landlord shall replace stained or damaged ceiling tiles as needed
throughout the suite.
4. Within ninety (90) days of the commencement date, Landlord agrees to
install new carpet in the common area and to touch up the paint in the
common area hallway.
"LANDLORD" "TENANT"
Twenty First Properties, Inc., medibuy.com
an Oklahoma Corporation a Delaware Corporation
By: /s/ PAUL D. WILSON By: /s/ CHARLIE SMITH
------------------------------ ------------------------------
Paul D. Wilson Charlie Smith
Title: President Title: President
--------------------------- ---------------------------
<PAGE> 12
EXHIBIT "B"
BUILDING RULES AND REGULATIONS
1. No additional locks or belts of any kind shall be placed upon any of the
doors or windows by Tenant, nor shall any changes be made in existing locks or
the mechanism thereof without the prior written consent of Landlord. Tenant
must, upon the termination of its tenancy, restore to Landlord all keys either
furnished to or otherwise procured by Tenant, and in the event of the loss of
any keys so furnished, Tenant shall pay to Landlord the cost thereof.
2. Directories will be placed by Landlord, at its own expense, in conspicuous
places in the Building. No other directories shall be permitted, unless
previously consented to by Landlord in writing.
3. Tenant will refer all contractors, contractor's representatives and
installation technicians, rendering any service to Tenant, to Landlord for
Landlord's supervision, approval and control before performance of any
contractual service. This provision shall apply to all work performed in the
Project including installations of telephones, telegraph equipment, electrical
devices and attachments and installations of any service affecting floors,
walls, woodwork, trim, windows, ceilings, equipment or any other physical
portion of Building.
4. Movement in or out of the Building of furniture or office equipment, or
dispersion or receipt by Tenant of any merchandise or materials which require
use of elevators or stairways, or movement through Building entrances or lobby
shall be restricted to hours designated by Landlord. All such movement shall be
under supervision of Landlord and in the manner agreed between Tenant and
Landlord by prearrangement before performance. Such prearrangement initiated by
Tenant will include determination by Landlord and subject to its decision and
control as to the time, method and routing of movement and as to limitations
imposed for safety or other concerns which may prohibit any article, equipment
or any other item from being brought into the Building. Tenant is to assume all
risk as to damage to articles moved and injury to persons or public engaged or
not engaged in such movement, including equipment, property, and personnel of
Landlord if damaged or injured as a result of acts in connection with carrying
out this service for Tenant, from time of entering property to completion of
work, and Landlord shall not be liable for acts of any person engaged in, or any
damage or loss to any of said property or persons resulting from any act in
connection with such service performed for Tenant.
5. No signs, advertisements or services shall be painted or affixed on or to
any windows or doors, or other parts of the Building or the Project, exempt of
color, size and style and in such places, as shall be first approved in writing
by Landlord. All signs will be contracted for by Landlord at the rate fixed by
Landlord from time to time, and Tenant will be billed and pay for such service
accordingly.
6. If any Premises becomes infested with vermin, the Tenant, at its sole cost
and expense, shall cause its premises to be exterminated from time to time to
the satisfaction of the Landlord and shall employ such exterminations as shall
be approved by Landlord.
7. Tenant and Tenant's agents, employees, guests and invitees shall not bring
into or keep in the Building, including but not limited to the Premises and the
Common Area, any explosives, firearms or weapons, including any licensed
concealed firearms. Tenant shall advise all agents, employees, guests and
invitees of this rule and shall enforce this rule upon the Premises. Tenant is
to assume all risk as to damage to real or personal property and injury to
persons as a result of Tenant's agents, employees, guests and invitees bringing
such items into the Building, including but not limited to the Premises and the
Common Area. Landlord shall not be liable for the acts of any persons bringing
explosives, firearms or weapons into the Building, including but not limited to
the Premises and the Common Area, or for any damage or loss to property or
persons resulting therefrom.
8. Tenant shall not place, install or operate in the Premises or in any part of
the Building, any engines or machinery, or maintain, use or keep any
inflammable, explosive, or hazardous material without comment of Landlord.
9. Landlord will not be responsible for lost or stolen personal property,
equipment, money, or jewelry from Tenant's area or public room regardless of
whether such loss occurs when the area is locked against entry or not.
10. No birds or animals shall be brought into or kept in or about Building.
11. Employees of Landlord shall not receive or carry messages for or to Tenant
or other person, nor contact with or render free of paid services to Tenant's
agents, employees or invitees.
12. Landlord will not permit entrance to Tenant's offices by use of pass keys
controlled by Landlord to any person at any time without written permission by
Tenant, except employees, contractors, or service personnel directly supervised
by Landlord.
13. The entries, passages, doors, elevators, elevator doors, hallways or
stairways shall not be blocked or obstructed; no rubbish, litter, trash, or
material of any nature shall be placed, emptied or thrown into these areas; and
such areas shall not be used at any time except for ingress or egress by Tenant,
Tenant's agents, employees, invitees or visitors to or from the Premises.
14. Plumbing fixtures and appliances shall be used only for purposes for which
constructed, and no sweepings, rubbish, rags or other unsuitable material shall
be thrown or placed therein. Damage resulting to any such fixtures or appliances
from misuse by Tenant shall be repaired and replaced at Tenant's sole cost and
expense, and Landlord shall not in any case be responsible therefor.
15. Tenant shall not do, or permit anything to be done in or about the Building,
or bring or keep anything therein, that will in any way increase the rate of
fire or other insurance on the Building, or on property kept therein, or
obstruct or interfere with the rights of, or otherwise ???? or annoy, other
tenants, or do anything in conflict with the valid pertinent laws, rules or
regulations of any governmental authority.
16. The Landlord desires to maintain highest standards of environmental comfort
and conveniences for the
<PAGE> 13
courtesy. It will be appreciated if any undesirable conditions or lack of
courtesy or attention are reported directly to the management.
17. The work of the janitor or cleaning equipment shall not be hindered by
Tenant after 5:30 p.m. and such work may be done at any time when the offices
are vacant, the windows, doors and fixtures may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles, cabinets, book cases, map
cases necessary to prevent unreasonable hardship if Landlord is discharging its
obligations regarding cleaning service.
18. Landlord shall have the right to determine and prescribe the weight and
proper position of any unusually heavy equipment including safes, large files,
etc., that are to be placed in the Building, and only those which in the opinion
of Landlord might act with reasonable possibility to damage to the floors,
structure and/or freight elevator, may be moved into said building. Any damage
occurred in connection with the moving or installing of such aforementioned
articles to said building of the existence of same in said building shall be
paid for by Tenant, unless otherwise covered by insurance.
19. Landlord shall have the right to prohibit the use of the name of the
Building or any other publicity by Tenant, which, in Landlord's opinion, stands
to impair the reputation of the Building or its desirability for the executive
offices of Landlord or of other lessee, and, upon written consent from Landlord.
Tenant will refrain from or discontinue such publicity.
20. The Premises shall not be used for lodging, sleeping, or cooking or for any
immoral or illegal purpose or for any purpose that will damage the premises or
the reputation thereof, or for any purpose other than that specified in the
Lease covering the Premises.
<PAGE> 14
(LANDLORD)
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
Before me, the undersigned Notary Public in and for said County and State,
on this __________ day of __________________, 19___, personally appeared Paul D.
Wilson, who subscribed the name of Twenty First Properties, Inc., an Oklahoma
corporation domesticated in Oklahoma, to the foregoing Lease Agreement as its
President and acknowledged to me that he executes the same as himself free and
voluntary act and deed and as the free and voluntary act and deed of Twenty
First Properties, Inc., an Oklahoma corporation domesticated in Oklahoma, for
the uses and purposes therein and forth.
Witness my hand and official seal the day and year last above written.
My Commission Expires:______________________ ______________________________
Notary Public
(IF TENANT IS A CORPORATION)
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
Before me, the undersigned, a Notary Public, in and for said County and
State, on this ____________ day of ________________________, 19___, personally
appeared ___________________________________, to me known to be the identical
person who subscribed the name of ____________________________________________,
a corporation, as Tenant to the foregoing Lease Agreement as its _____________,
and acknowledged to me that ________________ executed the same as _____________
free and voluntary act and deed, and as the free and voluntary act and deed of
such corporation, for the uses and purposes therein set forth.
Witness my hand and official seal the day and year last above written.
My Commission Expires: see attached
----------------- ------------------------------
Notary Public
<PAGE> 15
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On the 20th day of June, 1999, before me, the undersigned, a Notary Public in
and for said County and State, personally appeared CHARLIE SMITH known to me
___ (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name is/are subscribed to the within instrument, and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ MIRANDA C. LANKS
- ------------------------------ [SEAL]
NOTARY PUBLIC
<PAGE> 1
EXHIBIT 10.24
[LOGO]
SUBLEASE
SUBLESSOR: Southwall Technologies, Inc. PREMISES: 1029 Corporation Way
Palo Alto, California
SUBLESSEE: Medibuy, Inc., a Delaware DATE: October 14, 1999
corporation
1. PARTIES:
This Sublease is made and entered into as of October 14, 1999, by and
between Southwall Technologies, Inc. (Sublessor), and Medibuy, Inc., a
Delaware corporation (Sublessee), under the Master Lease dated October __,
1999, between C & J Development Company, a California corporation as
(Lessor) and Sublessor under this Sublease as (Lessee). A copy of the Master
Lease is attached hereto as Exhibit "A" and incorporated herein by this
reference.
2. PROVISIONS CONSTITUTING SUBLEASE:
2.1 This Sublessee is subject to all of the terms and conditions of the
Master Lease, Sublessee hereby assumes and agrees to perform all of the
obligations of Lessee under the Master Lease to the extent said obligations
apply to the Subleased Premises and Sublessee's use of the common areas, except
as specifically set forth herein. Sublessor hereby agrees to cause Lessor,
under the Master Lease, to perform all of the obligations of Lessor thereunder
to the extent said obligations apply to the Subleased Premises and Sublessee's
use of the common areas, Sublessee shall not commit or permit to be committed
on the Subleased Premises or on any other portion of the Project any act or
omission which violates any term or condition of the Master Lease. Except to
the extent waived or consented to in writing by the other party or parties
hereto who are affected thereby, neither of the parties hereto will, by
renegotiations of the Master Lease, assignment, subletting, default or any
other voluntary action, avoid or seek to avoid the observance or performance of
the terms to be observed or performed hereunder by such party but, will at all
times, in good faith assist in carrying out all the terms of this Sublease and
in taking all such action as may be necessary or appropriate to protect the
rights of the other party or parties hereto who are affected thereby against
impairment. Nothing contained in this Section 2.1 or elsewhere in this Sublease
shall prevent or prohibit Sublessor (a) from exercising its right to terminate
the Master Lease pursuant to the terms thereof or (b) from assigning its
interest in this Sublease or subletting the Premises to any other third party.
<PAGE> 2
SUBLEASE
All of the terms and conditions contained in the Master Lease are
incorporated herein, except as specifically provided below, and shall
together with the terms and conditions specifically set forth in this
Sublease constitute the complete terms and conditions of this Sublease.
The following paragraphs of the Master Lease shall not be included in
this Sublease:
2, 4, 5, 16, 48, 54, 55, Exhibit A.
3. PREMISES:
Sublessor leases to Sublessee and Sublessee leases from Sublessor the
Subleased Premises upon all of the terms, covenants and conditions contained
in this Sublease. The Subleased Premises consist of approximately 4,250
rentable square feet located in a portion of the second floor at 1029
Corporation Way, Suite 200, Palo Alto, California as shown and described in
Exhibit "B".
4. RENT:
Upon execution of this Agreement, Sublessee shall pay to Sublessor as Rent
for the Subleased Premises the sum of $15,937.50 and 00/100 Dollar,
representing the first month's rent. Thereafter, rent shall be in accordance
with the following schedule:
<TABLE>
<CAPTION>
MONTHS AMOUNT PER SQUARE FOOT/FULL SERVICE
------ -----------------------------------
<S> <C>
01-14 53-75/sq.ft/per month
</TABLE>
The rental amount shall be paid, without deductions, offset, prior notice or
demand. If the commencement date or the termination date of the Sublease
occurs on a date other than the first day or the last day, respectively, of
a calendar month, then its Rent for such partial month shall be prorated and
the prorated Rent shall be payable on the Sublease commencement date or on
the first day of the calendar month in which the Sublease termination date
occurs, respectively.
5. SECURITY DEPOSIT:
Upon execution of this Agreement, Sublessee shall pay to Sublessor an
equivalent of six (6) months' rent as a non-interest bearing Security
Deposit. Said Deposit shall be credited to the last five (5) months' rent of
the term, which will leave Sublessor with one (1) month's Security Deposit
at the end of the term. In the event Sublessee has performed all of the
terms and conditions of this Sublease during the term hereof, Sublessor
shall return to Sublessee, within ten (10) days after Sublessee has vacated
the Subleased Premises, the Security Deposit less any sums due and owing to
Sublessor.
<PAGE> 3
SUBLEASE
6. RIGHTS OF ACCESS AND USE:
6.1 Use:
Sublessee shall use the Subleased Premises only for those purposes
permitted in the Master Lease, unless Sublessor and Master Lessor
consent in writing to other uses prior to the commencement thereof.
7. SUBLEASE TERM:
7.1 Sublease Term:
The Sublease Term shall be for the period commencing on November 1,
1999, and continuing through December 31, 2000. In no event shall
the Sublease Term extend beyond the Term of the Master Lease.
7.2 Inability to Deliver Possession:
In the event Sublessor is unable to deliver possession of the
Subleased Premises at the commencement of the term, Sublessor shall
not be liable for any damage caused thereby nor shall this Sublease
be void or voidable, but Sublessee shall not be liable for Rent
until such time as Sublessor offers to deliver possession of the
Subleased Premises to Sublessee, but the term hereof shall not be
extended by such delay. If Sublessee, with Sublessor's consent,
take possession prior to commencement of the term, Sublessee shall
do so subject to all the covenants and conditions hereof and shall
pay Rent for the period ending with commencement of the term at the
same rental as that prescribed for the first month of the term
prorated at the rate of 1/30th thereof per day. In the event
Sublessor has been unable to deliver possession of the Sublease
Premises within thirty (30) days from the commencement date,
Sublessee, at Sublessee's option, may terminate this Sublease.
8. NOTICES:
All notices, demands, consents and approvals which may or are not
required to be given by either party to the other hereunder shall be
given in the manner provided in the Master Lease at the addresses shown
below. Sublessor shall notify Sublessee of any Event of Default under the
Master Lease, or of any other event of which Sublessor has actual
knowledge which will impair Sublessee's ability to conduct its normal
business at the Sublease Premises, as soon as reasonable practicable
following Sublessor's receipt of notice from the Lessor of an Event of
Default or actual knowledge of such impairment. If Sublessor elects to
terminate the Master Lease, Sublessor shall so notify Sublessee by giving
at least thirty (30) days notice prior to the effective date of such
termination.
<PAGE> 4
- --------------------------------------------------------------------------------
SUBLEASE
- --------------------------------------------------------------------------------
Sublessor's Address: Bill Finley Sublessee's Address: John Stevens
Southwall Technologies Meadbuy, Inc.
1029 Corporation Way 1029 Corporation
Palo Alto, CA 94308 Way #200
Palo Alto,
CA 94303
Phone Number: (650) 962-9111 Phone Number: TBD
Fax Number: (650) 967-8713 Fax Number: TBD
9. BROKER FEE:
Upon execution of the Sublease, Sublessor shall pay Cornish & Carey
Commercial, a licensed real estate broker, fees set forth in a separate
agreement between Sublessor and Broker for brokerage services rendered by
Broker to Sublessor in these transactions.
10. BROKER REPRESENTATION:
The only Brokers involved in this Sublease are Cornish & Carey Commercial
representing Sublessor and Cornish & Carey Commercial representing
Sublessee. If Cornish & Carey Commercial represents both parties, then
Sublessor and Sublessee consent to such dual representation and waive any
conflict of interest arising out of such dual agency.
11. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT:
Sublessee shall be responsible for the installation and cost of any and all
improvements, alterations or other work required on or to the Sublease
Premises or to any other portion of the property and/or building of which
the Subleased Premises are a part, required or reasonably necessary because
of: (1) Sublessee's use of the Subleased Premises or any portion thereof;
(2) the use by a Sublessee by reason of assignment or sublease; or (3)
both, including any improvements, alterations or other work required under
the Americans With Disabilities Act of 1990. Compliance with the provisions
of this Section ? shall be a condition of Sublessor granting its consent to
any assignment or Sublease of all or portion of this Sublease and the
Subleased Premises described in this Sublease.
Notwithstanding anything to the contrary in this Sublease, Sublessee shall
not be responsible for compliance with any laws, codes, ordinances or other
governmental directives where such compliance is not related to Tenant's
specific use and occupancy of the Subleased Premises or triggered by
Sublessee's alterations or improvements to the Subleased Premises.
13. COMPLIANCE WITH NONDISCRIMINATION REGULATIONS:
It is understood that it is illegal for Sublessor to refuse to display or
sublease the Subleased Premises or to assign, surrender or sell the Master
Lease, to any person because of race, color, religion, national origin,
sex, sexual orientation, martial status or disability
- -------------------------------------------------------------------------------
245 LYTTON AVENUE, SUITE 150, PALO ALTO, CA 94301 * (650) 322-2600 Fax (650)
321-0716
- -------------------------------------------------------------------------------
<PAGE> 5
13. TOXIC CONTAMINATION DISCLOSURE:
Notwithstanding anything to the contrary contained in the Master Lease as
incorporated herein (including, without limitation the provisions of
Section 50). Sublessor shall have no obligation to "clean up," monitor,
abate or to comply with any law or Environmental Requirements regarding, or
to reimburse, release, indemnify, or defend Sublessor with respect to any
toxic or Hazardous Materials which now or hereafter become regulated by any
governmental authority or agency thereof and which Sublessee did not store,
dispose of, or transport in, use, or cause to be on the Premises or Project
in violation of any Hazardous Materials laws or Environmental Requirements.
Sublessor and Sublessee each acknowledge that they have been advised that
numerous federal, state, and/or local laws, ordinances and regulations
(Laws) affect the existence and removal, storage, disposal, leakage of
and contamination by materials designated as hazardous or toxic (Toxics).
Many materials , some utilized in everyday business activities and
property maintenance, are designated as hazardous or toxic.
Some of the Laws require that Toxics be removed or cleaned up by
landowners, future landowners or former landowners without regard to
whether the party required to pay for "clean up" caused the contamination,
owned the property at the time the contamination occurred or even knew
about the contamination. Some items, such as asbestos or PCBs, which were
legal when installed, now are classified as Toxics and are subject to
removal requirements. Civil lawsuits for damages resulting from Toxics
may be filed by third parties in certain circumstances.
Sublessor and Sublessee each acknowledge that Broker has no specific
expertise with respect to environmental assessment or physical condition
of the Subleased Premises, including, but not limited to, matters relating
to: (i) problems which may be posed by the presence or disposal of
hazardous or toxic substances on or from the Subleased Premises, (ii)
problems which may be posed by the Subleased Premises being within the
Special Studies Zone as designated under the Alquist-Priole Special
Studies Zone Act (Earthquake Zones), Section 2621 - 2630, inclusive of
California Public Resources Code, and (iii) problems which may be posed by
the Subleased Premises being within a HUD Flood Zone as set forth in the
U.S. Department of Housing and Urban Development "Special Flood Zone Area
Maps", as applicable.
Sublessor and Sublessee each acknowledge that Broker has not made an
independent investigation or determination of the physical or environmental
condition of the Subleased Premises, including, but not limited to, the
existence or nonexistence of any underground tanks, sumps, piping, toxic
or hazardous substances on the Subleased Premises. Sublessee agrees that
it will rely solely upon its own investigation and/or the investigation
of professional retained by it or Sublessor, and neither Sublessor nor
Sublessee shall rely upon
<PAGE> 6
Broker to determine the physical and environmental condition of the
Sublease Premise or to determine whether, to what extent or in what
manner, such condition must disclosed to potential sublessees, assigned,
purchasers or other interested parties.
14. RENT ABATEMENT AND DAMAGES TO PERSONAL PROPERTY:
In the event Sublessor, pursuant to the terms of the Master Lease, is
entitled to and receives rent abatement, then to the extent such rent
abatement affects the Subleased Premises. Sublessee shall be entitled to
rent abatement in an amount that the net rentable area of the Subleased
premises bears to the total net rentable area of the Master Lease, and
only to the extent any such abatement applies in the Sublease Term. In
addition, any amounts paid or credited to Sublessor under the terms of
the Master Lease for damage to personal property shall be credited to
Sublessee, subject to the same limitations set forth above.
15. OPTIONS TO RENEW:
Subordinate to Sublessor needing the Premises, Sublessee shall have a six
(6) month option to renew their Sublease, under the same terms and
conditions except rent which shall be $3.85/sq. foot per month Full
Service. Sublessee shall give Sublessor three (3) months written notice
prior to the end of the term, of their desire to renew. Sublessor shall
then have fifteen (15) days to notify Sublessee if Sublessor will need
the Premises.
16. SIGNAGE:
Sublessor shall grant Sublessee, at Sublessee's sole cost, suite door,
signage.
17. FULL SERVICES:
Notwithstanding anything to the contrary in this Sublease, the Rent is
herein described shall be "full-service" rent inclusive of taxes, common
area charges, water, gas, electricity, HVAC maintenance and other
utilities and Sublessee shall not have any liability for, and there shall
be no pass-through of any charges relating to Sublessor's obligations
under the Master Lease.
18. OPERATING SYSTEMS:
Upon commencement of the Sublease, all operating systems, including
electrical, plumbing, HVAC and roof will be in good condition and repair.
19. TENANT IMPROVEMENTS:
Sublessee shall take possession of the Premises in an "AS IS" condition,
with the exception the space will be in a broom clean condition.
<PAGE> 7
[LOGO]
================================================================================
S U B L E A S E
================================================================================
Sublessor: SOUTHWALL TECHNOLOGIES
By: /s/ BILL R. FINLEY Date: 1 Nov. '99
--------------------------------- -------------------
Bill Finley, Vice President, CFO
Sublessee: MEDIBUY, INC., a Delaware Corporation
By: /s/ DENNIS J. MURPHY Date: 10-29-99
--------------------------------- -------------------
Dennis J. Murphy, CEO
NOTICE TO SUBLESSOR AND SUBLESSEE: CORNISH & CAREY COMMERCIAL, IS NOT
AUTHORIZED TO GIVE LEGAL OR TAX ADVICE; NOTHING CONTAINED IN THIS SUBLEASE OR
ANY DISCUSSIONS BETWEEN CORNISH & CAREY COMMERCIAL AND SUBLESSOR AND SUBLESSEE
SHALL BE DEEMED TO BE A REPRESENTATION OR RECOMMENDATION BY CORNISH & CAREY
COMMERCIAL, OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL EFFECT OR TAX
CONSEQUENCES OF THIS DOCUMENT OR ANY TRANSACTION RELATING THERETO. ALL PARTIES
ARE ENCOURAGED TO CONSULT WITH THEIR INDEPENDENT FINANCIAL CONSULTANTS AND/OR
ATTORNEYS REGARDING THE TRANSACTION CONTEMPLATED BY THIS PROPOSAL.
Exhibit "A:" Master Lease
Exhibit "B" Premises
- --------------------------------------------------------------------------------
245 LYTTON AVENUE, SUITE 130. PALO ALTO, CA 94301 --
(650) 332-2800 FAX (830) 321-0719
- --------------------------------------------------------------------------------
<PAGE> 8
EXHIBIT B
[SECOND FLOOR DIAGRAM]
<PAGE> 9
STANDARD INDUSTRIAL LEASE
BY AND BETWEEN
C & J DEVELOPMENT CO.,
AS LANDLORD
AND
SOUTHWALL TECHNOLOGIES, INC.
AS TENANT
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM
<S> <C>
1. USE
2. TERM
3. POSSESSION
4. MONTHLY RENT
5. ADJUSTMENT OF BASIC RENT
6. RESTRICTION ON USE
7. COMPLIANCE WITH LAWS
8. ALTERATIONS
9. REPAIR AND MAINTENANCE
10. LIENS
11. INSURANCE
12. UTILITIES AND SERVICE
13. TAXES AND OTHER CHARGES
14. ENTRY BY LANDLORD
15. COMMON AREA; PARKING
16. COMMON AREA CHARGES
17. DAMAGE BY FIRE; CASUALTY
18. INDEMNIFICATION
19. ASSIGNMENT AND SUBLETTING
20. DEFAULT
21. LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
22. EMINENT DOMAIN
23. NOTICE AND COVENANT TO SURRENDER
24. TENANT'S QUITCLAIM
25. HOLDING OVER
26. SUBORDINATION
27. CERTIFICATE OF ESTOPPEL
28. SALE BY LANDLORD
29. ATTORNMENT TO LENDER OR THIRD PARTY
30. DEFAULT BY LANDLORD
31. CONSTRUCTION CHANGES
32. MEASUREMENT OF PREMISES
33. ATTORNEY FEES
34. SURRENDER
35. WAIVER
36. EASEMENTS; AIRSPACE RIGHTS
37. RULES AND REGULATIONS
38. NOTICES
39. NAME
40. GOVERNING LAW; SEVERABILITY
41. DEFINITIONS
42. TIME
43. EXAMINATION OF LEASE
44. INTEREST ON PAST DUE OBLIGATIONS; LATE CHARGE
45. ENTIRE AGREEMENT
46. CORPORATE AUTHORITY
47. RECORDING
48. REAL ESTATE BROKERS
49. EXHIBITS AND ATTACHMENTS
50. ENVIRONMENTAL MATTERS
51. SIGNAGE
52. SUBMISSION OF LEASE
53. ADDITIONAL RENT
54. PREMISES TAKEN "AS IS"
55. CAPITAL EXPENDITURES
</TABLE>
<PAGE> 11
LEASE
THIS LEASE is made this _________ day of October, 1999, by and between C&J
Development Co., a California limited partnership, ("Landlord") and Southwall
Technologies, Inc. (formerly The Southwall Corporation), a Delaware corporation
("Tenant").
W I T N E S S E T H
Landlord leases to Tenant and Tenant leases from Landlord those certain
premises outlined in red on Exhibit A (the "Premises") commonly known as 1029
Corporation Way, Palo Alto, California, which Landlord and Tenant hereby agree
consists of approximately nineteen thousand seven hundred and eighty-two
(19,782) square feet in 1029 Corporation Way, Palo Alto, California (the
"Project"). As used herein the term Project shall mean and include all of the
land described in Exhibit B and all the buildings, improvements, fixtures and
equipment now or hereafter situated on said land.
Tenant covenants, as a material part of the consideration of this lease,
to perform and observe each and all the terms, covenants and conditions set
forth below, and this lease is made upon the condition of such performance and
observance.
1. USE
Subject to the restrictions contained in paragraph 6 hereof, Tenant
shall use the Premises for marketing, sales, research and development, general
office and administrative uses and shall not use or permit the Premises to be
used for any other purpose.
2. TERM
(a) The term shall be for three (3) years (unless sooner terminated as
hereinafter provided) and, subject to paragraph 3, shall commence on January 1,
2000 and end on December 31, 2002.
3. POSSESSION
(a) If Landlord for any reason cannot deliver possession of the
Premises to Tenant by the date of commencement set forth in paragraph 2, this
lease shall not be void or voidable, Landlord shall not be liable to Tenant for
any loss or damage on account thereof and Tenant shall not be liable for rent
until Landlord delivers possession of the Premises. If the term commences on a
date other than the date specified in paragraph 2 above, then the parties shall
immediately execute an amendment to this lease stating the actual date of
commencement and the revised expiration date. The expiration date of the term
shall be extended by the same number of days that Tenant's possession of the
Premises was delayed from that set forth in paragraph 2.
(b) Tenant's inability or failure to take possession of the Premises
when delivery is tendered by Landlord shall not delay the commencement of the
term of this lease or Tenant's obligation to pay rent. Tenant acknowledges that
Landlord shall incur significant expenses upon the execution of this lease,
even if Tenant never takes possession of the Premises, including without
limitation brokerage commissions and fees and legal and other professional
fees. Tenant acknowledges that all of said expenses shall be included in
measuring Landlord's damages should Tenant breach the terms of this lease.
4. MONTHLY RENT
(a) Basic Rent. Tenant shall pay to Landlord as basic rent for the
Premises, in advance and subject to adjustment as provided in paragraph 5, the
sum of Fifty Thousand and Four Hundred and Forty-Five and 10/100 Dollars
($50,444.10) on or before the first day of the first full calendar month of the
term and on or before the first day of each and every successive calendar
month. Basic rent for any partial month shall be payable in advance and shall
be prorated at the rate of 1/30th of the monthly basic rent per day.
(b) Common Area Charges. In addition to the above basic rent, and as
additional rent, Tenant shall pay to Landlord, subject to adjustments and
reconciliation as provided in paragraph 16 of this lease, the sum of Three
Thousand Seven Hundred and Five and 00/100 Dollars (3,705.00) on or before the
first day of the first full calendar month of the term and on the first day of
each and every succeeding calendar month, said sum representing Tenant's
estimated payment of its percentage share of common area charges as provided
for in paragraph 16 of this lease. Payment of common area charges for any
partial month shall be payable in advance and shall be prorated at the rate of
1/30th of the monthly payment of common area charges per day.
(c) Manner and Place of Payment. All payments of basic rent and
common area charges shall be paid to Landlord, without deduction or offset, in
lawful money of the United States of
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America, at the office of Landlord at 360 S. San Antonio Road, Suite 14, Los
Altos, California 94022 or to such other person or place as Landlord may from
time to time designate in writing.
(d) Last Month's Rent. Concurrently with Tenant's execution of this
lease, Tenant shall deposit with Landlord, the sum of Twenty-Two Thousand Seven
Hundred and Forty-Nine and 30/100 Dollars ($22,749.30), to be applied against
the basic rent and common area charges for the last lease month of the term.
(e) Security Deposit. Concurrently with Tenant's execution of this
lease, Tenant shall deposit with Landlord the sum of Twenty-Two Thousand Seven
Hundred and Forty-Nine and 30/100 Dollars ($22,749.30), which sum shall be held
by Landlord as a security deposit for the faithful performance by Tenant of all
of the terms, covenants and conditions of this lease to be kept and performed by
Tenant. If Tenant defaults with respect to any provision of this lease,
including but not limited to, the provisions relating to the payment of basic
rent and common area charges, Landlord may (but shall not be required to) use,
apply, or retain all or any part of this security deposit for the payment of any
amount which Landlord may spend by reason of Tenant's default or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
default. If any portion of said deposit is so used, Tenant shall, within ten
(10) days after written demand therefor, deposit cash with Landlord in the
amount sufficient to restore the security deposit to its original amount;
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 is
not in default at the expiration or termination of this lease, the security
deposit or any balance thereof shall be returned to Tenant after Tenant has
vacated the Premises. In the event of termination of Landlord's interest in this
lease, Landlord shall transfer said deposit to Landlord's successor in interest,
and Tenant agrees that Landlord shall thereupon be released from liability for
the return of such deposit or any accounting therefor.
5. ADJUSTMENT OF BASIC RENT
The basic rent provided for in paragraph 4(a) shall be adjusted
periodically and the monthly basic rent for each period shall be as set forth
below:
Lease Months 1-12 (1/1/00-12/31/00) $50,444.10 per month
Lease Months 1-12 (1/1/01-12/31/01) $51,957.42 per month
Lease Months 1-12 (1/1/02-12/31/02) $53,516.15 per month
6. RESTRICTION ON USE
Tenant shall not do or permit to be done in or about the Premises or
the Project, nor bring or keep or permit to be brought or kept in or about the
Premises or Project, anything which is prohibited by or will in any way increase
the existing rate of, or otherwise affect, fire or any other insurance covering
the Project or any part thereof, or any of its contents, or will cause a
cancellation of any insurance covering the Project or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in or about
the Premises or the Project which will constitute waste or which will in any way
obstruct or interfere with the rights of other tenants, business invitees or
occupants of the Project or injure or annoy them, or use or allow the Premises
to be used for any unlawful purpose, nor shall Tenant cause, maintain or permit
any nuisance in or about the Premises or the Project. No loudspeaker or other
device, system or apparatus which can be heard outside the Premises shall be
used in or at the Premises without the prior written consent of Landlord. Tenant
shall not use the Premises for the preparation, or mixing of anything that might
emit any objectionable odor, noise or light into the adjoining premises or
Common Area. Tenant shall not do anything on the Premises that will cause damage
to the Project and Tenant shall not overload the floor capacity of the Premises
or the Project. No machinery, apparatus or other appliance shall be used or
operated in or on the Premises that will in any manner injure, vibrate or shake
the Premises. Landlord shall be the sole judge, of whether such odor, noise,
light or vibration is such as to violate the provisions of this paragraph. No
waste materials or refuse shall be dumped upon or permitted to remain upon any
part of the Premises or the Project except in trash containers placed inside
exterior enclosures designated for that purpose by Landlord, or where otherwise
designated by Landlord; and no toxic or hazardous materials shall be disposed of
through the plumbing or sewage system. No materials, supplies, equipment,
finished products or semi-finished products, raw materials or articles of any
nature shall be stored or permitted to remain outside of the building proper. No
retail sales shall be made on the Premises.
7. COMPLIANCE WITH LAWS
Tenant shall, in connection with its use and occupation of the
Premises, at its sole cost and expense, promptly observe and comply with (i) all
laws, statutes, ordinances and governmental rules, regulations and requirements
now or hereafter in effect, (ii) with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted and (iii) with
any direction or occupancy certificate issued pursuant to law by any public
authority; provided, however, that no such failure shall be deemed a breach of
these provisions if Tenant, immediately upon notification,
<PAGE> 13
commences to remedy or rectify said failure. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against Tenant
(whether or not Landlord is a party thereto) that Tenant has violated any such
law, statute, ordinance or governmental rule, regulation, requirement,
direction or provision, shall be conclusive of that fact as between Landlord
and Tenant. This lease shall remain in full force and effect notwithstanding
any loss of use or other effect on Tenant's enjoyment of the Premises by reason
of any governmental laws, statutes, ordinances, rules, regulations and
requirements now or hereafter in effect.
Landlord represents that the project was constructed in accordance with
applicable laws, statutes, ordinances and/or governmental rules, regulations or
requirements in effect as of the date of construction of the Project, and that
the improvements to be constructed in accordance with Exhibit C of the original
lease between Landlord and Tenant dated October 21, 1983 were constructed in
accordance with applicable laws, statutes, ordinances and/or governmental
rules, regulations or requirements in effect as of the date of construction of
such improvements.
Landlord and Tenant hereby acknowledge that the Americans with
Disabilities Act and Title 24 of the Code of California Regulations may affect
Tenant's use and occupancy of the Premises and require Tenant to modify or
alter the design, layout or other physical elements of the interior of the
Premises or provide auxiliary aids and services in connection with its business
operations. Tenant shall, at Tenant's sole cost and expense, comply in all
respects with the requirements of the Americans with Disabilities Act and Title
24 of the Code of California Regulations as it affects Tenant's use and
occupancy of the Premises throughout the term of the lease, as may be extended,
and Tenant acknowledges and agrees that, notwithstanding any modifications to
the Common Area which may be made by Landlord in order to conform such areas
with the requirements of the Americans with Disabilities Act and Title 24 of
the Code of California Regulations, Landlord makes no representations or
warranties regarding the compliance of the Premises or the Project with the
Americans with Disabilities Act and Title 24 of the Code of California
Regulations, nor shall Landlord have any obligations or liabilities to Tenant
to construct any modifications or alterations to the interior of the Premises
in order to comply with the Americans with Disabilities Act and Title 24 of the
Code of California Regulations.
8. ALTERATIONS
Tenant shall not make or suffer to be made any alteration, addition
or improvement to or of the Premises or any part thereof (collectively referred
to herein as "alterations") without (i) the prior written consent of Landlord
(which consent shall not be unreasonably withheld and Landlord further agrees
that Landlord shall not raise the basic rent as of condition of such consent),
(ii) a valid building permit issued by the appropriate governmental authority
and (iii) otherwise complying with all applicable laws, regulations and
requirements of governmental agencies having jurisdiction with the rules,
regulations and requirements of any board of fire underwriters or similar body.
Any alteration made by Tenant (excluding moveable furniture and trade fixtures
not attached to the Premises) shall at once become a part of the Premises and
belong to Landlord. Without limiting the foregoing, all heating, lighting,
electrical (including all wiring, conduit, outlets, drops, buss ducts, main and
subpanels), air conditioning, partitioning, drapery and carpet installations
made by Tenant, regardless of how attached to the Premises, together with all
other alterations that have become an integral part of the Project in which the
Premises are a part, shall be and become part of the Premises and belong to
Landlord upon installation and shall not be deemed traded fixtures, and shall
remain upon and be surrendered with the Premises at the termination of the
lease.
If Landlord consents to the making of any alteration by Tenant, the same
shall be made by Tenant at its sole risk, cost and expense and only after
Landlord's written approval of any contractor or person selected by Tenant for
that purpose (provided that Landlord waives the right to approve such
contractor or person if the same is a duly licensed contractor and a valid
building permit is issued by the appropriate governmental authority), and the
same shall be made at such time and in such manner as Landlord may from time to
time designate. Tenant shall, if required by Landlord, secure at Tenant's cost
completion and lien indemnity bond for such work. Upon the expiration or sooner
termination of the term, Landlord may, at its sole option, require Tenant, at
Tenant's sole cost and expense, to promptly both remove any such alteration
made by Tenant and designated by Landlord to be removed and repair any damage
to the Premises caused by such removal. Any moveable furniture and equipment or
trade fixtures remaining on the Premises at the expiration or other termination
of the term shall become the property of the Landlord unless promptly removed
by Tenant.
If during the term, and subject to paragraph 7 above, any alteration,
addition or change of the Premises or the Project is required by law,
regulation, ordinance or order of any public or quasi-public authority, Tenant,
at its sole cost and expense, shall promptly make the same. If during the term
any alterations, additions or changes to the Common Area or to the Project in
which the Premises is located is required by law, regulations, ordinance or
order of any public or quasi-public authority, and it is impractical in
Landlord's judgment for the affected tenants to individually make such
alterations, additions or changes, Landlord shall make such alterations,
additions or changes and the cost thereof shall be a common area charge and
Tenant shall pay its percentage share of such cost to Landlord as provided in
paragraph 16.
<PAGE> 14
9. REPAIR AND MAINTENANCE
By entry hereunder, Tenant accepts the Premises as being in good and
sanitary order, condition and repair (excepting only "punchlist items"). Except
as expressly provided below, Tenant shall at its sole cost keep and maintain the
entire Premises and every part thereof including, without limitation, the
windows, window frames, plate glass, glazing, elevators within the Premises,
truck doors, doors and all door hardware, the interior walls and partitions,
lighting and the electrical, mechanical, and plumbing systems. Tenant shall also
repair and maintain the heating and air conditioning systems (unless Landlord
has elected to keep and maintain the heating and air conditioning systems as
provided below) which shall include, without limitation, a periodic maintenance
agreement with a reputable and licensed heating and air conditioning service
company. If Tenant's use of the heating and air conditioning systems is limited
to normal business hours (8:00 a.m. to 6:00 p.m.), such agreement shall provide
for service at least as often as every 60 days; if Tenant's use of the heating
or air conditioning systems extends beyond such normal business hours this
service shall be as often as may be required by landlord and in any event such
service shall meet all warranty enforcement requirements of such equipment and
comply with all manufacturer recommended maintenance. Landlord may elect, at its
option, to keep and maintain the heating and air conditioning systems of the
premises and in such event, Tenant shall pay to Landlord upon demand the full
cost of such maintenance.
Subject to the provisions of paragraph 17, Landlord shall keep and
reasonably maintain the roof, structural elements, and exterior walls of the
buildings constituting the Project and Common Area in reasonably good order and
repair. Tenant waives all rights under and benefits of California Civil Code
Sections 1932(1), 1941, and 1942 and under any similar law, statute or ordinance
now or hereafter in effect. The cost of the repairs and maintenance which are
the obligation of Landlord hereunder, including without limitation, maintenance
contracts and supplies, materials, equipment and tools used in such repairs and
maintenance shall be obtained at competitive prices for major repairs and shall
be a common area charge and Tenant shall pay its percentage share of such costs
to Landlord as provided in paragraph 16; provided, however, that if any repairs
or maintenance is required because of an act of omission of Tenant, or its
agents, employees or invitees, Tenant shall pay to Landlord upon demand the full
cost of such repairs or maintenance.
As used herein, "punchlist items" shall mean minor repairs to painting,
carpets, walls and other interior improvements to the Premises as reasonably
determined by Tenant and disclosed to Landlord within thirty (30) days of the
date Tenant takes possession of the Premises. Landlord shall repair all
punchlist items subject to the terms of paragraph 16, below. Landlord shall have
no obligation to repair items that are not disclosed to Landlord by Tenant in
writing within thirty (30) days of the date possession of the Premises is
delivered to Tenant.
10. LIENS
Tenant shall keep the Premises and the Project free from any liens arising
out of any work performed, materials furnished or obligations incurred by
Tenant, its agents, employees or contractors. Upon Tenant's receipt of a
preliminary twenty (20) day notice filed by a claimant pursuant to California
Civil Code Section 3097, Tenant shall immediately provide Landlord with a copy
of such notice. Should any such lien be filed against the Project, Tenant shall
give immediate notice of such lien to Landlord. In the event that Tenant shall
not, within ten (10) days following the imposition of such lien, cause the same
to be released of record, Landlord shall have, in addition to all other remedies
provided herein and by law, the right, but no obligation, to cause the same to
be released by such means as it shall deem proper, including payment of the
claim giving rise to such lien. All sums paid by Landlord for such purpose, and
all expenses (including attorneys' fees) incurred by it in connection therewith,
shall be payable to Landlord by Tenant on demand with interest at the rate of
ten percent (10%) per annum or the maximum rate permitted by law, whichever is
less. Landlord shall have the right at all times to post and, keep posted on the
Premises any notices permitted or required by law, or which Landlord shall deem
proper for the protection of Landlord, the Premises and the Project and any
other party having an interest therein, from mechanics' and material men's liens
and like liens. Tenant shall give Landlord at least fifteen (15) days prior
notice of the date of commencement of any construction on the Premises in order
to permit the posting of such notices. In the event Tenant is required to post
an improvement bond with a public agency in connection with any work performed
by Tenant on or to the Premises, Tenant shall include Landlord as an additional
obligee.
11. INSURANCE
Tenant, at its sole cost and expense, shall keep in force during the term
(i) commercial general liability and property damage insurance with a combined
single limit of at least $5,000,000 per occurrence insuring against personal or
bodily injury to or death of persons occurring in, on or about the Premises or
Project and any and all liability of the insured with respect to, the Premises
or arising out of Tenant's maintenance, use of occupancy of the Premises and all
areas appurtenant thereto, (ii) direct physical loss-special insurance covering
the leasehold improvements in the Premises and all of Tenant's equipment, trade
fixtures, appliances, furniture, furnishings, and personal property from time to
time located in, on or about the Premises, with coverage in the amount of the
full replacement cost thereof, (iii) Worker's Compensation Insurance as required
by law, together with employer's liability coverage with a limit of not less
than $1,000,000 for bodily injury for each accident and for bodily injury by
disease for each employee. Tenant's commercial general liability and property
damage insurance
<PAGE> 15
and Tenant's Workers Compensation Insurance shall be endorsed to provide that
said insurance shall not be canceled or reduced except upon at least thirty
(30) days prior written notice to Landlord and (iv) full replacement cost plate
glass insurance. Further, Tenant's commercial general liability and property
damage insurance shall be primary and shall name Landlord and McCandless Simons
Company, Inc., and their respective partners, officers, directors and employees
and such other persons or entities as directed from time to time by Landlord as
additional insured for all liability using ISO Bureau Form CG20111185 (or a
successor form); shall contain a severability of interest clause and a
cross-liability endorsement; shall be endorsed to provide that the limits and
aggregates apply per location using ISO Bureau Form CG25041185; and shall be
issued by an insurance company admitted to transact business in the State of
California and rated A+VIII or better in Best's Insurance Reports (or successor
report). The deductibles for all insurance required to be maintained by Tenant
hereunder shall be no more than $5,000 per occurrence. The commercial general
liability insurance carried by Tenant shall specifically insure the performance
by Tenant of the indemnification provisions set forth in paragraph 18 of this
lease provided, however, nothing contained in this paragraph 11 shall be
construed to limit the liability of Tenant under the indemnification provisions
set forth in said paragraph 18. If Landlord or any of the additional insured
named on any of Tenant's insurance, have other insurance which is applicable to
the covered loss on a contributing, excess or contingent basis, the amount of
the Tenant's insurance company's liability under the policy of insurance
maintained by Tenant shall not be reduced by the existence of such other
insurance. Any insurance carried by Landlord or any of the additional insured
named on Tenant's insurance policies shall be excess and non-contributing with
the insurance so provided by Tenant.
Tenant shall, prior to the commencement of the term, provide Landlord
with a completed Certificate of Insurance, using a form acceptable in
Landlord's reasonable judgment, attaching thereto copies of all endorsements
required to be provided by Tenant under this lease. Tenant agrees to increase
the coverage or otherwise comply with changes in connection with said
commercial general liability, property damage, direct physical loss and
Worker's Compensation Insurance as Landlord or Landlord's lender may from time
to time require.
Landlord shall obtain and keep in force a policy or policies of
insurance covering loss or damage to the Premises and Project, in the amount of
the full replacement value thereof, providing protection against those perils
included within the classification of "all risk" insurance, with increased cost
of reconstruction and contingent liability (including demolition), plus a
policy of rental income insurance in the amount of one hundred percent (100%)
of twelve (12) months' rent (including sums paid as additional rent) and such
other insurance as Landlord or Landlord's lender may from time to time require.
Landlord may, but shall not be obligated to, also obtain flood and/or
earthquake insurance. Landlord shall have no liability to Tenant if Landlord
elects not to obtain flood and/or earthquake insurance. The cost of all such
insurance purchased by Landlord, plus any charges for deferred payment of
premiums and the amount of any deductible incurred upon any covered loss within
the Project, shall be common area charges and Tenant shall pay to Landlord its
percentage share of such costs as provided in paragraph 16.
Landlord and Tenant hereby mutually waive any and all rights of
recovery against one another for real or personal property loss or damage
occurring to the Premises or the Project, or any part thereof, or to any
personal property therein, from perils insured against under fire and extended
insurance and any other property insurance policies existing for the benefit of
the respective parties so long as such insurance permits waiver of liability
and contains a waiver of subrogation without additional premiums.
If Tenant does not take out and maintain insurance as required
pursuant to this paragraph 11, Landlord may, but shall not be obligated to,
take out the necessary insurance and pay the premium therefor, and Tenant shall
repay to Landlord promptly on demand, as additional rent, the amount so paid.
In addition, Landlord may recover from Tenant and Tenant agrees to pay, as
additional rent, any and all reasonable expense (including attorney fees) and
damages which Landlord may sustain by reason of the failure of Tenant to obtain
and maintain such insurance, it being expressly declared that the expenses and
damages of Landlord shall not be limited to the amount of the premiums thereon.
12. UTILITIES AND SERVICE
Tenant shall pay for all water, gas, light, heat, power, electricity,
telephone, trash pickup, sewer charges and all other services supplied to or
consumed on the Premises. In the event that any service is not separately
metered or billed to the Premises, the cost of such utility service or other
service shall be a common area charge and Tenant shall pay its percentage share
of such cost to Landlord as provided in paragraph 16. In addition, the cost of
all utilities and services furnished by Landlord to the Common Area shall be a
common area charge and Tenant shall pay its percentage share of such cost to
Landlord as provided in paragraph 16.
If Tenant's use of any such utility or service is materially in
excess of the average furnished to the other tenants of the Project, and such
utility or service is not separately metered, then Tenant shall pay to Landlord
upon demand, as additional rent, the full cost of such excess use, or Landlord
may cause such utility or service to be separately metered, in which case
Tenant shall pay the full cost of such utility or service and reimburse
Landlord upon demand for the cost of installing the separate meter.
<PAGE> 16
Landlord shall not be liable for, and Tenant shall not be entitled to
any abatement or reduction of rent by reason of, the failure of any person or
entity to furnish any of the foregoing services when such failure is caused by
accident, breakage, repairs, strikes, lockouts or other labor disturbances or
labor disputes of any character, governmental moratoriums, regulations or other
governmental actions, or by any other cause, similar or dissimilar, beyond the
reasonable control of Landlord. In addition, Tenant shall not be relieved from
the performance of an covenant or agreement in this lease because of any such
failure, and no eviction of Tenant shall result from such failure.
13. TAXES AND OTHER CHARGES
All real estate taxes and assessments and other taxes, fees and
charges of every kind or nature, foreseen or unforeseen, which are levied,
assessed or imposed upon Landlord and/or against the Premises, building, Common
Area or Project, or any part thereof by any federal, state, county, regional,
municipal or other governmental or quasi-public authority, together with any
increases therein for any reason, shall be a common area charge and Tenant shall
pay its percentage share of such costs to Landlord as provided in paragraph 16.
By way of illustration and not limitation, "other taxes, fees and charges" as
used herein include any and all taxes payable by Landlord (other than state and
federal personal or corporate income taxes measured by the net income of
Landlord from all sources, and premium taxes), whether or not now customary or
within the contemplation of the parties hereto, (i) upon, allocable to, or
measured by the rent payable hereunder, including, without limitation, any gross
income or excise tax levied by the local, state or federal government with
respect to the receipt of such rent, (ii) upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any part thereof, (iii) upon or
measured by the value of Tenant's personal property or leasehold improvements
located in the Premises, (iv) upon this transaction or any document to which
Tenant is a party creating or transferring an interest or estate in the
Premises, (v) upon or with respect to vehicles, parking or the number of persons
employed in or about the Project, and (vi) any tax, license, franchise fee or
other imposition upon Landlord which is otherwise measured by or based in whole
or in part upon the Project or any portion thereof. If Landlord contests any
such tax, fee or charge, the cost and expense incurred by Landlord thereby
(including, but not limited to, costs of attorneys and experts) shall also be
common area charges and Tenant shall pay its percentage share of such costs to
Landlord as provided in paragraph 16. In the event the Premises and any
improvements installed therein by Tenant or Landlord are valued by the assessor
disproportionately higher than those of other tenants on the building or Project
or in the event alterations or improvements are made to the Premises, Tenant's
percentage share of such taxes, assessments, fees and/or charges shall be
readjusted upward accordingly and Tenant agrees to pay such readjusted share.
Such determination shall be made by Landlord from the respective valuations
assigned in the assessor's work sheet or such other information as may be
reasonably available and Landlord's determination thereof shall be conclusive.
Tenant agrees to pay, before delinquency, any and all taxes levied or
assessed during the term hereof upon Tenant's equipment, furniture, fixtures and
other personal property located in the Premises, including carpeting and other
property installed by Tenant notwithstanding that such carpeting or other
property has become a part of the Premises. If any of Tenant's personal property
shall be assessed with the Project, Tenant shall pay to Landlord, as additional
rent, the amount attributable to Tenant's personal property within ten (10) days
after receipt of a written statement from Landlord setting forth the amount of
such taxes, assessments and public charges attributable to Tenant's personal
property.
14. ENTRY BY LANDLORD
Landlord reserves, and shall at all reasonable times have, the right
to enter the Premises (i) to inspect the Premises, (ii) to supply services to be
provided by Landlord hereunder, (iii) to show the Premises to prospective
purchasers, lenders or tenants and to put 'for sale' or 'for lease' signs
thereon, (iv) to post notices required or allowed by this lease or by law, (v)
to alter, improve or repair the Premises and any portion of the Project, and
(vi) to erect scaffolding and other necessary structures in or through the
Premises or the Project where reasonably required by the character of the work
to be performed. Landlord shall not be liable in any manner for any
inconvenience, disturbance, loss of business, nuisance or other damage arising
from Landlord's entry and acts pursuant to this paragraph and Tenant shall not
be entitled to an abatement or reduction of rent if Landlord exercises any
rights presented in this paragraph. For each of the foregoing purposes, Landlord
shall at all times have and retain a key with which to unlock all of the doors
in, on and about the Premises (excluding Tenant's vaults, safes and similar
areas designated in writing by Tenant in advance), and Landlord shall have the
right to use any and all means which Landlord may deem proper to open said doors
in an emergency in order to obtain entry to the Premises. Any entry by Landlord
to the Premises pursuant to this paragraph shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into or a detainer of the
Premises or an eviction, actual or constructive, of Tenant from the premises or
any portion thereof. Notwithstanding the foregoing, and except in the case of
emergency, Landlord shall give Tenant at least twenty-four (24) hours prior
notice of its intent to enter the Premises.
<PAGE> 17
15. COMMON AREA; PARKING
Subject to the terms and conditions of this lease and such rules and
regulations as Landlord may from time to time prescribe and so long as such
rules and regulations do not conflict with the terms and conditions of this
lease, Tenant and Tenant's employees and invitees shall, in common with other
occupants of the Project, and their respective employees and invitees and others
entitled to the use thereof, have the non-exclusive right to use the access
roads, parking areas and facilities within the Project provided and designated
by Landlord for the general use and convenience of the occupants of the Project
which areas and facilities shall include, but not be limited to, sidewalks,
parking, refuse, landscape and plaza areas, roofs and building exteriors, which
areas and facilities are referred to herein as "Common Area". This right shall
terminate upon the termination of this lease.
Landlord reserves the right from time to time to make changes in the
shape, size, location, amount and extent of the Common Area. Landlord shall also
have the right at any time to change the name, number or designation by which
the Project is commonly known. Landlord further reserves the right to promulgate
such rules and regulations relating to the use of the Common Area, and any part
thereof, as Landlord may deem appropriate for the best interests of the
occupants of the Project. The rules and regulations shall be binding upon Tenant
upon delivery of a copy of them to Tenant and Tenant shall abide by them and
cooperate in their observance. Such rules and regulations may be amended by
Landlord from time to time, with or without advance notice.
Tenant shall have the non-exclusive use of seventy-five (75) parking
spaces in the Common Area as designated from time to time by Landlord. Landlord
reserves the right at its sole option to assign and label parking spaces, but it
is specifically agreed that Landlord is not responsible for policing any such
parking spaces. Tenant shall not at any time park or permit the parking of
Tenant's trucks or other vehicles, or the trucks or other vehicles of others,
adjacent to loading areas so as to interfere in any way with the use of such
areas; nor shall Tenant at any time park or permit the parking of Tenant's
vehicles or trucks, or other vehicles or trucks of Tenant's suppliers or others,
in any portion of the Common Area not designated by Landlord for such use by
Tenant. Tenant shall not park or permit any inoperative vehicle or equipment to
be parked on any portion of the Common Area. Tenant shall not permit, allow or
place any type of circulars or advertisements on vehicles parking in the Common
Area. Tenant shall not use any Common Area, including the space directly
adjacent to the Premises for sales or displays.
Landlord shall operate, manage and maintain the Common Area. The
manner in which the Common Area shall be operated, managed and maintained and
the expenditures for such operation, management and maintenance shall be at the
sole discretion of Landlord. The cost of such maintenance, operation and
management of the Common Area, including but not limited to landscaping, repair
of paving, parking lots and sidewalks, repaving, resurfacing, repairs,
replacements, painting, lighting, cleaning, trash removal, roof replacement and
repair, heating, ventilating and air-conditioning repair and replacement, fire
protection and similar items; non-refundable contributions toward one or more
reserves for replacements other than equipment; rental on equipment; security
and exterminator services and salaries and employee benefits (including union
benefits) of on-site and accounting personnel engaged in such maintenance and
operations management, shall be a common area charge and Tenant shall pay to
Landlord its percentage share of such costs as provided in paragraph 16.
16. COMMON AREA CHARGES
Tenant shall pay to Landlord, as additional rent, an amount equal to
One Hundred percent (100.00%) of the total common area charges as defined below.
Tenant's percentage share of common area charges shall be paid as follows:
Tenant's estimated monthly payment of common area charges payable by
Tenant during the calendar year in which the term commences is set forth in
paragraph 4(b) of this lease. Prior to the commencement of each succeeding
calendar year of the term (or as soon as practicable thereafter), Landlord shall
deliver to Tenant a written estimate of Tenant's monthly payment of common area
charges. Tenant shall pay, as additional rent, on the first day of each month
during the term in accordance with paragraph 4(b) of the lease, its monthly
share of common area charges as estimated by Landlord. Within one hundred twenty
(120) days of the end of each calendar year and of the termination of this lease
(or as soon as practicable thereafter), Landlord shall deliver to Tenant a
statement of actual common area charges incurred for the preceding year. If such
statement shows that Tenant has paid less than its actual percentage then Tenant
shall on demand pay to Landlord the amount of such deficiency. If Tenant fails
to pay such deficiency due within ten (10) days after demand, Tenant shall pay
an additional ten percent (10%) of the amount due as a penalty. If such
statement shows that Tenant has paid more than its actual percentage share then
Landlord shall, at its option, promptly refund such excess to Tenant or credit
the amount thereof to the common area charge next becoming due from Tenant.
Landlord reserves the right to revise any estimate of common area charges if
actual or projected common area charges show an increase or decrease in excess
of 10% from any earlier estimate for the same period. In such event, Landlord
shall deliver the revised estimate to Tenant, together with an explanation of
the reasons therefor, and Tenant shall revise its payments accordingly.
Landlord's and Tenant's obligation with respect to adjustments at the end of the
term or earlier expiration of this lease shall survive such termination or
expiration.
<PAGE> 18
"Common area charges," as used in this lease, shall include, but not
be limited to, (i) all items identified in paragraphs 8, 9, 11, 12, 13 and 15
as being common area charges; (ii) amortization of such capital improvements
having a useful life greater than one year as Landlord may have installed for
the purpose of reducing operating costs and/or to comply with governmental rules
and regulations promulgated after completion of the building (Tenant's share of
any such capital improvement shall equal Tenant's proportionate share of the
fraction of the cost of such capital improvement equal to the remaining term of
the lease over the useful life of such capital improvement); (iii) salaries and
employee benefits (including union benefits) of personnel engaged in the
operation and maintenance of the Project (or the building in which the Premises
are located) and payroll taxes applicable thereto; (iv) supplies, materials,
equipment and tools used or required in connection with the operation and
maintenance of the Project: (v) licenses, permits and inspection fees; (vi) a
reasonable reserve for repairs and replacement of equipment used in the
maintenance and operation of the Project; (vii) all other operating costs
incurred by Landlord in maintaining and operating the Project; and (viii) an
amount equal to five percent (5%) of the actual expenditures for the aggregate
of all other common area charges as compensation for Landlord's accounting and
processing services.
17. DAMAGE BY FIRE; CASUALTY
In the event the Premises are damaged by any casualty which is fully
covered under an insurance policy required to be maintained by Landlord pursuant
to paragraph 11, Landlord shall be entitled to the use of all insurance proceeds
and shall repair such damage as soon as reasonably possible and this lease shall
continue in full force and effect.
In the event the Premises are damaged by any casualty not fully
covered under an insurance policy required to be maintained pursuant to
paragraph 11, Landlord may, at Landlord's option, either (i) repair such damage,
at Landlord's expense, as soon as reasonably possible, in which event this lease
shall continue in full force and effect, or (ii) give written notice to Tenant
within thirty (30) days after the date of the occurrence of such damages of
Landlord's intention to cancel and terminate this lease as of the date of the
occurrence of the damages; provided, however, that if such damage is caused by
an act or omission of Tenant or its agent, servants or employees, then Tenant
shall repair such damage promptly at its sole cost and expense. In the event
Landlord elects to terminate this lease pursuant hereto, Tenant shall have the
right within ten (10) days after receipt of the required notice to notify
Landlord in writing of Tenant's intention to repair such damage at Tenant's
expense, without reimbursement from Landlord, in which event this lease shall
continue in full force and effect and Tenant shall proceed to make such repairs
as soon as reasonably. possible. If Tenant does not give such notice within the
ten (10) day period, this lease shall be canceled and terminated as of the date
of the occurrence of such damage. Under no circumstances shall Landlord be
required to repair any injury or damage to (by fire or other cause), or to make
any restoration or replacement of, any of Tenant's personal property, trade
fixtures or property leased from third parties, whether or not the same is
attached to the Premises.
If the Premises are totally destroyed during the term from any cause
(including any destruction required by any authorized public authority), whether
or not covered by the insurance required under paragraph 11, this lease shall
automatically terminate as of the date of such total destruction; provided,
however, that if the Premises can reasonably and lawfully be repaired or
restored within twelve (12) months of the date of destruction to substantially
the condition existing prior to such destruction and if the proceeds of the
insurance payable to the Landlord by reason of such destruction are sufficient
to pay the cost of such repair or restoration, then the insurance proceeds shall
be so applied, Landlord shall promptly repair and restore the Premises and this
lease shall continue, without interruption, in full force and effect. If the
Premises are totally destroyed during the last twelve (12) months of the term,
either Landlord or Tenant may at either parties' option cancel and terminate
this lease as of the date of occurrence of such damage by giving written notice
to the other of its' election to do so within thirty (30) days after the
occurrence of such damage.
If the Premises are partially or totally destroyed or damaged and
Landlord or Tenant repair them pursuant to this lease, the rent payable
hereunder for the period during which such damage and repair continues shall be
abated only in proportion to the square footage of the Premises rendered
untenantable to Tenant by such damage or destruction. Tenant shall have no claim
against Landlord for any damage, loss or expense suffered by reason of any such
damage, destruction, repair or restoration or Landlord's election under this
paragraph 17 not to repair or restore such damage or destruction. The parties
waive the provisions of California Civil Code sections 1932(2) and 1933(4)
(which provisions permit the termination of a lease upon destruction of the
leased premises), and hereby agree that the provisions of this paragraph 17
shall govern in the event of such destruction.
18. INDEMNIFICATION
Landlord shall not be liable to Tenant and Tenant hereby waives all
claims against Landlord for any injury to or death of any person or damage to or
destruction of property in or about the Premises or the Project (including but
not limited to damage to person or property caused by water leakage of any
character from the roof, walls, ceiling, basement or other portions of the
Project or caused by gas, fire, oil, fumes, electricity, steam or land or
structural movement) by or from any cause whatsoever except the material failure
of Landlord to perform its obligations under this lease where such failure has
persisted for an unreasonable period of time after written notice of such
failure.
<PAGE> 19
Without limiting the foregoing, Landlord shall not be liable to Tenant for any
injury to or death of any person or damages to or destruction of property by
reason of, or arising from, any latent defect in the Premises or Project or the
act or negligence of any other tenant of the Project. Tenant shall immediately
notify Landlord of any defect in the Premises or Project.
Except as to injury to persons or damage to property the principal
cause of which is the material failure by Landlord to observe any of the terms
and conditions of this lease where such failure has persisted for an
unreasonable period of time after written notice of such failure, Tenant shall
hold Landlord harmless from and defend Landlord against any claim, liability,
loss, damage or expense (including attorney fees) arising out of any injury to
or death of any person or damage to or destruction of property occurring in, on
or about the Premises from any cause whatsoever or on account of the use,
condition, occupational safety or occupancy of the Premises. Tenant shall
further hold Landlord harmless from and defend Landlord against any claim,
liability, loss, damage or expense (including reasonable attorney fees) arising
(i) from Tenant's use of the Premises or from the conduct of its business or
from any activity or work done, permitted or suffered by Tenant or its agents or
employees in or about the Premises or Project, (ii) out of the failure of Tenant
to observe or comply with Tenant's obligation to observe and comply with laws or
other requirements as set forth in paragraph 7, (iii) by reason of Tenant's use,
handling, storage, or disposal of toxic or hazardous materials or waste, (iv) by
reason of any labor or service performed for, or materials used by or furnished
to, Tenant or any contractor engaged by Tenant with respect to the Premises, or
(v) from any other act, neglect, fault or omission of Tenant or its agents,
employees or invitees. The provisions of this paragraph 18 shall survive the
expiration or earlier termination of this lease.
19. ASSIGNMENT AND SUBLETTING
Tenant shall not voluntarily assign, encumber or otherwise transfer
its interest in this lease or in the Premises, or sublease all or any part of
the Premises, or allow any other person, concessionaire or entity to occupy or
use all or any part of the Premises, without first obtaining Landlord's written
consent (which consent shall not be unreasonably withheld) and otherwise
complying with the requirements of this paragraph 19. Any assignment,
encumbrance or sublease without Landlord's consent, shall constitute a default.
If Tenant desires to sublet or assign all or any portion of the
Premises, Tenant shall give Landlord written notice thereof, specifying the
projected commencement date of the proposed sublet or assignment (which date
shall be not less than thirty (30) days or more than ninety (90) days after the
date of such notice), the portions of the Premises proposed to be sublet or
assigned, and the identity of the proposed assignee or subtenant. Tenant shall
further provide Landlord with such other information concerning the proposed
assignee or subtenant as requested by Landlord. Any proposed assignee or
subleases must agree to assume and agree to perform all the covenants and
conditions of Tenant under this lease. In the case of any proposed assignment,
or in the case of a proposed sublet of fifty percent (50%) or more of the
Premises at a time when Tenant has not occupied the Premises, or if the proposed
sublet is for fifty percent (50%) or more of the Premises for a sublet term
ending within the last twelve (12) months of the term of this lease, Landlord
shall have the right, exercisable by written notice to be delivered to Tenant
within thirty (30) days of receipt of Tenant's notice, to terminate this lease
effective as of the date specified in Tenant's notice as the proposed
commencement date of the assignment or sublease. If Landlord does not elect to
terminate this lease and if Landlord consents in writing to the proposed
assignment or sublet (regardless of whether Landlord had a termination right),
Tenant shall be free to assign or sublet all or a portion of the Premises
subject to the following conditions: (i) any sublease shall be on the same terms
set forth in the notice given to Landlord; (ii) no sublease shall be valid and
no subtenant shall take possession of the sublet premises until an executed
counterpart of such sublease has been delivered to Landlord; (iii) no subtenant
shall have a further right to sublet; (iv) any sums or other economic
consideration received by Tenant as a result of such assignment or sublet
(except rental or other payments received which are attributable to the
amortization over the term of this lease of the cost of leasehold improvements
constructed for such assignees or subtenant, and brokerage fees) whether
denominated rentals or otherwise, which exceed, in the aggregate, the total sums
which Tenant is obligated to pay Landlord under this lease (prorated to reflect
obligations allocable to that portion of the Premises subject to such sublease),
shall be shared equally between Landlord and Tenant (50%/50%) and (v) no sublet
or assignment shall release Tenant of Tenant's obligation or alter the primary
liability of Tenant to pay the rent and to perform all other obligations to be
performed by Tenant hereunder. Tenant shall pay to Landlord promptly upon demand
as additional rent, Landlord's actual attorneys' fees and other costs incurred
for reviewing, processing or documenting any requested assignment or sublease,
whether or not Landlord's consent is granted.
If Tenant is a partnership, a withdrawal or change, voluntary or
involuntary or by operation of law, of any general partner or the dissolution of
the partnership shall be deemed an assignment of this lease subject to all the
conditions of this paragraph 19. If Tenant is a corporation any dissolution,
merger, consolidation or other reorganization of Tenant or the sale or other
transfer of a controlling percentage of the capital stock of Tenant or the sale
of more than fifty percent (50%) of the value of Tenant's assets shall be an
assignment of this lease subject to all the conditions of this paragraph 19. The
term "controlling percentage" means the ownership of, and the right to vote,
stock possessing more than 50% of the total combined voting power of all classes
of Tenant's capital stock issued, outstanding and entitled to vote. This
paragraph shall not apply if Tenant is a corporation the
<PAGE> 20
stock of which is traded through an exchange.
The acceptance of rent by Landlord from any other person shall not be
deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or sublet shall not be deemed consent to any subsequent assignment or
sublet. In the event of default by any assignee of Tenant or any successor of
Tenant in the performance of any of the terms hereof, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against
such assignee or successor. Landlord may consent to subsequent assignments or
sublets of this lease or amendments or modifications to this lease with
assignees of Tenant, without notifying Tenant, or any successor of Tenant, and
without obtaining its or their consent thereto and such action shall not relieve
Tenant of liability under this lease.
No interest of Tenant in this lease shall be assignable by operation
of law (including, without limitation, the transfer of this lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary
assignment: (i) if Tenant is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors or institutes a proceeding under the
Bankruptcy Act in which Tenant is the bankrupt; or, if Tenant is a partnership
or consists of more than one person or entity, if any partner of the partnership
or other person or entity is or becomes bankrupt or insolvent, or makes an
assignment for the benefit of creditors; (ii) if a writ of attachment or
execution is levied on this lease; or (iii) if, in any proceeding or action to
which Tenant is a party, a receiver is appointed with authority to take
possession of the Premises. An involuntary assignment shall constitute a default
by Tenant and Landlord shall have the right to elect to terminate this lease, in
which case this lease shall not be treated as an asset of Tenant.
Tenant immediately and irrevocably assigns to Landlord, as security
for Tenant's obligations under this lease, all rent from any subletting of all
or a part of the Premises as permitted by this lease, and Landlord, as assignee
and as attorney-in fact for Tenant, or a receiver of Tenant appointed on
Landlord's application may collect such rent and apply it toward Tenant's
obligations under this lease; except that, until the occurrence of an act or
default by Tenant, Tenant shall have the right to collect such rent, subject to
promptly forwarding to Landlord any portion thereof to which Landlord is
entitled pursuant to this paragraph 19.
Notwithstanding the above requirement that Tenant obtain the consent
of Landlord prior to any assignment or sublet, Tenant may, without obtaining the
prior consent of Landlord, assign or sublease the whole or any part of the
Premises to any corporation or other entity which is wholly owned by Tenant or
of which Tenant is a wholly owned subsidiary, or which is wholly owned by either
of the foregoing or which merges with Tenant provided that (i) Tenant shall give
written notice thereof to Landlord in the manner required for other assignments
or subleases by this paragraph 19; (ii) Tenant shall continue to be fully
obligated under this lease; (iii) any such assignee or sublessee shall expressly
assume and agree to perform all of the terms and conditions of this lease to be
performed by Tenant; and (iv) any such assignment of sublet shall be subject to
all other terms and conditions of this paragraph 19 pertaining to assignments
and/or sublets (excepting only the requirement concerning prior written consent
of Landlord).
20. DEFAULT
The occurrence of any of the following shall constitute a default by
Tenant: (i) failure of Tenant to pay any rent or other sum payable hereunder
within five (5) days of when due; (ii) abandonment of the Premises (Tenant's
failure to occupy and conduct business in the Premises for fourteen (14)
consecutive days shall be deemed an abandonment); or (iii) failure of Tenant to
perform any other term, covenant or condition of this lease if the failure to
perform is not cured within thirty (30) days after notice thereof has been given
to Tenant (provided that if such default cannot reasonably be cured within
thirty (30) days, Tenant shall not be in default if Tenant commences to cure
such failure to perform within the thirty (30) day period and diligently and in
good faith continues to cure the failure to perform). The notice referred to in
clause (iii) above shall specify the failure to perform and the applicable lease
provision and shall demand that Tenant perform the provisions of this lease
within the applicable period of time. No notice shall be deemed a forfeiture or
termination of this lease unless Landlord so elects in the notice. No notice
shall be required in the event of abandonment or vacation of the Premises.
In addition to the above, the occurrence of any of the following
events shall also constitute a default by Tenant: (i) Tenant fails to pay its
debts as they become due or admits in writing its inability to pay its debts, or
makes a general assignment for the benefit of creditors (for purposes of
determining whether Tenant is not paying its debts as they become due, a debt
shall be deemed overdue upon the earliest to occur of the following: thirty (30)
days from the date a statement therefor has been rendered; the date on which any
action or proceeding therefor is commenced; or the date on which a formal notice
of default or demand has been sent); (ii) Tenant fails to furnish Landlord a
schedule of Tenant's aged accounts payable within ten (10) days after Landlord's
written request; (iii) any financial statements given to Landlord by Tenant, any
assignee of Tenant, subtenant of Tenant, any guarantor of Tenant, or successor
in interest of Tenant (including, without limitation, any schedule of Tenant's
aged accounts payable) are materially false. At any time during the term of this
lease Landlord, at Landlord's option, shall have the right to receive from
Tenant upon Landlord's request, a current annual balance sheet for Landlord's
review. If the balance sheet shows a negative net worth,
<PAGE> 21
Landlord may terminate this lease by giving Tenant sixty (60) days prior
notice.
In the event of a default by Tenant, then Landlord, in addition to
any other rights and remedies of Landlord at law or in equity, shall have the
right either to terminate Tenant's right to possession of the Premises (and
thereby terminate this lease) or, from time to time and without termination of
this lease, to relet the premises or any part thereof for the account and in the
name of Tenant for such term and on such terms and conditions as Landlord in its
sole discretion may deem advisable, with the right to make alterations and
repairs to the Premises.
Should Landlord elect to keep this lease in full force and effect,
Landlord shall have the right to enforce all of Landlord's rights and remedies
under this lease, including but not limited to the right to recover and to relet
the Premises. If Landlord relets the Premises, then Tenant shall pay to
Landlord, as soon as ascertained, the costs and expenses incurred by Landlord in
such reletting and in making alterations and repairs. Rentals received by
Landlord from such reletting shall be applied (i) to the payment of any
indebtedness due hereunder, other than basic rent and common area charges, from
Tenant to Landlord; (ii) to the payment of the cost of any repairs necessary to
return the Premises to good condition normal wear and tear excepted, including
the cost of alterations and the cost of storing any of Tenant's property left on
the Premises at the time of reletting; and (iii) to the payment of basic rent or
common area charges due and unpaid hereunder. The residue, if any, shall be held
by Landlord and applied in payment of future rent or damages in the event of
termination as the same may become due and payable hereunder and the balance,
if any at the end of the term of this lease, shall be paid to Tenant. Should the
basic rent and common area charges received from time to time from such
reletting during any month be less than that agreed to be paid during that month
by Tenant hereunder, Tenant shall pay such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. No such reletting of the
Premises by Landlord shall be construed as an election on its part to terminate
this lease unless a notice of such intention is given to Tenant or unless the
termination hereof is decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this lease for such previous breach, provided it
has not been cured. Landlord shall have the remedy described in California Civil
Code section 1951.4 (Landlord may continue the lease in effect after Tenant's
breach and abandonment and recover as rent as it becomes due, if Tenant has the
right to sublet or assign, subject only to reasonable limitations).
Should Landlord at any time terminate this lease for any breach, in
addition to any other remedy it may have, it shall have the immediate right of
entry and may remove all persons and property from the Premises and shall have
all the rights and remedies of a landlord provided by California Civil Code
Section 1951.2 or any successor code section. Upon such termination, in addition
to all its other rights and remedies, Landlord shall be entitled to recover from
Tenant all damages it may incur by reason of such breach, including the cost of
recovering the Premises and including (i) the worth at the time of award of the
unpaid rent which had been earned at the time of termination; (ii) the worth at
the time of award of the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; (iii) the
worth at the time of the award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such rental
loss that Tenant proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under this lease or which in the
ordinary course of events would be likely to result therefrom. The "worth at the
time of award of the amounts referred to in (i) and (ii) above is computed by
allowing interest at the rate of twelve percent (12%) per annum or the maximum
rate permitted by law, whichever is less. The "worth at the time of award of the
amount referred to in (iii) above shall be computed by discounting such amount
at the discount rate of the federal reserve bank of San Francisco at the time of
award plus one percent (1%). Property removed from the Premises may be stored in
a public or private warehouse or elsewhere at the sole cost and expense of
Tenant. In the event that Tenant shall not immediately pay the cost of storage
of such property after the same has been stored for a period of thirty (30) days
or more, Landlord may sell any or all thereof at a public or private sale in
such manner and at such times and places that Landlord, in its sole discretion,
may deem proper, without notice to or demand upon Tenant.
21. LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
Landlord, at any time after Tenant commits a default, may, but shall
not be obligated to, cure the default at Tenant's cost. If Landlord at any time,
by reason of Tenant's default, pays any sum or does any act that requires the
payment of any sum, the sum paid by Landlord shall be due immediately from
Tenant to Landlord and shall bear interest at the rate of twelve percent (12%)
per annum or the maximum rate permitted by law, whichever is less, from the date
the sum is paid by Landlord until Landlord is reimbursed by Tenant. Amounts due
Landlord hereunder shall be additional rent.
22. EMINENT DOMAIN
If all or any part of the Premises shall be taken by any public or
quasi-public authority under the power of eminent domain or conveyance in lieu
thereof, this lease shall terminate as to any portion of the Premises so taken
or conveyed on the date when title vests in the condemnor, and Landlord shall be
entitled to any and all payments, income, rent, award or any interest therein
whatsoever which may be paid or made in connection with such taking or
conveyance. Tenant shall
<PAGE> 22
have no claim against Landlord or otherwise for the value of any unexpired term
of this lease. Notwithstanding the foregoing, Tenant shall be entitled to any
compensation for depreciation to and cost of removal of Tenant's equipment and
fixtures and any compensation for its relocation expenses necessitated by such
taking, but in each case only to the extent the condemning authority makes a
separate award therefor or specifically identifies a portion of the award as
being therefor. Each party waives the provisions of Section 1265.130 of the
California Code of Civil Procedure (which section allows either party to
petition the Superior Court to terminate this lease in the event of a partial
taking of the Premises).
If any action or proceeding is commenced for such taking of the
Premises or any portion thereof or of any other space in the Project, or if
Landlord is advised in writing by any entity or body having the right or power
of condemnation of its intention to condemn the Premises or any portion thereof
or of any other space in the Project, and Landlord shall decide to discontinue
the use and operation of the Project or decide to demolish, alter or rebuild the
Project, then Landlord shall have the right to terminate this lease by giving
Tenant written notice thereof within sixty (60) days of the earlier of the date
of Landlord's receipt of such notice of intention to condemn or the commencement
of said action or proceeding. Such termination shall be effective as of the last
day of the calendar month next following the month in which such notice is given
or the date on which title shall vest in the condemnor, whichever occurs first.
In the event of a partial taking, or conveyance in lieu thereof, of the Premises
and fifty percent (50%) or more of the number of square feet in the Premises are
taken then Tenant may terminate this lease. Any election by Tenant to so
terminate shall be by written notice given to Landlord within sixty (60) days
from the date of such taking or conveyance and shall be effective on the last
day of the calendar month next following the month in which such notice is given
or the date on which title shall vest in the condemnor, whichever occurs first.
If a portion of the Premises is taken by power of eminent domain or
conveyance in lieu thereof and neither Landlord nor Tenant terminates this lease
as provided above, then this lease shall continue in full force and effect as to
the part of the Premises not so taken or conveyed and all payments of rent shall
be apportioned as of the date of such taking or conveyance so that thereafter
the amounts to be paid by Tenant shall be in the ratio that the area of the
portion of the Premises not so taken bears to the total area of the Premises
prior to such taking.
23. NOTICE AND COVENANT TO SURRENDER
On the last day of the term or on the effective date of any earlier
termination, Tenant shall surrender to Landlord the Premises and all of Tenant's
improvements and alterations in their condition existing as of the commencement
of the term (normal wear and tear excepted), with all originally painted
interior walls washed or repainted if marked or damaged, interior vinyl covered
walls cleaned and repaired or replaced if marked or damaged, all carpets
shampooed and cleaned, the air conditioning and heating system serviced and
repaired by a reputable and licensed service firm (unless Landlord has elected
to maintain such system pursuant to paragraph 8) and all floors cleaned and
waxed; all to the reasonable satisfaction of Landlord, Tenant shall remove all
of Tenant's personal property and trade fixtures, together with improvements or
alterations that Tenant is obligated to remove pursuant to the provisions of
paragraph 8, from the Premises, and all such property not removed shall be
deemed abandoned.
If the Premises are not surrendered as required in this paragraph,
Tenant shall indemnify Landlord against all loss, liability and expense
(including but not limited to, attorney fees) resulting from the failure by
Tenant in so surrendering the Premises, including, without limitation, any
claims made by any succeeding tenants. It is agreed between Landlord and Tenant
that the provisions of this paragraph shall survive termination of this lease.
24. TENANTS QUITCLAIM
At the expiration or earlier termination of this lease, Tenant shall
execute, acknowledge and deliver to Landlord, within ten (10) days after written
demand from Landlord to Tenant, any quitclaim deed or other document required to
remove the cloud or encumbrance created by this lease from the real property of
which the Premises are a part. This obligation shall survive said expiration or
termination.
25. HOLDING OVER
Any holding over after the expiration or termination of this lease
with the written consent of Landlord shall be construed to be a tenancy from
month to month at double the monthly rent as adjusted, in effect on the date of
such expiration or termination. All provisions of this lease, except those
pertaining to the term and any option to extend, shall apply to the month to
month tenancy. The provisions of this paragraph are in addition to, and do not
affect, Landlord's right of reentry or other rights hereunder or provided by
law.
If Tenant shall retain possession of the Premises or any part thereof
without Landlord's consent following the expiration or sooner termination of
this lease for any reason, then Tenant shall pay to Landlord for each day of
such retention double the amount of the daily rental in effect during the last
month prior to the date of such expiration or termination. Tenant shall also
indemnify and hold
<PAGE> 23
Landlord harmless from any loss, liability and expense (including, but not
limited to, attorneys fees) resulting from delay by Tenant in surrendering the
Premises, including without limitation any claims made by any succeeding tenant
founded on such delay. Acceptance of rent by Landlord following expiration or
termination shall not constitute a renewal of this lease, and nothing contained
in this paragraph shall waive Landlord's right to re-entry or any other right.
Tenant shall be only a Tenant at sufferance, whether or not Landlord accepts any
rent from Tenant, while Tenant is holding over without Landlord's written
consent.
26. SUBORDINATION
In the event Landlord's title or leasehold interest is now or
hereafter encumbered in order to secure a loan to Landlord, Tenant shall, at the
request of Landlord or the tender, execute in writing an agreement subordinating
its rights under this lease to the lien of such encumbrance, or, if so
requested, agreeing that the lien of lender's encumbrance shall be or remain
subject and subordinate to the rights of Tenant under this lease. Tenant hereby
irrevocably appoints Landlord the attorney-in-fact of Tenant to execute, deliver
and record any such instrument or instruments for and in the name and on behalf
of Tenant. Notwithstanding any such subordination, Tenant's possession under
this lease shall not be disturbed if Tenant is not in default and so long as
Tenant shall pay all amounts due hereunder and otherwise observe and perform all
provisions of this lease. In addition, if in connection with any such loan the
lender shall request reasonable modifications of this lease as a condition to
such financing, Tenant will not unreasonably withhold, delay or defer its
consent thereof, provided that such modifications do not increase the
obligations of Tenant hereunder or materially adversely affect the leasehold
interest hereby created or Tenant's rights hereunder.
Within ten (10) days after written request from Landlord, Tenant shall
deliver to Landlord such financial statements as are reasonably required by
Landlord or Landlord's lender to verify the net worth of Tenant. In addition,
Tenant shall deliver to Landlord's lender any financial statements required by
such holder to facilitate the financing or refinancing of Landlord's interest in
the Project. Tenant represents and warrants to Landlord that each such financial
statement is a true and accurate statement as of the date of such statement. All
financial statements shall be confidential and shall be used only for the
purposes set forth herein.
27. CERTIFICATE OF ESTOPPEL
Each party shall, within five (5) calendar days after request
therefor, execute and deliver to the other party, in recordable form, a
certificate stating that the lease is unmodified and in full force and effect,
or in full force and effect as modified and stating the modifications. The
certificate shall also state the amount of the monthly rent, the date to which
monthly rent has been paid in advance, the amount of the security deposit and/or
prepaid monthly rent, and, if the request is made by Landlord, shall include
such other items as Landlord or Landlord's lender may reasonably request.
Failure to deliver such certificate within such time shall constitute a
conclusive acknowledgment by the party failing to deliver the certificate that
the lease is in full force and effect and has not been modified except as may be
represented by the party requesting the Certificate. Any such Certificate
requested by Landlord may be conclusively relied upon by any prospective
purchaser or encumbrance of the Premises or Project. Further, within five (5)
calendar days following written request made from time to time by Landlord,
Tenant shall furnish to Landlord current financial statements of Tenant.
28. SALE BY LANDLORD
In the event the original Landlord hereunder, or any successor owner
of the Project or Premises, shall sell or convey the Project or Premises, all
liabilities and obligations on the part of the original Landlord, or such
successor owner, under this lease accruing thereafter shall terminate, and
thereupon all such liabilities and obligations shall be binding upon the new
owner. Tenant agrees to attorn to such new owner and to look solely to such new
owner for performance of any and all such liabilities and obligations.
29. ATTORNMENT TO LENDER OR THIRD PARTY
In the event the interest of Landlord in the land and buildings in
which the Premises are located (whether such interest of Landlord is a fee title
interest or a leasehold interest) is encumbered by deed of trust, and such
interest is acquired by a lender or any other third party through judicial
foreclosure or by exercise of a power of sale at private trustee's foreclosure
sale, Tenant hereby agrees to release Landlord of any obligation arising on or
after any such foreclosure sale and to attorn to the purchaser at any such
foreclosure sale and to recognize such purchaser as the Landlord under this
lease.
30. DEFAULT BY LANDLORD
Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within a reasonable time but in no event
earlier than thirty (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of trust covering the Premises
specifying wherein Landlord has failed to perform such obligations; provided,
however, that if the nature of Landlord's obligations is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day
<PAGE> 24
period and thereafter diligently prosecutes the same to completion.
If Landlord is in default of this lease, Tenant's sole remedy shall be
to institute suit against Landlord in a court of competent jurisdiction, and
Tenant shall have no right to offset any sums expended by Tenant as a result of
Landlord's default against future rent and other sums due and payable pursuant
to this lease. If Landlord is in default of this lease, and as a consequence
Tenant recovers a money judgment against Landlord, the judgment shall be
satisfied only out of the proceeds of sale received on execution of the judgment
and levy against the right, title and interest of Landlord in the Project of
which the Premises are a part, and out of rent or other income from such real
property receivable by Landlord or out of the consideration received by Landlord
from the sale or other disposition of all or any part of Landlord's right, title
and interest in the Project of which the Premises are a part. Neither Landlord
nor any of the partners comprising the partnership designated as Landlord shall
be personally liable for any deficiency.
31. CONSTRUCTION CHANGES
It is understood that the description of the Premises and the location
of ductwork, plumbing and other facilities therein are subject to such changes
as Landlord or Landlord's architect determines to be desirable in the course of
construction of the Premises and/or the improvements constructed or being
constructed therein and no such changes or any changes in plans for any other
portions of the Project, shall affect this lease or entitle Tenant to any
reduction of rent hereunder or result in any liability of Landlord to Tenant.
32. MEASUREMENT OF PREMISES
Tenant understands and agrees that any reference to square footage of
the Premises is approximate only and includes all interior partitions, columns
and exterior walls, and one-half of the partitions separating the Premises from
the rest of the Project, Tenant's proportionate share of the Common Area and, if
applicable, covered areas immediately outside the entry doors or loading docks.
Tenant waives any claim against Landlord regarding the accuracy of any such
measurement and agrees that there shall not be any adjustment in basic rent or
common area charges or other amounts payable hereunder by reason of inaccuracies
in such measurement.
33. ATTORNEY FEES
If either party commences an action against the other party arising
out of or in connection with this lease, the prevailing party shall be entitled
to have and recover from the losing party all expenses of litigation, including,
without limitation, travel expenses, reasonable attorney fees, expert witness
fees, trial and appellate court costs, and deposition and transcript expenses.
If either party becomes a party to any litigation concerning this lease, or
concerning the Premises or the Project, by reason of any act or omission of the
other party or its authorized representatives, the party that causes the other
party to become involved in the litigation shall be liable to the other party
for all expenses of litigation reasonably incurred, including, without
limitation, travel expenses, attorney fees, expert witness fees, trial and
appellate court costs, and deposition and transcript expenses.
34. SURRENDER
The voluntary or other surrender of this lease or the Premises by
Tenant, or a mutual cancellation of this lease, shall not work a merger, and at
the option of Landlord shall either terminate all or any existing subleases or
subtenancies or operate as an assignment to Landlord of all or any such
subleases or subtenancies.
35. WAIVER
No delay or omission in the exercise of any right or remedy of either
party on any default by the other party shall impair such right or remedy or be
construed as a waiver. The receipt and acceptance by Landlord of delinquent rent
or other payments shall not constitute a waiver of any other default and
acceptance of partial payments shall not be construed as a waiver of the balance
of such payment due. No act or conduct of Landlord, including, without
limitation, the acceptance of keys to the Premises, shall constitute an
acceptance of the surrender of the Premises by Tenant before the expiration of
the term. Only a written notice from Landlord to Tenant shall constitute
acceptance of the surrender of the Premises and accomplish a termination of this
lease. Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not be a
waiver of any other default concerning the same or any other provision of this
lease.
36. EASEMENTS; AIRSPACE RIGHTS
Landlord reserves the right to alter the boundaries of the Project and
grant easements and dedicate for public use portions of the Project without
Tenant's consent, provided that no such grant or dedication shall interfere with
Tenant's use of the Premises or otherwise cause Tenant to incur cost or expense.
From time to time, and upon Landlord's demand, Tenant shall execute, acknowledge
and
<PAGE> 25
deliver to Landlord, in accordance with Landlord's instructions, any and all
documents, instruments, maps or plats necessary to effectuate Tenant's covenants
hereunder.
This lease confers no rights either with regard to the subsurface of
or airspace above the land on which the Project is located or with regard to
airspace above the building of which the Premises are a part. Tenant agrees that
no diminution or shutting off of light or view by a structure which is or may be
erected (whether or not by Landlord) on property adjacent to the building of
which the Premises are a part or to property adjacent thereto, shall in any way
affect this lease, or entitle Tenant to any reduction of rent, or result in any
liability of Landlord to Tenant.
37. RULES AND REGULATIONS
Landlord shall have the right from time to time to promulgate
reasonable rules and regulations for the safety, care and cleanliness of the
Premises, the Project and the Common Area, or for the preservation of good
order. On delivery of a copy of such rules and regulations to Tenant, Tenant
shall comply with the rules and regulations, and a violation of any of them
shall constitute a default by Tenant under this lease. If there is a conflict
between the rules and regulations and any of the provisions of this lease, the
provisions of this lease shall prevail. Such rules and regulations may be
amended by Landlord from time to time with or without advance notice. No such
rules and regulations shall require Tenant to pay additional rent under this
lease.
38. NOTICES
All notices, demands, requests, consents and other communications
which may be given or are required to be given by either party to the other
shall be in writing and shall be sufficiently made and delivered if personally
served or if sent by United States first class mail, postage prepaid. All such
communications from Landlord to Tenant shall be addressed to Tenant at the
Premises. All such communications by Tenant to Landlord shall be sent to
Landlord at its offices at 360 S. San Antonio Road, Suite 14, Los Altos,
California 94022. Either party may change its address by notifying the other of
such change. Each such communication shall be deemed received on the date of the
personal service or mailing thereof in the manner herein provided, as the case
may be.
39. NAME
Tenant shall not use the name of the Project for any purpose, other
than as the address of the business conducted by Tenant in the Premises, without
the prior written consent of Landlord.
40. GOVERNING LAW; SEVERABILITY
This lease shall in all respects be governed by and construed in
accordance with the laws of the State of California. If any provision of this
lease shall be held or rendered invalid, unenforceable or ineffective for any
reason whatsoever, all other provisions hereof shall be and remain in full force
and effect.
41. DEFINITIONS
As used in this lease, the following words and phrases shall have the
following meanings:
ADDITIONAL RENT: any amount described in paragraph 53, below.
AUTHORIZED REPRESENTATIVE: any of officer, agent, employee or
independent contractor retained or employed by either party, acting within
authority given him by that party.
ENCUMBRANCE: any deed of trust, mortgage or other written security
device or agreement affecting the Premises or the Project that constitutes
security for the payment of a debt or performance of an obligation, and the note
or obligation secured by such deed of trust, mortgage or other written security
device or agreement.
LEASE MONTH: the period of time determined by reference to the day of
the month in which the term commences and continuing to one day short of the
same numbered day in the next succeeding month; e.g., the tenth day of one month
to and including the ninth day in the next succeeding month.
LENDER: the beneficiary, mortgagee or other holder of an encumbrance,
as defined above.
LIEN: a charge imposed an the Premises by someone other than Landlord,
by which the Premises are made security for the performance of an act. Most of
the liens referred to in this lease are mechanic's liens.
MAINTENANCE: repairs, replacement, repainting and cleaning.
MONTHLY RENT: the sum of the monthly payments of basic rent and common
area charges.
PERSON: one or more human beings, or legal entities or other
artificial persons, including,
<PAGE> 26
without limitation, partnerships, corporations, trusts, estates, associations
and any combination of human being and legal entities.
PROVISION: any term, agreement, covenant, condition, clause,
qualification, restriction, reservation or other stipulation in the lease that
defines or otherwise controls, establishes or limits the performance required or
permitted by either party.
PUNCHLIST ITEMS: minor repairs to painting, carpets, walls and other
interior improvements as described in paragraph 9, above.
RENT: basic rent, common area charges, additional rent, and all other
amounts payable by Tenant to Landlord required by this lease or arising by
subsequent actions of the parties made pursuant to this lease.
Words used in any gender include other genders. If there be more than
one Tenant, the obligations of Tenant hereunder are joint and several. All
provisions whether covenants or conditions, on the part of Tenant shall be
deemed to be both covenants and conditions. The paragraph headings are for
convenience of reference only and shall have no effect upon the construction or
interpretation of any provision hereof
42. TIME
Time is of the essence of this lease and of each and all of its
provisions.
43. EXAMINATION OF LEASE
Submission of this lease for examination or signature by Tenant does
not constitute a reservation or option for a lease, and this lease is not
effective until its execution and delivery by both Landlord and Tenant.
44. INTEREST ON PAST DUE OBLIGATIONS; LATE CHARGE
Any amount due from Tenant to Landlord hereunder which is not paid
within thirty (30) days of the date due shall bear interest at the rate of ten
percent (10%) per annum from when due until paid, unless otherwise specifically
provided herein, but the payment of such interest shall not excuse or cure any
default by Tenant under this lease. In addition, Tenant acknowledges that late
payment by Tenant to Landlord of basic rent or common area charges or of any
other amount due Landlord from Tenant, will cause Landlord to incur costs not
contemplated by this lease, the exact amount of such costs being extremely
difficult and impractical to fix. Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed on
Landlord, e.g., by the terms of any encumbrance and note secured by any
encumbrance covering the Premises. Therefore, if any such payment due from
Tenant is not received by Landlord within five (5) days of the date due (without
the requirement of providing Tenant notice), Tenant shall pay to Landlord an
additional sum of five percent (5%) of the overdue payment as a late charge. The
parties agree that this late charge represents a fair and reasonable estimate
of the costs that Landlord will incur by reason of late payment by Tenant.
Acceptance of any late charge shall not constitute a waiver of Tenant's default
with respect to the overdue amount, nor prevent Landlord from exercising any of
the other rights and remedies available to Landlord. No notice to Tenant of
failure to pay shall be required prior to the imposition of such interest and/or
late charge, and any notice period provided for in paragraph 20 shall not affect
the imposition of such interest and/or late charge.
45. ENTIRE AGREEMENT
This lease, including any exhibits and attachments, constitutes the
entire agreement between Landlord and Tenant relative to the Premises and this
lease and the exhibits and attachments may be altered, amended or revoked only
by an instrument in writing signed by both Landlord and Tenant. Landlord and
Tenant agree hereby that all prior or contemporaneous oral agreements between
and among themselves or their agents or representatives relative to the leasing
of the Premises are merged in or revoked by this lease.
46. CORPORATE AUTHORITY
If Tenant is a corporation, each individual executing this lease on
behalf of the corporation represents and warrants that he is duly authorized to
execute and deliver this lease on behalf of the corporation in accordance with a
duly adopted resolution of the Board of Directors of said corporation and that
this lease is binding upon said corporation in accordance with its terms. If
Tenant is a corporation, Tenant shall deliver to Landlord, within ten (10) days
of the execution of this lease, a copy of the resolution of the Board of
Directors of Tenant authorizing the execution of this lease and naming the
officers that are authorized to execute this lease on behalf of Tenant, which
copy shall be certified by Tenant's president or secretary as correct and in
full force and effect.
<PAGE> 27
47. RECORDING
Neither Landlord nor Tenant shall record this lease nor any short
form memorandum heretofore without the consent of the other.
48. REAL ESTATE BROKERS
Each party represents that it has not had dealings with any real
estate broker finder or other person with respect to this lease in any manner.
Each party shall hold harmless the other party from all damages resulting from
any claims that may be asserted against the other party by any broker, finder or
other person with whom the other party has or purportedly has dealt.
49. EXHIBITS AND ATTACHMENTS
All exhibits and attachments to this lease are a part hereof.
50. ENVIRONMENTAL MATTERS
A. Tenant's Covenants Regarding Hazardous Materials,
(1) Without limiting Tenant's obligations under paragraph 7
hereof, Tenant shall comply with and shall cause the Project to comply with, all
federal, state, and local laws, statutes, rules, regulations, codes, ordinances,
and other governmental requirements (including, without limitation, permits,
licenses, consent decrees and administrative orders) now or hereafter in effect
relating or pertaining in any way to (i) human health, safety or protection,
(ii) workplace safety, (iii) industrial hygiene, (iv) the use, generation,
handling, maintenance, treatment, removal, transportation, storage, release,
discharge, disposal, or disclosure of Hazardous Materials, or (v) the protection
or regulation of the environment, all as amended and modified from time to time
(collectively, "Environmental Requirements"). Tenant shall cause all
governmental permits and other approvals relating to the use or operation of the
Project required by applicable Environmental Requirements or any other
applicable laws to all times remain in effect, and Tenant shall at all times
comply with such permits and other approvals.
(2) Tenant shall not cause, or permit to occur, any release,
discharge, use, generation, manufacture, storage, treatment, transportation, or
disposal by Tenant or any of its employees, agents, contractors, visitors,
clients, customers, sublessees, assignees, successors, licensees or invitees, of
any Hazardous Materials on, in, under, about, or from the Premises or any other
part of the Project. However, notwithstanding the foregoing, Tenant may use on
the Premises, without Landlord's prior written consent, but only upon written
notice to Landlord and in compliance with all Environmental Requirements and
other applicable laws, any ordinary and customary materials reasonably required
for use by Tenant in the normal course of the permitted use described in
paragraph 1 hereof and further, but only so long as such use is not a Reportable
Use (defined below) and does not expose the Premises or any other part of the
Project or neighboring properties to any meaningful risk of contamination or
damage or expose Landlord to any liability whatsoever therefor. In addition,
Landlord may (but without any obligation to do so) condition its consent to any
Reportable Use of any Hazardous Materials by Tenant upon Tenant's giving
Landlord such additional assurances as Landlord in its sole discretion, deems
necessary to protect itself, the public, the Premises, the Project, and the
environment against damage, contamination or injury and/or liability therefor,
including but not limited to the installation (and, at Landlord's option,
removal on or before the expiration or earlier termination of this lease) of
reasonably necessary protective modifications to the Premises (such as concrete
encasement) and/or the deposit of an additional security deposit. As used
herein, "Reportable Use" shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the release, generation, possession, storage,
use, transportation, discharge or disposal of any Hazardous Materials that
requires a permit from, or with respect to which a report, notice, registration
or business plan is required to be filed with, any governmental agency or
authority, and (iii) the presence in, on or about the Premises, the Project of
any Hazardous Materials with respect to which any Environmental Requirements or
other applicable laws require that a notice be given to persons entering or
occupying the Premises, the Project or neighboring properties.
(3) If Tenant knows, or has reasonable cause to believe, that any
Hazardous Materials have come to be located in, on, under or about the Premises
or the Project (other than those Hazardous Materials that have come to be
located beneath and/or in the vicinity of the Project prior to the date of this
lease and other than those Hazardous Materials as previously consented to by
Landlord in writing, if any), to by Landlord, Tenant shall immediately give
Landlord written notice thereof, together with a copy of any statement, report,
notice, registration, application, permit, business plan, license, claim,
action, or proceeding, given to, or received from, any governmental authority or
private party concerning the presence, spill, release, discharge of, or exposure
to, such Hazardous Materials including but not limited to all such documents as
may be involved in any Reportable Use involving the Premises or the Project.
Landlord's receipt of any notice, documents or other information from Tenant as
provided above in this paragraph shall not create any obligation the part of
Landlord to respond in any way to such notice, documents or information or the
conditions described therein.
<PAGE> 28
(4) Tenant shall immediately notify Landlord and provide copies
upon receipt of all written complaints, claims, citations, demands, inquiries,
reports, or notices relating to the condition of the Premises or compliance with
Environmental Requirements (provided, however, that Landlord's receipt of any of
the foregoing shall in no way create or impose any duty or obligation upon
Landlord to respond thereto. Tenant shall promptly cure and have dismissed with
prejudice any of those actions and proceedings to the satisfaction of Landlord.
(5) Landlord, its agents, employees, contractors and designated
representatives, and the holders of any mortgages, deeds of trust or ground
leases an the Premises or Project shall have the right, but not the obligation,
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Tenant with this lease (including compliance
with Environmental Requirements) and Landlord shall be entitled to employ
experts and/or consultants in connection therewith to advise Landlord with
respect to Tenant's activities, including but not limited to Tenant's use,
storage, handling, transportation, maintenance, or removal of any Hazardous
Materials on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a default or
breach of this lease by Tenant or a violation of any Environmental Requirement
or a contamination caused or materially contributed to by the Tenant is found to
exist or to be imminent, or unless the inspection is requested or ordered by a
governmental agency or authority as the result of any such existing or imminent
violation or contamination, in such case, Tenant shall upon request reimburse
Landlord, for the costs and expenses of such inspections.
(6) If Tenant breaches any of its warranties, representations, or
covenants under this paragraph 50, Landlord may, without obligation, cause the
removal (or other cleanup or other response acceptable to Landlord) of any
Hazardous Materials from the Project, and the costs of any Hazardous Materials
removal, remediation, detoxification, or other response (including, without
limitation, disposal, transportation and storage costs and all costs of
refitting or otherwise altering the Premises or any other part of the Project
shall be covered by the indemnity in paragraph 50B, below, whether or not a
court or other governmental authority has ordered such removal, remediation,
detoxification or other response and those costs shall become due and payable on
demand by Landlord. Tenant shall give Landlord, its agents, contractors, and
employees access to the Premises to remove, remediate, detoxify, clean up or
otherwise respond to any Hazardous Materials, and this lease shall not be
construed as creating any such obligation.
B. Indemnification of Landlord. Tenant agrees to indemnify, defend (with
counsel acceptable to Landlord and at Tenant's sole cost), and hold Landlord and
Landlord's partners, employees, agents, attorneys, successors and assigns free
and harmless from and against any and all losses, liabilities, obligations,
penalties, claims, litigation, orders, demands, defenses, costs, judgments,
suits, penalties, proceedings, damages (including, without limitation,
consequential damages, diminution of the value of the Premises or Project,
disbursements, losses, or expenses of any kind (including, without limitation,
attorneys' and experts' fees and expenses incurred in investigating, defending,
or prosecuting any litigation, claim, or proceeding) that may at any time be
imposed upon, suffered by, incurred by, or asserted or awarded against Landlord
or any of its partners, employees, agents, attorneys, successors or assigns in
connection with or arising directly or indirectly out of:
(1) Any release, threatened release, discharge, handling, use, storage,
presence, transportation, or disposal of any Hazardous Materials (whether or not
the use thereof is a Reportable Use or has been consented to by Landlord on, in,
under, or affecting all or any part of the Premises or Project which is (or are)
attributable, in whole or in part, directly or indirectly, to any act or
omission of Tenant or any employee, agent, contractor, visitor, client,
customer, sublessee, assignee, successor, licensee or invitee of Tenant;
(2) Any misrepresentation, inaccuracy, or breach of any warranty,
covenant, or agreement contained or referred to in this paragraph 50;
(3) Any failure by Tenant or any employee, agent, contractor, visitor,
customer, sublessee, assignee, successor, client, licensee or invitee of Tenant
to comply with any Environmental Requirement or other applicable law, whether
such failure was made knowingly or unknowingly or intentionally or
unintentionally.
This indemnification is the personal obligation of Tenant and shall survive the
expiration or sooner termination of this lease. Tenant, its successors, and
assigns waive, release, and agree not to make any claim or bring any cost
recovery action against Landlord under the Comprehensive Environmental Response,
Compensation and Liability Act, as amended and reauthorized to date (42 U.S.C.
Sections 9601 et seq.) ("CERCLA"), or any state equivalent or any similar law
now existing or enacted after this date. To the extent that Landlord is strictly
liable under any such law, regulation, ordinance, or requirement, Tenant's
obligation to Landlord under this indemnity shall also be without regard to
fault on the part of Tenant with respect to the violation or condition that
results in liability to Landlord.
C. Definition of Hazardous Materials. "Hazardous Materials" means any
product substance, chemical, material or waste whose presence, nature, quantity
and/or intensity or existence, use, manufacture, disposal, transportation,
spill, release, or effect, either by itself or in combination with any other
materials, substances or chemicals is either (i) potentially injurious or
harmful to the
<PAGE> 29
public health, safety or welfare, the Premises, or the environment (including,
without limitation, any soil, air, groundwater, and subsurface media on, in,
under, above or about the Project); (ii) regulated or monitored by any federal,
state or local governmental authority; or (iii) a basis for potential liability
of Landlord to any governmental agency, private party, or other third party
under any Environmental Requirement or any other applicable statute, regulation,
code, ordinance or common law theory. Without limiting the scope or generality
of the foregoing, Hazardous Materials shall include, but not be limited to any
petroleum or petroleum byproducts or petroleum hydrocarbons, flammable
explosives, asbestos, urea formaldehyde, radioactive materials or waste and any
"hazardous substance" or "toxic waste" as those terms are defined under the
provision of the California Health and Safety Code and/or CERCLA.
D. Survival. The provisions of this paragraph 50 shall survive the
expiration or earlier termination of the term of this lease.
E. Limitation on Tenant Liability. Notwithstanding the provisions in
this lease to the contrary, Tenant shall have no obligation to clean up or to
reimburse, release, indemnify, or defend Landlord with respect to removal or
liability respecting Hazardous Materials unless the Hazardous Materials in
question were stored, used, generated, manufactured, treated, analyzed,
released, threaten to be released, discharged, disposed, transported or
otherwise caused to be present in, on or about the Premises or the Project by
Tenant or its agent's, employees, contractors, visitors, clients, customers,
sublessees, assignees, successors, licensees, invitees or others acting for or
on behalf of Tenant (whether or not they are negligent, intentional, willful or
unlawful).
51. SIGNAGE
Tenant shall not, without obtaining the prior written consent of
Landlord, install or attach any sign or advertising material on any part of the
outside of the Premises, or on any part of the inside of the Premises which is
visible from the outside of the Premises, or in the halls, lobbies, windows or
elevators of the building in which the Premises are located or on or about any
other portion of the Common Area or Project. If Landlord consents to the
installation of any sign or other advertising material, the location, size,
design, color and other physical aspects thereof shall be subject to Landlord's
prior written approval and shall be in accordance with any sign program
applicable to the Project. In addition to any other requirements of this
paragraph 51, the installation of any sign or other advertising material by or
for Tenant must comply with all applicable laws, statutes, requirements, rules,
ordinances and any C.C.&R.'s or other similar requirements. With respect to any
permitted sign installed by or for Tenant, Tenant shall maintain such sign or
other advertising material in good condition and repair and shall remove such
sign or other advertising material on the expiration or earlier termination of
the term of this lease. The cost of any permitted sign or advertising material
and all costs associated with the installation, maintenance and removal thereof
shall be paid for solely by Tenant. If Tenant fails to properly maintain or
remove any permitted sign or other advertising material, Landlord may do so at
Tenant's expense. Any cost incurred by Landlord in connection with such
maintenance or removal shall be deemed additional rent and shall be paid by
Tenant to Landlord within ten (10) days following notice from Landlord. Landlord
may remove any unpermitted sign or advertising material without notice to Tenant
and the cost of such removal shall be additional rent and shall be paid by
Tenant within ten (10) days following notice from Landlord. Landlord shall not
be liable to Tenant for any damage, loss or expense resulting from Landlord's
removal of any sign or advertising material in accordance with this paragraph
51. The provisions of this paragraph 51 shall survive the expiration or earlier
termination of this lease.
52. SUBMISSION OF LEASE
The submission of this lease to Tenant is not an offer to lease the
Premises, or an agreement by Landlord to reserve the Premises for Tenant.
Landlord will not be bound to Tenant until Tenant has duly executed and
delivered duplicate original leases to Landlord and Landlord has duly executed
and delivered one of those duplicate original leases to Tenant.
53. ADDITIONAL RENT
All costs, charges, fees, penalties, interest and any other payments
(including Tenant's reimbursement to Landlord of costs incurred by Landlord)
which Tenant is required to make to Landlord pursuant to the terms and
conditions of this lease and any amendments to this lease shall be and
constitute additional rent payable by Tenant to Landlord when due as specified
in this lease and any amendments to this lease.
54. PREMISES TAKEN "AS IS"
Tenant is leasing the Premises from Landlord "as is" in its existing
condition as of the date hereof. Landlord shall have no obligation to alter or
improve the Premises except only to paint the exterior of the building in which
the Premises are located. The cost of such exterior painting shall be deemed a
common area charge as provided in paragraph 16 and shall be amortized over the
remaining term of the lease.
<PAGE> 30
Tenant acknowledges that, except as expressly contained in this
lease, neither Landlord nor anyone acting for or on behalf of Landlord has made
any representation, warranty or promise to Tenant concerning the physical
aspects or condition of any of the Project; the feasibility, desirability or
convertibility of any of the Project into any particular use; the zoning,
building or land use restrictions applicable to the zoning, building or land use
restrictions applicable to the Project; the projected income or expenses for any
of the Project or any business conducted thereon; the suitability of the Project
for any particular use; or the presence or absence of any Hazardous Materials;
and that in entering into this lease, Tenant has not relied upon any
representation, statement or warranty of Landlord or anyone acting for or on
behalf of Landlord, other than as expressly contained in this lease, and that
all matters concerning the Premises shall be independently verified by Tenant
and that Tenant shall enter into this lease on Tenant's own examination thereof
(or Tenant's election not to do so). Tenant does hereby waive, and Landlord does
hereby disclaim, all warranties of any type or kind whatsoever with respect to
the Project, express or implied, including by way of description, but not
limitation, those of fitness for a particular purpose, tenantability,
habitability and use. Tenant hereby expressly assumes the risk that adverse
physical conditions and the full extent thereof (including, without limitation,
soil, groundwater and surface water contamination and air pollution from
Hazardous Materials) may not be revealed by Tenant's inspections, reviews and
studies of the Project prior to the date of possession.
No person acting on behalf of Landlord is authorized to make, and by
execution hereof Tenant acknowledges that no such person has made, any
representation, warranty, guaranty or promise except as may be expressly set
forth herein; and no agreement, statement, representation, guaranty or promise
made by any such person which is not expressly contained herein shall be valid
or binding on Landlord and Landlord's agents, heirs, successors or assigns. The
only representations or warranties outstanding with respect to the Project, or
Landlord, either express or implied by law, are expressly set forth herein.
Tenant acknowledges that any and all documentary information, soil
reports, environmental audits, site assessments, analyses or reports, insurance
policies or other information of whatever type which Tenant has received or may
receive from Landlord or Landlord's agents is furnished on the express condition
that Tenant shall make Tenant's own independent verification of the accuracy and
completeness of such information. Tenant agrees that Tenant shall not attempt to
assert any liability upon Landlord or Landlord's agents for furnishing such
information and Tenant does hereby release Landlord and Landlord's agents,
heirs, successors and assigns free and harmless from and against, any and all
such claims or liability.
55. CAPITAL EXPENDITURES
Notwithstanding anything to the contrary in paragraphs 7, 8 and 9,
(i) as to any required capital improvement to the Premises of a structural
nature (and including, when necessary in Landlord's sole judgment, replacement
of the roof and individual heating, ventilating and air-conditioning units but
excluding capital improvements required for ADA compliance except where such ADA
compliance is the responsibility of Landlord as described in the lease) having a
useful life of more than one year and which is not required by reason of
Tenant's specific use of or activities on the Premises, Landlord shall make such
capital improvement and Tenant shall pay to Landlord, as additional rent and in
equal monthly installments over the remaining term of this lease, the
fraction of the cost of such capital improvements equal to the remaining term of
this lease over the useful life of such capital improvement; (ii) as to any
required capital improvement to the common area having a useful life of more
than one year and which is not required by Tenant's specific use of or
activities on the Premises, the cost thereof shall be included within common
area charges ratably over the useful life of such capital improvement. Any
determination of useful life, as such term is used in this paragraph 55, shall
be reasonably made by Landlord.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
lease an the date first above written.
Landlord: Tenant:
C & J Development Co., a Southwall Technologies, Inc.,
California Limited Partnership a Delaware corporation
By:/s/ SANDRA SIMONS By: /s/ BILL R. FINLEY
------------------------------- ------------------------------
Sandra Simons, as Trustee under the (Signature)
Charles S. and Jean A. McCandless
Inter Vivos Trust Agreement dated Bill R. Finley
January 25, 1977, a General Partner ---------------------------------
(Name)
Vice President and CFO
---------------------------------
(Title)
Date: Oct 14, 1999 Date: 13 October 1999
- ------------------------------- ---------------------------------
<PAGE> 31
[FLOOR CHART]
EXHIBIT A
<PAGE> 1
EXHIBIT 10.25
LEASE
by and between
PARADIGM RESOURCES, L.C.
A UTAH LIMITED LIABILITY COMPANY
as Landlord
and
PARTNET INC.,
A UTAH CORPORATION
as Tenant
FOR SUITE 204
OF A BUILDING LOCATED AT
615 ARAPEEN DRIVE
SALT LAKE CITY, UTAH
<PAGE> 2
INDEX TO LEASE AGREEMENT: PARADIGM RESOURCES, L.C.
SALT LAKE CITY, UTAH
<TABLE>
<S> <C>
ARTICLE 1. BASIC LEASE PROVISIONS; ENUMERATION OF EXHIBITS ................ 1
SECTION 1.01 BASIC LEASE PROVISIONS ................................. 1
SECTION 1.02 SIGNIFICANCE OF A BASIC LEASE PROVISION ................ 3
SECTION 1.03 ENUMERATION OF EXHIBITS ................................ 3
ARTICLE II. GRANT AND PREMISES ............................................ 3
SECTION 2.01 PREMISES ............................................... 3
ARTICLE III. RENT ......................................................... 3
SECTION 3.01 BASE MONTHLY RENT ...................................... 3
SECTION 3.02 ESCALATION ............................................. 3
SECTION 3.03 TENANT'S SHARE OF LANDLORD'S EXPENSES .................. 4
SECTION 3.04 REPORT OF COSTS AND STATEMENT OF ESTIMATED COSTS ....... 4
SECTION 3.05 PAYMENT OF ADDITIONAL RENT ............................. 5
SECTION 3.06 TAXES .................................................. 5
SECTION 3.07 PAYMENTS ............................................... 5
ARTICLE IV. RENTAL TERM, COMMENCEMENT DATE & PRELIMINARY TERM ............. 5
SECTION 4.01 RENTAL TERM ........................................... 5
SECTION 4.02 RENTAL COMMENCEMENT DATE ............................... 5
SECTION 4.03 PRELIMINARY TERM ....................................... 6
ARTICLE V. CONSTRUCTION OF PREMISES ....................................... 6
SECTION 5.01 CONSTRUCTION BY LANDLORD ............................... 6
SECTION 5.02 CHANGES AND ADDITIONS BY LANDLORD ...................... 6
SECTION 5.03 DELIVERY OF POSSESSION ................................. 6
ARTICLE VI. TENANT'S WORK & LANDLORD'S CONTRIBUTION ....................... 6
SECTION 6.01 TENANT'S WORK .......................................... 6
ARTICLE VII. USE .......................................................... 7
SECTION 7.01 USE OF PREMISES ........................................ 7
SECTION 7.02 HAZARDOUS SUBSTANCES ................................... 7
ARTICLE VIII. OPERATION AND MAINTENANCE OF COMMON AREAS ................... 7
SECTION 8.01 CONSTRUCTION AND CONTROL OF COMMON AREAS ............... 7
SECTION 8.02 LICENSE ................................................ 8
ARTICLE IX. ALTERATIONS, SIGNS, LOCKS & KEYS .............................. 8
SECTION 9.01 ALTERATIONS ............................................ 8
SECTION 9.02 SIGNS .................................................. 8
SECTION 9.03 LOCKS AND KEYS ......................................... 8
ARTICLE X. MAINTENANCE AND REPAIRS; ALTERATIONS; ACCESS ................... 9
SECTION 10.01 LANDLORD'S OBLIGATION FOR MAINTENANCE ................. 9
SECTION 10.02 TENANT'S OBLIGATION FOR MAINTENANCE ................... 9
SECTION 10.03 SURRENDER AND RIGHTS UPON TERMINATION ................. 9
ARTICLE XI. INSURANCE AND INDEMNITY ....................................... 9
SECTION 11.01 LIABILITY INSURANCE AND INDEMNITY ..................... 9
SECTION 11.02 FIRE AND CASUALTY INSURANCE ........................... 10
SECTION 11.03 WAIVER OF SUBROGATION ................................. 10
ARTICLE XII. UTILITY CHARGES .............................................. 10
SECTION 12.01 OBLIGATION OF LANDLORD ................................ 10
SECTION 12.02 OBLIGATIONS OF TENANT ................................. 11
SECTION 12.03 LIMITATIONS ON LANDLORDS LIABILITY .................... 11
ARTICLE XIII. OFF-SET STATEMENT, ATTORNMENT AND SUBORDINATION ............. 12
SECTION 13.01 OFF-SET STATEMENT ..................................... 12
SECTION 13.02 ATTORNMENT ............................................ 12
SECTION 13.03 SUBORDINATION ......................................... 12
SECTION 13.04 MORTGAGEE SUBORDINATION .............................. 12
SECTION 13.05 REMEDIES .............................................. 12
ARTICLE XIV. ASSIGNMENT ................................................... 12
</TABLE>
i
<PAGE> 3
INDEX TO LEASE AGREEMENT: PARADIGM RESOURCES, L.C.
SALT LAKE CITY, UTAH
<TABLE>
<S> <C>
SECTION 14.01 ASSIGNMENT ............................................ 12
ARTICLE XV. WASTE OR NUISANCE ............................................. 12
SECTION 15.01 WASTE OR NUISANCE ..................................... 12
ARTICLE XVI. NOTICES ...................................................... 12
SECTION 16.01 NOTICES ............................................... 12
ARTICLE XVII. DESTRUCTION OF THE PREMISES ................................. 12
SECTION 17.01 DESTRUCTION ........................................... 12
ARTICLE XVIII. CONDEMNATION ............................................... 13
SECTION 18.01 CONDEMNATION .......................................... 13
ARTICLE XIX. DEFAULT OF TENANT............................................. 13
SECTION 19.01 DEFAULT - RIGHT TO RE-ENTER ........................... 13
SECTION 19.02 DEFAULT - RIGHT TO RE-LET ............................. 14
SECTION 19.03 LEGAL EXPENSES ........................................ 14
ARTICLE XX. BANKRUPTCY, INSOLVENCY OR RECEIVERSHIP ........................ 14
SECTION 20.01 ACT OF INSOLVENCY, GUARDIANSHIP, ETC .................. 14
ARTICLE XXI. LANDLORD ACCESS .............................................. 14
SECTION 21.01 LANDLORD ACCESS ....................................... 14
ARTICLE XXII. LANDLORD'S LIEN ............................................. 15
SECTION 22.01 LANDLORD'S LIEN ....................................... 15
ARTICLE XXIII. HOLDING OVER ............................................... 15
SECTION 23.01 HOLDING OVER .......................................... 15
SECTION 23.02 SUCCESSORS ............................................ 15
ARTICLE XXIV. RULES AND REGULATIONS ....................................... 15
SECTION 24.01 RULES AND REGULATIONS ................................. 15
ARTICLE XXV. QUIET ENJOYMENT .............................................. 15
SECTION 25.01 QUIET ENJOYMENT ....................................... 15
ARTICLE XXVI. SECURITY DEPOSIT ............................................ 15
SECTION 26.01 SECURITY DEPOSIT ...................................... 15
ARTICLE XXV11. MISCELLANEOUS PROVISIONS ................................... 16
SECTION 27.01 WAIVER ................................................ 16
SECTION 27.02 ENTIRE AGREEMENT ...................................... 16
SECTION 27.03 FORCE MAJEURE ......................................... 16
SECTION 27.04 LOSS AND DAMAGE ....................................... 16
SECTION 27.05 ACCORD AND SATISFACTION ............................... 16
SECTION 27.06 NO OPTION ............................................. 16
SECTION 27.07 ANTI-DISCRIMINATION ................................... 16
SECTION 27.08 SEVERABILITY .......................................... 16
SECTION 27.09 OTHER MISCELLANEOUS PROVISIONS ........................ 16
SECTION 27.10 REPRESENTATION REGARDING AUTHORITY .................... 17
ADDITIONAL PROVISIONS ..................................................... 17
SIGNATURES ................................................................ 18
LANDLORD ACKNOWLEDGMENT ................................................... 18
TENANT ACKNOWLEDGMENT ..................................................... 18
</TABLE>
ii
<PAGE> 4
LEASE AGREEMENT
ARTICLE 1. BASIC LEASE PROVISIONS; ENUMERATION OF EXHIBITS
SECTION 1.01 BASIC LEASE PROVISIONS
(A) DATE: JANUARY 12, 1999
(B) LANDLORD: PARADIGM RESOURCES, L.C., a Utah limited liability company
(C) ADDRESS OF LANDLORD FOR NOTICES (SECTION 16.01): 2733 East Parleys Way,
Suite 300, Salt Lake City, UT 84109.
(D) TENANT: PARTNET INC., a Utah corporation
(E) ADDRESS OF TENANT FOR NOTICES (SECTION 16.01): 423 So. Wakara way, Salt
Lake City, UT 84108. After opening for business at Leased Premises,
notice address will be the Leased Premises.
(F) PERMITTED USES (SECTION 7.01). Research, software programming, computer
network services assembly and general office uses.
(G) TENANT'S TRADE NAME (EXHIBIT "E" - SIGN CRITERIA): Partner Inc.
(H) BUILDING (SECTION 2.01): Situated at approx. 615 Arapeen Drive, in the
City of Salt Lake, County of Salt Lake, State of Utah.
(I) PREMISES (SECTION 2.01): A portion of the first floor of the Building at
the approximate location outlined on Exhibit "A-1" known as Suite 204
consisting of approximately 6,026 square feet of gross rentable area.
Said area is calculated by multiplying the full second floor usable area
of 5,019 s.f. by 1.2007 to account for Tenant's proportionate share of
common area corridors, lobby, mechanical, electrical, and other service
rooms etc. in the Building.
(J) DELIVERY OF POSSESSION (SECTION 5.03): On or before February 15, 1999,
Preliminary Term begins on Delivery of Possession (Section 4.03).
(K) RENTAL TERM, COMMENCEMENT AND EXPIRATION DATE (SECTIONS 4.01 & 4.02):
The Rental Term shall commence on the earlier of (a) fifteen (15) days
after Delivery of Possession or (b) opening of Tenant for business at
the Premises, and shall be for a period of five (5) full Lease Years
ending January 31, 2004, subject to Tenant right to terminate set forth
in Section 1.01(X).
(L) BASE MONTHLY RENT (SECTION 3.01):
Eight Thousand Two Hundred Eighty Five and 75/100ths Dollars ($8,285.75)
(M) ESCALATIONS IN BASE MONTHLY RENT (SECTION 3.02): The Base Monthly Rent
shall be increased annually on the first day of each February commencing
in the year 2000 ("Escalation Date") proportionate to any increase in
the U.S. Dept. of Labor, Bureau of Labor Statistics Consumer Price Index
for Urban Consumers, All City Average (1982-84=100). To calculate
said increase, Landlord shall use a fraction the denominator of which
shall be said index for the month of November, 1998 and the numerator of
which shall be the index for the November immediately previous the
Escalation Date. If there is a decrease in the relevant Consumer Price
Index, the Base Monthly Rent shall not be adjusted. If the U.S.
Department of Labor ceases to publish said Consumer Price Index, the
Landlord shall substitute an index which in Landlord's reasonable good
faith judgment most nearly approximates the Consumer Price Index
specified herein.
(N) LANDLORD'S SHARE OF OPERATING EXPENSES (SECTION 3.03): The Base Monthly
Rent shall be absolutely net to the Landlord as provided in Section
3.03.
(O) TENANT'S PRO RATA SHARE OF OPERATING EXPENSES (SECTION 3.03): Tenant
shall be responsible for all operating expenses as defined in Section
3.03. Tenant's proportionate of Basic Costs shall be 6.715%. Said
operating expenses include Basic Costs, Direct Costs and Metered Costs
as defined in Section 3.03 and are currently estimated to be $4.50 per
square foot or $2,259.75 monthly.
(P) UTILITIES AND SERVICES. Subject to the provisions of Section 3.03, 12.01
and 12.02, this Lease provides that the utilities and services shall be
paid or reimbursed by Tenant
(Q) LANDLORD'S CONTRIBUTION TO TENANT'S WORK (SECTION 6.02): Ninety Six
Thousand Four Hundred Sixteen and no/100ths Dollars ($96,416.00)
payable as set forth in Section 6.02 herein. If
1
<PAGE> 5
Tenant fails to spend all of Landlord's contribution then Landlord shall
reduce the Base Monthly Rent as set forth in Section 1.01 (L) by $ 1.00
for every $100.00 which Tenant does not spend.
(R) PREPAID RENT: $8,034.67 paid upon execution of this Lease to be applied
to the first installment(s) of Base Monthly Rent due hereunder.
(S) EXCESS HOUR UTILITY CHARGES AND HOURS OF OPERATION (SECTION 12.02):
Standard operating hours for the Building shall be 7:00 a.m. to 6:00
p.m. Monday through Friday and 8:00 a.m. to 1:00 p.m. on Saturday,
excluding holidays. To the extent Tenant operates during any time in
excess of those specified above, Tenant shall pay an extra hourly
utility charge of $0.20 per hour per 1,000 usable square feet for
lighting and electricity and $3.00 per hour per 1,000 usable square feet
for mechanical/HVAC system for each full or partial hour during which
Tenant operates.
(T) ADJUSTMENTS BASED ON FINAL AREA DETERMINATION: Upon final completion,
the Building shall be measured and the actual rentable area of the
Premises determined in accordance with standards of Section 2.01. The
sums set forth in Sections 1.01 (L), (M), (O), (Q) and (U) shall then be
proportionately adjusted to reflect the actual area of the Premises.
(U) SECURITY DEPOSIT (SECTION 26.01): Eight Thousand Dollars ($8,000.00)
(V) GUARANTOR(S): Don R. Brown
(W) GUARANTOR'S ADDRESS: 423 So. Wakara Way, Salt Lake City, UT 84108
(X) TENANT RIGHT TO TERMINATE: If Tenant needs additional space and Landlord
can not provide sufficient space contiguous to Tenant's Leased Premises
in the Building, then Tenant may elect to terminate this Lease effective
on not less than ninety (90) days prior written notice given to Landlord
and upon payment of the "unamortized portion" of the Landlord's
Contribution to Tenant Work set forth in Section 1.01 (Q), which payment
shall be made not less than five (5) days prior to the Termination Date.
To calculate the "unamortized portion", Landlord shall multiply the
amount of Landlord Contribution set forth in Section 1.01 (Q) as
adjusted pursuant to Section 1.01 (T) by a fraction, the numerator of
which shall be the number of months between the Termination Date as
provided in this Section 1.01 (X) and January 31, 2004 and the
denominator of which shall be 60.
2
<PAGE> 6
SECTION 1.02 SIGNIFICANCE OF A BASIC LEASE PROVISION. The foregoing
provisions of Section 1.01 summarize for convenience only certain fundamental
terms of the Lease delineated more fully in the Articles and Sections referenced
therein. In the event of a conflict between the provisions of Section 1.01 and
the balance of the Lease, the latter shall control.
SECTION 1.03 ENUMERATION OF EXHIBITS. The exhibits enumerated in this
Section and attached to this Lease are incorporated in the Lease by this
reference and are to be construed as a part of the Lease.
EXHIBIT "A" - SITE PLAN
EXHIBIT "A-1" - FIRST LEVEL PLAN
EXHIBIT "B" - LEGAL DESCRIPTION(S)
EXHIBIT "C" - LANDLORD'S WORK
EXHIBIT "D" - TENANT'S WORK
ARTICLE II. GRANT AND PREMISES
SECTION 2.01 PREMISES. Landlord has heretofore obtained a long-term
ground lease covering that certain tract of real property situated in the
University of Utah Research Park in Salt Lake City, State of Utah, more
particularly described in Exhibit "B" attached hereto, together with certain
easement for access rights. (Said tract is hereinafter referred to as the
"Property").
Landlord owns a building on the Property referred to in Section 1.01 (H)
(hereinafter the "Building") suitable for use as office research and development
space, together with related parking facilities and other improvements necessary
to enable to the Building to be so used (the Building and related facilities and
improvements are hereinafter collectively referred to as the "Improvements").
In consideration for the rent to be paid and covenants to be performed
by Tenant, Landlord hereby leases to Tenant, and Tenant leases from Landlord for
the Term and upon the terms and conditions herein set forth premises described
in Section 1.01(I) (hereinafter referred to as the "Premises" or "Leased
Premises"), located in the Building. Gross rentable area measurements herein
specified are from the exterior of the perimeter walls of the building to the
center of the interior walls. In addition, the factor set forth in Section 1.01
(1) has been added to the area as measured above to adjust for Tenant's
proportionate share of common hallways, restrooms, elevators, stairways, etc. in
the building.
The exterior walls and roof of the Premises and the areas beneath said
Premises are not demised hereunder, and the use thereof together with the right
to install, maintain, use, repair, and replace pipes, ducts, conduits, and wires
leading through the Premises in locations which will not materially interfere
with Tenant's use thereof and serving other parts of the building or buildings
are hereby reserved to Landlord. Landlord reserves (a) such access rights
through the Premises as may be reasonably necessary to enable access by Landlord
subject to reasonable notice to Tenant to the balance of the building and
reserved areas and elements as set forth above; and (b) the right to install or
maintain meters on the Premises to monitor use of utilities. In exercising such
rights, Landlord will use reasonable efforts so as to not commit waste upon the
Premises and as far as practicable to minimize annoyance, interference or damage
to Tenant when making modifications, additions or repairs.
Subject to the provisions of Article VIII, Tenant and its customers,
agents and invitees have the right to the non-exclusive use, in common with
others of such unreserved automobile parking spaces, driveways, footways, and
other facilities designated for common use within the Building, except that with
respect to non-exclusive automobile parking spaces, Tenant shall cause its
employees to park their cars only in areas specifically designated from time to
time by Landlord for that purpose. Landlord shall have the right to designate,
in its sole business judgment, certain spaces as "customer" parking spaces and
Tenant shall use its best efforts to cause its employees not to park in said
customer parking.
ARTICLE III. RENT
SECTION 3.01 BASE MONTHLY RENT. Tenant agrees to pay to Landlord the
Base Monthly Rent set forth in Section 1.01(L), as adjusted pursuant to Section
1.01(T), at such place as Landlord may designate, without prior demand
therefor, without offset or deduction and in advance on or before the first day
of each calendar month during the Rental Term, commencing on the Rental
Commencement Date. In the event the Rental Commencement Date occurs on a day
other than the first day of a calendar month, then the Base Monthly Rent to be
paid on the Rental Commencement Date shall include both the Base Monthly Rent
for the first full calendar month occurring after the Rental Commencement Date,
plus the Base Monthly Rent for the initial fractional calendar month prorated on
a per-diem basis (based upon a thirty (30) day month).
SECTION 3.02 ESCALATION. As set forth in Section 1.01(M).
3
<PAGE> 7
SECTION 3.03 TENANT'S SHARE OF LANDLORD'S EXPENSES.
(a) "Basic Costs" shall mean all reasonable actual costs and expense
incurred by Landlord in connection with the ownership, operation, management and
maintenance of the Property Improvements located thereon including, but not
limited to, all reasonable expenses incurred by Landlord as a result of
Landlord's compliance with any and all of its obligations under this Lease (or
under similar leases with other tenants). In explanation of the foregoing, and
not in limitation thereof, Basic Costs shall include: all real and personal
property taxes and assessments (whether general or special, known or unknown,
foreseen or unforeseen) and any tax or assessment levied or charged in lieu
thereof, whether assessed against Landlord and/or Tenant and whether collected
from Landlord and/or Tenant; snow removal, trash removal, common area utilities,
cost of equipment or devices used to conserve or monitor energy consumption,
supplies, insurance, license, permit and inspection fees, cost of services of
independent contractors, cost or compensation (including employment taxes and
reasonable fringe benefits) of all persons who perform regular and recurring
duties connected with day-to-day operation, maintenance, repair, and replacement
of the Building, its equipment and the adjacent walk, and landscaped area
(including, but not limited to janitorial, scavenger, gardening, security,
parking, elevator, painting, plumbing, electrical, mechanical, carpentry, window
washing, structural and roof repairs and reserves, signing and advertising), but
excluding persons performing services not uniformly available to or performed
for substantially all Building tenants; and rental expense or a reasonable
allowance FOR depreciation of personal property used in the maintenance,
operation and repair of the Building. The foregoing notwithstanding, Basic Costs
shall not include depreciation on the Building and Improvements; amounts paid
toward principal or interest of loans of Landlord; nor "Direct Costs" as defined
in Section 3.03 (b). If the cost of any repair or replacement exceeds $5,000.00
and is of the nature normally defined as a "capital cost" under generally
accepted accounting principles, then such cost shall be amortized together with
interest at 10% per annum and charged as a "Basic Cost" over the useful life of
said repair or replacement. Tenant shall pay its Proportionate Share of Basic
Costs. "Tenant's Proportionate Share of Basic Costs" shall mean the percentage
derived from a fraction, the numerator of which is the gross rentable area of
the Premises as set forth in Section 1.01(I) and the denominator of which is
the gross rentable square footage of the Building (89,741 s.f.). Tenant's
Proportionate Share of Basic Costs initially is set forth in Section 1.01(O),
subject to increase or decrease due to increases or decreases in the gross
rentable square footage of the Premises and/or the Building.
(b) "Direct Costs" shall mean all actual costs and expenses incurred by
Landlord in connection with the operation, management, maintenance, replacement,
and repair of the Premises, including but not limited to janitorial services,
maintenance, repairs, supplies, utilities, heating, ventilation, air
conditioning, and property management fees, (which property management fees
shall not exceed four (4%) percent of the Base Monthly Rent set forth herein).
If any category of Direct Costs can only be determined on a Building wide basis,
Tenant's proportionate share of any such category of Direct Costs will be based
on the same percentage established for Tenant's Proportionate Share of Basic
Costs.
(c) Landlord may cause at Landlord's sole cost and expense (which shall
not be reimbursable in whole or in part by Tenant) meters or monitors to be
installed to measure actual electrical and ventilation/air conditioning usage in
the Premises by Tenant. "Metered Costs" shall mean the actual cost of such
usage. If such meters are installed, Tenant shall pay Landlord monthly, as
Additional Rent, the estimated costs of such metered electrical and
ventilation/air conditioning usage. If the costs of ventilation/air conditioning
usage are not separately metered for tenants in the Building said costs shall be
considered Direct Costs and shall be calculated as set forth in 3.03(a).
(d) "Estimated Costs" shall mean the projected amount of Direct Costs,
Metered Costs and Proportionate Share of Basic Costs. The Estimated Costs for
the calendar year in which the Lease commences are set forth in Section 1.01(O),
and are not included in the Base Monthly Rent. If the Estimated Costs as of the
date Tenant takes occupancy are greater than the Estimated Costs at the time
this Lease is executed, the Estimated Costs shall be increased to equal the
Estimated Costs as of the date of Tenant's occupancy.
SECTION 3.04 REPORT OF COSTS AND STATEMENT OF ESTIMATED COSTS.
(a) Within sixty (60) days after the expiration of each calendar year
occurring during the term of this Lease, Landlord shall furnish Tenant a written
statement ("Annual Report of Costs") of the Tenant's actual Direct Costs,
Metered Costs and Proportionate Share of Basic Costs occurring during the
previous calendar year. Such Annual Report of Costs shall show in reasonable
detail a breakdown of the components of the Costs set forth herein. The Annual
Report of Costs shall specify the amount by which said actual costs for the
previous year exceeds or is less than the amounts paid by Tenant as Estimated
Costs during the previous calendar year.
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(b) At the same time specified in Section 3.04 (a), Landlord
shall furnish Tenant a written statement of the Estimated Costs for the
then current calendar year ("Annual Statement of Estimated Costs.")
(c) Landlord's records of costs shall be open to inspection by
Tenant at Landlord's office during business hours and upon five (5) days
prior written notice to Landlord of Tenant's desire to conduct such
inspection. If Tenant discovers any errors in Landlord's calculations as
a result of such inspections, Landlord shall immediately adjust such
costs and credit or charge Tenant for its share of the discrepancy.
SECTION 3.05 PAYMENT OF ADDITIONAL RENT. Tenant shall pay additional
rent ("Additional Rent") as follows:
(a) With each monthly payment of Base Monthly Rent pursuant to
Section 3.01 above, Tenant shall pay TO Landlord, without offset or
deduction, one-twelfth (1/12th) of the Annual Statement of Estimated
Costs. If at any time Landlord obtains information that indicates that
any of the categories of cost comprising Estimated Costs are
significantly different than as calculated in the Annual Statement of
Estimated Costs then in effect, Landlord may amend said Statement in
order to reflect a more accurate prediction of the actual costs that
will be incurred during the calendar year, and Tenant will pay amended
Additional Rent consistent with said amended Statement.
(b) Within thirty (30) days after delivery of the Annual Report
of Costs, Tenant shall pay to Landlord the amount by which Direct Costs,
Metered Costs and Proportionate Share of Basic Costs, as specified in
the Report, exceed the aggregate of Estimated Costs actually paid by
Tenant as Additional Rent for the year at issue.
(c) If the Annual Report of Costs indicates that the Estimated
Costs paid by Tenant exceeded the actual Direct Costs, Metered Costs and
Proportionate Share of Basic Costs for the same year, Landlord, at its
sole election, shall either (i) pay the amount of such excess to Tenant,
or (ii) apply such excess against the next installments) of Base Monthly
Rent and/or Additional Rent due hereunder and so notify Tenant.
SECTION 3.06 TAXES.
(a) Landlord shall pay all real property taxes and assessments
(all of which are hereinafter collectively referred to as "Taxes') which
are levied against or which apply with respect to the Premises to be
reimbursed by Tenant as a part of Basic Costs.
(b) Tenant shall prior to delinquency pay all taxes,
assessments, charges, and fees which during the Rental Term hereof may
be imposed, assessed, or levied by any governmental or public authority
against or upon Tenant's use of the Premises or any inventory, personal
property, fixtures or equipment kept or installed, or permitted to be
located therein by Tenant.
SECTION 3.07 PAYMENTS. All payments of Base Monthly Rent, Additional
Rent and other payments to be made to Landlord shall be made on a timely basis
and shall be payable to Landlord or as Landlord may otherwise designate. All
such payments shall be mailed or delivered to Landlord's principal office set
forth in Section 1.01 (C), or at such other place as Landlord may designate from
time to time in writing. If mailed, all payments shall be mailed in sufficient
time and with adequate postage thereon to be received in Landlord's account by
no later than the due date for such payment. If Tenant shall fail to pay any
Base Monthly Rent or any Additional Rent or any other amounts or charges within
five (5) days after the due date, Tenant shall pay interest from the due date of
such past due amounts to the date of payment, both before and after judgment at
a rate equal to the greater of fourteen (14%) percent per annum or two (2%)
percent over the "prime" or "base" rate charged by Zions First National Bank of
Utah at the due date of such payment; provided however, that in any case the
maximum amount or rate of interest to be charged shall not exceed the maximum
non-usurious rate in accordance with applicable law. Notwithstanding the above,
Landlord shall waive said interest for one late payment in any calendar year
provided that Tenant pays the past due charge within five (5) days after notice
from Landlord that the charge is past due.
ARTICLE IV. RENTAL TERM, COMMENCEMENT DATE & PRELIMINARY TERM
SECTION 4.01 RENTAL TERM. The initial term of this Lease shall be for
the period defined as the Rental Term in Section 1.01(K), plus the partial
calendar month, if any, occurring after the Rental Commencement Date (as
hereinafter defined) if the Rental Commencement Date occurs other than on the
first day of a calendar month. "Lease Year" shall include twelve (12) calendar
months, except that first Lease Year will also include any partial calendar
month beginning on the Rental Commencement Date.
SECTION 4.02 RENTAL COMMENCEMENT DATE. The Rental Term of this Lease and
Tenant's obligation to pay rent hereunder shall commence as set forth in Section
1.01K (the "Rental Commencement Date"). Within five (5) days after Landlord's
request to do so, Landlord and Tenant shall execute a written
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affidavit, in recordable form, expressing the Rental Commencement Date and the
termination date, which affidavit shall be deemed to be part of this Lease.
SECTION 4.03 PRELIMINARY TERM. The period between the date Tenant enters
upon the Premises and the commencement of the Rental Term will be designated as
the "preliminary term" during which neither Base Monthly Rent nor Additional
Rent shall accrue; however, other covenants and obligations of Tenant shall be
in full force and effect. Delivery of possession of the Premises to Tenant AS
provided in Section 5.03 shall be considered "entry" by Tenant and commencement
of "preliminary term".
ARTICLE V. CONSTRUCTION OF PREMISES
SECTION 5.01 CONSTRUCTION BY LANDLORD. Landlord will construct the
Building in which the Premises are to be located. The Premises shall be
constructed substantially in accordance with Outline Specifications entitled
"Landlord's Work" marked Exhibit "C" attached hereto and made a part hereof. it
is understood and agreed by Tenant that no minor changes which do not impair
Tenant's efficient business use of the Leased Premises from any plans or from
said Outline Specifications made necessary during construction of the Premises
or the Building shall affect or change this Lease or invalidate same.
SECTION 5.02 CHANGES AND ADDITIONS BY LANDLORD. Landlord hereby reserves
the right at any time, and from time to time, to make alterations or additions
TO, and to build additional stories on the Building in which the Premises are
contained and to build adjoining the same and to modify the existing parking or
other common areas to accommodate additional buildings. Landlord also reserves
the right to construct other buildings or improvements in the Building area from
time to time, on condition that if the Building area is expanded so as to
include any additional buildings, Landlord agrees to create or maintain a
parking ratio adequate to meet local laws and ordinances, including the right to
add land to the Building or to erect parking structures thereon. Notwithstanding
the above, the addition of new improvements shall not, after constructed,
materially interfere with Tenant's access to or from or use of the Leased
Premises. Furthermore, during construction, Landlord shall undertake prudent
reasonable steps to minimize interference with Tenant's access to or from the
Leased Premises.
SECTION 5.03 DELIVERY OF POSSESSION. Except as hereinafter provided,
Landlord shall deliver the Premises to Tenant ready for Tenant's Work on or
before the date set forth in Section 1.01(j). The Premises shall be deemed as
ready for delivery when Landlord shall have substantially completed construction
of the portion of the said Premises to be occupied exclusively by Tenant, in
accordance with Landlord's obligations set forth in Exhibit "C". Landlord shall,
from time to time during the course of construction, provide information to
Tenant concerning the progress of construction of said Premises, and will give
written notice to Tenant when said Premises are in fact ready for Tenant's Work.
Notwithstanding the foregoing, Landlord shall have the right to extend the date
for delivery of possession of the Premises for a period of three one (1) month
periods by notice in writing given to Tenant any time prior to said delivery
date. If any disputes shall arise as to the Premises being ready for delivery of
possession, a certificate furnished by Landlord's architect in charge so
certifying shall be conclusive and binding of that fact and date upon the
parties. It is agreed that by occupying the Premises as a tenant, Tenant
formally accepts the same and acknowledges that the Premises are in the
condition called for hereunder, except for items specifically excepted in
writing at date of occupancy as "incomplete".
ARTICLE VI. TENANT'S WORK & LANDLORD'S CONTRIBUTION
SECTION 6.01 TENANT'S WORK. Tenant agrees to provide all work of
whatsoever nature in accordance with its obligations set forth in Exhibit "D".
Tenant agrees to furnish Landlord, within the time periods required in Exhibit
"D", with a complete and detailed set of plans and specifications drawn by some
qualified person reasonably acceptable to Landlord setting forth and describing
Tenant's Work in such detail as Landlord may reasonably require and in
compliance with Exhibit "D", unless this requirement be waived in writing by
Landlord. If said plans and specifications are not so furnished by Tenant within
the required time periods, then Landlord may, at its option, in addition to
other remedies Landlord may enjoy, cancel this Lease at any time thereafter
while such plans and specifications have not been so furnished. No material
deviation from the final set of plans and specifications once submitted to and
approved by Landlord, shall be made by Tenant without Landlord's prior written.
consent, which shall not be unreasonably withheld. Landlord shall have the right
to approve Tenant's architect and contractor to be used in performing Tenant's
Work, and the right to require and approve insurance or bonds provided by Tenant
or such contractors. in due course after completion of Tenant's Work, Tenant
shall certify to Landlord the itemized cost of Tenant improvements and fixtures
located upon the Premises.
SECTION 6.02 LANDLORD CONTRIBUTION TO TENANT'S WORK. In addition to
Landlord Work to be completed pursuant to Exhibit "C", Landlord shall contribute
the amount set forth in Section 1.01 (Q) toward Tenant's Work set forth in
Exhibit "D". If Tenant does not spend all of the Contribution to Tenant's Work,
then Landlord shall reduce the Base Monthly Rent as set forth in Section 1.01
(L) by $1.00 for each $100.00 of Landlord Contribution which Tenant does not
spend.
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ARTICLE VII. USE
SECTION 7.01 USE OF PREMISES. Tenant shall use the Premises solely for
the purpose of conducting the business indicated in Section 1.01(F) and for
purposes ordinarily incidental to such use and only for such purposes and in
such manner as are permitted both by the Protective Covenants relating to the
University of Utah Research Park and by any existing legislation concerning the
Research Park. Tenant shall not make any use of the Premises which might cause
cancellation or an increase in the cost of any insurance policy covering the
same unless Tenant commits to pay the amount of increase in said insurance
premium in addition to other payments set forth in this Lease. Tenant shall not
make any use of the Leased Premises any article, item, or thing which is
prohibited by the standard form of fire insurance policy. Tenant shall not
commit any waste upon the Leased Premises and shall not conduct or allow any
business activity, or thing on the Leased Premises which is an annoyance or
causes damage to Landlord, to other sub-tenants, occupants, or users of the
Improvements, or to occupants of the vicinity. Tenant shall comply with and
abide by all laws, ordinances, and regulations of all municipal, county, state,
and federal authorities which are now in force or which may hereafter become
effective with respect to use and occupancy of the Premises. Landlord represents
that to the best of its knowledge and understanding, that upon delivery of
possession as set forth in Section 5.03, the Building will comply with all
currently applicable laws, ordinances and regulations of municipal, county,
state and federal authorities.
SECTION 7.02 HAZARDOUS SUBSTANCES.
(a) Landlord shall be responsible for removal of any Hazardous
Substances that existed at the Project prior to construction or any that
Landlord has or does install at the Premises OR Building. After
reasonable inquiry, Landlord is not aware of any existing Hazardous
Substances within the Project areas.
(b) Tenant shall not use, produce, store, release, dispose or
handle in or about the Leased Premises or transfer to or from the Leased
Premises (or permit any other party to do such acts) any Hazardous
Substance except in compliance with all applicable Environmental Laws.
Tenant shall not construct or use any improvements, fixtures or
equipment or engage in any act on or about the Leased Premises that
would require the procurement of any license or permit pursuant to any
Environmental Law. Upon Tenant obtaining actual knowledge of same,
Tenant shall immediately notify Landlord of (i) the existence of any
Hazardous Substance on or about the Leased Premises that may be in
violation of any Environmental Law (regardless of whether Tenant is
responsible for the existence of such Hazardous Substance), (ii) any
proceeding or investigation by any governmental authority regarding the
presence of any Hazardous Substance on the Leased Premises or the
migration thereof to or from any other property, (iii) all claims made
or threatened by any third party against Tenant relating to any loss or
injury resulting from any Hazardous Substance, or (iv) Tenant's
notification of the National Response Center of any release of a
reportable quantity of a Hazardous Substance in or about the Leased
Premises. "Environmental Laws" shall mean any federal, state or local
statute, ordinance, rule, regulation or guideline pertaining to health,
industrial hygiene, or the environment, including without limitation,
the federal Comprehensive Environmental Response, Compensation, and
Liability Act; "Hazardous Substance" shall mean all substances,
materials and wastes that are or become regulated, or classified as
hazardous or toxic, under any Environmental Law. If it is determined
that any Hazardous Substance exists on the Leased Premises resulting
from any act of Tenant or its employees, agents, contractors, licensees,
subtenants or customers, then Tenant shall immediately take necessary
action to cause the removal of said substance and shall remove such
within ten (10) days after discovery. Notwithstanding the above, if the
Hazardous Substance is of a nature that can not be reasonably removed
within ten (10) days Tenant shall not be in default if Tenant has
commenced to cause such removal and proceeds diligently thereafter to
complete removal, except that in all cases, any Hazardous Substance must
be removed within sixty (60) days after discovery thereof. Furthermore,
notwithstanding the above, if in the good faith judgment of Landlord,
the existence of such Hazardous Substance creates an emergency or is of
a nature which may result in immediate physical danger to persons AT the
Property, Landlord may enter upon the Leased Premises and remove such
Hazardous Substances and, if the existence was a result of the act of
the Tenant or its employee, agent, contractor, licensee, subtenant, or
customers, Landlord may charge the cost thereof to Tenant as Additional
Rent.
ARTICLE VIII. OPERATION AND MAINTENANCE OF COMMON AREAS
SECTION 8.01 CONSTRUCTION AND CONTROL OF COMMON AREAS. All automobile
parking areas, driveways, entrances and exits thereto, and other facilities
furnished by Landlord in or near the buildings or Building, including if any,
employee parking areas, truck ways, loading docks, mail rooms or mail pickup
areas, pedestrian sidewalks and hallways, landscaped areas, retaining walls,
stairways, elevators, utility rooms, restrooms and other areas and improvements
provided by Landlord for the general use in common tenants, their officers,
agents, employees and customers, shall at all times be subject to the exclusive
control and management of Landlord which shall have the right from time to time
to establish,
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reasonable non-discriminatory Rules and Regulations with respect to all
facilities and modify and enforce areas mentioned in this Section. Landlord
shall have the right to construct, maintain and operate lighting and drainage
facilities on or in all said areas and improvements; to police the same, from
time to time to change the area, level, location and arrangement of parking
areas and other facilities hereinabove referred to; to restrict parking by
tenants, their officers, agents and employees to employee parking areas; to
close temporarily all or any portion of said areas or facilities to such extent
as may, in the opinion of counsel, be legally sufficient to prevent a dedication
thereof or the accrual of any rights to any person or the public therein; to
assign "reserved" parking spaces for exclusive use of certain tenants or for
customer parking, to discourage non-employee and non-customer parking; and to do
and perform such other acts in and to said areas and improvements as, in the
exercise of good business judgment, the Landlord shall determine to be advisable
with a view toward maintaining of appropriate convenience uses, amenities, and
for permitted uses by tenants, their officers, agents, employees and customers.
Landlord will operate and maintain the common facilities referred to above in
such a manner as it, in its sole discretion, shall determine from time to time
but in any event, Landlord shall maintain the common facilities in a clean,
sanitary and safe condition in accordance with applicable laws, rules and
regulations. Landlord shall take reasonable measures to minimize to the extent
reasonably possible interference with Tenant's business while performing
Landlord's common area maintenance responsibilities, but Landlord shall not be
liable for any interference resulting from Landlord's prudent performance of
said responsibilities. Without limiting the scope of such discretion, Landlord
shall have the full right and authority to employ all personnel and to make all
Rules and Regulations pertaining to and necessary for the proper operation,
security and maintenance of the common areas and facilities. Building and/or
project signs, traffic control signs and other signs determined by Landlord to
be in best interest of the Building, will be considered part of common area and
common facilities.
SECTION 8.02 LICENSE. All common areas and facilities not within the
Premises, which Tenant may be permitted to use and occupy, are to be used and
occupied under a revocable license, and if the amount of such areas be
diminished, Landlord shall not be subject to any liabilities nor shall Tenant be
entitled to any compensation or diminution or abatement of rent, nor shall such
diminution of such areas be deemed constructive or actual eviction, so long as
such revocations or diminutions are deemed by Landlord to serve the best
interests OF the Building. Notwithstanding the above, Landlord shall not
permanently materially alter Tenant's access to or from the Leased Premises.
ARTICLE IX. ALTERATIONS, SIGNS, LOCKS & KEYS
SECTION 9.01 ALTERATIONS. Tenant shall not make or suffer to be made any
alterations or additions to the Premises in excess of $5,000 or which may affect
the building structure or building HVAC, electrical or plumbing systems without
the prior written consent of Landlord. Any additions to, or alterations of the
Premises except movable furniture, equipment and trade fixtures shall become a
part of the realty and belong to Landlord upon the termination of Tenant's lease
or renewal term or other termination or surrender of the Premises to Landlord.
SECTION 9.02 SIGNS. Subject to the restrictions of the University
Research Park and obtaining written prior approval of University Research Park
and of Landlord and any required municipal or other public approvals and subject
to full conformity with Exhibit "E" Tenant at its own expense, may place a
suitable Tenant identification sign on the Building and/or Premises, provided
that any such sign shall be in the same general Building location and the
general design conforms to the same design and style of other tenant signs on
the Building. If any sign is erected prior to obtaining written University
Research Park and Landlord approval Tenant shall be required to remove said sign
and repair any damage caused thereby at its sole cost and expense. At the
termination of this Lease, Tenant shall remove said signs. Tenant shall repair
any damage caused by the installation or removal of any Tenant signs. All work
shall be completed in a good and workmanlike manner
SECTION 9.03 LOCKS AND KEYS.
(a) The building shall be equipped with an electronic card
access system at entrance to building as well as primary doors of the
Leased Premises. Landlord shall issue, monitor, and program key cards
for Tenant and Tenant's employees, as reasonably needed. Tenant shall
pay the Landlord's cost for program key cards requested by Tenant. When
employment relationships change, Tenant shall cooperate to attempt to
retrieve said key cards from employees leaving Tenant.
(b) Where key access exists, Tenant may change locks or install
other locks on doors, but if Tenant does, Tenant must provide Landlord
with duplicate keys within twenty four hours after said change or
installation.
(c) Upon termination of this Lease Tenant shall deliver to
Landlord all cards and keys to the Premises including any interior
offices, toilet rooms, combinations to built-in safes, etc. which shall
have been furnished to or by the Tenant or are in the possession of the
Tenant.
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ARTICLE X. MAINTENANCE AND REPAIRS; ALTERATIONS; ACCESS
SECTION 10.01 LANDLORD'S OBLIGATION FOR MAINTENANCE. Landlord shall
maintain and repair: (1) the areas outside the Premises including hallways,
stairways, elevators, public restrooms, if any, general landscaping, parking
areas, driveways and walkways; (2) the Building structure including roof,
exterior walls, and foundation; and (3) all plumbing, electrical, heating, and
air conditioning systems. However, if the need for such repairs or maintenance
results from any careless, wrongful or negligent act or omission of Tenant,
Tenant shall pay the entire cost of any such repair or maintenance including a
reasonable charge to cover Landlord's supervisory overhead. Except in case of
emergency repairs of which Landlord becomes aware of, Landlord shall not be
obligated to repair any damage or defect until receipt of written notice from
Tenant of the need of such repair and Landlord shall have a reasonable time
after receipt of such notice in which to make such repairs. Tenant shall give
immediate notice to Landlord in case of fire or accidents in the Premises or in
the building of which the Premises are a part or of defects therein or in any
fixtures or equipment provided by Landlord. If Landlord does not repair such
items within a reasonable time, Tenant may do so on behalf of Landlord and bill
the cost thereof to Landlord who shall pay such within twenty (20) days after
receipt thereof unless Landlord notifies Tenant in writing that Landlord
disputes the repair or cost thereof.
SECTION 10.02 TENANT'S OBLIGATION FOR MAINTENANCE.
(a) Tenant shall provide its own janitorial service and keep and
maintain the Premises including the interior wall surfaces and windows,
floors, floor coverings and ceilings in a clean, sanitary and safe
condition in accordance with the laws of the State and in accordance
with all directions, rules and regulations of the health officer, fire
marshall, building inspector, or other proper officials of the
governmental agencies having jurisdiction, at the sole cost and expense
of Tenant, and Tenant shall comply with all requirements of law,
ordinance and otherwise, affecting said Premises.
(b) Tenant shall pay, when due, all claims for labor or material
furnished, for work under Sections 9.01, 9.02 and 10.02 hereof, to or
for Tenant at or for use in the Premises, and shall bond such work if
reasonably required by Landlord to prevent assertion of claims against
Landlord.
(c) Tenant agrees to be responsible for all furnishings,
fixtures and equipment located upon the Premises from time to time and
shall replace carpeting within the Premises if same shall be damaged by
tearing, burning, or stains resulting from spilling anything on said
carpet, reasonable wear and teat accepted.
SECTION 10.03 SURRENDER AND RIGHTS UPON TERMINATION.
(a) This Lease and the tenancy hereby created shall cease and
terminate at the end of the Rental Term hereof, or any extension or
renewal thereof, without the necessity of any notice from either
Landlord or Tenant to terminate the same, and Tenant hereby waives
notice to vacate the Premises and agrees that Landlord shall be entitled
to the benefit of all provisions of law respecting summary recovery of
possession of Premises from a Tenant holding over to the same extent as
if statutory notice has been given.
(b) Upon termination of this Lease at any time and for any
reason whatsoever, Tenant shall surrender and deliver up the Premises to
Landlord in the same condition as when the Premises were delivered to
Tenant or as altered as provided in Section 9.01, ordinary wear and tear
excepted. Upon request of Landlord, Tenant shall promptly remove all
personal property from the Premises and repair any damage caused by such
removal. Obligations under this Lease relating to events occurring or
circumstances existing prior to the date of termination shall survive
the expiration or other termination of the Rental Term of this Lease.
ARTICLE XI. INSURANCE AND INDEMNITY
SECTION 11.01 LIABILITY INSURANCE AND INDEMNITY. Tenant shall, during
all terms hereof, keep in full force and effect a policy of public bodily injury
and property damage liability insurance with respect to the Premises, with a
combined single limit of not less than Two Million Dollars ($2,000,000.00) per
occurrence. The policy shall name Landlord, Property Manager (i.e., Woodbury
Corporation) and any other persons, firms or corporations designated by Landlord
and Tenant as insured, and shall contain a clause that the insurer will not
cancel or change the insurance without first giving the Landlord ten (10) days
prior written notice. Such insurance shall include an endorsement permitting
Landlord and Property Manager to recover damage suffered due to act or omission
of Tenant, notwithstanding being named as an additional "Insured party" in such
policies. Such insurance may be furnished by Tenant under any blanket policy
carried by it or under a separate policy therefor. The insurance shall be with
an insurance company approved by Landlord and a copy of the paid-up policy
evidencing such insurance or a certificate of insurer
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certifying to the issuance of such policy shall be delivered to Landlord. If
Tenant fails to provide such insurance, Landlord may do so and charge same to
Tenant.
Tenant will indemnify, defend and hold Landlord harmless from and
against any and all claims, connection with loss of life, personal injury and/or
damage to actions, damages, liability and expense in property arising from or
out of any occurrence in, upon or at the Premises or from the occupancy or use
by Tenant of the Premises or any part thereof, or occasioned by any act or
omission of Tenant, its agents, contractors, employees, servants, sublessees,
concessionaires or business invitees unless caused by the negligence of Landlord
its employees, contractors or agents, and to the extent not covered by its fire,
casualty and liability insurance. In case Landlord shall, without fault of its
part, be made a party to any litigation commenced by or against Tenant, then
Tenant shall protect and hold Landlord harmless and shall pay ALL costs,
expenses and reasonable attorney fees incurred or paid by either in defending
itself or enforcing the covenants and agreements of this Lease.
SECTION 11.02 FIRE AND CASUALTY INSURANCE.
(a) Subject to the provisions of this Section 11.02, Landlord
shall secure, pay for, and at all times during the terms hereof
maintain, insurance providing coverage upon the building improvements in
an amount equal to the full insurable value thereof (as determined by
Landlord) and insuring against the perils of fire, extended coverage,
vandalism, and malicious mischief. All insurance required hereunder
shall be written by reputable, responsible companies licensed in the
State of Utah. Tenant shall have the right, at its request at any
reasonable time, to be furnished with copies of the insurance policies
then in force pursuant to this Section, together with evidence that the
premiums therefor have been paid.
(b) Tenant agrees to maintain at its own expense such fire and
casualty insurance coverage as Tenant may desire or require in respect
to Tenant's personal property, equipment, furniture, fixtures or
inventory and Landlord shall have no obligation in respect to such
insurance or losses. All property kept or stored on the Premises by
Tenant or with Tenant's permission shall be so done at Tenant's sole
risk and Tenant shall indemnify Landlord against and hold it harmless
from any claims arising out of loss or damage to same.
(c) Landlord represents that the Premises will be initially
designed to permit the operation of Tenant's computer-related business
as described to Landlord as of the date of this Lease without any
increase in casualty insurance premium. Thereafter, Tenant will not
permit said Premises to be used for any purpose which would render the
insurance thereon void or cause cancellation thereof or increase the
insurance risk or increase the insurance premiums (unless Tenant agrees
to pay such increased premiums) in effect just prior to the commencement
of this Lease. Tenant agrees to pay as additional rent the total amount
of any increase in the insurance premium of Landlord over that in effect
prior to the commencement of this lease resulting from Tenant use of the
Premises. If Tenant installs any electrical or other equipment which
overloads the lines in the Premises, Tenant shall at its own expense
make whatever changes are necessary to comply with the requirements of
Landlord's insurance.
(d) Tenant shall be responsible for all glass breakage within
the Premises and any exterior glass breakage resulting from acts or
negligence of Tenant, its employees, agents, contractors, licensees,
subtenants, or customers and agrees to immediately replace all glass
broken or damaged, for which Tenant is responsible, with glass of the
same quality as that broken or damaged. Landlord may replace, at
Tenant's expense, any such broken or damaged glass if not replaced by
Tenant within five (5) days after such damage and charge the cost
thereof to Tenant. Landlord shall be responsible for replacement of any
other damaged glass at the Premises or the Building and shall similarly
replace such in the same manner required of Tenant hereunder.
SECTION 11.03 WAIVER OF SUBROGATION. Each party hereto does hereby
release and discharge the other party hereto and any officer, agent, employee or
representative of such party, of and from any liability whatsoever hereafter
arising from loss, damage or injury caused by fire or other casualty for which
insurance (permitting waiver of liability and containing a waiver of
subrogation) is carried by the injured party at the time of such loss, damage or
injury to the extent of any recovery by the injured party under such insurance.
ARTICLE XII. UTILITY CHARGES
SECTION 12.01 OBLIGATION OF LANDLORD. Subject to the terms of Section
3.03 and unless otherwise agreed in writing by the parties, during the term of
this Lease the Landlord shall cause to be furnished to the Premises during
standard business hours (7:00 a.m. to 6:00 p.m. Monday through Friday and 8:00
a.m. to 1:00 p.m. on Saturday), except Holidays, the following utilities and
services, the cost and expense of which shall be included in Direct Costs,
Metered Costs and/or Basic Costs as appropriately categorized by the Landlord:
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(a) Electricity, water, gas and sewer service.
(b) Telephone connection, but not including telephone stations and
equipment (it being expressly under-stood and agreed that Tenant
shall be responsible for the ordering and installation of
telephone lines and equipment which pertain to the Premises).
(c) Heat and air-conditioning to such extent and to such levels as,
in Landlord's judgment, is reasonably required for the
comfortable use and occupancy of the Premises subject however to
any limitations imposed by University Research Park or any
government agency. The parties agree and understand that the
above heat and air-conditioning will be provided Monday through
Friday from 7:00 a.m. to 6:00 p.m. and Saturday from 8:00 a.m.
to 1:00 p.m.
(d) Snow removal and parking lot sweeping services.
(e) Elevator service.
SECTION 12.02 OBLIGATIONS OF TENANT. Tenant shall arrange for and shall
pay the entire cost and expense of all telephone stations, equipment and use
charges, electric light bulbs (but not fluorescent bulbs used in fixtures
originally installed in the Premises) and ALL other materials and services not
expressly required to be provided and paid for pursuant to the provisions of
Section 12.01 above. Tenant covenants to use good faith efforts to reasonably
conserve utilities by turning off lights and equipment when not in use and
taking such other reasonable actions in accordance with sound standards for
energy conservation. Landlord reserves the right at Landlord's sole expense
(without reimbursement for such installation and meter costs from Tenant) to
separately meter or otherwise monitor any utility usage and to separately charge
Tenants for its own utilities, in which case an equitable adjustment shall be
made to Base Rental and Tenant's share of Operating Expenses as set forth in
this Lease. Additional limitations of Tenant are as follows:
(a) Tenant will not, without the written consent of Landlord,
which consent shall not be unreasonably withheld, use any machine or
device at the Premises using current in excess of 208 volts which will
in any way or to any extent increase the amount of electricity or water
usually furnished or supplied for use on the Premises for the use
designated in Section 7.01 above, nor connect with electrical current,
except through existing electrical outlets in the Premises, or water
pipes, any apparatus or device, for the purposes of using electric
current or water.
(b) If Tenant shall require water or electric current in excess
of that usually furnished or supplied for use of the Premises, or for
purposes other than those designated in Section 7.01 above, Tenant shall
first procure the written consent of Landlord for the use thereof, which
consent Landlord may refuse and/or Landlord may cause a water meter or
electric current meter to be installed in the Leased Premises, so as to
measure the amount of water and/or electric current consumed for any
such use. The cost of such meters and of installation maintenance, and
repair thereof shall be paid for by Tenant and Tenant agrees to pay
Landlord promptly upon demand by Landlord for all such water and
electric current consumed as shown by said meters, at the rates charged
for such service by the City in which the Building is located or the
local public utility, as the case may be, furnishing the same, plus any
additional expense incurred in keeping account of the water and electric
current so consumed.
(c) If and where heat generating devices are used in the
Premises which materially affect the temperature otherwise maintained by
the air conditioning system, Landlord reserves the right to install
additional or supplementary air conditioning units for the Premises, and
the entire cost of installing operating, maintaining and repairing the
same shall be paid by Tenant to Landlord promptly after demand by
Landlord.
To the extent that Tenant operates hours in excess of the stated
standard business hours, Tenant may cause Landlord to provide services
set forth in Section 12.01 (a), (b), (c) and (e) above; however, Tenant
shall pay extra hourly utility charges as set forth in Section 1.01(S)
herein. If electricity is metered pursuant to Section 3.03(c), then
Tenant shall not be required to pay extra electrical charges as
electrical usage during 'excess hours' will be metered and charged to
Tenant in any case.
SECTION 12.03 LIMITATIONS ON LANDLORDS LIABILITY. Landlord shall not be
liable for and Tenant shall not be entitled to terminate this Lease or to
effectuate any abatement or reduction of rent by reason of Landlord's failure to
provide or furnish any of the foregoing utilities or services if such failure
was reasonably beyond the control of Landlord. In no event shall Landlord be
liable for loss or injury to persons or property, however, arising or occurring
in connection with or attributable to any failure to furnish such utilities or
services even if within the control of Landlord.
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ARTICLE XIII. OFF-SET STATEMENT, ATTORNMENT AND SUBORDINATION
SECTION 13.01 OFF-SET STATEMENT. Tenant agrees within ten (10) days
after request therefor by Landlord to execute in recordable form and deliver to
Landlord a statement in writing, certifying
(a) that this Lease is in full force and effect,
(b) the date of commencement of the Rental Term of this
Lease,
(c) that rent is paid currently without any off-set or
defense thereto,
(d) the amount of rent, if any paid in advance, and
(e) that there are no uncured defaults by Landlord or
stating those claimed by Tenant.
SECTION 13.02 ATTORNMENT. Tenant shall, in the event any proceedings are
brought for the foreclosure of, or in the event of exercise of the power of sale
under any mortgage or deed of trust made by Landlord covering the Premises,
attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as the Landlord under this Lease.
SECTION 13.03 SUBORDINATION. Tenant agrees that this Lease shall, at the
request of Landlord, be subordinate to any first mortgages or deeds of trust
that may hereafter be placed upon said Premises and to any and all advances to
be made thereunder, and to the interest thereon, and all renewals, replacements
and extensions thereof, provided the mortgagees or trustees named in said
mortgages or deeds of trust shall agree to recognize the Lease of Tenant in the
event of foreclosure, if Tenant is not in default and execute a non-disturbance
agreement in a form acceptable to Landlord's lender.
SECTION 13.04 MORTGAGEE SUBORDINATION. Tenant hereby agrees that this
Lease shall, if at any time requested by Landlord or any lender in respect to
Landlord's financing of the building or project in which the Premises are
located or any portion hereof, be made superior to any mortgage or deed of trust
that may have preceded such Lease.
SECTION 13.05 REMEDIES. Tenant hereby irrevocably appoints Landlord as
attorney-in-fact for the Tenant with full power and authority to execute and
deliver in the name of the Tenant any such instruments described in this Article
XIII upon failure of the Tenant to execute and deliver any of the above
instruments within fifteen (15) days after written request so to do by
Landlord; and such failure shall constitute a breach of this Lease entitling the
Landlord, at its option, to cancel this Lease and terminate the Tenant's
interest therein.
ARTICLE XIV. ASSIGNMENT
SECTION 14.01 ASSIGNMENT. Tenant may assign or sublet all or any portion
of the Premises, or any part thereof for the same use permitted in Section 1.01
(F), provided that Tenant shall maintain continuing liability for all
obligations under this Lease. Tenant may not assign or sublet for any other use
without the written consent of Landlord, which consent will not be withheld
unreasonably.
ARTICLE XV. WASTE OR NUISANCE
SECTION 15.01 WASTE OR NUISANCE. Tenant shall not commit or suffer to be
committed any waste upon the Premises, or any nuisance or other act or thing
which may disturb the quite enjoyment of any other tenant in the building in
which the Premises may be located, or elsewhere within the Building.
ARTICLE XVI. NOTICES
SECTION 16.01 NOTICES. Except as provided in Section 19.01, any notice
required or permitted hereunder to be given or transmitted between the parties
shall be either personally delivered, or mailed postage prepaid by registered
mall, return receipt requested, addressed if to Tenant at the address set forth
in Section 1.01 (E), and if to Landlord at the address set forth in Section
1.01(C). Either party may, by notice to the other given as prescribed in this
Section 16.01, change its above address for any future notices which are mailed
under this Lease.
ARTICLE XVII. DESTRUCTION OF THE PREMISES
SECTION 17.01 DESTRUCTION.
(a) If the Premises are partially or totally destroyed by fire
or other casualty insurable under standard fire insurance policies with
extended coverage endorsement so as to become
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partially or totally untenantable, the same shall be repaired or rebuilt
as speedily as practical under the circumstances at the expense of the
Landlord, unless Landlord elects not to repair or rebuild as provided in
Subsection (b) of this Section 17.01. During the period required for
restoration, a just and proportionate part of Base Rent, additional rent
and other charges payable by Tenant hereunder shall be abated until the
Premises are repaired or rebuilt. Notwithstanding the above, if Landlord
cannot reasonably restore the Premises to a tenantable condition within
120 days after the occurrence of the casualty, then Landlord shall
notify Tenant and Tenant may elect to terminate this Lease by giving
written notice to Landlord within 10 days after receipt of Landlord's
notice.
(b) If the Premises are (I) rendered totally untenantable by
reason of an occurrence described in Subsection (a), or (II) damaged or
destroyed as a result of a risk which is not insured under Landlord's
fire insurance policies, or (III) at least twenty percent (20%) damaged
or destroyed during the last two years of the Rental Term, or (IV) if
the Building is damaged in whole or in part (whether or not the Premises
are damaged), to such an extent that Tenant cannot practically use the
Premises for its intended purpose, then and in any such events Landlord
may at its option terminate this Lease Agreement by notice in writing to
the Tenant within sixty (60) days after the date of such occurrence.
Unless Landlord gives such notice, this Lease Agreement will remain in
full force and effect subject to this Section 17.01 and Landlord shall
repair such damage at its expense as expeditiously as possible under the
circumstances.
(c) If Landlord should elect or be obligated pursuant to
Subsection (b) above to repair or rebuild because of any damage or
destruction, Landlord's obligation shall be limited to the original
Building any other work or improvements which may have been originally
performed or installed at Landlord's expense. If the cost of performing
Landlord's obligation exceeds the actual proceeds of insurance paid or
payable to Landlord on account of such casualty, Landlord may terminate
this Lease Agreement unless Tenant, within fifteen (15) days after
demand therefor, deposits with Landlord a sum of money sufficient to pay
the difference between the cost of repair and the proceeds of the
insurance available for such purpose. Tenant shall replace all work and
improvements not originally installed or performed by Landlord at its
expense.
(d) Except as stated in this Article XVII, Landlord shall not be
liable for any loss or damage sustained by Tenant by reason of
casualties mentioned hereinabove or any other accidental casualty.
ARTICLE XVIII. CONDEMNATION
SECTION 18.01 CONDEMNATION. As used in this Section the term
"Condemnation Proceeding" means any action or proceeding in which any interest
in the Premises or Building is taken for any public or quasi-public purpose by
any lawful authority through exercise of the power of eminent domain or right of
condemnation or by purchase or otherwise in lieu thereof. If the whole of the
Premises is taken through Condemnation Proceedings, this Lease shall
automatically terminate as of the date possession is taken by he condemning
authority. If in excess of twenty-five (25%) percent of the Premises is taken,
either party hereto shall have the option to terminate this Lease by giving the
other written notice of such election at any time within thirty (30) days after
the date of taking. If less than twenty-five (25%) percent of the space is taken
and Landlord determines, in Landlord's sole discretion, that a reasonable amount
of reconstruction thereof will not result in the Premises or the Building
becoming a practical improvement reasonably suitable for use for the purpose for
which it is designed, then Landlord may elect to terminate this Lease Agreement
by giving thirty (30) days written notice as provided hereinabove. In all other
cases, or if neither party exercises its option to terminate, this Lease shall
remain in effect and the rent payable hereunder from and after the date of
taking shall be proportionately reduced in proportion to the ratio of: (1) the
area contained in the Premises which is capable of occupancy after the taking;
to (II) the total area contained in the Premises which was capable of occupancy
prior to the taking. in the event of any termination or rental reduction
provided for in this Section, there shall be a proration of the rent payable
under this Lease and Landlord shall refund any excess theretofore paid by
Tenant. Whether or not this Lease is terminated as a consequence of Condemnation
Proceedings, all damages or compensation awarded for a partial or total taking,
including any sums compensating Tenant for diminution in the value of or
deprivation of its leasehold estate, shall be the sole and exclusive property of
Landlord, except that Tenant will be entitled to any awards intended to
compensate Tenant for expenses of locating and moving Tenant's operations to a
new space.
ARTICLE XIX. DEFAULT OF TENANT
SECTION 19.01 DEFAULT - RIGHT TO RE-ENTER. In the event of any failure
of Tenant to pay any rental due hereunder within ten (10) days after written
notice that the same is past due shall have been mailed to Tenant, or any
failure by Tenant to perform any other of the terms, conditions or covenants
required of Tenant by this Lease within thirty (30) days after written notice of
such default shall have been mailed to Tenant, or if Tenant shall permit this
Lease to be taken under any writ of execution, then Landlord, besides other
rights or remedies it may have, shall have the right to declare this Lease
terminated and shall
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have the immediate right of re-entry and may remove all persons and property
from the Premises. Such property may be removed and stored in a public warehouse
or elsewhere at the cost of and for the account of Tenant, without evidence of
notice or resort to legal process and without being deemed guilty of trespass,
or becoming liable for any loss or damage which may be occasioned thereby.
Tenant hereby waives all compensation for the forfeiture of the term or its loss
of possession of the Premises in the event of the forfeiture of this Lease as
provided for above. If Tenant has abandoned the Premises and notices are not
deliverable to Tenant at the address provided by Tenant for notices, in lieu of
mailing, Landlord may conspicuously post such notice for ten (10) consecutive
days at the main entrance to or in front of the Premises, and such notice shall
constitute a good, sufficient, and lawful notice for the purpose of declaring a
forfeiture of this Lease and for terminating all of the rights of the Tenant
hereunder.
SECTION 19.02 DEFAULT - RIGHT TO RE-LET. Should Landlord elect to
re-enter, as herein provided, or should it take possession pursuant to legal
proceedings or pursuant to any notice provided for by law, it may either
terminate this Lease or it may from time to time, without terminating this
Lease, make such reasonable alterations and repairs as may be necessary in order
to relet the Premises, and may relet said Premises or any part thereof for such
term or terms (which may be for a term extending beyond the term of this Lease)
and at such rental or rentals and upon such other terms and conditions as
Landlord in its sole discretion may deem advisable. Upon each such reletting,
all rentals received by Landlord from such reletting shall be applied first to
the payment of any reasonable costs and expenses of such reletting, including
brokerage fees and attorney's fees and costs of such alterations and repairs;
second, to the payment of rent or other unpaid obligations due hereunder; and
the residue, if any, shall be held by Landlord and applied in payment of future
rent as the same may become due and payable hereunder. If such rental received
from such reletting during any month be less than that to be paid during that
month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord.
Such deficiency shall be calculated and paid monthly. No such re-entry or taking
possession of said Premises by Landlord shall be construed as an election on its
part to terminate this Lease unless a written notice of such intention be given
to Tenant or unless the termination thereof be decreed by a court or competent
jurisdiction. Notwithstanding any such reletting without termination, Landlord
may at any time elect to terminate this Lease for such previous default. Should
Landlord at any time terminate this Lease for any default, in addition to any
other remedies it may have, it may recover from Tenant all damages it may incur
by reason of such default, including the cost of recovering the Premises,
reasonable attorney's fees, and including the worth at the time of such
termination of the excess, if any, of the amount of rent and charges equivalent
to rent reserved in this Lease for the remainder of the stated term over the
then reasonable rental value of the Premises for the remainder of the stated
term, all of which amounts shall be immediately due and payable.
SECTION 19.03 LEGAL EXPENSES. In case of default by either party in the
performance and obligations under this Lease, the defaulting party shall pay all
costs incurred in enforcing this Lease, or any right arising out of such
default, whether by suit or otherwise, including a reasonable attorney's fee.
ARTICLE XX. BANKRUPTCY, INSOLVENCY OR RECEIVERSHIP
SECTION 20.01 ACT OF INSOLVENCY, GUARDIANSHIP, ETC. The following shall
constitute a default of this Lease by the Tenant for which Landlord, at
Landlord's option, may immediately terminate this Lease.
(a) The appointment of a receiver to take possession of all or
substantially all of the assets of the Tenant.
(b) A general assignment by the Tenant of his assets for the
benefit of creditors.
(c) Any action taken or suffered by or against the Tenant under
any federal or state insolvency or bankruptcy act.
(d) The appointment of a guardian, conservator, trustee, or
other similar officer to take charge of all or any substantial part of
the Tenant's property.
Except as set forth herein, neither this Lease, nor any interest therein
nor any estate thereby created shall pass to any trustee, guardian, receiver or
assignee for the benefit of creditors or otherwise by operation of law.
ARTICLE XXI. LANDLORD ACCESS
SECTION 21.01 LANDLORD ACCESS. Landlord or Landlord's agent shall have
the right to enter the Premises at all reasonable times to examine the same, or
to show them to prospective purchasers or
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lessees of the Building, or to make all repairs, alterations, improvements or
additions as Landlord may deem necessary or desirable, and Landlord shall be
allowed to take all material into and upon said Premises that may be required
therefor without the same constituting an eviction of Tenant in whole or in
part, and rent shall not abate while said repairs, alterations, improvements, or
additions are being made, by reason of loss or interruption of business of
Tenant, or otherwise. During the ninety days prior to the expiration of the
Rental Term of this Lease or any renewal term, Landlord may exhibit the Premises
to prospective tenants and place upon the Premises the usual notices "To Let" or
"For Rent" which notices Tenant shall permit to remain thereon with molestation.
ARTICLE XXII. LANDLORD'S LIEN
SECTION 22.01 LANDLORD'S LIEN. Tenant hereby grants to Landlord a lien
upon the improvements, trade fixtures and furnishings of Tenant to secure full
and faithful performance of all of the terms of this Lease. Landlord agrees to
subordinate its lien to Tenant's equipment financing lender provided such is on
the form provided by Landlord.
ARTICLE XXIII. HOLDING OVER
SECTION 23.01 HOLDING OVER. Any holding over after the expiration of the
Rental Term hereof shall be construed to be a tenancy at sufferance and all
provisions of this Lease Agreement shall be and remain in effect except that the
monthly rental shall be double the amount of rent (including any adjustments as
provided herein) payable for the last full calendar month of the Rental Term
including renewals or extensions.
SECTION 23.02 SUCCESSORS. All rights and liabilities herein given to, or
imposed upon, the respective parties hereto shall extend to and bind the several
respective heirs, executors, administrators, successors and assigns of the said
parties; and if there shall be more than one tenant, they shall all be bound
jointly and severally by the terms, covenants and agreements herein.
ARTICLE XXIV. RULES AND REGULATIONS
SECTION 24.01 RULES AND REGULATIONS. Tenant shall comply with all
reasonable nondiscriminatory rules and regulations which are now or which may be
hereafter prescribed by the Landlord and posted in or about said Premises or
otherwise brought to the notice of the Tenant, both with regard to the project
as a whole and to the Premises including common facilities.
ARTICLE XXV. QUIET ENJOYMENT
SECTION 25.01 QUIET ENJOYMENT. Upon payment by the Tenant of the rents
herein provided, and upon the observance and performance of all the covenants,
terms and conditions on Tenant's part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the Premises for the term hereby demised
without hindrance or interruption by Landlord or any other person or persons
lawfully or equitably claiming by, through or under the Landlord, subject,
nevertheless, to the terms and conditions of this Lease and actions resulting
from future eminent domain proceedings and casualty losses.
ARTICLE XXVI. SECURITY DEPOSIT
SECTION 26.01 SECURITY DEPOSIT. The Landlord herewith acknowledges
receipt of the amount set forth in Section 1.01 (U) which it is to retain as
security for the faithful performance of all the covenants, conditions and
agreements of this Lease, but in no event shall the Landlord be obliged to apply
the same upon rents or other charges in arrears or upon damages for the Tenant's
failure to perform the said covenants, conditions and agreements; the Landlord
may so apply the Security Deposit, at its option; and the Landlord's right to
the possession of the Leased Premises for non-payment of rents or for other
reasons shall not in any event be affected by reason of the fact that the
Landlord holds this Security Deposit. The said sum, if not applied toward the
payment of rents in arrears or toward the payment of damages suffered by the
Landlord by reason of the Tenant's breach of the covenants, conditions and
agreements of this Lease, is to be returned to Tenant without interest when this
Lease is terminated, according to these terms, and in no event is the said
Security Deposit to be returned until Tenant has vacated the Leased Premises and
delivered possession to the Landlord.
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In the event that the Landlord repossesses Leased Premises because of
the Tenant's default or because of the Tenant's failure to carry out the
covenants, conditions and agreements of this Lease, Landlord may apply the said
Security Deposit toward damages as may be suffered or shall accrue thereafter by
reason of the Tenant's default or breach. In the event of bankruptcy or other
debtor-creditor proceedings against Tenant as specified in Article XX, the
Security Deposit shall be deemed to be applied first to the payment of Rents and
other charges due Landlord for the earliest possible periods prior to the filing
of such proceedings. The Landlord shall not be obliged to keep the said Security
Deposit as a separate fund, but may mix the same with its own funds.
ARTICLE XXVII. MISCELLANEOUS PROVISIONS
SECTION 27.01 WAIVER. No failure on the part of Landlord or Tenant to
enforce any covenant or provision of this Lease shall discharge or invalidate
such covenant or provision or affect the right of that party to enforce the same
in the event of any subsequent breach. One or more waivers of any covenant or
condition by Landlord or Tenant shall not be construed as a waiver of a
subsequent breach of the same covenant or condition and the consent to or
approval of any subsequent similar act by the other party. No breach of a
covenant or condition of this Lease shall be deemed to have been waived by
Landlord or Tenant, unless such waiver be in writing signed by the waiving
party.
SECTION 27.02 ENTIRE AGREEMENT. This Lease constitutes the entire
Agreement and understanding between the parties hereto and supersedes all prior
discussions, understandings and agreements. This Lease may not be altered or
amended except by a subsequent written agreement executed by all parties.
SECTION 27.03 FORCE MAJEURE. Any failure to perform or delay in
performance by either party of any obligation under this Lease, other than
Tenant's obligation to pay rent, shall be excused if such failure or delay is
caused by any strike, lockout, governmental restriction or any similar cause
beyond the control of the party so falling to perform, to the extent and for the
period that such continues.
SECTION 27.04 LOSS AND DAMAGE. The Landlord shall not be responsible or
liable to the Tenant for any loss or damage that may be occasioned by or through
the acts or omissions of persons occupying all or any part of the premises
adjacent to or connected with the Premises or any part of the building of which
the Premises are a part, or for any loss or damage resulting to the Tenant or
his property from bursting, stoppage or leaking of water, gas sewer or steam
pipes or for any damage or loss of property within the Premises from any cause
whatsoever.
SECTION 27.05 ACCORD AND SATISFACTION. No payment by Tenant or receipt
by Landlord of a lesser amount than the amount owing hereunder shall be deemed
to be other than on account of the earliest stipulated amount receivable from
Tenant, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or receivable or pursue any other
remedy available under this Lease or the law of the state where the Premises are
located.
SECTION 27.06 NO OPTION. The submission of this Lease for examination
does not constitute a reservation of or option for the Premises and this Lease
becomes effective as a lease only upon full execution and delivery thereof by
Landlord and Tenant.
SECTION 27.07 ANTI-DISCRIMINATION. Tenant herein covenants by and for
itself, its heirs, executors, administrators and assigns and all persons
claiming under or through it, and this Lease is made and accepted upon and
subject to the following conditions: That there shall be no discrimination
against or segregation of any person or group of persons on account of race,
sex, marital status, color, creed, national origin or ancestry, in the leasing,
subleasing, assigning, use, occupancy, tenure or enjoyment of the Premises, nor
shall the Tenant itself, or any person claiming under or through it, establish
or permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of tenants,
lessees, sublessees, or subtenants in the Premises.
SECTION 27.08 SEVERABILITY. If any term, covenant or condition of this
Lease or the application thereof to any person or circumstance shall be invalid
or unenforceable to any extent, the remainder of this Lease, or the application
of such term, covenant or condition to persons or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected thereby
and each term, covenant or condition of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
SECTION 27.09 OTHER MISCELLANEOUS PROVISIONS. This instrument shall not
be recorded without the prior written consent of Landlord; however, upon the
request of either party hereto, the other party shall join in the execution of a
memorandum or "short form" lease for recording purposes which memorandum shall
describe the parties, the Premises, the Rental Term and shall incorporate this
Lease by reference, and may include other special provisions. The captions which
precede the Sections of this Lease
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are for convenience only and shall in no way affect the manner in which any
provisions hereof is construed. In the event there is more than one Tenant
hereunder, the liability of each shall be joint and several. This instrument
shall be governed by and construed in accordance with the laws of the State
wherein the Premises are located. Words of any gender used in this Lease shall
be held to include any other gender, and words in the singular number shall be
held to include the plural when the sense requires. Time is of the essence of
this Lease and every term, covenant and condition herein contained.
SECTION 27.10 REPRESENTATION REGARDING AUTHORITY. The persons who have
executed this Agreement represent and warrant that they are duly authorized to
execute this Agreement in their individual or representative capacity as
indicated.
ADDITIONAL PROVISIONS: None
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IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease as of the day and year first above written.
SIGNATURES:
LANDLORD
PARADIGM RESOURCES, L.C., A UTAH
LIMITED LIABILITY COMPANY
By: /s/ W. RICHARDS WOODBURY
-------------------------------------
W. Richards Woodbury, Manager
By: /s/ DON R. BROWN
-------------------------------------
Don R. Brown, Manager
TENANT
PARTNET, INC., A UTAH CORPORATION
By: /s/ DON R. BROWN
-------------------------------------
Don R. Brown, President
LANDLORD ACKNOWLEDGMENT
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On this 12 day of January, 1999 before me personally appeared W. RICHARDS
WOODBURY and DON R. BROWN to me personally known, who being by me duly sworn
did each for himself say that he is a Manager of that certain limited liability
company known as PARADIGM RESOURCES, L.C., and that the within instrument was
executed on behalf of said company by authority granted in said companies
operating agreement.
NOTARY PUBLIC
STATE OF UTAH
[SEAL] My Commission Expires /s/ KIM A. KUBOTA
June 21, 2001 -----------------------------------
KIM A. KUBOTA Notary Public
2677 Parleys Way
Salt Lake City, Utah 84109
TENANT ACKNOWLEDGMENT
(CORPORATE)
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On this 12 day of January, 1999 before me personally appeared Don R.
Brown, known to me to be the President of Partnet, Inc., the corporation that
executed the within instrument, known to me to be the person who executed the
within instrument on behalf of the corporate therein named, and acknowledged to
me that such corporation executed the within instrument pursuant to its bylaws
or a resolution of its board of directors.
NOTARY PUBLIC
STATE OF UTAH
[SEAL] My Commission Expires /s/ KIM A. KUBOTA
June 21, 2001 -----------------------------------
KIM A. KUBOTA Notary Public
2677 Parleys Way
Salt Lake City, Utah 84109
18
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GUARANTY
TO INDUCE PARADIGM RESOURCES L.C., a Utah limited company, to enter into
that certain Lease Agreement dated the 12 day of January, 1999 by and between
PARADIGM RESOURCES L.C., a Utah limited liability company, and Don Brown hereby
guarantees to PARADIGM RESOURCES L.C., a Utah limited liability company, the
Landlord, and its successors and assigns the due and punctual payment of all
rent thereunder, and the performance of all covenants, conditions and agreements
to be paid or performed by Tenant in or under the foregoing Lease.
Notwithstanding the above, the dollar amount of this Guaranty is expressly
limited amount of the "unamortized value" of the Landlord's Contribution to
Tenant's Work plus any interest accrued at fourteen (14%) percent per annum from
the date of demand for payment under this Guaranty to the date of actual
payment. Said "unamortized value" shall be product calculated by multiplying the
Landlord's Contribution to Tenant's Work as set forth in Section 1.01 (Q) as
adjusted pursuant to Section 1.01 (T) by a fraction the denominator of which
shall be sixty (60) and the numerator of which shall be the number of months
remaining in the lease term for which rent has not been paid.
The undersigned waives any demand for performance upon Tenant and any
notice to the undersigned of non-payment or non-performance by Tenant and hereby
waives all suretyship defenses. The undersigned further consents to any
indulgences granted or allowed to Tenant, including but not limited to granting
of extensions of times for payment or taking of any notes or other obligations
or any security for payment of sums due or to become due, without notice to the
undersigned and without thereby in any manner releasing or affecting the
liability of the undersigned.
DATED JANUARY 12, 1999
/s/ DON R. BROWN
-----------------------------------
Don R. Brown
ACKNOWLEDGMENT
STATE OF UTAH )
: ss.
COUNTY OF SL )
On this 12 day of JANUARY 1999 personally appeared before me Don R. Brown,
signer of the foregoing instrument, who duly acknowledged to me that he executed
the same.
NOTARY PUBLIC
STATE OF UTAH
[SEAL] My Commission Expires /s/ KIM A. KUBOTA
June 21, 2001 -----------------------------------
KIM A. KUBOTA Notary Public
2677 Parleys Way
Salt Lake City, Utah 84109
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[FLOOR PLAN]
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[FLOOR PLAN]
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[FLOOR PLAN]
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EXHIBIT "B"
LEGAL DESCRIPTION
Beginning at a point on the northwesterly right-of-way line of Chipeta Way
said point being South 44(degrees)00'00" West along the monument line 546.107
feet and North 46(degrees)00'00" East 52.00 feet from a Salt Lake City monument
located at the P.T. of Chipeta Way and running thence South 44(degrees)00'00"
West along said northwesterly right-of-way line 43.261 feet to a point of
curvature; thence along the arc of a 660.000 foot radius curve to the right and
said northwesterly right-of-way line, through a central angle of
24(degrees)00'07", 276.484 feet to a point of compound curvature; thence along
the arc of a 45.000 foot radius curve to the right, through a central angle of
81(degrees)21'51 ", 63.903 feet to a point of reverse curvature, said point also
being on the northeasterly right-of-way line of Arapeen Drive; thence along the
arc of a 600.575 foot radius curve to the left, through a central angle of
18(degrees)21'58", 192.515 feet to a point of tangency; thence North
49(degrees)00'00" West along said northeasterly right-of-way line 484.077 feet;
thence North 41(degrees)00'00" East 300.000 feet; thence South 49(degrees)00'00"
East 800.892 feet to the point of beginning.
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EXHIBIT "C"
LANDLORD'S WORK
The following is a description of the construction, and limitations of
same, which will be provided exclusively by the Landlord at Landlord's expense
unless indicated otherwise herein. The basic site, common areas, and building
shell improvements will be provided by Landlord in accordance with plans and
specifications, prepared by Landlord's Architect, and shall be of a type and
quality indicated herein or determined by Landlord's Architect. Where two types
of materials, structures, or installations are indicated, the option will be
exclusively with the Landlord.
A. GENERAL
1. CODE COMPLIANCE: Work shall satisfy all regulatory agency requirements
having jurisdiction over the project, including but not limited to, meeting all
applicable building codes, regulations and ordinances in force and adapted by
the local municipality, County and State building officials. The project shall
comply with the provisions of the Americans With Disability Act (ADA) in regard
to site and building accessibility, and parking requirements.
2. GENERAL CONDITIONS: Work shall include all usual and customary costs
for General Conditions associated with Landlords work, including but not limited
to the following:
a. Liability and builder's risk insurance;
b. Costs for permits, sewer and water connection fees, etc.;
c. Sales and use taxes;
d. Temporary field offices, toilet facilities, supplies and
equipment;
e. Miscellaneous equipment rentals;
f. Trash removal and clean-up;
g. Survey, staking & layout;
h. Jobsite field supervision;
i. Mobilization;
j. Temporary utility hook-ups and expenses for water, electricity
and telephone;
k. Quality assurance, including materials testing, inspections and
special inspections;
l. No performance and payment bonds are provided but Landlord
warrants the completion of the work, and agrees to make payment for all
obligations pertaining to Landlord's work.
3. WARRANTY: All work shall have a minimum of one (1) year general
building warranty from the date of initial building completion, five (5) years
for HVAC compressors, and ten (10) years roof membrane and flashings.
4. ENGINEERING: All construction shall be performed according to the
recommendations contained in Geotechnical Investigation and other engineering
reports specific to the site, and in accordance with good engineering and design
practices.
B. SITE WORK
1. EARTHWORK AND DRAINAGE: Perform all earthwork, excavation, grading, and
preparation of building pads and parking lot areas to receive final finishes.
Site to be graded to provide adequate site drainage, including storm water
retention areas, culverts, catch basins, drywalls, and other storm water
appurtenances. Storm water retention may occur in parking areas and drives
except at principal entries and access points.
2. CONCRETE: Install all exterior concrete, curb and gutter, vertical
curbs, valley gutters, sidewalks, retaining walls, transformer and trash
enclosure pads, and patio areas.
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3. LANDSCAPING: Furnish and install landscaping and automatically
controlled underground sprinkler systems in planters around the perimeter of the
building and parking lots where indicated on the Site Plan - Exhibit "A". The
general character and quality of such landscape improvements shall be similar to
that provided at other adjacent buildings.
4. PARKING LOT PAVING: Install all parking lot improvements, asphalt
paving, striping, and signage substantially in accordance with the Site Plan -
Exhibit A. Parking to be laid out in a 90E configuration with designated
handicapped parking stalls and signage, and ten (10) designated guest parking
stalls near the main building entrance.
5. UTILITIES: Provide all utility mains including culinary water, fire
protection, storm drainage, sanitary sewer, gas, electrical, and telephone and
install in accordance with the governing municipal and utility company
standards. Utility lines shall be sized to meet the requirements of the intended
building use and those set forth in this Exhibit C and Exhibit D.
6. POWER AND TELEPHONE: Extend power and telephone mains to electrical
rooms and provide distribution panels at a central location as more specifically
described herein. Fiber optic service, if available, to be provided exclusively
by the telephone utility at the request of the Tenant. Cost, if any, of fiber
optic systems is not included in Landlord's work.
7. TRASH ENCLOSURE: Provide one (1) trash enclosure to contain a standard
sized dumpster, located where shown on Site Plan. The enclosure shall be a
minimum of 5' high, constructed of materials and finishes compatible with the
exterior building and shall include access gates, concrete-filled protective
pipe bollards and a concrete housekeeping pad and apron.
8. EXTERIOR LIGHTING: Provide parking lot lighting throughout the site
which shall consist of 30'-0" high pole-mounted fixtures on raised concrete
bases, with spacing and lamp sizes to achieve a minimum lighting level of 1.5
footcandles to ensure nighttime security for employees and to enhance the
property. Provide soffit or wall-mounted fixtures at all building entrances and
exits.
9. EXTERIOR SIGNAGE: See Exhibit 'E' Sign Criteria.
C. SHELL BUILDING
1. SUPERSTRUCTURE: Construct a three-story building consisting of steel
structural support members on continuous concrete or spot footings of the shape,
size, and configuration as shown on Exhibit "A-1". All work to be in accordance
with plans and specifications prepared by Landlord's Architect and as follows.
a. FOUNDATION: Design and install a concrete foundation system to
resist all superimposed horizontal and vertical loads based upon the
recommendations of the geotechnical investigation report and customary
structural engineering practices.
b. SLAB-ON-GRADE: The slab-on-grade shall be a minimum of 4" thick,
3,000 psi concrete, with welded wire fabric reinforcing, supported on a 4"
aggregate base course. Sawcut control joints at spacing intervals
recommended by the structural engineer. Slabs shall be constructed with a
flatness tolerance of 1/4" in 10' radius.
c. COLUMNS: Structural columns shall be steel tube, wide flange or
pipe, spaced at approximately 28'0" x 30'0" typical.
d. STRUCTURAL FRAME. Combination of wide flange beams and girders
with open web steel joist and girder/beams and composite steel and
concrete suspended floor deck. Spacing to be as required to support
suspended loads and support appropriate lateral and vertical loads.
Lateral loads to be resisted utilizing moment frame design
e. SUSPENDED FLOOR SLABS: 6" concrete on 3" steel deck capable of
supporting a live load of 80 lbs. per square foot, and a dead load of 20
lbs. per square foot, with a designed vibration frequency rating not more
than 16,000 micro-in./sec.
f. ROOF STRUCTURE: To be a combination of steel beam and open web
steel joist and girder with steel deck. Roof structure shall slope to
perimeter roof drains/scuppers at a minimum pitch of 1/4' per 1'-0".
Provide built-up crickets around the building perimeter and at rooftop
equipment to divert run-off toward roof drains.
g. CLEARANCE: The clear height from floor to the underside of the
first floor and structure above shall be 12'6" at the lowest point and
from the wombsecond and third floors to the floor or roof structure above
at the lowest point shall be 12'0" with approximately 2'0" depth
of
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structural support joists. Floor to floor height between first and second
floor is 15'0" and between second and third floors and the roof is 14'6"
total.
2. EXTERIOR ENCLOSURE: To be a combination of load bearing masonry,
masonry veneer, and window wall more or less as depicted on Exhibit A-1.
a. STRUCTURAL FRAME: To be covered with colored and/or decorative
masonry units in a decorative configuration of colors, textures, and
coursing that will provide relief to the primary building wall material.
Veneers to use standard or large size brick units.
b. GLAZING: Glazing shall be provided around the building perimeter,
utilizing a combination of floor-to-ceiling storefront systems, full
height slab-to-roof curtain wall systems and "ribbon" or strip window
openings. The extent of glazing shall be as shown on the attached Exhibit
A-1. Vision glass and spandrel panels shall consist of 1" thick tinted or
reflective, insulated units set in manufacturer's standard color anodized
aluminum frames.
c. ENTRANCE DOORS AND HARDWARE: The main building entrance shall
match the shell building glazing systems. A pair of main entrance doors
and vestibule shall be provided with sidelights and manufacturer's
standard push/pull entrances hardware assemblies. Secondary employee
entrances shall be provided matching the shell building glazing systems
with a single door and sidelight and manufacturers standard push/pull
entrance hardware assembly. Entrances to be equipped with electronic key
pad or card reading security lock mechanism at Landlord's option.
d. EXTERIOR EXIT AND MAN-DOORS AND HARDWARE: Where a exterior door
is for service use only, Landlord may provide a standard, painted,
hollow-metal door and frame. Provide lockset-type hardware, closures and
exit devices as required by code and to maintain building security.
e. LOADING DOCK: Provide covered loading area with a 6'0 by 8'0
double door at grade and secure area for temporary storage of delivered
supplies and materials.
3. ROOF: Roof structure to be designed to carry imposed equipment,
structural and snow drift loads and a 30 pound live load. Roof membrane and
roofing appurtenances to generally be as follows:
a. MEMBRANE: To be a single-ply 60 mil un-reinforced or 45 mil
reinforced mechanically fastened or ballasted EPDM membrane system.
Provide a ten (10) year manufacturer's roof warranty.
b. INSULATION: Roof insulation shall provide a minimum insulating
value of R-19. Roof insulation shall be rigid board-type installed over
the deck or fiberglass batt below the deck or combination thereof.
c. DRAINAGE: The roof structure shall be designed and constructed to
slope to perimeter roof drains and interior roof leaders that extend
exposed down the inside face of the exterior walls. Primary drains to
connect underground to storm water system. Over flow drains to be provided
with turnouts daylighting at on-grade concrete splash blocks.
d. ROOF ACCESS: Provide one (1) 2'-6" x 3'-0" interior roof hatch,
with metal ships ladder, safety "ladder-up" post device and padlock, or at
Landlord's option, extend a stairway to roof.
e. ROOF CURBS: Provide permanent roof curbs, integrated into the
roof structure, at all roof-mounted equipment.
f. ROOF FLASHING: Provide a minimum of 24 gauge sheetmetal flashing,
counter-flashing and reglets where necessary to establish a weather tight
and moisture resistant condition.
g. ROOF-MOUNTED EQUIPMENT SCREENING: Extend perimeter walls above
the roof deck to a sufficient height, or construct equipment screen walls,
to satisfy the local municipality's requirements for visually screening
all roof-mounted equipment.
D. COMMON AREAS, LOBBIES, CORRIDORS, AND RESTROOMS
1. RESTROOMS FOR TENANT'S OCCUPYING FULL FLOORS: Tenant shall have
independent restrooms for its exclusive use which shall be constructed as part
of the "Additional Work To Which Construction Contribution Is Applied" or to
"Tenant Work".
2. RESTROOMS FOR TENANT'S OCCUPYING PARTIAL FLOORS: Landlord shall
construct men's and women's restrooms containing the number of stalls required
by code in conformance with the American's With Disabilities Act and with
finishes indicated.
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a. FINISHES: Floors to have ceramic tile with tile base. Wet walls
to be ceramic tile. Other walls to have vinyl wall coverings over gypsum
board. Ceilings to be painted gypsum board. All colors and types to be as
selected by Landlord's architect.
b. ACCESSORIES: Provide floor mounted enameled metal toilet
partitions; and stainless steel or chrome plated surface mounted paper
holders, coat hooks, grab bars, mirrors, soap dispensers, paper towel
dispensers, waste receptacles, and sanitary napkin dispensers all in
accordance with codes.
c. MILLWORK: Provide artificial marble or laminate covered counter
tops and drop panels with recessed ceramic or integral artificial marble
walls bowls, Utilize chrome plated brass-bodied, electronically operated
flush valves and faucets.
3. COMMON AREAS: Common lobbies will be created at each main building
entrance together with stairways, elevator, elevator equipment, janitor's
mechanical and other such rooms which serve and/or are available for use by all
tenants within the building. Such common facilities may also include restrooms
on floors serving multiple tenants and connecting corridors where deemed
necessary.
4. PUBLIC AREA FINISHES: Common lobbies, stairways, and corridors shall
have all finishes provided as follows:
a. WALLS: Walls to be exposed decorative masonry, marble or ceramic
tile, or gypboard. All gypboard walls to be either painted or covered with
vinyl wall coverings or tile as selected by Landlord's architect.
b. FLOORS: To have ceramic or marble tile and/or carpet. Carpet to
be cut pile and/or loop nylon, 32 oz. minimum face weight, either
stretched over pad or direct glued to floor surface at the option of
Landlord's architect.
c. BASE AND TRIM: Floor base to either be 6" high ceramic or marble
tile or wood (stained or painted) as selected by Landlord's architect.
Walls may also include other wood trims, chair rails, or crown molds as
may be selected by Landlord's architect to achieve a pleasing and
attractive decor.
d. CEILINGS: To be a combination of suspended painted gypboard and
2'0" x 2'0" acoustical tile and grid. Acoustical tile to have beveled or
tegular edge on 1" wide grid. Colors to be as selected by Landlord's
architect.
5. INTERIOR DOORS AND HARDWARE: Landlord shall provide 3'-0" x 7'-0" solid
core wood doors with hollow metal or wood frame at Landlord's option, stained
and finished on all interior doors within or adjoining common areas. Hardware
will typically include 1-1/2 pair hinges, door stop, and commercial grade
lockset. Closer and rated assemblies to be provided where required by code.
6. TENANT ENTRANCE DOORS AND SIDELIGHTS: To be provided between common
lobbies and Leased Premises. Assemblies to be constructed and rated in
accordance with codes. Doors to be flush panel solid core wood 3'0" x 7'0" with
adjoining sidelight in painted hollow metal frames together with 1-1/2" pair
hinges, door stop, and closer. Sidelight(s) to be 2'0" x 7'0" minimum width with
clear wired/tempered glass. Entrances to be equipped with electronic card
reading security lock mechanism or standard mortise type lockset with deadbolt
at Landlord's option.
7. EQUIPMENT AREA FINISHES: Provide mechanical and/or service and
equipment areas including walkways, trash rooms, janitors rooms, common
electrical rooms, mechanical rooms and shafts. Finishes to be as follows:
a. WALLS: Painted gypboard.
b. FLOORS: Sealed concrete or vinyl composition tile as selected by
Landlord's architect.
c. BASE: 4" coved vinyl base where provided. Penthouse mechanical
rooms will have no base.
d. CEILINGS: Suspended gypboard, 2'0" x 4'0" acoustical tile, or
exposed to structure as deemed appropriate by Landlord's architect.
8. HVAC AND LIGHTING: All common areas shall include complete HVAC system,
distribution, ventilation, controls, and finishes, and complete electrical power
service and lighting. Lighting in common lobbies and corridors to either be
recessed cans with fluorescent lamps, lay-in parabolic fixtures, or other
decorative fixture as selected by Landlord's architect.
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9. ALTERATIONS: Landlord reserves the right to make any additional
changes, modifications, alterations, or additions to common areas utilizing a
design and materials as determined appropriate by Landlord's Architect to
achieve overall building design schemes developed by Landlord's Architect.
10. DEMISING WALLS: Landlord shall install demising partitions between
common lobbies, corridors, stairways, restrooms, and leased premises which shall
be one-hour fire-rated and constructed of masonry or steel studs and 5/8" gypsum
board. Such partitions shall extend from floor to underside of roof or floor
construction above. No gypsum board to be installed on Tenant side of demising
walls, corridors, and exterior walls. Make
E. LANDLORD'S WORK WITHIN THE PREMISES (PAID FOR LANDLORD AS PART OF SHELL
CONSTRUCTION)
1. UTILITIES: Basic functional main utility lines and systems shall be
provided to all common facilities and to mechanical equipment, central
telephone, and electrical rooms or panels on each floor or within the Leased
Premises as indicated:
2. HEATING, VENTILATING AND AIR CONDITIONING (HVAC): The facility shall
contain a complete heating, ventilating and air conditioning system, consisting
of common boiler, chiller, air handling fans, building exhaust, relief, and
makeup air fans, water towers, and other central mechanical equipment required
for a variable air volume distribution system. The HVAC system shall be designed
to meet ASHRAE standards and shall be based upon the occupancy levels and
loading conditions indicated herein. Central mechanical equipment shall be
housed in a mechanical room in or around the central core of the building or
where otherwise determined necessary.
a. DESIGN CRITERIA: The HVAC system shall be designed to maintain
the facility with an inside design temperature between 74E F and 78E F dry
bulb summer and 68E F and 70E F dry bulb winter when outside temperatures
are 8E F dry bulb winter and 95E F dry bulb - 66E F wet bulb summer.
Internal gain design shall be based upon 2.75 watts per square foot
lighting maximum, 4 watts per square foot power and miscellaneous maximum,
and 1 person per 100 sq. ft. of net usable building area. Ventilation
shall be 15 CFM per person.
b. ZONES: The mechanical engineering design shall incorporate
perimeter and interior zones, based upon solar exposure. Landlord to
initially provide VAV boxes and controls for one zone per 2,000 sq. ft. of
gross leaseable area.
c. DUCTWORK: The base HVAC system shall include all central plant
equipment, sheetmetal plenum drops, medium pressure supply air loop, and
branch takeoffs with VAV boxes to each zone. Return air collection shell
generally be by means of open air plenum above ceiling. A return
air collection branch duct will be provided to within the Leased Premises
for connection of laboratory return and / or exhaust air. Main supply
ductwork shall be entirely insulated. Return air collection ductwork to be
un-insulated.
d. EXHAUST AND RELIEF AIR FANS: Provide central roof-mounted power
exhaust fans and shafts, with factory curbs, and branch ductwork extended
to Leased Premises to which tenant exhaust systems may attach. Exhaust and
makeup air capacity shall be 150 cfm per 1,000 sq. ft. of gross leaseable
area. Additional capacity is available for laboratory areas, fume hoods,
etc. if needed at a cost of $1,000.00 per 1,000 cfm.
e. TEMPERATURE CONTROL: The operation of each VAV box shall be
controlled by a temperature sensor located within the zoned space. All
temperature sensors and smoke detectors shall be interconnected with an
energy management and monitoring system with pre-set limited controls
adjustable from within the Premises.
f. ENERGY MANAGEMENT SYSTEM (EMS): The HVAC system shall be
controlled by a computerized energy management system, sufficient in
capacity to monitor and control the operation of each piece of mechanical
equipment during normal business hours, as well as after hour occupancy.
The system shall also have the capability for lighting control and to
interface with smoke detectors, fire alarm and security hardware devices.
g. HOURS OF OPERATION: Unless indicated otherwise in this Lease,
mechanical systems shall operate during all normal business hours from
7:00 a.m. to 6:00 p.m. five days per week and 8:00 a.m. to 1:00 p.m. on
Saturdays, except on holidays. Each leased space shall be equipped with
one keyed manual, timed override switch per approximately 6,000 sq. ft. to
permit operation of mechanical systems during after hours or weekend and
holiday periods. Tenant to pay additional rent at Landlord's customary
standard rate for off hours mechanical operation.
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h. OTHER: All other HVAC secondary distribution supply and return
air ductwork, registers, diffusers, grills, dampers, etc. shall be
supplied as part of "Work Included To Which Construction Contribution Is
Applied".
3. PLUMBING: The building plumbing system shall include all main utility
piping to the Leased Premises together with piping necessary for interior storm
piping (roof leaders) and piping insulation; and all HVAC central equipment
piping and branch distribution piping to VAV boxes supplied by Landlord.
Plumbing systems to common facilities and exterior hose bibs to also be
provided.
a. WATER: Provided in ceilings above restrooms, janitor's rooms,
mechanical rooms, etc. A 1-1/2 inch water supply and shutoff valve to be
provided to each leased premises.
b. SEWER: Underground mains to be extended to restrooms, janitor's
rooms, etc. A four (4) inch sewer line to be provided to each leased
premises of sufficient depth to enable sewer access to all points within
the premises.
c. NATURAL GAS: None provided except as required to common boilers,
HVAC equipment, and water heaters. Gas is available for Tenant at Tenant's
cost for extending service and making a separate metered connection at gas
service meter center.
d. OTHER GASES: None provided. All such facilities and piping to be
provided by Tenant.
4. AUTOMATIC FIRE SPRINKLER SYSTEM: An overhead wet, fully automatic fire
sprinkler system shall be provided, consisting of a main fire riser, horizontal
distribution piping, and a combination of upright sprinkler heads at exposed
areas and pendent sprinkler heads at finished ceiling conditions. The fire
sprinkler system shall be designed for Light Hazard Group density in accordance
with NFPA 13. supplied by Tenant. Landlord shall provide a complete system
within the shell building and one drop and head per 130 sq. ft. within Leased
Premises.
a. MONITORING: The fire sprinkler system shall incorporate all
requirements of the local Fire Marshal. The fire sprinkler riser shall
include electric alarm, water flow valve, and tamper devices for hook-up
to a fire alarm monitoring service.
b. CODE: All sprinkler piping shall be installed in accordance with
NFPA 13 for seismic protection as required by local codes.
c. OTHER: In IDF, Main Server Rooms, Computer Rooms, and other
special areas, fire suppression units shall be supplied as part of "Work
Included To Which Construction Contribution Is Applied".
5. ELECTRICAL: Main building electrical systems to be provided of
sufficient size and capacity to accommodate Tenant's needs including main
electrical service which shall be brought from the closest available electrical
utility power source to a utility owned transformer and from such transformer to
interior service entrance sections located in a building main electrical room.
a. POWER: Power to be of a sufficient size to accommodate Tenant's
requirements as described herein. Main service to either be 277/480 volt
with step down transformers for 120/208 volt receptacles and equipment or
120/208 volt power supply throughout in a three phase, four-wire
configuration.
b. DESIGN CRITERIA: Tenant's designed power capacity shall be based
upon an occupancy load of 1 person per 100 sq. ft. of net usable area,
with 6 watts per square foot general and miscellaneous power use, and 2.75
watts per sq. ft. lighting.
c. PANELS: The service entrance section cabinet, current
transformers, metering sections, main distribution panels and sub-panels
shall be consolidated in an Electrical Room located in or around the
central core of the building. To the extent determined advisable by the
electrical engineer, if determined to be more economical, subpanels may be
provided in locations outside of the main electrical room subject to
approval of Tenant as to location. Panels to be of sufficient size to
handle Tenant's requirements and to include main disconnect switch,
together with wiring and raceways between main distribution cabinets and
panels.
d. POWER METERS: Power circuitry to accommodate Tenant's
requirements for receptacles and equipment shall be 120/208 volt
throughout in a three phase, four-wire configuration. Consumption shall be
measured by means of a sub-meter placed around all power circuits used by
Tenant. Tenant shall pay as additional rent for all power usage. Amount
shall be determined by multiplying the watt hours used by the standard
rate charged by the municipal power utility company.
<PAGE> 33
e. LIGHTING: All ceiling lights to be 277/480 volt. Lights to be
operable during all normal business hours as indicated herein and
monitored to automatically shutoff at the close of normal operating hours.
Leased Premises to be equipped with one keyed manual, timed override
switch per approximately 6,000 sq. ft. to permit operation of ceiling
lighting during after hours or weekend and holiday periods. Tenant to pay
additional rent at Landlord's customary standard rate for off hours
lighting operation
f. TELEPHONE: Landlord to provide main telephone service trunk line
into building and main cable to telephone equipment rooms on each floor.
All terminations, cross-overs, and distribution wiring from panels to the
various equipment and receptacles shall be supplied as part of "Work
Included To Which Construction Contribution Is Applied".
g. EMERGENCY POWER: Landlord has provided a diesel powered emergency
generator to serve building emergency power needs with additional capacity
for Tenant usage. Tenant may connect to the emergency power system at a
cost of $350.00 per kilowatt of capacity. Tenant to pay all costs related
to the extension of emergency circuits to Tenant's Leased Premises from
central panels located on each floor.
h. OTHER: All other electrical power distribution systems from
panels to the various electrical equipment receptacles lighting, data, and
telephone cabling, etc. shall be supplied as part of "Work Included To
Which Construction Contribution Is Applied".
F. PLANS AND SPECIFICATIONS
1. SHELL DRAWINGS: Landlord shall initially prepare all final construction
drawings, details, and specifications completely describing site and building
improvements for Landlord provided work and building shell construction.
Landlord shall pay all costs and engineering fees required and related thereto.
2. TENANT SPACE LAYOUT AND DESIGN: Landlord shall provide building shell
construction drawings to Tenant's space planner/architect. Space planner shall
prepare a preliminary space layout plan showing the configuration of various
spaces desired within the Leased Premises. Such drawing shall be prepared on CAD
using Landlord's shell building configuration. Landlord's architect shall review
such drawing, discuss any required modifications until the layout meets Landlord
and Tenant's mutual approval. After approval of space layout drawing Tenant's
space planner shall provide the following additional services:
a. REFLECTED CEILING PLAN: To show the layout of lay-in ceilings and
the location of all desired lay-in light fixtures, recessed cans, and
other decorative lighting if any.
b. ELECTRICAL POWER PLAN: To show the location of all electrical
outlets, telephone or data connection points in fixed walls, special
equipment, power poles if any, or other points of connection of electrical
power to tenant landscaped furniture systems. Plan should include a
complete description of the power requirements to each work station,
conference rooms, server room, computer room, or other designated spaces.
c. FINISH SCHEDULE: A schedule of finishes for each room, including
specification or description of each finish material, paint color, floor
covering, tile colors, etc.
d. ELEVATIONS AND DETAILS: Elevations, details, or other information
requested by Landlord's architect showing cabinetry and millwork or other
special details and finishes.
e. SPECIFICATIONS: Written data or cut sheets with respect to
materials and finishes or other accessories, fixtures, hardware, and
installations requested by Tenant to be provided by Landlord.
3. TENANT CONSTRUCTION DRAWINGS: Upon receipt of final Tenant layout
drawings reflected ceiling plans, power plans, etc. Landlord shall prepare final
engineered working drawings including mechanical, plumbing, and electrical
drawings completely describing all work to be performed related to Tenant's
interior finishes and work required to which construction contributions is to be
applied. Tenant shall pay Landlord 65 cents per sq. ft. of gross leaseable area
for the cost of final engineering required and related thereto.
4. TENANT'S APPROVAL: Tenant shall review final construction drawings. Any
changes required shall be promptly communicated to Landlord who shall revise the
construction drawings and re-submit to Tenant until such drawings are
satisfactory and agreeable to Tenant in all respects. Landlord will not commence
construction of Tenant's interior finishes until receipt of written approval
from Tenant of final construction plans.
<PAGE> 34
5. TIMING: All plans and approvals or comments thereto shall be
communicated by Express Mail and where possible fax. Upon submission of plans to
either party, reviews and responses shall be given within five (5) working days
of receipt thereof. All plans shall be prepared as expeditiously as reasonably
possible so as to not delay construction. It is the intent that plans for
interior tenant finishes be completed within 45 days after the date of the
Lease.
6. DEVIATIONS: Landlord may make minor deviations to the approved plan
where deemed necessary by Landlord's Architect due to site conditions or where
good engineering and design may so dictate provided the aesthetic effect or
function of the space is not materially altered.
7. TENANT'S REPRESENTATIVE; RESPONSIBILITIES: Tenant shall designate an
individual to be considered as Tenant's representative who shall have authority
to approve and/or initiate changes with respect to Tenant's finish work. Unless
specifically notified otherwise, Landlord may rely on the directives or
instructions given by Tenant's representative and Tenant shall accept all
decisions and be responsible for the payment of all cost for work related to
changes or other improvements within the Lease Premises, as implemented under
the direction of the representative.
G. CONSTRUCTION OF TENANT'S LEASED PREMISES
1. GENERAL: The construction of Tenant's improvements shall generally be
by Landlord in accordance with the procedures and criteria herein. Tenant shall
be responsible for the entire cost thereof except to the extent that a Tenant
Improvement Allowance or Construction Contribution is specified in the Lease.
Tenant interior finish plans showing all Tenant finish construction to be
performed by Landlord will be prepared as indicated above.
2. CONSTRUCTION PROCEDURE: Tenant finish plans shall be separately bid
from other construction work within the facility. Landlord shall obtain a
minimum of three proposals. Tenant shall review such proposals and may request
changes and modifications thereto to implement cost savings or other
requirements. Landlord will not commence construction until receipt of Tenant's
written approval of cost proposals, authorization to proceed, and payment of any
deposit is made.
3. PAYMENT: Tenant may either provide a letter of credit in a form and
from a financial institution acceptable to landlord in the full amount of the
construction cost, or deposit funds in the full amount of the construction cost
in an escrow account upon which Landlord may draw, or provide some other
assurance acceptable to Landlord that Tenant has the financial capacity to pay
for its construction obligation. Where a Construction Allowance or Contribution
is provided by Landlord, Tenant shall only be required to provide evidence or
deposit funds in the amount by which the construction cost exceeds Landlord's
contribution.
4. PROGRESS PAYMENTS: Tenant shall pay 50% of the payment required
pursuant to Section 6.3 above and the remaining fifty (50%) percent shall be
paid on or before January 15, 1999. Late payments to be assessed an interest
charge at a rate of one percent (1 %) per month.
5. INSPECTION: Upon completion of the work, Tenant and Landlord shall
jointly inspect the space and prepare a deficiency list which describes any
defects or incomplete work. Landlord's contractor shall immediately make any
necessary corrections.
6. CONSTRUCTION BY TENANT: In the event that this Lease requires Tenant's
interior finish to be constructed by Tenant or a contractor hired directly by
Tenant, all procedures regarding the preparation of plans and construction
drawings shall remain as indicated herein. The procedures regarding bidding,
contracting for, and payment described herein shall not apply. Tenant may not
proceed with any construction until all plans have been approved in writing by
Landlord. Tenant shall perform all work in accordance with Exhibit "D".
H. ADDITIONAL WORK WITHIN TENANT'S LEASED PREMISES TO BE PROVIDED BY
LANDLORD. (BEYOND THAT DESCRIBED ABOVE OR THAT WHICH CURRENTLY EXISTS).
None
I. WORK PROVIDED BY LANDLORD TO WHICH CONSTRUCTION CONTRIBUTION IS APPLIED.
1. DRYWALL CONSTRUCTION: All drywall surfaces shall be prepared for a
smooth painted finish.
a. PERIMETER, DEMISING, AND AREA SEPARATION WALLS: Install 5/8"
Type X sheetrock extending from floor to window sill and from
window head to the underside of deck above, or where no
windows exist from floor to underside of deck. Fire tape as
required to achieve a 1-hour rating and install rockwool,
other acceptable insulation, or otherwise fill voids between
top of wall and deck flutes on all rated assemblies. Provide 2
layers of 5/8" sheetrock on area separation wall to achieve
2-hour rated assembly. Make allowance for deflection at top
track
<PAGE> 35
b. INTERIOR PARTITIONS: Conference rooms, server rooms, and other
designated walls to be constructed of 3-5/8" metal studs at
24" o.c., with sound insulation and 5/8" sheetrock on both
sides extending full height. Sheetrock shall be taped, sanded
and ready for wall finishes. Provide fire rated partition
assemblies where required by code. Partitions dividing other
Tenant rooms shall be similarly constructed except that no
sound insulation will be installed and partitions shall extend
to approximately 6" above the finished ceiling height. Ceiling
height is generally at 9'-0". In laboratory or other wet areas
use water resistant sheetrock.
c. COLUMNS: All perimeter and interior columns except tube
columns not engaging any partition wall shall be furred out
with metal studs and 5/8" gypsum board to 6" above finished
ceiling. Sheetrock shall be taped, sanded and ready for
finishes.
d. CEILINGS: Restroom, janitor's room, or other areas designated
by Tenant's space planner shall be suspended sheetrock on
metal tracks, taped and finished, ready for paint. Storage,
equipment or other special purpose rooms may be left exposed
to the structure where approved by Landlord.
2. DOORS, FRAMES & HARDWARE: Tenant interior doors, frames and hardware
shall be consistent with those to be supplied by Landlord as part of
building shell construction and as follows.
a. DOORS: Restroom and utility room doors shall be 3'-0" x 8'-0"
solid core, clear maple/with plain sliced veneers, or plastic
laminate clad doors, clad to match; pre-machined for hardware.
Provide UL fire rating labels as required.
b. FRAMES: All frames shall be 8'-0" height of welded hollow
metal construction with painted finish or pre-finished three
piece metal construction with snap on covers (Timely). Provide
UL fire rating labels as required.
c. HARDWARE: Provide a complete assembly of hardware for each
door, including locksets with lever handles, 1-1/2 pair
hinges, and door stops. Provide door closers where required by
code. Hardware shall be commercial grade, have a clear
aluminum (26D) finish, and meet the requirements of the ADA,
where applicable. Keying shall be coordinated with building
shell.
d. DOORS WITH SIDELIGHTS: Frames used in conjunction with doors
with sidelights to be clear anodized aluminum. Openings to
match standard details and to extend from floor to height of
door with intermediate, horizontal divider at 30". Provide
clear tempered glass. Where wireglass is required by code, use
type with square vertical and horizontal pattern.
3. WALL FINISHES: All interior sheetrock walls shall receive a standard
three coat paint application. Colors to be at Tenant's option except
in front reception areas. Vinyl wall covering to be provided in
front reception areas. Vinyl wall covering of Tenant's choice and
option may be utilized elsewhere in lieu of paint. In laboratory or
other wet areas use epoxy paint, FRP board or other water resistant
finish.
4. FLOOR FINISHES: Landlord shall provide 26 oz. level-loop carpet
directly glued to floor throughout the Premises or other floor
coverings as may be designated by Tenant's space planner. Equipment
rooms, file rooms, or other areas designated by Tenant's space
planner to have vinyl composition tile or static resistive tile.
Laboratory areas subject to water or chemical spillage shall utilize
chemical resistant and water tight materials and application
methods. Colors and styles at Tenant's option, selected from
manufacturer's standard line.
5. WALL BASE: To be 4" high, sewn edged carpet, straight or coved,
vinyl base, wood or tile to be provided throughout. Colors at
Tenant's option.
6. CEILING FINISHES: To be a factory finished, 1" wide suspended, metal
grid system with 2'0" x 4'0" tegular edge and standard fissure
finish, with a minimum STC rating of 65. Suspended gypboard or open
ceilings may be utilized in special purpose rooms where requested by
Tenant's space planner. Ceilings shall generally be constructed at
9'-0" above finished floor except where Tenant's equipment or other
structural elements dictate otherwise.
7. MILLWORK: Provide plastic laminate counter-top with 4" back-splash
and base cabinets in breakrooms and other areas as mutually
determined by Landlord's architect and Tenant's space planner. Wood
casings, chair rails, ceiling coves, and/or base matching color and
finish of wood doors may be used around doors and windows or in
other locations where deemed acceptable by Tenant. Other millwork or
shelving to be provided as detailed or directed by Tenant's space
planner.
8. RESTROOMS: Not included, but provided as indicated in Section D of
this Exhibit "C" Tenant may install additional restrooms, showers,
or other special facilities requiring plumbing connections to the
extent desired at Tenant's sole cost and expense.
9. BREAKROOM: Breakroom construction shall generally include plastic
laminate clad, base cabinets, countertops, and wall cabinets of the
length determined necessary by Tenant, with a two compartment sink,
in-line electric water heater, and special electrical outlets for
refrigerator, dishwasher, and microwave oven or other appliances.
10. WINDOW COVERINGS: To be 3" vertical shades of a uniform type and
color as dictated by Landlord's architect on all exterior windows.
Coverings on interior windows are at Tenant's option subject to
approval by Landlord as to type and color.
<PAGE> 36
11. HVAC: Provide additional VAV boxes, associated water piping, and
controls as required to augment that provided by Landlord, if
necessary. All secondary supply and return air distribution from all
VAV boxes and return air collection ducts, including all diffusers,
registers, dampers, outlets, and grilles shall be provided. Make
connections to shell provided systems. Provide final control wiring,
balancing, and start-up, etc. utilizing materials and systems
matching those provided elsewhere in the facility by Landlord.
Exhaust fans in conference rooms and breakrooms shall be extended to
main supply lines.
a. ZONES: The mechanical engineering design shall incorporate
perimeter and interior zones, based upon solar exposure, and
individual zones for spaces with special heating or air
conditioning demands, such as Computer Room; Main Server Room;
IDF Rooms; and all conference Rooms and Vendateria.
b. CONTROLS: All temperature sensors and smoke detectors shall be
interconnected with Landlord's energy management and
monitoring system. Each zone shall be equipped with
thermostatic control boxes adjustable within preset limits for
individual comfort. Type shall match those utilized elsewhere
in the building and each control shall be equipped with an
override switch for HVAC operation and a separate override
switch for ceiling lights. Override switches may be keyed at
Tenant's option.
c. SPECIAL PURPOSE ROOMS: Such rooms requiring 24 hour cooling or
which contain extraordinary loads must be equipped with
independent cooling equipment that is self-contained to the
extent possible. Remote condensers, if required, shall be
located within ceiling plenums, mechanical penthouses, or if
necessary, in alternate locations determined by Landlord (but
not on rooftops). All such equipment shall be connected to
Tenant's power panel and circuited through Tenant's power
submeter. Landlord reserves the right to assess a power
consumption surcharge to Tenant based on the load requirement
and demand factor associated with any such special purpose
equipment.
d. DUCTWORK: All supply ductwork to be metal with 1" wrap
insulation and/or insulated duct liner. Branch takeoffs from
supply air mains to be a minimum of 5'-0" in length. Flexible
ductwork may be utilized for drops but shall not exceed 10'-0"
in length. Provide balancing dampers as necessary. All bends
to have turning vanes.
e. EXHAUST SYSTEMS: Exhaust fans in conference rooms and
breakrooms shall be extended to main supply lines. Exhaust
duct from equipment hoods etc. to be connected to main exhaust
shafts and all required balancing and smoke/fire dampers and
controls provided. Utilize Teflon lined or other special duct
where good engineering practice may dictate.
12. FIRE SPRINKLERS: Tenant is responsible for the relocation or
addition of any fire sprinkler heads and drops including the
adjustment of the height of any sprinkler heads provided by Landlord
to the extent required in order to maintain a design in conformance
with NFPA #13 and other applicable codes and requirements of
Landlord's insurance carrier. All heads and escutcheons shall match
the type and color provided elsewhere in the facility. Tenant to
provide special chemical sprinkler systems where operations dictate.
13. ELECTRICAL: Provide overhead lighting, special lighting, emergency
lighting, switches, duplex outlets, horns, strobes, phone outlets,
and other electrical devices as required by codes and as determined
by Tenant's space planner. Work shall include all circuitry,
wiring, conduits, raceways, disconnects and breakers, and
termination devices extending from panels to equipment and fixtures
provided.
a. CONDUIT AND WIRING: Wire to be copper, minimum #12 THW and
enclosed in minimum 1/2" rigid steel conduit. All conduit and
wiring to be concealed in walls or ceiling plenums above. MC
cabling and wiring or flexible conduit may only be utilized
where specifically approved by Landlord. Low voltage,
telephone and data wiring shall be plenum rated of the size
and type required for the specific application. Category V
wire to be provided for all data cabling.
b. POWER DISTRIBUTION IN FIXED WALLS:
1) Light switches and outlets to be white colored, 20 amp
devices or of any other matching type specifically
required.
2) Provide duplex outlets where required or indicated by
Tenant's space planner. Outlets for computerized
equipment to be on isolated ground circuits. GFI
receptacles to be provided in breakrooms and other areas
adjacent to water sources.
3) Provide box and conduit extending to ceiling plenum
above for required data or telephone outlets.
c. WORK STATION DISTRIBUTION SYSTEMS: Provide in-slab and/or
overhead electrical power distribution systems to power poles
or other designated location to connect to and deliver
services to each work station.
1) In-slab distribution shall consist of empty conduit and
floor junction boxes or a premanufactured ducted system.
Overhead distribution shall consist of a grid of empty
conduit and junction boxes mounted to the roof
structure. These distribution
<PAGE> 37
systems, combined, shall be of sufficient size, spacing
and density to serve the initial work stations as well
as to provide flexibility for future work station
reconfigurations.
2) Cable trays are recommended for data and
telecommunication distribution. If not provided, such
wiring should be bundled together and hung from the
structure in a uniform and well organized manner and
shall not be laid loosely in a random alignment on top
of ceiling systems. All wiring terminations and
equipment to be provided, installed, and paid for by
Tenant.
3) Perimeter furred walls, interior partitions and furred
columns shall be used to extend conduit feeds and
conductors from the overhead grid system to Tenant's
work station wire management raceways. Dropped cables
not enclosed in walls or power poles are prohibited.
d. INTERIOR LIGHTING: General office areas and conference rooms
to have 2'-0" x 4'-0" and/or 18-cell deep parabolic light
fixtures with T-8 lamps and electronic ballasts. Exit lights
to have clear aluminum finish and LED type lettering. Provide
recessed fluorescent can lights or other special fixtures
selected by Tenant's space planner. Utility rooms, breakrooms,
and storage rooms may be furnished with lay-in fixtures with
acrylic lenses or surface mounted, acrylic wrapped flourescent
fixtures. Provide exit, life-safety and emergency battery-pack
lighting as required to meet applicable codes.
e. FIRE ALARM: Tenant shall provide a fire alarm system
throughout the premises as required by codes including but not
limited to local annunciators, strobes, manual pull stations,
smoke detectors, controls at dampers and emergency lighting.
All devices must match those used elsewhere in the facility
must be interconnected with Landlord's master alarm control
panel.
f. SECURITY: Building security shall consist of rough-in for
electrically operated card access devices located at each
building main entrance. At Tenant's option main entrance doors
may also be provided with a card access lock control mechanism
connected with Landlord's building system. All materials must
match those used elsewhere within the facility. Additional
security systems may be provided by the Tenant at Tenant's
option.
g. TELEPHONE & DATA: Overhead telephone and data distribution
systems shall be provided as indicated above. All other work
associated with telecommunications and data services shall be
provided, installed, and paid for by Tenant. On-site fiber
optic may be utilized by Tenant at Tenant's option. Tenant
responsible for contracting with a local telephone dial-tone
provider.
h. UN-INTERRUPTED POWER SUPPLY: Provide all panels, circuitry,
wiring, batteries, switching devices and other items required
to provide an uninterrupted power source.
i. EMERGENCY GENERATOR: Make connection to emergency panels
provided by Landlord as set forth in Section E.5.g. of this
Exhibit "C/D". Pay any additional costs to augment or enlarge
existing system or for extraordinary use and equipment as
described in Exhibit "C".
14. GENERAL CONDITIONS: All general conditions as described in Paragraph
A, relating to Tenant interior finishes shall be included.
15. SEISMIC BRACING: All fixtures, equipment, suspended ceiling systems,
other equipment, and piping supported from the structure above shall
be seismically braced in accordance with local codes and good
engineering design.
16. OTHER: Any work that is otherwise required to place the Premises in
a finished occupiable condition shall be provided by Tenant in
accordance with plans and specifications approved in advance by
Landlord's architect.
J. LOCATING THE WORK OF OTHER TENANT'S WITHIN THE PREMISES
1. LANDLORD'S RIGHT: In addition to any rights that Landlord or other
building occupants might have through the Restrictions, Rules, and Covenants
related to this project, Landlord and other Tenants shall have the right to
locate utility mains and other facilities within the Premises, when such
location is dictated by necessities of engineering design, good practice, and/or
code requirements. These shall be located, wherever possible, in ceiling plenums
and walls or so as to cause the minimum of interference with the Tenant and to
be unobtrusive in appearance, and so as not to materially interfere with
Tenant's business or use of space.
2. CEILING PLENUMS: This right to locate work within the Premises shall
include the right to locate work in ceiling plenum areas between finished
ceiling and roof or floor deck above, as well as on the roof or under the roof
thereof.
3. TYPES: Facilities may include, but are not necessarily limited to:
drains, water supply, sewerage lines, refrigerant lines, sprinkler risers,
electric power circuits, telephone circuits, pump stations,
<PAGE> 38
electric panel boards, sanitary vents, air supply, ducts and shafts, exhaust
ducts, and flues servicing other building occupants.
4. LOCATION: Such areas shall be located adjacent to an interior wall and
shall in no event exceed one (1.0%) percent of the floor area.
<PAGE> 39
EXHIBIT "D"
TENANT'S WORK
The following is a description of the construction, and limitations of same,
which will be provided exclusively by the Tenant unless indicated otherwise
herein. Except as specifically described in Exhibit "C" of this Lease, the
Tenant is responsible for the final design and construction of all interior
improvements within its premises including all architectural, plumbing,
mechanical, electrical, finishes, and furnishings necessary to place the
premises in a complete and occupiable condition in accordance with the
requirements and specifications described herein. Where two types of materials,
structures, or installations are indicated, the option will be the Tenant's.
A. PLANS AND SPECIFICATIONS
To be prepared in accordance with the criteria and procedures outlined in
Exhibit "C" of this Lease. Notwithstanding anything to the contrary
elsewhere in the Lease, Tenant shall pay the costs of all plan preparation
and construction documents describing Tenant Finish work. Landlord's
mechanical and electrical engineers shall be utilized to perform all final
construction documents describing plumbing, HVAC, and electrical
installations required.
B. LANDLORD'S WORK WITHIN THE PREMISES (PAID FOR BY TENANT AS PART OF TENANT
FINISH)
1. PURCHASES BY LANDLORD: Landlord reserves the right to provide
certain materials and/or improvements on behalf of Tenant where
deemed prudent by Landlord. Wherever materials and/or improvements
are provided by Landlord, Tenant will be charged at Landlord's
actual cost thereof, but may include markup for a ratable share of
General Conditions and contractor overhead and fee plus five (5%)
percent for Landlord's overhead.
2. SCOPE: Such items of work may include but is not limited to the
following:
a. ENTRANCE DOOR CARD ACCESS: At the election of Tenant, provide
card access pad, magnetic lock or electric strike and
installation of electronic controls compatible with main
building system.
b. DOORS: To facilitate timely completion for doors that have
special sizes or finishes.
c. VAV BOXES: Provide branch takeoff, hot water piping, and box
including electrical connection where deemed prudent.
d. TEMPERATURE CONTROL: Provide controls compatible with building
system including installation and programming.
3. TENANT SPACE LAYOUT AND DESIGN: Where requested by tenant only. Rate
to be 75 cents per sq. ft. Final electrical and mechanical
engineering to be provided at a competitive rate based on the scope
and complexity of the installation required.
C. TENANT'S WORK TO WHICH LANDLORD CONTRIBUTION SHALL NOT BE APPLIED
1. SIGNAGE: Suite identification signs and signage within the premises.
Exterior signs, if permitted.
2. SPECIAL MILLWORK: Reception counters and other special purpose work
stations, counters, and cabinetry.
<PAGE> 40
3. FURNITURE SYSTEMS: Landscape office furniture, shelving, desks, and
other associated accessories, tables, chairs, couches, artwork,
planters and plants, and other furnishings.
4. EQUIPMENT: Office equipment, copy machines, faxes, computers,
servers, telephone equipment, switch boards, handsets, sound
systems, security equipment, safes, audio visual equipment, etc.
5. OTHER SPECIALTIES: Chalk boards, white boards, tack boards,
projection screens, movable or operable wall systems, postal
accessories, etc.
<PAGE> 1
EXHIBIT 10.26
[SUN MICROSYSTEMS LOGO]
SUN MICROSYSTEMS FINANCE
MASTER LEASE AGREEMENT
MASTER LEASE # SL7079446
Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor, subject
to the following terms of this Master Lease Agreement ("Master Lease") and any
Lease Schedule ("Schedule"), collectively referred to as the Lease ("Lease"),
the personal property described in any Schedule together with all attachments,
replacements, parts, substitutions, additions, upgrades, accessories, software
licenses and operating manuals (the "Product"). Each Schedule shall constitute a
separate, distinct, and independent Lease and contractual obligation of Lessee.
1. COMMENCEMENT DATE AND TERM
The initial lease term ("Initial Term") and Lessee's rental obligations shall
begin on the Commencement Date and continue for the number of Rental Periods
specified in the Lease as set forth in Section 2 below and shall renew
automatically thereafter until terminated by either party upon not less them
ninety (90) days prior written notice. The Commencement Date with respect to
each item of Product shall be the 16th day after date of shipment to Lessee.
2. RENT AND RENTAL PERIOD
All rental payments and any other amounts payable under a Lease are collectively
referred to as "Rent". The Rental Period shall mean the rental payment period of
either calendar months, quarters, or as otherwise specified in each Schedule.
Rent for the specified Rental Period is due and payable in advance, to the
address specified in Lessor's invoice, on the first day of each Rental Period
during the Initial Term and any extension (collectively, the "Lease Term"),
provided, however, that Rent for the period of time (if any) from the
Commencement Date to the first day of the first Rental Period shall begin to
accrue on the Commencement Date. If any Rent is not paid when due, Lessee will
pay a service fee equal to five percent (5%) of the overdue amount plus interest
at the rate of one and one half percent (1.5%) per month or the maximum legal
interest rate, whichever is less.
3. NET LEASE, TAXES AND FEES
Each Schedule shall constitute a net lease and payment of Rent shall be absolute
and unconditional, and shall not be subject to any abatement, reduction, set
off, defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever. Lessee agrees to pay Lessor when due shipping charges, fees,
assessments and all taxes (municipal, state and federal) imposed upon a Lease or
the Product or its ownership, leasing, renting, possession or use except for
taxes based on Lessor's income.
4. TITLE
Product shall always remain personal property. Lessee shall have no right or
interest in the Product except as provided in this Master Lease and the
applicable Schedule and shall hold the Product subject and subordinate to the
rights of Lessor. Lessee agrees to execute UCC financing statements as and when
requested by Lessor and hereby appoints Lessor as its attorney-in-fact to
execute such financing statements. Lessor may file a photocopy of any Lease as a
financing statement.
Lessee will, at its expense, keep the Product free and clear from any liens or
encumbrances of any kind (except any caused by Lessor) and will indemnify and
hold Lessor harmless from and against any loss or expense caused by Lessee's
failure to do so. Lessee shall give Lessor immediate written notice of any
attachment or judicial process affecting the Product or Lessor's ownership. If
requested, Lessee will label the Product as the property of Lessor and shall
allow, subject to Lessee's reasonable security requirements, the inspection of
the Product during regular business hours.
5. USE, MAINTENANCE AND REPAIR
Lessee, at its own expense, shall keep the Product in good repair, appearance
and condition, other than normal wear and tear and shall obtain and keep in
effect throughout the term of the Schedule a hardware and software maintenance
agreement with the manufacturer or other party acceptable to Lessor. All parts
furnished in connection with such repair and maintenance shall be manufacturer
authorized parts and shall immediately become components of the Product and the
property of Lessor. Lessee shall use the Product in compliance with the
manufacturer's or supplier's suggested guidelines.
6. DELIVERY AND RETURN OF PRODUCT
Lessee assumes the full expense of transportation, insurance, and installation
to Lessee's site. Upon termination of each Schedule, Lessee will provide Lessor
a letter from the manufacturer certifying that the Product is in good operating
condition and is eligible for continued maintenance and that the operating
system is at the then current level, unless under a Sun service contract during
the Lease Term. Lessee, at its expense, shall deinstall, pack and ship the
Product to a U.S. location identified by Lessor. Lessee shall remain obligated
to pay Rent on the Product until the Product and certification are received by
Lessor.
7. ASSIGNMENT AND RELOCATION
Lessee may sublease or assign its rights under this agreement with Lessor's
prior written consent, which consent shall not be unreasonably withheld,
subject, however, to any terms and conditions which Lessor may require. No
permitted assignment or sublease shall relieve Lessee of any of its obligations
hereunder.
Lessee acknowledges Lessor may sell and/or assign its interest or grant a
security interest in each Lease and/or the Product to an assignee ("Lessor's
Assignee"), so long as Lessee is not in default hereunder. Lessor or Lessor's
Assignee shall not interfere with Lessee's right of quiet enjoyment and use of
the Product. Upon the assignment of each Lease, Lessor's Assignee shall have any
and all discretions, rights and remedies of Lessor and all references to Lessor
shall mean Lessor's Assignee. In no event shall any assignee of Lessor be
obligated to perform any duty, covenant or condition under this Lease and Lessee
agrees it shall pay such assignee without any defense, rights of set-off or
counterclaims and shall not hold or attempt to hold such assignee liable for any
of Lessor's obligations hereunder.
Lessee, at its expense, may relocate Product (after packing it for shipment in
accordance with the manufacturer's instructions) to a different address with
thirty (30) days prior written notice to Lessor. The Product shall at all times
be used solely within the United States.
8. UPGRADES AND ADDITIONS
Lessee may affix or install any accessory, addition, upgrade, equipment or
device on the Product ("Additions") provided that such Additions W can be
removed without causing material damage to the Product, 60 do not reduce the
value of the Product and (iii) are obtained from or approved by Sun Microsystems
Computer Corporation and are not subject to the interest of any third party
other than Lessor. Any other Additions may not be installed without Lessor's
prior written consent. At the end of the Schedule Term, Lessee shall remove any
Additions which (i) were not leased by Lessor and (ii) are readily removable
without causing material damage or impairment of the intended function, use, or
value of the Product and restore the Product to its original configuration. Any
Additions which are not so removable will become the Lessor's property (lien
free).
9. LEASE END OPTIONS
Upon written notice given at least ninety (90) days prior to expiration of the
Lease Term, and provided Lessee is not in default under any Schedule, Lessee may
W exercise any purchase option set forth on the Schedule, or 60 renew the
Schedule for a minimum extension period of twelve (12) months, or (iii) return
the Product to Lessor at the expiration date of the Schedule pursuant to Section
6 above.
10. INSURANCE, LOSS OR DAMAGE
Effective upon shipment of Product to Lessee and until Product is received by
Lessor, Lessee shall provide at its expense G) insurance against the loss or
theft or damage to the Product for the full replacement value, and (ii)
insurance against public liability and property damage. Lessee shall provide a
certificate of insurance that such coverage is in effect, upon request by
Lessor, naming Lessor as loss payee and/or additional insured as may be
required.
Lessee shall bear the entire risk of loss, theft, destruction of or damage to
any item of Product. No loss or damage shall relieve Lessee of the obligation to
pay Rent or any other obligation under the Schedule. In the event of loss or
damage, Lessee shall promptly notify Lessor and shall, at Lessor's option, (i)
place the Product in good condition and repair, or (ii) replace the Product with
lien free Product of the same model, type and configuration in which case the
relevant Schedule shall continue in full force and effect and clear title in
such Product shall automatically vest in Lessor, or (iii) pay Lessor the present
value of remaining Rent plus the buyout purchase option price provided for in
the applicable Schedule.
11. SELECTION, WARRANTIES AND LIMITATION OF LIABILITY
Lessee acknowledges that it has selected the Product and disclaims any reliance
upon statements made by Lessor. Lessee acknowledges and agrees that use and
possession of the Product by Lessee shall be subject to and controlled by the
terms of any manufacturer's or, if appropriate, supplier's warranty, and Lessee
agrees to look solely to the manufacturer or, if appropriate, supplier with
respect to all mechanical, service and other claims, and the right to enforce
all warranties made by said manufacturer are hereby assigned to Lessee for the
term of the Schedule.
EXCEPT AS SPECIFICALLY PROVIDED HEREIN, LESSOR HAS NOT MADE AND DOES NOT MAKE
ANY REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, NONINFRINGEMENT, THE DESIGN, QUALITY,
CAPACITY OR CONDITION
<PAGE> 2
OF THE PRODUCT, ITS MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. IT
BEING AGREED THAT AS THE LESSEE SELECTED BOTH THE PRODUCT AND THE SUPPLIER, NO
DEFECT, EITHER PATENT OR LATENT SHALL RELIEVE LESSEE OF ITS OBLIGATION
HEREUNDER. LESSEE AGREES THAT LESSOR SHALL NOT BE LIABLE FOR SPECIFIC
PERFORMANCE OR ANY LIABILITY, LOSS, DAMAGE OR EXPENSE OF ANY KIND INCLUDING,
WITHOUT LIMITATION, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES OF
ANY NATURE, DAMAGES ARISING FROM THE LOSS OF USE OF PRODUCT, LOST DATA, LOST
PROFITS, OR FOR ANY CLAIM OR DEMAND.
12. INDEMNITY
Lessee shall indemnify and hold harmless Lessor and Lessor's Assignee from and
against any and all claims, actions, suits, proceedings, liabilities, damages,
penalties, costs and expenses (including reasonable attorneys' fees), arising
out of the use, operation, possession, ownership (for strict liability in tort
only), selection, leasing, maintenance, delivery or return of any item of
Product.
13. DEFAULT AND REMEDIES
Lessee shall be in default of any Lease if 0) Lessee fails to pay Rent within
ten (10) days of due date; (it) Lessee fails to perform or observe or breaches
any covenant or condition or any representation or warranty in such Lease, and
such failure or breach continues unremitted for a period of ten (10) days after
written notice from Lessor; (iii) Lessee, except as expressly permitted in the
Lease, attempts to move, sell, transfer, encumber, or sublet without consent any
item of Product leased under such Lease; (iv) Lessee files or has filed against
it a petition in bankruptcy or becomes insolvent or makes an assignment for the
benefit of creditors or consents to the appointment of a trustee or receiver or
either shall be appointed for Lessee or for a substantial part of its property
without its consent, or (v) Lessee or any guarantor of Lessee is declared
legally deceased or if Lessee shall terminate its existence by merger,
consolidation, sale of substantially all of its assets or otherwise.
Upon default, Lessor may, at its option, take one or more of the following
actions, (i) declare all sums due and to become due under the Schedule
immediately due and payable, 00 require Lessee to return immediately all Product
leased under such Schedule to Lessor in accordance with Paragraph 6 hereof,
(iii) without breach of the peace take immediate possession of and remove the
Product; 0v) sell any or all of the Product at public or private sale or
otherwise dispose of, hold, use or lease to others, or; (v) exercise any right
or remedy which may be available to Lessor under applicable law, including the
right to recover damages for the breach of the Schedule. In addition, Lessee
shall be liable for reasonable attorney's fees, other costs and expenses
resulting from any default, or the exercise of Lessor's remedies, including
placing such Product in the condition required by Paragraph 6 hereof. Each
remedy shall be cumulative and in addition to any other remedy otherwise
available to Lessor at law or in equity. No express or implied waiver of any
default shall constitute a waiver of any of Lessor's other rights.
14. LESSEE'S REPRESENTATIONS
Lessee represents and warrants for this Master Lease and each Schedule that the
execution, delivery and performance by Lessee have been duly authorized by all
necessary corporate action; the individual executing was duly authorized to do
so; the Master Lease and each Schedule constitute valid, binding agreements of
the Lessee enforceable in accordance with their terms; that all information
supplied by Lessee, including but not limited to the credit application and
other financial information concerning Lessee, is accurate in all material
respects as of the date provided; and if there is any material change in such
information prior to manufacturer's or, if appropriate, supplier's shipment of
Product under the Schedule, Lessee will advise Lessor of such change in writing.
15. APPLICABLE LAW
This Master Lease and each Schedule shall in all respects be governed by and
construed in accordance with the laws of the state of California without giving
effect to the principles of conflict of laws.
16. MISCELLANEOUS
Lessee agrees to execute and deliver to Lessor such further documents,
including, but not limited to, financing statements, assignments, and financial
reports and take such further action as Lessor may reasonably request to protect
Lessor's interest in the Product.
The performance of any act or payment by Lessor shall not be deemed a waiver of
any obligation or default on the part of Lessee, Lessor's failure to require
strict performance by Lessee of any of the provisions of this Master Lease shall
not be a waiver thereof. No rights or remedies referred to in Article 2A of the
Uniform Commercial Code will be conferred on Lessee unless expressly granted in
this Master Lease.
This Master Lease together with any Schedule constitutes the entire
understanding between the parties and supersedes any previous representations or
agreements whether verbal or written with respect to the use, possession and
lease of the Product described in that Schedule. In the event of a conflict, the
terms of the Schedule shall prevail over the Master Lease.
No amendment or change of any of the terms or conditions herein shall be binding
upon either party unless they are made in writing and are signed by an
authorized representative of each party Each Schedule is non-cancellable for the
full term specified and each Schedule shall be binding upon, and shall inure to
the benefit of Lessor, Lessee, and their respective successors, legal
representatives and permitted assigns.
All agreements, representations and warranties contained herein shall be for the
benefit of Lessor and shall survive the execution, delivery and termination of
this Master Lease, any Schedule or related document.
Any provision of this Master Agreement and/or each Schedule which is
unenforceable shall not cause any other remaining provision to be ineffective or
invalid. The captions set forth herein are for convenience only and shall not
define or limit any of the terms hereof. Any notices or demands in connection
with any Schedule shall be given in writing by regular or certified mail at the
address indicated in the Schedule, or to any other address specified.
THIS MASTER LEASE SHALL BECOME EFFECTIVE ON THE DATE ACCEPTED BY LESSOR.
LESSOR: SUN MICROSYSTEMS FINANCE LESSEE: Medibuy.com, Inc.
A Sun Microsystems, Inc. (Full legal name of Lessee)
Business (Business Entity)
BY: /s/ Vicki Kandl BY: /s/ Jeffrey H. Strasberg
----------------------------- ---------------------------
(Authorized Signature)
NAME: Vicki Kandl NAME: Jeffrey H. Strasberg
----------------------------- ---------------------------
TITLE: Manager - Lease Originations TITLE: Chief Financial Officer
----------------------------- ---------------------------
DATE: 9/26/99
-----------------------------
<PAGE> 3
[SUN MICROSYSTEMS LETTERHEAD]
LEASE SCHEDULE ("SCHEDULE") NO. 001
TO MASTER LEASE AGREEMENT ("MASTER LEASE") NO. SL7079446
LESSEE LESSOR
------ ------
NAME: MediBuy.com, Inc. SUN MICROSYSTEMS FINANCE
A SUN MICROSYSTEMS, INC. BUSINESS
901 SAN ANTONIO ROAD
PALO ALTO, CA 94303
ADDRESS: 7777 Alvarado Road
La Mesa, CA 91941
ADMIN. CONTACT: Mr. Jeff Strasberg
PHONE NO.: 619-667-2880 PHONE NO.: 800-786-3366
FAX NO.: 612-513-3299
BILLING ADDRESS PAYMENT SCHEDULE
--------------- ----------------
Same as above LEASE TERM: 24 MONTHS
RENTAL: $22,243.00* PER MONTH
--------
*PAYMENTS TO BE MADE USING AUTOMATIC
BANK WITHDRAWAL
LESSEE PURCHASE ORDER NO.: _____________ SALES/USE TAX: Payment amount may be
CONTACT: _______________________________ increased to include applicable
PHONE NO.: _____________________________ sales/use tax.
LOCATION OF PRODUCT END OF LEASE OPTIONS
------------------- --------------------
Same as above [X] FMV PURCHASE OR RENEWAL
CONTACT: _______________________________ [ ] $1 PURCHASE OPTION
PHONE NO.: _____________________________ [ ] 10% PURCHASE OPTION
[ ] OTHER: ________________________
PRODUCT DESCRIPTION AS DESCRIBED IN APPLIED COMPUTER SOLUTIONS EXHIBIT "A", LINE
ITEMS 1-14 & 19, EXHIBIT "B", LINE ITEMS 1-9, EXHIBIT "C", LINE ITEMS 1-16,
EXHIBIT "D", LINE ITEMS 1, 4-6, 9, 12-14, 17, & 18, EXHIBIT "E", LINE ITEMS
1-13, EXHIBIT "F", LINE ITEMS 1-10, & EXHIBIT "G", LINE ITEMS 1-6, 16 & 18
ATTACHED HERETO.
MASTER AGREEMENT: This Schedule is issued and effective this date set forth
below pursuant to the Master Lease identified above. All of the terms,
conditions, representations and warranties of the Master Lease are hereby
incorporated herein and made a part hereof as if they were expressly set forth
in this Schedule and this Schedule constitutes a separately enforceable,
complete and independent lease with respect to the Product described herein. By
their execution and delivery of this Schedule, the parties hereby affirm all of
the terms, conditions, representations and warranties of the Master Lease.
The additional terms set forth on the reverse side hereof are made a part of
this Schedule.
AGREED AND ACCEPTED BY: AGREED AND ACCEPTED BY:
SUN MICROSYSTEMS FINANCE LESSEE MEDIBUY.COM, INC.
A SUN MICROSYSTEMS, INC.
BUSINESS
BY: /s/ Vicki Kandl BY: /s/ Jeffrey H. Strasberg
------------------------------- ----------------------------
NAME: Vicki Kandl NAME: Jeffrey H. Strasberg
------------------------------- ----------------------------
TITLE: Manager - Lease Originations TITLE: Chief Financial Officer
------------------------------- ----------------------------
DATE: 9/26/99 DATE: 10/7/99
------------------------------- ----------------------------
<PAGE> 4
ADDITIONAL TERMS FOR SMCC PRODUCTS
The following additional terms and conditions shall govern the use of SMCC
Products leased hereunder.
1.0 USE OF SOFTWARE
Lessee's use of any software Products ("Software") provided under this Schedule
shall be governed by the object code license accompanying such Software.
2.0 WARRANTY
Product warranties may vary depending on the specific SMCC Product leased.
Applicable terms and conditions are as set out in the then current U.S. End User
Price List. Software is warranted to conform to published specifications for a
period of ninety (90) days from the date of delivery. SMCC does not warrant
that: (i) operation of any Software will be uninterrupted or error free; or (ii)
functions contained in Software will operate in combinations which may be
selected for use by the licensee or meet the licensee's requirements. These
warranties extend only to Lessee as an original Lessee.
Lessee's exclusive remedy and SMCC's entire liability under these warranties
will be: (i) with respect to Product, repair or at SMCC's option, replacement;
and (ii) with respect to Software, use its best efforts to correct such Software
as soon as practical after licensee has notified SMCC of Software's
nonconformance. If such repair, replacement or correction is not reasonably
achievable, SMCC will refund the rental fee/license fee. Unless Lessee has
executed an on-site service agreement, repair or replacement will be undertaken
at a service location authorized by SMCC.
All Software customization is provided "AS IS", without a warranty of any kind.
No SMCC warranty shall apply to any Software that is modified without SMCC's
written consent or any Product or Software which has been misused, altered,
repaired or used with equipment or software not supplied or expressly approved
by SMCC.
SMCC reserves the right to change these warranties at any time upon Notice and
without liability to Lessee or third parties.
EXCEPT AS SPECIFIED IN THIS AGREEMENT, ALL EXPRESS OR IMPLIED REPRESENTATIONS
AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT, ARE HEREBY DISCLAIMED.
3.0 TRADEMARKS AND OTHER PROPRIETARY RIGHTS
"Trademarks" means all company names, products' names, marks, logos, designs,
trade dress and other designations or brands used by Sun Microsystems, Inc., its
subsidiaries and affiliates ("Sun") in connection with Products, including, Sun,
Sun Microsystems, the Sun logo, SPARCstation, SPARCserver, and all Sun product
designs.
Lessee is granted no right, title, license or interest in the Trademarks. Lessee
acknowledges Sun's rights in the Trademarks and agrees that any and all use of
the Trademarks by Lessee shall inure to the sole benefit of Sun.
4.0 HIGH RISK ACTIVITIES
PRODUCTS ARE NOT FAULT-TOLERANT AND ARE NOT DESIGNED, MANUFACTURED OR INTENDED
FOR USE OR RESALE AS ON-LINE CONTROL EQUIPMENT IN HAZARDOUS ENVIRONMENTS
REQUIRING FAIL-SAFE PERFORMANCE, SUCH AS IN THE OPERATION OF NUCLEAR FACILITIES,
AIRCRAFT NAVIGATION OR COMMUNICATION SYSTEMS, AIR TRAFFIC CONTROL, DIRECT LIFE
SUPPORT, OR WEAPONS SYSTEMS IN WHICH THE FAILURE OF PRODUCTS COULD LEAD DIRECTLY
TO DEATH, PERSONAL INJURY, OR SEVERE PHYSICAL OR ENVIRONMENTAL DAMAGE ("HIGH
RISK ACTIVITIES"). SMCC SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY
OF FITNESS FOR HIGH RISK ACTIVITIES.
Lessee represents and warrants that it will not use, distribute or resell
Products (including Software) for High Risk Activities and that it will ensure
that its end-users or customers of Product are provided with a copy of the
notice in the previous paragraph.
<PAGE> 1
EXHIBIT 10.27
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. SOLICITATION/CONTRACT/MODIFICATION FORM APPROVED
CONTRACT PRICING PROPOSAL COVER SHEET NO. OMB NO.
BAA 25 3090-0116
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: This form is used in contract actions if submission of cost or pricing data is required. (See FAR 15.804-6(b)
- ------------------------------------------------------------------------------------------------------------------------------------
2. NAME AND ADDRESS OF OFFEROR (Include Zip Code) 3A. NAME AND TITLE OF OFFEROR'S POINT 3B. TELEPHONE NO.
PartNet Inc. Don Brown, Chairman (801) 581-5340
505 Wakara Way -----------------------------------------------------------------------------
Salt Lake City, UT 84108 4. TELEPHONE OF CONTRACT ACTION (Check)
-----------------------------------------------------------------------------
X A. NEW CONTRACT D. LETTER CONTRACT
-----------------------------------------------------------------------------
B. CHANGE ORDER E. UNPRICED ORDER
-----------------------------------------------------------------------------
C. PRICE REVISION/ F. OTHER (Specify)
REDETERMINATION
- ------------------------------------------------------------------------------------------------------------------------------------
5. TYPE OF CONTRACT (Check) 6. PROPOSED COST (A + B = C)
[ ] FFP [X] CPFF [ ] CPIF [ ] CPAF -----------------------------------------------------------------------------
[ ] FPI [ ] OTHER (Specify) A. COST B. PROFIT/FEE C. TOTAL
$2,874,533 $287,453 $3,161,986
- ------------------------------------------------------------------------------------------------------------------------------------
7. PLACE(S) AND PERIOD(S) OF PERFORMANCE
1 October 1996 to 30 September 1999, PartNet Inc., Salt Lake City, Utah
- ------------------------------------------------------------------------------------------------------------------------------------
8. List and reference the identification, quantity and total price proposed for each contract line item. A line item cost breakdown
supporting this recap is required unless otherwise specified by the Contracting Officer. (Continue on reverse, and then on
plain paper, if necessary. Use same headings.)
- ------------------------------------------------------------------------------------------------------------------------------------
A. LINE ITEM NO. B. IDENTIFICATION C. QUANTITY D. TOTAL PRICE E. REF
- ------------------------------------------------------------------------------------------------------------------------------------
1 Personnel Costs 1,451,214
2 Travel 316,457
3 Software 51,580
4 Hardware 70,555
5 Supplies 9,000
6 Indirect Costs 975,727
7 Fee 287,453
- ------------------------------------------------------------------------------------------------------------------------------------
9. PROVIDE NAME, ADDRESS, AND TELEPHONE NUMBER FOR THE FOLLOWING (If available)
- ------------------------------------------------------------------------------------------------------------------------------------
A. CONTRACT ADMINISTRATION OFFICE B. AUDIT OFFICE
Fort Huachuca
P.O. Box 12746
Ft. Huachuca, AZ 85670-2748
Gloria Bickler
- ------------------------------------------------------------------------------------------------------------------------------------
10. WILL YOU REQUIRE THE USE OF ANY GOVERNMENT PROPERTY 11A. DO YOU REQUIRE GOVERNMENT 11B. TYPE OF FINANCING (If one)
IN THE PERFORMANCE OF THIS WORK? (If "Yes," identify) CONTRACT FINANCING TO PERFORM
THIS PROPOSED CONTRACT? If [X] ADVANCE PAYMENTS
[ ] YES [X] NO "Yes," complete Item 11B) [ ] PROGRESS PAYMENTS
[ ] YES [X] NO [ ] GUARANTEED LOANS
- ------------------------------------------------------------------------------------------------------------------------------------
12. HAVE YOU BEEN AWARDED ANY CONTRACTS OR SUBCONTRACTS FOR 13. IS THIS PROPOSAL CONSISTENT WITH YOUR ESTABLISHED ESTIMATING AND
THE SAME OR SIMILAR ITEMS WITHIN THE PAST 3 YEARS? ACCOUNTING PRACTICES AND PROCEDURES AND FAR PART 31 COST
(If "Yes," identify item(s), customer(s) and contract principles? If "No," explain)
number(s))
[ ] YES [X] NO [X] YES [ ] NO
- ------------------------------------------------------------------------------------------------------------------------------------
14. COST ACCOUNTING STANDARDS BOARD (CASB) DATA (Public Law 91-379 as amended and FAR PART 30)
- ------------------------------------------------------------------------------------------------------------------------------------
A. WILL THIS CONTRACT ACTION BE SUBJECT TO CASB REGULATIONS? B. HAVE YOU SUBMITTED A CASB DISCLOSURE STATEMENT (CASB DS-1 OR 2)?
(If "No," explain in proposal) (If "Yes," specify in proposal the office to which submitted and if
determined to be adequate)
[X] YES [ ] NO [ ] YES [X] NO
- ------------------------------------------------------------------------------------------------------------------------------------
C. HAVE YOU BEEN NOTIFIED THAT YOU ARE OR MAY BE IN NON- D. IS ANY ASPECT OF THIS PROPOSAL INCONSISTENT WITH YOUR DISCLOSED
COMPLIANCE WITH YOUR DISCLOSURE STATEMENT OR COST PRACTICES OR APPLICABLE COST ACCOUNTING STANDARDS? (If "Yes,"
ACCOUNTING STANDARDS? (If "Yes," explain in proposal) explain in proposal)
[ ] YES [X] NO [ ] YES [X] NO
- ------------------------------------------------------------------------------------------------------------------------------------
This proposal is submitted in response to the RFP contract, modification, etc. in Item 1 and reflects our best estimates and/or
actual costs as of this date.
- ------------------------------------------------------------------------------------------------------------------------------------
15. NAME AND TITLE (Type) 16. NAME OF FIRM
Don R. Brown, Chairman PartNet, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
17. SIGNATURE 18. DATE OF SUBMISSION
/s/ DON R. BROWN 16 September 1996
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
TOTAL BASELINE
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3
DIRECT LABOR Hours Cost Hours Cost Hours Cost
----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Principal Investigator 1,190 $113,050 1,350 $134,663 1,000 $104,738
Senior Software Engineer 2,110 $75,960 2,750 $103,950 1,320 $ 52,391
Research Associate 1,650 $63,525 1,730 $69,935 1,550 $ 65,792
Software Engineer 4,045 $84,945 6,345 $139,907 1,870 $ 43,295
Systems Engineer 2,300 $46,000 3,720 $78,120 1,500 $ 33,075
-------- ---------- ---------
Subtotal $383,480 $526,575 $299,290
Benefits $76,696 $105,315 $ 59,858
-------- ---------- ---------
Total Direct Labor $460,176 $631,890 $ 359,148
Other Direct Costs
Travel $104,740 $125,345 $ 86,372
Equipment
Software $32,380 $9,600 $ 9,600
Hardware $60,565 $9,990 $ -
Supplies $1,800 $6,200 $1,000
-------- ---------- ---------
Total Other Direct Costs $199,485 $151,135 $96,972
TOTAL DIRECT COSTS $659,661 $783,025 $456,120
OVERHEAD COSTS* 55.0% $191,909 $276,885 $140,476
G & A COSTS 17.0% $125,548 $157,292 $ 83,616
-------- ---------- ---------
TOTAL COSTS $977,119 $ 1,217,202 $680,212
FEE 10.0% $97,712 $ 121,720 $ 68,021
-------- ---------- ---------
TOTAL $1,074,831 $1,338,922 $748,233
========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
Year 4 Year 5
DIRECT LABOR Hours Cost Hours Cost Total Hours Total Cost
----- ---- ----- ---- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Principal Investigator $ - $ - 3,540 $352,450
Senior Software Engineer $ - $ - 6,180 $232,301
Research Associate $ - $ - 4,930 $199,252
Software Engineer $ - $ - 12,260 $268,147
Systems Engineer $ - $ - 7,520 $157,195
----- ---- ----------
Subtotal $ - $ - 34,430 $1,209,345
Benefits $ - $ - $ 241,869
----- ---- ----------
Total Direct Labor $ - $ - $1,451,214
Other Direct Costs $ -
Travel $ - $ - $316,457
Equipment $ -
Software $ - $ - $ 51,580
Hardware $ - $ - $70,555
Supplies $ - $ - $9,000
----- ---- -----------
Total Other Direct Costs $ - $ - $447,592
TOTAL DIRECT COSTS $ - $ - $ 1,898,806
OVERHEAD COSTS* $ - $ - $ 609,270
G & A COSTS $ - $ - $ 366,457
----- ---- -----------
TOTAL COSTS $ - $ - $ 2,874,533
FEE $ - $ - $ 287,453
TOTAL $ - $ - $ 3,161,986
===== ==== ===========
</TABLE>
* Travel and Equipment are exempted from overhead
* Principal Investigator is a paid consultant and is exempt from Overhead and
G&A.
<PAGE> 3
<TABLE>
<CAPTION>
Equipment Baseline PRICE YEAR 1 YEAR 2 YEAR 3 TOTAL COST
HARDWARE NUMBER COST NUMBER COST NUMBER COST
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pentium Pro - based workstation $ 4,995 6 $29,970 2 $9,990 $ - $39,960
Internet Server $24,395 1 $24,395 $ - $ - $24,395
Modem $210 12 $2,520 $ - $ - $2,520
Hub $340 2 $680 $ - $ - $680
Router $3,000 1 $3,000 $ $ - $3,000
-------- -------- ------ --------
Total Hardware $60,565 $9,990 $ - $70,555
SOFTWARE
C++ Compiler License (NT) $200 8 $1,600 12 $2,400 12 $2,400 $6,400
zApp Developer License $2,000 2 $4,000 $ - $ - $4,00
Oracle 8 Developer License $1,000 8 $8,000 $ - $ - $8,000
Windows NT Operating System License $500 8 $4,000 12 $6,000 12 $6,000 $16,000
Solaris Operating System $1,200 1 $1,200 1 $1,200 1 $1,200 $3,600
Adobe Acrobat $750 1 $750 $ - $ - $750
Adobe Photoshop $750 1 $750 $ - $ - $750
Microsoft Off ice $500 8 $4,000 $ - $ - $4,000
Hummingbird Exceed $385 8 $3,080 $ - $ - $3,080
RSA Bsafe $5,000 1 $5,000 $ - $ - $5,000
-------- ------- ------ --------
Total Software $32,380 $9,600 $9,600 $51,580
TOTAL EQUIPMENT $148,510 $29,580 $9,600 $122,135
</TABLE>
<PAGE> 4
PROPOSAL
SUBMITTED BY
PARTNET, INC.
TO THE
DEFENSE ADVANCED RESEARCH PROJECTS AGENCY
FOR THE
LOGISTICS RESEARCH AND DEVELOPMENT PROGRAM
BAA 95-25
DLA Topic: USER SOURCE LINK
Technical Topic Area: WIDE AREA INFORMATION EXCHANGE
Proposal Title:
An Information Infrastructure for Defense Logistics
TECHNICAL CONTACT: Don R. Brown, Ph.D. ([email protected])
ADMINISTRATIVE CONTACT: Seth Jarvis ([email protected])
PARTNET, INC.
505 Wakara Way
Research Park
Salt Lake City, Utah 84108
(801) 581-5340 - phone
(801) 585-5238 - fax
Contractor's Type of Business: OTHER SMALL BUSINESS
THREE-YEAR CONTRACT COST: $3,168,000
submitted July 15, 1996
<PAGE> 5
II. A. Innovative Claims
We are on the verge of a new era in electronic commerce, where companies
transact business spontaneously over the Internet. The DLA has a unique
opportunity to exploit this electronic marketplace, and to influence its
development in ways that benefit all.
We will define an open procurement architecture using PartNet to operate over
the Internet. API's will be defined to let agents interact with WWW. The use of
agents and open API's will make PartNet and related services accessible directly
through industry leading software packages for Forms, CAD, and EDI. The
resulting instant access to a vast pool of users will attract new classes of
vendors to the network, resulting in a critical mass of buyers and sellers that
will catalyze the marketplace to rapidly and efficiently expand.
Specifically, we will:
* Deploy a PartNet distributed parts catalog connecting directly to
product sources with 22 suppliers and 12 DLA sites. Over I million parts
will be available. This will allow DLA customers to receive product
information as well as price and availability directly from the
information sources. Product will be searchable by parameter for product
and price comparison. Major enhancements of PartNet will be made to
facilitate this deployment.
* Develop an open architecture with published API's supporting a variety
of means for moving, searching, and sorting information, as well as
performing purchasing and supply management functions. Features of the
architecture will include security, allowing authentication of all parties
involved in a transaction, as well as encryption and non-repudiability of
their messages.
H. B. DELIVERABLES
From this research, ARPA and DLA will gain the following:
1. PartNet. PartNet will prototype a distributed product information system
which enables military personnel to search for product information by parameter
value, by supplier, or by part type. This system will enable military personnel
to search for product information by parameter value, by supplier, or by part
type. PartNet aims to become the PRIMARY means by which DoD personnel receive
find and order the products that they require.
The following aspects are critical to demonstrating PartNet's ability to perform
this mission:
A. PartNet will be tested with at least twelve DLA customer sites, such as
flightline support, ALC's, and supply centers. Supplier servers will be
installed in at least 22 supplier sites containing at least 1 million
parts.
<PAGE> 6
B. The cost of participating in PartNet will be dramatically lowered and
the flexibility increased through developments such as:
A supplier starter kit that will enable a supplier to download all
the software modules required to build a PartNet supplier server.
This will include configuration aids, data conversion tools, schema
conversion, data entry tools and a database manager.
A port of the supplier server software to the Windows/NT platform,
running either with Microsoft's SQL Server or Oracle.
A port of the graphical user interface to MS Windows.
Support for distributed data within a supplier. PartNet will
integrate data from two sources to answer a query about a single
part. For example, DLSC may have data about a part's parameters but
DESC may have the data on its price and availability
C. At the end of the period, the research team will recommend how PartNet
can be deployed for broader DoD missions.
D. PartNet will demonstrate an Emergency Inventory Listing Service for
wartime logistics. Any post or installation that has any inventory that
may be "advertised" on PartNet by entering that data into a special
PartNet supplier server that DLA would maintain. Any unit requiring those
items may find them by querying the system. Optionally, these servers
could be installed at each site.
E. PartNet will be made secure so that communications will be encrypted,
authenticated, and the hosts themselves will be protected from intrusion.
PROPRIETARY CLAIMS. Contractors claim the information contained in this proposal
as proprietary. Should ARPA fund the work under this proposal at the level
requested, contractors will grant a non-exclusive royalty-free license to the
Department of Defense for its internal use.
<PAGE> 7
IL C. COST, SCHEDULE, AND MILESTONES
<TABLE>
<CAPTION>
TASKS DESCRIPTION START MONTH TASK COST $K
DURATION
(IN MONTHS)
<S> <C> <C> <C> <C>
1 Identify target military sites 1 3 10
2 Identify target suppliers 1 3 10
3 Supplier Installations 3 32 1,420
4 Install AT Military Sites 3 32 460
5 Windows NT/SQL Server 12 12 175
6 Distributor Server 6 12 213
7 Install PartNet at DLSC 18 6 110
8 Install PartNet at DESC/DSCC 18 6 110
9 Integrate DESC & DLSC Data 18 6 250
10 Evaluate System Performance 6, 12, 18, 24, 36 5 60
11 API 350
- -----------------------------------------------------------------------------------------
TASK TOTALS 117 $ 3,168
OPTIONAL TASKS
- -----------------------------------------------------------------------------------------
A MS Windows 3.1 port of GUI 3 12 150
B Foreign Application Toolkit 0 12 200
C Services for Credentials, Directories 0 36 1,000
- -----------------------------------------------------------------------------------------
OPTIONAL TOTALS 60 $ 1,350
PROJECT TOTALS 177 $ 4,518
</TABLE>
<PAGE> 8
PartNet Task Schedule
Identify Target Military Sites
Identify Target Supplies
Supplier Installations
Tasks Install at Military Sites
Windows NT/SQL Server
Distributor Server
Install PartNet at DLSC
Install PartNet at DESC/DSCC
Integrate DESC & DLSC data
Evaluate System Performance
MS Windows 3.1 port of GUI
Foreign Application Toolkit
Services for Credentials, Directories
3 6 9 12 15 18 21 24 27 30 33 36
Contract Month
<PAGE> 9
II. D. TECHNICAL RATIONALE
INTRODUCTION
In the emerging global electronic marketplace, buyers can browse multimedia
catalogs, solicit bids and place orders; sellers can respond to bids, schedule
production, and coordinate deliveries. A vast array of value-added information
services will bring buyers and sellers together: specialized directories, broker
and referral services, vendor certification and credit reporting, network
notaries and repositories, financial and transportation services -- all the
business services that have evolved to support conventional paper-based
transactions.
Electronic transactions occur routinely between large corporations and major EDI
trading partners, but they involve prior arrangements and dedicated lines or
VANs. The resulting costs and lead times create significant entry barriers to
widespread participation, especially for small and medium size firms. What is
new is the ability of buyers and sellers to transact business spontaneously in
an open marketplace on the public Internet. The unprecedented efficiency and
openness of this electronic marketplace will dramatically change every aspect of
business from sales, marketing and distribution to engineering, manufacturing
and support.
The electronic marketplace is already forming. By the end of 1994, more than ten
thousand companies were offering information and services for sale over a
combination of Internet and VAN service providers. Their ranks are expected to
swell to nearly 100,000 this year, and over a million by the year 2000, when
Internet connectivity approaches the ubiquity of fax. By participating actively
in this marketplace, and promoting a sensible mix of computer-to-computer and
interactive EDI services, the DLA will not just promote E-commerce -- it will
stimulate the creation of a massive, competitive vendor base.
The proposed test-bed will include all of the functionality necessary to support
DLA procurement processes securely on the Internet: company directories,
catalogs, RFQ postings, product data exchange, buyer authorization, vendor
certification, competitive bidding, ordering, tracking, and payment
authorization.
The essence of what we propose is to launch these array of services through an
expanded test of a greatly enhanced PartNet system. The PartNet system will
include security an purchasing, two necessities for the kinds of advanced
services that are possible. At the same time, this research will demonstrate the
effectiveness of PartNet itself in bringing reductions of customer wait time,
inventory, backorders, processing time, and locator inaccuracies within the DLA.
<PAGE> 10
BACKGROUND
PartNet is a client/server information system that enables suppliers to make
their catalogs and databases available to customers over the Internet. From
their computer, customers choose the types of parts and the parameters of the
parts that want. PartNet goes directly to the databases held by the suppliers of
those parts to discover their availability. The suppliers return information
about the parts to customer. PartNet consists of a graphical user interface, a
query server, several vendor database interfaces, and some part databases.
Customers interact with PartNet through a World-Wide Web Browser such as Mosaic
or the PartNet Graphical User Interface (GUI). These connect to a centralized
Query Server (QS). This Query Server receives queries about parts which are then
routed to vendors who supply those parts. Each vendor site provides one or more
Vendor Database Interface (VDI) processes which execute the query and return the
answer to the QS. The QS in turn forwards the data to the original requesting
customer. A single Query Server will handle hundreds of simultaneous customers.
As load increases the Query Servers will be replicated.
The PartNet Client user interface has been tested in the DLA at the Sacramento
Air Logistics Center (SM-ALC) since November of 1994 with exceptional results.
SM-ALC was given the GUI, which runs on a Sun workstation. This client
communicated with a query server located at the University of Utah in Salt Lake
City. There are several vendor servers also located at the University of Utah
which contain approximately 25,000 parts. Engineers at SM-ALC used the system
and reported very favorably on the concept and the performance of the system.
The common thread underlying their wishes was to increase the number of
suppliers and parts on the system.
The vendor server software is being tested at Stock Drive Products on Long
Island, New York. Stock Drives currently has over 16,000 parts listed with over
14,000 Autocad drawings available. Their server resides at an Internet service
provider with a T1 network connection.
The existing effort of the PartNet team is to install the vendor database
interface at several external sites including a vendor, the Defense Logistics
Service Center (DLSC) and the Defense Electronics Supply Center (DESC). This
task should be complete before the start of any work under the BAA 95-25 effort.
A major portion of the proposed effort is to install a secure PartNet and
support it at the 12 DLA customer sites and a total of 22 supplier sites. (There
will be 19 new sites in addition to the 3 sites already under the current
effort.) Customers will be able search for parts by parameter, retrieve product
information, do product and price comparison, and finally, order the part -- all
from their personal computer.
<PAGE> 11
The second major thrust of the proposed effort is to enhance the system in many
important ways. The most important of those is to provide security between the
various agents in the system. This will enable purchasing and delivery of orders
from a user's workstation and for this to occur in an extremely secure manner.
Other major enhancements will include an expanded parts taxonomy, a MS Windows
user interface, a port to Windows NT operating system, interfaces to Sybase,
Informix and SQL Server database managers, an enhanced vendor toolkit to ease
catalog authoring. All of these enhancements are aimed at making the system
easier to adopt and use, which will increase its value to the DLA.
II. E. GENERAL DISCUSSION OF OTHER RESEARCH IN THIS AREA
Other research that is related to this effort are:
1. Internet Listing Services. These services produce WWW pages that list
products and the companies that produce them. You might think of them as having
an "electronic yellow pages." Virtually every Internet Provider in the world
provides this to some extent. Three of the most notable of such are Thomas
Register, IndustryNet, and Marshall Industries. Each of these has a WWW server
which may be queried for product information by keyword search. The good aspect
of this work is that there are lots of companies represented because listing
them is relatively easy. There are two primary disadvantages. The first is that
they are acting as "middlemen" for data, insuring that the data will not be
accurate. The second disadvantage is that the data is searchable only by
keyword, not by parameter.
2. Queryable Centralized Data. These are parameter searchable databases stored
in a repository. This repository may be on CDROM, such as is sold by Information
Handling Services (IHS) or their former competitor CAPS, now owned by IHS.
Aspect Development has licensed the IHS CAPS database and, in turn, licensed it
to Western Micro for access over WWW. The advantage of this approach is that
there is currently a great deal of data on the system. A complete library of IHS
consists of over 60 CDROMS. The disadvantage, like before, is that there is no
direct link created between buyer and seller. The DLA currently uses the IHS
system in many of its operations but have expressed dissatisfaction with the
inaccessibility of the data and the "data freshness" problem.
3. EDI. Electronic Data Interchange has been developed since the 1960's and is
in widespread use today. It has developed mostly over private networks operated
by VAN's (value-added networks). Recently, Premenos, Inc. introduced an EDI
product that uses email over the Internet to send and receive encrypted
messages. There is not much developed in the way of catalogs for EDI. There is a
transaction set called an 832 which is a price sheet, but this falls far short
in terms of semantic richness when compared to PartNet. This research should
investigate how EDI can be tied together with PartNet and USLINK.
<PAGE> 12
4. FAST. FAST is an online parts broker for components that was built at ISL The
DLA has hosted several tests of this system. PartNet and FAST are working
together on a pilot program in which a person uses PartNet to do the parts
finding and FAST to do the parts buying. PartNet is building on the FAST effort.
5. CommerceNet has an electronic commerce pilot which is automating RFQ process
distributing bid packages via secure email. This pilot has plans to expand to
work with electronic catalogs. The advantage of an email-based system is its
ubiquity while the disadvantage is its non-interactive nature.
<PAGE> 13
II. F. LIST OF KEY PERSONNEL
Key personnel for this project, the percentage of time dedicated to the project,
their role, and expertise are as follows:
<TABLE>
<CAPTION>
Name Role Expertise
- ---- ---- ---------
<S> <C> <C>
Don Brown, Ph.D. (10%) P.I., PartNet Logistics & Design Manufact.
Research & Dev. Mgt.
Andrew Hwang, Ph.D. (20%) Data Integration Data Conversion &
Software Engineering
Ben Spigle (100%) Software Architecture Quality Assurance
Dave Crandall (100%) Software Production Software Design
Sean Dalby (100%) System Management Internet Protocols
John P. Creer (100%) Supplier Coordinator Supplier Relations
</TABLE>
<PAGE> 14
III. A. STATEMENT OF WORK
En route to accomplishing the goals of this project, the team will complete the
following tasks:
Task 1. Identify Target Military Sites
This task is to identify additional military sites for PartNet installations.
These sites should encompass all the services and comprise a variety of support
activities. There should be at least 12 sites.
Task 2. Identify Target Military Suppliers
Identify the suppliers that are capable of installing parts on PartNet , are
military suppliers and are willing to install part databases on PartNet. There
should be at least 24 suppliers.
Task 3. Supplier Installations
Install PartNet vendor software at supplier sites. This includes assisting
vendors in converting data, normalizing data and adding data into the
appropriate data formats.
Task 4. Military Installations
Install PartNet client software at military sites. Included in this task is
support and training for a limited number of military personnel at each site.
Support will include bug fixes and an email-based hot-line.
Task 5. Windows NT/SQL Server port.
Port the PartNet software to Windows NT and SQL Server.
Task 6. Distributor Server
Construct a "distributor server" which enables clients to see technical
information from a manufacturer along with prices and availability from a
distributor.
Task 7. DLSC Installation
Install PartNet at the Defense Logistics Services Center. This installation will
be the distributor server version mentioned above. This will replace the
existing PartNet server at DLSC. In addition to installing the software, this
task includes assisting DLSC personnel in maintaining the software over the
period.
<PAGE> 15
Task 8. DESC Installation
Install PartNet at the Defense Electronics Supply Center/ Defense Supply Center-
Columbus. This installation will be the distributor server version mentioned
above. This will replace the existing PartNet server at DESC. In addition to
installing the software, this task includes assisting DESC personnel in
maintaining the software over the period.
Task 9. Integrate DLSC and DESC data
Use the distributor server to integrate part characteristic data from DLSC with
part price and availability data from DESC.
Task 10. Evaluate System Performance
This task is performed at 6 month intervals to evaluate the system performance.
Metrics to be used are: number of parts available, number of vendors available,
type and amount of part characteristics available, price and stock level
information, part delivery timeliness.
Task 1 1. Application Programmer Interface
This task encompasses a variety of interface issues involving other systems that
are part of the Log R&D effort. It includes improving the interface with FAST
and other purchasing mechanisms such as EDI. It also includes interfacing with
other Log R&D efforts such as ontology servers.
Optional Tasks
Task A. Windows 3.1 port of client software
In addition to supporting Windows NT and Windows 95, port the client user
interface to Windows 3. 1.
Task B. Foreign Application Toolkit
Provide a toolkit for integrating other applications into PartNet as a front
end. An example might be a Workflow system. This task to be performed by EIT
Corporation.
Task C. Directory Services and Credentials
Provide and support services for directories and credentials for use in the
PartNet environment.
<PAGE> 16
This task also concerns itself with security issues including
encryption/decryption, authentication and non-repudiation. This task to be
performed partially under a subcontract to CommerceNet.
III. B. DESCRIPTION OF THE PROJECT RESULTS, PRODUCTS, AND DEMONSTRATION PLAN.
From this research, ARPA and DLA will gain the following:
1. PartNet. A distributed product information system. This system will enable
military
personnel to search for product information by parameter value, by supplier, or
part type. PartNet aims to become the PRIMARY means by which DoD personnel
receive find and order the products that they mean require.
The following aspects are critical to demonstrating PartNet's ability to perform
this mission:
A. PartNet will be tested with at least twelve DLA customer sites, such as
flightfine support, ALC's, and supply centers. Supplier servers will be
installed in at least 22 supplier sites containing at least 1 million
parts.
B. The cost of participating in PartNet will be dramatically lowered
through new developments such as:
A vendor starter kit that will enable a supplier to download all the
software modules required to build a PartNet supplier server. This
will include configuration aids, data conversion tools, schema
conversion, data entry tools and a database manager.
A port of the supplier server software to the Windows/NT platform,
running either with Microsoft's SQL Server or Oracle.
A port of the graphical user interface to MS Windows.
C. At the end of the period, the research team will recommend how PartNet
can be deployed for broader DoD missions.
D. PartNet will be made secure so that communications will be encrypted,
authenticated, and the hosts themselves will be protected from intrusion.
<PAGE> 17
III. C. DETAILED TECHNICAL RATIONALE
It is assumed that most readers are familiar with the PartNet system. For
further information, a technical discussion of the system exists in a paper in
the Appendix. (Section IV Additional Information) This section discusses how
users in the DLA may benefit by using PartNet.
There are many types of users in the armed services that will benefit from
PartNet technology. Here we discuss four functions that these users perform:
design engineering, reverse engineering, field/organizational/flightline
maintenance, and parts cataloging.
1. DESIGN ENGINEERING
Engineers involved in product design, modification and upgrades require new
parts or parts that will replace or upgrade current parts in existing designs.
Current methods to identify, select and source (i.e., find sources for) parts
are inefficient (they are very time consuming) and sometimes minimally effective
(they do not result in locating the best part for the design, the best price for
the part selected, or parts that might be readily available locally in
Government inventories). Engineers are often faced with limited data or outdated
data about the parts they are considering (e.g., a single, outdated vendor parts
catalog). Engineers' demands on one or more levels of customer service
organizations to assist in identifying and sourcing the needed parts consume
time and resources.
PartNet can be viewed as an EMPOWERMENT TOOL FOR THE FRONT-LINE ENGINEER who
needs a part. Engineers can view PartNet data and electronic images provided by
a range of manufacturers and vendors that want to sell their parts. That data
and those images will most likely be presented in ways that are best understood
and appreciated by parts users and buyers. The PartNet displays can overcome
limitations in current Federal catalog data that do not contain the wealth of
images or the industry standard descriptors for parts. Also, the PartNet data
have not been filtered through DoD prime equipment contractors or integrators
who might have vested interests in their own sales of those parts rather than
identifying the true manufacturer or source of parts. DoD prime equipment
contractors and integrators that provide cataloging data to Federal agencies
have, on many occasions, limited the data, misrepresented the data, or declared
the data as proprietary where, in fact, the cited part is readily available
commercially from multiple sources.
PartNet can greatly reduce or obviate the need for customer service support at
customer field activities and DLA organizations for design engineers who need
parts to satisfy their design requirements. Efficient PartNet self-help menus
can enable engineers to enter data and make decisions that result in identifying
commercially available parts needed in their designs. Real-time displays of
pictures of candidate parts can assure engineers that the part selected is what
it is believed to be (physically, based on transmitted photographic images).
Engineers can compare currently available parts and their associated data with a
<PAGE> 18
removed part or design requirement. Current PartNet information and PartNet
displays can provide engineers with significantly more robust information than
Federal catalog data files and create a higher likelihood that the decisions the
engineers make on part selection and sourcing will be correct. PartNet can make
customer service more of a self-service function than one that depends on the
expertise and limited documentation of customer service personnel. Engineers
will be able to approach the parts ordering process knowing precisely the part
they want and the source for the part. Guesswork can be eliminated concerning
when and whether they can get the part they want.
Linkage of PartNet with local, regional or national Federal Government parts
inventories could allow preference for selection of parts that are currently in
inventory. Parts that appear in Government inventories could be highlighted for
the engineer making the part selection decision. PartNet could display tutorial
guidance on the benefits of selecting parts in local inventory. Such is the goal
of the work with DESC and DLSC. DLSC holds the product information while DESC
holds the delivery and price information that a customer desires. This is
analogous to the situation where manufacturer's hold the product information and
distributors hold the product and price information.
PartNet is capable of providing a broad range of parts alternatives based on
design characteristics that are significant to the design engineer. For each
part being considered for selection, PartNet can quickly provide current,
electronic displays of characteristics data, 2-D drawings (including footprints
and design symbols), 3-D drawings (including wireframe and solids), graphical
function displays, photographic views of the parts, and video motion images.
Design engineers can save their personal time in the design process by capturing
those electronic displays and incorporating them into computer aided design
(CAD) records for product design. For example, design symbols can be
incorporated into schematic designs, appropriately scaled part footprints can be
placed in 2-D layouts, and wireframe and solids can be incorporated into
proposed 3-D "as built" designs.
ALL engineers responsible for identifying, selecting or sourcing parts as well
as engineers who establish initial design specifications could benefit from
PartNet capabilities. By having access to a powerful, current data base of
characteristics of existing parts, an engineer can "design in" existing parts
rather than producing a design in which the needed part must be made for the
unique application or the design must be modified at a later date. Either of
those actions is expensive and time-consuming. PartNet provides the tool for the
front-line engineer to document and affect the make-versus-buy decision using
data on available parts as the baseline for the buy alternative.
2. REVERSE ENGINEERING
Personnel at intermediate and depot level component repair/overhaul sites that
are responsible for repair or servicing repairable components often have to rely
on reverse engineering to locate parts needed to restore a repairable component
to operational status. Needed repair parts may not be identified to a current
manufacturer's part number or National Stock Number (NSN) in documentation
available to the servicing personnel.
<PAGE> 19
Parts originally used to make the repairable component may no longer be in
inventory or in production. Reverse engineering can be made more efficient and
effective if the known characteristics about the repair parts being replaced
could be used to enter a data base for identification of existing parts that
will satisfy those characteristics requirements.
DLA customer sites such as Army forts, depots and bases; naval shipyards, bases,
and air stations; Air Force bases and logistic centers; and Marine Corps bases
and air stations, must rely on their engineering talent to identify
requirements. In many cases, customer service organizations must assist in
translating those requirements into available parts.
Technology Role: PartNet can be viewed as an EMPOWERMENT TOOL FOR THE FRONT-LINE
ENGINEER OR TECHNICIAN who needs a part. Engineers and technicians can view
PartNet data and other images provided by manufacturers and vendors that want to
sell their parts and compare that information with parts and/or part functions
where the currently installed part is no longer available or is no longer being
produced.
PartNet could be linked to current DLSC files to assist in identifying the
National Stock Number (NSN) of the part that is no longer in production and in
identifying the catalog characteristics data for that NSN. PartNet could be
interrogated using those characteristics values, with adjustments made to delete
non-critical characteristics or to adjust tolerances (i.e., range of acceptable
values) where appropriate, based on the application of the part, to identify
currently available commercial parts.
PartNet is working on linkages or aliases for names of characteristics in
Federal catalog files and names of characteristics used in identification of
commercial parts. Those linkages will facilitate the use of characteristics for
Federally cataloged parts that are no longer in production, for identification
of currently available commercial parts.
For engineers and technicians who need parts, PartNet can greatly reduce or
obviate the need for customer service support at field activities and DLA.
Efficient PartNet self-help menus enable engineers and technicians to enter data
and make decisions that result in identification of commercially available
parts. Real-time displays of pictures of candidate parts can assure that the
part selected is what it is believed to be (physically, based on transmitted
photographic images). Engineers and technicians tan electronically compare
currently available parts and their associated data with the removed part.
Current PartNet information and PartNet displays provide significantly more
robust information than Federal catalog data files and create a higher
likelihood that the decisions made on part selection and sourcing will be
correct. PartNet can make customer service more of a self-service function than
one which depends on the expertise of customer service personnel. Engineers and
technicians will be able to approach the parts ordering process knowing
precisely the part they want and the source(s) for the part. Guesswork can be
eliminated concerning when and whether they can get the part they want.
<PAGE> 20
Linkage of PartNet with local, regional or national Federal Government parts
inventories could allow preference for selection of parts that are currently in
inventory. Parts that appear in Government inventory could be highlighted to
assist in the part selection decision. Tutorial guidance could be displayed on
the benefits of selecting parts in local inventory.
3. FIELD/ORGANIZATIONAL/FLIGHTLINE MAINTENANCE
Maintenance and servicing technicians responsible for restoring equipment and
systems to fully functional status are often faced with the problem of
identifying failed (or not acceptably functional) parts but not being able to
identify a readily available part needed to effect repair. The level of
education of these personnel is usually not as high as personnel involved in
design engineering (User View #1) or reverse engineering (User View #2);
therefore, their need for part information is more basic. Those technicians need
to match part numbers on problem parts, physical features of problem parts, or
information in maintenance/servicing documentation (e.g., repair manuals and
schematics) with data or images that PartNet can provide.
4. PARTS CATALOGING
DLA is responsible for cataloging parts used by the Department of Defense and
for maintaining files of cataloged parts for all Federal agencies. One purpose
of the cataloging system is to assure that for a given item of supply (e.g., a
part), different Federal activities are not in competition for the procurement
of that item. The parts cataloging process includes the development of lists of
characteristics that describe each part type, the populating of the parts
catalog data base with data for cataloged parts and the assignment of National
Stock Numbers (NSNs) to those cataloged parts.
PartNet Role: PartNet can empower the Government parts cataloger at the
screening activities responsible for developing and for accepting contract data
deliverables of cataloging data as well as the activity responsible for
inputting that data into Government cataloging files. PartNet will allow part
source verification by assisting in identifying the true source of a part.
PartNet can assist by indicating that the purported source is not a commercial
source for that part and by accessing information from likely true parts sources
through matching of images and data on the part to be cataloged and similar
parts from commercial sources. Real-time access to commercial parts data can
reduce the probability of parts being introduced as newly cataloged parts due to
misinformation or incomplete information. PartNet is working on linkages or
aliases for names of characteristics in Federal catalog files and names of
characteristics used in identification of commercial parts. Those linkages will
facilitate the use of characteristics for Federally cataloged parts to identify
commercially available parts, and to identify Federally cataloged parts using
the characteristics of commercially available parts.
PartNet can provide an electronic communications bridge between Federal
catalogers and companies that manufacture and sell parts in the commercial
sector. By permitting
<PAGE> 21
catalogers to physically see the types of data and electronic images available
in the commercial sector, they can be more EFFECTIVE and EFFICIENT in developing
parts identification guides and in populating the Federal catalog identification
records for parts being used by Federal agencies. Closer links in the
terminology of characteristics (data elements) as well as values that quantify
those characteristics will facilitate the users of Federal parts catalog data in
translating those parts characteristics into commercially available parts, and
in identifying National Stock Numbers (NSNs) for commercially available parts.
PartNet can also play a major role in readily providing part manufacturers' data
before it is contaminated by part sellers and, sometimes more importantly, the
weapon system or equipment manufacturers or integrators that develop and submit
the provisioning and cataloging data used by Federal agencies in cataloging
parts. Federal parts catalogers, armed with protected original source
information from parts manufacturers can be more effective in identifying parts
and assuring the quality of data being introduced into Federal cataloging files.
Current, electronic displays of characteristics data, 2-D and 3-D drawings,
graphical function displays, photographic views of the parts, and video motion
images of the parts from PartNet will assist in this process. PartNet can be
instrumental in assuring the validity, completeness and currency of Federal
catalog data. PartNet can also enable DLA policing of inclusion of National
Stock Numbers (NSNs) as a data element in the PartNet records for commercially
available parts.
PartNet can assist in understanding and presenting the Federal parts catalog
data base. Although there is some disagreement (and even some misunderstanding)
of this issue, a National Stock Number does not represent a unique part
identification. A National Stock Number has application and packaging (e.g.,
unit of issue) implications, as opposed to a manufacturer's part number which is
typically an identification of a specific part. For example, a single resistor
sold by itself can have a different stock number than the same resistor sold in
a tape or reel of 1000 resistors. PartNet can assist in identifying the
variations in physical packaging of parts in the commercial marketplace as well
as assist in identifying the range of characteristics and values that are
included within a National Stock Number.
III. D. DETAILED TECHNICAL APPROACH
Requirements
An architecture that will support the electronic commerce and supply management
needs of the DLA must have a number of features:
It must be an open architecture, with published API's supporting a variety
of means for moving, searching, and sorting information, as well as
performing purchasing and supply management functions.
<PAGE> 22
It must support translation between widely used protocols, both at the
network level (e.g., TCP/IP, IPX) and at the message level (e.g., EDI X12,
EFT).
It must be secure, allowing authentication of all parties involved in a
transaction, as well as encryption and non-repudiability of their
messages.
It must support active intelligent agents that will query the network for
parts availability, costs, delivery schedules, etc. Such agents will play
an increasingly important role in electronic commerce.
Security
Security is essential for a viable electronic marketplace. We will use the SSL
technology (Secure Socket Layer, as embodied in the RSA BSafe toolkit) to enable
DLA and its contractors to engage in secure transactions to engage in secure
transactions over open networks, such as Internet. We will explore the use of
security technology in two ways. First, we will use SSL to enable secure WWW
access (following a traditional client-server style), including inquiry and
purchase transactions. Second, we will develop secure agent technology based on
SHTTP, which will provide a secure transport mechanism for site-to-site
messaging and data transport among agents.
SSL, which underlies our security solutions, is based on RSA Data Security's
public-key cryptography technology. The toolkit resolves three key transaction
security issues: data encryption (i.e., message not being intercepted or
altered), authentication (i.e., parties can prove who they are), and digital
signature (i.e., parties can irreputably commit to an obligation, such as a
purchase order). The tools we develop for the, DLA network will be generally
applicable to Internet electronic markets, thus extending the DLA market to
suppliers and buyers nationwide.
III. E. COMPARISON WITH OTHER ONGOING RESEARCH
This topic is discussed in Section II E.
III. F. DISCUSSION OF PROPOSER'S PREVIOUS ACCOMPLISHMENTS
Previous accomplishments in this research area:
PartNet, Inc. has created the PartNet system which is the first distributed
database manager to operate over the Internet. PartNet is being tested at the
DLA and other defense installations.
<PAGE> 23
111. G. FACILITIES
PartNet, Inc. occupies approximately 2,500 square feet of office space in
Research Park, a 300 acre R&D "campus" directly adjacent to the University of
Utah. Within the PartNet office space is a lab area of approximately 1,200
square feet in which are located 10 Sun Sparc workstations, a file server, and
several PCs in work cubicles.
Peripheral to the lab are four private offices for the directors of software
development, vendor relations and other administrative services. PartNet Inc.,
is equipped with at dedicated high-speed "TI" telephone line for PartNet's
connection to the Internet.
PartNet, Inc. is located less than five minutes from the University of Utah's
Merrill Engineering Building, where the offices of Drs. Brown and Hwang are
located. Adjacent to Dr. Brown and Dr. Hwang's office is another computer lab
area for use by graduate students participating in the PartNet project at the
University.
III. H. QUALIFICATIONS OF KEY PERSONNEL
DON R. BROWN, PH.D. (PRINCIPAL INVESTIGATOR) is an Associate Professor in the
department of Mechanical Engineering at the University of Utah and an Adjunct
Assistant Professor in the Department of Computer Science. He received his Ph.D.
in Mechanical Engineering from Stanford University in 1988 He has worked at
Schlumberger Palo Alto Research as a developer of new CAD environments, Stanford
University as the designer of the Next-Cut concurrent engineering system, and
Raychem Corporation as a design engineer. Dr. Brown has authored more than
eighteen publications in the area of concurrent engineering. He designed and
directs the PartNet project to solve the product information bottleneck that
designers face.
KUO-YEN HWANG, PH.D. is a Research Assistant Professor in the Department of
Mechanical Engineering at the University of Utah. He received his Ph.D. in
Mechanical Engineering at the University of Utah in 1993. His major research
interests are in CAD, AI, Expert Systems, Optimal Design and Mechanical
Engineering Design.
BEN SPIGLE has a B.A. in Computer Science with honors from Indiana University.
He joined the PartNet project as a University of Utah Research Associate in
January of 1994, and has been involved in all aspects of the PartNet design and
development cycle, with special emphasis on deployment and testing.
SEAN DALBY has a B.S. in computer science from the University of Utah. Mr. Dalby
joined the PartNet project as a University of Utah Research Associate in May of
1994, where his principal efforts have been in behalf of developing PartNet's
World Wide Web interface and Internet security issues.
<PAGE> 24
DAVID CRANDALL earned his M.S. degree in Mechanical Engineering at the
University of Utah in 1993 for his work on query servers for distributed
component information retrieval. He currently designs and develops
object-oriented computer aided design systems for the PartNet project as a
Research Associate at the University of Utah.
JOHN P. CREER is PartNet, Inc.'s Vice President for Marketing. Mr. Creer
received his B.S. in accounting from the University of Utah in 1986. He has over
eight years of experience in business management, and is currently involved in
PartNet, Inc.'s efforts to identify and enroll supplier and distributor
participation in PartNet.
<PAGE> 25
1. COSTS
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3
ANNUAL COST ANNUAL COST ANNUAL COST TOTAL COST
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNBURDENED PERSONNEL COSTS $443,417 $465,587 $488,867 $1,397,871
- ------------------------------------------------------------------------------------------------------------------------------
benefits @20% $68,908 $69,838 $73,330 $212,076
equipment $63,720 $63,720 $63,720 $191,160
travel $144,000 $144,000 $144,000 $432,000
supplies $6,000 $6,000 $6,000 $18,000
- ------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL $726,044 $751,660 $778,557 $2,256,262
- ------------------------------------------------------------------------------------------------------------------------------
overhead @30% $217,813 $225,498 $233,567 $676,878
- ------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL $943,857 $977,158 $1,012,124 $2,933,140
- ------------------------------------------------------------------------------------------------------------------------------
fee @ 8% $75,509 $78,173 $80,970 $234,651
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $1,019,366 $1,055,331 $1,093,094 $3,167,791
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 26
Section IV. ADDITIONAL INFORMATION
The attached paper, "The Design and Implementation of PartNet" contains
background information on the creation and implementation of a federated
database of supplier parts.
<PAGE> 27
The Design and Implementation of PartNet
Robert Mecklenburg
Department of Computer Science
University of Utah
Don Brown
Dave Crandall
Andrew Hwang
Ben Spigle
Department of Mechanical Engineering
University of Utah
Salt Lake City, Utah 84112
e-mail: [email protected]
October 10, 1994
<PAGE> 28
Abstract
PartNet is a federated database for providing interactive online access to
mechanical parts catalogs. We export the data contained in the vendor's product
databases using a network-based distributed database protocol. A single coherent
view of these vendor databases is provided by a set of replicated Query Servers
which clients access to pose queries and receive answers. The client interface
programs are simple and can be executed on current desktop computers. The system
is scalable to thousands of vendors and tens of thousands of customers. We feel
this approach provides better service at less cost than traditional paper or CD
ROM catalogs.
<PAGE> 29
1 INTRODUCTION
PartNet is a project to provide direct, interactive online access to mechanical
parts catalogs. This access relies on the Internet network [Comer, 1991] to
provide an efficient communications medium for transferring parts information
from vendors to customers. This approach has many advantages over either
traditional paper catalogs or CD ROM-based methods [Williams, 1993]. Both paper
and CD ROM provide a more traditional "batch oriented" style of access to parts
data. Normal manufacturing and production delays mean that customers cannot rely
on this information to be completely up to date or complete (due to space
limitations). Due to the discrete nature of catalogs and ROM disks it is not
possible to search all catalogs simultaneously (without the number of disk
drives equal to the number of catalogs). It may also not be possible to acquire
all catalogs (even from a single catalog distributor) due to shipping or
publishing constraints (e.g., a new vendor has been added to the catalog suite,
but the customer cannot get the catalog until our next product release). The
PartNet system overcomes these problems by providing immediate access to all
vendors simultaneously. All information a vendor is willing to distribute is
available including images and animation. When a new vendor joins the PartNet
catalog or when a existing vendor adds new products, their information is
immediately available to customers through the distributed PartNet software
system.
The design of PartNet focuses on a small number of important issues. First, the
architecture must be scalable to thousands of vendors and tens of thousands of
customers. It should be possible to start with an initial installation of a
single
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<PAGE> 30
vendor and a few customers and grow on demand. As the subscription rate
increases, the system should be dynamically configurable to handle the increased
load. Second, the system should be tolerant of network failure and processing
delays. Since the system relies on databases maintained by vendors at the
vendor's site, the catalog information will be widely separated both
geographically and logically. If answering a query requires all vendor systems
to be operational and timely then eventually no query could ever be processed.
Finally, the system must be "portable" in the most general sense of the word.
Vendor databases all likely run on the full spectrum of computer hardware, use a
wide variety of database management system (DBMS) software, and encompass many
different data formats. All this diversity must be managed and translated into a
unified format suitable for an online parts catalog.
One of the underlying assumptions of PartNet is that many vendors
already have or will want to store their product information in online
databases. Success in the PartNet system is then a matter of exporting this
product information in a controlled fashion to the customers who request it.
Although this assumption may not reflect current business practice we feel it is
an obvious and economically sound choice. Vendors must already maintain
inventory and manufacturing databases, many also have design databases. These
can be unified by a comprehensive product database which includes traditional
catalog data, availability and delivery information, images, as well as
non-traditional data such as animation, CAD models, and vendor tutorials.
Information stored in online systems is easier to access, maintain and deliver
to end users and will
2
<PAGE> 31
reduce the cost of delivery and dissemination.
Finally, to further improve the accessibility of parts information we
will support the Hypertext Transfer Protocol (HTTP) use by the World Wide Web
initiative [Berners-Lee et al., 1992]. This entails generating browsable
hypertext views of vendor catalog data and providing this as a Hypertext Markup
Language (HTML) files. In this capacity centralized Query Servers will act as
directories in the Web.
We begin the design discussion by reviewing the computational
environment our system will require. Following that, we discuss the architecture
of the PartNet system as a decomposition into cooperative services and their
responsibilities. We then review auxiliary tools for accessing and maintaining
PartNet. This is followed by summary of the implementation choices we have made
for the initial prototype. Finally, we discuss the status of the project, early
results and suggest directions for the future of the system.
1.1 THE ENVIRONMENT
PartNet is intended to perform in a dynamic and heterogeneous computing
environment. The Internet is a loose collection of thousands of computers from
every computer vendor and running almost every operating system. The common
thread these systems share is their physical connection to the
telecommunications network and their support for the TCP/IP networking protocols
[Comer, 1991]. Vendors are distributed geographically as well as having the
normal variety of computer hardware and software. Customer's computer systems
are even more
3
<PAGE> 32
diverse since they may not even support multi-tasking.
The core PartNet software will require a large address space,
multiprocessing, high performance mass storage, and fast network access. We are
targeting our prototype system to run on the average Unix workstation with 32Mb
of RAM. We assume that both the interface software at the vendor's site and the
Query Servers will run on such machines, although we have no bias against other
operating systems with similar capabilities (e.g., VMS, Windows/NT).
The customer interface, however, is assumed to run on much simpler
hardware and software (e.g., PC with Windows). In fact, the customer computer
may not even have direct access to the Internet. This is accommodated by
providing a Query Server on a gateway machine which is connected both to the
Internet and to the customer's internal network.
Finally, we assume that the Internet network provides modest bandwidth
capabilities consistent with current performance. Peak transmission of data
using the optimized File Transfer Protocol (FTP) can achieve data rates of 110
kilobytes per second with average transfer rates of 40 kilobytes per second.
This suggests that network bandwidth is of concern and the architecture should
address this issue.
2 PARTNET ARCHITECTURE
PartNet is designed as a federated database management system [Ullman,
1988] specialized for read-only access. Each vendor site presents a database of
parts
4
<PAGE> 33
information available for access by customers. These databases are managed by
the vendor using various (possibly proprietary) database management systems. Our
goal is to allow controlled export of this vendor maintained information to the
customer on demand. Furthermore, it is important that the mechanism for
delivering data be as distributed as possible to allow scaling up to many
vendors.
The process structure of PartNet is depicted in Figure 2. Customers
interact with the system through a textual or graphical interface which connects
to a centralized Query Server. This Query Server receives queries about parts
which are then routed to vendors who supply those parts. Each vendor site
provides one or more Vendor Database Interface (VDI) processes which execute the
query and return the answer to the Query Server. The Query Server in turn
forwards the data to the original requesting customer. A single Query Server
will handle several hundred simultaneous customers. As load increases Query
Servers will be replicated.
This process architecture addresses several basic issues inherent to
distributed databases. First, the diversity of vendor database software is
managed by a single coherent interface exported by the Vendor Database
Interface. Each VDI is responsible for mapping from vendor specific formats into
canonical PartNet format. This translation includes DBMS query language, part
attribute and value conversion, and image format conversion. The Query Server
provides a centralized process for routing queries to vendors, managing global
information to avoid inconsistent updates, and caching vendor data to reduce
latency and
5
<PAGE> 34
[FLOW CHART]
Figure 1: The PartNet process structure.
6
<PAGE> 35
improve throughput. The existence of the Query Server process also dramatically
reduces the NxM connectivity problem inherent with allowing customers to talk
directly with vendors. Finally, the customer-side user interface software is
kept simple to allow execution on low-performance, low-capability hardware.
Communication between processes occurs via a message-based command and
response protocol. This allows a simple, portable implementation which is as
efficient as Remote Procedure Call systems for average messages, but without the
added implementation complexity.
2.1 THE QUERY SERVER
The Query Server is the "glue" which binds PartNet together. It provides a
centralized service which can be accessed through either a well-known network
address or by name from an Internet name server. Since it is centralized it
forms a locus for routing information, global data management, and performance
monitoring. We anticipate greater computational power at a Query Server host
which can be used to reduce network traffic and latency through caching which
may not be possible at the customer site (due to fewer computing resources).
The major responsibilities of the Query Server are:
- manage a set of customers and vendors,
- route messages from customers and vendors,
- control access to global data (taxonomy and part lists),
- cache data,
7
<PAGE> 36
- log transactions.
As the central router for messages the Query Server must ensure that
each customer is serviced fairly and that no customer process is "orphaned" or
"mislead". In particular, answers to customer queries are delivered to the
customer incrementally as each vendor supplies their portion of the answer. It
is important that the customer not mistake a partial answer for a complete one.
For each query submitted by a customer, the Query Server determines
which vendor is capable of supplying an answer and forwards the query to that
set of capable vendors. This dramatically reduces network traffic when compared
with forwarding every query to every vendor. To properly determine the capable
vendors, the Query Server must know all parts supplied by each vendor and it
must update this information as it changes.
Other information the Query Server manages is global data such as the
taxonomy and parts list. These items are global in that they unify all the
information supplied by all vendors. This requires that each vendor report the
parts they supply and a taxonomy of how these parts relate to the rest of
PartNet. A problem arises when two vendors wish to update this global data
simultaneously. To properly handle this case some sort of concurrency control is
required. PartNet uses a traditional two-phase locking algorithm [Ullman, 1988]
which requires a vendor to request a lock on the part list or taxonomy before
modifying it. When the Server receives the modification request it updates the
table and releases the lock.
To improve throughput and reduce latency, the Query Server caches the
8
<PAGE> 37
answers to previous queries. When a query is received from a customer, the cache
is first scanned for other queries about the same part requested in the current
query. If any are found, the cached query is analyzed to determine if the
previous query describes a superset of the current query. If this is true the
current query can be answered directly from the cache without the overhead of
forwarding the query to the vendors. This feature will become more useful as the
size of PartNet grows. We anticipate users presenting naive queries which return
many parts, then refining the query to reduce the size of the answer. Only
actual use of PartNet can determine if this pattern of usage, and consequently
the utility of caching, actually occurs.
If a cache is employed the problem of cache consistency and invalidation
must be solved. In short, a problem occurs when a vendor updates part
information while the Query Server has copied information about that part. In
this case, the customer may be given out of date information about a part. This
problem is solved by requiring the VDI process to inform the query server
whenever parts information is changed. To reduce the burden on the VDI and
reduce network traffic, the Query Server associates a lifetime with each answer.
When the lifetime has expired the answer is removed from the cache. Removing
parts information from the cache in a timely manner also prevents the cache from
growing without bound. The lifetime should be long enough to allow reasonable
performance gains while short enough to minimize the load on network and VDI.
Finally, the Query Server is responsible for monitoring the performance
of the PartNet system as a whole. This includes ensuring that vendors and cus-
9
<PAGE> 38
tomers are not "orphaned", recording timing statistics on network latency and
bandwidth, recording quantity of information delivered by each vendor to each
customer (e.g., for billing purposes), and recording general usage patterns. Due
to faults in networks and software it may be possible for customers or vendors
to become unreachable. This should be noted and should not cause other software
(e.g., Query Server or customer interface) to fail. Also, by recording network
performance statistics, the Query Server can improve the user interface by
anticipating delays.
2.2 THE VENDOR DATABASE INTERFACE
PartNet does not impose a particular DBMS or database management paradigm on
participating vendors. This is important since vendors may have invested
enormous time and expense in building existing databases. Furthermore, the
vendor may even have a proprietary database management system tailored to their
specific data. Any attempt to replace this database or impose some standardized
format will result in vendors who are unable or unwilling to participate in
PartNet.
To avoid excluding vendors by requiring a standard database and query
language, PartNet provides an interface process which responds to the PartNet
communications protocol and implements database queries through native calls to
the vendor database. This interface process manages:
- network communication,
- taxonomy and names,
10
<PAGE> 39
- concurrency, and
- caching.
We discuss each of these responsibilities in turn.
The first responsibility of the VDI is to manage network communication.
Even if a vendor database directly accepted the PartNet command language,
additional software would be required to identify the available Query Servers
and manage network connections. When a VDI is initiated it identifies a Query
Server through either a well known port and address or using the Internet name
service. After establishing a connection to this Query Server it requests a
complete list of active Query Servers with which it should register. By
registering with a Query Server the vendor signals its readiness to receive and
process queries. VDIs are able to accept connections from new Query Servers as
they are added to the network and manage communication from Database Server
Processes which are spawned to perform actual database queries.
Once a vendor has registered with a Query Server, it transmits a
taxonomy describing part categories the vendor supplies and their relationship
in the taxonomy of known mechanical parts. The Query Server receives this
taxonomy and merges it with any existing taxonomy, thus incrementally generating
a global hierarchy of all part categories known to the PartNet system. If the
Query Server is presented with an unknown part category, the VDI may be asked to
send a detailed description of the category. This allows new parts categories to
be added by vendors to the PartNet system.
The VDI must present the taxonomy and detailed part category
descriptions
11
<PAGE> 40
identifying the name of a part category and its characteristics using
"canonical" PartNet names. For instance, vendors may represent a part number in
their database as "PN", "part number", "part no", etc. Since the names of
mechanical parts and their attributes are not standardized the PartNet system
adopts a single canonical name for each category and attribute. This
canonicalized form is used by the Query Server and the customer user interface
to simplify part selection and query formulation. Only the VDI needs to know the
translation of canonical names to vendor specific names.
Since a VDI will be connected to several Query Servers which are in turn
connected to many customers, a vendor may be asked to answer several different
queries in a small space of time. Ideally we would like to answer all queries
immediately with response time related only to the delay imposed by the vendor's
own DBMS. Unfortunately, there may be an arbitrary number of simultaneous
queries limited only by the total number of customers. Also many databases and
operating systems are limited in the amount of concurrency a single program can
achieve. For instance, a single program executing a database query might be
required to wait until that query is processed by the DBMS and the answer
returned before being allowed to initiate another query. This is overcome in the
PartNet design by creating several database server processes which execute
queries synchronously, but in parallel with each other (i.e., process-level
parallelism). These servers are discussed in more detail in Sections 2.3 and
4.2. The VDI process serializes all commands, but since each command can be
handled very quickly (i.e., by forwarding the command to a Query Server or a
database
12
<PAGE> 41
server) no command is forced to wait an undue amount of time for processing.
The final responsibility of the VDI is to aid in Query Server cache
management. To improve throughput and reduce latency the Query Server caches
answers to customer queries. The details of this caching are discussed in
Sections 2.1. It is essential that a customer is never given out of date
information because the cache is inconsistent with the vendor's actual data.
This is the problem of cache consistency and consequently, cache invalidation.
To aid in maintaining a consistent cache, the VDI must monitor answers to
queries it receives as long as the data is held in a Query Server cache. If this
data ever changes, the VDI must notify the appropriate Query Server that the
original data is now invalid.
2.3 THE DATABASE SERVER
The Database Server is a slave process of the VDI and Query Server which
performs actual database queries using the native DBMS interface. The purpose of
this separate process is to overcome the singly threaded nature of many
operating systems and DBMS interfaces. While a single Database Server process
may perform one query at a time waiting for DBMS to process the query and return
an answer, a collection of Database Server processes can handle multiple queries
in parallel. These processes are managed by a single scheduler which maintains a
queue of pending queries and a suite of available server processes. Queries are
scheduled on idle processors and query answers are delivered using the standard
PartNet protocol. It should be emphasized that this does not
13
<PAGE> 42
require a multiprocessor to execute. It is merely a mechanism to achieve
process-level parallelism in a singly threaded DBMS or operating system.
Although this does not achieve the ideal goal of the fastest query
processing possible (which would require a cpu per query), it does provide a
reasonable mechanism to maximize throughput and tune query processing. A simple
algorithm would allocate a fixed number of Database Servers as determined by
past query loads. A more sophisticated algorithm could dynamically adapt to
query loads by spawning additional Database Servers as query arrival rate and
system load dictate.
2.4 USER INTERFACE
Although user interface specifics are a matter of implementation
choices, certain features of the problem so profoundly affect the user interface
that it is reasonable to provide architectural support for them. One such
feature is the vast amount of parts information to which PartNet will provide
access. Navigating through the unified parts catalog which PartNet provides
without imposing some overall structure on the data may be difficult. To address
this problem, we have devised a hierarchical classification system for
identifying categories of parts called a taxonomy.
The taxonomy is developed by consensus as each vendor determines the
subcategories which differentiate one type of part from another. The development
of this taxonomy will be moderated by PartNet to ensure that no conflicts or
inconsistencies occur. This taxonomy will form the initial interface to PartNet
14
<PAGE> 43
which users will navigate.
Due to the distributed nature of PartNet the user interface should have
several added features. Since a query is executed in a distributed fashion,
users are able to view partial results of queries. The interface should clearly
indicate that an answer is not complete and what percentage of vendors have
responded. It is also possible for a customer to execute several queries
simultaneously, so a display of pending queries and their status is useful.
PartNet is designed to deliver multi-media information as well as
traditional text. This implies a windowing interface for full functionality.
Nevertheless, it is reasonable to provide text-only or even "batch mode"
interfaces for users with fewer computational resources. An interactive
text-only interface could provide support for simultaneous queries and viewing
partial results, while a batch interface can deliver queries and answers through
electronic mail.
2.5 QUERY SERVERS AS DIRECTORIES
Query Servers will add another critical link to the information distribution
infrastructure by serving as information navigators. Navigation is a significant
problem with the World-Wide Web (WWW). The Web has an arbitrary, cyclic graph
structure in which it is easy to get "lost". Also, there is no systematic
mechanism for information providers to make their services known to the Web.
Query Servers provide a means for users to perform value-based searches of the
Web thereby help them quickly find the information they need.
Query servers will perform the function of service advertisers. When a
new
15
<PAGE> 44
Vendor Server comes "online", it will contact its assigned set of Query Servers
and inform them of the products it provides. Interfaces to WWW such as Mosaic
will provide a link to a Query Server where designers can browse the available
services. The Query Server also holds taxonomies and parts lists which serve as
a "yellow pages" of part types for clients to browse. The Query Servers could
also serve as directories for non-catalog services on the net.
3 NAMES, QUERIES, AND TOLERANCE
A significant problem in federated databases is resolving conflicts in the
shared data model. These conflicts manifest themselves through inconsistent data
in response to queries. Three problems discussed here are maintaining a
consistent taxonomy and parts list, translating queries, and support for diverse
units systems and tolerances.
3.1 SEMANTIC CONSISTENCY OF GLOBAL INFORMATION
The taxonomy and parts list have been discussed briefly in previous sections;
here we discuss some difficult semantic interpretation problems these tables
create. Parts categories in PartNet are identified by name. A part category has
associated with it a collection of attributes, types and units for these
attributes and annotations describing them. Unfortunately, even with this level
of detail describing a part category, there is the possibility that a purely
software driven solution may incorrectly identify one part category as another.
As a simple example, suppose one vendor registers a gear with the Query Server
whose
16
<PAGE> 45
attributes consist of a diameter and a number of teeth. For this set of
attributes it is possible that some other vendor has already registered a
different type of gear with the same name and the same attributes. Adding more
attributes only reduces the probability of this collision, the probability will
never be zero. The same problem occurs when locating part categories in the
taxonomy.
The goal of PartNet is not to provide a universal parts identification
system, rather it is to provide a unified parts catalog. The difference lies in
the degree to which we require a completely unambiguous parts description
language. Our approach to this problem is to involve vendors in the parts
identification and differentiation process. When vendors add part categories to
the PartNet system they must ensure that their category and attribute names
unambiguously identify their product. This does not seem unreasonable since the
vendor is already involved in entering product information into their own
computer systems.
3.2 QUERY TRANSLATING
When merging part attributes from many vendors, it is likely that some vendor
will supply an attribute not supplied by any other vendor. If the user poses a
query containing this attribute how should the system respond? There are three
possible choices:
1. reject the query,
2. send the query only to vendors supplying all attributes,
17
<PAGE> 46
3. send the query to all vendors supplying the part category and
omit the attribute for vendors which don't supply it.
Given that we anticipate many vendors supplying the same part category, the
first option leads to an unusable system. The second and third choices can be
restated as "for those vendors not supplying the attribute, assume the attribute
is never matched" and "for those vendors not supplying the attribute, assume the
attribute is always matched". Since there are queries for which each of these
choices are reasonable, the choice must be selectable by the user (possibly with
a default).
3.3 UNITS AND TOLERANCES
When handling attributes with units, it is important to be able to convert
freely between units systems. Furthermore, a conversion from one system to
another will typically yield values which no longer compare "properly" due to
floating point rounding errors. We address this problem by implementing a
combined units and tolerancing facility which allows users to indicate the units
applicable to a particular query, whether conversion to other units systems
should be performed, and the tolerance on those conversions if performed. This
facility is configured with reasonable defaults which allow most users to ignore
these details if absolute control over the query is not required.
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<PAGE> 47
4 PARTNET CORE IMPLEMENTATION
Here we describe the basic approach used to develop the PartNet software. In
general, we will concentrate on the software framework and avoid the exact
details of implementation. We will discuss specific algorithms only where the
solution is either novel or of particular interest. PartNet is written in C++ as
a tool kit for managing parts information in a distributed environment. Since it
is a tool kit we leverage off of existing code to a surprising degree. For
instance, less than 10% of the PartNet source code is specific to any one
component program. The PartNet framework focuses on a small collection of
objects which manage the fundamental aspects of networking, database management,
command and control, and describing parts and their attributes. We will discuss
the interesting features of each of the objects in turn.
4.1 NETWORKING
Network communication is mediated by a single network object in each PartNet
process. This object maintains a list of all network connections, is capable of
establishing new connections and controls the extent to which network failures
are visible to the PartNet process. The main event loop executed by the various
PartNet servers is mediated by the network object which identifies network
partners requiring service and the order in which they are serviced.
One of the problems in scaling PartNet is the limitation on the number
of simultaneous open network connections a single process can maintain. In the
prototype, network connections are established between every VDI and every
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<PAGE> 48
Query Server. This limits the total scale of the system to about 100 vendors
and 40,000 customers. This limitation can be overcome in several ways. One is to
partition the PartNet network by service provided. A user looking for gears,
transmissions, or motors would connect to one Query Server while a user needing
fasteners or connectors would reference a different Query Server. This routing
can be handled transparently to the user by PartNet itself. Another technique
for handling greater network connectivity is to provide network access through
network server processes which multiplex I/O to the main Query Server. These
techniques can all be incorporated within the network object with little or no
impact on the remaining PartNet software.
Another responsibility of the network object is to monitor network
bandwidth and latency. Latency is currently managed through a simple protocol:
1. When a command is issued the master process records the time of
issuance.
2. When the server sends its response it records in the response
the elapsed time required to execute the command.
3. When the master receives the answer it subtracts the elapsed
time recorded in the response from total elapsed time to
determine the network bandwidth + latency.
Where the command is small (i.e., less than one network packet) this determines
the network latency. This is a simple algorithm which does not require
synchronizing clocks on a long haul network.
20
<PAGE> 49
4.2 DATABASE MANAGEMENT
This object provides a "virtual database manager" interface to vendor specific
database software. The object provides functionality sufficient to manipulate
the database without relying on the details of the DBMS software. The database
object is used for three purposes: database control, query language support, and
cache management. The database control features are straightforward. They allow
the controlling PartNet process to open and close the database and determine
data characteristics such as record layout and data types. Query language
support is much more subtle.
The PartNet system employs its own query language syntax which is a
simplified form of SQL [Chamberlin et al., 1976]. As users compose queries
graphically in the Motif interface the software derives an SQL-like textual
query which is passed as a command to the Query Server which, in turn, forwards
the query to vendors able to respond. The database object supports a query
action which transforms the PartNet query parse tree into a valid DBMS-specific
query and executes it. This translation process will be different for different
vendor databases but will provide the same interface to the PartNet software.
Likewise, the answer to a query will be a collection of part
descriptions consisting of <attribute,value> pairs describing the part. These
answers are collected into a list of row objects with each item corresponding to
a row or record in the vendor database. Thus, the database object forms an
interface to the DBMS control functions, the query language, and the data model.
Actual DBMS specific functions are performed by classes derived from the
database
21
<PAGE> 50
object.
4.3 COMMAND AND CONTROL
PartNet communicates between its various processes by passing command objects.
These objects are derived from a common root class which provides the framework
for their behavior. Basic command characteristics include the network partner
who issued the command, the time the command was issued, and a unique
transaction identifier. All commands respond to an execute function which
performs the action appropriate for the issuing process.
Command objects can be communicated between processes in a variety of
ways. The prototype implements a textual translation of objects into a simple
command language grammar. This is convenient for prototyping since the Query
Server and VDI can be manipulated interactively through telnet. The textual
transmission protocol can be replaced with a more compact form by changing two
functions. Note that if the textual command is less than the size of a network
packet there will be little or no performance gains from sending binary data.
Another reason for maintaining a simple textual interface is to allow
PartNet to be an open system. The current interface is suitable for use by a
wide variety of applications due to its simple LL(1) grammar.
22
<PAGE> 51
4.4 TAXONOMY AND PARTS LISTS
The taxonomy and parts list objects form the more visible components to the
user. A taxonomy is a singly rooted, acyclic directed graph (DAG) which
describes the universe of mechanical parts by decomposing part categories into
differentiating features. The parts list is much more subtle. A vendor part is
described by a part category (or PartCat) object in PartNet. The PartCat
represents the "platonic ideal" for a part in that it associates with a part
name the union of all attributes provided by vendors. These attributes are given
nonconflicting names and annotations along with implementation data such as data
type and units (if any). The VDI is responsible for mapping from these PartNet
canonical names back to vendor specific nomenclature.
Note that the set of attributes describing a single part category depends on
the set of vendors participating in PartNet at any instant. If a vendor goes
off-line (for instance, to perform backups) and that vendor is the only one
supplying a particular attribute for the part category, the attribute should be
removed from the set of queryable part attributes.
This same variability applies to the taxonomy. As vendors join and leave
the PartNet system the taxonomy is immediately updated to reflect the currently
available parts.
4.5 TRANSACTION MANAGEMENT
Finally, we have a transaction management object which records commands and
their responses. The basic task of the transaction manager is to record which
23
<PAGE> 52
network partner sent a particular command. Since a Query Server manages many
"conversations" concurrently, when it receives a response command it must route
that response to the process which initiated the query. This can be done by
identifying each command with a unique identifier and recording the query
identifier in the response. If a response command is received with an
"originator" command identifier the original command is found and the sending
process identified. The response command is then forwarded to the original
process. If a simple command is received, one that does not require a response
or forwarding, it is executed, logged, and discarded. Commands whose answer
contains part information are handled by the cache manager.
When part information is received by the Query Server, the data is
immediately forwarded to the appropriate customer. Furthermore, the data is then
logged in the transaction table and written to a local cache in the form of a
local DBMS accessed through the database object. When further queries about that
particular part are received by the Query Server, the transaction table is
scanned for queries whose answers can be proven to form a superset of the
current query. If any answers are found the Query Server then answers the
customer query directly from its cache. Since answers are received independently
from each vendor and cached for a fixed amount of time, some answers will have
been purged from the cache while some answers are still resident. In this case,
the transaction table will contain information about which vendors responded to
a particular query and whether their data is still resident. The cache manager
can then answer a query directly from the cache for that data which has not
24
<PAGE> 53
been purged and can resend the query to those vendors for which the data has
been purged.
Another use of the transaction table is to identify "dead" or "orphaned"
network partners. Since every command sent to a customer or vendor is recorded
in the table until a response is received all outstanding commands are in the
table. A time stamp is already associated with each command for performance
analysis (see Section 4.1). A scan of the transaction table can quickly
determine exactly how long a customer or vendor has been waiting for a response.
Appropriate action (probably determined by the user interface) can then be
taken.
Finally, as commands are purged from the transaction table, they are
logged to allow off-line analysis of customer usage patterns, network load,
demographic information, and charge back information.
4.6 THE USER INTERFACE
We have discussed a wide variety of user interfaces which we can support. Among
these are graphical window-based applications, interactive, but textbased
applications, batch oriented electronic mail interfaces and hypertext-based
applications. Such a diverse set of user interfaces is possible because of the
simple text command format and the process layering architecture around which
PartNet is built.
The Motif graphical interface for PartNet, the interactive text
interface, and the e-mail interface are all relatively simple. They access the
Query Server using the same command language/object set used by the backend
processors. For the
25
<PAGE> 54
e-mail interface we assume that users formulate queries with our simplified SQL
query language. In this case, the receiver strips the mail headers and forwards
the query to the Query Server as usual where it is reconstituted into a query
object. The interactive interfaces should include support for executing multiple
queries simultaneously and managing partial queries.
The other interface discussed is that of the World Wide Web. Here we
have developed a Common Gateway Interface (CGI) process which handles WWW
requests. When the CGI process is invoked it maps the received URL into PartNet
SQL and sends it to the Query Server. The CGI interface then collects the
responses and formats them into an HTML document and returns the document to the
requester. The Web software can then access vendor catalog data directly through
hypertext links. Maintaining a dual representation is avoided by formatting
responses on-the-fly. The forms interface to the Web is defined by the CGI
process.
5 CURRENT STATUS
The current status of PartNet includes a beta-test version of the Query Server,
Vendor Database Interface, and Database Server processes. The system runs on a
distributed network of 6 Sun workstations and totals 45,000 lines of C++. As
mentioned in Section 4 most of this code is reused in each of the PartNet
processes. The prototype is currently simulating five vendors using two
different DBMSs to manage the vendor data. It is also able to manage non-textual
data
26
<PAGE> 55
such as images and CAD data files. As part of the prototype we have simulated
several vendors with databases currently holding over 2,000 spur gears. A custom
Motif user interface and a World Wide Web interface are both available.
6 CONCLUSIONS AND FUTURE WORK
The PartNet system implements a federated database for accessing mechanical
parts catalogs from a large set of vendors in real time using the Internet as
the communications medium. This system has distinct advantages over traditional
paper catalogs or CD ROM systems. PartNet queries are performed by each vendor
in parallel providing superior response times. Answers are complete and accurate
at the time of query since all updates to vendor data is performed by the vendor
at the time the data changes. Images, sound, animation, and CAD models can be
delivered as easily as text. The system is scalable to thousands of vendors and
tens of thousands of users.
The problems of naming conflicts in federated databases are solved
pragmatically by relying on communication between vendors and coordinated by
PartNet. Units conversion is performed where necessary and is configurable by
users. Several user interfaces are available including custom Motif and World
Wide Web interfaces.
Future work includes improving the handling of large numbers of vendors
and users, better management of query processing delays, and support for
electronic commerce.
27
<PAGE> 56
REFERENCES
[Berners-Lee et al., 1992] Berners-Lee, T., Cailliau, R., Groff, J., and
Pollerman, B. (1992). World-Wide Web: The information universe.
Electronic Networking: Research Applications and Policy, 2(l):52-58.
[Chamberlin et al., 1976] Chamberlin, D. D. et al. (1976). SEQUEL 2: A unified
approach to data definition, manipulation, and control. IBM J. Research
and Development, 20(6):560-575.
[Comer, 1991] Comer, D. E. (1991). Internetworking with TCP/IP, volume 1.
Prentice Hall, Englewood Cliffs, New Jersey, 2nd edition.
[Ullman, 1988] Ullman, J. D. (1988). Principles of Database and Knowledgebase
Systems, volume 1. Computer Science Press, Rockville, Maryland.
[Williams, 1993] Williams, M. A. (1993). Highlights of the online/CD-ROM
database industry: Opportunities through technology. In Proceedings of
the 14th National ONLINE Meeting, pages 1-4.
28
<PAGE> 57
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AWARD/CONTRACT 1. THIS CONTRACT IS A RATED ORDER (???) PAGE OF PAGES
UNDER DPAS (5 CFR 700) DOA7 1 31
- --------------------------------------------------------------------------------------------------------------------------
2. CONTRACT (???) NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
DABT63-96-C-0089 See Block 20C Below HJ1500-6129-0798
- --------------------------------------------------------------------------------------------------------------------------
5. ISSUED BY CODE DKO-I 6. ADMINISTERED BY (If other than item 5) CODE EMPTY
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
GLORIA A. BICKLER C12
(520) 533-1418
- --------------------------------------------------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 8. DELIVERY DESTINATION
(No., street, city, county, State and ZIP Code) [ ] FOB ORIGIN [X] OTHER (See below)
PARTNET INC 9. DISCOUNT FOR PROMPT PAYMENT
505 WAKARA WAY
SALT LAKE CITY UT 84108 00.000% 00 NET 030
CEC: 89532726A CAGE: 07SP3 10. SUBMIT INVOICES ITEM
(4 copies unless other-
wise specified) TO THE See Section G,
ADDRESS SHOWN IN: Para G.1
CODE FACILITY CODE
- --------------------------------------------------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE D ARPA 12. PAYMENT WILL BE MADE BY CODE S02086
DEFENSE ADVANCED RESEARCH PROJECTS DFAS - OPLOC SEASIDE
AGENCY ATTN DFAS-SS/FFV (VENDOR PAY BR)
3701 NORTH FAIRFAX DRIVE 400 GIGLING ROAD
ARLINGTON VA 22203-1714 SEASIDE CA 93955-6771
- --------------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION: 14. ACCOUNTING AND APPROPRIATION DATA
[ ] 1O U.S.C. 2304(c)(____) [ ] 41 U.S.C. 253(c)(____) SEE SECTION G, PARAGRAPH G.4
Award Oblig Amc US$ $756,000.00
- --------------------------------------------------------------------------------------------------------------------------
15A. ITEM NO. 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
See attached Schedule(s)
COST PLUS FIXED FEE
- --------------------------------------------------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT $3,161,986.00
- --------------------------------------------------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- --------------------------------------------------------------------------------------------------------------------------
(X) SEC. DESCRIPTION PAGE (S) (X) SEC. DESCRIPTION PAGE (8)
- --------------------------------------------------------------------------------------------------------------------------
PART I - THE SCHEDULE PART II - CONTRACT CLAUSES
- --------------------------------------------------------------------------------------------------------------------------
X A SOLICITATION/CONTRACT FORM 1 X I CONTRACT CLAUSES 19
- --------------------------------------------------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COSTS 1 PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
- --------------------------------------------------------------------------------------------------------------------------
X C DESCRIPTION/SPECS./WORK STATEMENT 1 X J LIST OF ATTACHMENTS 1
- --------------------------------------------------------------------------------------------------------------------------
X D PACKAGING AND MARKING 1 PART IV - REPRESENTATIONS AND INSTRUCTIONS
- --------------------------------------------------------------------------------------------------------------------------
X E INSPECTION AND ACCEPTANCE 1 K REPRESENTATIONS, CERTIFICATIONS AND
- --------------------------------------------------------------- OTHER STATEMENTS OF OFFERORS
X F DELIVERIES OR PERFORMANCE 1
- --------------------------------------------------------------------------------------------------------------------------
X G CONTRACT ADMINISTRATION DATA 3 L INSTRS., CONDS., AND NOTICES TO OFFERORS
- --------------------------------------------------------------------------------------------------------------------------
X H SPECIAL CONTRACT REQUIREMENTS 2 M EVALUATION FACTORS FOR AWARD
- --------------------------------------------------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- --------------------------------------------------------------------------------------------------------------------------
17. [ ] CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is 18. [ ] AWARD (Contractor is not required to sign this
required to sign this document and return ___________ document.) Your offer on Solicitation Number BAA
copies to issuing office.) Contractor agrees to 95-25, including the additions or changes made by you
furnish and deliver all items or perform all which additions or changes are set forth in full
the services set forth or otherwise identified above above, is hereby accepted as to the items listed above
and on any continuation sheets for the consideration and on any continuation sheets. This award consummates
stated herein. The rights and obligations of the the contract which consists of the following
parties to this contract shall be subject to and documents: (a) the Government's solicitation and your
governed by the following documents: (a) this offer, and (b) this award/contract. No further
award/contract, (b) the solication, if any, and (c) contractual document is necessary.
such provisions, representations, certifications, and
specifications, as are attached or incorporated by
reference herein. (Attachments are listed herein.)
- --------------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print) 20A. NAME OF CONTRACTING OFFICER
TONI L. DAVIES C18 (520) 533-1452
- --------------------------------------------------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR 19C. DATE SIGNED 20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
BY BY /s/ TONI L. DAVIES 9/25/96
---------------------------------------- ------------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
- --------------------------------------------------------------------------------------------------------------------------
NSN 7540-01-152-8069 25-108 STANDARD FORM 26 (REV, 4-85)
PREVIOUS EDITION UNUSABLE Prescribed by GSA - FAR (48 CFR) 53.214(a)
</TABLE>
<PAGE> 58
09/26/96 DD350 - EDIT REPORT FOR CONTRACT NUMBER DABT63-96-C-0089 Page: 1
This is a listing of errors made while entering the DD350.
The CEC code in BSA in not contained in the CEC table.
Please verify that the code is correct.
There are no errors on the DD350 for DABT63-96-C-0089
<PAGE> 59
SECTION B
SUPPLIES OR SERVICES AND PRICES/COSTS
<TABLE>
<CAPTION>
EST TOTAL
ITEM DESCRIPTION QTY U/M U/P AMOUNT
<S> <C> <C> <C> <C> <C>
0001 The contractor shall provide 1 LT $2,333,318
all the necessary personnel and
facilities to perform research and
development on An Information
Infrastructure for Defense
Logistics, in accordance with
Section C of the contract, and
Statement of Work dated
August 9, 1996. The contractor's
technical proposal is incorporated
by reference.
0002 Travel (includes 17% G&A) 1 LT 370,255
0003 Equipment and Supplies 1 LT 170,960
(includes 17% G&A)
0004 Contract Data Requirements 1 LT NSP
List identified at Exhibit A
CDRL A001 $NSP
CDRL A002 $NSP
CDRL A003 $NSP
TOTAL ESTIMATED AMOUNT $2,874,533
FIXED FEE 2,874.53
----------
$3,161,986
</TABLE>
NSP = Not Separately Priced
Page B-1
<PAGE> 60
SECTI0N C
DESCRIPTION/SPECS./WORK STATEMENT
The contractor shall furnish the necessary personnel, materials, facilities, and
nonpersonal services to perform the research and development as specified in the
contractor's technical proposal , entitled "An Information Infrastructure for
Defense Logistics" undated, and PartNET (Part 2) Statement of Work, dated August
9, 1996 (Attachment 2).
END OF SECTION C
C-1
<PAGE> 61
SECTION D
PACKAGING AND MARKING
D.1 PACKAGING
All deliverables called for shall be packed and shipped in accordance
with the best commercial practices in a manner that shall afford
adequate protection against physical and environmental deterioration and
damage during shipment.
D.2 MARKING
Shipping documents containers correspondence and packages shall be
marked with the Mowing information:
a. Contract Number: DABT63-96-C-0089
b. Requisition/Purchase Request and Commitment Number (PR&C):
HJ1500-6129-0798
c. AAP Number: N/A
d. Short titles of contract line items:
Information infrastructure for Defense Logistics
END OF SECTION D
D-1
<PAGE> 62
SECTION E
INSPECTION AND ACCEPTANCE
E.1 52.246-0008 INSPECTION OF RESEARCH AND DEVELOPMENT (SHORT FORM) (APR
1984) (Reference 46.309)
E.2 ACCEPTANCE OF SERVICES--Acceptance of research and development
services will be made by the Contracting Officer or his/her authorized
representative.
END OF SECTION E
E-1
<PAGE> 63
SECTION F
DELIVERABLES AND PERFORMANCE
F.1 52.242-0015 I STOP-WORK ORDER (AUG. 1989)--ALTERNATE I (APR 1984)
(Reference 42.1305(b)(2)
F.2 52.247-0034 F.O.B. DESTINATION (NOV. 1991)
(Reference 47.303-6(c))
F.3 CONTRACT PERIOD
The estimated contract period of performance is thirty six (36) months from date
of award. This is an R&D environment therefore, the period of performance is an
estimate,. If at a later date, it becomes necessary to extend the period of
performance due to the uncertainties/unknowns in an R&D environment, the
contract may be extended, but would not exceed 10 years duration in accordance
with DFARS 235.002.
END OF SECTION F
F-1
<PAGE> 64
SECTION G
CONTRACT ADMINISTRATION DATA
GA SUBMISSION OF PUBLIC VOUCHERS
a. All requests for contract financing payments shall be submitted in
accordance with FAR Clause 52.232-25, Prompt Payment. The SF 1034 public voucher
should identify the name, title, phone number of person responsible for the
submittal: NOTE: If prepared by a copying process, one copy shall be marked
"ORIGINAL".
b. Distribution of Public Vouchers:
(1) COST
For reimbursement of cost, the Contractor shall submit an original and four (4)
copies of Public Voucher Standard Form 1034 for purchases or services to the
Defense Contract Audit Agency (DCAA) for their certification.
Defense Contract Audit Agency
1717 S. Redwood Rd, Ste 200
Salt Lake City, UT 84104-5110
DCAA will forward the provisionally approved vouchers to the DFAS for payment
and one copy will be mailed to the Contracting Officer listed in (2) below.
DFAS
Operating Location Seaside
ATTN: DFAS-SS/DFA
400 Gigling Road
Seaside, CA 93955-6771
Tele: 1-800-582-8780 Facsimile 408-583-1307
(2) FEE
For reimbursement of fee, the Contractor shall submit an original and four (4)
copies of Public Voucher the Contracting Officer at the address listed below:
Directorate of Contracting
ATTN: ATSI-DKO-I
Post Office Box 12748
Fort Huachuca, AZ 85670-2748
NOTE.- CONTRACT FINANCING PAYMENTS SHALL NOT BE MADE IN ACCORDANCE WITH FAR
52.23225(b)(4). NO INTEREST WILL BE PAID UNDER THE TERMS AND CONDITIONS OF THIS
CONTRACT INVOICES/VOUCHERS WILL BE SUBMITTED MONTHLY.
Page G-1
<PAGE> 65
SECTION G
CONTRACT ADMINISTRATION DATA
G.2 CONTRACT ADMINISTRATION DATA
Bidders/offerors office which will receive payment, supervise, and administer
resulting contract: PartNet Inc. 505 Wakara Way
Salt Lake City, UT 84108
Telephone Number: (601)581-5340
G.3 GOVERNMENT CONTRACT ADMINISTRATOR
Administration of this contract shall be performed by:
Directorate of Contracting
ATTN.: ATZS-DKO-I
Post Office Box 748
Fort Huachuca Arizona 85613-0748
Point of Contact: Gloria Bickler
Telephone Number: (520) 538-1418
G.4 ACCOUNTING CLASSIFICATION
AA 9760400510900004P7510100000.25.160EAT600DOC00MPRTLOG9660000S33181 in the
amount of $600,000. These funds are anticipated to be sufficient for performance
of CLINs 0001 through 0004 from award date through April 30, 1997.
AB AA1761804.12UB00068939000000688922D00PNIS0800068939602597Q0000000 in the
amount $156,000. These funds are anticipated to be sufficient for performance of
CLINs 0001 through 0004 from award date through April 30, 1997.
G.5 INCREMENTAL FUNDING
Of the total price of CLINs 0001 through 0004, the sum of $756,000 is available
for payment and allotted to this contract. It is anticipated that from time to
time additional funds will be allotted to this contract until the total price of
the contract is fully funded. It is contemplated that funds presently allotted
to this contract will cover the work to be performed through April 30, 1997.
Accordingly, the contractor is working at his own risk if he expends funds
beyond those currently allotted to the contract at any given time.
G-2
<PAGE> 66
SECTION G
CONTRACT ADMINISTRATION DATA
G.6 ACQUISITION OF COMPUTER EQUIPMENT AND RELATED ITEMS
Equipment and supplies that cost $2,500 or more per item must be acquired
competitively, and will require Contracting Officer approval prior to finalizing
the purchase. The Contractor's written request shall list the following
information: The proposed Contractor's name, address and telephone number,
business size, cost of each item, shipping (if applicable), and total cost of
the order. If item(s) are not available competitively, the Contractor shall
submit a sole source justification with the request. This information can be
faxed (520-538-0415) or emailed bicklerg%hua1@huachuca-emh11. army.mil) to the
Contact Specialist at the Fort Huachuca Directorate of Contracting.
END OF SECTION G
G-3
<PAGE> 67
SECTION H
SPECIAL CONTRACT REQUIREMENTS
H.1 PERMITS, TAXES, LICENSES, ORDINANCES AND REGULATIONS
The Contractor shall at his own expense obtain all necessary permits, give all
notices, pay all license fees and taxes, comply with all Federal, State,
Municipal, County, and local board of Health ordinances, rules, and regulations
applicable to the business carried on under this contract and be responsible for
all applicable State Sales and Use Taxes
H.2 KEY PERSONNEL REQUIREMENTS
a. Certain skilled/experienced professional and/or technical personnel
are essential for successful contractor accomplishment of the work to be
performed under this contract. These are defined as key personnel and are those
individuals identified as follows:
b. The contractor agrees that key personnel shall not be removed from
the contract work or replaced without compliance with the following:
PROGRAM MANAGER: John Creer
(1) If one or more of the key personnel for whatever reason
becomes, or is expected to become unavailable for work under Ns contract for a
continuous period exceeding 30 work days, or is expected to devote substantially
less effort to the work than indicated in the proposal as initially anticipated,
the contractor shall promptly notify the Contracting Officer at the address
specified in Section G, in the paragraph entitled "GOVERNMENT CONTRACT
ADMINISTRATOR". Upon concurrence of the Contracting Officer or his authorized
representative, the contractor shall promptly replace such personnel with
personnel of at least substantially equal ability and qualifications.
(2) All requests for approval of substitutions hereunder must be
in writing and provide a detailed explanation of the circumstances necessitating
the proposed substitution(s). They must contain a complete resume for the
proposed substitution. The Contracting Officer or designated representative will
evaluate such requests and promptly notify the contractor of his approval or
disapproval thereof in writing.
H.3 TRAVEL AND PER DIEM
Travel and per diem required by the Contractor in performance of this contract
shall be reimbursed in accordance with Volume II of the Joint Travel Regulation.
The Contractor agrees to use the most economical method of travel available.
Request(s) to travel will be reviewed and approved by the Contracting Officer's,
Representative prior to traveling.
H-1
<PAGE> 68
H.4 PUBLICATION
Publication of results of the research project in appropriate professional
journals is encouraged as an important method of recording and reporting
scientific information. One copy of each paper planned for publication will be
submitted to the DARPA Program Manager simultaneously with its submission for
publication. Following publication, copies of published papers shall be
submitted to the DARPA Program Manager, or to other addresses in quantities as
may be directed by the Contracting Officer.
H.5 NO-COST SETTLEMENT
Subject to mutual agreement between the parties, a no-cost settlement may be
executed in lieu of a termination in accordance with FAR Part 49. 1 0 1 (b) due
to the immature stages and uncertainties involved in contract performance in
research and development efforts. In a no-cost settlement all costs
reimbursable, not previously paid, for the performance of the contract to the
date of the termination are allowable; however, the costs for anticipatory
profits or consequential damages resulting from the termination of this contract
(or any subcontract) accounting, legal, clerical, and other expenses necessary
for the preparation of settlement proposals and supporting data shall be
excluded from the settlement proposal submitted by the contractor. The rights
and remedies of the Government in this clause are in addition to any other
rights and remedies provided by law or under this contract.
H.6. PROVISIONAL APPROVAL OF INDIRECT RATES
The parties hereby agree to award this contract with the indirect rates as
stated in the cost proposal. The parties hereby agree that within nine (9)
months after contract award, DCAA will perform a full audit of the contractor's
proposal. The audit findings may result in an upward or downward adjustment to
the total estimated contract amount. If required, the revised rates will be
incorporated into this contract by modification.
H.7 LIMITATION OF COMPENSATION
In accordance with DFARS Part 23 1. "Contract Cost Principles and Procedures":
(a) Costs for individual compensation in excess of $250,000 per year are
unallowable under DoD contracts that are awarded after April; 15, 1995, and are
funded by fiscal year 1995 appropriations (Public Law 103.335).
(b) Costs for bonuses or other payments, that are in excess of the
normal salary paid by the contractor to the employee and that are part of
restructuring costs associated with business combination are unallowable under
DoD contracts funded by fiscal year 1996 appropriations (Public Law 104-61).
This limitation does not apply to severance payments or early retirement
incentive payments. (See 23 1.205-70(b) for the definitions of "business
combination" and restructuring costs.)
H-2
<PAGE> 69
(c) In accordance with Section 8086 of the fiscal year 1996 Defense
Appropriations Act, individual compensation is capped at $200,000 per year on
contracts executed after July 1, 1996 that are funded with fiscal year 1996
appropriations. However, the cap will expire September 30, 1996, when the fiscal
year ends.
H.8 ACKNOWLEDGMENT OF SUPPORT AND DISCLAIMER (MAY 1995) (Reference
235.071(c))
(a) The contractor shall include an acknowledgment of the Government's
support in the publication of any material based on or developed under this
contract, stated in the following terms: his material is based upon work
supported by the Defense Advanced Research Projects Agency (DARPA) under
Contract No. DABT63-96-C-0089.
(b) All material, except scientific articles or papers published in
scientific journals must, in addition to any notices or disclaimers by the
Contractor, also contain the following disclaimer: Any opinions, findings and
conclusions or recommendations expressed in this material are those of the
author(s) and do not necessarily reflect the views of DARPA.
END OF SECTION H
H-3
<PAGE> 70
SECTION I
CONTRACT CLAUSES
I.1 52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988)
This contract incorporates one or more clauses by reference, with the
same force and effect as if they were given in full text. Upon request,
the Contracting Officer will make their full text available.
(End of clause)
I.2 52.202-1 DEFINITIONS (OCT 1995)
(Reference 2.201)
1.3 52.203-3 GRATUITIES (APR 1984)
(Reference 3.202)
I.4 S2.203-5 COVENANT AGAINST CONTINGENT FEES (APR 1984)
(Reference 3.404(c))
I.5 52.203-6 RESTRICTIONS ON SUBCONTRACTOR SALES TO THE GOVERNMENT
(JUL 1995)
(Reference 3.503-2)
I.6 52.203-7 ANTI-KICKBACK PROCEDURES (JUL 1995)
(Reference 3.502-3)
I.7 52.203-10 PRICE OR FEE ADJUSTMENT FOR ILLEGAL OR IMPROPER ACTIVITY
(SEP 1990)
(Reference 3.104-10(c))
I.8 52.203-12 LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL
TRANSACTIONS (JAN 1990)
(Reference 3.808(b))
I.9 52.204-4 PRINTING/COPYING DOUBLE-SIDED ON RECYCLED PAPER (JUN 1996)
(Reference 4.304)
I.10 52.209-6 PROTECTING THE GOVERNMENT'S INTEREST WHEN SUBCONTRACTING
WITH CONTRACTORS DEBARRED, SUSPENDED, OR PROPOSED FOR
DEBARMENT (AUG 1995)
(Reference 9.409(b))
I.11 52.211-15 DEFENSE PRIORITY AND ALLOCATION REQUIREMENTS (SEP 1990)
(Reference 11.604(b))
I.12 52.215-2 AUDIT AND RECORDS--NEGOTIATION (AUG 1996)
(Reference 1S.106-1(b))
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<PAGE> 71
I.13 52.215-22 PRICE REDUCTION FOR DEFECTIVE COST OR PRICING DATA
(OCT 1995)
(Reference 15.804-8(a))
I.14 52.215-24 SUBCONTRACTOR COST OR PRICING DATA (OCT 1995)
(Reference 15.804-8(c))
I.15 52.215-26 INTEGRITY OF UNIT PRICES (OCT 1995)
(Reference 15.812-2(a))
I.16 52.215-27 TERMINATION OF DEFINED BENEFIT PENSION PLANS (MAR 1996)
(Reference 15.804-8(e))
I.17 52.215-31 WAIVER OF FACILITIES CAPITAL COST OF MONEY (SEP 1987)
(Reference 15.904(b))
I.18 52.215-33 ORDER OF PRECEDENCE (JAN 1986)
(Reference 15.406-3(b))
I.19 52.215-39 REVERSION OR ADJUSTMENT OF PLANS FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS (PRB) (MAR 1996)
(Reference 15.804-8(f))
I.20 52.215-40 NOTIFICATION OF OWNERSHIP CHANGES (FEB 1995)
(Reference 15.804-8(g))
I.21 52.216-7 ALLOWABLE COST AND PAYMENT (AVG 1996)
(Reference 16.307(a))
I.22 52.216-8 FIXED FEE (JUL 1995)
(Reference 16.307(b))
I.23 52.219-8 UTILIZATION OF SMALL, SMALL DISADVANTAGED AND WOMEN-OWNED
SMALL BUSINESS CONCERNS (OCT 1995)
(Reference 19.708(a))
I.24 252.225-7011 RESTRICTION ON ACQUISITION OF SUPERCOMPUTERS (JUL 1995)
(Reference 25.7023-3)
I.25 52.219-16 LIQUIDATED DAMAGES--SUBCONTRACTING PLAN (OCT 1995)
(Reference 19.708(b)(2)
I-2
<PAGE> 72
I.26 52.222-3 CONVICT LABOR (AUG 1996)
(Reference 22.202)
I.27 52.222-26 EQUAL OPPORTUNITY (APR 1984)
(Reference 22.810(e))
I.28 52.222-28 EQUAL OPPORTUNITY PREAWARD CLEARANCE OF SUBCONTRACTS
(APR 1984)
(Reference 22.810(g))
I.29 52.222-35 AFFIRMATIVE ACTION FOR SPECIAL DISABLED AND VIETNAM ERA
VETERANS (APR 1984)
(Reference 22.1308)
I.30 52.222-36 AFFIRMATIVE ACTION FOR-HANDICAPPED WORKERS (APR 1984)
(Reference 22.1408)
I.31 52.222-37 EMPLOYMENT REPORTS ON SPECIAL DISABLED VETERANS AND
VETERANS OF THE VIETNAM ERA (JAN 1988)
(Reference 22.1308(b))
I.32 52.223-2 CLEAN AIR AND WATER (APR 1904)
(Reference 23.105(b))
I.33 52.223-6 DRUG-FREE WORKPLACE (JUL 1990)
(Reference 23.505(b))
I.34 52.223-14 TOXIC CHEMICAL RELEASE REPORTING (OCT 1995)
(Reference 23.907(b))
I.35 52.225-11 RESTRICTIONS ON CERTAIN FOREIGN PURCHASES (MAY 1992)
(Reference 25.704)
I.36 52.227-11 AUTHORIZATION AND CONSENT (APR 1984)--ALTERNATE I
(APR 19 4)
(Reference 27.201-2(b))
I.37 52.227-2 NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT
INFRINGEMENT (AUG 1996)
(Reference 27.202-2)
I.38 52.227-11 PATENT RIGHTS--RETENTION BY THE CONTRACTOR (SHORT FORM)
(JUN 1989)
(Reference 27.303(a)(l)
I-3
<PAGE> 73
I.39 52.228-7 INSURANCE--LIABILITY TO THIRD PERSONS (MAR. 1996)
(Reference 28.311-1)
I.40 52.232-9 LIMITATION ON WITHHOLDING OF PAYMENTS (APR 1984)
(Reference 32.111(c)(2)
I.41 52.232-17 INTEREST (JUN 1996)
(Reference 32.617(a)&()
I.42 52.232-22 LIMITATION OF FUNDS (APR 1984)
(Reference 32.705-2(c))
I.43 52.232-23 ASSIGNMENT OF CLAIMS (JAN 1986)--ALTERNATE I (APR 1984)
(Reference 32.806(a)(2)
I.44 52.232-25 PROMPT PAYMENT (MAR 1994)
(Reference 32.908(c))
I.45 52.232-28 ELECTRONIC FUNDS TRANSFER PAYMENT METHODS (APR 1989)
(Reference 32.908(d))
I.46 52.233-1 DISPUTES (OCT 1995)
(Reference 33.215)
I.47 52.233-3 1 PROTEST AFTER AWARD (AUG 1996)--ALTERNATE I (JUN 1985)
(Reference 33.106(b))
I.48 52.242-1 NOTICE OF INTENT TO DISALLOW COSTS (APR 1984)
(Reference 42.802)
I.49 52.242-3 PENALTIES FOR UNALLOWABLE. COSTS (OCT 1995)
(Reference 42.709-6)
I.50 52.242-13 BANKRUPTCY (JUL 1995)
(Reference 42.903)
I.51 52.243-2 V CHANGES--COST-REIMBURSEMENT (AUG 1987)--ALTERNATE V
(APR 1984)
(Reference 43.205(b)(6)
1.52 52.243-6 CHANGE ORDER ACCOUNTING (APR 1984)
(Reference 43.205(f))
I-4
<PAGE> 74
I.53 52.244-2 1 SUBCONTRACTS (COST-REIMBURSEMENT AND LETTER CONTRACTS)
(MAR 1996)-- ALTERNATE I (AUG 1996)
(Reference 44.204(b))
I.54 42.244-5 COMPETITION IN SUBCONTRACTING (JAN 1996)
(Reference 44.204(e))
I.55 52.244-6 SUBCONTRACTS FOR COMMERCIAL ITEMS AND COMMERCIAL COMPONENTS
(OCT 1995)
(Reference 44.403)
I.56 52.245-5 GOVERNMENT PROPERTY (COST-REIMBURSEMENT,
TIME-AND-MATERIAL, OR LABOR-HOUR CONTRACTS) (JAN 1986)
(Reference 45.106(f)(1)
I.57 52.246-23 LIMITATION OF LIABILITY (APR 1984)
(Reference 46.805(a)(1)
I.58 52.246-25 LIMITATION OF LIABILITY--SERVICES (APR 1984)
(Reference 46-805)
I.59 52.249-6 TERMINATION (COST-REIMBURSEMENT) (MAY 1986)
(Reference 49.503(a)(1)
I.60 52.249-14 EXCUSABLE DELAYS (APR 1984)
(Reference 49.505(d))
I.61 252.201-7000 CONTRACTING OFFICER'S REPRESENTATIVE (DEC 1991)
(Reference 01.602-70)
I.62 252.203-7000 STATUTORY PROHIBITION ON COMPENSATION TO FORMER DEPARTMENT
OF DEFENSE EMPLOYEES (NOV 1995)
(Reference 03.170-4)
I.63 252.203-7001 SPECIAL PROHIBITION ON EMPLOYMENT (NOV 1995)
(Reference 03.570-5)
I.64 2S2.204-7003 CONTROL OF GOVERNMENT PERSONNEL WORK PRODUCT (APR 1992)
(Reference 04.404-70(b)
I.65 252.20S-7000 PROVISION OF INFORMATION To COOPERATIVE AGREEMENT HOLDERS
(DEC 1991)
(Reference 05.470-2)
I-5
<PAGE> 75
I.66 252.209-7000 ACQUISITION FROM SUBCONTRACTORS SUBJECT TO ON-SITE
INSPECTION UNDER THE INTERMEDIATE-RANGE NUCLEAR FORCES
(INF) TREATY (NOV 1995)
(Reference 09.103-70)
I.67 252.215-7000 PRICING ADJUSTMENTS (DEC 1991)
(Reference 15.804-8(1))
I.68 252.225-7002 QUALIFYING COUNTRY SOURCES AS SUBCONTRACTORS (DEC 1991)
(Reference 25.109-70(a)
I.69 252.225-7007 TRADE AGREEMENTS (JUL 1996
(Reference 25.408(a)(2)
I.70 252.225-7009 DUTY-FREE ENTRY--QUALIFYING COUNTRY END PRODUCTS AND
SUPPLIES (DEC 1991) (Reference
(25.605-70(b)
I.71 252.225-7012 PREFERENCE FOR CERTAIN DOMESTIC COMMODITIES (NOV 1995)
(Reference 2S.7002-4(a)
I.72 2S2.225-7031 SECONDARY ARAB BOYCOTT OF ISRAEL (JUN 1992)
(Reference 25.770-5)
I.73 252.225-7036 NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
(JAN 1994)
(Reference 25.408(a)(4)
I.74 252.227-7013 RIGHTS IN TECHNICAL DATA--NONCOMMERCIAL ITEMS (NOV 1995)
(Reference 27.7103-6(a)
I.75 252.227-7014 RIGHTS IN NONCOMMERCIAL COMPUTER SOFTWARE MM NONCOMMERCIAL
COMPUTER SOFTWARE DOCUMENTATION (JUN 1995)
(Reference 27.7203-6(a)
I.76 252.227-7016 RIGHTS IN BID OR PROPOSAL INFORMATION (JUN 1995)
(Reference 27.7103-6(e)
I.77 252.227-7019 VALIDATION OF ASSERTED RESTRICTIONS--COMPUTER SOFTWARE
(JUN 1995)
(Reference 27.7104(e)()
I.78 252.227-702S LIMITATIONS ON THE USE OR DISCLOSURE OF
GOVERNMENT-FURNISHED INFORMATION MARKED WITH RESTRICTIVE
LEGENDS (JUN 1995)
(Reference 27.7103-6(c)
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<PAGE> 76
I.79 252.227-7026 DEFERRED DELIVERY OF TECHNICAL DATA OR COMPUTER SOFTWARE
(APR 1988)
(Reference 27.7103-8(a)
I.60 252.227-7027 DEFERRED ORDERING OF TECHNICAL DATA OR COMPUTER SOFTWARE
(APR 1988)
(Reference 27.7103-8(b)
I.81 252.227-7030 TECHNICAL DATA--WITHHOLDING OF PAYMENT (OCT 1988)
(Reference 27.7103-6(f)
I.82 252.227-7034 PATENTS--SUBCONTRACTS (APR 1984)
(Reference 27.304-4)
I.83 252.227-7037 VALIDATION OF RESTRICTIVE MARKINGS ON TECHNICAL DATA
(NOV 1995)
(Reference 27.7102-3(c)
I.84 252.227-7039 PATENTS--REPORTING OF SUBJECT INVENTIONS (APR 1990)
(Reference 27.303(a))
I.85 252.231-7000 SUPPLEMENTAL COST PRINCIPLES (DEC 1991)
(Reference 31.100-70)
I.86 252.232-7006 REDUCTION OR SUSPENSION OF CONTRACT PAYMENTS UPON FINDING
OF FRAUD (AUG 1992)
(Reference 32.111-70)
I.87 252.235-7009 RESTRICTION ON PRINTING (DEC 1991)
(Reference 35.015-71(i)
I.88 2S2.235-7011 FINAL SCIENTIFIC OR TECHNICAL REPORT (MAY 1995)
(Reference 35.071(d))
I.89 252.245-7001 REPORTS OF GOVERNMENT PROPERTY (MAY 1994)
(Reference 45.505-14)
I.90 52.203-9 REQUIREMENT FOR CERTIFICATE OF PROCUREMENT
INTEGRITY--MODIFICATION (SEPT 1995)
(a) Definitions. The definitions set forth in PAR 3.104-4 are
hereby incorporated in this clause.
(b) The Contractor agrees that it will execute the certification
set
I-7
<PAGE> 77
forth in paragraph (c) of this clause when requested by the Contracting
officer in connection with the execution of any modification of this
contract.
(c) Certification. An required in paragraph (b) of this clause,
the officer or employee responsible for the modification proposal shall
execute the following certification. The certification in paragraph (c)
(2) of this clause is not required for a modification which procures
commercial items.
CERTIFICATE OF PROCUREMENT INTEGRITY--MODIFICATION (NOV 1990)
(1) I, ___________________________ (Name of certifier) am the
officer or employee responsible for the preparation of this modification
proposal and hereby certify that, to the beat of my knowledge and
belief, with the exception of any information described in this
certification, I have no information concerning a violation or possible
violation of subsection 27 (a), (b), (d) or (f) of the Office of Federal
Procurement Policy Act, as amended+ (41 U.S.C. 423), (hereinafter
referred to as 'the Act') , as implemented in the FAR, occurring during
the conduct of this procurement __________________ (contract and
modification number).
(2) As required by subsection 27 (e) (1) (B) of the Act. I
further certify that to the beet of my knowledge and belief, each
officer, employee, agent, representative, and consultant of
__________________________ (Name of Offeror) who has participated
personally and substantially in the preparation or submission of this
proposal has certified that he or she is familiar with, and will comply
with, the requirements of subsection 27(a) of the Act, as implemented in
the FAR, and will report immediately to me any information concerning a
violation or possible violation of subsections 27(a), (b), (d), or (f)
of the Act, an implemented in the, FAR, pertaining to this procurement.
(3) Violations or possible violations: (continue on plain bond
paper if necessary and label Certificate of Procurement
Integrity--Modification (Continuation Sheet), ENTER 'NONE* IF NONE
EXISTS)
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
[Signature of the officer or employee responsible for the modification
proposal and date]
[Typed name of the officer or employee responsible for the modification
proposal]
I-8
<PAGE> 78
*Subsections 27 (a), (b) , and (d) are effective on December 1, 1990.
Subsection 27(f) is effective on June 1, 1991.
THIS CERTIFICATION CONCERNS A MATTER WITHIN THE JURISDICTION OF AN
AGENCY OF THE UNITED STATES AND THE MAKING OF A FALSE, FICTITIOUS, OR
FRAUDULENT CERTIFICATION MAY RENDER THE MAKER SUBJECT TO PROSECUTION
UNDER TITLE 18, UNITED STATES CODE, SECTION 1001.
(End of certification)
(d) In making the certification in paragraph (2) of the
certificate, the officer or employee of the competing Contractor
responsible for the offer or bid, may rely upon a one-time certification
from each individual required to submit a certification to the competing
Contractor, supplemented by periodic training. These certifications
shall be obtained at the earliest possible date after an individual
required to certify begins employment or association with the
Contractor. If a Contractor decides to rely on a certification executed
prior to the suspension of section 27 (i.e., prior to December 1, 1989),
the Contractor shall ensure that an individual who has so certified is
notified that section 27 has been reinstated. These certifications shall
be maintained by the Contractor for a period of 6 years from the date a
certifying employee's employment with the company ends or, for an
agency, representative, or consultant, 6 years from the date such
individual ceases to act on behalf of the Contractor.
(e) The certification required by paragraph (c) of this clause
is a material representation of fact upon which reliance will be placed
in executing this modification.
(End of clause)
1.91 52.222-2 PAYMENT FOR OVERTIME PREMIUMS (JUL 1990)
(a) The use of overtime is authorized under this contract if the
overtime premium does not exceed 0 or the overtime premium is paid for
work-
(1) Necessary to cope with emergencies such as those
resulting from accidents, natural disasters, breakdowns of
production equipment, or occasional production bottlenecks of a
sporadic nature;
(2) By indirect-labor employees such as those performing
duties in connection with administration, protection,
transportation, maintenance, standby plant protection, operation
of utilities, or accounting;
(3) To perform tests, industrial processes, laboratory
procedures, loading or unloading of transportation conveyances,
and operations in
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<PAGE> 79
flight or afloat that are continuous in nature and cannot reasonably be
interrupted or completed otherwise; or
(4) That will result in lower overall costs to the Government.
(b) Any request for estimated overtime premiums that exceeds
the amount specified above shall include all estimated overtime for
contract completion and shall --
(1) Identify the work unit; e.g., department or section
in which the requested overtime will be used, together with
present workload, staffing, and other data of the affected unit
sufficient to permit the Contracting Officer to evaluate the
necessity for the overtime;
(2) Demonstrate the effect that denial of the request
will have on the contract delivery or performance schedule;
(3) Identify the extent to which approval of overtime
would affect the performance or payments in connection with
other Government contracts, together with identification of each
affected contract; and
(4) Provide reasons why the required work cannot be
performed by using multishift operations or by employing
additional personnel.
(End of Clause)
I.92 52.242-4 CERTIFICATION OF INDIRECT COSTS (OCT 1995)
(a) The Contractor shall --
(1) Certify any proposal to establish or modify
billing rates or to establish final indirect cost rates;
(2) Use the format in paragraph (c) of this clause to
certify; and
(3) Have the certificate signed by an individual of
the Contractor's organization at a level no lower than a vice
president or chief financial officer of the business segment of
the Contractor that submits the proposal.
(b) Failure by the Contractor to submit a signed certificate,
as described in this clause, shall result in payment of indirect costs
at rates unilaterally established by the Government.
(c) The certificate of indirect costs shall read as follows:
This is to certify that to the best of my knowledge and belief:
Certificate of Indirect Costs
1. I have reviewed this indirect cost proposal;
2. All costs included in this proposal (identify
proposal and date) to
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<PAGE> 80
establish billing or final indirect costs rates for (identify period
covered by rate) are allowable in accordance with the requirements of
contracts to which they apply and with the cost principles of the
Federal Acquisition Regulation (FAR) and its supplements applicable to
those contracts;
3. This proposal does not include any costs which are
unallowable under applicable cost principles of the FAR or its
supplements, including, but not limited to: advertising and public
relations costs, contributions and donations, entertainment costs, fines
and penalties, lobbying costs, defense of fraud proceedings, and
goodwill; and
4. All costs included in this proposal are properly allocable to
Government contracts on the basis of a beneficial or causal relationship
between the expenses incurred and the contracts to which they are
allocated in accordance with applicable acquisition regulations.
I declare under penalty of perjury that the foregoing is true
and correct.
Firm: ------------------------------------------------------------------
Signature: -------------------------------------------------------------
Name of Certifying Official: -------------------------------------------
Title: -----------------------------------------------------------------
Date of Execution: -----------------------------------------------------
(End of clause)
1.93 252.225-7001 BUY AMERICAN ACT AND BALANCE OF PAYMENTS PROGRAM (JAN 1994)
(a) Definitions. (1) "Components" means those articles,
materials, and supplies directly incorporated into end products.
(2) "Qualifying country" means any country met forth in
subsection 225.872-1 of the Defense PAR Supplement.
(3) "Qualifying country component" means an item mined,
produced, or manufactured in a qualifying country.
(4) "End product" means those articles, materials, and
supplies to be
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<PAGE> 81
acquired for public use under the contract. For this contract, the end
products are the line items to be delivered to the Government (including
supplies to be acquired by the Government for public use in connection
with service contracts, but excluding installation and other services to
be performed after delivery).
(5) "Domestic end product" means--
(i) An unmanufactured end product which has been mined
or produced in the United States; or
(ii) An end product manufactured in the United States if
the cost of its qualifying country components and its components
which are mined, produced, or manufactured in the United States
exceeds 50 percent of the cost of all its components. The cost
of components shall include transportation costs to the place of
incorporation into the end product and U.S. duty (whether or not
a duty-free entry certificate may be issued). Consider a
component to have been mined, produced, or manufactured in the
United States (regardless of its source in fact) if the end
product in which it is incorporated is manufactured in the
United States and the component is of a class or kind--
(A) Determined to be not mined, produced, or
manufactured in the United States in sufficient and
reasonably available commercial quantities and of a
satisfactory quality, or
(B) Which the Secretary concerned determines
would be inconsistent with the public interest to apply
the restrictions of the Buy American Act.
(6) "Nonqualifying country end product, means an end product
which is neither a domestic end product nor a qualifying country end
product.
(7) Qualifying country end product, means--
(i) An unmanufactured end product mined or produced in a
qualifying country; or
(ii) An end product manufactured in a qualifying country
if the cost of the components mined, produced, or manufactured
in the qualifying country and its components mined, produced, or
manufactured in the United States exceeds 50 percent of the cost
of all its components.
(b) This clause implements the Buy American Act (41 U.S.C.
10a-d) in a manner that will encourage a favorable international balance
of payments by providing a preference to domestic end products over
other end products, except for end products which are qualifying country
end products.
(c) The Contractor agrees that it will deliver only domestic end
products unless, in its offer, it specified delivery of other end
products in the Buy American Act and Balance of Payments Certificate or
the Buy American Act--Trade Agreements--Balance of Payments Program
Certificate. An
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<PAGE> 82
offer certifying that a qualifying country end product will be supplied
requires the Contractor to deliver a qualifying country end product or a
domestic end product.
(d) The offered price of nonqualifying country end products must
include all applicable duty. Generally, when the Buy American Act is
applicable, each nonqualifying country offer is adjusted for the purpose
of evaluation by adding 50 percent of the offer, inclusive of duty,
(End of clause)
1.94 252.225-7008 SUPPLIES TO BE ACCORDED DUTY-FREE ENTRY (DEC 1991)
In accordance with paragraph (a) of the Duty-Free Entry clause
and/or paragraph (b) of the Duty-Free Entry--Qualifying Country End
Products and Supplies clause of this contract, the following supplies
are accorded duty-free entry:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(End of clause)
I.95 252.227-7036 CERTIFICATION OF TECHNICAL DATA CONFORMITY (MAY 1987)
(a) All technical data delivered under this contract shall be
accompanied by the following written certification;
The Contractor, __________________, hereby certifies that, to
the best of its knowledge and belief, the technical data delivered
herewith under Contract No. ________________ is complete, accurate, and
complies with all requirements of the contract. ___________________ Date
________________________ Name and Title of Certifying official This
written certification shall be dated and the certifying official
(identified by name and title) shall be duly authorized to bind the
Contractor by the certification.
(b) The Contractor shall identify, by name and title, each
individual (official) authorized by the Contractor to certify in writing
that the technical data is complete, accurate, and complies with all
requirements of the contract. The Contractor hereby authorizes direct
contact with the
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<PAGE> 83
authorized individual responsible for certification of technical data.
The authorized individual shall be familiar with the Contractor's
technical data conformity procedures and their application to the
technical data to be certified and delivered.
(c) Technical data delivered under this contract may be subject
to reviews by the Government during preparation and prior to acceptance.
Technical data is also subject to reviews by the Government subsequent
to acceptance. Such reviews may be conducted as a function ancillary to
other reviews, such as in-process reviews or configuration audit
reviews.
(End of clause)
I.96 252.233-7000 CERTIFICATION OF CLAIMS AND REQUESTS FOR ADJUSTMENT OR
RELIEF (MAY 1994)
(a) Any contract claim, request for equitable adjustment to
contract terms, request for relief under Pub. L. 85-804, or other
similar request exceeding $100.000 shall bear, at the time of
submission, the following certificate given by an individual who has
knowledge of the basis of the claim or request, knowledge of the
accuracy and completeness of the supporting data, and knowledge of the
claim or request:
I certify that the claim is made in good faith, that the
supporting data are accurate and complete to the beat of my
knowledge and belief; that the amount requested accurately
reflects the contract adjustment for which the Contractor
believes the Government is liable; and that I am duly authorized
to certify the claim on behalf of the Contractor.
______________________________
(Official's Name)
______________________________
(Title)
(b) The certification in paragraph (a) of this clause requires
full disclosure of all relevant facts, including cost and pricing data.
(c) The certification requirement in paragraph (a) of this
clause does not apply to:
(1) Requests for routine contract payments; for example,
those for payment for accepted supplies and services, routine
vouchers under cost-reimbursement type contracts, and progress
payment invoices; or
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<PAGE> 84
(2) Final adjustments under incentive provisions of
contracts.
(d) In those situations where no claim certification for the
purposes of 10 U.S.C. 2410e has been submitted prior to the inception of
a contract dispute, a single certification, using the language
prescribed by the Contract Disputes Act (41 U.S.C. 601 et seq.) but
signed by an individual who is authorized to bind the contractor and who
has knowledge of the basis of the claim or request, knowledge of the
accuracy and completeness of the supporting data, and knowledge of the
claim or request, will satisfy the certification requirements of both
statutes.
(e) If this is a request for equitable adjustment under a
substantially completed contract or a completed contract, the
certification will be expanded to include the following:
This claim includes only costs for performing the alleged
change, and does not include any costs which have already been
reimbursed or which have been separately claimed. All indirect
costs claimed are properly allocable to the alleged change in
accordance with applicable acquisition regulations. I am aware
that the submission of a false claim to the Government can
result in the assessment of significant criminal and civil
penalties and fines.
(End of clause)
1.97 252.235-7010 ACKNOWLEDGMENT OF SUPPORT AND DISCLAIMER (MAY 1995)
(a) The Contractor shall include an acknowledgment of the
Government support in the publication of any material based on or
developed under this contract, stated in the following terms: This
material is based upon work supported by the _____ (name of contracting
agency(ies))_____ under Contract No.____ (Contracting agency(ies)
contract number(s))_____.
(b) All material, except scientific articles or papers published
in scientific journals, must, in addition to any notices or disclaimers
by the contractor, also contain the following disclaimer: Any opinions,
findings and conclusions or recommendations expressed in this material
are those of the author(s) and do not necessarily reflect the views of
the _____ (name of contracting agency(ies))____.
(End of clause)
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<PAGE> 85
I.98 252.247-7023 TRANSPORTATION OF SUPPLIES BY SEA (NOV 1995)
(a) Definition. As used in this clause--
(1) "Components" means articles. materials, and supplies
incorporated directly into end products at any level of
manufacture, fabrication, or assembly by the Contractor or any
subcontractor.
(2) "Department of Defense (DoD)" means the Army, Navy,
Air Force, marine Corps. and defense agencies.
(3) "Foreign flag vessel" means any vessel that is not a
U.S.-flag vessel.
(4) "Ocean transportation" means any transportation
aboard a ship, vessel, boat, barge, or ferry through
international waters.
(5) Subcontractor means a supplier, materialman,
distributor, or vendor at any level below the prime contractor
whose contractual obligation to perform results from, or is
conditioned upon, award of the prime contract and who is
performing any part of the work or other requirement of the
prime contract. However, effective May 1, 1996, the term does
not include a supplier, materialman, distributor, or vendor of
commercial items or commercial components.
(6) "Supplies" means all property, except land and
interests in land, that is clearly identifiable for eventual use
by or owned by the DoD at the time of transportation by sea.
(i) An item is clearly identifiable for eventual
use by the DoD if, for example, the contract
documentation contains a reference to a DoD contract
number or a military destination.
(ii) Supplies includes (but is not limited to)
public works; buildings and facilities; ships; floating
equipment and vessels of every character, type, and
description, with parts, subassemblies, accessories, and
equipment; machine tools; material; equipment; stores of
all kinds; and items; construction materials; and
components of the foregoing.
(7) "U.S.-flag vessel" means a vessel of the United
States or belonging to the United States, including any vessel
registered or having national status under the laws of the
United States.
(b) The Contractor shall employ U.S.-flag vessels in the
transportation by sea of any supplies to be furnished in the performance
of this contract. The Contractor and its subcontractors may request that
the Contracting officer authorize shipment in foreign-flag vessels, or
designate available U.S.-flag vessels, if the Contractor or a
subcontractor believes that--
(1) U.S.-flag vessels are not available for timely
shipment;
(2) The freight charges are inordinately excessive or
unreasonable; or
I-16
<PAGE> 86
(3) Freight charges are higher than charges to private
persons for transportation of like goods.
(c) The Contractor must submit any request for use of other than
U.S.flag vessels in writing to the Contracting Officer at least 45 days
prior to the sailing date necessary to meet its delivery schedules. The
Contracting Officer will process requests submitted after ouch date(s)
as expeditiously as possible, but the Contracting Officer's failure to
grant approval to meet the shipper's sailing date will not of itself
constitute a compensable delay under this or any other clause of this
contract. Requests shall contain at a minimum--
(1) Type, weight, and cube of cargo;
(2) Required shipping date;
(3) Special handling and discharge requirements;
(4) Loading and discharge points;
(5) Name of shipper and consignee;
(6) Prime contract number; and
(7) A documented description of efforts made to secure
U.S.-flag vessels, including points of contact (with names and
telephone numbers) with at least two U.S.-flag carriers
contacted. Copies of telephone notes, telegraphic and facsimile
message or letters will be sufficient for this purpose.
(d) The Contractor shall, within 30 days after each shipment
covered by this clause, provide the Contracting Officer and the Division
of National Cargo, Office of Market Development, Maritime
Administration, U.S. Department of Transportation, Washington, DC 20590,
one copy of the rated on board vessel operating carrier's ocean bill of
lading, which shall contain the following information--
(1) Prime contract number;
(2) Name of vessel,
(3) Vessel flag of registry;
(4) Date of loading;
(5) Port of loading;
(6) Port of final discharge;
(7) Description of commodity;
(8) Gross weight in pounds and cubic feet if available;
(9) Total ocean freight in U.S. dollars; and
(10) Name of the steamship company.
(e) The Contractor agrees to provide with its final invoice
under this contract a representation that to the beat of its knowledge
and belief--
(1) No ocean transportation was used in the performance
of this contract;
I-17
<PAGE> 87
(2) Ocean transportation was used and only U.S.-flag
vessels were used for all ocean shipments under the contract;
(3) Ocean transportation was used, and the Contractor
had the written consent of the Contracting Officer for all
non-U.S.-flag ocean transportation; or
(4) Ocean transportation was used and some or all of the
shipments were made on non-U.S.-flag vessels without the written
consent of the Contracting Officer. The Contractor shall
describe these shipments in the following format:
<TABLE>
<CAPTION>
Item Contract
Description Line Items Quantity
<S> <C> <C> <C>
Total........
</TABLE>
(f) If the final invoice does not include the required
representation, the Government will reject and return it to the
Contractor as an improper invoice for the purposes of the Prompt Payment
clause of this contract. In the event there has been unauthorized use of
non-U.S.-flag vessels in the performance of this contract, the
Contracting officer is entitled to equitably adjust the contract, based
on the unauthorized use.
(g) The Contractor shall include this clause, including this
paragraph (g) in all subcontracts under this contract, which exceed the
simplified acquisition threshold in Part 13 of the Federal Acquisition
Regulation (End of clause)
I.99 252.247-7024 NOTIFICATION OF TRANSPORTATION OF SUPPLIES BY SEA
(NOV 1995)
(a) The Contractor has indicated by the response to the
solicitation provision, Representation of Extent of Transportation by
Sea, that it did not anticipate transporting by sea any supplies. If.
however, after the award of this contract, the Contractor learns that
supplies, as defined in the Transportation of Supplies by Sea clause of
this contract, will be transported by sea, the Contractor---
(1) Shall notify the Contracting Officer of that fact;
and
(2) Hereby agrees to comply with all the terms and
conditions of the
I-18
<PAGE> 88
Transportation of Supplies by Sea clause of this contract.
(b) The Contractor shall include this clause, including this
paragraph lb) , revised as necessary to reflect the relationship of the
contracting parties, in all subcontracts hereunder, except (effective
May 1, 1996) subcontracts for the acquisition of commercial items or
components.
(End of clause)
END OF SECTION I
I-19
<PAGE> 89
SECTION J
LIST OF ATTACHMENTS
J.1 EXHIBITS
Exhibit A - DD form 1423, Contract Data Requirements List (CDRL), A001
through A003.
a. A001, Scientific and Technical Reports, DI-MISC-80711, 88/12/02, 1 page
b. A002, R&D Status Report, DI-A-3002A, 85/01/15, 2 pages
c. A003, Funds and Man-Hour Expenditure Report, DI-FNCL-80331, dated
87/02/27, 5 pages.
J.2 ATTACHMENTS
Attachment 1 - SF 3881 ACH Vendor/Miscellaneous Payment Enrollment Form
(Rev 12/90)
Attachment 2 - Statement of Work
J-1
<PAGE> 90
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00001 04/30/97 HJ1500-7076-0310 MMPRT-LOG-97-11
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
505 WAKARA WAY
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/25/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required) Mod Obligated Amount US $1,000,000.00
AC:97704005107007P751.01USL.OAPCERT70DOCMMPRT60G9711S331810000000000
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
X 51.232.22, LIMITATION OF FUNDS, UNILATERAL
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [ ] is required to sign this document and return ______ copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.)
THE PURPOSE OF THIS MODIFICATION IS AS FOLLOWS:
A. TO INCREMENTALLY FUND AND OBLIGATE FUNDS. THE OBLIGATED AMOUNT IS INCREASED:
BY: $1,000,000.00 FROM: $756,000.00 TO: $1,756,000.00
B. To transfer the Government contract administration as follows:
Except as provided herein, all terms and conditions of the documents referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
GLORIA A. BICKLER C12
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
---------------------------------------- BY /s/ GLORIA A. BICKLER 4/1/97
(Signature of person authorized to sign) ----------------------------------
(Signature of Contracting Officer)
=================================================================================================================================
N5N 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR(48 CFR)53.243
30-105
</TABLE>
<PAGE> 91
SF 30 CONTINUATION SHEET
FROM: GLORIA BICKLER TO: WESSELEEN STOOKESBERRY
C. REMOVE PAGE G-2 AND INSERT REVISED PAGE G-2. CHANGES ARE DENOTED BY
A VERTICAL LINE IN THE LEFT MARGIN.
2
<PAGE> 92
CONTRACT ADMINISTRATION DATA
G.2 CONTRACT ADMINISTRATION DATA
Bidders/offerors office which will receive payment, supervise, and administer
resulting contract:
PartNet Inc.
505 Wakara Way
Salt Lake City, UT 84108
Telephone Number: (601) 581-5340
G.3 GOVERNMENT CONTRACT ADMINISTRATOR
Administration of this contract shall be performed by:
Directorate of Contracting
ATTN: ATZS-DKO-I
Post Office Box 748
Fort Huachuca Arizona 85613-0748
Point of Contact: Wesseleen Stookesberry
Telephone Number: (520) 538-1418
G.4 ACCOUNTING CLASSIFICATION
AA 9760400510900004P7510100000.25.160EAT600DOC00MPRTLOG9660000S33181 in the
amount of $600,000. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1997.
AB AA1761804.12UB00068939000000688922D00PNIS0800068939602597Q0000000 in the
amount $156,000. These funds are anticipated to be sufficient for performance
of CLINs 0001 through 0004 from award date through April 30, 1997.
AC 97704005107007P751.01USL.OAPCERT70DOCMMPRT60G9711S331810000000000 in the
amount of $1,000,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
G.5 INCREMENTAL FUNDING
Of the total price of CLINs 0001 through 0004, the sum of $1,756,000 is
available for payment and allotted to this contract. It is anticipated that
from time to time additional funds will be allotted to this contract until the
total price of the contract is fully funded. It is contemplated that funds
presently allotted to this contract will cover the work to be performed through
30 April 1998. Accordingly, the contractor is working at his own risk if he
expends funds beyond those currently allotted to the contract at any given time.
G-2
<PAGE> 93
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00001 04/30/98 HJ1500-7076-0310 MMPRT-LOG-97-11
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
505 WAKARA WAY
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/25/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required) Mod Obligated Amount US $1,000,000.00
AC:97704005107007P751.01USL.OAPCERT70DOCMMPRT60G9711S331810000000000
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
X 52.232.22, LIMITATION OF FUNDS, UNILATERAL
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [ ] is required to sign this document and return ______ copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.)
THE PURPOSE OF THIS MODIFICATION IS AS FOLLOWS:
A. TO INCREMENTALLY FUND AND OBLIGATE FUNDS. THE OBLIGATED AMOUNT IS INCREASED:
BY: $1,000,000.00 FROM: $756,000.00 TO: $1,756,000.00
B. To transfer the Government contract administration as follows:
Except as provided herein, all terms and conditions of the documents referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
GLORIA A. BICKLER C12
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
---------------------------------------- BY /s/ GLORIA A. BICKLER 4/1/97
(Signature of person authorized to sign) ----------------------------------
(Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
30-105 FAR(48 CFR)53.243
</TABLE>
<PAGE> 94
SF 30 CONTINUATION SHEET
FROM: GLORIA BICKLER TO: WESSELEEN STOOKESBERRY
C. REMOVE PAGE G-2 AND INSERT REVISED PAGE G-2. CHANGES ARE DENOTED BY A
VERTICAL LINE IN THE LEFT MARGIN.
<PAGE> 95
CONTRACT ADMINISTRATION DATA
G.2 CONTRACT ADMINISTRATION DATA
Bidders/offerors office which will receive payment, supervise, and administer
resulting contract:
PartNet Inc.
505 Wakara Way
Salt Lake City, UT 84108
Telephone Number: (601) 581-5340
G.3 GOVERNMENT CONTRACT ADMINISTRATOR
Administration of this contract shall be performed by:
Directorate of Contracting
ATTN: ATZS-DKO-I
Post Office Box 748
Fort Huachuca Arizona 85613-0748
Point of Contact: Wesseleen Stookesberry
Telephone Number: (520) 538-1418
G.4 ACCOUNTING CLASSIFICATION
AA 9760400510900004P7510100000.25.160EAT600DOC00MPRTLOG9660000S33181 in the
amount of $600,000. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1997.
AB AA1761804.12UB00068939000000688922D00PNIS0800068939602597Q0000000 in the
amount $156,000. These funds are anticipated to be sufficient for performance
of CLINs 0001 through 0004 from award date through April 30, 1997.
AC 97704005107007P751.01USL.0APCERT70DOCMMPRT60G9711S331810000000000 in the
amount of $1,000,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
G.5 INCREMENTAL FUNDING
Of the total price of CLINs 0001 through 0004, the sum of $1,756,000 is
available for payment and allotted to this contract. It is anticipated that
from time to time additional funds will be allotted to this contract until the
total price of the contract is fully funded. It is contemplated that funds
presently allotted to this contract will cover the work to be performed through
30 April 1998. Accordingly, the contractor is working at his own risk if he
expends funds beyond those currently allotted to the contract at any given time.
G-2
<PAGE> 96
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00002 07/19/97 HJ1500-7197-0360 MMPRT-LOG-97-27
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
505 WAKARA WAY
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/25/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended.
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of
the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the amendment; (b) By acknowledging receipt
of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the
solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS
PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an
offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the
solicitation and this amendment, and is received prior to the opening hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required) Mod Obligated Amount US $480,000.00
AC:97704005107007P751.01USL25.16ERT7S3318100MMPRTLOG9727000000000000 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
X IAW FAR 52.232-0022 Limitation of Funds Unilateral
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [ ] is required to sign this document and return ______ copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.)
The purpose of this modification is to provide incremental funding IAW FAR
52.232-0022, Limitation of Funds.
a. Funds are increased:
BY: $480,000.00 FROM: $1,756,000.00 TO: $2,236,000.00
It is anticipated that the funds allotted will cover the
work to be performed through 30 April 1998.
Except as provided herein, all terms and conditions of the document referenced in item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 18A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
TONI L. DAVIES C18
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 19B. UNITED STATES OF AMERICA 18C. DATE SIGNED
---------------------------------------- BY /s/ TONI L. DAVIES 7/23/97
(Signature of person authorized to sign) ----------------------------------
(Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
30-105 FAR(48 CFR)53.243
</TABLE>
<PAGE> 97
SF 30 CONTINUATION SHEET
b. Funds Status:
<TABLE>
<CAPTION>
Total Total Total
Value Obligated Unfunded
Amount Amount Amount
<S> <C> <C> <C>
Basic
CLINs 0001-0004 $3,161,986.00 $ 756,000.00 $2,405,986.00
P00001
CLINs 0001-0004 $3,161,986.00 $1,000,000.00 $1,405,986.00
P00002
CLINs 0001-0004 $3,161,986.00 $ 480,000.00 $ 925,986.00
</TABLE>
c. Remove page(s) G-2 through G-3 and insert revised page(s) G-2 thru
G-3.
d. Changes are denoted by a vertical line in the left margin of each
page.
e. All other terms and conditions remain unchanged.
2
<PAGE> 98
SECTION G
CONTRACT ADMINISTRATION DATA
G.2 CONTRACT ADMINISTRATION DATA
Bidders/offerors office which will receive payment, supervise, and administer
resulting contract:
PartNet Inc.
505 Wakara Way
Salt Lake City, UT 84108
Telephone Number: (601) 581-5340
G.3 GOVERNMENT CONTRACT ADMINISTRATOR
Administration of this contract shall be performed by:
Directorate of Contracting
ATTN: ATZS-DKO-I
Post Office Box 748
Fort Huachuca Arizona 85613-0748
Point of Contact: Wesseleen Stookesberry
Telephone Number: (520) 538-0416
G.4 ACCOUNTING CLASSIFICATION
AA 9760400510900004P7510100000.25.160EAT600DOC00MPRTLOG9660000S33181 in the
amount of $600,000. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1997.
AB AA1761804.12UB00068939000000688922D00PNIS0800068939602597Q0000000 in the
amount $156,000. These funds are anticipated to be sufficient for performance
of CLINs 0001 through 0004 from award date through April 30, 1997.
AC 97704005107007P751.01USL.OAPCERT70D0CMMPRT60G9711S331810000000000 in the
amount of $1,000,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
AD 97704005107007P751.01USL25.16ERT7S3318100MMPRTLOG9727000000000000 in the
amount of $480,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
G-2
<PAGE> 99
SECTION G
CONTRACT ADMINISTRATION DATA
G.5 INCREMENTAL FUNDING
Of the total price of CLINs 0001 through 0004, the sum of $2,236,000.00 is
available for payment and allotted to this contract. It is anticipated that
from time to time additional funds will be allotted to this contract until the
total price of the contract is fully funded. It is contemplated that funds
presently allotted to this contract will cover the work to be performed through
April 30, 1998. Accordingly, the contractor is working at his own risk if he
expends funds beyond those currently allotted to the contract at any given time.
G.6 ACQUISITION OF COMPUTER EQUIPMENT AND RELATED ITEMS
Equipment and supplies that cost $2,500 or more per item must be acquired
competitively, and will require Contracting Officer approval prior to
finalizing the purchase. The Contractor's written request shall list the
following information: The proposed Contractor's name, address and telephone
number, business size, cost of each item, shipping (if applicable), and total
cost of the order. If item(s) are not available competitively, the Contractor
shall submit a sole source justification with the request. This information can
be faxed (520-538-0415) or emailed bicklerg%[email protected]) to
the Contact Specialist at the Fort Huachuca Directorate of Contracting.
END OF SECTION G
G-3
<PAGE> 100
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00003 11/06/97
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
505 WAKARA WAY
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
09/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATE (if required)
AD:97704005107007P751.01USL25.16ERT7S3318100MMPRTLOG9727000000000000 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
X appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [ ] is required to sign this document and return ______ copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.
THE PURPOSE OF THIS MODIFICATION IS CHANGED THE PROGRAM MANAGER:
FROM: JOHN GEER TO: STEVE BOWEN
a. REMOVE PAGE H-1 AND INSERT REVISED PAGE H-1. CHANGES ARE DENOTED BY A
VERTICAL LINE IN THE LEFT MARGIN.
Except as provided herein, all terms and conditions of the document referenced in item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
GLORIA A. BICKLER C12
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
---------------------------------------- BY /s/ GLORIA A. BICKLER 11/7/97
(Signature of person authorized to sign) ---------------------
(Signature of Contracting Officer)
=================================================================================================================================
N5N 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
30-105 FAR (48 CFR) 53.243
</TABLE>
<PAGE> 101
SF 30 CONTINUATION SHEET
<TABLE>
<CAPTION>
RECAP: TOTAL TOTAL TOTAL
VALUE OBLIGATED UNFUNDED
AMOUNT AMOUNT AMOUNT
<S> <C> <C> <C>
BASIC $3,161,986.00 $ 756,000.00 $2,405,986.00
P00001 $3,161,986.00 $1,000,000.00 $1,405,986.00
P00002 $3,161,986.00 $ 480,000.00 $ 925,986.00
P00003 $3,161,986.00 $ 00.00 $ 925,986.00
TOTALS $3,161,986.00 $2,236,000.00 $ 925,986.00
</TABLE>
2
<PAGE> 102
SECTION H
SPECIAL CONTRACT REQUIREMENTS
H.1 PERMITS, TAXES, LICENSES, ORDINANCES AND REGULATIONS
The Contractor shall at his own expense obtain all necessary permits, give all
notices, pay all license fees and taxes, comply with all Federal, State,
Municipal, County, and local board of Health ordinances, rules, and regulations
applicable to the business carried on under this contract and be responsible
for all applicable State Sales and Use Taxes
H.2 KEY PERSONNEL REQUIREMENTS
a. Certain skilled/experienced professional and/or technical personnel
are essential for successful contractor accomplishment of the work to be
performed under this contract. These are defined as key personnel and are those
individuals identified as follows:
b. The contractor agrees that key personnel shall not be removed from the
contract work or replaced without compliance with the following:
PROGRAM MANAGER: Steve Bowen
(1) If one or more of the key personnel for whatever reason
becomes, or is expected to become unavailable for work under this contract for a
continuous period exceeding 30 work days, or is expected to devote substantially
less effort to the work than indicated in the proposal as initially anticipated,
the contractor shall promptly notify the Contracting Officer at the address
specified in Section G, in the paragraph entitled "GOVERNMENT CONTRACT
ADMINISTRATOR". Upon concurrence of the Contracting Officer or his authorized
representative, the contractor shall promptly replace such personnel with
personnel of at least substantially equal ability and qualifications.
(2) All requests for approval of substitutions hereunder must be in
writing and provide a detailed explanation of the circumstances necessitating
the proposed substitution(s). They must contain a complete resume for the
proposed substitution. The Contracting Officer or designated representative
will evaluate such requests and promptly notify the contractor of his approval
or disapproval thereof in writing.
H.3 TRAVEL AND PER DIEM
Travel and per diem required by the Contractor in performance of this contract
shall be reimbursed in accordance with Volume II of the Joint Travel
Regulation. The Contractor agrees to use the most economical method of travel
available. Request(s) to travel will be reviewed and approved by the
Contracting Officer's Representative prior to traveling.
H-1
<PAGE> 103
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00004 03/19/98 HJ1500-8063-0619 MMPRT-LOG-98-17
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
505 WAKARA WAY
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (if required) Mod Obligated Amount US $925,986.00
AE:97804005107007P791.98USC2527APC00ERT800S33181000MMPRTLOG981700000 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
X IAW FAR 52.232-0022, LIMITATION OF FUNDS, UNILATERAL
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [ ] is required to sign this document and return ______ copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.
THE PURPOSE OF THIS MODIFICATION IS TO PROVIDE INCREMENTAL FUNDING,
CORRECT CONTRACTOR'S ADDRESS, AND THE OBI CONSORTIUM REQUIREMENTS ARE
ATTACHED TO THE CONTRACT CITED IN BLOCK 10A.
1. FUNDS ARE INCREASED:
BY: $925,986 FROM: $2,236,000 TO: $3,161,986
Except as provided herein, all terms and conditions of the document referenced in item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
GLORIA A. BICKLER C12
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
----------------------------------------
(Signature of person authorized to sign) BY /s/ Gloria A. Bickler 3/25/98
----------------------
(Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (as CFR 53.243
</TABLE>
<PAGE> 104
SF 30 CONTINUATION SHEET
IT IS ANTICIPATED THAT THE FUNDS ALLOTTED WILL COVER THE WORK TO BE PERFORMED
THROUGH 24 SEPTEMBER 1999.
a. FUNDS STATUS:
<TABLE>
<CAPTION>
Total Total Total
Value Obligated Unfunded
Amount Amount Amount
<S> <C> <C> <C>
Basic
CLINs 0001-0004 $3,161,986 $ 756,000 $2,405,986
P00001
CLINs 0001-0004 $3,161,986 $1,000,000 $1,405,986
P00002
CLINs 0001-0004 $3,161,986 $ 480,000 $ 926,986
P00004
CLINs 0001-0004 $3,161,986 $ 925,986 $ 000
</TABLE>
2. REMOVE PAGEs G-2 THRU G-3 AND INSERT REVISED PAGEs. CHANGES ARE
DENOTED BY VERTICAL LINE IN THE LEFT MARGIN ON EACH PAGE.
3. PARTNET PARTICIPATED IN THE OBI CONSORTIUM REQUIREMENTS IS
INCORPORATED, SEE ATTACHMENT #1.
4. ALL OTHER TERMS AND CONDITIONS REMAIN THE SAME.
RECAP:
<TABLE>
<S> <C> <C>
BASIC OBLIGATED AMOUNT $ 756,000
MOD #1 OBLIGATED AMOUNT 1,000,000
MOD #2 OBLIGATED AMOUNT 480,000
MOD #3 OBLIGATED AMOUNT 0,000
MOD #4 OBLIGATED AMOUNT 925,986
TOTAL OBLIGATED AMOUNT $3,161,986
</TABLE>
2
<PAGE> 105
SECTION G
CONTRACT ADMINISTRATION DATA
G.2 CONTRACT ADMINISTRATION DATA
Bidders/offerors office which will receive payment, supervise, and administer
resulting contract:
PartNet Inc.
423 Wakara Way
Suite 216
Salt Lake City, UT 84108
Telephone Number: (801) 581-1118/30
G.3 GOVERNMENT CONTRACT ADMINISTRATOR
Administration of this contract shall be performed by:
Directorate of Contracting
ATTN: ATZS-DKO-I
Post Office Box 748
Fort Huachuca Arizona 85613-0748
Point of Contact: Wesseleen Stookesberry
Telephone Number: (520) 538-0416
G.4 ACCOUNTING CLASSIFICATION
AA 9760400510900004P7510100000.25.160EAT600DOC00MPRTLOG9660000S33181 in the
amount of $600,000. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1997.
AB AA1761804.12UB00068939000000688922D00PNIS0800068939602597Q0000000 in the
amount $156,000. These funds are anticipated to be sufficient for performance
of CLINs 0001 through 0004 from award date through April 30, 1997.
AC 97704005107007P751.01USL.OAPCERT70D0CMMPRT60G9711S331810000000000 in the
amount of $1,000,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
AD 97704005107007P751.01USL25.16ERT7S3318100MMPRTLOG9727000000000000 in the
amount of $480,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
G-3
<PAGE> 106
SECTION G
CONTRACT ADMINISTRATION DATA
AE 97804005107007P91.98USC2527APC00ERT800S33181000MMPRTLOG981700000 In the
amount of $925,986.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through 24 September
1999.
G.5 INCREMENTAL FUNDING
Of the total price of CLINs 0001 through 0004, the sum of $3,161,986 is
available for payment and allotted to this contract. It is anticipated that
from time to time additional funds will be allotted to this contract until the
total price of the contract is fully funded. It is contemplated that funds
presently allotted to this contract will cover the work to be performed through
September 24, 1999. Accordingly, the contractor is working at his own risk if he
expends funds beyond those currently allotted to the contract at any given time.
G.6 ACQUISITION OF COMPUTER EQUIPMENT AND RELATED ITEMS
Equipment and supplies that cost $2,500 or more per item must be acquired
competitively, and will require Contracting Officer approval prior to
finalizing the purchase. The Contractor's written request shall list the
following information: The proposed Contractor's name, address and telephone
number, business size, cost of each item, shipping (if applicable), and total
cost of the order. If item(s) are not available competitively, the Contractor
shall submit a sole source justification with the request. This information can
be faxed (520-538-0415) or emailed bicklerg%[email protected]) to
the Contact Specialist at the Fort Huachuca Directorate of Contracting.
END OF SECTION G
G-4
<PAGE> 107
PartNet participation in the OBI Consortium
Introduction:
The Defense Logistics Agency (DLA) wants the solutions it adopts in electronic
commerce to be compatible with what industry adopts. Since OBI appears to be
the leading contender as far as adopting these standards, it is important that
DLA be represented and PartNet will serve that purpose. The OBI Consortium is a
group of leading players in electronic commerce including Microsoft, Netscape,
IBM, American Express, Visa, MasterCard, Oracle, Ford Motor, etc. They are
developing standards and setting the direction for doing business on the
Internet.
BACKGROUND:
PartNet has a significant amount of work done already that DLA would like to
leverage in the electronic commerce arena. If DLA/PartNet does not have a voice
in determining what the standards are, the work already completed could be
lost. The DLA Electronic Mall (EMALL) uses concepts that DLA would like to see
as a standard presentation format.
The OBI membership consortium is developing standards and setting the direction
for doing business on the Internet. PartNet's membership in the OBI consortium
will provide a voice to reflect DLA's interest and input to the emerging
standard. The risk of PartNet not being a member of the OBI consortium, is
that, potentially DLA will then have to re-do large parts of its EC solution
because of different standards. Being a member of OBI will help PartNet
leverage and shape what the industry does.
PartNet Requirement/Task:
1. PartNet, Inc. would represent DLA on the OBI Consortium.
2. PartNet, Inc. would voice the DLA interests in order to protect the DLA
investment in electronic commerce research and development.
3. PartNet, Inc. would influence the standards, direction and policies
regarding electronic commerce on behalf of DLA.
Benefit/Justification:
The benefits to be derived from PartNet's participation as a member of the OBI
consortium, on behalf of DLA, are substantial. PartNet will serve as the DLA
voice (eyes and ears) needed to articulate DLA's interests and concerns in
electronic commerce industry. The thirty-five thousand dollar ($35,000.)
membership fee for PartNet is well justified, given the influence they can
provide regarding emerging standards, direction and policies regarding
electronic
Attachment #1. DABT63-96-C-0089
P00004
<PAGE> 108
commerce on behalf of DLA.
Attachment #1. DABT63-96-C-0089
P00004
<PAGE> 109
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 3
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00008 06/23/98 HJ1500-8113-0631 MM8H2A2MPA429
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
423 Wakara, Suite 216
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
CAGE # 07SP3 DUNNs# 944317163 X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required) Mod Obligated Amount US $358,584.00
AF:97X49305CA0009P8150102566MMIPH2A2MMPH2A2MPAP4290FDI:BS03318100000 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X Mutual Agreement IAW 10 USC 2304
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [ ] is not, [X] is required to sign this document and return 0 copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.)
THE PURPOSE OF THIS MODIFICATION IS TO INCREASE THE OBLIGATED AMOUNT, TO
INCREASE THE VALUE OF THE CONTRACT, INCORPORATE REVISED STATEMENT OF WORK,
DELETE SECTION F IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION P,
DELETE SECTION G IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION G, DELETE
SECTION K IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION H, TO THE
BASIC CONTRACT CITED IN BLOCK 10A.
Except as provided herein, all terms and conditions of the documents referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Don R. Brown, Chairman BARBARA C. VANDOREN C22
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
/s/ DON R. BROWN 7/13/98 BY
---------------------------------------- ------------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE 30-105 Prescribed by GSA
FAR(48 CFR)53.243
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 3
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00005 06/23/98 HJ1500-8113-0631 MM8H2A2MPAP429
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
423 WAKARA, SUITE 216
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
CAGE# 07SP3 DUNNs# 944317163
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required) Mod Obligated Amount US $358,584.00
AF:97X49305CA0009P8150102566MMIPH2A2MMPH2A2MPAP4290FDI:BSO3318100000 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X Mutual Agreement IAW 10 USC 2304
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [ ] is not, [X] is required to sign this document and return 0 copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.
THE PURPOSE OF THIS MODIFICATION IS TO INCREASE THE OBLIGATED AMOUNT, TO
INCREASE THE VALUE OF THE CONTRACT, INCORPORATE REVISED STATEMENT OF WORK,
DELETE SECTION F IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION F,
DELETE SECTION G IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION G, DELETE
SECTION H IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION H, TO THE
BASIC CONTRACT CITED IN BLOCK 10A.
Except as provided herein, all terms and conditions of the documents referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
BARBARA C. VANDOREN C22
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
BY
---------------------------------------- ----------------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR(48 CFR)53.243
30-105
</TABLE>
<PAGE> 111
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 3
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00005 06/23/98 HJ1500-8113-0631 MM8H2A2MPAP429
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
423 WAKARA, SUITE 216
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
CAGE# 07SP3 DUNNs# 944317163
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
09/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (if required) Mod Obligated Amount US $358,584.00
AF:97X49305CA0009P8150102566MMIPK2A2MMPK2A2MPAP4290FDI:BS03318100000 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X Mutual Agreement IAW 10 USC 2304
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [ ] is not, [X] is required to sign this document and return 0 copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.)
THE PURPOSE OF THIS MODIFICATION IS TO INCREASE THE OBLIGATED AMOUNT, TO
INCREASE THE VALUE OF THE CONTRACT, INCORPORATE REVISED STATEMENT OF WORK,
DELETE SECTION F IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION F,
DELETE SECTION G IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION G, DELETE
SECTION H IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION H, TO THE
BASIC CONTRACT CITED IN BLOCK 10A.
Except as provided herein, all terms and conditions of the document referenced in item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 18A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Don R. Brown, Chairman BARBARA C. VANDOREN C22
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 19B. UNITED STATES OF AMERICA 18C. DATE SIGNED
/s/ DON R. BROWN 7/13/98 BY /s/ BARBARA C. VANDOREN 13 July 98
---------------------------------------- ----------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
30-105 FAR (48 CFR) 53.243
</TABLE>
<PAGE> 112
SF 30 CONTINUATION SHEET
1. a. THE OBLIGATED AMOUNT OF THIS CONTRACT IS INCREASED
BY: $358,584 FROM: $3,161,986 TO: $3,520,570
b. CLIN 0005 IS ADDED TO THE BASIC IN THE AMOUNT OF $358,584.
c. THE PAYMENT OFFICE FOR CLIN 0005 (ONLY) IS:
DEFENSE FINANCE AND ACCOUNTING SERVICE
P.O. BOX 182317, ATTN: DFAS-CO-ALCB
COLUMBUS, OH 43218-2317
2. THE VALUE OF THIS CONTRACT IS INCREASED
BY: $358,584 FROM: $3,161,986 TO: $3,520,570
3. INCORPORATE THE ADDENDUM TO THE STATEMENT OF WORK TITLED, "THE OPERATION
AND MAINTENANCE OF THE DEFENSE LOGISTICS AGENCY'S ELECTRONIC MALL (EMALL)
SEARCH ENGINE SOFTWARE" DATED 3/27/98 AT SECTION C.
4. REMOVE SECTION G, OF THE BASIC CONTRACT, AND INCORPORATE NEW SECTION G,
PAGES G-1 THRU G-3. CHANGES ARE ANNOTATED BY A VERTICAL LINE IN THE LEFT
MARGIN.
5. REMOVE SECTION H, OF THE BASIC CONTRACT, AND INCORPORATE NEW SECTION H,
PAGES H-1 THRU H-3. CHANGES ARE ANNOTATED BY A VERTICAL LINE IN THE LEFT
MARGIN.
6. REMOVE SECTION F, OF THE BASIC CONTRACT, AND INCORPORATE NEW SECTION F,
PAGE F-1. CHANGES ARE ANNOTATED BY A VERTICAL LINE IN THE LEFT MARGIN.
7. THE PERIOD OF PERFORMANCE IS CHANGED TO READ "AWARD THROUGH 30 SEPTEMBER
2000."
8. ALL OTHER TERMS AND CONDITIONS REMAIN THE SAME.
<TABLE>
<CAPTION>
TOTAL TOTAL TOTAL
VALUE OBLIGATED UNFUNDED
RECAP: AMOUNT AMOUNT AMOUNT
- ------ ------ --------- --------
<S> <C> <C> <C> <C>
BASIC $3,161,986 $ 756,000 $2,405,986
P00001 3,161,986 1,000,000 1,405,986
P00002 3,161,986 480,000 925,986
P00003 3,161,986 0,000 925,986
P00004 3,161,986 925,986 000,000
P00005 3,520,570 358,584 000,000 *NOTE
$3,520,570 $3,520,570 $ 000,000
</TABLE>
*NOTE: P00005 INCREASED THE VALUE OF THE CONTRACT.
2
<PAGE> 113
SUPPLIES OR SERVICES AND PRICES/COSTS
<TABLE>
<CAPTION>
ITEM DESCRIPTION QUANTITY U/I UNIT PRICE AMOUNT
- ---- ----------- -------- --- ---------- ------
<S> <C> <C> <C> <C> <C>
0005 RESEARCH AND DEVELOPMENT IAW ADDENDUM TO 1.00 JB 358584.000000 358,584.00
THE STATEMENT OF WORK DATED, 3/27/98.
ESTIMATED COST (LESS TRAVEL $322,584.
TRAVEL (NOT TO EXCEED) $ 30,000.
EQUIPMENT $ 6,000.
TOTAL OF CLIN 0005 $358,584.
</TABLE>
3
<PAGE> 114
SECTION F
DELIVERABLES AND PERFORMANCE
F.1 52.242-0015 I STOP-WORK ORDER (AUG. 1989)--ALTERNATE I (APR 1984)
(Reference 42.1305(b)(2)
F.2 52.247-0034 F.O.B. DESTINATION (NOV. 1991)
(Reference 47.303-6(c))
F.3 CONTRACT PERIOD
The estimated contract period of performance is award through 24 September 1999.
This is an R&D environment therefore, the period of performance is an estimate.
If at a later date, it becomes necessary to extend the period of performance due
to the uncertainties/unknowns in an R&D environment, the contract may be
extended, but would not exceed 10 years duration in accordance with DFARS
235.002.
END OF SECTION F
F-1
<PAGE> 115
SECTION G
CONTRACT ADMINISTRATION DATA
G.1 SUBMISSION OF PUBLIC VOUCHERS
a. All requests for contract financing payments shall be submitted
in accordance with FAR Clause 52.232-25, Prompt Payment. The SF 1034 public
voucher should identify the name, title, phone number of person responsible for
the submittal: NOTE: If prepared by a copying process, one copy shall be marked
"ORIGINAL".
b. Distribution of Public Vouchers:
(1) COST
For reimbursement of cost, the Contractor shall submit an original and four (4)
copies of Public Voucher Standard Form 1034 for purchases or services to the
Defense Contract Audit Agency (DCAA) for their certification.
Defense Contract Audit Agency
1717 S. Redwood Rd, Ste 200
Salt Lake City, UT 84104-5110
DCAA will forward the provisionally approved vouchers to the DFAS, as noted for
payment, and one copy will be mailed to the Contracting Officer listed in (2)
below.
CLINs 0001 through 0004
DFAS Operating Location Seaside
ATTN: DFAS-SS/DFA
400 Gigling Road
Seaside, CA 93955-6771
Tele: 1-800-582-8780 Facsimile 408-583-1307
CLIN 0005 (only)
Defense Finance and Accounting Service
ATTN: ATSI-DKO-I
Post Office Box 12748
Fort Huachuca, AZ 85670-2748
NOTE: CONTRACT FINANCING PAYMENTS SHALL NOT BE MADE IN ACCORDANCE WITH FAR
52.232-
DABT63-96-C-00098
P00005
G-1
<PAGE> 116
SECTION G
CONTRACT ADMINISTRATION DATA
25(b)(4). No interest will be paid under the terms and conditions of this
contract. Invoices/vouchers will be submitted monthly.
G.2 CONTRACT ADMINISTRATION DATA
Bidders/offerors office which will receive payment, supervise, and administer
resulting contract:
PartNet Inc.
423 Wakara Way
Suite 216
Salt Lake City, UT 84180
Telephone Number: (801) 581-1118/30
G.3 GOVERNMENT CONTRACT ADMINISTRATOR
Administration of this contract shall be performed by:
Directorate of Contracting
ATTN.: ATZS-DKO-I
Post Office Box 748
Fort Huachuca, Arizona 85613-0748
Point of Contact: Wesseleen Stookesberry
Telephone Number: (520) 538-0416
G.4 ACCOUNTING CLASSIFICATION
AA 9760400510900004P7510100000.25.160EAT600DOC00MPRTLOG9660000S33181 in the
amount of $600,000. These funds are anticipated to be sufficient for performance
of CLINs 0001 through 0004 from award date through April 30, 1997.
AB AA1761804.12UB00068939000000688922D00PNIS0800068939602597Q0000000 in the
amount of $156,000. These funds are anticipated to be sufficient for performance
of CLINs 0001 through 0004 from award date through April 30, 1997.
AC 97704005107007P751.01USL.OAPCERT70DOCMMPRT60G9711S331810000000000 in the
amount of $1,000,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
AD 97704005107007P751.01USL25.16ERT7S3318100MMPRTLOG9727000000000000 in the
amount of $480,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
DABT63-96-C-0089
P00005 G-2
<PAGE> 117
SECTION G
CONTRACT ADMINISTRATION DATA
AE 97804005107007P91.98USC2527APC00ERT800S33181000MMPRTLOG98170000
In the amount of $925,986.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through 24 September
1999.
AF 97X49305CAO009P8150102566MMIPH2A2MMPH2A2MPAP4290FDI:BS03318100000
In the amount of $358,584. These funds are anticipated to be sufficient for
performance of CLIN 0005 for 12 months from date of award.
G.5 INCREMENTAL FUNDING
Of the total price of CLINs 0001 through 0005, the sum of $3,520,570 is
available for payment and allotted to this contract. It is anticipated that
from time to time additional funds will be allotted to this contract until the
total price of the contract is fully funded. It is contemplated that funds
presently allotted to this contract will cover the work to be performed through
September 24, 1999. Accordingly, the contractor is working at his own risk if
he expends funds beyond those currently allotted to the contract at any given
time.
G.6 ACQUISITION OF COMPUTER EQUIPMENT AND RELATED ITEMS
Equipment and supplies that cost $2,500 or more per item must be acquired
competitively, and will require Contracting Officer approval prior to
finalizing the purchase. The Contractor's written request shall list the
following information: The proposed Contractor's name, address and telephone
number, business size, cost of each item, shipping (if applicable), and total
cost of the order. If item(s) are not available competitively, the Contractor
shall submit a sole source justification with the request. This information can
be faxed (520-538-0415) or emailed [email protected]) to the
Contact Specialist at the Fort Huachuca Directorate of Contracting.
G.7 PROVISIONAL APPROVAL OF INDIRECT RATES
The previous section H.6 is hereby re-designated Section G.7.
Section G.7 is amended to read as follows:
The parties agree that the rates charged to the contract as indirect costs for
the period beginning on the effective date of the contract and extending to 31
March 1997, shall be in accordance with the rates determined in the DCAA audit
of 31 March 1998. Additionally, the parties agree that the forward rates
applicable to the contract, beginning with the effective date of amendment
P00005, shall be in accordance with the DCAA audit of 29 June 1998.
END OF SECTION G
DABT 63-96-C-0089
P00005
G-3
<PAGE> 118
SECTION H
SPECIAL CONTRACT REQUIREMENTS
H.1 PERMITS, TAXES, LICENSES, ORDINANCES AND REGULATIONS
The Contractor shall at his own expense obtain all necessary permits,
give all notices, pay all license fees and taxes, comply with all Federal,
State, Municipal, County, and local board of Health ordinances, rules, and
regulations applicable to the business carried on under this contract and be
responsible for all applicable State Sales and Use Taxes
H.2 KEY PERSONNEL REQUIREMENTS
a. Certain skilled/experienced professional and/or technical personnel
are essential for successful contractor accomplishment of the work to be
performed under this contract. These are defined as key personnel and are those
individuals identified as follows:
b. The contractor agrees that key personnel shall not be removed from
the contract work or replaced without compliance with the following:
PROGRAM MANAGER: Steve Bowen
(1) If one or more of the key personnel for whatever reason
becomes, or is expected to become unavailable for work under this contract for a
continuous period exceeding 30 work days, or is expected to devote substantially
less effort to the work than indicated in the proposal as initially anticipated,
the contractor shall promptly notify the Contracting Officer at the address
specified in Section G, in the paragraph entitled "GOVERNMENT CONTRACT
ADMINISTRATOR". Upon concurrence of the Contracting Officer or his authorized
representative, the contractor shall promptly replace such personnel with
personnel of at least substantially equal ability and qualifications.
(2) All requests for approval of substitutions hereunder must be
in writing and provide a detailed explanation of the circumstances necessitating
the proposed substitution(s). They must contain a complete resume for the
proposed substitution. The Contracting Officer or designated representative will
evaluate such requests and promptly notify the contractor of his approval or
disapproval thereof in writing.
H.3 TRAVEL AND PER DIEM
Travel and per diem required by the Contractor in performance of this contract
shall be reimbursed in accordance with Volume II of the Joint Travel Regulation.
The Contractor agrees to use the most economical method of travel available.
Request(s) to travel will be reviewed and approved by the Contracting Officer's
Representative prior to traveling.
H-1
<PAGE> 119
H.4 PUBLICATION
Publication of results of the research project in appropriate professional
journals is encouraged as an important method of recording and reporting
scientific information. One copy of each paper planned for publication will be
submitted to the DARPA Program Manager simultaneously with its submission for
publication. Following publication, copies of published papers shall be
submitted to the DARPA Program Manager, or to other addresses in quantities as
may be directed by the Contracting Officer.
H.5 NO-COST SETTLEMENT
Subject to mutual agreement between the parties, a no-cost settlement may be
executed in lieu of a termination in accordance with FAR Part 49.101(b) due
to the immature stages and uncertainties involved in contract performance in
research and development efforts. In a no-cost settlement all costs
reimbursable, not previously paid, for the performance of the contract to the
date of the termination are allowable; however, the costs for anticipatory
profits or consequential damages resulting from the termination of this contract
(or any subcontract) accounting, legal, clerical, and other expenses necessary
for the preparation of settlement proposals and supporting data shall be
excluded from the settlement proposal submitted by the contractor. The rights
and remedies of the Government in this clause are in addition to any other
rights and remedies provided by law or under this contract.
H.6 LIMITATION OF COMPENSATION
In accordance with DFARS Part 231. "Contract Cost Principles and Procedures":
(a) Costs for individual compensation in excess of $250,000 per year are
unallowable under DoD contracts that are awarded after April 15, 1995, and are
funded by fiscal year 1995 appropriations (Public Law 103.335).
(b) Costs for bonuses or other payments, that are in excess of the
normal salary paid by the contractor to the employee and that are part of
restructuring costs associated with business combination, are unallowable under
DoD contracts funded by fiscal year 1996 appropriations (Public Law 104-61).
This limitation does not apply to severance payments or early retirement
incentive payments. (See 231.205-70(b) for the definitions of "business
combination" and restructuring costs.")
(c) In accordance with Section 8086 of the fiscal year 1996 Defense
Appropriations Act, individual compensation is capped at $200,000 per year on
contracts executed after July 1, 1996 that are funded with fiscal year 1996
appropriations. However, the cap will expire September 30, 1996, when the fiscal
year ends.
REVISED PAGE
H-2
<PAGE> 120
H.7 ACKNOWLEDGMENT OF SUPPORT AND DISCLAIMER (MAY 1995) (REFERENCE 235.071(c))
(a) The contractor shall include an acknowledgment of the Government's
support in the publication of any material based on or developed under this
contract, stated in the following terms: his material is based upon work
supported by the Defense Advanced Research Projects Agency (DARPA) under
Contract No. DABT63-96-C-0089.
(b) All material, except scientific articles or papers published in
scientific journals must, in addition to any notices or disclaimers by the
Contractor, also contain the following disclaimer: Any opinions, findings and
conclusions or recommendations expressed in this material are those of the
author(s) and do not necessarily reflect the views of DARPA.
END OF SECTION H
H-3
<PAGE> 121
STATEMENT OF WORK
FOR
THE OPERATION AND MAINTENANCE OF THE DEFENSE LOGISTICS AGENCY'S
(DLA)
ELECTRONIC MALL (EMALL) SEARCH ENGINE SOFTWARE
1. Overview
PartNET (the contractor) shall supply computer operation-and sustaining software
engineering services in support of the Defense Logistics Agency (DLA). Support
of the DLA EMall includes the extensions to its Information Technology
products, (e.g., ITEC chaired by the Navy). The purpose of this Statement of
Work (SOW) is to maintain and enhance the current EMALL system search engine
software. These services will include providing 24 hour, 7 days per week
operation of software engineering support for their application (EMALL)
software.
2. Required Tasks
PartNET (the contractor) shall supply computer operation and sustaining
engineering services in support of the Defense Logistics Agency (DLA). Support
of the DLA EMall includes the extensions to its Information Technology products
(e.g. ITEC) chaired by the Navy. The Contractor will perform the following casks
for DLA for the duration of this effort:
2.1 PartNET EMALL Search Engine Software
The contractor will maintain in working condition the PartNET
EMALL search engine software (the server) which consists of the
VDI, the NM, and the web server plug-in to the NIB. At a
minimum, the software will run on Sun SPARC-based (TM) servers
running the Solaris 2.5 (TM) operating system (the operating
system). The Software or portions of the software may also run
on the Intel-based servers running the Windows NT (TM) Server
operating system., version 4.0 or later. Contractor will convert
the Software to run on the latest version of the Operating
System. Contractor will not maintain prior versions of the
Software beyond six months after converting to the latest
Operating System.
2.1.1 Implement Changes from the E-Mall Configuration
Management Board (2.6.1) To the extent that the
resources under this effort allow, the Contractor will
implement change requests approved by the DLA ECR
process. Contractor will coordinate work with the DLA
EMall Program Manager to specify and prioritize the ECR
changes.
Page 1
<PAGE> 122
Contractor will maintain a list of the approved ECRs in
process, their estimated completion dates, and status.
2.1.2 DEVELOP SCRIPTS (PROGRAMS) TO SUPPORT WEB SERVER, NIB
AND VDI
(a) The contractor will write scripts (programs)
that will re-start the Web server, NM, and
Government hosted VDI's either automatically
upon machine boot-up or via manual start.
(b) The contractor will write Scripts (programs)
that will send an alert via e-mail when a Web
server, NM, or Government hosted VDI process is
down.
(c) The contractor Will write Scripts (programs)
that can be run by operations contractor to
determine which VDIs (Government and vendor
owned) are successfully connected to the NIB.
2.2 INFORMATION TECHNOLOGY
2.2.1 The Contractor will also provide the following support
for the Information Technology functions (e.g., ITEC)
currently residing on the EMALL.
2.2.2 Maintain in working condition the PartNET EMALL search
engine software (the server) which consists of the VDI,
the NIB, and the web server plug-in to the NEB.
2.2.3 Develop required web pages and applications to support
the expanding and evolving DLA EMALL requirements to
scale up to a potential DoD EMALL operation.
2.3 Optional TASK: DATA MAINTENANCE SERVICES
2.3.1 At DLA's option, the Contractor will provide data
maintenance services for the purpose of enhancing the
appearance and serviceability of data that comes from
the DLA supply Centers. This work includes helping to
specify the Item Name Codes (INCs) and Master
Requirement Codes (MRCs) that should be displayed as
well as specifying the format for each field that is
shown. Contractor will. also provide assistance and
consultation in loading the data into the Government
hosted parts database so it may be presented to the
user. This includes advice as to speeding the product
search in the case that the field is searchable.
2.4 SOFTWARE OPERATION
Contractor shall have a qualified system administrator to
support the operating configuration of the production PartNET
EMall software.
2.5 TRANSITION SUPPORT
Page 2
<PAGE> 123
PartNet will support the software on the EMall production NIB
server. PartNet will install the EMall production NIB server
and verify proper operation at the Contractor's location and
oversee transfer and installation to the EMall Contractor for
production operational responsibility.
2.6 EMALL SOFTWARE
2.6.1 CONFIGURATION MANAGEMENT
2.6.1.1 DLA will establish and operate a Configuration
Control Board (CCB) that will review and approve
changes to the EMall software. The EMall CCB
will develop a list of desired changes and their
associated levels of importance.
2.6.1.2 The Contractor's procedure for managing changes
to the DLA-approved baseline for the EMall
system software, NIB and VDI structures, and
application software installed on the primary
EMall servers is:
2.6.1.2.1 Receive, evaluate and classify the
difficulty of implementing the ECRs and
provide a report to the program manager.
2.6.1.2.2 The EMall Program Manager will establish
the priority of the desired changes.
2.6.1.2.3 The EMall Program Manager and Contractor
will agree on the changes to be
implemented within available resources
and in which scheduled software release
they will be included. Additional
resources may be provided by the Emall
Program Manager to supplement the
resources available to implement
unfunded ECRs.
2.6.1.2.4 As ECRs (EMall Change Requests) are
completed, notify DLA to close out the
ECR.
2.6.2 EMERGENCY MAINTENANCE
Contractor shall implement "hotline" and "warmline" procedures
to respond to anomalies (i.e., "bugs" or other problems) found
in the operational PartNET (EMall) software. The contractor
shall respond to anomalies identified as "hotline" by DLA's
EMall Program Manager within one hour during Contractor's normal
business hours (8 AM - 5 PM MT), and two hours during
non-business hours. Those anomalies identified as "warmline"
will be responded to within 6 hours. All others will be handled
on an ECR-like enhancement.
Page 3
<PAGE> 124
NOTE: Response to an anomaly does not always mean that the
anomaly is corrected. Some problems will take more than 24 or 72
hours to fix. Temporary work-around(s) or disabling a function
may be the only immediate solution. In these cases, the
Contractor shall coordinate the alternatives with, and obtain
approval of, DLA's EMall Program Manager.
2.6.3 ENHANCEMENTS FROM THE R&D PROGRAM MANAGER
Enhancements arising from the DLA's Logistics R&D Program will
be handled through the CCB process described in section 2.6.1.
2.6.4 DOCUMENTATION
2.6.4.1 The Contractor shall prepare the following
documentation:
(a) Guides to assist vendors and DLA to install and
operate PartNET software such as the VDI and
NIB.
(b) Specification of hardware and software
requirements.
(c) A record of test profiles and associated test
results for software changes or enhancements
will be maintained by the contractor (e.g., in a
software test document folder).
2.7 SECURITY ACCREDITATION
The contractor shall, as required, participate in DLA sponsored
security certification efforts as needed to:
(a) Implement security controls in the EMall system as
required by DLA to obtain operational accreditation.
(b) Support security tests and evaluations of the EMall
system.
2.8 EMALL ENGINEERING SOFTWARE SUPPORT
(a) The Contractor shall provide monitoring utilities as
described in section 2.1.2.c that allow the operating
contractor to evaluate and report the software
statistics.
(b) Provide technical briefings to DLA and the user
community as requested within the proposed resources.
2.9A DEVELOPMENT COORDINATION
2.9A.1 The contractors, (PartNet and the Alpine) will
coordinate on joint requirements/tasks and work together
on related issues as required. They will jointly address
and resolve all tasks requiring their mutual planning,
development and resolution to complete those tasks. The
contractor shall coordinate design changes to the system
with Raytheon (Alpine) and DLIS (DLA) where there are
dependencies that effect those entities. Likewise,
testing and actual implementation of these changes
Page 4
<PAGE> 125
will be coordinated with both entities to ensure that
system integrity is maintained in accordance with the
requirements contained herein of this SOW.
2.9A.2 The contractor will submit a monthly performance report
to Raytheon (Alpine) for consolidation into a single
report that covers the entire EMALL status and activity
for the reporting period. The conditions stated herein
will also apply to the optional task stated below, if it
is deemed or accepted as part of this SOW.
2.9B PROGRAM MANAGEMENT
The Contractor shall:
(a) Manage the work of subcontractors as necessary to
support the EMall hardware and software.
(b) Prepare, present, and deliver project management and
technical reports and reviews, as required.
(c) Prepare and submit monthly project status and technical
reports. Where there are project dependencies with work
being done by PartNet, the PartNet tasks will be
reflected in the project schedules provided by ALPINE,
and
(d) Prepare and submit weekly EMall Activity reports, as
determined by DLA.
2.9C TRANSITION TO DLA.
The Contractor shall support the transfer of software from a
development server environment to a production server
environment. This will include the transition from the
Contractor's facility to a DLA-designated facility where the
production operational EMALL server will be maintained.
3. DELIVERABLES
3.1 Contractor will deliver monthly reports to DLA showing the
status of its efforts and the costs incurred to date. The report
will include the New Features List and comments as to their
status.
Page 5
<PAGE> 126
4. PERFORMANCE GOALS
<TABLE>
<CAPTION>
PERFORMANCE FACTOR EXPECTED STANDARD (GOAL)
- ------------------------------------------------------------ -------------------------------------
<S> <C>
Period of operation 24 hours per day. 7 days per week
Downtime for scheduled maintenance Less than 2 hours per month
Downtime due to installation problems; e.g. air, power, etc. Less than 12 hour per year (see Note)
On-call response time during Contractor's prime shift 1 hour
On-call response time during Contractor's off shifts 2 hours
</TABLE>
5. PROPRIETARY DATA RIGHTS
Contractor shall immediately notify DLA of the intent to use proprietary data
and obtain authorization to proceed. Any Contractor proprietary information
provided under this project may be used free of restriction by the United States
Government, but would be fully restricted from commercial use without the
express permission of the Contractor.
6. RELEASE OF LIABILITY
The Contractor shall not be held liable for any damages not caused by gross
negligence on its part that result from operation and maintenance of the E-Mall
servers, NIB, VDI and application software.
Page 6
<PAGE> 127
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 3
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00007 01/21/99 HJ1500-8364-0615 LSPRTLOG9904/ISO
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC 9B. DATED (SEE ITEM 11)
423 WAKARA WAY
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATE (if required) Mod Obligated Amount US $1,800,000.00
AG:USL97199904005107007P791.98002516000000LSPRTLOG990400ERT900S33181 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [ ] is not, [X] is required to sign this document and return 1 copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible).
THE PURPOSE OF THIS MODIFICATION IS TO INCREASE THE OBLIGATED AMOUNT, ADD A
IN, TO INCREASE THE VALUE OF THE CONTRACT, INCORPORATE REVISED STATEMENT
OF WORK, DELETE SECTION F IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION
F, DELETE PAGES G-1 AND G-3 AND REPLACE WITH REVISED PAGES G-1 AND G-3,
TO THE BASIC CONTRACT CITED IN BLOCK 10A ABOVE.
1. a. The obligated amount of this contract is increased:
BY: $1,800,000 FROM: $3,520,570 TO: $5,320,570
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Don R. Brown, President GLORIA A. BICKLER C12
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
/s/ DON R. BROWN 1/25/99 BY /s/ GLORIA A. BICKLER 1-25-99
---------------------------------------- -----------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
30-105
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 3
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00007 01/21/99 HJ1500-8364-0615 LSPRTLOG9904/ISO
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC 9B. DATED (SEE ITEM 11)
423 WAKARA WAY
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATE (if required) Mod Obligated Amount US $1,800,000.00
AG:USL97199904005107007P791.98002516000000LSPRTLOG990400ERT900S33181 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [ ] is not, [X] is required to sign this document and return 1 copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible).
THE PURPOSE OF THIS MODIFICATION IS TO INCREASE THE OBLIGATED AMOUNT, ADD A
IN, TO INCREASE THE VALUE OF THE CONTRACT, INCORPORATE REVISED STATEMENT
OF WORK, DELETE SECTION F IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION
F, DELETE PAGES G-1 AND G-3 AND REPLACE WITH REVISED PAGES G-1 AND G-3,
TO THE BASIC CONTRACT CITED IN BLOCK 10A ABOVE.
1. a. The obligated amount of this contract is increased:
BY: $1,800,000 FROM: $3,520,570 TO: $5,320,570
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
GLORIA A. BICKLER C12
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
BY
---------------------------------------- ----------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
30-105
</TABLE>
<PAGE> 129
SF 30 CONTINUATION SHEET
b. CLIN 0006 is added to the Basic in the amount of $1,800,000.
c. The payment office for CLIN 0006 is:
Defense Finance and Accounting Service
P.O. Box 183317, ATTN: DFAS-CO-ALCB
COLUMBUS, OH 43218-2317
2. The value of this contract is increased:
By: $1,800,000 FROM: $3,520,570 TO: $5,320,570
3. Incorporate the Addendum to Statement of Work "PartNET/DARPA
Contract DABT63-96-C-0089" at Section C.
4. Remove Section G-1 and G-3, of the Basic Contract, and replace with revised
pages G-1 and G-3. Changes are annotated by a vertical line in the left
margin.
5. Remove Section F, of the Basic Contract, and replace with revised page F-1.
Changes are annotated by a vertical line in the left margin.
6. Due to a technical error, P00006 was voided. P00006 will not be issued.
7. All other terms and conditions remain the same.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
RECAP: TOTAL TOTAL TOTAL
VALUE OBLIGATED UNFUNDED
AMOUNT AMOUNT AMOUNT
BASIC $3,161,986 $ 756,000 $2,405,986
P00001 3,161,986 1,000,000 1,405,986
P00002 3,161,986 480,000 925,986
P00003 3,161,986 0,000 925,986
P00004 3,161,986 925,986 000,000
P00005 3,520,570 358,584 000,000 * NOTE
P00006 void void void
P00007 5,320,570 1,800,000 0,000 * NOTE
TOTAL $5,320,570 $5,320,570 $ 0,000
</TABLE>
* NOTE: P00005 AND P00007 INCREASED THE VALUE OF THE CONTRACT.
2
<PAGE> 130
SUPPLIES OR SERVICES AND PRICES/COSTS
<TABLE>
<CAPTION>
ITEM DESCRIPTION QUANTITY U/I UNIT PRICE AMOUNT
- ----- ----------------------------------------- -------- --- -------------- ------------
<S> <C> <C> <C> <C> <C>
0001 R&D Award 1.00 JB 3161986.000000 3,161,986.00
PR Number: HJ1500-6129-0798
0002 RESEARCH AND DEVELOPMENT IAW ADDENDUM TO 1.00 JB 358584.000000 358,584.00
THE STATEMENT OF WORK DATED, 3/27/98.
ESTIMATED COST (LESS TRAVEL $322,584.
TRAVEL (NOT TO EXCEED) $ 30,000.
EQUIPMENT $ 6,000.
TOTAL OF CLIN 0005 $358,584.
PR Number: MOD&&&-9806-0094
0006 RESEARCH AND DEVELOPMENT IAW ADDENDUM TO 1.00 lt 1800000.000000 1,800,000.00
THE STATEMENT OF WORK ATTACHED.
ESTIMATED COST $1,733,899
EQUIPMENT $ 66,101
TOTAL OF CLIN 0007 $1,800,000
PR Number: HJ1500-8364-0615
</TABLE>
<PAGE> 131
SECTION F
DELIVERABLES AND PERFORMANCE
F.1 52.242-0015 1 STOP-WORK ORDER (AUG. 1989)--ALTERNATE I (APR 1984)
(Reference 42.1305(b)(2)
F.2 52.247-0034 F. 0. B. DESTINATION (NOV. 1991)
(Reference 47.303-6(c))
F.3 CONTRACT PERIOD
The estimated contract period of performance is award through 25 January 2000.
This is an R&D environment therefore, the period of performance is an estimate,.
If at a later date, it becomes necessary to extend the period of performance due
to the uncertainties/unknowns in an R&D environment, the, contract may be
extended, but would not exceed 10 years duration in accordance with DFARS
235.002.
END OF SECTION F
DABT63-96-C-0089
P00007
F-1
<PAGE> 132
SECTION G
CONTRACT ADMINISTRATION DATA
G.1 SUBMISSION OF PUBLIC VOUCHERS
a. All requests for contract financing payments shall be submitted in
accordance with FAR Clause 52.232-25, Prompt Payment. The SF 1034 public
voucher should identify the name, title, phone number of person responsible for
the submittal: NOTE: If prepared by a copying process, one copy shall be marked
"ORIGINAL".
b. Distribution of Public Vouchers:
(1) COST
For reimbursement of cost, the Contractor shall submit an original and four (4)
copies of Public Voucher Standard Form 1034 for purchases or services to the
Defense Contract Audit Agency (DCAA) for their certification.
Defense Contract Audit Agency
1717 S. Redwood Rd, Ste 200
Salt Lake City, UT 84104-51 10
DCAA will forward the provisionally approved vouchers to the DFAS, as noted for
payment, and one copy will be mailed to the Contracting Officer listed in (2)
below .
CLINs 0001 through 0004
DFAS Operating Location Seaside
ATTN: DFAS-SS/DFA
400 Gigling Road
Seaside, CA 93955-6771
Tele: l-800-582-8780 Facsimile 408-583-1307
CLIN 0005 and CLIN 0006
Defense Finance and Accounting Service
P.O. Box 182317, ATTN: DFAS-CO-ALCB
Columbus, OH 43218-2317
(2) FEE
For reimbursement of fee, the Contractor shall submit an original and four (4)
copies of Public Voucher the Contracting Officer at the address listed below:
Directorate of Contracting
ATTN: ATSI-DKO-I
Post Office Box 12748
Fort Huachuca, AZ 85670-2748
NOTE. CONTRACT FINANCING PAYMENTS SHALL NOT BE MADE IN ACCORDANCE WITH FAR
52.232-
DABT63-96-C-0089
P00007
G-1
<PAGE> 133
SECTION G
CONTRACT ADMINISTRATION DATA
AE 97804005107007P91.98USC2527APC00ERT800S33181000MMPRTLOG98170000
In the amount of $925,986.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through 24 September
1999.
AF 97X49305CAO009P8150102566MMIPH2A2MMPH2A2MPAP4290FDI:BS03318100000
In the amount of $358,584. These funds are anticipated to be sufficient for
performance of CLIN 0005 for 12 months from date of award.
AG USL97199904005107007P791.98002516000000LSPRTLOG990400ERT900S33181
In the amount of $1,800,000. These funds are anticipated to be sufficient for
performance of CLIN 0006 for 12 months from date of award.
G.5 INCREMENTAL FUNDING
Of the total price of CLINs 0001 through 0006, the sum of $5,320,570 is
available for payment and allotted to this contract. It is anticipated that from
time to time additional funds will be allotted to this contract until the total
price of the contract is fully funded. It is contemplated that funds presently
allotted to this contract will cover the work to be performed through January
25, 2000. Accordingly, the contractor is working at his own risk if he expends
funds beyond those currently allotted to the contract at any given time.
G.6 ACQUISITION OF COMPUTER EQUIPMENT AND RELATED ITEMS
Equipment and supplies that cost $2,500 or more per item must be acquired
competitively, and will require Contracting Officer approval prior to finalizing
the purchase. The Contractor's written request shall list the following
information: The proposed Contractor's name, address and telephone number,
business size, cost of each item, shipping (if applicable), and total cost of
the order. If item(s) are not available competitively, the Contractor shall
submit a sole source justification with the request. This information can be
faxed (520-538-0415) or emailed [email protected]) to the
Contact Specialist at the Fort Huachuca Directorate of Contracting.
G.7 PROVISIONAL APPROVAL OF INDIRECT RATES
The previous section H.6 is hereby re-designated Section G.7.
Section G.7 is amended to read as follows:
The parties agree that the rates charged to the contract as indirect costs for
the period beginning on the effective date of the contract and extending to 31
March 1997, shall be in accordance with the rates determined in the DCAA audit
of 31 March 1998. Additionally, the parties agree that the forward rates
applicable to the contract, beginning with the effective date of amendment
P00005, shall be in accordance with the DCAA audit of 29 June 1998.
G-3
DABT63-96-C-0089
P00007
<PAGE> 134
ADDENDUM TO STATEMENT OF WORK
FOR
PARTNET / DARPA CONTRACT DABT63-96-C-0089
OVERVIEW
PartNET (Contractor) has been working on R&D tasks related to distributed
electronic cataloging over the Internet as part of its original contract with
DARPA. As the contract has proceeded, much has been learned about current and
evolving technology, several new initiatives have been prioritized and scheduled
by the DLA, and previous assumptions have changed that require adjustments made
in the original Statement of Work. In light of the expanding scope and desired
software functionality, it has become necessary to expand the number and the
scope of the tasks that are to be performed by PartNET.
TASKS
The tasks below represent additional work that is to be performed by
PartNET.
TASK 13: XML INTERFACE TO PARTNET
Develop capabilities to interface with XML catalog servers and
integrate them into a PartNET electronic catalog network. The work may
include migration of part characteristic information and order status
from an XML server into a PartNET electronic catalog. Additional
capabilities may include incorporating part order information out to an
XML server from a PartNET system. Further work may include defining or
integrating industry standard XML part taxonomies and part class
attributes into the PartNET taxonomy in order to support cross-vendor
characteristic searches.
TASK 14: BULK REQUISITIONING
Develop capabilities to enable a PartNET electronic catalog to
interface with non-interactive processes in bulk requisitioning. The
non-interactive interface will allow third-party processes to access
part information in a PartNET distributed catalog for procurement
evaluation.
TASK 15: NETWORK INTERFACE BROKER (NIB) ADMINISTRATORS UTILITY
In order to efficiently manage and administer a PartNET electronic
catalog, PartNET will develop an Administrators Utility for the Network
Interface Broker (NIB). The effort will include the development of user
documentation for the software. The concept will be similar to the
purpose behind the development of the Vendor Kit referenced in Task 12.
The Administrators Utility will allow a systems administrator to set-up
and manage a PartNET catalog. Functionality may include maintenance of
a parts taxonomy or hierarchy, part class attributes mapping, part
class and vendor mapping, vendor connectivity maintenance, user profile
and group security administration, shopping cart management NIB cache
management, and order status tracking.
TASK 16: ENHANCED BROWSER-SIDE FUNCTIONALITY
Enhance browser client functionality by developing capabilities for
more active browser logic for record sorting, filtering, and general
presentation of data. This task may also include enhanced security
implementation by enabling a browser-side digital certificate.
TASK 17: eBROKER AND ePORT ORDERING
The ePort currently represents a secure link to a vendor's product
catalog database. This task will be to exploit that secure link into
the vendor to a further extent by also sending orders to the vendor and
placing the order directly into his database. The order will also be
recorded in an order database at the eBroker. This will allow both the
vendor and the government to do reporting functions on data that is
currently not being captured. It also will allow real-time order status
from the vendor's order database.
DABT63-96-C-0089
P00007
<PAGE> 135
TASK 18: PURCHASING APPROVAL WORKFLOW
Attendant with many purchasing systems is the need for an official
purchasing approval process. The current implementation does not
support any formal approval structure for ordering. This task will
focus on developing a mechanism to facilitate a Web-based purchasing
approval flow.
The tasks below are existing SOW tasks, and should be modified
according to new mandates from the DLA.
<TABLE>
<CAPTION>
SOW TASK MODIFICATION
-------- ------------
<S> <C>
Task 1 & 4 These two tasks call for recruitment of military sites
and installation of client software at these military
sites. PartNET is now a Web-based cataloging engine,
so client-side software is no longer necessary nor
supported. The pervasive accessibility of the DLA
E-Mall via the Web also obviates the need for
recruitment of military sites for installation of
PartNET software.
</TABLE>
DELIVERABLES
PartNET will provide monthly status reports to DLA program management regarding
task scheduling and task status. Financial status will also be reported stating
actual monthly billing, cumulative spending from the beginning of the contract,
and forecast spending for future months.
PartNET will continue its quarterly task and financial reporting to DARPA as
currently required by the contract.
PROPRIETARY RIGHTS
PartNET shall immediately notify DLA of the intent to use proprietary data and
obtain authorization to proceed. Any PartNET software provided under this
contract may be operated free of restriction by the United States Government for
its own internal use but would be fully restricted from commercial use without
the express written permission of PartNET.
RELEASE OF LIABILITY
The Contractor shall not be held liable for any damages not caused by gross
negligence on its part that result from operation and maintenance of the E-Mall
servers, NIB, VDI and application software.
BUDGET
DABT63-96-C-0089
P00007
<PAGE> 136
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 3
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00007 01/21/99 HJ1500-8364-0615 LSPRTLOG9904/ISO
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC 9B. DATED (SEE ITEM 11)
423 WAKARA WAY
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATE (if required) Mod Obligated Amount US $1,800,000.00
AG:USL97199904005107007P791.98002516000000LSPRTLOG990400ERT900S33181 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [ ] is not, [X] is required to sign this document and return 1 copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible).
THE PURPOSE OF THIS MODIFICATION IS TO INCREASE THE OBLIGATED AMOUNT, ADD A
IN, TO INCREASE THE VALUE OF THE CONTRACT, INCORPORATE REVISED STATEMENT
OF WORK, DELETE SECTION F IN ITS ENTIRETY AND REPLACE WITH REVISED SECTION
F, DELETE PAGES G-1 AND G-3 AND REPLACE WITH REVISED PAGES G-1 AND G-3,
TO THE BASIC CONTRACT CITED IN BLOCK 10A ABOVE.
1. a. The obligated amount of this contract is increased:
BY: $1,800,000 FROM: $3,520,570 TO: $5,320,570
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Don R. Brown, President GLORIA A. BICKLER C12
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
/s/ DON R. BROWN 1/25/99 BY /s/ GLORIA A. BICKLER 1-25-99
---------------------------------------- -----------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
30-105
</TABLE>
<PAGE> 137
CERTIFICATE OF CURRENT COST OR
PRICING DATA
This is to certify that, to the best of my knowledge and belief, the cost
or pricing data (as defined in section 15.801 of the Federal Acquisition
Regulation (FAR) and required under FAR subsection 15.804-2) submitted either
actually or by specific identification in writing, to the contracting officer
or to the contracting officer's representative in support of DABT63-C-0089 are
accurate, complete, and current as of 1-20-99. This certification includes the
cost or pricing data supporting any advance agreements and forward pricing rate
agreements between the offeror and the Government that are part of the proposal.
FIRM PartNet, Inc.
----------------------------------
SIGNATURE /s/ DON R. BROWN
-----------------------------
NAME Don R. Brown
----------------------------------
TITLE CEO
---------------------------------
DATE OF EXECUTION 1/22/99
---------------------
<PAGE> 138
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00008 03/22/99
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-9416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC 9B. DATED (SEE ITEM 11)
423 WAKARA WAY
SALT LAKE CITY UT 84108 ------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATE (if required)
AD:97704005107007P751.01USL25.16ERT783318100MMPRTLOG9727000000000000 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
X appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [ ] is required to sign this document and return ___ copies to the issuing office
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.
THE PURPOSE OF THIS MODIFICATION IS TO CHANGE PAYING STATION FOR CLIN 0001
THRU CLIN 0006 TO DPAS-CO-ALCB, COLUMBUS, OH. DELETE SECTION Q IN ITS
ENTIRETY AND REPLACE WITH REVISED SECTION G TO THE BASIC CONTRACT CITED IN
BLOCK 10A ABOVE.
1. a. Remove Section G of the Basic Contract, and incorporate new Section G.
Changes are annotated by a vertical line in the left margin.
Except as provided herein, all terms and conditions of the documents referenced in item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
GLORIA A. BICKLER C12
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
BY /s/ GLORIA A. BICKLER 3-25-99
---------------------------------------- ----------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
30-105
</TABLE>
<PAGE> 139
SF 30 CONTINUATION SHEET
2. All other terms and conditions remain the same.
RECAP: TOTAL TOTAL TOTAL
VALUE OBLIGATED UNFUNDED
AMOUNT AMOUNT AMOUNT
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BASIC $3,161,986 $ 756,000 $2,405,986
P00001 3,161,986 1,000,000 1,405,986
P00002 3,161,986 480,000 925,986
P00003 3,161,986 0,000 925,986
P00004 3,161,986 925,986 000,000
P00005 3,520,570 358,584 000,000 * NOTE
P00006 void void void
P00007 5,320,570 1,800,000 000,000 * NOTE
P00008 5,320,570 0,000 0,000
TOTAL $5,320,000 $5,320,000 $ 0,000
</TABLE>
* NOTE: P00005 AND P00007 INCREASED THE VALUE OF THE CONTRACT.
DABT63-96-C-0089 Mod. P00009 2
<PAGE> 140
SECTION G
CONTRACT ADMINISTRATION DATA
G.1 SUBMISSION OF PUBLIC VOUCHERS
a. All requests for contract financing payments shall be submitted
in accordance with FAR Clause 52.232-25, Prompt Payment. The SF 1034 public
voucher should identify the name, title, phone number of person responsible for
the submittal: NOTE: If prepared by a copying process, one copy shall be marked
"ORIGINAL".
b. Distribution of public Vouchers:
(1) COST
For reimbursement of cost, the Contractor shall submit an original and four (4)
copies of Public Voucher Standard Form 1034 for purchases or services to the
Defense Contract Audit Agency (DCAA) for their certification.
Defense Contract Audit Agency
1717 S. Redwood Rd, Ste 200
Salt Lake City, UT 84104-5110
DCAA will forward the provisionally approved vouchers to the DFAS, as noted for
payment, and one copy will be mailed to the Contracting Officer listed in (2)
below.
CLINs 0001 through 0006
Defense Finance and Accounting Service, COLUMBUS C&R
P.O. Box 369016, ATTN: DFAS-CO-ALCB
Columbus, OH 43236-9016
DEFENSE FINANCE AND ACCOUNTING SERVICE, COLUMBUS, OHIO
ATTN: DFAS-C0-LCOAA
Bldg. 11 Sec 5
Columbus, OH 43236-9016
Lee Hayes 614 693-1105
(2) FEE
For reimbursement of fee, the Contractor shall submit an original and four (4)
copies of Public Voucher the Contracting Officer at the address listed below:
Directorate of Contracting
ATTN: ATSI-DKO-I
Post Office Box 12748
Fort Huachuca, AZ 85670-2748
NOTE: CONTRACT FINANCING PAYMENTS SHALL NOT BE MADE IN ACCORDANCE WITH FAR
52.232-25(b)(4). NO INTEREST WILL BE PAID UNDER THE TERMS AND CONDITIONS OF
THIS CONTRACT. INVOICES/VOUCHERS WILL BE SUBMITTED MONTHLY.
G.2 CONTRACT ADMINISTRATION DATA
Bidders/offerors office which will receive payment, supervise, and administer
resulting
DABT63-96-C-0089
P00010
G-1
<PAGE> 141
SECTION G
CONTRACT ADMINISTRATION DATA
contract:
PartNet Inc.
423 Wakara Way
Suite 216
Salt Lake City, UT 84180
Telephone Number: (801) 581-1118/30
G.3 GOVERNMENT CONTRACT ADMINISTRATOR
Administration of this contract shall be performed by:
Directorate of Contracting
ATTN.: ATZS-DKO-I
Post Office Box 748
Fort Huachuca, Arizona 85613-0748
Point of Contact: Wesseleen Stookesberry
Telephone Number: (520) 538-0416
G.4 ACCOUNTING CLASSIFICATION
AA 9760400510900004P7510100000.25.160EAT600DOC00MPRTLOG9660000S33181
in the amount of $600,000. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1997.
AB AA1761804.12UB00068939000000688922D00PNIS0800068939602597Q0000000
in the amount $156,000. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 00004 from award date through April 30, 1997.
AC 97704005107007P751.01USL.OAPCERT70D0CMMPRT60G9711S331810000000000 in the
amount of $1,000,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
AD 97704005107007P751.01USL25.16ERT7S3318100MMPRTLOG9727000000000000
in the amount of $480,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
AE 97804005107007P91.98USC2527APC00ERT800S33181000MMPRTLOG98170000 In the
amount of $925,986.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through 24 September
1999.
AF 97X49305CAO009P8150102566MMIPH2A2MMPH2A2MPAP4290FDI:BS03318100000 In the
amount of $358,584. These funds are anticipated to be sufficient for
performance of
G-2
<PAGE> 142
SECTION G
CONTRACT ADMINISTRATION DATA
CLIN 0005 for 12 months from date of award.
AG USL97199904005107007P791.98002516000000LSPRTLOG990400ERT900S33181 In the
amount of $1,800,000. These funds are anticipated to be sufficient for
performance of CLIN 0006 for 12 months from date of award.
G.5 INCREMENTAL FUNDING
Of the total price of CLINs 0001 through 0006, the sum of $5,320,570 is
available for payment and allotted to this contract. It is anticipated that from
time to time additional funds will be allotted to this contract until the total
price of the contract is fully funded. It is contemplated that funds presently
allotted to this contract will cover the work to be performed through January
25, 2000. Accordingly, the contractor is working at his own risk if he expends
funds beyond those currently allotted to the contract at any given time.
G.6 ACQUISITION OF COMPUTER EQUIPMENT AND RELATED ITEMS
Equipment and supplies that cost $2,500 or more per item must be acquired
competitively, and will require Contracting Officer approval prior to finalizing
the purchase. The Contractor's written request shall list the following
information: The proposed Contractor's name, address and telephone number,
business size, cost of each item, shipping (if applicable), and total cost of
the order. If item(s) are not available competitively, the Contractor shall
submit a sole source justification with the request. This information can be
faxed (520-538-0415) or emailed [email protected]) to the
Contract Specialist at the Fort Huachuca Directorate of Contracting.
G.7 PROVISIONAL APPROVAL OF INDIRECT RATES
The previous section H.6 is hereby re-designed Section G.7.
Section G.7 is amended to read as follows:
The parties agree that the rates charged to the contract as indirect costs for
the period beginning on the effective date of the contract and extending to 31
March 1997, shall be in accordance with the rates determined in the DCAA audit
of 31 March 1998. Additionally, the parties agree that the forward rates
applicable to the contract, beginning with the effective date of amendment
P00005, shall be in accordance with the DCAA audit of June 29, 1998.
END OF SECTION G
G-3
<PAGE> 143
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00009 03/30/99
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
615 ARAPEEN DRIVE
SUITE 204 ------------------------------------------
SALT LAKE CITY UT 84108 10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (if required)
AD:97704005107007P751.D1USL25.16ERT783318100MMPRTLOG9727000000000000 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
X appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [ ] is required to sign this document and return ___ copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.
THE PURPOSE OF THIS MODIFICATION IS TO CHANGE THE ADDRESS TO THE
BASIC CONTRACT CITED IN BLOCK 10A ABOVE.
1. The address is changed:
FROM: PartNet Inc.
423 Wakara Way
Salt Lake City, UT 84108
Except as provided herein, all terms and conditions of the documents referenced in item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 18A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
BARBARA C. VANDOREN C22
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 19B. UNITED STATES OF AMERICA 18C. DATE SIGNED
BY /s/ BARBARA C. VANDOREN 31 MAR. 99
---------------------------------------- -----------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
30-105 FAR (48 CFR) 53.243
</TABLE>
<PAGE> 144
SF 30 CONTINUATION SHEET
TO: PartNet Inc.
615 Arapeen Drive
Suite 204
Salt Lake City, UT 84108
2. All other terms and conditions remain the same.
VALUE OBLIGATED UNFUNDED
AMOUNT AMOUNT AMOUNT
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BASIC $3,161,986 $ 756,000 $2,405,986
P00001 3,161,986 1,000,000 1,405,986
P00002 3,161,986 480,000 925,986
P00003 3,161,986 0,000 925,986
P00004 3,161,986 925,986 000,000
P00005 3,520,570 358,584 000,000 * NOTE
P00006 void void void
P00007 5,320,000 1,800,000 000,000 * NOTE
P00008 5,320,570 0,000 000,000
P00009 admin 0,000 000,000 ** NOTE
TOTAL $5,320,000 $5,320,000 $ 0,000
</TABLE>
* NOTE: P00005 AND P00006 INCREASED THE VALUE OF THE CONTRACT.
** NOTE: ADDRESS CHANGE.
DABT63-96-C-0089 Mod. P00009 2
<PAGE> 145
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 2
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00019 07/13/99 MJ1900-9090-0859 LSPRT-LOG-99-26
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
615 ARAPEEN DRIVE
SUITE 204 ------------------------------------------
SALT LAKE CITY UT 84108 10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (if required) Mod Obligated Amount US $450,000.00
AN:9719990400 5107 007 P791 .98 USL 25.27LSPRTLOG9926 APC34T9 S33181 EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [X] is not, [ ] is required to sign this document and return ___ copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.
THE PURPOSE OF THIS MODIFICATION IS TO INCREASE THE OBLIGATED
AMOUNT, INCREASE THE VALUE OF THE CONTRACT, ADD A CLIN, INCORPORATE THE
ADDENDUM TO THE STATEMENT OF WORK, DELETE SECTION F IN ITS ENTIRETY AND
REPLACE WITH REVISED SECTION F, DELETE SECTION G IN ITS ENTIRETY AND
REPLACE WITH REVISED PAGES G-1 THROUGH G-3 TO THE BASIC CONTRACT CITED IN
BLOCK 10A ABOVE.
1. a. The obligated amount of this contract is increased:
Except as provided herein, all terms and conditions of the documents referenced in item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 18A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
GLORIA A. BICKLER C12
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 19B. UNITED STATES OF AMERICA 18C. DATE SIGNED
BY /s/ GLORIA A. BICKLER 7/28/99
---------------------------------------- -----------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE 30-105 Prescribed by GSA
FAR (48 CFR) 53.243
</TABLE>
<PAGE> 146
SF 30 CONTINUATION SHEET
BY: $450,000 FROM: $5,320,570 TO: $5,770,570
b. CLIN 0007 is being added to the Basic in the amount of $450,000.
2. The value of this contract is increased:
BY: $450,000 FROM: $5,320,570 TO: $5,770,570
3. Incorporate the Addendum to Statement of Work, "PartNET Purchase of
WebMethods and Phaos COTS" DABT63-96-C-0089 at Section C.
4. Remove Section F, of the Basic Contract and replace with revised page
F-1. Changes are annotated by a vertical line in the left margin.
5. Remove Section G, pages G-1 through G-3 and replace with revised pages
G-1 through G-3. Changes are annotated by a vertical line in the left
margin.
6. All other terms and conditions remain the same.
<TABLE>
<CAPTION>
TOTAL TOTAL TOTAL
VALUE OBLIGATED UNFUNDED
RRCAP: AMOUNT AMOUNT AMOUNT
<S> <C> <C> <C>
BASIC $3,161,986 $ 756,000 $2,405,986
MOD #1 3,161,986 1,000,000 1,405,986
MOD #2 3,161,986 480,000 925,986
MOD #3 3,161,986 0,000 925,986
MOD #4 3,161,986 925,986 0,000
MOD #5 3,520,570 358,584 0,000 *NOTE
MOD #6 void void void
MOD #7 5,320,570 1,800,000 0,000 *NOTE
MOD #8 5,320,570 0,000 0,000
MOD #9 admin 0,000 0,000 **NOTE
MOD #10 $5,770,570 450,000 0,000 **NOTE
TOTAL $5,770,570 $5,770,570 0,000
</TABLE>
* NOTE: P00005 AND P00007 AND P00010 INCREASED THE VALUE OF THE CONTRACT.
** NOTE: P00009 ADDRESS CHANGE.
7. Period of Performance remains 25 January 2001.
2
<PAGE> 147
SECTION F
DELIVERABLES AND PERFORMANCE
F.1 52.242-0015 I STOP-WORK ORDER (AUG. 1989) -- ALTERNATE I (APR 1984)
(Reference 42.1305(b)(2))
F.2 52.247-0034 F.O.B. DESTINATION (NOV. 1991)
(Reference 47.303-6(c))
F.3 CONTRACT PERIOD
The estimated contract period of performance is award through 25 January 2001.
This is an R&D environment therefore, the period of performance is an estimate.
If at a later date, it becomes necessary to extend the period of performance
due to the uncertainties/unknowns in an R&D environment, the contract may be
extended, but would not exceed 10 years duration in accordance with DFARS
235.002.
END OF SECTION F
F-1
<PAGE> 148
SECTION G
CONTRACT ADMINISTRATION DATA
G.1 SUBMISSION OF PUBLIC VOUCHERS
a. All requests for contract financing payments shall be submitted
in accordance with FAR Clause 52.232-25, Prompt Payment. The SF 1034 public
voucher should identify the name, title, phone number of person responsible for
the submittal: NOTE: If prepared by a copying process, one copy shall be marked
"ORIGINAL".
b. Distribution of public Vouchers:
(1) COST
For reimbursement of cost, the Contractor shall submit an original and four (4)
copies of Public Voucher Standard Form 1034 for purchases or services to the
Defense Contract Audit Agency (DCAA) for their certification.
Defense Contract Audit Agency
1717 S. Redwood Rd, Ste 200
Salt Lake City, UT 84104-5110
DCAA will forward the provisionally approved vouchers to the DFAS office (as
noted below) for all CLINS noted for payment, and one copy will be mailed to the
Contracting Officer listed in (2) below.
CLINs 0001 through 0007
Defense Finance and Accounting Service
P.O. Box 182317, ATTN: DFAS-CO-ALCB
Columbus, OH 43218-2317
(2) FEE
For reimbursement of fee, the Contractor shall submit an original and four (4)
copies of Public Voucher the Contracting Officer at the address listed below:
Directorate of Contracting
ATTN: ATSI-DKO-I
Post Office Box 12748
Fort Huachuca, AZ 85670-2748
NOTE: CONTRACT FINANCING PAYMENTS SHALL NOT BE MADE IN ACCORDANCE WITH FAR
52.232-25(b)(4). NO INTEREST WILL BE PAID UNDER THE TERMS AND CONDITIONS OF
THIS CONTRACT. INVOICES/VOUCHERS WILL BE SUBMITTED MONTHLY.
G.2 CONTRACT ADMINISTRATION DATA
Bidders/offerors office which will receive payment, supervise, and administer
resulting
DABT63-96-C-0089
P00010
G-1
<PAGE> 149
SECTION G
CONTRACT ADMINISTRATION DATA
contract:
PartNet Inc.
423 Wakara Way
Suite 216
Salt Lake City, UT 84180
Telephone Number: (801) 581-1118/30
G.3 GOVERNMENT CONTRACT ADMINISTRATOR
Administration of this contract shall be performed by:
Directorate of Contracting
ATTN.: ATZS-DKO-I
Post Office Box 748
Fort Huachuca Arizona 85613-0748
Point of Contact: Wesseleen Stookesberry
Telephone Number: (520) 538-0416
G.4 ACCOUNTING CLASSIFICATION
AA 9760400510900004P7510100000.25.160EAT600DOC00MPRTLOG9660000S33181 in the
amount of $600,000. These funds are anticipated to be sufficient for performance
of CLINs 0001 through 0004 from award date through April 30, 1997.
AB AA1761804.12UB00068939000000688922D00PNIS0800068939602597Q0000000 in the
amount of $156,000. These funds are anticipated to be sufficient for performance
of CLINs 0001 through 0004 from award date through April 30, 1997.
AC 97704005107007P751.01USL.OAPCERT70D0CMMPRT60G9711S331810000000000 in the
amount of $1,000,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
AD 97704005107007P751.01USL25.16ERT7S3318100MMPRTLOG9727000000000000 in the
amount of $480,000.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through April 30, 1998.
AE 97804005107007P91.98USC2527APC00ERT800S33181000MMPRTLOG98170000 In the
amount of $925,986.00. These funds are anticipated to be sufficient for
performance of CLINs 0001 through 0004 from award date through 24 September
1999.
AF 97X49305CAO009P8150102566MMIPH2A2MMPH2A2MPAP4290FDI:BS03318100000 In the
amount of $358,584. These funds are anticipated to be sufficient for performance
of
DABT63-96-C-0089
P00010
G-2
<PAGE> 150
SECTION G
CONTRACT ADMINISTRATION DATA
CLIN 0005 for 12 months from date of award.
AG USL97199904005107007P791.98002516000000LSPRTLOG9940400ERT900S33181
In the amount of $1,800,000. These funds are anticipated to be sufficient for
performance of CLIN 0006 for 12 months from date of award.
AH 9719990400 5107 007 P791.98 USL 25.27LSPRTLOG9926 APC 34T9 S33181
In the amount of $450,000. These funds are anticipated to be sufficient for
performance of CLIN 0007 through 25 January 2001
G.5 INCREMENTAL FUNDING
Of the total price of CLINs 0001 through 0007, the sum of $5,770,570 is
available for payment and allotted to this contract. It is anticipated that
from time to time additional funds will be allotted to this contract until the
total price of the contract is fully funded. It is contemplated that funds
presently allotted to this contract will cover the work to be performed through
January 25, 2001. Accordingly, the contractor is working at his own risk if he
expends funds beyond those currently allotted to the contract at any given time.
G.6 ACQUISITION OF COMPUTER EQUIPMENT AND RELATED ITEMS
Equipment and supplies that cost $2,500 or more per item must be acquired
competitively, and will require Contracting Officer approval prior to
finalizing the purchase. The Contractor's written request shall list the
following information: The proposed Contractor's name, address and telephone
number, business size, cost of each item, shipping (if applicable), and total
cost of the order. If item(s) are not available competitively, the Contractor
shall submit a sole source justification with the request. This information can
be faxed (520-538-0415) or emailed [email protected]) to the
Contact Specialist at the Fort Huachuca Director of Contracting.
G.7 PROVISIONAL APPROVAL OF INDIRECT RATES
The previous section H.6 is hereby re-designated Section G.7.
Section G.7 is amended to read as follows:
The parties agree that the rates charged to the contract as indirect costs for
the period beginning on the effective date of the contract and extending to 31
March 1997, shall be in accordance with the rates determined in the DCAA audit
of 31 March 1998. Additionally, the parties agree that the forward rates
applicable to the contract, beginning with the effective date of amendment
P00005, shall be in accordance with the DCAA audit of 29 June 1998.
END OF SECTION G
DABT63-96-C-0089
P00010 G-3
<PAGE> 151
<TABLE>
<CAPTION>
================================================================================================================================
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
U 1 3
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQ. NO. 5. PROJECT NO. (if applicable)
P00019 11/17/99 RF1600-6122-0788 DLA
- ---------------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY CODE
(if other than Item 6)
DIRECTORATE OF CONTRACTING
ATTN: ATZS-DKO-I
POST OFFICE BOX 12748
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416
- ---------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR Vendor ID: 00059424 (X) 9A. AMENDMENT OF SOLICITATION NO.
(No., street, county, State and ZIP Code)
------------------------------------------
PARTNET INC. 9B. DATED (SEE ITEM 11)
615 ARAPEEN DRIVE
SUITE 204 ------------------------------------------
SALT LAKE CITY UT 84108 10A. MODIFICATION OF CONTRACT/ORDER NO.
X DABT63-96-C-0089
------------------------------------------
10B. DATED (SEE ITEM 13)
9/11/96
- ---------------------------------------------------------------------------------
CODE 07SP3 FACILITY CODE
- ---------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers [ ] is
extended, [ ] is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the
solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or
telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT
THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by
virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter,
provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening
hour and date specified.
- ---------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (if required) Mod Obligated Amount US $0.00
ACRN: XX
THIS MODIFICATION IS NOT AN OBLIGATION OF FUNDS. EFT: T
- ---------------------------------------------------------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS,
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
- ---------------------------------------------------------------------------------------------------------------------------------
(X) A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT
ORDER NO. IN ITEM 10A.
- ---------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
- ---------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X IAW MUTUAL AGREEMENT
- ---------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- ---------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [ ] is not, [X] is required to sign this document and return ___ copies to the issuing office.
- ---------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter
where feasible.
The purpose of this modification is to realign funding for contract Line
Item numbers 0005 and 0006 and re-state the entire CLIN structure on the
contract cited in Block 10A above. this realignment does not alter the
dollar amount of the order.
a. CLIN 0001 amount is increased by $43,570.27, from: $356,583.40, to:
$401,154.87.
Except as provided herein, all terms and conditions of the documents referenced in item 9A or 10A, as heretofore changed, remains
unchanged and in full force and effect.
- ---------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 18A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Steve Bowen, Vice President BARBARA C. VANDOREN C22
- ---------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 19B. UNITED STATES OF AMERICA 18C. DATE SIGNED
Steve Bowen Dec. 2, 1999 BY /s/ BARBARA C. VANDOREN 2 Dec 99
---------------------------------------- -----------------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
=================================================================================================================================
NSN 7540-01-152-8070 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
FAR (48 CFR) 53.243
30-105
</TABLE>
<PAGE> 152
SF 30 CONTINUATION SHEET
b. CLIN 0006 amount is decreased by: <$42,570.27>, from: $1,800,000.00, to:
$1,757,429.73.
c. Total dollar amount of order remains unchanged at: $5,770,570.00.
d. Period of performance remains 25 January 2001.
e. All other terms and conditions remain unchanged.
DABT63-96-C-0089 Mod. P00013 2
<PAGE> 153
SUPPLIES OR SERVICES AND PRICES/COSTS
<TABLE>
<CAPTION>
ITEM DESCRIPTION QUANTITY U/I UNIT PRICE AMOUNT
- ---- ----------- -------- --- ---------- ------
<S> <C> <C> <C> <C> <C>
0001 THE CONTRACTOR SHALL PROVIDE ALL THE 1.00 JB 3161986.000000 3,161,986.00
NECESSARY PERSONNEL AND FACILITIES TO
PERFORM RESEARCH AND DEVELOPMENT ON AN
INFORMATION INFRASTRUCTURE FOR DEFENSE
LOGISTICS, IN ACCORDANCE WITH SECTION C
OF THE CONTRACT, AND STATEMENT OF WORK
DATED AUGUST 9, 1996. THE CONTRACTOR'S
TECHNICAL PROPOSAL IS INCORPORATED BY
REFERENCE.
PR Number: HJ1500-6129-0798
0002 TRAVEL (INCLUDES G&A) 1.00 LT NSP NSP
003 EQUIPMENT AND SUPPLIES 1.00 LO NSP NSP
(INCLUDES G&A)
0004 CONTRACT DATA REQUIREMENTS LIST 1.00 LT NSP NSP
IDENTIFIED AT EXHIBIT A
CDRL A001 $NSP
CDRL A002 $NSP
CDRL A003 $NSP
0005 RESEARCH AND DEVELOPMENT IAW ADDENDUM TO 1.00 LT 400154.270000 401,154.27
THE STATEMENT OF WORK DATED, 3/27/98.
0006 RESEARCH AND DEVELOPMENT IAW ADDENDUM TO 1.00 lt 1757429.730000 1,757,429.73
THE STATEMENT OF WORK ATTACHED.
0007 RESEARCH AND DEVELOPMENT IAW ADDENDUM TO 1.00 LT 450000.000000 450,000.00
THE STATEMENT OF WORK ATTACHED.
</TABLE>
3
<PAGE> 154
PARTNET INTEGRATION OF WEBMETHODS, REMEDY, AND
PHAOS COTS SOFTWARE
STATEMENT OF WORK
OBJECTIVE OF WEBMETHODS COTS
Investigate the feasibility of constructing XML wrappers for accessing data from
on-line web sources that may be integrated as suppliers. This would be
accomplished without any software being installed at the supplier's site and
would access and use the native capabilities of the supplier's on-line catalog.
TASKS
1. Integrate the webMethods software with PartNET eCommerce software so that
commercial web catalog sites can be accessed using a PartNET eBroker
system.
2. Modify the PartNET administration tools so that a PartNET eBroker
administrator can make the configurations necessary into order to build an
XML wrapper and access a commercial web catalog site.
3. Build wrappers that will be used via webMethods and PartNET software to
integrate selected commercial vendor web catalog sites into the DoD EMALL.
DELIVERABLES
1. Report on feasibility testing of integrating typical commercial and
government web sites into the DoD EMALL.
OBJECTIVE OF PHAOS COTS
This software would enable encryption between our various software modules,
namely the eBroker and ePort. This software would partially replace the existing
RSA software that PartNET currently uses. This software allows for the insertion
of a variety of encryption technologies in to the PartNET eBroker and ePort
modules.
DELIVERABLES
1. An ePort that eliminates the per copy license fee that the government
must pay for each ePort installed.
OBJECTIVE OF REMEDY PURCHASING APPROVAL WORKFLOW COTS
Investigate the feasibility of implementing purchasing approval workflow using
the Remedy Purchasing@Work application. The purpose is to implement a pilot
program at a
<PAGE> 155
government site to determine the feasibility of integrating purchasing approval
workflow into PartNET.
TASKS
1. Implement a pilot web based e-mall site at a government organization where
PartNET catalog and ordering capabilities are integrated with the Remedy
Purchasing@Work application.
2. Bring up commercial and/or government depots on the pilot e-mall site as
suppliers.
<PAGE> 156
Proposed Log R D Budget Page 1 10/22/99
<TABLE>
<CAPTION>
DIRECT COSTS ANNUAL RATE HOURLY RATE HOURS/MONTH MONTHLY COST TOTAL COST
------------ ----------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Database Engineer $ 65,000 $31 60 $ 1,875 11,250
Software Engineer $ 85,000 $41 103 $ 4,200 25,197
Project Manager $105,000 $50 20 $ 1,010 6,058
-------------------------
TOTAL LABOR COSTS $ 7,084 42,505
Fringe @20.4% $ 1,445 8,671 20.40%
Overhead @028.16% $ 2,402 14,411 28.16%
-------------------------
SUBTOTAL 10,931 65,587
Travel $ 2,000 12,000
-------------------------
SUBTOTAL $ 12,931 $ 77,587
Software
WebMethods 12,500 75,000
Remedy 16,667 100,000
Phaos, 2,500 15,000
-------------------------
SUBTOTAL $ 44,598 $267,587
Hardware 1,667 $ 10,000
-------------------------
SUBTOTAL $ 46,265 $277,587
Sub-Contract
Technical Writer $50 100 $ 5,000 30,000
-------------------------
SUBTOTAL $ 51,265 $307,587
G&A @33% $ 16,917 101,504 33.00%
-------------------------
SUBTOTAL $ 68,182 $409,091
Fee @ 10% $ 6,818 40,909
=========================
TOTAL BUDGET $ 75,000 450,000
</TABLE>
Prepared by Don R. Brown 10/22/99 Page I
<PAGE> 157
Statement of Work Addendum PartNET
================================================================================
Addendum to Statement of Work
for
PartNET/DARPA Contract DABT63-96-C-0089
1 INTRODUCTION
PartNET (Contractor) is under contract with the DoD to perform Research and
Development related to distributed electronic cataloging over the Internet as
part of its original contract with DARPA. This addendum seeks to continue work
that is deemed to be in the course of the evolution of mainstream electronic
commerce and should help to position DoD e-commerce activities in this field
for the next several years.
1.1 OVERVIEW
This Statement of Work (SOW) is a pilot for integration of PartNET's World
Wide Web Catalog Software (eBroker and ePort) with Parametric Technology
Corporation's (PTC) InPart World Wide Web Software for the DoD Electronic
Mall (EMall) Search Engine Software.
The objective is a proof-of-concept of the two companies' product
offerings to enhance the functionality of the EMall. The combined product
offers the power of searching parts using PTC's Computer Aided Design
(CAD) catalog with PartNET's distributed, real-time shopping cart and
ordering submission to DLA MOMS.
2 TASKS
The tasks below represent additional work that is to be performed by PartNET.
2.1 DEVELOP SOFTWARE
Interfaces Links from the InPart catalog will be provided to allow
Between a part found in InPart to be added to a PartNET shopping
Partnet & cart. Software will be developed as needed to facilitate
Inpart the integration.
PartNET will oversee and manage research, development
and the integration of its software with the PTC
software for this pilot and ensure the pilot is
consistent with the DoD EMall architecture.
- --------------------------------------------------------------------------------
09/01/99 CONFIDENTIAL, COPYRIGHT 1999, PARTNET, INC.
<PAGE> 158
Statement of Work Addendum PartNET
================================================================================
2.2 RECRUIT VENDORS
Set-up vendors At least one vendor will be set-up with a PartNET ePort
with ePorts for the pilot.
2.3 OPERATE PILOT
Pilot PartNET will configure and maintain its software and
Configuration will make best efforts to ensure performance and
and availability of the integrated software during the pilot
Maintenance period.
2.4 EVALUATE PILOT
Evaluation PartNET will provide an evaluation report at the end of
the pilot period that will include recommendations for
or against using the technology developed in the EMall
production environment.
- --------------------------------------------------------------------------------
09/01/99 CONFIDENTIAL, COPYRIGHT 1999, PARTNET, INC. 2
<PAGE> 159
Statement of Work Addendum PartNET
================================================================================
3 DELIVERABLES
3.1 PTC INPART CATALOG SUBSCRIPTION
3 site licenses for PTC InPart Catalog Subscriptions will be provided for the
pilot period (90 days).
3.2 VENDOR EPORTS
PartNET ePorts will be installed and maintained for the pilot period.
3.3 FINANCIAL REPORTS
As applicable, the PTC PartNET pilot will be included in ParTNET's quarterly
task and financial reporting to DARPA as currently required by the contract.
3.4 FINAL Evaluation REPORT
At the end of the pilot, a final report will be delivered stating the findings
of the pilot and recommendations.
4 PERIOD OF PERFORMANCE
The estimated contract period of performance for this SOW is 1 September 1999
through 31 March 2000. This is an R&D environment, therefore the period of
performance is an estimate. If at a later date it becomes necessary to extend
the period of performance due to the uncertainties/unknowns in an R&D
environment, the contract may be extended, but would not exceed 10 years
duration in accordance with DFARS 235.002.
5 PROPRIETARY RIGHTS
PartNET shall immediately notify DLA of the intent to use proprietary data and
obtain authorization to proceed. Any PartNET software provided under this
contract may be operated free of restriction by the United States Government for
its own internal use but would be fully restricted from commercial use without
the express written permission of PartNET.
6 RELEASE OF LIABILITY
The Contractor shall not be held liable for any damages not caused by gross
negligence on its part that result from this pilot.
- --------------------------------------------------------------------------------
09/01/99 CONFIDENTIAL, COPYRIGHT 1999, PARTNET, INC. 3
<PAGE> 160
Statement of Work Addendum PartNET
================================================================================
APPENDIX A: PARTNET BUDGET
<TABLE>
<CAPTION>
BUDGET
DIRECT COSTS ANNUAL RATE HOURLY RATE HOURS/MONTH ANNUAL COST
<S> <C> <C> <C> <C> <C>
Sub Contract 99,800
-------
SUBTOTAL 99,800
G&A @ 33.06% 32,994 33.06%
-------
SUBTOTAL 132,794
Fee @ 10% 13,279
=======
TOTAL 146,073
</TABLE>
- --------------------------------------------------------------------------------
09/01/99 CONFIDENTIAL, COPYRIGHT 1999, PARTNET, INC. 4
<PAGE> 161
Statement of Work Addendum PartNET
================================================================================
APPENDIX B: PTC QUOTATION
[PARAMETRIC LOGO] QUOTATION
8000 TOWERS CRESCENT DRIVE, SUITE 1350
VIENNA, VA 22182
Sales Person: Tom Bacigalupo CUSTOMER: PartNET (Attn: Don Brown)
Phone: 703-760-7810 615 Arapeen Drive, Suite 204
Fax: 703-760-7899 Salt Lake City, Utah 84108
Quote Date: 31-Aug-99 (o) 801-581-1118
Quote Expiration: 25-Sep-99 (f) 801-581-1785
<TABLE>
<CAPTION>
QTY. PRODUCT DESCRIPTION UNIT-LIST EXTENDED PRICE
- ---- ------------------- --------- --------------
<S> <C> <C> <C>
SOFTWARE
3 InPart Mechanical Part $ 11,100.00 $ 33,300.00
Catalogue Subscript
3 SITE 90 DAY PILOT
SOFTWARE SUBTOTAL $ 33,300.00
</TABLE>
<TABLE>
<CAPTION>
QTY. PRODUCT DESCRIPTION UNIT-LIST EXTENDED PRICE
- ---- ------------------- --------- --------------
<S> <C> <C> <C>
TRAINING & CONSULTING
18 One Day visit per site every two weeks $1,750.00 $ 31,500.00
TRAINING AND
SUPPORT SUBTOTAL $ 31,500.00
</TABLE>
<TABLE>
<CAPTION>
QTY. PRODUCT DESCRIPTION UNIT-LIST EXTENDED PRICE
- ---- ------------------- --------- --------------
<S> <C> <C> <C>
INTEGRATION/DEVELOPMENT
200 Development Hours/Integration $ 175.00 $ 35,000.00
DEVELOPMENT SUBTOTAL $ 35,000.00
TOTAL $ 99,800.00
</TABLE>
- --------------------------------------------------------------------------------
09/01/99 Confidential, Copyright 1999, PartNET, Inc. 5
<PAGE> 162
PartNet
<TABLE>
<CAPTION>
BUDGET
DIRECT COSTS ANNUAL RATE HOURLY RATE HOURS/MONTH ANNUAL COST
- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sub Contract 99,800
-------
subtotal 99,800
G&A @ 33.06% 32,994 33.06%
-------
subtotal 132,794
Fee @ 10% 13,279
total =======
146,073
</TABLE>
Page 1
<PAGE> 163
[PARAMETRIC LOGO] QUOTATION [PARAMETRIC LOGO]
8000 TOWERS CRESCENT DRIVE, SUITE 1350
VIENNA, VA 22182
Sales Person: Tom Bacigalupo CUSTOMER: PartNET (Attn: Don Brown)
Phone: 703-760-7810 615 Arapeen Drive, Suite 204
Fax: 703-760-7899 Salt Lake City, Utah 84108
Quote Date: 31-Aug-99 (o) 801-581-1118
Quote Expiration: 25-Sep-99 (f) 801-581-1785
<TABLE>
<CAPTION>
QTY. PRODUCT DESCRIPTION UNIT-LIST EXTENDED PRICE
- ---- ------------------- --------- --------------
<S> <C> <C> <C>
SOFTWARE
3 InPart Mechanical Part Catalogue Subscription $11,100,00 $ 33,300.00
3 SITE 90 DAY PILOT
SOFTWARE SUBTOTAL $ 33,300.00
</TABLE>
<TABLE>
<CAPTION>
QTY. PRODUCT DESCRIPTION UNIT-LIST EXTENDED PRICE
- ---- ------------------- --------- --------------
<S> <C> <C> <C>
TRAINING & CONSULTING
18 One Day visit per site every two weeks $ 1,750.00 $ 31,500.00
TRAINING AND SUPPORT SUBTOTAL $ 31,500.00
</TABLE>
<TABLE>
<CAPTION>
QTY. PRODUCT DESCRIPTION UNIT-LIST EXTENDED PRICE
- ---- ------------------- --------- --------------
<S> <C> <C> <C>
INTEGRATION/DEVELOPMENT
200 Development Hours/Integration $ 175.00 $ 35,000.00
DEVELOPMENT SUBTOTAL $ 35,000.00
TOTAL $ 99,800.00
</TABLE>
<PAGE> 164
SIMS-DEAL/PARTNET COLLABORATION AND RESEARCH EFFORT
EXPANSION
STATEMENT OF WORK
BACKGROUND
The SIMS/Ariadne system supports convenient, integrated query access to
multiple, heterogeneous information sources, including databases and Web sites.
The system, as used in the SIMS-Deal effort, contains several components:
- - A system for formally describing the application domain about which data
is stored in information sources: databases and Web sites.
- - A methodology and language for formally describing the structure content
and access methods of different sources.
- - A system that can be used, for a given information source, to construct
programs that will translate an SQL query into a procedure for retrieval
from that information source, and will execute that retrieval procedure.
- - A system that can be used, for a given query for information from the
application domain, to construct a plan for satisfying that query by
means of a series of partial queries to individual sources.
Component 3 is referred to below as a facility for wrapper construction. For
example, a wrapper for a Web site will accept SQL queries against an agreed upon
view of the data contained in the site, and will translate such queries into
appropriate HTML page retrieval and site searches. Essentially, this enables one
to treat the wrapped Web site as a relational database, against which one may
pose queries in real-time.
OBJECTIVE
The goal of this effort is to produce a system for rapidly constructing
mediators/wrappers for semi-structured Web-based catalogs and apply it to Web
sites of interest to PartNET's DLA-sponsored effort. The proposed work will
continue and extend the research and development being performed on the
SIMS-Deal portion of USC/ISI's Dealmaker contract currently and over the past
two years. In addition, the proposed work will refine and deliver a version of
the SIMS/Ariadne system that can be used by PartNET to incorporate new sites
into the DoD EMALL.
Our objectives are as follows:
- - Extend the Ariadne wrapping system to increase the variety of sources
that can be supported;
- - Develop the capability to automatically evolve wrappers as changes to
the syntactic format of a site are detected;
- - Continue SIMS-Deal's integration with PartNET;
- - Provide needed enhancements, documentation, bug fixes, and support to
allow the system to be used by PartNET to add new sites to the DoD
EMALL.
<PAGE> 165
SCOPE & TASKS
The amount being requested is approximately $310K. A precise budget will be
supplied separately.
Specifically, the scope of the effort for the proposed tasks effort is as
follows:
1. Enhance the existing SIMS/Ariadne system with support for Web sources of
interest to PartNET, including sources that use frames, complex table
structures, and result pages with multiple formats.
2. Add the ability to automatically identify changes to Web-based vendor
sites that are part of EMALL, and the ability to automatically evolve
wrappers for those sites to the extent possible without programmer
intervention.
3. Integrate on-line GSA (if needed) and VA catalog into the DoD EMALL
through PartNET.
4. Continue work on improving the SIMS/Ariadne system, documentation, bug
fixes, and support in collaboration with PartNET for the DoD EMALL.
5. Upgrade wrapper-building software and technology to a level that will
enable external parties (e.g., PartNET) to develop wrappers
independently. Provide training in wrapper building to PartNET
engineers.
6. Integrate multiple on-line catalogs into the DoD EMALL through PartNET;
Vendor sites of interest will be chosen in consultation with PartNET and
DLA, within the scope of the funded effort.
PERIOD OF PERFORMANCE
April 1, 1999 to September 30, 1999.
DELIVERABLES
1 Enhanced system for third-party construction of efficient wrappers for
accessing data from on-line Web sources.
2. System for automatically detecting changes to wrapped Web sites and
modifying the wrappers for them.
3. Wrappers for GSA and commercial vendor Web sites selected in
consultation with PartNET and DLA.
4. SIMS/Ariadne software with currently existing wrapping capabilities.
5. Enhanced system for third-party construction of efficient wrappers for
accessing data from on-line Web sources.
6. Support to PartNET, as needed, in construction of wrappers for multiple
vendor Web sites.
7. A monthly status report regarding the progress of the tasks. Elements of
the status report should include:
- financial costs for the month
- total financial costs to date
- percent completed to date for each deliverable 1 through 5
<PAGE> 166
Proposed Log R D Budget Page 1
<TABLE>
<CAPTION>
PARTNET BUDGET FOR ISI SIMS COLLABORATION
DIRECT COSTS ANNUAL RATE HOURLY RATE HOURS/MONTH MONTHLY COST TOTAL COST
- ------------ ----------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Database Engineer $65,000 $31 16 $ 500 3,000
Software Engineer $85,000 $41 32 $ 1,308 7,846
Project Manager $105,000 $50 24 $ 1,212 7,269
------- --------
TOTAL LABOR COSTS $ 3,019 18,115
Fringe @20.4% $ 616 3,696 20.40%
Overhead @28.16% $ 850 5,101 28.16%
------- --------
SUBTOTAL $ 3,635 21,811
Travel $ 1,500 9,000
Equipment $0 0
------- --------
SUBTOTAL $ 5,135 30,811
$52,954 317,722
Sub-Contract
------- --------
SUBTOTAL $58,089 348,533
G&A @33% $19,169 115,016 33.00%
------- --------
SUBTOTAL $77,258 $463,549
Fee @10% $ 7,726 46,355
======= ========
TOTAL BUDGET $84,984 509,903
</TABLE>
Page 1
<PAGE> 167
SUB-CONTRACT
ISI Proposal No. 1999-ISI-037
Web Deal: SIMS-Deal Web Extension
Project Leader: Yigal Arens
Period of Performance: 4/1/99 - 9/30/99
<TABLE>
<S> <C> <C>
Salaries & Wages 111,562
Fringe Benefits 31,844
Materials & Supplies 4,033
Software 10,825
Travel 23,427
ISI Common costs 26,208
IPC Costs 13,685
-------
SUBTOTAL(MTDC) 221,584
Facilities & Admin 53,623
Equipment 11,938
Devision Admin costs 16,772
ISI Facilities 13,805
-------
SUBTOTAL 317,722
</TABLE>
MINOR DIFFERENCES MAY EXIST DUE TO ROUNDING
Proposed Effort: 3.05
<TABLE>
<S> <C>
Y. Arens, Director, Div 45%
C. Knoblock, Proj Leade 10%
H. Oh, Programmer, Anal 100%
A. Philpot, Programmer, 50%
M. Muslea, Programmer A 100%
</TABLE>
Page 1
<PAGE> 168
Proposed Log R D Budget Page 1
TRAVEL
Training/Consultation; Salt Lake City, UT
2 Person(s); 2 day(s); 6 trip(s)
<TABLE>
<S> <C> <C> <C>
Airfare: 652
Per Diem @ 175/day: 350
Taxi to/from LAX 35
-----
Basic Cost 1 Person 1,037
Times 2 People 2,074
Car Rental @ 44/day: 88
-----
Base Cost per Trip 2,162
100% of cost proposed: 13,296
DLA demo/consultation; Washington, DC
2 person(s); 2 day(s); 2 trip(s)
Airfare: 1,942
Per Diem @ 175/day: 350
Conference Fee 100
Taxi to/from LAX 35
-----
Basic Cost 1 Person 2,427
Times 2 People 4,854
Car Rental @ 44/day: 88
-----
Base Cost per Trip 4,942
100% of cost proposed: 10,131
Total Travel 23,427
</TABLE>
Page 1
<PAGE> 169
Proposed Log R D Budget Page 1
SOFTWARE
<TABLE>
<CAPTION>
DATE DESCRIPTION QTY PRICE SUBTOTAL TAX TOTAL
- ---- ----------- --- ----- -------- --- -----
<S> <C> <C> <C> <C> <C> <C>
Apr-99 ODBC Server Develo 1 8,000 8,000 660 8,660
Apr-99 ODBC annual suppt 1 2,000 2,000 165 2,165
------
Software Total 10,825
</TABLE>
EQUIPMENT
<TABLE>
<CAPTION>
DATE DESCRIPTION QTY PRICE SUBTOTAL TAX TOTAL
- ---- ----------- --- ----- -------- --- -----
<S> <C> <C> <C> <C> <C> <C>
Apr-99 Windows NT Server 2 5514 11,028 910 11,938
------
11,938
</TABLE>
Page 1
<PAGE> 170
ADDENDUM TO STATEMENT OF WORK
FOR
PARTNET / DARPA CONTRACT DABT63-96-C-0089
September 1999
INTRODUCTION - DISTRIBUTED COMMERCE INFRASTRUCTURE
PartNET has been involved in the development of the "Distributed Commerce
Infrastructure" (DCI. The DCI is a set of processes that facilitate secure
communication between the Department of Defense and its suppliers. Currently,
there are four applications built on the DCI in various stages of development
and deployment: the DOD Emall, Finished Goods Inventory, On Demand
Manufacturing, and a new project being done with a commercial CAD supplier
(Figure 1). In all instances, this secure realtime communications mechanism has
proven to be a key enabler of eCommerce applications. Although the DCI exists in
a stable form today, further R&D effort will provide the DLA with an extensible
electronic commerce framework it will need to compete over the next decade. The
two directions this R&D should take are improved application interfaces and
improved scaleability.
[DIAGRAM]
Figure 1. The DCI is a platform for DLA's electronic
commerce applications.
APPLICATION INTERFACES
The Defense Logistics Agency services many customers with many needs. Its
audience includes maintenance shops, engineering design groups and provisioning
operations. The background of individuals in those organizations varies from
clerical to highly technical. It is doubtful that any single application could
be built that would service all of its needs.
However, there is one capability that virtually all of DLA's customers need.
That is the ability to INTERACT with the holders of inventory in the commercial
or public sector. This interaction may take the form of searching for items to
buy, checking stock, availability and prices, communicating purchase orders,
checking order status, settling accounts to name a few. The challenge is to
deliver the capability of interacting in an agile, scaleable manner and
delivering that capability into a form useable by a DLA's broad customer base.
The way to do this is to construct a solid platform that can be easily
interfaced.
Some applications have been built but further work is needed. The Emall is an
example of an interactive module for shopping internal and external suppliers.
FGI is a batch process used in bulk requisitioning. ODM is a means for
"cataloging" manufacturing capability. Another example just begun is an
engineering designer's interface that uses a commercial CAD system as a front
end. Unfortunately, interfaces from these applications to the DCI required
involvement of PartNET technical staff. Clearly, the DCI will not thrive as a
platform if unrelated parties cannot build their own applications without the
system's creators.
<PAGE> 171
Consequently, a portion of this proposed effort focuses on improving the DCI's
ability to interface. The new interfaces will involve state-of-the-art methods
that are thoroughly documented.
SCALEABILITY
In addition to having a broad audience, DLA serves an enormous population. It's
throughput in wartime is on the same scale as all the private sector combined.
With that is the need for massive scaleability in its systems, including the
DCI. Hence, a major portion of the immediate effort relates to improving
scaleability on every known dimension. The relevant metrics today are
simultaneous users, number of SKUs, number of suppliers, mean time between
failure, tolerance for error, and heterogeneity of supplier systems.
TASKS
The tasks below represent additional work that is to be performed by
PartNET.
TASK 1: XML INTERFACE
This task is a continuation of an existing task to interface with XML
enabled web servers. PartNET will develop capabilities to interface with
XML catalog servers and integrate them into a PartNET electronic catalog
network. The work may include migration of part characteristic
information and order status from an XML server into a PartNET
electronic catalog. This capability may be in either a data-harvesting
mode or in a real-time mode. Additional capabilities may include
transmitting shopping cart or order information out to an XML server
from a PartNET system. Further work may include defining industry
standard XML part taxonomies and part class attributes from
participation within OBI, CommerceNet, and RosettaNet standards bodies.
Output from these standards bodies may be integrated into PartNET
taxonomy structures and cross-vendor search mechanisms.
TASK 2: SUPPORT FOR WINDOWS NT AND OTHER PLATFORMS
This task is a continuation of an existing task that called for the
support of Windows NT. Primary development will be performed on Sun
Solaris. However, in a distributed network application, support for
other platforms is necessary. PartNET will support other platforms, such
as Windows NT and other forms of Unix, via Java implementations of the
ePort. In addition, the PartNET eBroker and web plug-in will continue
support for Windows NT.
TASK 3: PURCHASING APPROVAL PROCESS
This task is a continuation of an existing task that called for
investigating purchasing approval processes including the purchasing
approval pilot with Remedy. Attendant with many purchasing systems is
the need for an official purchasing approval mechanism. This task will
focus on investigating current commercial applications and/or developing
a DoD specific mechanism to facilitate a purchasing approval process for
DoD wide e-commerce applications.
TASK 4: COMMERCIAL WEB SITE WRAPPING
This task is a continuation of an existing task that called for
investigating and developing capabilities to interface with commercial
catalog web sites that already have cataloging and ordering
capabilities. These web sites would not require the installation of an
ePort. Instead, PartNET would leverage their existing e-commerce
capabilities. The task is to continue development with HTML wrapping
technologies, such as webMethods, and to interface these commercial web
sites into a standard PartNET e-commerce system.
TASK 5: ENHANCED SYSTEM MONITORING
This task is a continuation of an existing task that called for PartNET
to have metrics on system performance. PartNET has initial system
monitoring capabilities that perform diagnostics on system nodes and
also notify a system administrator upon process failures. Further R&D
efforts would be to enhance the system monitoring capabilities so as to
increase system reliability, which
<PAGE> 172
is critical in network applications. The next stage of development would
be to support automatic system recovery and to detect error conditions
or non-optimized conditions in the network or in the software that may
impact performance or reliability.
TASK 6: ENHANCEMENT TO EXISTING ADMINISTRATION TOOLS
This task is a continuation of an existing task that called for tools
to support vendor participation and system administration. The preceding
tasks will require additions and enhancements to the existing
administration tools - the PartNET ePort kit and the PartNET eBroker
Manager. This task will continue work on the tools with features and
functionality developed under the preceding tasks.
TASK 7: EBROKER API
Other systems and processes have been requesting direct interfaces to
PartNET e-commerce implementations, such as the Finished Goods Inventory
(FGI) project and the CommerceNet interoperability pilot. PartNET will
begin to formulate an eBroker API for external processes to have direct
access to PartNET eBroker functions. This will facilitate greater system
bandwidth, efficiencies, and throughput for programmatic interfaces that
require processing large loads in batch.
TASK 8: MODULAR WEB PLUG-IN
This task would be to make the web application plug-in easier and
quicker to modify across application implementations by moving some of
its custom functions into server-resident Java modules. As the
application infrastructure and architecture for distributed cataloging,
several application may need to be built upon the PartNET architectural
foundation. A modular web front-end would allow various DoD e-commerce
applications, whether interactive or programmatic, to implement
differing functionality that would not impact the other applications.
TASK 9: TECHNICAL DOCUMENTATION
The above tasks will require the additions and enhancements to be
clearly documented for use by users, developers, and administrators.
DELIVERABLES
PartNET will provide monthly status reports to DLA program management regarding
task scheduling and task status. Financial status will also be reported stating
actual monthly billing, cumulative spending from the beginning of the contract,
and forecast spending for future months. PartNET will continue its quarterly
task and financial reporting to DARPA as currently required by the contract.
PROPRIETARY RIGHTS
PartNET shall immediately notify DLA of the intent to use proprietary data and
obtain authorization to proceed. Any PartNET software provided under this
contract may be operated free of restriction by the United States Government for
its own internal use but would be fully restricted from commercial use without
the express written permission of PartNET.
RELEASE OF LIABILITY
The Contractor shall not be held liable for any damages not caused by gross
negligence on its part that result from operation and maintenance of the E-Mall
servers, NIB, VDI and application software.
BUDGET
<PAGE> 173
10/22/99
Proposed Log R D Budget Page 1
<TABLE>
<CAPTION>
BUDGET FOR REQUIRED TASKS MONTHLY
DIRECT COSTS ANNUAL RATE HOURLY RATE HOURS/MONTH HEADCOUNT COST
- -------------------------- ----------- ----------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Senior Software Engineer (C++) 100,000 50.00 109 2 10,900
Software Engineer (C++) 70,000 35.00 119 4 16,660
Software Engineer (Java) 70,000 35.00 128 2 8,960
Database Engineer 65,000 32.50 91 1 2,958
Test Engineer 72,000 36.00 128 1 4,608
System Administrator 75,000 37.50 146 1 5,475
Tech Writer 45,000 22.50 91 1 2,048
Project Manager 113,000 56.50 73 1 4,125
---------
TOTAL LABOR COSTS 55,733
Fringe @ 20.4% 11,369 20.40%
---------
SUBTOTAL 67,102
Overhead @ 28.16% 18,896 28.16%
---------
SUBTOTAL 85,998
Travel 2,500
Supplies 50
Software 3,039
Hardware 3,883
---------
SUBTOTAL 95,470
Sub-Contract
Web Page design work 90.00 20.00 1,800
---------
SUBTOTAL 97,270
G&A @ 33.06% 31,562 33.06%
---------
SUBTOTAL 128,832
Fee @ 10% 12,883
=========
MONTHLY TOTAL 141,715
---------
ANNUAL TOTAL 1,700,586
=========
</TABLE>
<PAGE> 174
10/22/99
Proposed Log R D Budget Page 1
<TABLE>
<CAPTION>
SOFTWARE Qty Cost Ea. Extended
- -------- ------ -------- --------
<S> <C> <C> <C> <C>
Netscape Server on Windows NT 1 1500 1,500
MS Office 2000 20 250 5,000
MS Project Upgrades 4 200 800
Sun Developer package 1 6815 6,815
Install Shield Express 1 800 800
Oracle Silver Advanced Maintanance
for SUN/UE 4000/Solaris 1 1000 1,000
Oracle Silver Advanced Maintanance
for Intel/PentiumII/Windows NY 1 1000 1,000
Sybase SQL Anywhere software 1 400 400
Visual Studio Upgrade 1 1000 1,000
Rational Purify Matenance 1 250 250
Rational Purify NT 1 1000 1,000
Exceed Annual Main 1 500 500
Adobe Page Maker 1 600 600
Visual Cafe Pro Ed. For Window 95/98 2 650 1,300
Upgrade Sun Visual Worksph C++ 4 1100 4,400
MS SQL Server 7.0 1 500 500
MS C++ Upgrades 5 500 2,500 *
Exceed Licences 5 200 1,000 *
Photo Shop Upgrade 1 350 350 *
Solaris DiskSuite For 2.7 1 1000 1,000 *
MS NT 2000 Server 2 1400 2,800 *
MS NT 2000 Workstation 13 150 1,950 *
-
-
-
-
-
Total 36,465
</TABLE>
<PAGE> 175
10/22/99
Proposed Log R D Budget Page 1
<TABLE>
<CAPTION>
HARDWARE Qty Cost Ea. Extended
- -------- --- -------- --------
<S> <C> <C> <C>
Sun E45 1 28,000 28,000
PC System/ Replacement 5 3,500 17,500
Switch 2 550 1,100
Total 46,600
</TABLE>
<PAGE> 176
ADDENDUM TO STATEMENT OF WORK
FOR
PARTNET/DARPA CONTRACT DABT63-96-C-0089
OVERVIEW
PartNET (Contractor) has been working on R&D tasks related to distributed
electronic cataloging over the Internet as part of its original contract with
DARPA. As the contract has proceeded, much has been learned about current and
evolving technology, several new initiatives have been prioritized and scheduled
by the DLA, and previous assumptions have changed that require adjustments made
in the original Statement of Work. In light of the expanding scope and desired
software functionality, it has become necessary to expand the number and the
scope of the tasks that are to be performed by PartNET.
TASKS
The tasks below represent additional work that is to be performed by
PartNET.
TASK 13: XML INTERFACE TO PARTNET
Develop capabilities to interface with XML catalog servers and integrate
them into a PartNET electronic catalog network. The work may include
migration of part characteristic information and order status from an
XML server into a PartNET electronic catalog. Additional capabilities
may include incorporating part order information out to an XML server
from a PartNET system. Further work may include defining or integrating
industry standard XML part taxonomies and part class attributes into the
PartNET taxonomy in order to support cross-vendor characteristic
searches.
TASK 14: BULK REQUISITIONING
Develop capabilities to enable a PartNET electronic catalog to interface
with non-interactive processes in bulk requisitioning. The
non-interactive interface will allow third-party processes to access
part information in a PartNET distributed catalog for procurement
evaluation.
TASK 15: NETWORK INTERFACE BROKER (NIB) ADMINISTRATORS UTILITY
In order to efficiently manage and administer a PartNET electronic
catalog, PartNET will develop an Administrators Utility for the Network
Interface Broker (NIB). The effort will include the development of user
documentation for the software. The concept will be similar to the
purpose behind the development of the Vendor Kit referenced in Task 12.
The Administrators Utility will allow a systems administrator to set-up
and manage a PartNET catalog. Functionality may include maintenance of a
parts taxonomy or hierarchy, part class attributes mapping, part class
and vendor mapping, vendor connectivity maintenance, user profile and
group security administration, shopping cart management, NIB cache
management, and order status tracking.
TASK 16: ENHANCED BROWSER-SIDE FUNCTIONALITY
Enhance browser client functionality by developing capabilities for more
active browser logic for record sorting, filtering, and general
presentation of data. This task may also include enhanced security
implementation by enabling a browser-side digital certificate.
TASK 17: eBROKER AND ePORT ORDERING
The ePort currently represents a secure link to a vendor's product
catalog database. This task will be to exploit that secure link into the
vendor to a further extent by also sending orders to the vendor and
placing the order directly into his database. The order will also be
recorded in an order database at the eBroker. This will allow both the
vendor and the government to do reporting functions on data that is
currently not being captured. It also will allow real-time order status
from the vendor's order database.
<PAGE> 177
TASK 18: PURCHASING APPROVAL WORKFLOW
Attendant with many purchasing systems is the need for an official
purchasing approval process. The current implementation does not support
any formal approval structure for ordering. This task will focus on
developing a mechanism to facilitate a Web-based purchasing approval
flow.
The tasks below are existing SOW tasks, and should be modified according
to new mandates from the DLA.
<TABLE>
<CAPTION>
SOW TASK MODIFICATION
- -------- ------------
<S> <C>
Task 1 & 4 These two tasks call for recruitment of military
sites and installation of client software at these
military sites. PartNET is now a Web-based cataloging
engine, so client-side software is no longer necessary
nor supported. The pervasive accessibility of the DLA
E-Mall via the Web also obviates the need for
recruitment of military sites for installation of
PartNET software.
</TABLE>
DELIVERABLES
PartNET will provide monthly status reports to DLA program management regarding
task scheduling and task status. Financial status will also be reported stating
actual monthly billing, cumulative spending from the beginning of the contract,
and forecast spending for future months. PartNET will continue its quarterly
task and financial reporting to DARPA as currently required by the contract.
PROPRIETARY RIGHTS
PartNET shall immediately notify DLA of the intent to use proprietary data and
obtain authorization to proceed. Any PartNET software provided under this
contract may be operated free of restriction by the United States Government for
its own internal use but would be fully restricted from commercial use without
the express written permission of PartNET.
RELEASE OF LIABILITY
The Contractor shall not be held liable for any damages not caused by gross
negligence on its part that result from operation and maintenance of the E-Mall
servers, NIB, VDI and application software.
BUDGET
<PAGE> 178
Total
CONTRACT SUMMARY
<TABLE>
<CAPTION>
BEGINNING CEILING
AMOUNT INCREASE TOTAL SOFTWARE TOTAL
------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
PERSONNEL COSTS 1,580,156.00 739,894.35 2,320,050.35 42,505.00 2,362,555.35
TRAVEL 346,457.00 -- 346,457.00 12,000.00 358,457.00
SOFTWARE 51,580.00 49,900.89 101,480.89 190,000.00 291,480.89
HARDWARE 76,555.00 16,200.00 92,755.00 10,000.00 102,755.00
Supplies 9,000.00 -- 9,000.00 -- 9,000.00
SUB-CONTRACT -- 30,000.00 30,000.00 30,000.00 60,000.00
INDIRECT COSTS 1,136,770.00 800,368.39 1,937,138.39 124,586.00 2,061,724.39
FEE 320,052.00 163,636.36 483,688.36 40,909.00 524,597.36
------------ ------------ ---------- ------------
TOTAL 3,520,570.00 1,800,000.00 5,320,570.00 450,000.00 5,770,570.00
</TABLE>
<TABLE>
<CAPTION>
TASK COST CEILING ESTIMATED %
ALLOCATION INCREASE ALLOCATION
- ---------- ---------- -----------
<S> <C> <C>
General 199,122.31
Task 6 477,771.34 30%
Task 13 179,164.25 11%
Task 14 119,442.83 7%
Task 15 298,607.09 19%
Task 16 119,442.83 7%
Task 17 203,224.67 13%
Task 18 203,224.67 13%
------------ ---
1,800,000.00 100%
</TABLE>
Page 1
<PAGE> 179
Proposed Log R D Budget Page 1
<TABLE>
<CAPTION>
BUDGET FOR REQUIRED TASKS INCREMENTAL
DIRECT COSTS ANNUAL RATE HOURLY RATE HOURS/MONTH INCREASE
- ------------------------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Software Engineer 75,000 36.06 776.34 335,916
Sr. Software Engineer 82,000 39.42 776.34 367,268
Project Manager 101,000 48.56 63.00 36,710
---------
TOTAL LABOR COSTS 739,894
Fringe @ 20.4% 150,938 20.40%
---------
SUBTOTAL 890,833
Overhead @ 28.16% 250,859 28.16%
---------
SUBTOTAL 1,141,691
Travel 0
Software 49,901
Hardware 16,200
---------
SUBTOTAL 1,207,792
Sub-Contract 30,000
---------
SUBTOTAL 1,237,792
G&A @ 33% 398,571 33.00%
---------
1,636,364
SUBTOTAL
Fee @ 10% 163,636
=========
TOTAL 1,800,000
</TABLE>
<PAGE> 180
Proposed Log R D Budget Page 1
EQUIPMENT BASELINE
<TABLE>
<CAPTION>
Original Amount Additional Amount
------------------------------- ------------------------------
Unit Extended Unit Extended Qty
HARDWARE Cost Qty Cost Cost Qty Cost Total Total
- -------- --------- --- --------- -------- --- -------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pentium Pro - based workstation 4,995.00 8 39,960.00 4,995.00 2 9,990.00 10 49,950.00
Internet Server 24,395.00 1 24,395.00 -- 1 24,395.00
Modem 210.00 12 2,520.00 -- 12 2,520.00
Hub 340.00 2 680.00 -- 2 680.00
Router 3,000.00 1 3,000.00 -- 1 3,000.00
Firewall processor 1,210.00 1 1,210.00 1 1,210.00
UPS 2,000.00 1 2,000.00 1 2,000.00
Switch 1 3,000.00 1 3,000.00
-- --
-----------------------------------------------------------------------------------------------
Total Hardware 70,555.00 16,200.00 86,755.00
SOFTWARE
C++ Compiler License (NT) 200 32 6,400.00 32 6,400.00
zApp Developer License 2000 2 4,000.00 2 4,000.00
Oracle 8 Developer License 1000 8 8,000.00 8 8,000.00
Windows NT Operating System Li 500 32 16,000.00 32 16,000.00
Solaris Operating System 1200 3 3,600.00 3 3,600.00
Adobe Acrobat 750 1 750.00 1 750.00
Adobe Photoshop 750 1 750.00 1 750.00
Microsoft Office 500 8 4,000.00 8 4,000.00
Hummingbird Exceed 385 8 3,080.00 8 3,080.00
RSA Bsafe 5000 1 5,000.00 20,000.00 1 20,000.00 2 25,000.00
Install Shield Express -- 260.00 1 260.00 1 260.00
Solaris SPARC Develop 1703.75 5 8,518.75 5 8,518.75
MS Project 288.04 2 576.08 2 576.08
Java 300 1 300.00 1 300.00
Rational Rose 2400 3 7,200.00 3 7,200.00
MS Developer Studio 900 1 900.00 1 900.00
NT Server 5.0 500 1 500.00 1 500.00
Maint. Purify 1000 2 2,000.00 2 2,000.00
Maint. Exceed 45 8 360.00 8 360.00
Maint. Oracle NT & Solaris 960 6 5,760.00 6 5,760.00
Other 3,526.06 -- 3,526.06
-- --
-----------------------------------------------------------------------------------------------
Total Software 51,580.00 49,900.89 101,480.89
</TABLE>
<PAGE> 181
ESTIMATE OF ePORT SETUP FOR NEWARK INACTIVE INVENTORY
Assumptions:
- - Will be very similar to current Newark database.
- - Current Newark meta-data is larger and more complex than average.
- - Requires additional and/or different categories from Newark database.
- - Newark will handle issue of "Excluding some inactive inventory from
co-mingling with regular data in queries". This can possibly be done by
creating a view on the database with a procedure that performs the desired
exclusions.
- - Executable binaries will be the same as the current Newark ePort.
- - Actual installation of the ePort will be performed by Newark.
- - Travel and incidental costs for the on-site consulting will be billed
separately.
- - On-site consulting may not be necessary.
Estimate:
<TABLE>
<CAPTION>
Time Estimate Task
- ------------- ----
<S> <C>
24.0 hrs ePort Meta-data schema analysis and design.
8.0 hrs Create and test ePort Meta-data.
8.0 hrs Consult by phone with Newark on installation and integration.
24.0 hrs On-site consulting
64.0 hrs Total
</TABLE>
ePort license $5,000.00
Required Hrs. 40 6,000.00
---------
Sub Total 11,000.00
On site consulting if necessary
24 hrs 3,600.00
Travel expenses 900.00
---------
Sub Total 4,500.00
----------
Total $15,500.00
<PAGE> 182
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
ORDER FOR SUPPLIES OR SERVICES Form Approved PAGE 1 OF 6
OMB No. 0704-0187
(Contractor must submit four copies of invoice.) Expires Jun 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for
reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing
the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information
including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for
Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of
Management and Budget, Paperwork Reduction Project (0704-0187), Washington, DC 20503.
PLEASE DO NOT RETURN YOUR FORM TO EITHER OF THESE ADDRESSES.
SEND YOUR COMPLETED FORM TO THE PROCUREMENT OFFICIAL IDENTIFIED IN ITEM 6.
- ------------------------------------------------------------------------------------------------------------------------------------
1. CONTRACT/PURCH ORDER NO 2. DELIVERY ORDER NO. 3. DATE OF ORDER 4. REQUISITION/PURCH REQUEST NO. 5. PRIORITY
DABT63-99-P-0459 99SEP14 HJ1500-9253-0738 D0-C9
- ---------------------------------------------------------------------------------------------------------------
6. ISSUED BY CODE DKO-I 7. ADMINISTERED BY (If other than 6) CODE DKO-I
-------- ------------------------
DIRECTORATE OF CONTRACTING 8. DELIVERY FOB
ATTN: ATZS-DKO-I See Block 6 [X] DEST
POST OFFICE BOX 12748 [ ] OTHER
FORT HUACHUCA AZ 85670-2748
WESSELEEN STOOKESBERRY C24 (520) 538-0416 (See Schedule if other)
- ------------------------------------------------------------------------------------------------------------------------------------
9. CONTRACTOR Vendor Id: 00059424 07SP3 FACILITY CODE 10. DELIVER TO FOB POINT BY (Date) 11. MARK IF
----- ------ 99DEC31 BUSINESS IS
CODE [X] SMALL
PARTNET INC ---------------------------------- [ ] SMALL DISAD-
NAME AND 615 ARAPEEN DRIVE 12. DISCOUNT TERMS VANTAGED
ADDRESS SUITE 204 0% 000 Days Net 030 [ ] WOMEN-OWNED
SALT LAKE CITY UT 84108 ----------------------------------------------------
13. MAIL INVOICES TO
WILLIS DRAKE 703 767-2651
- ------------------------------------------------------------------------------------------------------------------------------------
14. SHIP TO CODE SCHEDULE 15. PAYMENT WILL BE MADE BY CODE COLUMBUS
---------- -------- MARK ALL
DABT6399P0459 DEFENSE FINANCE & ACCOUNTING PACKAGES AND
SEE SCHEDULE ATTN: DFAS-CO-AAR PAPERS WITH
POST OFFICE BOX 182317 CONTRACT OR
COLUMBUS OH 43218-2317 ORDER NUMBER
EFT: T
- ------------------------------------------------------------------------------------------------------------------------------------
16. DELIVERY [ ] This delivery order is issued on another Government agency or in accordance with and subject to terms and
conditions of above numbered contract.
TYPE ----------------------------------------------------------------------------------------------------------------------------
OF PURCHASE [X] Reference your __________________________________________ furnish the following on terms specified herein.
ORDER ---------------------------------------------------------------------------------------------------------------
- -------------------- ACCEPTANCE. THE CONTRACTOR HEREBY ACCEPTS THE OFFER REPRESENTED BY THE NUMBERED PURCHASE ORDER AS IT MAY
PREVIOUSLY HAVE BEEN OR IS NOW MODIFIED, SUBJECT TO ALL OF THE TERMS AND CONDITIONS SET FORTH, AND AGREES TO
PERFORM THE SAME.
------------------ -------------------- ------------------------------- -----------
NAME OF CONTRACTOR SIGNATURE TYPED NAME AND TITLE DATE SIGNED
(YYMMDD)
[ ] If this box is marked, supplier must sign Acceptance and return the following number of copies:
- ------------------------------------------------------------------------------------------------------------------------------------
17. ACCOUNTING AND APPROPRIATION DATA/LOCAL USE
B3:97X49305CA0009P815.5725.57LSIPH2A2LS9H2A2MPAP765FDI:B033181 Award Oblig Amt US$ 100,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
18. 19. 20. QUANTITY 21. UNIT 22. 23.
ITEM NO. SCHEDULE OF SUPPLIES/SERVICE ORDERED/ UNIT PRICE AMOUNT
ACCEPTED*
- ------------------------------------------------------------------------------------------------------------------------------------
0001 REFERENCE MIPR # LS9H2A2MPAP765 1.00 LT 100000.000000 100000.00
THE CONTRACTOR SHALL PROVIDE THE
NON-PERSONAL SERVICES IN ACCORDANCE WITH
THE STATEMENT OF WORK.
FIRM FIXED PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
* If quantity accepted by 24. UNITED STATES OF AMERICA 25. TOTAL $100000.00
the Government is same as BY: GLORIA A. BICKLER, c12 /s/ GLORIA A. BICKLER ------------------------------------------
quantity ordered, indicate 9-15-99 ---------------------------- 29.
by X. If different, enter CONTRACTING/ORDERING OFFICER DIFFERENCES -----------------
actual quantity accepted
below quantity ordered and
encircle.
- ------------------------------------------------------------------------------------------------------------------------------------
26. QUANTITY IN COLUMN 20 HAS BEEN 27. SHIP. NO. 28. D.O. VOUCHER NO. 30. _________________
________ ________________ INITIALS
[ ] INSPECTED [ ] RECEIVED [ ] ACCEPTED, AND CONFORMS TO THE [ ] PARTIAL ----------------------------------------------------
CONTRACT EXCEPT AS NOTED [ ] FINAL 32. PAID BY 33. AMOUNT VERIFIED CORRECT FOR
- ------------- ------------------------------------------------- ------------- -------------------------------
DATE SIGNATURE OF AUTHORIZED GOVERNMENT 31. PAYMENT 34. CHECK NUMBER
REPRESENTATIVE
- ---------------------------------------------------------------- [ ] COMPLETE -------------------------------
36. I certify this account is correct and proper for payment. [ ] PARTIAL 35. BILL OF LADING NO.
[ ] FINAL
- ------------- -------------------------------------------------
DATE SIGNATURE AND TITLE OF CERTIFYING OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
37. RECEIVED AT 38. RECEIVED BY (Print) 39. DATE RECEIVED 40. TOT. CONTAINERS 41. S/R ACCOUNT NUMBER 42. S/R VOUCHER NO.
(YYMMMDD)
- ------------------------------------------------------------------------------------------------------------------------------------
DD FORM 1155, JUN 94 PREVIOUS EDITIONS MAY BE USED. 480/122
</TABLE>
<PAGE> 183
DABT63-99-P-0459 2 of 6
PARTNET INC
PERIOD OF PERFORMANCE
FROM DATE OF AWARD THRU 30 DECEMBER 1999
PROGRAM MANAGER/RECEIVING AUTHORITY:
DLA MATERIAL MANAGEMENT
8725 JOHN J. KINGMAN RD.
SUITE 4235
FT BELVOIR, VA 22060-6221
PHONE: 703 767-2651
FAX: 703 767-2602
E-mail: [email protected]
PARTIAL PAYMENTS AUTHORIZED.
THE CONTRACTOR SHALL SUBMIT INVOICE TO PROGRAM MANAGER/RECEIVING AUTHORITY
CITED ABOVE. LIST THE FOLLOWING INFORMATION ON INVOICE:
PURCHASE ORDER NUMBER: DABT63-99-P-0459
RECEIVING AUTHORITY WILL FILL IN BLOCK 26 AND 27 OF DD FORM 1155. RECEIVING
REPORT AND INVOICE WILL BE SUBMIT TO THE DEFENSE FINANCE AND ACCOUNTING SERVICE
CITED IN BLOCK 15 OF DD FORM 1155.
THE CONTRACTOR SHALL ENSURE PRODUCTS PROVIDED UNDER THIS CONTRACT, TO INCLUDE
HARDWARE, SOFTWARE, FIRMWARE, AND MIDDLEWARE, WHETHER ACTING ALONE OR COMBINED
AS A SYSTEM, ARE YEAR 2000 COMPLIANT AS DEFINED IN FAR PART 39.
52.252-2 CLAUSES INCORPORATED BY REFERENCE (FEB 1998)
This contract incorporates one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available. Also, the full text of
a clause may be accessed electronically at these addresses:
http://www.arnet.gov/far
http://farsite.hill.af.mil
http://www.dtic.mil/dfars
(End of clause)
<PAGE> 184
DABT63-99-P-0459 3 of 6
PARTNET INC
52.212-4 CONTRACT TERMS AND CONDITIONS--COMMERCIAL ITEMS (MAY 1999)
(Reference 12.301(b)(3)
52.232-7 PAYMENTS UNDER TIME-AND-MATERIALS AND LABOR-HOUR CONTRACTS
(FEB 1997)
52.247-34 F.O.B. DESTINATION (NOV 1991)
(Reference 47.303-6(c))
52.212-5 CONTRACT TERMS AND CONDITIONS REQUIRED TO IMPLEMENT STATUTES OR
EXECUTIVE ORDERS--COMMERCIAL ITEMS (MAY 1999)
(a) The Contractor agrees to comply with the following FAR clauses, which
are incorporated in this contract by reference, to implement provisions of law
or Executive orders applicable to acquisitions of commercial items:
(1) 52.222-3, Convict Labor (E.O. 11755); and
(2) 52.233-3, Protest After Award (31 U.S.C 3553).
(b) The Contractor agrees to comply with the FAR clauses in this paragraph
(b) which the contracting officer has indicated as being incorporated in this
contract by reference to implement provisions of law or executive orders
applicable to acquisitions of commercial items or components:
_NA_ (1) 52.203-6, Restrictions on Subcontractor Sales to the Government,
with Alternate I (41 U.S.C. 253g and 10 U.S.C. 2402).
_NA_ (2) 52.219-3, Notice of HUBZone Small Business Set-Aside (Jan 1999).
_NA_ (3) 52.219-4, Notice of Price Evaluation Preference for HUBZone Small
Business Concerns (Jan 1999) (if the offeror elects to waive the
preference, it shall so indicate in its offer).
_NA_ (4)(i) 52.219-5, Very Small Business Set-Aside (Pub. L. 103-403,
section 304, Small Business Reauthorization and Amendments Act of 1994).
_NA_ (4)(ii) Alternate I to 52.219-5.
_NA_ (4)(iii) Alternate II to 52.219-5.
_NA_ (5) 52.219-8, Utilization of Small Business Concerns (15 U.S.C. 637
(d) (2) and (3));
_NA_ (6) 52.219-9, Small Business Subcontracting Plan (15 U.S.C. 637
(d)(4));
_NA_ (7) 52.219-14, Limitations on Subcontracting (15 U.S.C. 637(a)(14)).
_NA_ (8)(i) 52.219-23, Notice of Price Evaluation Adjustment for Small
Disadvantaged Business Concerns (Pub. L. 103-355, section 7102, and 10
U.S.C. 2323) (if the offeror elects to waive the adjustment, it shall so
indicate in its offer).
_NA_ (8)(ii) Alternate I of 52.219-23.
<PAGE> 185
DABT63-99-P-0459 4 of 6
PARTNET INC
_NA_ (9) 52.219-25, Small Disadvantaged Business Participation
Program--Disadvantaged Status and Reporting (Pub. L. 103-355, section
7102, and 10 U.S.C. 2323).
_NA_ (10) 52.219-26, Small Disadvantaged Business Participation
Program--Incentive Subcontracting (Pub. L. 103-355, section 7102, and 10
U.S.C. 2323).
_NA_ (11) 52.222-21, Prohibition of Segregated Facilities (Feb 1999).
_XX_ (12) 52.222-26, Equal Opportunity (E.O. 11246).
_XX_ (13) 52.222-35, Affirmative Action for Disabled Veterans and Veterans of
the Vietnam Era (38 U.S.C. 4212).
_XX_ (14) 52.222-36, Affirmative Action for Workers with Disabilities (29
U.S.C. 793).
_XX_ (15) 52.222-37, Employment Reports on Disabled Veterans and Veterans of
the Vietnam Era (38 U.S.C. 4212).
_NA_ (16) 52.225-3, Buy American Act--Supplies (41 U.S.C. 10).
_NA_ (17) 52.225-9, Buy American Act--Trade Agreements Act--Balance of Payments
Program (41 U.S.C. 10, 19 U.S.C. 2501-2582).
(18) Reserved.
_NA_ (19) 52.225-18, European Union Sanction for End Products (E.O. 12849).
_NA_ (20) 52.225-19, European Union Sanction for Services (E.O. 12849).
_NA_ (21)(i) 52.225-21, Buy American Act--North American Free Trade Agreement
Implementation Act--Balance of Payments Program (41 U.S.C. 10, Pub. L.
103-187).
_NA_ (21)(ii) Alternate I of 52.225-21.
_XX_ (22) 52.232-33, Payment by Electronic Funds Transfer--Central Contractor
Registration (31 U.S.C. 3332).
_NA_ (23) 52.232-34, Payment by Electronic Funds Transfer--Other than Central
Contractor Registration (31 U.S.C. 3332).
_NA_ (24) 52.232-36, Payment by Third Party (31 U.S.C. 3332).
_NA_ (25) 52.239-1, Privacy or Security Safeguards (5 U.S.C. 552a).
_NA_ (26) 52.247-64, Preference for Privately Owned U.S.-Flag Commercial
Vessels (46 U.S.C. 1241).
(c) The Contractor agrees to comply with the FAR clauses in this
paragraph (c), applicable to commercial services, which the Contracting
Officer has indicated as being incorporated in this contract by reference to
implement provisions of law or executive orders applicable to acquisitions of
commercial items or components:
_XX_ (1) 52.222-41, Service Contract Act of 1965, As amended (41 U.S.C. 351, et
seq.).
_XX_ (2) 52.222-42, Statement of Equivalent Rates for Federal Hires
<PAGE> 186
DABT63-99-P-0459 5 of 6
PARTNET INC
(29 U.S.C. 206 and 41 U.S.C. 351, et seq.).
_XX_ (3) 52.222-43, Fair Labor Standards Act and Service Contract Act--Price
Adjustment (Multiple Year and Option Contracts) (29
U.S.C. 206 and 41 U.S.C. 351, et seq.).
_XX_ (4) 52.222-44, Fair Labor Standards Act and Service Contract Act--Price
Adjustment (29 U.S.C. 206 and 41 U.S.C. 351, et seq.).
_NA_ (5) 52.222-47, SCA Minimum Wages and Fringe Benefits Applicable to
Successor Contract Pursuant to Predecessor Contractor Collective Bargaining
Agreement (CBA) (41 U.S.C. 351, et seq.).
(d) Comptroller General Examination of Record. The Contractor agrees to
comply with the provisions of this paragraph (d) if this contract was awarded
using other than sealed bid, is in excess of the simplified acquisition
threshold, and does not contain the clause at 52.215-2, Audit and
Records--Negotiation.
(1) The Comptroller General of the United States, or an authorized
representative of the Comptroller General, shall have access to and right to
examine any of the Contractor's directly pertinent records involving
transactions related to this contract.
(2) The Contractor shall make available at its offices at all reasonable
times the records, materials, and other evidence for examination, audit, or
reproduction, until 3 years after final payment under this contract or for any
shorter period specified in FAR Subpart 4.7, Contractor Records Retention, of
the other clauses of this contract. If this contract is completely or
partially terminated, the records relating to the work terminated shall be made
available for 3 years after any resulting final termination settlement. Records
relating to appeals under the disputes clause or to litigation or the
settlement of claims arising under or relating to this contract shall be made
available until such appeals, litigation, or claims are finally resolved.
(3) As used in this clause, records include books, documents, accounting
procedures and practices, and other data, regardless of type and regardless of
form. This does not require the Contractor to create or maintain any record
that the Contractor does not maintain the ordinary course of business or
pursuant to a provision of law.
(e) Notwithstanding the requirements of the clauses in paragraphs (a),
(b), (c) or (d) of this clause, the Contractor is not required to include any
FAR clause, other than those listed below (and as may be required by an addenda
to this paragraph to establish the reasonableness of prices under Part 15), in
a subcontract for commercial items or commercial components--
(1) 52.222-26, Equal Opportunity (E.O. 11246);
(2) 52.222-35, Affirmative Action for Disabled Veterans and Veterans of
the Vietnam Era (38 U.S.C. 4212); and
(3) 52.222-36, Affirmative Action for Workers with Disabilities
<PAGE> 187
DABT63-99-P-0459 6 of 6
PARTNET INC
(29 U.S.C. 793); and
(4) 52.247-64, Preference for Privately Owned U.S.-Flag Commercial Vessels
(46 U.S.C. 1241) (flow down not required for subcontracts awarded beginning May
1, 1996).
(End of clause)
<PAGE> 188
SUPPLEMENTAL STATEMENT OF WORK
FOR THE
OPERATION AND MAINTENANCE OF THE DoD
ELECTRONIC MALL (EMALL) SEARCH ENGINE SOFTWARE
1. OVERVIEW.
In accordance with Section 332 of the 1999 Defense Authorization Act, which
requires the establishment and maintenance of a consistent DoD-wide electronic
commerce infrastructure, it is necessary to expand the scope of the operations
and maintenance tasks that are currently being performed by PartNET (the
contractor) for the DLA EMall.
Since the formation of the DLA EMall, the Joint Electronic Commerce Program
Office (JECPO) has expanded the mission of the DLA EMall to encompass more of a
DoD role rather than merely a role limited to DLA operational objectives. In
fact, the name of the EMall has been officially changed from the DLA EMall to
the DoD EMall to further signify the emergence of a DoD standard and general
architecture for DoD-wide electronic commerce.
The mandates included in the 1999 Defense Authorization Act together with
efforts by the JECPO for increased standardization of the DoD EMall architecture
has spread to the military services and has highlighted the need for further
support and maintenance as the military services implement their own electronic
commerce initiatives. Within this context, this supplemental Statement of Work
(SOW) outlines the projected effort, tasks, and budget necessary to support
current efforts within the DoD and possibly other areas of the federal
government for implementing and supporting new electronic commerce initiatives
consistent with the DoD EMall architecture.
PartNET (the contractor) shall supply computer operation and sustaining software
engineering services in support of emerging electronic commerce initiatives
within the DoD and possibly other areas in the federal government. The purpose
of this SOW is to maintain and enhance the current system search engine
software. These services will include providing 24 hour, 7 days per week
operation of software engineering support for the application software.
2. REQUIRED TASKS
PartNET (the contractor) shall supply computer operation and sustaining
engineering services in support of emerging electronic commerce initiative that
are consistent with the DoD EMall electronic catalog architecture. Each
electronic commerce initiative (EMall) may operate independently or in concert
with the DoD EMall, but in any event, the architecture will be consistent with
DoD EMall electronic catalog architecture. The Contractor will perform the
following tasks for DLA for the duration of this effort:
Page 1
<PAGE> 189
2.1 PARTNET EMALL SEARCH ENGINE SOFTWARE
The contractor will maintain in working condition the PartNET
search engine software (the server) which consists of the VDI
(ePort), the NIB (eBroker), and the web server plug-in to the
NIB. The software will run on Sun SPARC-based (TM) servers
running the Solaris 2.5 (TM) operating system (the operating
system) and may also run on the Intel-based servers running the
Windows NIT (TM) Server operating system, version 4.0 or later.
Contractor will convert the Software to run on the latest
version of the Operating System. Contractor will not maintain
prior versions of the Software beyond six months after
converting to the latest Operating System.
2.1.1 IMPLEMENT CHANGES FROM THE E-MALL PROGRAM MANAGER
(2.6.1)
To the extent that the resources under this effort
allow, the Contractor will implement change requests
approved by the EMall Program Manager. Contractor will
coordinate work with the EMall Program Manager to
specify and prioritize the ECR changes. Contractor will
maintain a list of the approved ECRs in process, their
estimated completion dates, and status.
2.1.2 DEVELOP SCRIPTS (PROGRAMS) TO SUPPORT WEB SERVER, NIB
AND VDI
(a) The contractor will write scripts (programs)
that will re-start the Web server, NIB, and
Government hosted VDI's either automatically
upon machine boot-up or via manual start.
(b) The contractor will write Scripts (programs)
that will send an alert via e-mail when a Web
server, NIB, or Government hosted VDI process is
down.
(c) The contractor will write Scripts (programs)
that can be run by operations contractor to
determine which VDIs (Government and vendor
owned) are successfully connected to the NIB.
2.1.3 ESTABLISH REGIONAL OR MILITARY SERVICE E-MALLS
To the extent that the resources under this effort
allow, the Contractor will implement e-malls consistent
with the overall DoD EMALL architecture to serve
regional base purchasing needs or emalls specific to the
military branches of service. This effort may include:
a) establishing the Web server
b) installing and configuring a NIB specific to the
organization needs
c) operating the Web server and NIB
d) hosting local catalogs or VDIs
Page 2
<PAGE> 190
e) attaching appropriate local or national supplier
VDIs to the email
2.1.4 ESTABLISH PARALLEL CORRIDORS WITHIN THE DoD EMALL
To the extent that the resources under this effort
allow, the Contractor will implement e-malls corridors
consistent with the overall DoD EMALL architecture to
serve information technology products, services,
education, or construction. This effort may include:
a) establishing the Web server
b) installing and configuring a NM specific to the
corridor
c) operating the Web server and NIB
d) hosting local catalogs or VDIs
e) attaching appropriate local or national supplier
VDIs to the e-mall
2.4 SOFTWARE OPERATION
Contractor shall have a qualified system administrator to
support the operating configuration of the production PartNET
EMall software.
2.5 TRANSITION SUPPORT
PartNET will support the software on the EMall production NIB
server. PartNET will install the EMall production NIB server and
verify proper operation at the Contractor's location and oversee
transfer and installation to the Emall Contractor for production
operational responsibility.
2.6 EMALL SOFTWARE
2.6.1 CONFIGURATION MANAGEMENT
2.6.1.1 The EMall Program Manager will review and
approve changes to the Emall software along
with implementation priorities.
2.6.1.2 The Contractor's procedure for managing
changes to the approved baseline for the EMall
system software, NIB and VDI structures, and
application software installed on the primary
EMall servers is:
2.6.1.2.1 Receive, evaluate and classify the
difficulty of implementing the ECRs
and provide a report to the Program
Manager.
2.6.1.2.2 The Emall Program Manager will
establish the priority of the desired
changes.
2.6.1.2.3 The Emall Program Manager and
Contractor will agree on the changes
to be implemented within available
Page 3
<PAGE> 191
resources and in which scheduled software
release they will be included. Additional
resources may be provided by the Emall Program
Manager to supplement the resources available
to implement unfunded ECRs.
2.6.1.2.4 As ECRs (EMall Change Requests) are completed,
notify the Program Manager to close out the
ECR.
2.6.2 EMERGENCY MAINTENANCE
Contractor shall implement "hotline" and "warmline"
procedures to respond to anomalies (i.e., "bugs" or
other problems) found in the operational PartNET (EMall)
software. The contractor shall respond to anomalies
identified as "hotline" by EMall Program Manager within
one hour during Contractor's normal business hours (8 AM
- 5 PM MT), and two hours during non-business hours.
Those anomalies identified as "warmline" will be
responded to within 6 hours. All others will be handled
on an ECR-like enhancement.
NOTE: Response to an anomaly does not always mean that
the anomaly is corrected. Some problems will take more
than 24 or 72 hours to fix. Temporary work-around(s) or
disabling a function may be the only immediate solution.
In these cases, the Contractor shall coordinate the
alternatives with, and obtain approval of, EMall Program
Manager.
2.6.3 ENHANCEMENTS FROM THE R&D PROGRAM MANAGER
Enhancements arising from the DLA's Logistics R&D
Program will be handled through the configuration
control process described in section 2.6.1.
2.6.4 DOCUMENTATION
2.6.4.1 The Contractor shall prepare the following
documentation:
(a) Guides to assist vendors and the Program
Manager to install and operate PartNET
software such as the VDI and NEB.
(b) Specification of hardware and software
requirements.
(c) A record of test profiles and associated
test results for software changes or
enhancements will be maintained by the
contractor (e.g., in a software test
document folder).
2.7 SECURITY ACCREDITATION
The contractor shall, as required, participate in electronic
sponsored security certification efforts as needed to:
(a) Implement security controls in the EMall system as
required by the Program Manager to obtain operational
accreditation.
Page 4
<PAGE> 192
(b) Support security tests and evaluations of the EMall
system.
2.8 EMALL ENGINEERING SOFTWARE SUPPORT
(a) The Contractor shall provide monitoring utilities as
described in section 2.1.2.c that allow the operating
contractor to evaluate and report the software
statistics.
(b) Provide technical briefings to the Program Manager and
the user community as requested within the proposed
resources.
2.9A DEVELOPMENT COORDINATION
2.9A.1 The contractors, (PartNET and the Alpine) will
coordinate on joint requirements/tasks and work together
on related issues as required. They will jointly address
and resolve all tasks requiring their mutual planning,
development and resolution to complete those tasks. The
contractor shall coordinate design changes to the system
with Raytheon (Alpine) and the EMall Program Manager
where there are dependencies that effect those entities.
Likewise, testing and actual implementation of these
changes will be coordinated with both entities to ensure
that system integrity is maintained in accordance with
the requirements contained herein of this SOW.
2.9A.2 The contractor will submit a monthly performance report
to Raytheon (Alpine) for consolidation into a single
report that covers the entire EMall status and activity
for the reporting period. The conditions stated herein
will also apply to the optional task stated below, if it
is deemed or accepted as part of this SOW.
2.9B PROGRAM MANAGEMENT
The Contractor shall:
(a) Manage the work of subcontractors as necessary to
support hardware and software.
(b) Prepare, present, and deliver project management and
technical reviews, as required.
(c) Prepare and submit monthly project status and technical
reports. Where there are project dependencies with work
being done by PartNET, the PartNET tasks will be
reflected in the project schedules provided by ALPINE,
and
(d) Prepare and submit weekly EMall Activity reports, as
determined by the EMall Program Manager.
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<PAGE> 193
2.9C TRANSITION OF EMall TO PRODUCTION
The Contractor shall support the transfer of software from a
development server environment to a production server
environment. This will include the transition from the
Contractor's facility to a designated facility where the
production operational EMall server will be maintained.
3. DELIVERABLES
3.1 Contractor will deliver monthly reports to the EMall showing the
status of its efforts and the costs incurred to date. The report
will include the New Features List and comments as to their
status.
Page 6
<PAGE> 194
4. PERFORMANCE GOALS
<TABLE>
<CAPTION>
Performance Factor Expected Standard (Goal)
- ------------------ ------------------------
<S> <C>
Period of operation 24 hours per day, 7 days per week
Downtime for scheduled maintenance Less than 2 hours per month
Downtime due to installation problems; e.g. air, power, etc: Less than 12 hour per year (see Note)
On-call response time during Contractor's prime shift 1 hour
On-call response time during Contractor's off shifts 6 hours
</TABLE>
5. PROPRIETARY DATA RIGHTS
Contractor shall immediately notify the Program Manager of the intent to use
proprietary data and obtain authorization to, proceed. Any Contractor
proprietary information provided under this project may be used free of
restriction by the United States Government, but would be fully restricted from
commercial use without the express permission of the Contractor.
6. PERIOD OF PERFORMANCE
The estimated contract period of performance is through December 1999. This is
an operational function that evolved from an R&D environment. Therefore, a
different contractual vehicle will be obtained to support this EMALL operation
in year 2000.
7. Reserved
8. RELEASE OF LIABILITY
The Contractor shall not be held liable for any damages not caused by gross
negligence on its part that result from operation and maintenance of the EMall
servers, NIB, VDI and application software.
Page 7
<PAGE> 195
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
SOLICITATION/CONTRACT/ORDER FOR COMMERCIAL ITEMS 1. REQUISITION NUMBER PAGE 1 OF 14
OFFEROR TO COMPLETE BLOCKS 12, 17, 23, 24, AND 30 DD2MR97832
- ------------------------------------------------------------------------------------------------------------------------------------
2. CONTRACT NO. 3. AWARD/EFFECTIVE DATE 4. ORDER NUMBER 5. SOLICITATION NUMBER 6. SOLICITATION ISSUE DATE
4700-99-C-0010 30-Sep-1999 SP4700-99-R-0020 15-Sep-1999
- ------------------------------------------------------------------------------------------------------------------------------------
7. FOR SOLICITATION a. NAME b. TELEPHONE (No Collect Calls) 8. OFFER DUE DATE/LOCAL TIME
INFORMATION CALL Ronald Zalimas 703-767-1190 20-Sep-1999 16:00
- ------------------------------------------------------------------------------------------------------------------------------------
9. ISSUED BY CODE SP4700 10. THIS ACQUISITION IS 11. DELIVER FOR FOB DESTINATION 12. DISCOUNT TERMS
------ UNLESS BLOCK IS MARKED
GSA Administrative Center [X] UNRESTRICTED [ ] SEE SCHEDULE
8725 John J. Kingman Rd. Suite 0119 [ ] SET ASIDE: % FOR -------------------------------------------------------------
FORT BELVOIR, VA 22060-6220 [ ] SMALL BUSINESS [ ] 13a. THIS CONTRACT IS A RATED ORDER
[ ] SMALL DISADV. BUSINESS UNDER DPAS (15 CFR 700)
TEL: 703-767-1212 [ ] 8(A) -------------------------------------------------------------
FAX: 703-767-1183 13b. RATING
SIC: 7372 -------------------------------------------------------------
14. METHOD OF SOLICITATION
SIZE STANDARD: $ [ ] RFQ [ ] IFB [X] RFP
- ------------------------------------------------------------------------------------------------------------------------------------
15. DELIVER TO: CODE 16. ADMINISTERED BY: CODE
---------- -----------
SEE SCHEDULE SEE ITEM 9
- ------------------------------------------------------------------------------------------------------------------------------------
17a. CONTRACTOR/ CODE 944317163 FACILITY 18a. PAYMENT WILL BE MADE BY: CODE 842500
OFFEROR CODE
--------- ---------
PARTNET Defense Accounting Office
ATTN: DENNIS FOSTER DISA ATTN: DC51 701 S. Courthouse Rd.
615 ARAPEEN DRIVE, SUITE 204 ARLINGTON, VA 22204-2199
SALT LAKE CITY, UT 84108
TELEPHONE NO.: 801-883-4629
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] 17b. CHECK IF REMITTANCE IS DIFFERENT AND PUT 18b. SUBMIT INVOICES TO ADDRESS SHOWN IN BLOCK 18a. UNLESS BLOCK
SUCH ADDRESS IN OFFER BELOW IS CHECKED [X] SEE ADDENDUM
- ------------------------------------------------------------------------------------------------------------------------------------
19. ITEM NO. 20. SCHEDULE OF SUPPLIES/SERVICES 21. QUANTITY 22. UNIT 23. UNIT PRICE 24. AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
SEE SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------------
25. ACCOUNTING & APPROPRIATION DATA 26. TOTAL AWARD AMOUNT
AA 9790100. 4300 P98466100 D26 2592 DD2MR97832 842500 $333,680.00 $333,680.00
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] 27a. SOLICITATION INCORPORATES BY REFERENCE FAR 52.212-1, 52.212-4, FAR 52.212-3 AND 52.212-5 ARE ATTACHED.
ADDENDA [ ] ARE [ ] ARE NOT ATTACHED
[ ] 27b. CONTRACT/PURCHASE ORDER INCORPORATES BY REFERENCE FAR 52.212-4, FAR 52.212-5 IS ATTACHED.
ADDENDA [ ] ARE [ ] ARE NOT ATTACHED
- ------------------------------------------------------------------------------------------------------------------------------------
28. CONTRACTOR IS REQUIRED TO SIGN THIS DOCUMENT AND 29. AWARD OF CONTRACT: REFERENCE Proposal
[X] RETURN 1 COPIES TO ISSUING OFFICE. CONTRACTOR AGREES --------
TO FURNISH AND DELIVER ALL ITEMS SET FORTH OR OTHER- [X] OFFER DATED 30-Sep-1999. YOUR OFFER ON SOLICITATION
WISE IDENTIFIED ABOVE AND ON ANY ADDITIONAL SHEETS -----------
SUBJECT TO THE TERMS AND CONDITIONS SPECIFIED HEREIN. (BLOCK 5), INCLUDING ANY ADDITIONS OR CHANGES WHICH ARE
SET FORTH HEREIN, IS ACCEPTED AS TO ITEMS: SEE SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------------
30a. SIGNATURE OF OFFEROR/CONTRACTOR 31a. UNITED STATES OF AMERICA (SIGNATURE OF CONTRACTING OFFICER)
/s/ STEVE BOWEN /s/ CAROL R. LEON
- ------------------------------------------------------------------------------------------------------------------------------------
30b. NAME AND TITLE OF SIGNER 30c. DATE SIGNED 31b. NAME OF CONTRACTING OFFICER (TYPE OR PRINT) 31c. DATE SIGNED
(TYPE OR PRINT) Steve Bowen 9/30/99 CAROL R. LEON 30-Sep-1999
Vice President
- ------------------------------------------------------------------------------------------------------------------------------------
32a. QUANTITY IN COLUMN 21 HAS BEEN 33. SHIP NUMBER 34. VOUCHER NUMBER 35. AMOUNT VERIFIED
ACCEPTED AND CONFORMS CORRECT FOR
[ ] RECEIVED [ ] INSPECTED [ ] TO THE CONTRACT, -----------------------
EXCEPT AS NOTED [ ] PARTIAL [ ] FINAL
- ------------------------------------------------------------------------------------------------------------------------------------
32b. SIGNATURE OF AUTHORIZED GOVT. 32c. DATE 36. PAYMENT 37. CHECK NUMBER
REPRESENTATIVE [ ] COMPLETE [ ] PARTIAL [ ] FINAL
---------------------------------------------------------------------
38. S/R ACCOUNT NUMBER 39. S/R VOUCHER NUMBER 40. PAID BY
- ------------------------------------------------------------------------------------------------------------------------------------
41a. I CERTIFY THIS ACCOUNT IS CORRECT AND PROPER FOR PAYMENT 42a. RECEIVED BY (Print)
41b. SIGNATURE AND TITLE OF 41c. DATE 42b. RECEIVED AT (Location)
CERTIFYING OFFICER
42c. DATA REC'D (YY/MM/DD) 42d. TOTAL CONTAINERS
- ------------------------------------------------------------------------------------------------------------------------------------
AUTHORIZED FOR LOCAL REPRODUCTION STANDARD FORM 1449 (10/95)
Prescribed by GSA
FAR (48 CFR) 53.212
</TABLE>
<PAGE> 196
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
SOLICITATION/CONTRACT/ORDER FOR COMMERCIAL ITEMS 1. REQUISITION NUMBER PAGE 1 OF 14
OFFEROR TO COMPLETE BLOCKS 12, 17, 23, 24, AND 30 DD2MR97832
- ------------------------------------------------------------------------------------------------------------------------------------
2. CONTRACT NO. 3. AWARD/EFFECTIVE DATE 4. ORDER NUMBER 5. SOLICITATION NUMBER 6. SOLICITATION ISSUE DATE
4700-99-C-0010 30-Sep-1999 SP4700-99-R-0020 15-Sep-1999
- ------------------------------------------------------------------------------------------------------------------------------------
7. FOR SOLICITATION a. NAME b. TELEPHONE (No Collect Calls) 8. OFFER DUE DATE/LOCAL TIME
INFORMATION CALL Ronald Zalimas 703-767-1190 20-Sep-1999 16:00
- ------------------------------------------------------------------------------------------------------------------------------------
9. ISSUED BY CODE SP4700 10. THIS ACQUISITION IS 11. DELIVER FOR FOB DESTINATION 12. DISCOUNT TERMS
------ [X] UNRESTRICTED UNLESS BLOCK IS MARKED
GSA Administrative Center [ ] SET ASIDE: % FOR [ ] SEE SCHEDULE
8725 John J. Kingman Rd. Suite 0119 [ ] SMALL BUSINESS -------------------------------------------------------------
FORT BELVOIR, VA 22060-6220 [ ] SMALL DISADV. BUSINESS [ ] 13a. THIS CONTRACT IS A RATED ORDER
[ ] 8(A) UNDER DPAS (15 CFR 700)
TEL: 703-767-1212 -------------------------------------------------------------
FAX: 703-767-1183 SIC: 7372 13b. RATING
-------------------------------------------------------------
14. METHOD OF SOLICITATION
SIZE STANDARD: $ [ ] RFQ [ ] IFB [X] RFP
- ------------------------------------------------------------------------------------------------------------------------------------
15. DELIVER TO: CODE 16. ADMINISTERED BY: CODE
---------- -----------
SEE SCHEDULE SEE ITEM 9
- ------------------------------------------------------------------------------------------------------------------------------------
17a. CONTRACTOR/ CODE 944317163 FACILITY 18a. PAYMENT WILL BE MADE BY: CODE 842500
OFFEROR CODE
--------- ---------
PARTNET Defense Accounting Office
ATTN: DENNIS FOSTER DISA ATTN: DC51 701 S. Courthouse Rd.
615 ARAPEEN DRIVE, SUITE 204 ARLINGTON, VA 22204-2199
SALT LAKE CITY, UT 84108
TELEPHONE NO.: 801-883-4629
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] 17b. CHECK IF REMITTANCE IS DIFFERENT AND PUT 18b. SUBMIT INVOICES TO ADDRESS SHOWN IN BLOCK 18a. UNLESS BLOCK
SUCH ADDRESS IN OFFER BELOW IS CHECKED [X] SEE ADDENDUM
- ------------------------------------------------------------------------------------------------------------------------------------
19. ITEM NO. 20. SCHEDULE OF SUPPLIES/SERVICES 21. QUANTITY 22. UNIT 23. UNIT PRICE 24. AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
SEE SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------------
25. ACCOUNTING & APPROPRIATION DATA 26. TOTAL AWARD AMOUNT
AA 9790100. 4300 P98466100 D26 2592 DD2MR97832 842500 $333,680.00 $333,680.00
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] 27a. SOLICITATION INCORPORATES BY REFERENCE FAR 52.212-1, 52.212-4, FAR 52.212-3 AND 52.212-5 ARE ATTACHED.
ADDENDA [ ] ARE [ ] ARE NOT ATTACHED
[ ] 27b. CONTRACT/PURCHASE ORDER INCORPORATES BY REFERENCE FAR 52.212-4, FAR 52.212-5 IS ATTACHED.
ADDENDA [ ] ARE [ ] ARE NOT ATTACHED
- ------------------------------------------------------------------------------------------------------------------------------------
28. CONTRACTOR IS REQUIRED TO SIGN THIS DOCUMENT AND 29. AWARD OF CONTRACT: REFERENCE Proposal
[X] RETURN 1 COPIES TO ISSUING OFFICE. CONTRACTOR AGREES --------
TO FURNISH AND DELIVER ALL ITEMS SET FORTH OR OTHER- [X] OFFER DATED 30-Sep-1999. YOUR OFFER ON SOLICITATION
WISE IDENTIFIED ABOVE AND ON ANY ADDITIONAL SHEETS ------------
SUBJECT TO THE TERMS AND CONDITIONS SPECIFIED HEREIN. (BLOCK 5), INCLUDING ANY ADDITIONS OR CHANGES WHICH ARE
SET FORTH HEREIN, IS ACCEPTED AS TO ITEMS: SEE SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------------
30a. SIGNATURE OF OFFEROR/CONTRACTOR 31a. UNITED STATES OF AMERICA (SIGNATURE OF CONTRACTING OFFICER)
/s/ STEVE BOWEN
- ------------------------------------------------------------------------------------------------------------------------------------
30b. NAME AND TITLE OF SIGNER 30c. DATE SIGNED 31b. NAME OF CONTRACTING OFFICER (TYPE OR PRINT) 31c. DATE SIGNED
(TYPE OR PRINT) Steve Bowen 9/30/99 30-Sep-1999
Vice President
- ------------------------------------------------------------------------------------------------------------------------------------
32a. QUANTITY IN COLUMN 21 HAS BEEN 33. SHIP NUMBER 34. VOUCHER NUMBER 35. AMOUNT VERIFIED
ACCEPTED AND CONFORMS CORRECT FOR
[ ] RECEIVED [ ] INSPECTED [ ] TO THE CONTRACT, -----------------------
EXCEPT AS NOTED [ ] PARTIAL [ ] FINAL
- ------------------------------------------------------------------------------------------------------------------------------------
32b. SIGNATURE OF AUTHORIZED GOVT. 32c. DATE 36. PAYMENT 37. CHECK NUMBER
REPRESENTATIVE [ ] COMPLETE [ ] PARTIAL [ ] FINAL
---------------------------------------------------------------------
38. S/R ACCOUNT NUMBER 39. S/R VOUCHER NUMBER 40. PAID BY
- ------------------------------------------------------------------------------------------------------------------------------------
41a. I CERTIFY THIS ACCOUNT IS CORRECT AND PROPER FOR PAYMENT 42a. RECEIVED BY (Print)
41b. SIGNATURE AND TITLE OF 41c. DATE 42b. RECEIVED AT (Location)
CERTIFYING OFFICER
42c. DATA REC'D (YY/MM/DD) 42d. TOTAL CONTAINERS
- ------------------------------------------------------------------------------------------------------------------------------------
AUTHORIZED FOR LOCAL REPRODUCTION STANDARD FORM 1449 (10/95)
Prescribed by GSA
FAR (48 CFR) 53.212
</TABLE>
<PAGE> 197
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 2 of 14
- -------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- -------------------------------------------------------------------------------
SECTION SF 1449 CONTINUATION SHEET
- -------------------------------------------------------------------------------
0001 $ $
- -------------------------------------------------------------------------------
EMALL Expansion
FFP - Operation and Maintenance of the DoD Electronic Mall (EMALL) Search
Engine Software in accordance with the attached Statement of Work, and the
Partnet, Inc. proposal dated 30 Sept. 1999, attached.
PURCHASE REQUEST NUMBER DD2MR97832
- -------------------------------------------------------------------------------
0001AA 1,413.00 Hours $150.00 $211,950.00
- -------------------------------------------------------------------------------
Software Engineer
FFP
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
0001AB 216.00 Hours $150.00 $ 32,400.00
- -------------------------------------------------------------------------------
System Administrator
FFP
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
0001AC 423.00 Hours $150.00 $ 63,450.00
- -------------------------------------------------------------------------------
Project Manager
FFP
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
0002 1.00 Lot $30,000.00 $ 30,000.00
- -------------------------------------------------------------------------------
Travel
COST
- -------------------------------------------------------------------------------
ESTIMATED COST $21,380.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
0003 1.00 Lot $ 6,000.00 $ 6,000.00
- -------------------------------------------------------------------------------
Equipment
COST
- -------------------------------------------------------------------------------
ESTIMATED COST $ 4,500.00
- -------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
<PAGE> 198
- --------------------------------------------------------------------------------
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 3 OF 14
- --------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- --------------------------------------------------------------------------------
ACCOUNTING AND APPROPRIATION DATA
<TABLE>
<CAPTION>
CONTRACT FUNDING DATA COST CODE AMOUNT
ACRN
<S> <C> <C> <C>
AA 9790100.4300 P98466100 D26 2592 $333,680.00
DD2MR97832 842500
</TABLE>
<TABLE>
<CAPTION>
FUNDING JOB ORDER NO JOB ORDER JOB ORDER AMOUNT
ACRN QTY
<S> <C> <C> <C>
</TABLE>
CLAUSES INCORPORATED BY REFERENCE:
<TABLE>
<S> <C> <C>
52.203-3 Gratuities APR 1984
52.204-4 Printing/Copying Double-Sided on Recycled Paper JUN 1996
52.209-6 Protecting the Government's Interest When Subcontracting With JUL 1995
Contractors Debarred, Suspended, or Proposed for Debarment
52.222-3 Convict Labor AUG 1996
52.222-21 Prohibition of Segregated Facilities FEB 1999
52.222-26 Equal Opportunity FEB 1999
52.222-35 Affirmative Action for Disabled Veterans and Veterans of the APR 1998
Vietnam Era
52.222-36 Affirmative Action For Workers With Disabilities JUN 1998
52.222-37 Employment Reports On Disabled Veterans And Veterans Of The JAN 1999
Vietnam Era
52.225-11 Restrictions On Certain Foreign Purchases AUG 1998
52.227-1 Authorization and Consent JUL 1995
52.227-2 Notice And Assistance Regarding Patent And Copyright AUG 1996
Infringement
52.229-4 Federal, State And Local Taxes (Noncompetitive Contract) JAN 1991
52.229-5 Taxes -- Contracts Performed In U.S. Possessions Or Puerto Rico APR 1984
52.233-3 Protest After Award AUG 1996
52.242-13 Bankruptcy JUL 1995
52.247-34 F.O.B. Destination NOV 1991
52.253-1 Computer Generated Forms JAN 1991
252.201-7000 Contracting Officer's Representative DEC 1991
252.204-7003 Control Of Government Personnel Work Product APR 1992
252.204-7004 Required Central Contractor Registration MAR 1998
252.209-7004 Subcontracting With Firms That Are Owned or Controlled By The MAR 1998
Government of a Terrorist Country
252.243-7001 Pricing of Contract Modifications DEC 1991
252.243-7002 Requests for Equitable Adjustment MAR 1998
252.246-7000 Material Inspection And Receiving Report DEC 1991
</TABLE>
- --------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR)53.110
<PAGE> 199
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 4 OF 14
- -----------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- -----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
252.247-7023 Transportation of Supplies by Sea NOV 1995
252.247.7024 Notification Of Transportation Of Supplies By Sea NOV 1995
52.202-1 Definitions OCT 1995
52.203-5 Covenant Against Contingent Fees APR 1984
52.203-6 Restrictions On Subcontractor Sales To The Government JUL 1995
52.203-7 Anti-Kickback Procedures JUL 1995
52.203-8 Cancellation, Recission, and Recovery of Funds for JAN 1997
Illegal or Improper Activity
52.203-10 Price Or Fee Adjustment For Illegal Or Improper JAN 1997
Activity
52.203-12 Limitation On Payments To Influence Certain Federal JUN 1997
Transactions
52.215-8 Order of Precedence--Uniform Contract Format OCT 1997
52.215-14 Integrity of Unit Prices OCT 1997
52.215-15 Pension Adjustments and Asset Reversions DEC 1998
52.215-17 Waiver of Facilities Capital Cost of Money OCT 1997
52.215-18 Reversion or Adjustment of Plans for Postretirement OCT 1997
Benefits (PRB) Other than Pensions
52.215-19 Notification of Ownership Changes OCT 1997
52.216-7 Allowable Cost And Payment APR 1998
52.216-11 Cost Contract--No Fee APR 1984
52.223-2 Clean Air And Water APR 1984
52.223-6 Drug Fee Workplace JAN 1997
52.228-7 Insurance--Liability To Third Persons MAR 1996
52.232-1 Payments APR 1984
52.232-6 Payment Under Communication Service Contracts with APR 1984
Common Carriers
52.232-9 Limitation On Withholding Of Payments APR 1984
52.232-17 Interest JUN 1996
52.232-20 Limitation Of Cost APR 1984
52.232-23 Alt I Assignment of Claims (Jan 1986) - Alternate I APR 1984
52.232-25 Prompt Payment JUN 1997
52.233-1 Disputes DEC 1998
52.233-3 Alt I Protest After Award (Aug 1996) - Alternate I JUN 1985
52-242-1 Notice of Intent to Disallow Costs APR 1984
52.242-4 Certification of Final Indirect Costs JAN 1997
52.244-2 Alt I Subcontracts (Aug 1998) - Alternate I AUG 1998
52.244-5 Competition In Subcontracting DEC 1996
52.245-5 (Dev) Government Property (Cost-Reimbursement, JAN 1986
Time-and-Material, or Labor-Hour Contracts) (Deviation)
52.249-2 Termination For Convenience Of The Government SEP 1996
(Fixed-Price)
52.249-6 Termination (Cost Reimbursement) SEP 1996
52.249-14 Excusable Delays APR 1984
252.203-7001 Prohibition On Persons Convicted of Fraud or Other MAR 1999
Defense-Contract-Related Felonies
252.209-7000 Acquisition From Subcontractors Subject To On-Site NOV 1995
Inspection Under The Intermediate Range Nuclear Forces
(INF) Treaty
252.239-7002 Access DEC 1991
252.239-7003 Facilities And Services To Be Furnished--Common DEC 1991
Carriers
252.239-7004 Orders For Facilities And Services--Common Carriers DEC 1991
</TABLE>
- -----------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
<PAGE> 200
- --------------------------------------------------------------------------------
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING PAGE 5 OF 14
CONTINUED SP4700-99-C-0010
- --------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
252.239-7005 Rates, Charges, And Services--Common Carriers DEC 1991
252.239-7006 Tariff Information JUL 1997
252.239-7007 Cancellation Or Termination Of Orders--Common Carriers JAN 1997
252.239-7008 Reuse Arrangements DEC 1991
252.239-7012 Title To Telecommunication Facilities And Equipment DEC 1991
252.239-7013 Obligation Of The Government DEC 1991
252.239-7014 Term Of Agreement DEC 1991
252.242-7004 Material Management And Accounting System SEP 1996
252.245-7001 Reports of Government Property MAY 1994
</TABLE>
CLAUSES INCORPORATED BY FULL TEXT
52.252-2 CLAUSES INCORPORATED BY REFERENCE (FEB 1998)
This contract incorporates one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available. Also, the full text of
a clause may be accessed electronically at this/these address(es):
http://www.arnet.gov/far/
52.215-21 REQUIREMENTS FOR COST OR PRICING DATA OR INFORMATION OTHER THAN
COST OR PRICING DATA-MODIFICATIONS (OCT 1997)
(a) Exceptions from cost or pricing data. (1) In lieu of submitting cost or
pricing data for modifications under this contract, for price adjustments
expected to exceed the threshold set forth at FAR 15.403-4 on the date of the
agreement on price or the date of the award, whichever is later, the Contractor
may submit a written request for exception by submitting the information
described in the following subparagraphs. The Contracting Officer may require
additional supporting information, but only to the extent necessary to
determine whether an exception should be granted, and whether the price is fair
and reasonable--
(i) Identification of the law or regulation establishing the price offered. If
the price is controlled under law by periodic rulings, reviews, or similar
actions of a governmental body, attach a copy of the controlling document,
unless it was previously submitted to the contracting office.
(ii) Information on modifications of contracts or subcontracts for commercial
items. (A) If--
(1) The original contract or subcontract was granted an exception from cost
or pricing data requirements because the price agreed upon was based on
adequate price competition or prices set by law or regulation, or was a contract
or subcontract for the acquisition of a commercial item; and
(2) The modification (to the contract or subcontract) is not exempted based on
one of these exceptions, then the Contractor may provide information to
establish that the modification would not change the contract or subcontract
from a contract or subcontract for the acquisition of a commercial item to a
contract or subcontract for the acquisition of an item other than a commercial
item.
- --------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
<PAGE> 201
- --------------------------------------------------------------------------------
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING PAGE 6 OF 14
CONTINUED SP4700-99-C-0010
- --------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- --------------------------------------------------------------------------------
(B) For a commercial item exception, the Contractor shall provide, at a
minimum, information on prices at which the same item or similar items have
previously been sold that is adequate for evaluating the reasonableness of the
price of the modification. Such information may include--
(1) For catalog items, a copy of or identification of the catalog and its
date, or the appropriate pages for the offered items, or a statement that the
catalog is on file in the buying office to which the proposal is being
submitted. Provide a copy or describe current discount policies and price lists
(published or unpublished), e.g., wholesale, original equipment manufacturer,
or reseller. Also explain the basis of each offered price and its relationship
to the established catalog price, including how the proposed price relates to
the price of recent sales in quantities similar to the proposed quantities.
(2) For market-priced items, the source and date or period of the market
quotation or other basis for market price, the base amount, and applicable
discounts. In addition, describe the nature of the market.
(3) For items included on an active Federal Supply Service Multiple Award
Schedule contract, proof that an exception has been granted for the schedule
item.
(2) The Contractor grants the Contracting Officer or an authorized
representative the right to examine, at any time before award, books, records,
documents, or other directly pertinent records to verify any request for an
exception under this clause, and the reasonableness of price. For items priced
using catalog or market prices, or law or regulation, access does not extend to
cost or profit information or other data relevant solely to the Contractor's
determination of the prices to be offered in the catalog or marketplace.
(b) Requirements for cost or pricing data. If the Contractor is not granted an
exception from the requirement to submit cost or pricing data, the following
applies:
(1) The Contractor shall submit cost or pricing data and supporting
attachments in accordance with Table 15-2 of FAR 15.408.
As soon as practicable after agreement on price, but before award (except for
unpriced actions), the Contractor shall submit a Certificate of Current Cost or
Pricing Data, as prescribed by FAR 15.406-2.
52.222-2 PAYMENT FOR OVERTIME PREMIUMS (JUL 1990)
(a) The use of overtime is authorized under this contract if the overtime
premium cost does not exceed or the overtime premium is paid for work--
(1) Necessary to cope with emergencies such as those resulting from accidents,
natural disasters, breakdowns of production equipment, or occasional production
bottlenecks of a sporadic nature;
(2) By indirect-labor employees such as those performing duties in connection
with administration, protection, transportation, maintenance, standby plant
protection, operation of utilities, or accounting;
(3) To perform tests, industrial processes, laboratory procedures, loading or
unloading of transportation
- --------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
<PAGE> 202
- --------------------------------------------------------------------------------
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 7 OF 14
- --------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- --------------------------------------------------------------------------------
conveyances, and operations in flight or afloat that are continuous in nature
and cannot reasonably be interrupted or completed otherwise; or
(4) That will result in lower overall costs to the Government.
(b) Any request for estimated overtime premiums that exceeds the amount
specified above shall include all estimated overtime for contract completion
and shall --
(1) Identify the work unit; e.g., department or section in which the requested
overtime will be used, together with present workload, staffing, and other data
of the affected unit sufficient to permit the Contracting Officer to evaluate
the necessity for the overtime;
(2) Demonstrate the effect that denial of the request will have on the contract
delivery or performance schedule;
(3) Identify the extent to which approval of overtime would affect the
performance or payments in connections with other Government contracts,
together with identification of each affected contract; and
(4) Provide reasons why the required work cannot be performed by using
multishift operations or by employing additional personnel.
(End of clause)
52.244-6 SUBCONTRACTS FOR COMMERCIAL ITEMS AND COMMERCIAL COMPONENTS (OCT 1998)
(a) Definitions.
"Commercial item", as used in this clause, has the meaning contained in the
clause at 52.202-1, Definitions.
"Subcontract", as used in this clause, includes a transfer of commercial items
between divisions, subsidiaries, or affiliates of the Contractor or
subcontractor at any tier.
(b) To the maximum extent practicable, the Contractor shall incorporate, and
require its subcontractors at all tiers to incorporate, commercial items or
nondevelopmental items as components of items to be supplied under this
contract.
(c) Notwithstanding any other clause of this contract, the Contractor is not
required to include any FAR provisions or clause, other than those listed below
to the extent they are applicable and as may be required to establish the
reasonableness of prices under Part 15, in a subcontract at any tier for
commercial items or commercial components:
(1) 52.222-16, Equal Opportunity (E.O. 11246);
(2) 52.222-35, Affirmative Action for Disabled Veterans and Veterans of the
Vietnam Era (38 U.S.C. 4212(a));
(3) 52.222-36, Affirmative Action for Workers with Disabilities (29 U.S.C.
793); and
(4) 52.247-64, Preference for Privately-Owned U.S.-Flagged Commercial Vessels
(46 U.S.C. 1241) (flow down not required for subcontracts awarded beginning
May 1, 1996).
- --------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR)53.110
<PAGE> 203
- --------------------------------------------------------------------------------
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 9 OF 14
- --------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- --------------------------------------------------------------------------------
"Contracting office" includes any contracting office that the acquisition is
transferred to, such as another branch of the agency or another agency's office
that is performing a joint acquisition action.
"Contractor's development and implementation costs," as used in this clause,
means those costs the Contractor incurs on a VECP specifically in developing,
testing, preparing, and submitting the VECP, as well as those costs the
Contractor incurs to make the contractual changes required by Government
acceptance of a VECP.
"Future unit cost reduction," as used in this clause, means the instant unit
cost reduction adjusted as the Contracting Officer considers necessary for
projected learning or changes in quantity during the sharing period. It is
calculated at the time the VECP is accepted and applies either (1) throughout
the sharing period, unless the Contracting Officer decides the recalculation is
necessary because conditions are significantly different from those previously
anticipated or (2) to the calculation of a lump-sum payment, which cannot later
be revised.
"Government costs," as used in this clause, means those agency costs that
result directly from developing and implementing the VECP, such as any net
increases in the cost of testing, operations, maintenance, and logistics
support. The term does not include the normal administrative costs of
processing the VECP or any increase in this contract's cost or price resulting
from negative instant contract savings.
"Instant contract," as used in this clause, means this contract, under which
the VECP is submitted. It does not include increases in quantities after
acceptance of the VECP that are due to contract modifications, exercise of
options, or additional orders. If this is a multiyear contract, the term does
not include quantities funded after VECP acceptance. If this contract is a
fixed-price contract with prospective price redetermination, the term refers to
the period for which firm prices have been established.
"Instant unit cost reduction" means the amount of the decrease in unit cost of
performance (without deducting any Contractor's development or implementation
costs) resulting from using the VECP on this, the instant contract. If this is
a service contract, the instant unit cost reduction is normally equal to the
number of hours per line-item task saved by using the VECP on this contract,
multiplied by the appropriate contract labor rate.
"Negative instant contract savings" means the increase in the cost or price of
this contract when the acceptance of a VECP results in an excess of the
Contractor's allowable development and implementation costs over the product of
the instant unit cost reduction multiplied by the number of instant contract
units affected.
"Net acquisition savings" means total acquisition savings, including instant,
concurrent, and future contract savings, less Government costs.
"Sharing base," as used in this clause, means the number of affected end items
on contracts of the contracting office accepting the VECP.
"Sharing period," as used in this clause, means the period beginning with
acceptance of the first unit incorporating the VECP and ending at the later of
(1) 3 years after the first unit affected by the VECP is accepted or (2) the
last scheduled delivery date of an item affected by the VECP under this
contract's delivery schedule in effect at the time the VECP is accepted.
"Unit," as used in this clause, means the item or task to which the Contracting
Officer and the Contractor agree the VECP applies.
- --------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
<PAGE> 204
- --------------------------------------------------------------------------------
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 10 OF 14
- --------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- --------------------------------------------------------------------------------
"Value engineering change proposal (VECP)" means a proposal that--
(1) Requires a change to this, the instant contract, to implement; and
(2) Results in reducing the overall projected cost to the agency without
impairing essential functions or characteristics; provided, that it does not
involve a change--
(i) In deliverable end item quantities only;
(ii) In research and development (R&D) end items or R&D test quantities that is
due solely to results of previous testing under this contract; or
(iii) To the contract type only.
(c) VECP preparation. As a minimum, the Contractor shall include in each VECP
the information described in subparagraphs (1) through (8) below. If the
proposed change is affected by contractually required configuration management
or similar procedures, the instructions in those procedures relating to format,
identification, and priority assignment shall govern VECP preparation. The VECP
shall include the following:
(1) A description of the difference between the existing contract requirement
and the proposed requirement, the comparative advantages and disadvantages of
each, a justification when an item's function or characteristics are being
altered, the effect of the change on the end item's performance, and any
pertinent objective test data.
(2) A list and analysis of the contract requirements that must be changed if
the VECP is accepted, including any suggested specification revisions.
(3) Identification of the unit to which the VECP applies.
(4) A separate, detailed cost estimate for (i) the affected portions of the
existing contract requirement and (ii) the VECP. The cost reduction associated
with the VECP shall take into account the Contractor's allowable development and
implementation costs, including any amount attributable to subcontracts under
the Subcontracts paragraph of this clause, below.
(5) A description and estimate of costs the Government may incur in implementing
the VECP, such as test and evaluation and operating and support costs.
(6) A prediction of any effects the proposed change would have on collateral
costs to the agency.
(7) A statement of the time by which a contract modification accepting the VECP
must be issued in order to achieve the maximum cost reduction, noting any effect
on the contract completion time or delivery schedule.
(8) Identification of any previous submissions of the VECP, including the dates
submitted, the agencies and contract numbers involved, any previous Government
actions, if known.
(d) Submission. The Contractor shall submit VECP's to the Contracting Officer,
unless this contract states otherwise. If this contract is administered by other
than the contracting office, the Contractor shall submit a copy of the VECP
simultaneously to the Contracting Officer and to the Administrative Contracting
Officer.
- --------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR)53.110
<PAGE> 205
- --------------------------------------------------------------------------------
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 11 OF 14
- --------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- --------------------------------------------------------------------------------
(e) Government action. (1) The Contracting Officer shall notify the Contractor
of the status of the VECP within 45 calendar days after the contracting office
receives it. If additional time is required, the Contracting Officer shall
notify the Contractor within the 45-day period and provide the reason for the
delay and the expected date of the decision. The Government will process VECP's
expeditiously; however, it shall not be liable for any delay in acting upon a
VECP.
(2) If the VECP is not accepted, the Contracting Officer shall notify the
Contractor in writing, explaining the reasons for rejection. The Contractor may
withdraw any VECP, in whole or in part, at any time before it is accepted by
the Government. The Contracting Officer may require that the Contractor provide
written notification before undertaking significant expenditures for VECP
effort.
(3) Any VECP may be accepted, in whole or in part, by the Contracting Officer's
award of a modification to this contract citing this clause and made either
before or within a reasonable time after contract performance is completed.
Until such a contract modification applies a VECP to this contract, the
Contractor shall perform in accordance with the existing contract. The
Contracting Officer's decision to accept or reject all or part of any VECP and
the decision as to which of the sharing rates applies shall be final and not
subject to the Disputes clause or otherwise subject to litigation under the
Contract Disputes Act of 1978 (41 U.S.C. 601-613).
(f) Sharing rates. If a VECP is accepted, the Contractor shall share in net
acquisition savings according to the percentages shown in the table below. The
percentage paid the Contractor depends upon (1) this contract's type
(fixed-price, incentive, or cost-reimbursement), (2) the sharing arrangement
specified in paragraph (a) above (incentive, program requirement, or a
combination as delineated in the Schedule), and (3) the source of the savings
(the instant contract, or concurrent and future contracts), as follows:
CONTRACTOR'S SHARE OF NET ACQUISITION SAVINGS
(figures in percent)
<TABLE>
<CAPTION>
Sharing Arrangement
Incentive Program
Contract Type (voluntary) requirement
(mandatory)
Instant Concurrent Instant Concurrent
contract and future contract and future
rate rate rate rate
<S> <C> <C> <C> <C>
Fixed-price (Other than
incentive) 50/50 50/50 75/25 75/25
Incentive (fixed-price
or cost 50/50 75/25
Cost-reimbursement
(other than incentive) 75/25 75/25 85/15 85/1
</TABLE>
(g) Calculating net acquisition savings.
(l) Acquisition savings are realized when (i) the cost or price is reduced on
the instant contract, (ii) reductions are negotiated in concurrent contracts,
(iii) future contracts are awarded, or (iv) agreement is reached on a lump-sum
- --------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
<PAGE> 206
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 12 of 14
- -------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- -------------------------------------------------------------------------------
payment for future contract savings (see subparagraph (i)(4) below). Net
acquisition savings are first realized, and the Contractor shall be paid a
share, when Government costs and any negative instant contract savings have been
fully offset against acquisition savings.
(2) Except in incentive contracts, Government costs and any price or cost
increases resulting from negative instant contract savings shall be offset
against acquisition savings each time such savings are realized until they are
fully offset. Then, the Contractor's share is calculated by multiplying net
acquisition savings by the appropriate Contractor's percentage sharing rate (see
paragraph (f) above). Additional Contractor shares of net acquisition savings
shall be paid to the Contractor at the time realized.
(3) If this is an incentive contract, recovery of Government costs on the
instant contract shall be deferred and offset against concurrent and future
contract savings. The Contractor shall share through the contract incentive
structure in savings on the instant contract items affected. Any negative
instant contract savings shall be added to the target cost or to the target
price and ceiling price, and the amount shall be offset against concurrent and
future contract savings.
(4) If the Government does not receive and accept all items on which it paid
the Contractor's share, the Contractor shall reimburse the Government for the
proportionate share of these payments.
(h) Contract adjustment. The modification accepting the VECP (or a subsequent
modification issued as soon as possible after any negotiations are completed)
shall --
(1) Reduce the contract price or estimated cost by the amount of instant
contract savings, unless this is an incentive contract;
(2) When the amount of instant contract savings is negative, increase the
contract price, target price and ceiling price, target cost, or estimated cost
by that amount;
(3) Specify the Contractor's dollar share per unit on future contracts, or
provide the lump-sum payment;
(4) Specify the amount of any Government costs or negative instant contract
savings to be offset in determining net acquisition savings realized from
concurrent or future contract savings; and
(5) Provide the Contractor's share of any net acquisition savings under the
instant contract in accordance with the following:
(i) Fixed-price contracts -- add to contract price.
(ii) Cost-reimbursement contracts -- add to contract fee.
(i) Concurrent and future contract savings.
(I) Payments of the Contractor's share of concurrent and future contract
savings shall be made by a modification to the instant contract in accordance
with subparagraph (h)(5) above. For incentive contracts, shares shall be added
as a separate firm-fixed-price line item on the instant contract. The Contractor
shall maintain records adequate to identify the first delivered unit for 3 years
after final payment under this contract.
- -------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
<PAGE> 207
- --------------------------------------------------------------------------------
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 13 OF 14
- --------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- --------------------------------------------------------------------------------
(2) The Contracting Officer shall calculate the Contractor's share of
concurrent contract savings by (i) subtracting from the reduction in price
negotiated on the concurrent contract any Government costs or negative instant
contract savings not yet offset and (ii) multiplying the result by the
Contractor's sharing rate.
(3) The Contracting Officer shall calculate the Contractor's share of future
contract savings by (i) multiplying the future unit cost reduction by the
number of future contract units scheduled for delivery during the sharing
period, (ii) subtracting any Government costs or negative instant contract
savings not yet offset, and (iii) multiplying the result by the Contractor's
sharing rate.
(4) When the Government wishes and the Contractor agrees, the Contractor's
share of future contract savings may be paid in a single lump sum rather than
in a series of payments over time as future contracts are awarded. Under this
alternate procedure, the future contract savings may be calculated when the
VECP is accepted, on the basis of the Contracting Officer's forecast of the
number of units that will be delivered during the sharing period. The
Contractor's share shall be included in a modification to this contract (see
subparagraph (h)(3) above) and shall not be subject to subsequent adjustment.
(5) Alternate no-cost settlement method. When, in accordance with subsection
48.104-3 of the Federal Acquisition Regulation, the Government and the
Contractor mutually agree to use the no-cost settlement method, the following
applies:
(i) The Contractor will keep all the savings on the instant contract and on its
concurrent contracts only.
(ii) The Government will keep all the savings resulting from concurrent
contracts placed on other sources, savings from all future contracts, and all
collateral savings.
(j) Collateral savings. If a VECP is accepted, the instant contract amount
shall be increased, as specified in subparagraph (h)(5) above, by 20 percent of
any projected collateral savings determined to be realized in a typical year of
use after subtracting any Government costs not previously offset. However, the
Contractor's share of collateral savings shall not exceed (1) the contract's
firm-fixed-price, target price, target cost, or estimated cost, at the time the
VECP is accepted, or (2) $100,000, whichever is greater. The Contracting
Officer shall be the sole determiner of the amount of collateral savings, and
that amount shall not be subject to the Disputes clause or otherwise subject to
litigation under 41 U.S.C. 601-613.
(k) Relationship to other incentives. Only those benefits of an accepted VECP
not rewardable under performance, design-to-cost (production unit cost,
operating and support costs, reliability and maintainability), or similar
incentives shall be rewarded under this clause. However, the targets of such
incentives affected by the VECP shall not be adjusted because of VECP
acceptance. If this contract specifies targets but provides no incentive to
surpass them, the value engineering sharing shall apply only to the amount of
achievement better than target.
(l) Subcontracts. The Contractor shall include an appropriate value engineering
clause in any subcontract of $100,000 or more and may include one in
subcontracts of lesser value. In calculating any adjustment in this contract's
price for instant contract savings (or negative instant contract savings), the
Contractor's allowable development and implementation costs shall include any
subcontractor's allowable development and implementation costs, and any value
engineering incentive payments to a subcontractor, clearly resulting from a
VECP accepted by the Government under this contract. The Contractor may choose
any arrangement for subcontractor value engineering incentive payments;
provided, that the payments shall not reduce the Government's share of
concurrent or future contract savings or collateral savings.
- --------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR)53.110
<PAGE> 208
- --------------------------------------------------------------------------------
CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED PAGE
SP4700-99-C-0010 14 OF 14
- --------------------------------------------------------------------------------
NAME OF OFFEROR OR CONTRACTOR
PARTNET
- --------------------------------------------------------------------------------
(m) Data. The Contractor may restrict the Government's right to use any part of
a VECP or the supporting data by marking the following legend on the affected
parts:
"These data, furnished under the Value Engineering clause of contract .........,
shall not be disclosed outside the Government or duplicated, used, or
disclosed, in whole or in part, for any purpose other than to evaluate a value
engineering change proposal submitted under the clause. This restriction does
not limit the Government's right to use information contained in these data if
it has obtained or is otherwise available from the Contractor or from another
source without limitations."
If a VECP is accepted, the Contractor hereby grants the Government unlimited
rights in the VECP and supporting data, except that, with respect to data
qualifying and submitted as limited rights technical data, the Government shall
have the rights specified in the contract modification implementing the VECP
and shall appropriately mark the data. (The terms "unlimited rights" and
"limited rights" are defined in Part 27 of the Federal Acquisition Regulation.)
252.239-7015 CONTINUATION OF COMMUNICATION SERVICE AUTHORIZATIONS (DEC 1991)
(a) All communication service authorizations (CSAs) issued by _____ under Basic
Agreement Number _____, dated , are transferred to this basic agreement.
The CSAs shall continue in full force and effect as though placed under this
agreement.
(b) Communication service authorizations currently in effect which were issued
by the activity in paragraph (a) of this clause under other agreements with the
Contractor may also be transferred to this agreement.
(End of clause)
- --------------------------------------------------------------------------------
NSN 7540-01-152-8057 50336-101 OPTIONAL FORM 336A (4-86)
Sponsored by GSA
FAR (48 CFR)53.110
<PAGE> 1
EXHIBIT 10.28
AVENIR(TM) PROPOSAL FOR
HS.COM
G. SYSTEM / DATA LICENSE AGREEMENT
This is a Data License Agreement (Agreement) effective 9/30/98 (Effective Date)
between Healthdemographics, Inc. (a Delaware Corporation) (HD) with principal
offices at 4901 Morena Blvd., Suite 701, San Diego, CA 92117 and HS.com
(Company) with principal offices at 380 Vista Abierta, El Cajon, CA 92019.
Definitions:
a. "AVENIR and HealthPacs" Data are HD proprietary products that include
demographic data, population based models of the incidence of diseases by
category, estimates of the demand for services (inpatient, outpatient,
physician services, etc.). These models present estimates of the current
demand and forecasts of the changes in demand that can be anticipated over
the next five (5) years, as described in Health-demographics most recent
documentation.
b. For purposes of this Agreement, "Product" or "Products" shall be defined
as (a) each Product designated in this Agreement, including but not
limited to AVENIR and HealthPacs; and (b) any materials, know-how and
technical information provided to Company in written form for use in
connection with each Product.
Grant of License:
a. AVENIR/HealthPacs; Subject to the terms and conditions of this Agreement,
HD hereby grants to Company, a non-exclusive, non transferable license to
use certain AVENIR/ HealthPacs databases specified in Exhibit A, attached
hereto and incorporated herein, to create specialized reports to be sold
in conjunction with Company's services to Company's customers. Company
shall not resell in whole or in part the HealthPac databases. All other
uses of the Product are strictly prohibited under the terms of this
agreement.
b. Company may not authorize third parties to use or market the Product, or
any part thereof.
c. All reports, maps and databases generated by the AVENIR System that
contain Healthdemographics content shall reference Healthdemographics as
the source of the data.
<PAGE> 2
AVENIR(TM) PROPOSAL FOR
HS.COM
Access to the Product:
a. Delivery: Upon execution of this Agreement, HD will deliver the Product to
the Company in the format outlined in Exhibit A.
b. Product Changes: HD reserves the right to make any changes, modifications
or enhancements to the Product during the term of the Agreement as long as
they do not diminish the quality of or substantially alter the content of
said Product.
Term of License: The term of license granted hereunder shall commence upon the
Effective Date specified herein and continue for one (1) year.
Payment: Company agrees to pay HD an annual license fee for the AVENIR/HealthPac
data of $120,000. The first payment of $40,000 will be due Net 60 from product
delivery. The second payment of $40,000 will be due Net 150, and the third
payment of $40,000 will be due Net 180. Company is responsible for all
applicable use and sales taxes.
HD Support:
a. HD agrees that during the term of this Agreement, HD will furnish all
modifications, enhancements and corrections to the Product necessary to
fulfill its obligations to Company under the Agreement.
b. Company shall be entitled during the term of this Agreement to the
following products and services from HD at no additional charge: (1) one
copy of each appropriate user manual, (2) use of all Product
modifications, improvements, and updates, and (3) toll free telephone
support Monday through Friday, 8:00 a.m. to 5:00 p.m. Pacific Time,
excluding legal holidays, for all authorized personnel within Company's
organization.
Copying the Product: Other than a single copy for backup and archival purposes,
Company shall make no copies of the Product or any part thereof without the
express written consent of HD.
Limitation of Liability: HD shall not be responsible for any statement or
representation made in regard to the Product by an employee of Company.
<PAGE> 3
AVENIR(TM) PROPOSAL FOR
HS.COM
OTHER THAN AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, HD MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY,
FITNESS FOR ANY PARTICULAR PURPOSE OR OTHERWISE WITH RESPECT TO THE PRODUCT, NOR
SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES EVEN IF HD
HAS BEEN OR IS HEREAFTER ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. In no event
shall HD's liability to Company, under this Agreement, if any exceed the amount
of payments made by Company to HD under this Agreement.
Ownership of Product: The Product shall at all times be and remain the sole and
exclusive property of HD. It is mutually agreed that this Agreement involves a
license for the use of the Product and that nothing contained herein shall be
deemed to convey any title or ownership in the Product to Company.
Termination: Either party may terminate this Agreement if (a) the other party
commits a breach of the Agreement, and (b) said breach has not been cured to the
reasonable satisfaction of the non-breaching party within thirty (30) days of
receipt of written notice from the non-breaching party stating the nature of
said breach, and delivered by registered or certified mail.
Indemnification by HD: HD represents and warrants that it has title or
proprietary rights to license the Product, and/or to sublicense any aspect of
the Product to which HD does not have title or proprietary rights. HD shall
defend, indemnify and hold Company harmless from any claim that any part of the
Product infringes an any third party, provided that HD is notified within 90
days by Company of such claim. HD shall have sole control of the defense with
respect to the claim (including settlement of such claim) unless HD agrees
otherwise.
Indemnification by Company: Company shall defend, indemnify and hold HD harmless
from and against any losses, damages, claims, demands, suits and liabilities
(including reasonable attorney's fees) that may directly or indirectly result
from Company's use of the Product.
Survival of Obligations: HD and Company's obligations under this Agreement which
by their nature would continue beyond the termination, cancellation or
expiration of this Agreement, including by way of illustration only and not
limitation, those in clause "Limitation of Liability" shall survive
termination, cancellation or expiration of this Agreement.
<PAGE> 4
AVENIR(TM) PROPOSAL FOR
HS.COM
Notices: Any notice to be given under the Agreement shall be given in writing
delivered to the address of each party set forth, or to such other address as
either party may designate by written notice to the other.
Assignments: This Agreement may not be assigned by either party in whole or in
part, except to subsidiaries or affiliates, without prior written consent of the
other party. Any attempted assignment absent such consent shall be void.
General Provisions: Should any provision of this Agreement be held by a tribunal
of competent jurisdiction to be contrary to law, the remaining provisions shall
remain in full force and effect. This Agreement constitutes the entire
understanding between HD and Company and may not be altered except by a written
contract signed by authorized representatives of HD and Company. The terms and
conditions of this Agreement are offered and valid until September 30, 1998.
Please sign and return two copies of this agreement. This provides original,
signed copies to HS.com and Healthdemographics.
Accepted and Agreed:
Healthdemographics HS.com
4901 Morena Blvd. 380 Vista Abierta
Suite 701 El Cajon, CA 92019
San Diego, CA 92117
/s/ M.D. Chermak /s/ C.R. Smith
- ---------------------------- --------------------------------------
Michael D. Chermak Charles Smith, President
Chief Operating Officer Printed Name/Title
Date: 9/29/98 Date: 9/29/98
<PAGE> 5
AVENIR(TM) PROPOSAL FOR
HS.COM
EXHIBIT A
PRODUCT LICENSES
A. AVENIR/HealthPac Database License
The following HealthPacs are included for the entire United States, by Zip
Code, County, and State:
HealthPac Databases:
<TABLE>
<S> <C> <C> <C>
1. Ambulatory [X] 9. Managed Care (county level only) [X]
2. Behavioral Medicine [ ] 10. Pediatrics [ ]
3. Cancer [ ] 11. Provider Inventory [X]
4. Cardiovascular [ ] 12. Rehabilitation [ ]
5. Demographic [X] 13. Renal Care [X]
6. DRG [X] 14. Respiratory [ ]
7. Eyecare [ ] 15. Senior [X]
8. Hispanic [ ] 16. Women's Care [X]
</TABLE>
Additional Data Included
Hospital MedPar and Nursing Home Cost Database
Mailing list databases for: Hospitals, Diagnostic Imaging Centers, Kidney
Dialysis Centers, Nursing Homes, Ambulatory Care Centers, Outpatient Surgery
Centers, and Medical Device, Supply, and Equipment Manufactures and
Distributors. These mailing lists will be geocoded, and will contain contact
names and phone numbers.
B. License Title and Product Return: HD shall retain all rights and title to the
licensed Products described herein. Upon expiration of this Agreement, Company
shall return to HD all licensed Products within five (5) business days.
Use and Transferability: The AVENIR/HealthPac Product database access is
licensed for twelve concurrent users. Company may physically transfer the
Product from one computer to another provided the Product is used on only twelve
computers at a time. Company may not distribute copies of the Avenir software
application to others.
<PAGE> 6
AVENIR(TM) PROPOSAL FOR
HS.COM
ADDENDUM TO
SYSTEM/DATA LICENSE AGREEMENT
This Addendum is attached to and made a part thereof of the System/Data License
Agreement (Agreement) between Healthdemographics (HD) and HS.com, Inc. (Company)
executed on September 29,1998 (date). This Addendum shall have the same binding
force and effect on all parties hereto as does the Agreement, and shall take
precedence over any and all conflicting or contrary language contained in the
Agreement or prior Addenda. HD and Company agree as follows:
In consideration of payment to Healthdemographics of the additional sum of
$250,000.00, Healthdemographics covenants and agrees that during the initial
term-year of this Agreement it shall not license (the product) to any other
party for use in the business of Internet-based sales or purchases of medical
supplies, devices or equipment; provided, however, that this covenant shall not
apply to other pre-existing current licensees of (the product) from
Healthdemographics whose license agreements do not contain such a restriction on
usage.
Payment is due Net 90 from the execution of this Addendum.
Agreed and Accepted.
Healthdemographics HS.com
4901 Morena Blvd. 380 Vista Abierta
Suite 701 El Cajon, CA 92019
San Diego, CA 92117
/s/ Michael Chermak /s/ Ben Carter, CFO
- ------------------------------- ---------------------------------------
Michael D. Chermak, COO Signature & Title
Date: 12/24/98 Date: 12/24/98
<PAGE> 1
EXHIBIT 10.29
SUPPLYLINE(R) LICENSE AGREEMENT
This AGREEMENT (the "AGREEMENT") is executed as of this 13th day of
October, 1999, (the "EXECUTION DATE") with certain provisions as described
herein to be effective as of October 15, 1999 (the "EFFECTIVE DATE") by and
between OWEN HEALTHCARE, INC. ("OWEN"), a Texas Corporation with its principal
place of business located at 1330 Enclave Parkway, Houston, Texas 77077, and
MEDIBUY.COM, INC. ("CLIENT"), a Delaware Corporation with its principal place of
business located at 7777 Alvarado Road, La Mesa, California 91941.
RECITALS
WHEREAS, OWEN has created and is the sole owner of a supply database
product known as Supplyline(R), a tool for the management of healthcare supply
cost, utilization, and purchasing contract compliance,
WHEREAS, Supplyline(R) is a database of information which is designed to
link supply manufacturer assigned Bar Code Numbers to OWEN designed
Supplyline(R) Product Classification Number (incorporating categories, product
lines, class codes, product codes manufacturer and/or distributor data) and
Supplyline(R) Product Classification Numbers to Supplyline(R) Reference Numbers
("SUPPLYLINE(R) SYSTEM"),
WHEREAS, CLIENT is an Internet Infomediary organization supporting
healthcare providers, and wishes to use Supplyline information in its internal
business activities,
WHEREAS, the parties desire to memorialize their agreements,
NOW, THEREFORE, for and in consideration of the agreements contained
herein, the adequacy of which consideration is hereby acknowledged and
confessed, the parties hereby agree as follows:
PROVIDED BY OWEN. OWEN will provide CLIENT with the following.
OWEN agrees to provide CLIENT with the applicable license and data files
listed in EXHIBIT A. The license will allow the CLIENT access to all
Supplyline(R) listings, including invoice price data. The data fields included
for the license type selected by CLIENT are listed in EXHIBIT A. The data files
will be provided to client via CD ROM or other mutually agreed upon medium or
media and updated monthly. The initial delivery of data files shall be made
following receipt of the initial installment of the applicable License Fee. The
amount of the License fee(s) due from CLIENT to OWEN will be calculated using
EXHIBIT B. OWEN agrees the SUPPLYLINE(R) SYSTEM will
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be readable and useable by CLIENT. OWEN agrees to provide its standard level of
support to CLIENT for the implementation of the SUPPLYLINE(R) SYSTEM.
PROVIDED BY CLIENT. CLIENT agrees to provide OWEN with the following.
CLIENT agrees to provide OWEN with line item invoice data for all
purchases processed by CLIENT on a monthly basis. Invoice data must contain
distributor and or manufacturer, product description, catalog number, purchase
quantity, purchase unit of measure, quantity per unit of measure, price paid for
item, invoice date, and invoice number. OWEN agrees to use CLIENT supplied data
solely for the purpose of adding price information to the price comparison
portion of the database. No information supplied by CLIENT will be identifiable
as originating from CLIENT to any other licensee or will be used by OWEN for any
other purposes than adding price information to the price comparison portion of
the database.
COMPENSATION. Client agrees to pay OWEN as described below.
1. Supplyline(R) Licensing Fee: Pursuant to EXHIBIT B, CLIENT shall
pay to OWEN those License fees set forth in EXHIBIT B, payable
as provided herein.
2. Payment: Initial payment is due within thirty (30) days of
receipt by OWEN of this executed AGREEMENT. Any subsequent fees
shall be due within thirty (30) days of the invoice date.
Provided OWEN is not in default under this AGREEMENT, if full
payment is not received by OWEN within thirty (30) days of the
invoice date, CLIENT will be charged and agrees to pay, a
finance charge on any unpaid balance equal to the lesser of one
and one-half percent (1.5%) per month, or the maximum rate
permitted by law, if lower.
3. CLIENT shall make all payments to OWEN under this AGREEMENT by
either wire transfer of funds (FEDWIRE) to the appropriate OWEN
bank account as provided by OWEN or, alternately, by mail, to
the following address:
Owen Healthcare, Inc.
21377 Network Place
Chicago, Illinois 60673
TERM OF LICENSE. The term of the license to the applicable Supplyline(R)
Data Files ("SUPPLYLINE(R) SYSTEM") shall be for one (1) year from the EFFECTIVE
DATE. The term of the license is subject to earlier termination for breach of
these license terms, as described below.
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<PAGE> 3
LICENSE GRANT. In consideration of the payment provided by CLIENT, as
defined in this AGREEMENT, and for the term set forth above and subject to the
restrictions hereinafter set forth, OWEN hereby grants CLIENT a personal,
non-exclusive and non-transferable license to:
(a) use the SUPPLYLINE(R) SYSTEM within the CLIENT offices located
at the address described in this AGREEMENT or such other
locations approved in advance by OWEN, on one or more computers
for internal purposes only and solely for the CLIENT's internal
business activities, except as expressly provided in Paragraph 4
under License Restrictions.
(b) use the SUPPLYLINE(R) SYSTEM in connection with other programs
maintained for CLIENT's own internal use within CLIENT offices;
provided that, to the extent that the SUPPLYLINE(R) SYSTEM is
modified through or to the effect such use, the SUPPLYLINE(R)
SYSTEM as so modified shall continue to be the property of OWEN
and shall continue to be subject to the terms of this AGREEMENT;
and provided further that, upon termination of the license
granted in this AGREEMENT, SUPPLYLINE(R) SYSTEM as so modified
shall be completely removed from such other programs.
(c) make one (1) copy of the SUPPLYLINE(R) SYSTEM for archival or
backup purposes, provided such copy includes all OWEN's
copyright or other proprietary notices.
LICENSE RESTRICTIONS: The foregoing license shall be subject to the
following restrictions.
1. Except as provided above, CLIENT shall not modify the
SUPPLYLINE(R) SYSTEM or any part thereof, or attempt to alter,
decompile, cross compile, disassemble, reverse engineer, or use
any other means to decode or make a derivative work from the
SUPPLYLINE(R) SYSTEM. Under no circumstances may CLIENT use the
SUPPLYLINE(R) SYSTEM or any parts thereof or any systems or
codifications included therein to develop an alternate
codification or classification system.
2. CLIENT shall not lend, lease, sublicense, or attempt to perfect
any lien or property right in, the SUPPLYLINE(R) SYSTEM, or
otherwise make the SUPPLYLINE(R) SYSTEM available to any third
party or any Affiliate of CLIENT.
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3. CLIENT agrees that the SUPPLYLINE(R) SYSTEM will be used under
the license granted hereby only for the benefit of CLIENT. In
the event CLIENT incorporates the SUPPLYLINE(R) SYSTEM into
products or services offered to CLIENT'S customers, the
SUPPLYLINE(R) SYSTEM shall not be visible to or downloadable by
CLIENT'S customers. The CLIENT agrees that any installation of,
or incorporation of SUPPLYLINE(R) information into other
products or services offered by CLIENT, or access to the
SUPPLYLINE(R) SYSTEM from CLIENT offices not stated as its
principal place of business in this agreement will require a
SUPPLYLINE(R) Site License fee pursuant to EXHIBIT B.
4. Under no circumstances may the codification system or generic
descriptions that are included in the SUPPLYLINE(R) SYSTEM be
transmitted or disclosed to any third party or Affiliate of
CLIENT; provided, however, CLIENT may show the alpha numeric
Product Description on screen, but it shall not be downloadable.
5. CLIENT may transmit and receive SUPPLYLINE(R) proprietary data
fields only with those entities identified by OWEN as possessing
the required Supplyline(R) License Agreement.
6. CLIENT agrees that throughout the term of this AGREEMENT and any
extension thereof, it will not directly or indirectly throughout
itself or any affiliate, develop, invest, contract, design,
create, or acquire any rights in any system which might compete
or replace the SUPPLYLINE(R) SYSTEM unless either party shall
first have exercised its right to terminate and tendered written
notice in accordance with the Term section of this AGREEMENT.
OWEN agrees that the UNSPSC catalogue system for medical
supplies and medical devices in its current form utilized by
CLIENT shall not constitute a breach of this AGREEMENT by
CLIENT.
PROPRIETARY INTERESTS AND OWNERSHIP OF PROGRAM. The SUPPLYLINE(R) SYSTEM
is licensed to CLIENT by OWEN for CLIENT's use in accordance with this
AGREEMENT. The SUPPLYLINE(R) SYSTEM, any copies made by CLIENT and all
proprietary rights whatsoever thereto shall remain the sole and exclusive
property of OWEN. The SUPPLYLINE(R) SYSTEM and the proprietary systems and
information contained therein constitute trade secrets of OWEN, and the
unauthorized use or disclosure of the SUPPLYLINE(R) SYSTEM by CLIENT will result
in irreparable damage to OWEN.
CONFIDENTIAL INFORMATION. The SUPPLYLINE(R) SYSTEM, any documentation
provided by OWEN for such program or its use, and any information furnished to
CLIENT by OWEN that is marked "confidential" or "proprietary" are the sole and
exclusive proprietary information or trade secrets of OWEN. CLIENT may use the
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OWEN Confidential Information during the term of this AGREEMENT only as
permitted hereunder. CLIENT shall not disclose or provide any OWEN Confidential
Information to any third party or to any Affiliate of CLIENT, and shall take
reasonable measures to prevent any unauthorized disclosure by its employees,
agents, contractors or consultants during the term hereof including appropriate
individual nondisclosure agreements. The foregoing duty shall apply to any OWEN
Confidential Information for a period of ten (10) years from the date of the
receipt thereof by CLIENT. The obligations set forth in this Section shall
survive the termination of this AGREEMENT.
Provided, however, that the following information shall not be
considered OWEN Confidential Information under this Section:
(a) information which is in or enters in the public domain
through no fault or act of CLIENT that is in breach of
the AGREEMENT;
(b) information which was independently developed by CLIENT
without the use of or reliance on the OWEN Confidential
Information; or
(c) information which was provided to CLIENT by a third
party under no duty of confidentiality to OWEN.
LIMITED WARRANTY. OWEN represents and warrants to CLIENT that (a) OWEN
has the lawful right to grant the rights to the SUPPLYLINE(R) SYSTEM as set
forth herein; (b) as of its shipment date from OWEN, OWEN has no knowledge that
the SUPPLYLINE(R) SYSTEM infringes any third party intellectual property rights,
such as patents, copyrights, trade secrets or trademarks, in the United States;
and (c) the media containing the SUPPLYLINE(R) SYSTEM will be free from defects
in materials and workmanship under normal use and service for a period of ninety
(90) days from the delivery of the SUPPLYLINE(R) SYSTEM, except as set forth in
this section, the SUPPLYLINE(R) SYSTEM is provided to the CLIENT "as is". OWEN
expressly disclaims any representation or warranty that the SUPPLYLINE(R) SYSTEM
is or will be free of errors.
The warranties set forth above with respect to the SUPPLYLINE(R) SYSTEM
are in lieu of all other warranties, express or implied, which are hereby
disclaimed by OWEN, including any warranty of merchantability or fitness for a
particular purpose or use. No representative of OWEN is authorized to make any
modification, extension or addition to the warranties set forth in this section.
INFRINGEMENT INDEMNITY AND LIMITATION OF REMEDIES. OWEN hereby agrees to
indemnify, defend and hold CLIENT harmless from any and all lost, cost damage or
expense arising out of any third party suits, claims, or demands or other legal
action
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("Legal Action") that alleges the SUPPLYLINE(R) SYSTEM infringes any United
States patent, copyright, or trade secret, including any reasonable costs or
legal fees incurred by CLIENT as a result. However, CLIENT shall give written
notice of any Legal Action to OWEN within twenty (20) days of its first
knowledge thereof, and any failure by CLIENT to give such notice to OWEN shall
relieve OWEN of its duty of indemnification hereunder. OWEN shall have sole and
exclusive control of the defense of any Legal Action, including the choice and
direction of any legal counsel. CLIENT shall not settle or compromise any Legal
Action without the written consent of OWEN; and CLIENT shall cooperate with OWEN
with respect to all Legal Actions.
If the SUPPLYLINE(R) SYSTEM is found to infringe any third party
intellectual property right in a Legal Action, at OWEN's sole discretion and
expense, OWEN may:
(a) obtain a license from such third party for CLIENT's benefit at
no further cost to CLIENT; or
(b) replace or modify the SUPPLYLINE(R) SYSTEM so that it is no
longer infringing; or
(c) if neither of the foregoing is commercially feasible in the
opinion of OWEN, terminate this AGREEMENT, in which case a
prorated portion of the License Fee will be refunded to CLIENT
in the event of termination.
The foregoing indemnification shall not extend to, and OWEN shall have
no liability for, any infringement resulting from the use of the SUPPLYLINE(R)
SYSTEM with any software or program not supplied by OWEN. Furthermore, OWEN
shall have no liability or obligation to indemnify CLIENT pursuant to the
foregoing provisions if CLIENT fails to use a non-infringing version or release
of the SUPPLYLINE(R) SYSTEM if made available by OWEN.
LIMITATION OF DAMAGES AND REMEDIES. In no event other than intellectual
properties infringement, as defined above, shall the liability of OWEN include
any special, indirect, incidental or consequential loss or damage, even if OWEN
has been advised of the possibility of such potential loss or damage, including
any liability for damages arising out of or resulting from the use, maintenance
of performance of the SUPPLYLINE(R) SYSTEM. The foregoing disclaimer shall
extend to any liability for loss or corruption of the SUPPLYLINE(R) SYSTEM by
CLIENT. OWEN'S liability of any kind (including liability for negligence) with
respect to the SUPPLYLINE(R) SYSTEM and all other performance or non-performance
by OWEN or its agents shall be limited to the amount of maintenance and license
fees paid by CLIENT to OWEN.
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<PAGE> 7
TERMINATION OF LICENSE. If either party breaches or defaults under any
material provision of this AGREEMENT, and such default is not cured within
twenty-five (25) days after such defaulting party's receipt of a written notice
by the non breaching or non-defaulting party specifying the nature and extent of
such breach or default, then the non-defaulting party may elect to terminate
this AGREEMENT in its entirety, or seek such other legal or equitable relief as
to which it may be entitled. In the event of breach by OWEN, CLIENT may seek
damages including the return of License Fees.
Within ten (10) days of termination of this AGREEMENT for any reason (by
either CLIENT or OWEN), CLIENT shall return to OWEN or shall erase and destroy
any copies in its possession of (a) the SUPPLYLINE(R) SYSTEM, (b) any
documentation related to the SUPPLYLINE(R) SYSTEM, and (c) any other
Confidential Information of OWEN in tangible form. CLIENT shall then certify in
writing to OWEN that it has so returned or erased and destroyed such materials.
GOVERNMENTAL USES. If CLIENT will employ the SUPPLYLINE(R) SYSTEM on
behalf of any unit, office, agency or instrumentality of the U.S. Government,
the SUPPLYLINE(R) SYSTEM is subject to "Restricted Rights," as that term is
defined in the Department of Defense Supplement to the Federal Acquisition
Regulations, P.252.227-7013(c)(1), or in the Federal Acquisition Regulations,
P.52.227-19(c)(2), as may be applicable, or any successor rules or regulations.
Any use, duplication or disclosure of the SUPPLYLINE(R) SYSTEM by the U.S.
Government shall be subject to such regulatory restrictions. For purposes of the
foregoing regulations, the Contractor/Manufacturer is: Owen Healthcare, Inc.,
1330 Enclave Parkway, Houston, Texas, 77077.
YEAR 2000 ISSUES. The SUPPLYLINE SYSTEM is (to the extent applicable),
(1) Year 2000 compliant and allows for date data century recognition,
calculations that accommodate same century and multi-century formulas and date
values, and date data interface elements that reflect the proper century, and
(ii) free of any known bugs or defects, and to the best knowledge of OWEN, is
and shall be useable in the same form from and after the EFFECTIVE DATE.
MISCELLANEOUS.
1. Multiple Counterparts. This AGREEMENT may be executed in two or
more counterparts, each of which shall be deemed as original,
but which together shall constitute one and the same instrument.
2. Binding on Assigns. This AGREEMENT shall extend to and be
binding upon and inure to the benefit of the parties hereto,
their respective successors and assigns. Except as expressly
provided herein, this AGREEMENT may not be assigned by either
party without the prior
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written consent of the other party, which consent may be
withheld by the sole discretion of such other party.
3. Other Agreements/Amendments. This AGREEMENT sets forth the
entire understanding of the parties and supersedes all prior
agreements or understandings, whether written or oral, with
respect to the subject matter hereof. No terms, conditions,
warranties, other than those contained herein, and no amendments
or modifications hereto shall be binding unless made in writing
and signed by the parties hereto.
4. Notices. Any notice, demand or other document required or
permitted to be delivered hereunder shall be in writing and may
be delivered personally or shall be deemed to be delivered three
(3) days after such notice is deposited in the United States
mail, postage prepaid, registered or certified mail, return
receipt requested, addressed to the parties at their respective
address indicated below, or at such other addresses as may have
theretofore been specified in written notice delivered in
accordance herewith.
If to OWEN:
Owen Healthcare, Inc.
1330 Enclave Parkway
Houston, TX 77077
Attention: Sr. Vice President, Diversified Services
With a copy to:
Owen Healthcare, Inc.
1330 Enclave Parkway
Houston, TX 77077
Attention: General Counsel
If to CLIENT:
Medibuy.com, Inc.
7777 Alvarado Road
La Mesa, CA 91941
Attention: Director, Catalog Management
5. Open Records. Pursuant to the requirements of 42 CFR 420.300 et
seq., OWEN agrees to make available to the Secretary of Health
and Human Services ("HHS"), the Comptroller General of the
Government Accounting
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Office ("GAO") or their authorized representatives, all
contracts, books, documents and records relating to the nature
and extent of costs hereunder for a period of four (4) years
after the furnishing of services hereunder for any and all
services furnished under this Agreement. In addition, OWEN
hereby agrees to require by contract that each subcontractor
makes available to the HHS and GAO, or their authorized
representative, all contracts, books, documents and records
relating to the nature and extent of the costs thereunder for a
period of four (4) years after the furnishing of services
thereunder.
6. Controlling Law. This Agreement and the performance of the
parties hereunder shall be controlled and governed by the laws
of the State of Texas.
7. Invalidity of Certain Provisions. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under
present or future laws effective during the term hereof, such
provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof, and
the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible and still
be legal, valid or enforceable.
8. Press Releases. Except as required by law, it is understood that
all press releases or other public communication of any sort
relating to this Agreement and the method of the release for
publication thereof, will be subject to the prior written
approval of both parties.
9. Interpretation and Effect. This Agreement terminates and
supersedes any existing agreement pertaining to the same subject
matter between the parties hereto. This Agreement, as executed
and approved, shall not be modified unless in writing, expressly
stating its intent to modify the terms of this Agreement, and
signed by the parties hereto.
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IN TESTIMONY WHEREOF, THIS INSTRUMENT IS EXECUTED as of the day and year
first above written.
OWEN HEALTHCARE, INC. MEDIBUY. COM, INC.
/s/ RICHARD A. HEARD /s/ KATHLEEN H. PENA
- ---------------------------------- ------------------------------------
Richard A. Heard KATHLEEN H. PENA
Sr. Vice President, Diversified Services VICE PRESIDENT
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[SCHEDULES OMITTED]
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EXHIBIT 10.30
WEB CONTENT AGREEMENT
THIS WEB CONTENT AGREEMENT (the "Agreement") is entered into as of this
day of October 1999 (the "Effective Date") by and between physiciansite.com,
Inc. (hereinafter "physiciansite.com"), a corporation organized and existing
under the laws of Delaware and having a principal place of business at 230
Newport Center Drive, Suite 300, Newport Beach, CA 92660, and medibuy.com, Inc.
(hereinafter "medibuy") having a principal place of business at _______________
physiciansite.com and medibuy are the parties to this Agreement.
BACKGROUND
A. physiciansite.com is an Internet-based services company providing
connectivity and information management services in the healthcare industry for
physiciansite.com Users through the physiciansite.com Site. physiciansite.com
desires to give physiciansite.com Users the ability to register on and use the
medibuy Site to purchase supplies and equipment.
B. medibuy is an Internet-based services company that enables medibuy
Users to conduct their procurement and selling activities through the medibuy
Services.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the adequacy and sufficiency of which consideration is hereby
acknowledged, physiciansite.com and medibuy agree as follows:
AGREEMENT
ARTICLE 1. DEFINITIONS
1.1. As used in this Agreement and Background Section, the following terms
have the stated meanings:
a. "CONFIDENTIAL INFORMATION" means both parties' valid and subsisting
trade secrets, confidential information, client lists, test codes,
test information, contact information and know-how and show-how
embodied in and/or related to the parties' products and services, as
evidenced by or embodied in any business or technical information,
idea, design, concept, technique, invention, discovery or
improvement, whether or not patentable, which is not generally
known. Confidential Information shall specifically include (i) the
terms and conditions of this Agreement, and (ii) any user
information and data, including, without limitation, registration
information, collected by either party under the terms of this
Agreement.
b. "MEDIBUY SITE" means any of the web sites owned and/or operated or
that come to be owned and/or operated by medibuy (e.g., the one
currently located at WWW.MEDIBUY.COM at such URL or locations as
medibuy may designate.
c. "MEDIBUY SERVICES" means the services made available to
physiciansite.com Users from the medibuy Site via the Links as more
fully described in Exhibit C, and shall include such additional
services that medibuy makes available to physiciansite.com Users as
authorized under this Agreement.
d. "NET REVENUE" means all revenue paid to medibuy that is attributable
to transactions conducted by Joint Users (as defined below)
utilizing the medibuy Services, and which revenue is actually
received by medibuy during the term of this Agreement or the winding
down period provided for in Article 9, Section 9.4 of this
Agreement. The foregoing notwithstanding, the following items shall
be excluded
CONFIDENTIAL
DRAFT OF 10/28/99
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from Net Revenue: (i) amounts that medibuy rebates to any Joint
Users or their affiliated group purchasing organization in respect
of purchases made by such Joint User; any credit card or other fees
charged to and payable by medibuy as a result of the method of
payment selected by Joint Users; (iii) any refund that medibuy makes
to any Joint User, which amount would have been included in Net
Revenue had it not been refunded; and (iv) vendor subscription fee
payments to medibuy.
e. "PHYSICIANSITE.COM SITE" means any of physiciansite.com's Internet
web sites targeted to persons and entities in the healthcare
industry (e.g., the one currently located at
"WWW.PHYSICIANSITE.COM") that physiciansite.com owns, maintains, is
directly or indirectly affiliated with, or hosts and on which
physiciansite.com is authorized by this agreement to place the links
and other information supplied by medibuy in order to effect the
purposes of this Agreement. Each web site may have multiple web
pages and may have a different domain name and/or IP address, and
may be hosted by one or more different servers in one or more
different locations.
f. "PHYSICIANSITE.COM USERS" means all persons or entities that have
registered with physiciansite.com to access any of the
physiciansite.com Sites.
g. "INTELLECTUAL PROPERTY RIGHTS" means the worldwide intangible legal
rights or interests evidenced by or embodied in: (i) any idea,
design, concept, method, process, technique, apparatus, invention,
discovery, or improvement, including any patents, trade secrets, and
know-how; (ii) any work of authorship, including any copyrights,
moral rights or neighboring rights; (iii) any trademark, service
mark, trade dress, trade name, or other indicia of source or origin;
and (iv) any other similar rights. The Intellectual Property Rights
of a party include all worldwide intangible legal rights or
interests that the party may have acquired by assignment or license
with the right to grant sublicenses.
h. "LINKS" means a direct link or links from the physiciansite.com Site
to the medibuy Site that will allow physiciansite.com Users to click
on a graphical and/or textual element located on the
physiciansite.com Site and be connected to the medibuy Site as more
fully described in Exhibit A.
i. "MARKS" means trademarks, trade names, brands, logos, service marks
and other such business identifiers.
j. "PERFORMANCE STANDARDS" means the requirements specified in Exhibit
C attached hereto.
k. "JOINT USER" means a physiciansite.com User who registers as a
medibuy User through the physiciansite.com Site.
ARTICLE 2. LICENSE
2.1 LICENSE TO PHYSICIANSITE.COM. Subject to the terms and conditions of
this Agreement, and solely for the purpose of promoting the objectives
of this Agreement, medibuy grants to physiciansite.com the revocable,
nonexclusive, worldwide license to provide physiciansite.com Users with
the ability to register as medibuy Users through the physiciansite.com
Site. Without limiting the foregoing, the license granted to
physiciansite.com hereby shall include the right to:
a. use, copy, adapt, distribute, publicly perform and publicly display,
incorporate, transmit, publish, promote, and advertise the medibuy
Site (or any portion thereof), as described in Exhibit A;
CONFIDENTIAL
DRAFT OF 10/28/99
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b. establish Links or other pointers from the physiciansite.com Site to
the medibuy Site;
c. authorize physiciansite.com Users to use and access the medibuy
Services; and
d. use, reproduce, publicly perform, and publicly display medibuy's
Marks in connection with establishing the Links, and for the purpose
of facilitating the promoting and advertising of the medibuy
Services, provided that physiciansite.com makes no substantive
modifications to medibuy's Marks unless medibuy has approved such
substantive modification in writing.
This license shall include the right to display any third party marks or
proprietary information that is available by links to such third-party
site through the medibuy Site, but only to the extent that medibuy is
authorized by such third parties to display such marks or proprietary
information.
2.2 LICENSE TO MEDIBUY. Subject to the terms and conditions of this
Agreement, and solely for the purpose of promoting the objectives of
this Agreement, physiciansite.com grants to medibuy a revocable,
nonexclusive, worldwide license and right to use physiciansite.com's
Marks in making medibuy Services available to Joint Users. medibuy may
use physiciansite.com's Marks as permitted hereunder, provided that
medibuy makes no substantive modifications to physiciansite.com's Marks,
unless physiciansite.com has approved such substantive modification in
writing. medibuy may also use the physiciansite.com Marks in any
advertising or promotional material that accurately describes the nature
of the relationship created between physiciansite.com and medibuy under
this Agreement.
2.3 NO OTHER LICENSES. All rights not expressly granted to either party in
this Article or elsewhere in this Agreement are reserved. Nothing
contained in this Agreement shall be construed as conferring by
implication, estoppel, or otherwise upon either party any license or
other right, except for the licenses and rights expressly granted in
this Article 2 and solely for the purposes stated in said Article.
ARTICLE 3. GENERAL OBLIGATIONS OF THE PARTIES
3.1 MEDIBUY'S GENERAL OBLIGATIONS. medibuy shall be responsible for the
following duties, in addition to other duties that may be specified
herein:
a. MAINTENANCE, OPERATION, AND CONTINUED DEVELOPMENT OF MEDIBUY SITE.
medibuy shall be responsible for and shall use reasonable care in
maintaining and operating the medibuy Site and for the further
development of the medibuy Services described in Exhibit B. medibuy
shall use commercially reasonable efforts to complete the
developments in Exhibit B accordance with the deadlines associated
with them. medibuy shall inform physiciansite.com of any delay that
may occur in the scheduled completion of any of such developments.
The failure of medibuy to meet the schedule set forth in Exhibit B
shall not be considered a breach of this Agreement.
b. INTEGRATION OBLIGATIONS. medibuy shall perform those tasks necessary
to ensure that the medibuy Site is accessible through the
physiciansite.com Site, including, without limitation:
(i) developing the Links and delivering the Links to
physiciansite.com, including any digitized representations of
the medibuy Marks comprising the Links;
(ii) serving the medibuy Site, including the medibuy Services, upon
activation of the Links by a physiciansite.com User according
to the specifications set forth in Exhibit A;
CONFIDENTIAL
DRAFT OF 10/28/99
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(iii) informing physiciansite.com promptly of all links within the
medibuy Site that may reasonably be construed to be links to a
competitor of physiciansite.com, and suppressing those links
on the medibuy Site when accessed through the
physiciansite.com Site; and
(iv) otherwise cooperating with physiciansite.com to establish and
maintain the Links and user interface and navigational
integration of the medibuy Site with the physiciansite.com
Site or any component thereof.
b. REGISTRATION. Each physiciansite.com User must register individually
with medibuy as described in the registration guidelines set forth
in Exhibit D attached hereto. Such registration will constitute
acceptance by the physiciansite.com User of all Terms and Conditions
of using medibuy's Site. medibuy assumes all responsibility for
reviewing and checking the user registration information to ensure
that each physiciansite.com User meets medibuy's criteria for using
the medibuy Services, and medibuy shall have no obligation to accept
or maintain the registration of a physiciansite.com User that does
not.
c. MEDIBUY SERVICES. medibuy shall make the medibuy Services available
to Joint Users according to the terms and conditions of this
Agreement. medibuy shall only make available to Joint Users the
services identified as medibuy Services in Exhibit B and such other
services as medibuy shall come to offer to provide medibuy Users
generally.
d. UPDATES. medibuy shall notify physiciansite.com of any updates or
modifications to the medibuy Site or medibuy Services that will have
a material effect on the performance of either party's obligations
under this Agreement at least one week prior to the release of such
updates or modifications on the medibuy Site. For purposes of this
provision, updates which are designed to refresh existing content to
reflect current and accurate information shall not trigger a notice
obligation under this provision.
e. EXPENSES. Unless otherwise expressly provided in this Agreement,
medibuy shall be solely responsible for all expenses it incurs in
the performance of its obligations hereunder, including, without
limitation, development, engineering and design expenses.
3.2 PHYSICIANSITE.COM GENERAL OBLIGATIONS. physiciansite.com shall be
responsible for the following duties, in addition to other duties that
may be specified herein:
a. MAINTENANCE AND OPERATION OF PHYSICIANSITE.COM SITE.
physiciansite.com shall be responsible and shall exercise reasonable
care in maintaining and operating the physiciansite.com Site, and
physiciansite.com shall also be responsible for performing those
tasks necessary to establish the Links.
b. EXPENSES. Unless otherwise expressly provided in this Agreement,
physiciansite.com shall be solely responsible for all expenses it
incurs in the performance of its obligations hereunder, including,
without limitation, development, engineering, design and promotional
expenses.
ARTICLE 4. PERFORMANCE STANDARDS; MAINTENANCE AND SUPPORT
4.1 PERFORMANCE STANDARD FOR MEDIBUY SERVICES. Each Party agrees that it
shall be solely responsible for ensuring that its Site meets or exceed
the Performance Standards.
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Either party's failure to comply with the Performance Standards shall be
considered a material breach of this Agreement, but it shall be subject
to the cure provisions set forth at Article 10, Section 10.3.
4.2 SUPPORT FOR MEDIBUY SERVICES. medibuy shall make available Support
Services to Joint Users that are at least the equivalent of the Support
Services provided to medibuy Users.
ARTICLE 5. PAYMENT AND FEES
5.1 REVENUE SHARING. (a) physiciansite.com shall be entitled to the
following percentages of Net Revenue that medibuy receives from
transactions conducted by each Joint User:
On Net Revenue received within the first twelve months
following the Joint User's registration: 50%
On Net Revenue received during the second twelve months
following the Joint User's registration: 20%
On Net Revenue received after the second twelve months
following the Joint User's registration: 8%
(b) Determining Net Revenue Due. At the conclusion of each calendar
month, medibuy shall scan its databases and records to determine the
Net Revenue received that month from transactions conducted on the
medibuy Site by each Joint User.
(c) medibuy shall pay to physiciansite.com the above percentage of the
Net Revenue received from all such accounts during each calendar
month, payable within thirty (30) days following the end of the
calendar month.
(d) physiciansite.com is not entitled to a share of subscription fees
collected by medibuy from its subscribers, which medibuy currently
collects only from vendors. However, if during the term of this
Agreement medibuy begins to collect subscription fees from buyers,
medibuy will include in Net Revenue those subscriptions fees that
are paid by Joint Users to register with medibuy.
5.2 BILLING. medibuy acknowledges and agrees that it shall administer all
aspects of billing under this Agreement, including, without limitation,
collecting and paying all taxes due on any payments made by Joint Users
to medibuy, but not including the payment of any taxes that
physiciansite.com may owe on payments that it receives from medibuy.
5.3 BILLING REPORTS. medibuy agrees to render monthly written reports
supporting the share of Net Revenue payable to physiciansite.com for
that month (the "Billing Reports"). Billing Reports for each month are
due by the 30th day of the following month. Billing Reports shall
include the information specified in Exhibit F.
5.4 RECORDS; AUDITS. medibuy shall keep and maintain reasonably detailed and
accurate records throughout the term of this Agreement and for three (3)
years thereafter. Upon reasonable prior written notice to medibuy, and
not more than once per quarter, physiciansite.com may during usual
business hours inspect and audit medibuy's books and records relevant to
the calculation of the portion of Net Revenue that is payable to
physiciansite.com under this Agreement. Such inspection or audit shall
occur at the place where those books and records are regularly
maintained. If physiciansite.com shall cause an audit to be made of
such books and records by an independent auditor, and if
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such audit shall find that amounts owed physiciansite.com have been
misstated, then the party who has received the benefit of such
misstatement shall immediately reimburse disadvantaged by such
misstatement, subject to the right of medibuy to contest the validity of
the audit. If the audit shows that the amount owed to physiciansite.com
was understated by five percent (5%) or more, and medibuy accepts the
validity of such audit, medibuy shall also immediately reimburse to
physiciansite.com the reasonable cost of such audit in addition to the
amounts shown to be payable by such audit, plus interest thereon. If
medibuy contests the validity of such audit, it shall be liable for the
costs of the audit only if it is determined by a court of competent
jurisdiction that medibuy underpaid physiciansite.com by 5% or more
during the period covered by the audit.
ARTICLE 6. MARKETING
6.1 PRESS RELEASES. Each party grants to the other party the right to
prepare and issue a press release announcing the general terms of this
Agreement and generally promoting the products. However, any press
release prepared under this Section 6.1 by either party must be approved
in writing by the other party prior to release.
6.2 HIGH RESOLUTION IMAGES. At a party's request, the other party shall
provide high resolution images of one or more of the graphical
representations of such party's Marks in electronic format for use in
advertising as permitted under this Agreement.
ARTICLE 7. INTELLECTUAL PROPERTY RIGHTS
7.1 OWNERSHIP. As between medibuy and physiciansite.com, each party shall
retain ownership of the Intellectual Property Rights in and to any
Content, Marks, materials, Confidential Information, or products or
services created or provided by such party pursuant to this Agreement.
Unless otherwise provided in this Agreement and, except for the licenses
granted under Article 2, neither party is acquiring any right, title, or
interest whatsoever in the other party's Intellectual Property Rights.
ARTICLE 8. CONFIDENTIAL INFORMATION
8.1 OBLIGATION OF CONFIDENCE. Each party shall (i) treat as confidential all
Confidential Information received from the other party; (ii) not use
such Confidential Information except as expressly permitted under this
Agreement; and (iii) not disclose such Confidential Information to any
third party without the other party's prior written consent. Without
limiting the foregoing, each party shall use at least the same degree of
care which it uses to prevent the disclosure of its own Confidential
Information of like importance, but in no event less than reasonable
care, to prevent the disclosure of Confidential Information disclosed to
it by the other party under this Agreement.
8.2 EXCEPTIONS. Information shall not be considered to be Confidential
Information if the receiving party proves with documentary or other
competent evidence that such information: (i) was known by the receiving
party, without an obligation to keep it confidential, prior to its
disclosure to the receiving party by the disclosing party, as is
evidenced by the receiving party's written records that existed at the
time the disclosure was made to the receiving party; (ii) is or becomes
lawfully available to the receiving party from a source other than the
disclosing party; (iii) was or becomes available to others in a
publication in tangible form through a source other than the receiving
party and through no fault of the receiving party; or (iv) is required
to be used or disclosed by an order of any court or other governmental
authority, but only to the extent required by such order, and only after
giving the party whose Confidential Information is to be disclosed
timely notice of such order and an opportunity to defend against it. The
parties agree that while certain items of the Confidential Information
may be publicly known, these
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items, when put together, often form combinations that are not publicly
known and are hence included within the Confidential Information. The
receiving party is not permitted to use the Confidential Information to
piece together a series of items of information from unconnected sources
and fit these items of information together to make a showing that all
or part of the Confidential Information was "public."
8.3 NON-DISCLOSURE AND NON-USE. Each party shall exert its reasonable
efforts to maintain the confidentiality of Confidential Information,
including, but not limited to, the execution of proprietary
nondisclosure agreements with employees and consultants, and the taking
of reasonable legal action to enforce compliance with the provisions of
this Article 8 by its directors, officers, employees, and any third
party to whom it is authorized to provide access to Confidential
Information of the other party. The parties agree not to use any
Confidential Information for any purpose except to fulfill their
obligations and duties under this Agreement.
8.4 REMEDIES. Unauthorized use by a party of the other party's Confidential
Information will diminish the value of such information, thereby causing
irreparable harm to the other party. Therefore, if a party breaches any
of its obligations with respect to confidentiality and unauthorized use
of Confidential Information hereunder, the other party shall be entitled
to equitable relief to protect its interests therein including, but not
limited to, injunctive relief.
ARTICLE 9. TERMINATION
9.1 TERM. This Agreement shall commence on the Effective Date and, unless
earlier terminated as provided below, shall remain in effect for three
(3) years. At the end of the first or any subsequent term, this
Agreement shall automatically extend for one (1) year, unless either
party gives written notice of termination not less than ninety (90) days
prior to the end of the then current term.
9.2 TERMINATION FOR CAUSE. Either party may, by notice in writing, terminate
this Agreement upon default by the other party. Default under this
Agreement shall include, but not be limited to, a material breach by
either party of any of the terms and conditions of this Agreement unless
cured in a timely manner as provided for in Section 10.3 below, an
adjudication of bankruptcy of either party under any bankruptcy or
insolvency law, the appointment by or for either party of a receiver for
its business or property, or the making of any general assignment of its
assets for the benefit of creditors.
9.3 RIGHT TO CURE. No breach of any term of this Agreement shall be deemed a
default giving rise to a right of termination unless the party claiming
to be aggrieved by such breach first provides written notice to the
breaching party of the precise nature of the breach and the breaching
party fails to cure the breach within thirty (30) days following its
receipt of such notice. In the event that the breach asserted is one
that cannot be reasonably cured within such (30) day period, no default
shall occur if the breaching party has commenced substantial and good
faith efforts to cure the breach and continues those efforts without
interruption until a cure is effected.
9.4 EFFECT OF TERMINATION. The termination of this Agreement shall be
without prejudice to any other rights or claims of either party against
the other, or any other remedy available to such party, including, but
not limited to, the right of physiciansite.com to recover all of the
amounts required to be paid by medibuy pursuant Article 5. To the extent
that medibuy continues the operation of the medibuy Site generally, upon
the termination or expiration of this Agreement for any reason medibuy
agrees to maintain the medibuy Site and make the medibuy Services
available to Joint Users according to the terms and conditions hereunder
for a period of two years, or a shorter period of time if so elected in
writing by physiciansite.com (the Winding Down Period), During the
Winding Down Period, physiciansite.com shall remove the links, Marks and
other references and
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connections to the medibuy Site that are contained on or available
through the physiciansite.com Site. During the Winding-Down Period,
physiciansite.com will continue to be entitled to receive its percentage
of Net Revenue as provided in Section 5.1 above, which Net Revenue is
actually received by medibuy prior to the end of the Winding Down
Period, and medibuy will remain obligated to account to
physiciansite.com therefor, but all other obligations of medibuy to
physiciansite.com shall cease upon termination and it shall owe to
physiciansite.com no obligation of any kind whatsoever following the
conclusion of the Winding Down Period, except as provided for in Section
9.5 below.
9.5 SURVIVAL. Notwithstanding the foregoing, the provisions of Articles 7,
8, 10, 11, and 12, shall survive termination or expiration of this
Agreement, together with any provisions of this Agreement which by their
terms survive expiration or termination of this Agreement. Any amounts
owed by medibuy to physiciansite.com hereunder shall continue to be
owed.
ARTICLE 10. REPRESENTATIONS AND WARRANTIES; DISCLAIMERS
10.1 PHYSICIANSITE.COM'S WARRANTIES AND DISCLAIMERS. physiciansite.com
represents and warrants that (i) physiciansite.com has full power and
authority to enter into this Agreement, to grant the licenses provided
for herein, and to perform its obligations hereunder, and its entry into
this Agreement does not violate any other agreement by which it is
bound; and (ii) physiciansite.com's conduct in performing this Agreement
shall at all times comply with all applicable federal, state, and local
laws, rules, and regulations in the United States.
10.2 MEDIBUY'S WARRANTIES AND DISCLAIMERS. medibuy represents and warrants
that (i) medibuy has the full power and authority to enter into this
Agreement, to grant the licenses provided for herein, and to perform its
obligations hereunder, and its entry into this Agreement does not
violate any other agreement by which it is bound; and (ii) medibuy's
conduct in performing this Agreement shall at all times comply with all
applicable federal, state, and local laws, rules, and regulations in the
United States.
10.3 NO OTHER REPRESENTATIONS. Each party agrees that it shall have no right
or authority, at any time, to make any representation or commitment on
behalf of the other party, or to make any representations or warranties,
guarantees or commitments with respect to other party, except as
expressly authorized in this Agreement or a separate writing signed by
the other party.
ARTICLE 11. MISCELLANEOUS
11.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California where, under the
rules of such courts, venue may property lie, without reference to
conflict of law principles.
11.2 VENUE AND JURISDICTION. Exclusive jurisdiction and venue for all
disputes arising under this agreement shall be with the state or federal
courts located in Santa Clara, California, and the parties expressly
submit themselves to the personal jurisdiction of such courts.
11.3 SEVERABILITY. If any provision of this Agreement shall be held to be
illegal, invalid, or unenforceable by a court of competent jurisdiction,
that provision shall be deleted and the remainder of this Agreement
shall remain in full force and effect.
11.4 ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the complete
and exclusive statement of the agreement between the parties. All
previous representations are merged in this Agreement. This Agreement
may be modified only by a writing signed by the parties.
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11.5 ASSIGNMENT. This Agreement shall bind and inure to the benefit of the
parties hereto and their successors and assigns, including any person,
partnership, or corporation which may acquire all or substantially all
of a party's assets or business, or into which either may be
consolidated or merged. Unless otherwise allowed in this Agreement,
neither party shall assign, sublicense, or transfer this Agreement
without the prior written consent of the other party, and any attempt to
do so shall be void.
11.6 REPORTING FORMAT. Unless otherwise provided in this Agreement, all data
included in reports prepared by medibuy shall be provided to
physiciansite.com in MS Excel spreadsheets.
11.7 NOTICES. All notices and communications under this Agreement shall not
be valid unless in writing and shall be deemed to have been given on the
day of delivery or transmission if delivered by hand or if sent by
facsimile transmission (with receipt confirmed), or on the fifth
business day following the day of mailing if mailed, postage prepaid. In
any case, unless otherwise provided in this Agreement, delivery,
transmission, or mailing must be made to the party concerned as follows:
IF TO MEDIBUY: IF TO PHYSICIANSITE.COM:
medibuy.com, Inc. physiciansite.com
7777 Alvarado Road 230 Newport Center Drive
Suite 401 Suite 300
La Mesa, CA 91941 Newport Beach, CA 92660
Attn: Daniel P. Beharry Attn: Andrea Kofl
11.8 CONSTRUCTION. Unless otherwise provided in this Agreement, the singular
includes the plural and vice versa.
11.9 NO WAIVER. Failure of any party to enforce any provision of this
Agreement will not constitute or be construed as a waiver of such
provision or of the right to enforce such provision. No waiver by a
party of any breach of any provision of this Agreement will constitute a
waiver of any other breach of that or any other provisions of this
Agreement.
11.10 RIGHT OF SETOFF. In the event that medibuy shall determine in good faith
that there is an amount due and owing to it from physiciansite.com
(e.g., due to an overpayment by medibuy) medibuy may setoff such amount
due to it against any future payments that medibuy is obligated to make
under this Agreement to physiciansite.com.
11.11 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be construed to
constitute or appoint either party as the agent, partner, or
representative of the other party for any purpose whatsoever, or to
grant to either party any rights or authority to assume or create any
obligation or responsibility, express or implied, for or on behalf of or
in the name of the other, or to bind the other in any way or manner
whatsoever.
11.12 HEADINGS. The headings in this Agreement are for purposes of convenience
and reference only and are not intended to affect the meaning or
interpretation of this Agreement.
11.13 COUNTERPARTS. This Agreement may be executed in duplicate and either
copy or both copies are considered originals.
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11.14 NO BIAS. This Agreement shall be interpreted as written and negotiated
jointly by the parties. It shall not be strictly construed against
either party, regardless of the actual drafter of the Agreement.
11.15 FORCE MAJEURE. If either party is unable to perform its obligations
under this Agreement due to circumstances beyond its reasonable control
(other than obligations for the payment of money), such obligations will
be suspended so long as those circumstances persist, provided that the
delaying party notifies the other party promptly of the delay and its
causes and uses commercially reasonable efforts to recommence
performance without delay.
Understood and Agreed:
FOR PHYSICIANSITE.COM FOR MEDIBUY.COM, INC.
By: /s/ ANDREA S. KOFL By: /s/ DENNIS MURPHY
-------------------------------- ---------------------------------
Signature Signature
Andrea S. Kofl COO Dennis Murphy CEO
-------------------------------- ---------------------------------
Name and Title Name and Title
10/28/99 11-3-99
-------------------------------- ---------------------------------
Date Date
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[SCHEDULES OMITTED]
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EXHIBIT 10.31
================================================================================
AGREEMENT AND PLAN
OF
MERGER AND REORGANIZATION
among:
MEDIBUY.COM, INC.,
a Delaware corporation;
MEDIBUY ACQUISITION CORPORATION,
a Utah corporation;
PARTNET, INC.,
a Utah corporation;
and
SHAREHOLDERS OF PARTNET, INC.
---------------------------
Dated as of October 29,1999
---------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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DEFINITIONS..................................................................................2
SECTION 1. DESCRIPTION OF TRANSACTION....................................................7
1.1 Merger of Merger Sub into the Company.........................................7
1.2 Effect of the Merger..........................................................7
1.3 Closing; Effective Time.......................................................7
1.4 Articles of Incorporation and Bylaws; Directors and Officers..................8
1.5 Conversion of Shares..........................................................8
1.6 Employee Stock Options........................................................9
1.7 Closing of the Company's Transfer Books.......................................9
1.8 Exchange of Certificates.....................................................10
1.9 Dissenting Shares............................................................11
1.10 Tax Consequences.............................................................11
1.11 Further Action...............................................................12
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................12
2.1 Due Organization; No Subsidiaries; Etc.......................................12
2.2 Articles of Incorporation and Bylaws; Records................................13
2.3 Capitalization, Etc..........................................................13
2.4 Financial Statements.........................................................14
2.5 Absence of Changes...........................................................14
2.6 Title to Assets..............................................................16
2.7 Bank Accounts; Receivables...................................................16
2.8 Equipment; Leasehold.........................................................17
2.9 Company Proprietary Assets...................................................17
2.10 Contracts....................................................................18
2.11 Liabilities..................................................................23
2.12 Compliance with Legal Requirements...........................................23
2.13 Governmental Authorizations..................................................23
2.14 Tax Matters..................................................................23
2.15 Employee and Labor Matters; Benefit Plans....................................25
2.16 Environmental Matters........................................................27
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2.17 Insurance....................................................................27
2.18 Company Related Party Transactions...........................................28
2.19 Legal Proceedings; Orders....................................................28
2.20 Authority; Binding Nature of Agreement.......................................28
2.21 Non-Contravention; Consents..................................................29
2.22 Full Disclosure..............................................................30
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....................30
3.1 Valid Issuance...............................................................30
3.2 Due Organization; Subsidiaries; Etc..........................................30
3.3 Certificate of Incorporation and Bylaws; Records.............................30
3.4 Capitalization, Etc..........................................................31
3.5 Financial Statements.........................................................31
3.6 Absence of Changes...........................................................32
3.7 Title to Assets..............................................................33
3.8 Liabilities..................................................................33
3.9 Compliance with Legal Requirements...........................................33
3.10 Legal Proceedings; Orders....................................................34
3.11 Authority; Binding Nature of Agreement.......................................34
3.12 Non-Contravention; Consents..................................................34
3.13 Equipment; Leasehold.........................................................35
3.14 Parent Proprietary Assets....................................................35
3.15 Contracts....................................................................36
3.16 Governmental Authorizations..................................................38
3.17 Tax Matters..................................................................38
3.18 Environmental Matters........................................................39
3.19 Shareholder Market Stand-Off Agreements......................................39
3.20 Insurance....................................................................40
3.21 Parent Related Party Transactions............................................40
3.22 Full Disclosure..............................................................40
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SECTION 4. SHAREHOLDER REPRESENTATIONS; RELEASE.........................................40
4.1 Shareholder Representations..................................................40
4.2 Investment Representations...................................................41
4.3 Market Stand-Off Agreement...................................................42
4.4 Release......................................................................43
SECTION 5. CERTAIN COVENANTS OF THE PARTIES.............................................44
5.1 Filings and Consents.........................................................44
5.2 Notice Filing................................................................44
5.3 Company Shareholders' Consent................................................44
5.4 Public Announcements.........................................................44
5.5 Best Efforts.................................................................44
5.6 Employment and Noncompetition Agreements.....................................44
5.7 [Intentionally Omitted]......................................................44
5.8 Termination of Employee Plans................................................44
5.9 FIRPTA Matters...............................................................45
5.10 Company Location.............................................................45
5.11 Retention of Company Employees...............................................45
5.12 Allocation for Future Stock Options..........................................45
5.13 Access and Investigation.....................................................45
5.14 Operation of the Company's Business..........................................46
5.15 Operation of Parent's Business...............................................47
5.16 Notification; Updates to Company Disclosure Schedule.........................48
5.17 No Company Negotiation.......................................................49
5.18 No Parent Negotiation........................................................49
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB................50
6.1 Accuracy of Representations..................................................50
6.2 Performance of Covenants.....................................................50
6.3 Consents.....................................................................50
6.4 Shareholder Approval.........................................................50
</TABLE>
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6.5 Agreements and Documents.....................................................50
6.6 No Restraints................................................................51
6.7 No Legal Proceedings.........................................................51
6.8 Employees....................................................................51
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY...........................51
7.1 Accuracy of Representations..................................................51
7.2 Performance of Covenants.....................................................51
7.3 Legal Opinion................................................................51
7.4 No Restraints................................................................52
7.5 No Legal Proceedings.........................................................52
7.6 Consents.....................................................................52
SECTION 8. TERMINATION..................................................................52
8.1 Termination Events...........................................................52
8.2 Termination Procedures.......................................................53
8.3 Effect of Termination........................................................53
8.4 Survival of Certain Covenants................................................53
SECTION 9. INDEMNIFICATION, ETC.........................................................53
9.1 Survival of Representations, Etc.............................................53
9.2 Indemnification by Shareholders..............................................54
9.3 Indemnification by Parent....................................................55
9.4 Limited Remedies.............................................................55
9.5 Satisfaction of Indemnification Claims.......................................55
9.6 No Contribution..............................................................56
9.7 Threshold....................................................................56
9.8 Defense of Third Party Claims................................................56
9.9 Exercise of Remedies by Indemnitees Other Than Parent or Shareholders........58
SECTION 10. MISCELLANEOUS PROVISIONS.....................................................58
10.1 Shareholders' Agent..........................................................58
10.2 Further Assurances...........................................................59
10.3 Fees and Expenses............................................................59
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10.4 Attorneys' Fees..............................................................59
10.5 Notices......................................................................59
10.6 Confidentiality..............................................................60
10.7 Time of the Essence..........................................................61
10.8 Headings.....................................................................61
10.9 Counterparts.................................................................61
10.10 Governing Law................................................................61
10.11 Successors and Assigns.......................................................61
10.12 Remedies Cumulative; Specific Performance....................................61
10.13 Waiver.......................................................................61
10.14 Amendments...................................................................62
10.15 Severability.................................................................62
10.16 Parties in Interest..........................................................62
10.17 Entire Agreement.............................................................62
10.18 Construction.................................................................62
</TABLE>
Exhibit A - Shareholders
Exhibit B - Form of Amended and Restated Articles of Incorporation of
Surviving Corporation
Exhibit C - Directors and officers of Surviving Corporation
Exhibit D - Escrow Agreement
Exhibit E - Persons to sign Employment and Noncompetition Agreements
Exhibit F - Form of legal opinion of Preston Gates & Ellis LLP
Exhibit G - Form of legal opinion of Cooley Godward LLP
v.
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An extra Section break has been inserted above this paragraph. Do not delete
this Section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
1.
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AGREEMENT AND PLAN
OF
MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of October 29, 1999, by and among: MEDIBUY.COM, INC., a
Delaware corporation ("Parent"); MEDIBUY ACQUISITION CORPORATION, a Utah
corporation and a wholly owned subsidiary of Parent ("Merger Sub"); PARTNET,
INC. a Utah corporation (the "Company"); and the parties identified on EXHIBIT A
(the "Shareholders"). Certain other capitalized terms used in this Agreement are
defined in the Section titled "Definitions."
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub into the Company in accordance with this Agreement and the URBCA (the
"Merger"). Upon consummation of the Merger, Merger Sub will cease to exist, and
the Company will become a wholly owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company, and by the shareholders of
Merger Sub and the Company.
D. The Shareholders own a total of 109,569 shares of the common stock,
$.01 par value, of the Company ("Company Common Stock").
DEFINITIONS
For purposes of the Agreement the following terms shall have the
meanings specified below:
AGREEMENT. "Agreement" shall mean this Agreement and Plan of Merger and
Reorganization (including the Company Disclosure Schedule and the Parent
Disclosure Schedule), as it may be amended from time to time.
ASSOCIATED PARTIES. "Associated Parties," when used herein with respect
to a Shareholder, shall mean and include: (i) such Shareholder's predecessors,
successors, executors, administrators, heirs and estate; (ii) such Shareholder's
past, present and future assigns, agents and representatives; (iii) each entity
that such Shareholder has the power to bind (by such Shareholder's acts or
signature) or over which such Shareholder directly or indirectly exercises
control; and (iv) each entity of which such Shareholder owns, directly or
indirectly, at least 50% of the outstanding equity, beneficial, proprietary,
ownership or voting interests.
CLOSING CERTIFICATE. "Closing Certificate" shall have the meaning
ascribed thereto in Section 6.5.
1.
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COMPANY ACQUISITION TRANSACTION. "Company Acquisition Transaction" shall
mean any transaction involving:
(a) the sale, lease, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common stock issued to
employees of the Company, upon exercise of Company Options or otherwise, in
routine transactions in accordance with the Company's past practices), (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of the Company (other than
stock options granted to employees of the Company in routine transactions in
accordance with the Company's past practices), or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.
COMPANY COMMON STOCK. "Company Common Stock" shall have the meaning
ascribed thereto in Recital D of this Agreement.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY DISCLOSURE SCHEDULE. "Company Disclosure Schedule" shall mean
the schedule (dated as of the date of the Agreement) delivered to Parent on
behalf of the Company.
COMPANY MATERIAL ADVERSE EFFECT. A matter will be deemed to have a
"Company Material Adverse Effect" if such matter would have a material adverse
effect on the Company's business, condition, assets, liabilities, operations,
financial performance or prospects, taken as a whole.
COMPANY MATERIAL CONTRACT. "Company Material Contract" shall have the
meaning ascribed thereto in Section 2.10(a).
COMPANY OPTION. "Company Option" shall have the meaning ascribed thereto
in Section 1.6.
COMPANY PLAN. "Company Plan" shall have the meaning ascribed thereto
under Section 1.6
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
2.
<PAGE> 10
COMPANY RELATED PARTY. "Company Related Party" shall have the meaning
ascribed thereto in Section 2.18.
COMPANY RETURNS. "Company Returns" shall have the meaning ascribed
thereto in Section 2.14.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written or oral agreement, contract,
subcontract, lease, understanding, instrument, note, warranty, insurance policy,
benefit plan or legally binding commitment.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement, option,
right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
EFFECTIVE TIME. "Effective Time" shall have the meaning ascribed thereto
in Section 1.3.
EMPLOYEE. "Employee" shall have the meaning ascribed therein in Section
2.15(a).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ENVIRONMENTAL LAW. "Environmental Law" shall mean any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
EXCHANGE RATIO. "Exchange Ratio" shall have the meaning ascribed thereto
in Section 1.5(a)(iii).
3.
<PAGE> 11
GOVERNMENT BID. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body or
any such prime contractor or subcontractor otherwise has or may acquire any
right or interest.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
INDEMNITOR. "Indemnitor" shall mean either Parent or the Shareholders,
as the case may be, which Person or Persons are required to hold harmless,
indemnify, compensate or reimburse the Shareholder Indemnitees or Parent
Indemnitees, as applicable, pursuant to Section 9.
KNOWLEDGE. An individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, actual knowledge of such fact or matter. Further, "Knowledge" of the
Company will be deemed to include Knowledge of Don Brown, Steven Bowen and
Dennis Foster.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes, toxic substances, petroleum
and petroleum products
4.
<PAGE> 12
and any other substance that is now or hereafter regulated by any Environmental
Law or that is otherwise a danger to health, reproduction or the environment.
PARENT ACQUISITION TRANSACTION. "Parent Acquisition Transaction" shall
mean any transaction involving:
(a) the purchase, lease, license or acquisition of all or a material
portion of the business or assets of any Person that markets and sells
technology that is substantially similar to and competitive with the Company's
technology ("Company Competitor");
(b) the purchase or acquisition of (i) any capital stock or other
equity security of any Company Competitor, (ii) any option, call, warrant or
right (whether or not immediately exercisable) to acquire any capital stock or
other equity security of any Company Competitor, or (iii) any security,
instrument or obligation that is or may become convertible into or exchangeable
for any capital stock or other equity security of any Company Competitor; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the acquisition by Parent of a Company
Competitor.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the common stock,
$.001 par value, of Parent.
PARENT CONTRACT: "Parent Contract" shall mean any Contract: (a) to which
Parent is a party; (b) by which Parent or any of its assets is or may become
bound or under Parent has, or may become subject to, any obligation; or (c)
under which Parent has or may acquire any right or interest.
PARENT DISCLOSURE SCHEDULE. "Parent Disclosure Schedule" shall mean the
schedule (dated as of the date of the Agreement) delivered to the Company on
behalf of Parent and Merger Sub.
PARENT INDEMNITEES. "Parent Indemnitees" shall mean the following
Persons: (a) Parent and (b) the successors and assigns of Parent; provided,
however, that no Shareholder shall be deemed to be a "Parent Indemnitee."
PARENT MATERIAL ADVERSE EFFECT. A matter will be deemed to have a
"Parent Material Adverse Effect" if such matter would have a material adverse
effect on Parent's business, condition, assets, liabilities, operations,
financial performance or prospects, taken as a whole.
PARENT MATERIAL CONTRACT. "Parent Material Contract" shall have the
meaning ascribed thereto in Section 3.15(a).
PARENT OPTION. "Parent Option" shall have the meaning ascribed thereto
in Section 3.6(d).
PARENT PREFERRED STOCK. "Parent Preferred Stock" shall have the meaning
ascribed thereto in Section 3.4(a).
5.
<PAGE> 13
PARENT PROPRIETARY ASSET: "Parent Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to Parent or otherwise used by Parent.
PARENT RETURNS. "Parent Returns" shall have the meaning ascribed thereto
in Section 3.17.
PARENT SUBSTITUTED OPTION. "Parent Substituted Option" shall have the
meaning ascribed thereto in Section 1.6.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
RELEASEES. "Releasees" shall mean and include: (i) Parent; (ii) the
Company; (iii) each of the direct and indirect subsidiaries of Parent and the
Company; (iv) each other affiliate of Parent and the Company; and (v) the
successors and past, present and future assigns, directors, officers, employees,
agents and representatives of the respective entities identified or otherwise
referred to in clauses "(i)" through "(iv)" of this sentence, other than the
Shareholders.
RELEASED CLAIMS. "Released Claims" shall mean and include each and every
Shareholder Claim that (i) any Shareholder or any Associated Party of any
Shareholder may have had in the past, may now have or may have in the future
against any of the Releasees, and (ii) has arisen or arises directly or
indirectly out of, or relates directly or indirectly to, any circumstance,
agreement, activity, action, omission, event or matter occurring or existing on
or prior to the date of this Agreement (excluding only such Shareholder's rights
or claims, if any, arising from or relating to (x) this Merger Agreement, (y)
any agreement entered in connection with the Merger; or (z) laws applicable to
this Merger Agreement, or any agreement entered into in connection with the
Merger, or the transactions contemplated thereby, including, but not limited to,
applicable securities laws and regulations.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
SHAREHOLDER CLAIMS. "Shareholder Claims" shall mean and include all
past, present and future disputes, claims, controversies, demands, rights,
obligations, liabilities, actions and causes of action of every kind and nature,
including, without limitation: (i) any unknown, unsuspected or undisclosed
claim; (ii) any claim or right that may be asserted or exercised by a
Shareholder in
6.
<PAGE> 14
such Shareholder's capacity as a shareholder, director, officer or employee of
the Company or in any other capacity; (iii) any claim, right or cause of action
based upon any breach of any express, implied, oral or written contract or
agreement; and (iv) any claim, right or cause of action arising in connection
with any acquisition of Company securities from the Company or the sale,
transfer or assignment of any Company securities to the Company.
SHAREHOLDERS' AGENT. "Shareholders' Agent" shall have the meaning
ascribed thereto in Section 10.1.
SHAREHOLDER INDEMNITEES. "Shareholder Indemnitees" shall mean the
following Persons: (a) the Shareholders; and (b) the respective successors and
assigns of the Shareholders.
SHAREHOLDERS INDEMNITY SHARES. "Shareholders Indemnity Shares" shall
have the meaning ascribed thereto in Section 1.8(b).
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
URBCA. "URBCA" shall mean the Utah Revised Business Corporation Act.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the URBCA.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, 4365
7.
<PAGE> 15
Executive Drive, Suite 1100, San Diego, California
92121-2128 at 10:00 a.m. on November ___, 1999 or such other date and time as
the parties hereto may agree (the "Closing Date"). Contemporaneously with or as
promptly as practicable after the Closing, properly executed articles of merger
conforming to the requirements of Section 16-10a-1105 of the URBCA shall be
filed with the Utah Department of Commerce, Division of Corporations and
Commercial Code. The Merger shall become effective at the time such agreement of
merger is filed with and accepted by the Utah Department of Commerce, Division
of Corporations and Commercial Code (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
otherwise determined by Parent and the Company prior to the Effective Time:
(a) the Articles of Incorporation of the Surviving Corporation shall
be amended and restated as of the Effective Time to conform to EXHIBIT B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
EXHIBIT C.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.8(d) and 1.9, at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any shareholder of the Company:
(i) each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be converted into the right to receive: (A)
one share of Parent Common Stock multiplied by (B) the Exchange Ratio; and
(ii) each share of the common stock, no par value, of Merger Sub
outstanding immediately prior to the Effective Time shall be converted into one
share of common stock of the Surviving Corporation.
(iii) the term "Exchange Ratio" shall mean a fraction equal to
(A) 875,000 divided by (B) the sum of (1) the total number of outstanding shares
of Company Common Stock, and (2) the total number of shares of Company Common
Stock which are issuable upon exercise of all Company Options outstanding
immediately prior to the Effective Time.
(b) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common Stock
will also be unvested and subject to the same repurchase option,
8.
<PAGE> 16
risk of forfeiture or other condition, and the certificates representing such
shares of Parent Common Stock may accordingly be marked with appropriate
legends.
(c) A total of 775,000 of the shares of Parent Common Stock issuable
with respect to Company Common Stock under Section 1.5(a)(i) above shall be
either subject to Parent Substituted Options granted pursuant to Section 1.6 or
delivered to the Shareholders in accordance with Section 1.8(a) below, and
100,000 of such shares of Parent Common Stock shall be delivered to the Escrow
Agent in accordance with Section 1.8(b) below.
1.6 EMPLOYEE STOCK OPTIONS. At the Effective Time, each stock option
that is then outstanding under the Company's 1995 Stock Option Plan (the
"Company Plan"), whether vested or unvested (a "Company Option"), shall be
substituted by Parent with a stock option under Parent's 1999 Omnibus Equity
Plan (or an equivalent plan) (the "Parent Plan") with a term, exercisability and
vesting schedule equivalent to such Company Option and with all other terms in
accordance with the Parent Plan and as set forth in this Section 1.6 (a "Parent
Substituted Option"). Accordingly, from and after the Effective Time, (a) each
Parent Substituted Option substituted for a Company Option may be exercised
solely for shares of Parent Common Stock, (b) the number of shares of Parent
Common Stock subject to each Parent Substituted Option shall be equal to the
number of shares of Company Common Stock that were subject to such Company
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, (c)
the per share exercise price for the Parent Common Stock issuable upon exercise
of each Parent Substituted Option shall be determined by dividing the exercise
price per share of Company Common Stock subject to such substituted Company
Option, as in effect immediately prior to the Effective Time, by the Exchange
Ratio, and rounding the resulting exercise price up to the nearest whole cent,
and (d) the Parent Substituted Option shall contain all restrictions on the
exercise of each such substituted Company Option, which shall continue in full
force and effect; provided, however, that each such Parent Substituted Option
shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by Parent after the
Effective Time. The Company and Parent shall take all action that may be
necessary (under the Company Plan, the option agreements thereunder and
otherwise) to effectuate the provisions of this Section 1.6. Following the
Closing, Parent will send to each holder of a substituted Company Option a Stock
Option Grant Notice and Stock Option Agreement under the Parent Plan reflecting
the terms of the Parent Substituted Option for execution by such holder.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company Stock Certificate") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in Section 1.8.
9.
<PAGE> 17
1.8 EXCHANGE OF CERTIFICATES.
(a) Subject to Section 1.8(b), at or as soon as practicable after
the Effective Time, the holders of Company Common Stock shall be entitled to
certificates representing Parent Common Stock as calculated pursuant to Section
1.5(a)(i). Parent will send to the holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as Parent
may reasonably specify and (ii) instructions for use in effecting the surrender
of Company Stock Certificates in exchange for certificates representing Parent
Common Stock. Upon surrender of a Company Stock Certificate to Parent for
exchange, together with a duly executed letter of transmittal and such other
documents as may be reasonably required by Parent, the holder of such Company
Stock Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock that
such holder has the right to receive pursuant to the provisions of this Section
1, and the Company Stock Certificate so surrendered shall be canceled. Until
surrendered as contemplated by this Section 1.8, each Company Stock Certificate
shall be deemed, from and after the Effective Time, to represent only the right
to receive upon such surrender a certificate representing shares of Parent
Common Stock (and cash in lieu of any fractional share of Parent Common Stock)
as contemplated by this Section 1. If any Company Stock Certificate shall have
been lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any certificate representing Parent Common Stock,
require the owner of such lost, stolen or destroyed Company Stock Certificate to
provide an appropriate affidavit and to deliver a bond (in such sum as Parent
may reasonably direct) as indemnity against any claim that may be made against
Parent or the Surviving Corporation with respect to such Company Stock
Certificate.
(b) At or as soon as practical after the Effective Time, Parent
shall deposit certificates representing 100,000 shares of the Parent Common
Stock issuable to the holders of Company Common Stock in the Merger into an
escrow (the "Shareholders Indemnity Shares") administered by a third party
escrow agent selected by Parent and reasonably acceptable to the Company (the
"Escrow Agent") and which shall be held subject to the terms and conditions set
forth in the Escrow Agreement of even date herewith between Parent, the Company,
the Escrow Agent and the Shareholders (the "Escrow Agreement") attached hereto
as EXHIBIT D. Upon release from the escrow under the Escrow Agreement, the
Shareholders Indemnity Shares shall be distributed to the Shareholders in
accordance with the Escrow Agreement.
(c) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Stock Certificate in accordance with this
Section 1.8 (at which time such holder shall be entitled to receive all such
dividends and distributions and such cash payment).
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital stock
of the Company who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all
10.
<PAGE> 18
fractional shares of Parent Common Stock issuable to such holder) shall, upon
surrender of such holder's Company Stock Certificate(s), be paid in cash the
dollar amount (rounded to the nearest whole cent), without interest, determined
by multiplying such fraction by the fair market value per share of the Parent
Common Stock as of the Effective Time, as determined in good faith by Parent's
board of directors.
(e) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(f) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.9 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become subject to a Company shareholder's exercise of his, her
or its right to dissent pursuant to Section 16-10a-1302 of the URBCA, shall not
be converted into or represent the right to receive Parent Common Stock in
accordance with Section 1.5 (or cash in lieu of fractional shares in accordance
with Section 1.8(d)), and the dissenting holder or holders of such shares shall
be entitled only to such rights as may be granted to such holder or holders
under Section 16-10a-1302 of the URBCA; provided, however, that if the status of
any such shareholder as a dissenter shall not be perfected, or if any such
shareholder shall lose his, her or its status as a dissenter, then, as of the
later of the Effective Time or the time of the failure to perfect such status or
the loss of such status, the shares held by such shareholder shall automatically
be converted into and shall represent only the right to receive (upon the
surrender of the certificate or certificates representing such shares) Parent
Common Stock in accordance with Section 1.5 (and cash in lieu of fractional
shares in accordance with Section 1.8(c)).
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to Section
16-10a-1302 of the URBCA and of any other demand, notice or instrument delivered
to the Company prior to the Effective Time pursuant to the URBCA, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
any such demand, notice or instrument. The Company shall not make any payment or
settlement offer prior to the Effective Time with respect to any such demand
unless Parent shall have consented in writing to such payment or settlement
offer.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this
11.
<PAGE> 19
Agreement hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
1.11 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation or Parent
with full right, title and possession of and to all rights and property of
Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants, to and for the benefit of the
Parent Indemnitees, as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted and (ii) to own and use its assets in the
manner in which its assets are currently owned and used.
(b) Except as set forth in Part 2.1(b) of the Company Disclosure
Schedule, the Company has not conducted any business under or otherwise used,
for any purpose or in any jurisdiction, any fictitious name, assumed name, trade
name or other name, other than the name "PartNET, Inc."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the
Company Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Company
Material Adverse Effect. The Company is in good standing as a foreign
corporation in each of the jurisdictions identified in Part 2.1(c) of the
Company Disclosure Schedule, except where the failure to be in good standing
would not have a Company Material Adverse Effect.
(d) Part 2.1(d) of the Company Disclosure Schedule accurately sets
forth (i) the names of the members of the Company's board of directors, (ii) the
names of the members of each committee of the Company's board of directors, and
(iii) the names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any Entity
and, except for the equity interests identified in Part 2.1(e) of the Company
Disclosure Schedule, the Company has never owned, beneficially or otherwise, any
shares or other securities of, or any direct or indirect equity interest in, any
Entity. The Company has not agreed and is not obligated to make any future
investment in or capital contribution to any Entity. The Company has not
guaranteed and is not responsible or liable for any obligation of any of the
Entities in which it owns or has owned any equity interest.
12.
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2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's articles
of incorporation and bylaws, including all amendments thereto; (2) the stock
records of the Company; and (3) except as set forth in Part 2.2 of the Company
Disclosure Schedule, the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the shareholders of the Company, the board of directors of the
Company and all committees of the board of directors of the Company. There have
been no formal meetings or other proceedings of the shareholders of the Company,
the board of directors of the Company or any committee of the board of directors
of the Company that are not reflected in such minutes or other records. There
has not been any violation of any of the provisions of the Company's articles of
incorporation or bylaws, and the Company has not taken any action that is
inconsistent in any material respect with any resolution adopted by the
Company's shareholders, the Company's board of directors or any committee of the
Company's board of directors. The books of account, stock records, minute books
and other records of the Company are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of
1,000,000 shares of Common Stock, $.01 par value, of which 109,569 shares have
been issued and are outstanding as of the date of this Agreement. All of the
outstanding shares of Company Common Stock have been duly authorized and validly
issued, and are fully paid and non-assessable. Part 2.3(a) of the Company
Disclosure Schedule provides an accurate and complete description of the terms
of each repurchase option which is held by the Company and to which any of such
shares is subject.
(b) Except as set forth in Part 2.3(b) of the Company Disclosure
Schedule, there is no: (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company; (iii)
Contract under which the Company is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; or (iv) to the
Knowledge of the Company, condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of the Company.
(c) All outstanding shares of Company Common Stock have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) Except as set forth in Part 2.3(d) of the Company Disclosure
Schedule, the Company has never repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities of the Company. All securities
so reacquired by the Company were reacquired in compliance with (i) the
applicable provisions of the URBCA and all other applicable Legal Requirements,
and (ii) all requirements set forth in applicable restricted stock purchase
agreements and other applicable Contracts.
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2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) The unaudited balance sheets of the Company as of March 31,
1999, 1998 and 1997, and the related unaudited income statements, statements of
shareholders' equity and statements of cash flows of the Company for the years
then ended, together with the notes thereto; and
(ii) the unaudited balance sheet of the Company for the interim
period as of September 30, 1999 (the "Company Unaudited Interim Balance Sheet"),
and the related unaudited income statement of the Company as of September 30,
1999 (the "Company Balance Sheet Date").
(b) The Company Financial Statements are accurate in all material
respects and present fairly the financial position of the Company as of the
respective dates thereof and the results of operations and (in the case of the
financial statements referred to in Section 2.4(a)(i)) cash flows of the Company
for the periods covered thereby. The Company Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except that the financial
statements do not contain footnotes and the financial statements referred to in
Section 2.4(b)(ii) are subject to normal and recurring year-end audit
adjustments, which will not, individually or in the aggregate, be material in
magnitude).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Company
Disclosure Schedule, since the Company Balance Sheet Date:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the Knowledge of the Company, no event has occurred that
will, or could reasonably be expected to, have a Company Material Adverse
Effect;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's material assets
(whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance of
(i) any capital stock or other security (except for Company Common Stock issued
upon the exercise of outstanding Company Options), (ii) any option or right to
acquire any capital stock or any other security (except for Company Options
described in Part 2.3(b) of the Company Disclosure Schedule), or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security;
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(e) the Company has not amended or waived any of its rights under,
or permitted the acceleration of vesting under, (i) any provision of any
agreement evidencing any outstanding Company Option or (ii) any restricted stock
purchase agreement;
(f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party to any
Company Acquisition Transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since the
Company Balance Sheet Date, exceeds $25,000;
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Company Material Contract, or (ii) amended or prematurely
terminated, or waived any material right or remedy under, any such Company
Material Contract;
(j) the Company has not (i) acquired, leased or licensed any right
or other asset from any other Person, (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness in excess of the bad debt reserve on the Company Financial
Statements;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money in
excess of $25,000 in the aggregate;
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees other than in accordance with the Company's past practices, or
(iii) hired any new employee;
(o) the Company has not changed any of its methods of accounting or
accounting practices in any material respect;
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<PAGE> 23
(p) the Company has not made any material Tax election;
(q) the Company has not commenced or settled any material Legal
Proceeding;
(r) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(s) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it (other than Company Proprietary Assets,
as to which representations and warranties are set forth in Section 2.9),
including: (i) all assets reflected on the Company Unaudited Interim Balance
Sheet; (ii) all assets referred to in Parts 2.1 and 2.7(b) of the Company
Disclosure Schedule and all of the Company's rights under the Contracts
identified in Part 2.10 of the Company Disclosure Schedule; and (iii) all other
assets reflected in the Company's books and records as being owned by the
Company. Except as set forth in Part 2.6 of the Company Disclosure Schedule, all
of said assets are owned by the Company free and clear of any liens or other
Encumbrances, except for (x) any lien for current taxes not yet due and payable,
and (y) minor liens that have arisen in the ordinary course of business and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of the Company.
(b) Part 2.6 of the Company Disclosure Schedule identifies all
assets that are material to the business of the Company (other than Company
Proprietary Assets, which are identified pursuant to Section 2.9 and in Part 2.9
of the Company Disclosure Schedule) and that are being leased or licensed to the
Company.
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Company Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) Part 2.7(b) of the Company Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of the Company as of September 30, 1999. Except
as set forth in Part 2.7(b) of the Company Disclosure Schedule, all existing
accounts receivable of the Company (including those accounts receivable
reflected on the Company Unaudited Interim Balance Sheet that have not yet been
collected and those accounts receivable that have arisen since September 30,
1999 and have not yet been collected) (i) represent valid obligations of
customers of the Company arising from bona fide transactions entered into in the
ordinary course of business, and (ii) are current and will be collected in full
when due, without any counterclaim or set off (net of an allowance for doubtful
accounts not to exceed $10,000 in the aggregate).
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2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Company Disclosure Schedule.
2.9 COMPANY PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Company Proprietary Asset registered with any Governmental
Body or for which an application has been filed with any Governmental Body, (i)
a statement identifying such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.9(a)(ii) of the Company Disclosure Schedule provides a statement identifying
all other Company Proprietary Assets. Part 2.9(a)(iii) of the Company Disclosure
Schedule identifies each Proprietary Asset licensed to the Company by any Person
(except for any Proprietary Asset that is licensed to the Company under any
third party software license generally available to the public at a cost of less
than $10,000), and identifies the license agreement under which such Proprietary
Asset is being licensed to the Company. Except as set forth in Part 2.9(a)(iv)
of the Company Disclosure Schedule, the Company has good, valid and marketable
title to all of the Company Proprietary Assets identified in Parts 2.9(a)(i) and
2.9(a)(ii) of the Company Disclosure Schedule, free and clear of all liens and
other Encumbrances, and has a valid right to use all Proprietary Assets
identified in Part 2.9(a)(iii) of the Company Disclosure Schedule. Except as set
forth in Part 2.9(a)(v) of the Company Disclosure Schedule, the Company is not
obligated to make any payment to any Person for the use of any Company
Proprietary Asset. Except as set forth in Part 2.9(a)(vi) of the Company
Disclosure Schedule, the Company has not developed jointly with any other Person
any Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Company has taken reasonable measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. Except as set forth in Part 2.9(b) of the
Company Disclosure Schedule, the Company has not (other than pursuant to license
agreements identified in Part 2.10 of the Company Disclosure Schedule) delivered
to any Person, or permitted the disclosure or delivery to any Person of, the
source code, or any portion of the source code, of any Company Proprietary
Asset. The Company has not delivered to any Person any object code of any
Company Proprietary Asset unless such Person entered into a license or other
similar agreement with the Company which governs the use of such object code and
retains all ownership rights of such object code in the Company.
(c) To the Knowledge of the Company, none of the Company Proprietary
Assets infringes or conflicts with any Proprietary Asset owned or used by any
other Person. To
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<PAGE> 25
the Knowledge of the Company, the Company is not infringing, misappropriating or
making any unlawful use of, and the Company has not at any time infringed,
misappropriated or made any unlawful use of, or received any notice or other
communication (in writing or orally) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the Knowledge of the Company, no
other Person is infringing, misappropriating or making any unlawful use of, and
no Proprietary Asset owned or used by any other Person infringes with, any
Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Company Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material respects
with any written specification, documentation, performance standard,
representation or statement made or provided with respect thereto by the
Company, and (ii) there has not been any claim by any customer or other Person
alleging that any Company Proprietary Asset (including each version thereof that
has ever been licensed or otherwise made available by the Company to any Person)
does not conform in all material respects with any written specification,
documentation, performance standard, representation or statement made or
provided by the Company, and, to the Knowledge of the Company, there is no valid
basis for any such claim.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business is being conducted. Except as set forth in Part 2.9(e) of
the Company Disclosure Schedule, (i) the Company has not licensed any of the
Company Proprietary Assets to any Person on an exclusive basis, and (ii) the
Company has not entered into any covenant not to compete or Contract limiting
its ability to exploit fully any of its Proprietary Assets or to transact
business in any market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Company Disclosure
Schedule, (i) all current and former employees of the Company have executed and
delivered to the Company an agreement (containing no exceptions to or exclusions
from the scope of its coverage) that is substantially identical to the form of
Confidential Information and Invention Assignment Agreement previously delivered
to Parent, and (ii) all current and former consultants and independent
contractors to the Company have executed and delivered to the Company an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Consultant Confidential
Information and Invention Assignment Agreement previously delivered to Parent.
2.10 CONTRACTS.
(a) Part 2.10 of the Company Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor
in excess of $25,000 annually;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any material technology or any
material Company Proprietary Asset;
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<PAGE> 26
(iii) each Company Contract imposing any material restriction on
the Company's right or ability (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person, to
sell any product or other asset to or perform any services for any other Person
or to transact business or deal in any other manner with any other Person, or
(C) develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship that is not
cancelable according to its terms on 30 days notice or less;
(v) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any material asset of the Company;
(vii) each Company Contract involving or incorporating any
material guaranty, any pledge, any performance or completion bond, any indemnity
or any surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Company Related Party;
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the Company's past
practices or is subject to audit by any Governmental Body;
(xii) any other Company Contract that has a term of more than 30
days and that may not be terminated by the Company (without penalty) within 30
days after the delivery of a termination notice by the Company; and
(xiii) any other Company Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $25,000 in the aggregate, or (B) the performance of
services having a value in excess of $25,000 in the aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Company Material
Contracts.")
(b) The Company has delivered to Parent accurate and complete copies
of all written Contracts identified in Part 2.10 of the Company Disclosure
Schedule, including all
19.
<PAGE> 27
amendments thereto. Part 2.10 of the Company Disclosure Schedule provides an
accurate description of the terms of each Company Contract that is not in
written form. Each Contract identified in Part 2.10 of the Company Disclosure
Schedule is valid and in full force and effect, and, to the Knowledge of the
Company, is enforceable by the Company in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Company Disclosure
Schedule:
(i) the Company has not violated or breached, or committed any
default under, any Contract, and, to the Knowledge of the Company, no other
Person has violated or breached, or committed any default under, any Company
Material Contract;
(ii) to the Knowledge of the Company, no event has occurred, and
no circumstance or condition exists, that (with or without notice or lapse of
time) will, or could reasonably be expected to, (A) result in a violation or
breach of any of the provisions of any Company Material Contract, (B) give any
Person the right to declare a default or exercise any remedy under any Company
Material Contract, (C) give any Person the right to accelerate the maturity or
performance of any Company Material Contract, or (D) give any Person the right
to cancel, terminate or modify any Company Material Contract;
(iii) since January 1, 1997, the Company has not received any
notice (or to the Knowledge of the Company, any other communication) regarding
any actual or possible violation or breach of, or default under, any Company
Material Contract; and
(iv) the Company has not waived any of its material rights under
any Company Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Company Material Contract to renegotiate, any amount paid or payable to
the Company under any Company Material Contract or any other material term or
provision of any Company Material Contract.
(e) Part 2.10 of the Company Disclosure Schedule identifies each
proposed Company Material Contract as to which any bid, offer, award, written
proposal, term sheet or similar document has been submitted or received by the
Company since January 1, 1997.
(f) Except as set forth in Part 2.10(f) of the Company Disclosure
Schedule:
(i) the Company has not had any determination of noncompliance,
entered into any consent order or undertaken any internal investigation relating
directly or indirectly to any Government Contract or Government Bid;
(ii) the Company has complied in all material respects with all
Legal Requirements with respect to all Government Contracts and Government Bids;
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(iii) the Company has not, in obtaining or performing any
Government Contract, violated (A) the Truth in Negotiations Act of 1962, as
amended, (B) the Service Contract Act of 1963, as amended, (C) the Contract
Disputes Act of 1978, as amended, (D) the Office of Federal Procurement Policy
Act, as amended, (E) the Federal Acquisition Regulations (the "FAR") or any
applicable agency supplement thereto, (F) the Cost Accounting Standards, (G) the
Defense Industrial Security Manual (DOD 5220.22-M), (H) the Defense Industrial
Security Regulation (DOD 5220.22-R) or any related security regulations, or (I)
any other applicable procurement law or regulation or other Legal Requirement;
(iv) all facts set forth in or acknowledged by the Company in
any certification, representation or disclosure statement submitted by the
Company with respect to any Government Contract or Government Bid were current,
accurate and complete as of the date of submission;
(v) neither the Company nor any of its employees has been
debarred or suspended from doing business with any Governmental Body, and, to
the Knowledge of the Company and the Shareholders, no circumstances exist that
would warrant the institution of debarment or suspension proceedings against the
Company or any employee of the Company;
(vi) no negative determinations of responsibility have been
issued against the Company in connection with any Government Contract or
Government Bid;
(vii) no direct or indirect costs incurred by the Company have
been questioned or disallowed as a result of a finding or determination of any
kind by any Governmental Body;
(viii) no Governmental Body, and no prime contractor or
higher-tier subcontractor of any Governmental Body, has withheld or set off, or
threatened to withhold or set off, any amount due to the Company under any
Government Contract;
(ix) to the Knowledge of the Company, there are not and have not
been any irregularities, misstatements or omissions relating to any Government
Contract or Government Bid that have led to or could reasonably be expected to
lead to (A) any administrative, civil, criminal or other investigation, Legal
Proceeding or indictment involving the Company or any of its employees, (B) the
questioning or disallowance of any costs submitted for payment by the Company,
(C) the recoupment of any payments previously made to the Company, (D) a finding
or claim of fraud, defective pricing, mischarging or improper payments on the
part of the Company, or (E) the assessment of any penalties or damages of any
kind against the Company;
(x) there is not and has not been any (A) outstanding claim
against the Company by, or dispute involving the Company with, any prime
contractor, subcontractor, vendor or other Person arising under or relating to
the award or performance of any Government Contract, (B) fact known by the
Company upon which any such claim could reasonably be expected to be based or
which may give rise to any such dispute, (C) final decision of any Governmental
Body against the Company;
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(xi) the Company is not undergoing and has not undergone any
audit, and the Company has no Knowledge of any basis for any impending audit,
arising under or relating to any Government Contract (other than normal routine
audits conducted in the ordinary course of business);
(xii) the Company has not entered into any financing arrangement
or assignment of proceeds with respect to the performance of any Government
Contract;
(xiii) no payment has been made by the Company or by any Person
acting on the Company's behalf to any Person (other than to any bona fide
employee or agent (as defined in subpart 3.4 of the FAR) of the Company) which
is or was contingent upon the award of any Government Contract or which would
otherwise be in violation of any applicable procurement law or regulation or any
other Legal Requirement;
(xiv) the Company's cost accounting system is in compliance with
applicable regulations and other applicable Legal Requirements, and has not been
determined by any Governmental Body not to be in compliance with any Legal
Requirement;
(xv) the Company has complied with all applicable regulations
and other Legal Requirements and with all applicable contractual requirements
relating to the placement of legends or restrictive markings on technical data,
computer software and other Proprietary Assets;
(xvi) in each case in which the Company has delivered or
otherwise provided any technical data, computer software or Company Proprietary
Asset to any Governmental Body in connection with any Government Contract, the
Company has marked such technical data, computer software or Company Proprietary
Asset with all markings and legends (including any "restricted rights" legend
and any "government purpose license rights" legend) necessary (under the FAR or
other applicable Legal Requirements) to ensure that no Governmental Body or
other Person is able to acquire any unlimited rights with respect to such
technical data, computer software or Company Proprietary Asset;
(xvii) the Company has not made any disclosure to any
Governmental Body pursuant to any voluntary disclosure agreement;
(xviii) the Company has reached agreement with the cognizant
government representatives approving and "closing" all indirect costs charged to
Government Contracts for 1994, 1995, 1996, 1997 and 1998, and those years are
closed;
(xix) the responsible government representatives have agreed
with the Company on the "forward pricing rates" that the Company is charging on
cost-type Government Contracts and including in Government Bids; and
(xx) the Company is not and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any
Governmental Body under or in connection with any Government Contract or
Government Bid as a result of or by virtue of (A) the execution, delivery of
performance of this Agreement or any of the other agreements referred
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to in this Agreement, or (B) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
2.11 LIABILITIES. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Company
Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries that
have been incurred by the Company since the Company Balance Sheet Date in the
ordinary course of business and consistent with the Company's past practices;
(c) liabilities under the Company Contracts identified in Part 2.10 of the
Company Disclosure Schedule, to the extent the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Company Contracts; and (d) the liabilities identified in Part 2.11 of the
Company Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since its inception been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Company Material Adverse Effect. Except as set
forth in Part 2.12 of the Company Disclosure Schedule, since its inception, the
Company has not received any notice or other communication from any Governmental
Body regarding any actual or possible violation of, or failure to comply with,
any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Company Disclosure
Schedule identifies each material Governmental Authorization held by the
Company, and the Company has delivered to Parent accurate and complete copies of
all Governmental Authorizations identified in Part 2.13 of the Company
Disclosure Schedule. The Governmental Authorizations identified in Part 2.13 of
the Company Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable the
Company to conduct its business in the manner in which its business is currently
being conducted. To the Company's Knowledge, the Company is, and at all times
since its inception has been, in substantial compliance with the terms and
requirements of the respective Governmental Authorizations identified in Part
2.13 of the Company Disclosure Schedule. Since its inception, the Company has
not received any notice or other communication from any Governmental Body
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending on
or before the Closing Date (the "Company Returns") (i) have been or will be
filed on or before the applicable due date (including any extensions of such due
date), and (ii) have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the Closing
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Date have been or will be paid on or before the Closing Date. The Company has
delivered to Parent accurate and complete copies of all Company Returns filed
since December 31, 1996 which have been requested by Parent.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. The Company
will establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
January 1, 1999 through the Closing Date, and the Company will disclose the
dollar amount of such reserves to Parent on or prior to the Closing Date.
(c) No Company Return relating to income Taxes has ever been
examined or audited by any Governmental Body. Except as set forth in Part 2.14
of the Company Disclosure Schedule, there have been no examinations or audits of
any Company Return. The Company has delivered to Parent accurate and complete
copies of all audit reports and similar documents (to which the Company has
access) relating to the Company Returns. Except as set forth in Part 2.14 of the
Company Disclosure Schedule, no extension or waiver of the limitation period
applicable to any of the Company Returns has been granted (by the Company or any
other Person), and no such extension or waiver has been requested from the
Company.
(d) Except as set forth in Part 2.14 of the Company Disclosure
Schedule, no claim or Legal Proceeding is pending or, to the Knowledge of the
Company, has been threatened against or with respect to the Company, in respect
of any Tax. There are no unsatisfied liabilities for Taxes (including
liabilities for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document received
by the Company with respect to any Tax (other than liabilities for Taxes
asserted under any such notice of deficiency or similar document which are being
contested in good faith by the Company and with respect to which adequate
reserves for payment have been established). There are no liens for Taxes upon
any of the assets of the Company except liens for current Taxes not yet due and
payable. The Company has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code. The Company has not been, and
the Company will not be, required to include any adjustment in taxable income
for any tax period (or portion thereof) pursuant to Section 481 or 263A of the
Code or any comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
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2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by the Company for
the benefit of any employee of the Company ("Employee"), except for Plans which
would not require the Company to make payments or provide benefits having a
value in excess of $25,000 in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Company Disclosure
Schedule, the Company does not maintain, sponsor or contribute to, and, to the
Knowledge of the Company, has not at any time in the past maintained, sponsored
or contributed to, any employee pension benefit plan (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
whether or not excluded from coverage under specific Titles or Merger Subtitles
of ERISA) for the benefit of Employees or former Employees (a "Pension Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees which are described in Part
2.15(c) of the Company Disclosure Schedule (the "Welfare Plans"), none of which
is a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, and all material employee
communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and recordkeeping agreements; and
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(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) The Company is not required to be, and, to the Knowledge of the
Company, has never been required to be, treated as a single employer with any
other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or
(o) of the Code. The Company has never been a member of an "affiliated service
group" within the meaning of Section 414(m) of the Code. To the Knowledge of the
Company, the Company has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA, resulting
in "withdrawal liability," as such term is defined in Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such liability under either
Section 4207 or 4208 of ERISA).
(f) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law) in a
manner that would affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Company Disclosure
Schedule, no Welfare Plan provides death, medical or health benefits (whether or
not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law, including coverage provided pursuant to Section 4980B of the
Code, (ii) deferred compensation benefits accrued as liabilities on the Company
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(i) To the Knowledge of the Company, each of the Plans has been
operated and administered in all material respects in accordance with applicable
Legal Requirements, including but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the Internal Revenue
Service, and neither the Company nor any of the Shareholders is aware of any
reason why any such determination letter should be revoked.
(k) Except as set forth in Part 2.15(k) of the Company Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former Employee or director of
the Company (whether or not under any Plan), or materially increase the benefits
payable under any Plan, or result in any acceleration of the time of payment or
vesting of any such benefits.
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(l) Part 2.15(l) of the Company Disclosure Schedule contains a list
of all salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the Company's employees are "at will" employees.
(m) Part 2.15(m) of the Company Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date of
return to full service.
(n) To the Knowledge of the Company, the Company is in compliance in
all material respects with all applicable Legal Requirements and Contracts
relating to employment, employment practices, wages, bonuses and terms and
conditions of employment, including employee compensation matters.
(o) Except as set forth in Part 2.15(o) of the Company Disclosure
Schedule, the Company has good labor relations, and none of the Shareholders has
any reason to believe that (i) the consummation of the Merger or any of the
other transactions contemplated by this Agreement will have a material adverse
effect on the Company's labor relations, or (ii) any of the Company's employees
intends to terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. To the Knowledge of the Company, the Company
is in compliance in all material respects with all applicable Environmental
Laws, which compliance includes the possession by the Company of all permits and
other Governmental Authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof. The Company has not
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that the Company is not in compliance with any Environmental Law, and, to the
Knowledge of the Company, there are no circumstances that may prevent or
interfere with the Company's compliance with any Environmental Law in the
future. To the Knowledge of the Company, no current or prior owner of any
property leased or controlled by the Company has received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or the Company is not in compliance with any Environmental Law. All
Governmental Authorizations currently held by the Company pursuant to
Environmental Laws are identified in Part 2.16 of the Company Disclosure
Schedule.
2.17 INSURANCE. Part 2.17 of the Company Disclosure Schedule identifies
all insurance policies maintained by, at the expense of or for the benefit of
the Company and identifies any material claims made thereunder, and the Company
has delivered to Parent accurate and complete copies of the insurance policies
identified on Part 2.17 of the Company Disclosure Schedule. Each of the
insurance policies identified in Part 2.17 of the Company Disclosure Schedule is
in full force and effect. Since January 1, 1998, the Company has not received
any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under
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any insurance policy, or (c) material adjustment in the amount of the premiums
payable with respect to any insurance policy.
2.18 COMPANY RELATED PARTY TRANSACTIONS. Except as set forth in Part
2.18 of the Company Disclosure Schedule: (a) no Company Related Party has, and
no Company Related Party has at any time since January 1, 1998 had, any direct
or indirect interest in any material asset used in or otherwise relating to the
business of the Company; (b) no Company Related Party is, or has at any time
since January 1, 1998 been, indebted to the Company; (c) since January 1, 1998,
no Company Related Party has entered into, or has had any direct or indirect
financial interest in, any material Contract, transaction or business dealing
involving the Company; (d) no Company Related Party is competing, or has at any
time since January 1, 1998 competed, directly or indirectly, with the Company;
and (e) no Company Related Party has any claim or right against the Company
(other than rights under Company Options and rights to receive compensation for
services performed as an employee of the Company). (For purposes of this Section
2.18 each of the following shall be deemed to be a "Company Related Party": (i)
each of the Shareholders; (ii) each individual who is, or who has at any time
since January 1, 1998 been, an officer or director of the Company; (iii) each
member of the immediate family of each of the individuals referred to in clauses
"(i)" and "(ii)" above; and (iv) any trust or other Entity (other than the
Company) in which any one of the individuals referred to in clauses "(i)",
"(ii)" and "(iii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary or
equity interest.)
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.19 of the Company Disclosure
Schedule, there is no pending Legal Proceeding, and (to the Knowledge of the
Company) no Person has threatened to commence any Legal Proceeding: (i) that
involves the Company or any of the assets owned or used by the Company or any
Person whose liability the Company has or may have retained or assumed, either
contractually or by operation of law, except for such Legal Proceedings that
would not have a Company Material Adverse Effect; or (ii) that challenges, or
that may have the effect of preventing, delaying, making illegal or otherwise
interfering with, the Merger or any of the other transactions contemplated by
this Agreement. To the Knowledge of the Company and the Shareholders, except as
set forth in Part 2.19 of the Company Disclosure Schedule, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that could reasonably be expected to, give rise to or serve as a basis
for the commencement of any such Legal Proceeding.
(b) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject. To
the Knowledge of the Company, no officer or other employee of the Company is
subject to any order, writ, injunction, judgment or decree that prohibits such
officer or other employee from engaging in or continuing any conduct, activity
or practice relating to the Company's business.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement; and the execution, delivery and
performance by the Company of this Agreement have been duly authorized by all
necessary action on the part of the Company, its board of
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directors and its shareholders. This Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.21 of
the Company Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's articles of incorporation or bylaws, or (ii) any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract that is or
would constitute a Company Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Company Contract,
(ii) accelerate the maturity or performance of any such Company Contract, or
(iii) cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company);
except, in the case of subparagraphs (b), (c), (d) and (e), such that would not
have a Company Material Adverse Effect.
Except as set forth in Part 2.21 of the Company Disclosure Schedule, the Company
is not and will not be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement, except for Consents
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which the failure to obtain would not have a Company Material Adverse Effect or
prevent or delay the Merger or the other transactions contemplated hereby.
2.22 FULL DISCLOSURE. This Agreement (including the Company Disclosure
Schedule) does not, and the Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact or necessary in
order to make the representations, warranties and information contained and to
be contained herein and therein (in the light of the circumstances under which
such representations, warranties and information were or will be made or
provided) not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
the Company and the Shareholders as follows:
3.1 VALID ISSUANCE. Subject to Section 1.5(c), the Parent Common Stock
to be issued in the Merger will, when issued in accordance with the provisions
of this Agreement, be validly issued, fully paid and nonassessable.
3.2 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of its state of
organization and has all necessary power and authority: (i) to conduct its
business in the manner in which its business is currently being conducted and
(ii) to own and use its assets in the manner in which its assets are currently
owned and used.
(b) Parent is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 3.2 of the
Parent Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Parent
Material Adverse Effect. Parent is in good standing as a foreign corporation in
each of the jurisdictions identified in Part 3.2 of the Parent Disclosure
Schedule, except where the failure to be in good standing would not have a
Parent Material Adverse Effect.
3.3 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. Parent has made
available to the Company accurate and complete copies of: (1) Parent's
certificate of incorporation and bylaws, including all amendments thereto; (2)
the stock records of Parent; and (3) except as set forth in Part 3.3 of the
Parent Disclosure Schedule, the minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or otherwise
without a meeting) of the stockholders of Parent, the board of directors of
Parent and all committees of the board of directors of Parent. There have been
no formal meetings or other proceedings of the stockholders of Parent, the board
of directors of Parent or any committee of the board of directors of Parent that
are not fully reflected in such minutes or other records. There has not been any
violation of any of the provisions of Parent's certificate of incorporation or
bylaws, and Parent has not taken any action that is inconsistent in any material
respect with any resolution
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adopted by Parent's stockholders, Parent's board of directors or any committee
of Parent's board of directors. The books of account, stock records, minute
books and other records of Parent are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
3.4 CAPITALIZATION, ETC.
(a) The authorized capital stock of Parent consists of 50,000,000
shares of stock, 40,000,000 shares are designated Common Stock, $.001 par value,
of which 6,101,555 shares were issued and are outstanding as of the date of this
Agreement and 10,000,000 shares are designated Preferred Stock, $.001 par value,
("Parent Preferred Stock") of which 68,100 shares are designated Series A
Preferred Stock, all of which were issued and outstanding as of the date of this
Agreement, 334,907 shares are designated Series B Preferred Stock, all of which
are issued and outstanding as of the date of this Agreement, 5,000,000 shares
are designated Series C Preferred Stock, of which 4,458,332 shares are issued
and outstanding as of the date of this Agreement, and 2,400,000 shares are
designated Series D Preferred Stock, of which 1,714,940 shares are issued and
outstanding as of the date of this Agreement. All of the outstanding shares of
Parent Common Stock and Parent Preferred Stock have been duly authorized and
validly issued, and are fully paid and non-assessable. The authorized capital
stock of Merger Sub consists of 10,000 shares of common stock, of which 1,000
shares are issued and outstanding. All of the outstanding shares of Merger Sub
common stock have been duly authorized and are validly issued, and are
fully-paid and non-assessable.
(b) Except as contemplated in the Merger or as set forth in Part
3.4(b) of the Parent Disclosure Schedule, there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities of
Parent or Merger Sub; (ii) outstanding security, instrument or obligation that
is or may become convertible into or exchangeable for any shares of the capital
stock or other securities of Parent or Merger Sub; (iii) Contract under which
Parent or Merger Sub is or may become obligated to sell or otherwise issue any
shares of its capital stock or any other securities; or (iv) to the Knowledge of
Parent, condition or circumstance that may give rise to or provide a basis for
the assertion of a claim by any Person to the effect that such Person is
entitled to acquire or receive any shares of capital stock or other securities
of Parent.
3.5 FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company the following financial
statements and notes (collectively, the "Parent Financial Statements"):
(i) The audited balance sheets of Parent as of December 31,
1998, and the related audited income statements, statements of shareholders'
equity and statements of cash flows of Parent for the years then ended, together
with the notes thereto and the unqualified report and opinion of
PricewaterhouseCoopers LLP relating thereto; and
(ii) the unaudited balance sheet of Parent as of August 30, 1999
(the "Parent Unaudited Interim Balance Sheet"), and the related unaudited income
statement of Parent as of August 30, 1999 (the "Parent Balance Sheet Date").
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(b) Parent Financial Statements are accurate in all material
respects and present fairly the financial position of Parent as of the
respective dates thereof and the results of operations and (in the case of the
financial statements referred to in Section 3.5(a)(i)) cash flows of Parent for
the periods covered thereby. Parent Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered (except that the financial statements
referred to in Section 3.5(a)(ii) do not contain footnotes and are subject to
normal and recurring year-end audit adjustments, which will not, individually or
in the aggregate, be material in magnitude).
3.6 ABSENCE OF CHANGES. Except as set forth in Part 3.6 of the Parent
Disclosure Schedule, since the Parent Balance Sheet Date:
(a) there has not been any material adverse change in Parent's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the Knowledge of Parent, no event has occurred that will, or
could reasonably be expected to, have a Parent Material Adverse Effect;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of Parent's material assets
(whether or not covered by insurance);
(c) Parent has not declared, accrued, set aside or paid any dividend
or made any other distribution in respect of any shares of capital stock, and
has not repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities;
(d) Parent has not sold, issued or authorized the issuance of (i)
any capital stock or other security (except for Parent Common Stock issued upon
the exercise of outstanding stock options, warrants and other rights to acquire
capital stock of Parent ("Parent Options"); (ii) any option or right to acquire
any capital stock or any other security; (iii) any instrument convertible into
or exchangeable for any capital stock or other security;
(e) Parent has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any agreement
evidencing any outstanding Parent Option or (ii) any restricted stock purchase
agreement;
(f) there has been no amendment to Parent's Certificate of
Incorporation or bylaws, and Parent has not effected or been a party to any
Parent Acquisition Transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(g) Parent has not formed any subsidiary, other than Merger Sub, or
acquired any equity interest or other interest in any other Entity;
(h) Parent has not made any capital expenditure which, when added to
all other capital expenditures made on behalf of Parent since the Parent Balance
Sheet Date, exceeds $100,000;
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(i) Parent has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness in excess of the bad debt reserve on the Parent Financial
Statements;
(j) Parent has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except for
pledges of immaterial assets made in the ordinary course of business and
consistent with Parent's past practices;
(k) Parent has not (i) lent money to any Person (other than pursuant
to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
(l) Parent has not changed any of its methods of accounting or
accounting practices in any material respect;
(m) Parent has not commenced or settled any material Legal
Proceeding;
(n) Parent has not entered into any material transaction or taken
any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(o) Parent has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(n)" above.
3.7 TITLE TO ASSETS. Parent owns, and has good, valid and marketable
title to, all assets purported to be owned by it (other than Parent Proprietary
Assets, as to which representations and warranties are set forth in Section
3.14), including: (i) all assets reflected on the Parent Unaudited Interim
Balance Sheet; and (ii) all other assets reflected in Parent's books and records
as being owned by Parent. Except as set forth in Part 3.7 of the Parent
Disclosure Schedule, all of said assets are owned by Parent free and clear of
any liens or other Encumbrances, except for (x) any lien for current taxes not
yet due and payable, and (y) minor liens that have arisen in the ordinary course
of business and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of Parent.
3.8 LIABILITIES. Parent has no accrued, contingent or other liabilities
of any nature, either matured or unmatured (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Parent
Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries that
have been incurred by Parent since the Parent Balance Sheet Date in the ordinary
course of business and consistent with Parent's past practices; (c) liabilities
under Parent Contracts to the extent the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Parent Contracts; and (d) the liabilities identified in Part 3.8 of the Parent
Disclosure Schedule.
3.9 COMPLIANCE WITH LEGAL REQUIREMENTS. To Parent's Knowledge, Parent
is, and has at all times since its inception been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and will not have a Parent Material Adverse
Effect. Parent has not received any notice or other communication
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from any Governmental Body regarding any actual or possible violation of, or
failure to comply with, any Legal Requirement.
3.10 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding, and (to the Knowledge of
Parent) no Person has threatened to commence any Legal Proceeding: (i) that
involves Parent or any of the assets owned or used by Parent or any Person whose
liability Parent has or may have retained or assumed, either contractually or by
operation of law, except for such Legal Proceedings that would not have a Parent
Material Adverse Effect; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the
Knowledge of Parent, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) There is no order, writ, injunction, judgment or decree to which
Parent, or any of the assets owned or used by Parent, is subject. To the
Knowledge of Parent, no officer or other employee of Parent is subject to any
order, writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to Parent's business.
3.11 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent has the absolute and
unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
Parent of this Agreement have been duly authorized by all necessary action on
the part of Parent and its board of directors. This Agreement constitutes the
legal, valid and binding obligation of Parent, enforceable against Parent in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.12 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 3.12 of
the Parent Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Parent's certificate of incorporation or bylaws, or (ii) any
resolution adopted by Parent's stockholders, Parent's board of directors or any
committee of Parent's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which Parent, or any of the assets owned or used by Parent, is
subject;
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(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by Parent or that otherwise relates to Parent's business or to any
of the assets owned or used by Parent;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Parent Contract that is or
would constitute a material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Parent Contract, (ii)
accelerate the maturity or performance of any such Parent Contract, or (iii)
cancel, terminate or modify any such Parent Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by Parent (except
for minor liens that will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of Parent).
Except as set forth in Part 3.12 of the Parent Disclosure Schedule, Parent is
not and will not be required to make any filing with or give any notice to, or
to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
3.13 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to Parent are adequate for the uses to which they are being put,
are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of Parent's business in the manner in which such
business is currently being conducted.
(b) Parent does not own any real property or any interest in real
property, except for the leasehold created under the real property leases
identified in Part 3.13 of the Parent Disclosure Schedule.
3.14 PARENT PROPRIETARY ASSETS.
(a) Except as set forth in Part 3.14(a)(i) of the Parent Disclosure
Schedule, Parent has good, valid and marketable title to all of its Parent
Proprietary Assets, free and clear of all liens and other Encumbrances, and has
a valid right to use all Proprietary Assets. Except as set forth in Part
3.14(a)(ii) of the Parent Disclosure Schedule, Parent is not obligated to make
any payment to any Person for the use of any Parent Proprietary Asset. Parent
has not developed jointly with any other Person any Parent Proprietary Asset
with respect to which such other Person has rights.
(b) Parent has taken reasonable measures and precautions necessary
to protect and maintain the confidentiality and secrecy of all Parent
Proprietary Assets (except Parent Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Parent Proprietary Assets. Except as set forth in Part 3.14(b) of the
Parent Disclosure Schedule, Parent has not delivered to any Person, or permitted
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the disclosure or delivery to any Person of, the source code, or any portion or
aspect of the source code, of any Parent Proprietary Asset. Parent has not
delivered to any Person any object code of any Parent Proprietary Asset unless
such Person entered into a license or other similar agreement with Parent which
restricts the use of such object code and retains all ownership rights of such
object code in the Company.
(c) To the Knowledge of Parent, none of the Parent Proprietary
Assets infringes or conflicts with any Proprietary Asset owned or used by any
other Person. To the Knowledge of Parent, Parent is not infringing,
misappropriating or making any unlawful use of, and Parent has not at any time
infringed, misappropriated or made any unlawful use of, or received any notice
or other communication (in writing or orally) of any actual, alleged, possible
or potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the Knowledge of Parent, no other
Person is infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes or conflicts with,
any Parent Proprietary Asset.
(d) Except as set forth in Part 3.14(d) of the Parent Disclosure
Schedule: (i) each Parent Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation or
statement made or provided with respect thereto by Parent; and (ii) there has
not been any claim by any customer or other Person alleging that any Parent
Proprietary Asset (including each version thereof that has ever been licensed or
otherwise made available by Parent to any Person) does not conform in all
material respects with any specification, documentation, performance standard,
representation or statement made or provided by Parent, and, to the Knowledge of
Parent, there is no basis for any such claim.
(e) The Parent Proprietary Assets constitute all the Proprietary
Assets necessary to enable Parent to conduct its business in the manner in which
such business has been and is being conducted. Except as set forth in Part
3.14(e) of the Parent Disclosure Schedule, (i) Parent has not licensed any of
the Parent Proprietary Assets to any Person on an exclusive basis, and (ii)
Parent has not entered into any covenant not to compete or Contract limiting its
ability to exploit fully any of its Proprietary Assets or to transact business
in any market or geographical area or with any Person.
3.15 CONTRACTS.
(a) The following Contracts shall be deemed to be "Parent Material
Contracts":
(i) each Parent Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor
in excess of $25,000 annually;
(ii) each Parent Contract relating to the acquisition, transfer,
use, development, sharing or license of any material technology or any material
Parent Proprietary Asset;
(iii) each Parent Contract imposing any material restriction on
Parent's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or
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any services from any other Person, to sell any product or other asset to or
perform any services for any other Person or to transact business or deal in any
other manner with any other Person, or (C) develop or distribute any technology;
(iv) each Parent Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship that is not
cancelable according to its terms on 30 days notice or less;
(v) each executory Parent Contract relating to the acquisition,
issuance or transfer of any securities;
(vi) each Parent Contract relating to the creation of any
Encumbrance with respect to any material asset of Parent;
(vii) each Parent Contract involving or incorporating any
material guaranty, any pledge, any performance or completion bond, any indemnity
or any surety arrangement;
(viii) each Parent Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Parent Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Parent Related Party;
(x) each Parent Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Parent Contract that was entered into outside the
ordinary course of business or was inconsistent with Parent's past practices;
(xii) any other Parent Contract that has a term of more than 30
days and that may not be terminated by Parent (without penalty) within 30 days
after the delivery of a termination notice by Parent; and
(xiii) any other Parent Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $100,000 in the aggregate, or (B) the performance of
services having a value in excess of $100,000 in the aggregate.
(b) Each Parent Material Contract is valid and in full force and
effect, and, to the Knowledge of Parent, is enforceable by Parent in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
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(c) Except as set forth in Part 3.15 of the Parent Disclosure
Schedule:
(i) Parent has not violated or breached, or committed any
default under, any Contract, and, to the Knowledge of Parent, no other Person
has violated or breached, or committed any default under, any Parent Material
Contract;
(ii) to the Knowledge of Parent, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to, (A) result in a violation or breach of
any of the provisions of any Parent Material Contract, (B) give any Person the
right to declare a default or exercise any remedy under any Parent Material
Contract, (C) give any Person the right to accelerate the maturity or
performance of any Parent Material Contract, or (D) give any Person the right to
cancel, terminate or modify any Parent Material Contract;
(iii) since August 18, 1998, Parent has not received any notice
(or to the Knowledge of Parent, any other communication) regarding any actual or
possible violation or breach of, or default under, any Parent Material Contract;
and
(iv) Parent has not waived any of its material rights under any
Parent Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Parent Material Contract to renegotiate, any amount paid or payable to
Parent under any Parent Material Contract or any other material term or
provision of any Parent Material Contract.
3.16 GOVERNMENTAL AUTHORIZATIONS. Parent's material Governmental
Authorizations are valid and in full force and effect, and collectively
constitute all material Governmental Authorizations necessary to enable Parent
to conduct its business in the manner in which its business is currently being
conducted. To Parent's Knowledge, Parent is, and at all times since its
inception has been, in substantial compliance with the terms and requirements of
the respective Governmental Authorizations. Since its inception, Parent has not
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization.
3.17 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of Parent
with any Governmental Body with respect to any taxable period ending on or
before the Closing Date (the "Parent Returns") (i) have been or will be filed on
or before the applicable due date (including any extensions of such due date),
and (ii) have been, or will be when filed, accurately and completely prepared in
all material respects in compliance with all applicable Legal Requirements.
Parent has delivered to the Company accurate and complete copies of all Parent
Returns filed since August 18, 1998 which have been requested by the Company.
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(b) The Parent Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles.
(c) No Parent Return relating to income Taxes has ever been examined
or audited by any Governmental Body. Except as set forth in Part 3.17 of the
Parent Disclosure Schedule, there have been no examinations or audits of any
Parent Return. Parent has delivered to the Company accurate and complete copies
of all audit reports and similar documents (to which Parent has access) relating
to Parent Returns. Except as set forth in Part 3.17 of the Parent Disclosure
Schedule, no extension or waiver of the limitation period applicable to any of
the Parent Returns has been granted (by Parent or any other Person), and no such
extension or waiver has been requested from Parent.
(d) No claim or Legal Proceeding is pending or, to the Knowledge of
Parent, has been threatened against or with respect to Parent in respect of any
Tax. There are no unsatisfied liabilities for Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by Parent with
respect to any Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document which are being contested in good faith
by Parent and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of Parent
except liens for current Taxes not yet due and payable. Parent has not entered
into or become bound by any agreement or consent pursuant to Section 341(f) of
the Code. Parent has not been, and Parent will not be, required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant to
Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing.
(e) Parent is not, and has never been, a party to or bound by any
tax indemnity agreement, tax sharing agreement, tax allocation agreement or
similar Contract.
3.18 ENVIRONMENTAL MATTERS. To the Knowledge of Parent, Parent is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by Parent of all permits and other
Governmental Authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. Parent has not received any
notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that
Parent is not in compliance with any Environmental Law, and, to the Knowledge of
Parent, there are no circumstances that may prevent or interfere with Parent's
compliance with any Environmental Law in the future. To the Knowledge of Parent,
no current or prior owner of any property leased or controlled by Parent has
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that such current or prior owner or Parent is not in compliance with any
Environmental Law.
3.19 SHAREHOLDER MARKET STAND-OFF AGREEMENTS. All of Parent's
stockholders are obligated to comply with market stand-off agreements upon terms
which are substantially the same as the provisions of Section 4.3.
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3.20 INSURANCE. Parent has delivered to the Company accurate and
complete copies of Parent's insurance policies. There have been no material
claims made under any of Parent's insurance policies. Each of Parent's insurance
policies is in full force and effect. Parent has not received any notice or
other communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection
of any claim under any insurance policy, or (c) material adjustment in the
amount of the premiums payable with respect to any insurance policy.
3.21 PARENT RELATED PARTY TRANSACTIONS. Except as set forth in Part 3.21
of the Parent Disclosure Schedule, since June 11, 1999:
(a) no obligations of Parent to any Parent Related Party have been
incurred other than (i) rights under Parent Options and rights to receive
compensation for services performed as an employee or consultant of Parent, (ii)
reimbursement for reasonable expenses incurred on behalf of Parent and (iii) for
other standard employee benefits made generally available to all employees;
(b) no Parent Related Party has become indebted to Parent for any
material amount; and
(c) no Parent Related Party has become interested in any material
Contract with Parent (other than such Contracts as they relate to any such
person's purchase or ownership of capital stock or other securities of Parent).
For purposes of this Section 3.21 each of the following shall be deemed to be a
"Parent Related Party": (i) each officer or director of Parent; (ii) each member
of the immediate family of an officer or director of Parent; and (iii) any trust
or other Entity (other than Parent) in which any one of the individuals referred
to in clauses "(i)" and "(ii)" above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.
3.22 FULL DISCLOSURE. This Agreement (including the Parent Disclosure
Schedule) does not, (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact or necessary in order to make the representations, warranties
and information contained and to be contained herein and therein (in the light
of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
SECTION 4. SHAREHOLDER REPRESENTATIONS; RELEASE
4.1 SHAREHOLDER REPRESENTATIONS. Each Shareholder severally, and not
jointly, represents and warrants to Parent and Merger Sub that:
(a) this Agreement has been duly and validly executed and delivered
by such Shareholder;
(b) this Agreement is a valid and binding obligation of such
Shareholder and is enforceable against such Shareholder in accordance with its
terms, subject to (i) laws of
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general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies;
(c) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to the Knowledge of such
Shareholder, threatened against such Shareholder that challenges or would
challenge the execution and delivery of this Agreement or the taking of any of
the actions required to be taken by such Shareholder under this Agreement;
(d) neither the execution and delivery of this Agreement nor the
performance hereof will (i) result in any violation or breach of any agreement
or other instrument to which such Shareholder is a party or by which such
Shareholder is bound, or (ii) result in a violation or any law, rule,
regulation, treaty, ruling, directive, order, arbitration award, judgment or
decree to which such Shareholder is subject; and
(e) no authorization, instruction, consent or approval of any person
or entity is required to be obtained by such Shareholder in connection with the
execution and delivery of this Agreement or the performance hereof.
4.2 INVESTMENT REPRESENTATIONS. Each of the Shareholders makes the
following certifications and representations in connection with his, her or its
receipt of Parent Common Stock in the Merger:
(a) The Shareholder represents and warrants that the Shareholder is
acquiring the shares of Parent Common Stock solely for the Shareholder's account
for investment and not with a view to or for sale or distribution of the shares
of Parent Common Stock or any part thereof. The Shareholder also represents that
the entire legal and beneficial interests of the shares of Parent Common Stock
the Shareholder is acquiring is being acquired for, and will be held for, the
Shareholder's account only.
(b) The Shareholder understands that the shares of Parent Common
Stock have not been registered under the Securities Act, on the basis that no
distribution or public offering of the Shares is to be effected. The Shareholder
realizes that the basis for the exemption may not be present if, notwithstanding
the Shareholder's representations, the Shareholder has in mind merely acquiring
the shares of Parent Common Stock for a fixed or determinable period in the
future, or for a market rise, or for sale if the market does not rise. The
Shareholder has no such intention.
(c) The Shareholder recognizes that the shares of Parent Common
Stock being acquired by the Shareholder must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. The Shareholder recognizes that Parent has no
obligation to register the shares of Parent Common Stock or to comply with any
exemption from such registration.
(d) The Shareholder is aware that the shares of Parent Common Stock
may not be sold pursuant to Rule 144 and/or Rule 145 adopted under the
Securities Act ("Rule 144/145") unless certain conditions are met and until the
Shareholder has held the shares of Parent Common Stock for at least one year.
Among the conditions for use of Rule 144/145 is the
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availability of current information to the public about Parent. The Shareholder
understands that Parent has not made such information available.
(e) The Shareholder further agrees not to make any disposition of
all or any part of the shares of Parent Common Stock being acquired in any event
unless and until:
(i) The shares of Parent Common Stock are transferred pursuant
to Rule 144/145, and Parent shall have received from the Shareholder
documentation acceptable to Parent that a sale of the shares of Parent Common
Stock has occurred in accordance with all of the provisions of Rule 144/145; or
(ii) Parent shall have received a letter secured by the
Shareholder from the SEC stating that no action will be recommended to the SEC
with respect to the proposed disposition; or
(iii) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said registration statement; or
(iv) (1) The Shareholder shall have notified Parent of the
proposed disposition and shall have furnished Parent with a detailed statement
of the circumstances surrounding the proposed disposition, (2) the Shareholder
shall have furnished Parent with an opinion of counsel for the Shareholder to
the effect that such disposition will not require registration of such shares of
Parent Common Stock under the Securities Act, and (3) such opinion of counsel
for the Shareholder shall have been concurred in by Parent's counsel and Parent
shall have advised the Shareholder of such concurrence.
(f) The Shareholder understands and agrees that all certificates
evidencing the shares of Parent Common Stock to be issued to the Shareholder may
bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
4.3 MARKET STAND-OFF AGREEMENT. Each of the Shareholders acknowledges
and agrees that in connection with the first underwritten registration of the
offering of any securities of Parent under the Securities Act, the Shareholder
will not sell or otherwise transfer or dispose of any common stock or any other
stock or other securities of Parent during such period (not to exceed one
hundred eighty (180) days) following the effective date of the registration
statement of Parent filed under the Securities Act as may be requested by the
representative of Parent's underwriters or by Parent (based upon the request of
Parent's underwriters); provided that the foregoing shall be effective only if
all officers and directors of Parent who then hold common stock (or other
securities of Parent) enter into similar agreements. Each Shareholder further
agrees that Parent may impose stop-transfer instructions with respect to
securities subject to the
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foregoing restrictions until the end of such period and the Shareholder will
enter into further agreements requested by Parent and/or Parent's underwriters
from time to time to further document the foregoing agreement.
4.4 RELEASE.
(a) Each Shareholder, for himself and for each of such Shareholder's
Associated Parties, hereby generally, irrevocably, unconditionally and
completely releases and forever discharges each of the Releasees from, and
hereby irrevocably, unconditionally and completely waives and relinquishes, each
of the Released Claims.
(b) Each Shareholder also hereby waives the benefits of, and any
rights such Shareholder may have under, any statute or common law principle of
similar effect in any jurisdiction with respect to the Released Claims.
(c) Each Shareholder further represents and warrants that:
(i) such Shareholder has not assigned, transferred, conveyed or
otherwise disposed of any Shareholder Claim against any of the Releasees, or any
direct or indirect interest in any such Shareholder Claim, in whole or in part;
(ii) to the Shareholder's Knowledge, no other person or entity
has any interest in any of the Released Claims;
(iii) no Associated Party of such Shareholder has or had any
Shareholder Claim against any of the Releasees;
(iv) no Associated Party of such Shareholder will in the future
have any Shareholder Claim against any Releasee that arises directly or
indirectly from or relates directly or indirectly to any circumstance,
agreement, activity, action, omission, event or matter occurring or existing on
or before the date of this Agreement;
(d) Without in any way limiting any of the rights or remedies
otherwise available to any Releasee and notwithstanding any other provision of
this Agreement (including, without limitation, the provisions of Section 9),
each Shareholder shall indemnify and hold harmless each Releasee against and
from any loss, damage, injury, harm, detriment, lost opportunity, liability,
exposure, claim, demand, settlement, judgment, award, fine, penalty, tax, fee,
charge or expense (including attorneys' fees) that is directly or indirectly
suffered or incurred at any time by such Releasee, or to which such Releasee
otherwise becomes subject at any time, and that arises directly or indirectly
out of or by virtue of, or relates directly or indirectly to, (a) any failure on
the part of such Shareholder to observe, perform or abide by, or any other
breach of, any restriction, covenant, obligation, representation, warranty or
other provision contained in this Section 4.4, or (b) the assertion or purported
assertion of any of the Released Claims by such Shareholder or any of such
Shareholder's Associated Parties.
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SECTION 5. CERTAIN COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. The Company
shall (upon request) promptly deliver to Parent a copy of each such filing made,
each such notice given and each such Consent obtained by the Company during the
Pre-Closing Period.
5.2 NOTICE FILING. Promptly after the execution of this Agreement, the
Company and Parent shall prepare and cause to be filed a Form D under Rule 506
of the Securities Act and such other state securities filings as may be required
under any applicable state securities laws.
5.3 COMPANY SHAREHOLDERS' CONSENT. Concurrently with the execution of
this Agreement, the Company shall, in accordance with its articles of
incorporation and bylaws and the applicable requirements of the URBCA, cause its
shareholders who represent at least ninety percent (90%) of the outstanding
shares of Company Common Stock to execute written consents approving the Merger
and this Agreement.
5.4 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, neither the
Company nor any of the Shareholders nor Parent shall (and neither the Company
nor Parent shall permit any of its Representatives to) issue any press release
or make any public statement regarding this Agreement or the Merger, or
regarding any of the other transactions contemplated by this Agreement, without
the other party's prior written consent, except as required by law and except
that Parent may disclose this Agreement and file it with the SEC in accordance
with applicable federal securities laws.
5.5 BEST EFFORTS. During the Pre-Closing Period, (a) the Company and the
Shareholders shall use their best efforts to cause the conditions set forth in
Section 6 to be satisfied on a timely basis, and (b) Parent and Merger Sub shall
use their best efforts to cause the conditions set forth in Section 7 to be
satisfied on a timely basis.
5.6 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. At or prior to the
Closing, each of the Persons identified on EXHIBIT E shall execute and deliver
to the Company and Parent an Employment Agreement and a Noncompetition Agreement
in a form acceptable to Parent. The Company shall use best efforts to cause such
individuals to execute and deliver to the Parent, at the Closing, an Employment
Agreement and a Noncompetition Agreement.
5.7 [INTENTIONALLY OMITTED] .
5.8 TERMINATION OF EMPLOYEE PLANS. At the Closing, the Company shall
terminate its Company Plan, and shall ensure that no employee or former employee
of the Company to certain of the Company's employees and affiliates has any
rights under such Plan and that any liabilities of the Company under such Plan
(including any such liabilities relating to services performed prior to the
Closing) are fully extinguished at no cost to the Company or Parent.
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5.9 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasure Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Section 1.897 - 2(h)(2)
of the United States Treasury Regulations.
5.10 COMPANY LOCATION. Following the Effective Time, Parent will use
commercially reasonable efforts to maintain the surviving Corporation's
operations in or around Salt Lake City, Utah; provided, however, that Parent
shall not be restricted from relocating the operations of the Company if
Parent's board of directors determines in good faith that it is in the best
interests of Parent to relocate such operations.
5.11 RETENTION OF COMPANY EMPLOYEES. Following the Effective Time,
Parent shall cause the Company to offer the employees of the Company salary
compensation at the same levels as in effect prior to the Effective Time, Parent
will offer such employees participation in Parent's health and benefit plans,
and employees of the Company will be eligible to participate in Parent's
company-wide bonus plan, if any, and in the Parent Plan; provided, however, that
except as expressly provided in this Agreement, such employees will not receive
any bonuses or stock awards under the Parent Plan in connection with such
employees becoming employees of Parent in connection with the Merger, and
provided further that nothing in this Agreement shall prevent Parent from
adjusting salaries, benefit levels or bonus criteria and levels from time to
time following the Effective Time in the sole discretion of its board of
directors.
5.12 ALLOCATION FOR FUTURE STOCK OPTIONS. Following the Effective Time,
Parent shall allocate at least 75,000 shares of Parent Common Stock for issuance
to future new-hires of the Company under the Parent Plan. Such grants to any new
employees will be made as determined by the board of directors of Parent and
upon terms no more favorable than grants made to other participants under the
Parent Plan.
5.13 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; and (b)
provide Parent and Parent's Representatives with copies of such existing books,
records, Tax Returns, work papers and other documents and information relating
to the Company, and with such additional financial, operating and other data and
information regarding the Company, as Parent may reasonably request. During the
period from the date of this Agreement through the Effective Time (the
"Pre-Closing Period"), Parent shall, and shall cause its Representatives to: (a)
provide the Company and the Company's Representatives with reasonable access to
Parent's Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to Parent; and (b) provide the Company and the Company's Representatives with
copies of such existing books, records, Tax Returns, work papers and other
documents and information relating to Parent, and with such additional
financial, operating and other data and information regarding Parent, as the
Company may reasonably request.
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5.14 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
material suppliers, customers, landlords, creditors, employees and other Persons
having business relationships with the Company;
(c) the Company shall keep in full force all material insurance
policies identified in Part 2.17 of the Company Disclosure Schedule;
(d) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities (except that the Company may repurchase
Company Common Stock from former employees pursuant to the terms of existing
restricted stock purchase agreements);
(e) the Company shall not sell, issue or authorize the issuance of
(i) any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that the Company
shall be permitted (y) to grant stock options to employees in accordance with
its past practices, and (z) to issue Company Common Stock to employees upon the
exercise of outstanding Company Options);
(f) the Company shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, (i) any provision of any agreement
evidencing any outstanding Company Option, or (ii) any provision of any
restricted stock purchase agreement;
(g) the Company shall not amend or permit the adoption of any
amendment to the Company's articles of incorporation or bylaws, or effect or
permit the Company to become a party to any Company Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(h) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(i) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed $5,000 per
month;
(j) the Company shall not (i) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract that is or would
constitute a Company Material Contract, or (ii) amend or prematurely terminate,
or waive any material right or remedy under, any such material Contract;
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(k) the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or disposed
of by the Company pursuant to Contracts that are not Company Material Contracts;
(l) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary course
of business and may, consistent with its past practices, allow employees to
acquire Company Common Stock in exchange for promissory notes upon exercise of
Company Options), or (ii) incur or guarantee any indebtedness for borrowed money
in excess of $25,000;
(m) the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees unless in the ordinary
course of business and consistent with post practices, or (iii) hire any new
employee whose aggregate annual compensation is expected to exceed $40,000;
(n) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(o) the Company shall not make any material Tax election;
(p) the Company shall not commence or settle any material Legal
Proceeding;
(q) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(p)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(q)" above if Parent gives its prior written consent to
the taking of such action by the Company, which consent will not be unreasonably
withheld.
5.15 OPERATION OF PARENT'S BUSINESS. During the Pre-Closing Period:
(a) Parent shall conduct its business and operations in the ordinary
course and in substantially the same manner as such business and operations have
been conducted prior to the date of this Agreement;
(b) Parent shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
material suppliers, customers, landlords, creditors, employees and other Persons
having business relationships with Parent;
(c) Parent shall not commence or settle any material Legal
Proceeding;
(d) Parent shall not agree or commit to take any of the actions
described in clauses "(a)" through "(c)" above.
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Notwithstanding the foregoing, Parent may take any action described in clause
"(c)" above if the Company gives its prior written consent to the taking of such
action by Parent, which consent will not be unreasonably withheld.
5.16 NOTIFICATION; UPDATES TO COMPANY DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(i) the discovery by the Company of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
the Company in this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of the Company or
any of the Shareholders; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) During the Pre-Closing Period, Parent shall promptly notify the
Company in writing of:
(i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes an inaccuracy in or breach of any representation
or warranty made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
Parent in this Agreement if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of Parent; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
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(c) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 5.16(a) or 5.16(b) requires any change in
the Company's or Parent's Disclosure Schedule, as the case may be, or if any
such event, condition, fact or circumstance would require such a change assuming
the Company Disclosure Schedule or Parent Disclosure Schedule, as applicable,
were dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstance, then the Company or Parent, as
applicable, shall promptly deliver to Parent or the Company, as applicable, an
update to the Company Disclosure Schedule or Parent Disclosure Schedule
specifying such change. No such update shall be deemed to supplement or amend
the Company Disclosure Schedule or Parent Disclosure Schedule for the purpose of
(i) determining the accuracy of any of the representations and warranties made
by the Company or Parent in this Agreement, or (ii) determining whether any of
the conditions set forth in Section 6 has been satisfied.
5.17 NO COMPANY NEGOTIATION. During the Pre-Closing Period, neither the
Company nor any of the Shareholders shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Company
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Company Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Company Acquisition
Transaction.
The Company shall promptly notify Parent in writing of any inquiry, proposal or
offer relating to a possible Company Acquisition Transaction that is received by
the Company or any of the Shareholders during the Pre-Closing Period.
5.18 NO PARENT NEGOTIATION. During the Pre-Closing Period, Parent shall
not, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Parent
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Parent Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Parent Acquisition
Transaction.
Parent shall promptly notify the Company in writing of any material inquiry,
proposal or offer relating to a possible Parent Acquisition Transaction that is
received by Parent during the Pre-Closing Period.
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SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company in this Agreement and in each of the other
agreements and instruments delivered to Parent in connection with the
transactions contemplated by this Agreement shall have been accurate in all
material respects as of the date of this Agreement (without giving effect to any
"Company Material Adverse Effect" or other materiality qualifications, or any
similar qualifications, contained or incorporated directly or indirectly in such
representations and warranties), and shall be accurate in all material respects
as of the Closing Date as if made at the Closing Date without giving effect to
any "Company Material Adverse Effect" or other materiality qualifications, or
any similar qualifications, contained or incorporated directly or indirectly in
such representations and warranties).
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Company and the Shareholders are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all material
respects.
6.3 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement (including
the Consents identified in Part 2.21 of the Company Disclosure Schedule) shall
have been obtained and shall be in full force and effect.
6.4 SHAREHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the affirmative vote of 90% of the shares of Company
Common Stock entitled to vote with respect thereto.
6.5 AGREEMENTS AND DOCUMENTS. Parent shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Employment Agreements in a form acceptable to Parent, executed
by Don Brown and Steve Bowen;
(b) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees of the
Company and by all consultants and independent contractors to the Company who
have not already signed such agreements (including the individuals identified in
Part 2.9(f) of the Company Disclosure Schedule);
(c) an estoppel certificate, dated as of a date not more than five
days prior to the Closing Date and satisfactory in form and content to Parent,
executed by [Landlord];
(d) a certificate executed by the Chief Executive Officer of the
Company to the effect that each of the representations and warranties set forth
in Section 2 is accurate in all
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respects as of the Closing Date as if made on the Closing Date and that the
conditions set forth in Sections 6.1, 6.2, 6.3 and 6.4 have been duly satisfied
(the "Closing Certificate");
(e) an executed stock option agreement in the form acceptable to
Parent from each holder of a Company Option who will receive a Parent
Substituted Option upon the Merger;
(f) a legal opinion of Preston Gates & Ellis LLP, dated as of the
Closing Date, in the form of EXHIBIT F; and
(g) written resignations of all directors and officers of the
Company (other than those directors and officers listed on EXHIBIT C, which
shall have been duly appointed), effective as of the Effective Time.
6.6 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.7 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to prohibit
or limit the exercise by Parent of any material right pertaining to its
ownership of stock of the Surviving Corporation.
6.8 EMPLOYEES. None of Don Brown, Steven Bowen or Dennis Foster shall
have ceased to be employed by, or expressed an intention to terminate their
employment with, the Company.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties), and shall be accurate in all material respects
as of the Closing Date as if made at the Closing Date (without giving effect to
any materiality or similar qualifications contained in such representations and
warranties).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 LEGAL OPINION. The Company shall have received a legal opinion of
Cooley Godward llp, dated as of the Closing Date, in the form of EXHIBIT G.
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7.4 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.5 NO LEGAL PROCEEDINGS. No Person shall have commenced any Legal
Proceeding challenging or seeking to prevent consummation of the Merger.
7.6 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this shall have been
obtained and shall be in full force and effect; provided that if Parent elects
to indemnify the Company and the Shareholders against any damages on account of
the failure to obtain such Consents, this condition may be waived by Parent.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the Company or
any of the Shareholders to comply with or perform any covenant or obligation set
forth in this Agreement or in any other agreement or instrument delivered to
Parent);
(c) by Parent at or after the Closing Date if any condition set
forth in Section 6 has not been satisfied by the Effective Time;
(d) by the Company at or after the Closing Date if any condition set
forth in Section 7 has not been satisfied by the Effective Time;
(e) by Parent if the Closing has not taken place on or before
November 1, 1999 (other than as a result of any failure on the part of Parent to
comply with or perform any covenant or obligation of Parent set forth in this
Agreement);
(f) by the Company if the Closing has not taken place on or before
November 1, 1999 (other than as a result of the failure on the part of the
Company or any of the Shareholders to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or instrument
delivered to Parent); or
(g) by the mutual consent of Parent and the Company.
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8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), Parent shall
deliver to the Company a written notice stating that Parent is terminating this
Agreement and setting forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate this Agreement
pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f), the Company shall
deliver to Parent a written notice stating that the Company is terminating this
Agreement and setting forth a brief description of the basis on which the
Company is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither the Company, any Shareholder nor
Parent shall be relieved of any obligation or liability arising from any prior
breach by such party of any provision of this Agreement; (b) the parties shall,
in all events, remain bound by and continue to be subject to the provisions set
forth in Section 10; and (c) the Company shall, in all events, remain bound by
and continue to be subject to Section 5.4.
8.4 SURVIVAL OF CERTAIN COVENANTS. Notwithstanding anything to the
contrary herein, the Shareholders' covenants under Section 4.3 ("Market
Stand-Off Agreement") shall survive the Closing of the Merger and shall survive
the expiration of any of the representations and warranties hereunder.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties of the Company (including the
representations and warranties set forth in Section 2 and the representations
and warranties set forth in the Closing Certificate) shall survive the Closing
and shall expire on the first anniversary of the Closing Date (the "Expiration
Date"); provided, however, that if, at any time prior to the Expiration Date,
any Parent Indemnitee delivers to the Shareholders' Agent a written notice
alleging the existence of an inaccuracy in or a breach of any of the
representations and warranties made by the Company (and setting forth in
reasonable detail the basis for such Parent Indemnitee's belief that such an
inaccuracy or breach may exist) and asserting a claim for recovery under Section
9.2 based on such alleged inaccuracy or breach, then the claim asserted in such
notice shall survive the Expiration Date until such time as such claim is fully
and finally resolved. All representations and warranties made by Parent and
Merger Sub shall terminate and expire on the Expiration Date, and any liability
of Parent or Merger Sub with respect to such representations and warranties
shall thereupon cease; provided, however, that if prior to the Expiration Date,
the Shareholders' Agent delivers to Parent a written notice alleging the
existence of an inaccuracy in or breach of any of the representations made by
Parent (and setting forth in reasonable detail the basis for the Shareholders'
Agent's belief that such an inaccuracy or breach may exist) and asserting a
claim for recovery under Section 9.3 based on such alleged inaccuracy or breach,
then the claim asserted in such notice shall survive the Expiration Date until
such time as such claim is fully and finally resolved.
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(b) The representations, warranties, covenants and obligations of
the Company, and the rights and remedies that may be exercised by the Parent
Indemnitees, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or knowledge of, any of
the Parent Indemnitees or any of their Representatives. The representations,
warranties, covenants and obligations of Parent, and the rights and remedies
that may be exercised by the Shareholder Indemnitees, shall not be limited or
otherwise affected by or as a result of any information furnished to, or any
investigation made by or knowledge of, any of the Shareholder Indemnitees or any
of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth with respect to the Company in the Company Disclosure
Schedule or in any update to the Company Disclosure Schedule shall be deemed to
be a representation and warranty made by the Company in this Agreement, and each
statement or other item of information set forth with respect to Parent in the
Parent Disclosure Schedule or in any update to the Parent Disclosure Schedule
shall be deemed to be a representation and warranty made by Parent in this
Agreement.
9.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) From and after the Effective Time (but subject to Section 9.1(a)
and Section 9.4(a)), the Shareholders, jointly and severally, shall hold
harmless and indemnify each of the Parent Indemnitees from and against, and
shall compensate and reimburse each of the Parent Indemnitees for, any Damages
which are directly or indirectly suffered or incurred by any of the Parent
Indemnitees or to which any of the Parent Indemnitees may otherwise become
subject (regardless of whether or not such Damages relate to any third-party
claim) and which arise from or as a result of, or are directly or indirectly
connected with: (i) any inaccuracy in or breach of any representation or
warranty set forth in Section 2 or in the Closing Certificate (without giving
effect to any "Material Adverse Effect" or other materiality qualification or
any similar qualification contained or incorporated directly or indirectly in
such representation or warranty, but giving effect to any update to the Company
Disclosure Schedule delivered by the Company to Parent prior to the Closing);
(ii) any breach of any covenant or obligation of the Company or any of the
Shareholders (including the covenants set forth in Section 5); (iii) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)" or "(ii)" above (including any Legal Proceeding commenced by any
Parent Indemnitee for the purpose of enforcing any of its rights under this
Section 9); or (iv) any claim or right of, or dispute with John Creer related to
the ownership of or right to acquire any securities or other assets or property
of the Company.
(b) The Shareholders acknowledge and agree that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then (without limiting any of
the rights of the Surviving Corporation as a Parent Indemnitee) Parent shall
also be deemed, by virtue of its ownership of the stock of the Surviving
Corporation, to have incurred Damages as a result of and in connection with such
inaccuracy or breach.
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9.3 INDEMNIFICATION BY PARENT. From and after the Effective Time (but
subject to Section 9.1(a) and Section 9.4(b)), Parent shall hold harmless and
indemnify each of the Shareholder Indemnitees from and against, and shall
compensate and reimburse each of the Shareholder Indemnitees for, any Damages
which are directly or indirectly suffered or incurred by any of the Shareholder
Indemnitees or to which any of the Shareholder Indemnitees may otherwise become
subject (regardless of whether or not such Damages relate to any third-party
claim) and which arise from or as a result of, or are directly or indirectly
connected with: (i) any inaccuracy in or breach of any representation or
warranty set forth in Section 3 (without giving effect to any "Material Adverse
Effect" or other materiality qualification or any similar qualification
contained or incorporated directly or indirectly in such representation or
warranty, but giving effect to any update to the Parent Disclosure Schedule
delivered by Parent to the Company prior to the Closing); (ii) any breach of any
covenant or obligation of Parent or Merger Sub (including the covenants set
forth in Section 5); or (iii) any Legal Proceeding relating to any inaccuracy or
breach of the type referred to in clause "(i)" or "(ii)" above (including any
Legal Proceeding commenced by any Shareholder Indemnitee for the purpose of
enforcing any of its rights under this Section 9).
9.4 LIMITED REMEDIES.
(a) The sole and exclusive remedy of the Parent Indemnitees under
this Section 9 shall be cancellation of the Shareholders Indemnity Shares in
accordance with the terms of the Escrow Agreement.
(b) Parent will have no liability (for indemnification or otherwise)
under this Section 9 for any Damages which exceed the fair market value (as
determined by Parent's board of directors in its sole discretion) of the
Shareholders Indemnity Shares on the date of the Merger.
9.5 SATISFACTION OF INDEMNIFICATION CLAIMS.
(a) In the event any Shareholder shall have any liability (for
indemnification or otherwise) to any Parent Indemnitee under this Section 9,
Parent is authorized to make a claim against the Shareholders Indemnity Shares
by notifying the Escrow Agent in writing with a copy to the Shareholders' Agent
pursuant to the terms of the Escrow Agreement.
(b) In the event Parent shall have any liability (for
indemnification or otherwise) to any Shareholder Indemnitee under this Section
9, the Shareholders' Agent shall have the sole right to make a claim for
indemnification, reimbursement or contribution hereunder and shall do so by
notifying Parent in writing of such claim clearly stating the basis for such
claim. Parent shall have the option to satisfy such liability by delivering to
the Shareholders' Agent shares of Parent Common Stock equal in value to the
amount of the liability, such number of shares of Parent Common Stock to be
determined using the fair market value of Parent Common Stock (as determined
Parent's board of directors in its sole discretion) at the time the obligation
to make such payment accrues in accordance with this Section 9. Further, upon
notice to the Shareholders' Agent specifying in reasonable detail the basis for
such set-off, Parent may set off any amount to which it may be entitled to
receive under this Section 9 against amounts otherwise payable to Shareholder
Indemnitees.
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(c) Each of the Indemnitors will have the right to dispute the
validity of any claim submitted for indemnification, reimbursement or
contribution hereunder, provided that with respect to claims arising under
Section 9.2(a), any such dispute shall be carried out pursuant to the terms of
the Escrow Agreement.
9.6 NO CONTRIBUTION. Each Shareholder waives, and acknowledges and
agrees that he shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become subject
under or in connection with this Agreement or the Closing Certificate.
9.7 THRESHOLD. No Indemnitor shall be required to make any
indemnification payment pursuant to Section 9.2(a) or Section 9.3, as
applicable, for any inaccuracy in or breach of any of the Company's or Parent's
and Merger Sub's representations and warranties set forth in Section 2 or
Section 3, as the case may be, until such time as the total amount of all
Damages (including the Damages arising from such inaccuracy or breach and all
other Damages arising from any other inaccuracies in or breaches of any
representations or warranties) that have been directly or indirectly suffered or
incurred by any one or more of the Parent Indemnitees or Shareholder
Indemnitees, as the case may be, or to which any one or more of the Parent
Indemnitees or Shareholder Indemnitees, as the case may be, has or have
otherwise become subject, exceeds $50,000 in the aggregate; provided, however,
that the threshold requirement will not apply to any indemnification obligation
related to any right or claim of, or dispute with John Creer as contemplated in
Section 9.2(a), and Parent Indemnitees will be entitled to recover all Damages
arising therefrom. If the total amount of such Damages exceeds $50,000, then the
Parent Indemnitees or Shareholder Indemnitees, as the case may be, shall be
entitled to be indemnified against and compensated and reimbursed for all
Damages from the applicable Indemnitor.
9.8 DEFENSE OF THIRD PARTY CLAIMS.
(a) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding (whether against the Surviving Corporation,
against Parent or against any other Person) with respect to which any of the
Shareholders may become obligated to hold harmless, indemnify, compensate or
reimburse any Parent Indemnitee pursuant to this Section 9, Parent shall have
the right, at its election, to designate the Shareholders' Agent to assume the
defense of such claim or Legal Proceeding at the sole expense of the
Shareholders. If Parent so elects to designate the Shareholders' Agent to assume
the defense of any such claim or Legal Proceeding:
(i) the Shareholders' Agent shall proceed to defend such claim
or Legal Proceeding in a diligent manner with counsel satisfactory to Parent;
(ii) the Shareholders' Agent shall keep Parent informed of all
material developments and events relating to such claim or Legal Proceeding;
(iii) Parent shall have the right to participate in the defense
of such claim or Legal Proceeding;
56.
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(iv) the Shareholders' Agent shall not settle, adjust or
compromise such claim or Legal Proceeding without the prior written consent of
Parent; and
(v) Parent may at any time (notwithstanding the prior
designation of the Shareholders' Agent to assume the defense of such claim or
Legal Proceeding) assume the defense of such claim or Legal Proceeding with
counsel selected by Parent.
If Parent does not elect to designate the Shareholders' Agent to assume the
defense of any such claim or Legal Proceeding (or if, after initially
designating the Shareholders' Agent to assume such defense, Parent elects to
assume such defense), Parent may proceed with the defense of such claim or Legal
Proceeding on its own, with counsel selected by Parent. If Parent so proceeds
with the defense of any such claim or Legal Proceeding:
(vi) all reasonable expenses relating to the defense of such
claim or Legal Proceeding shall be borne and paid exclusively by the
Shareholders;
(vii) each Shareholder shall make available to Parent any
documents and materials in his possession or control that may be necessary to
the defense of such claim or Legal Proceeding; and
(viii) Parent shall have the right to settle, adjust or
compromise such claim or Legal Proceeding with the consent of the Shareholders'
Agent; provided, however, that such consent shall not be unreasonably withheld.
Parent shall give the Shareholders' Agent prompt notice of the commencement of
any such Legal Proceeding against Parent or the Surviving Corporation; provided,
however, that any failure on the part of Parent to so notify the Shareholders'
Agent shall not limit any of the obligations of the Shareholders under this
Section 9 (except to the extent such failure materially prejudices the defense
of such Legal Proceeding).
(b) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding (whether against the Shareholders or against any
other Person but specifically excluding any claim or Legal Proceeding brought
against Parent) with respect to which Parent may become obligated to hold
harmless, indemnify, compensate or reimburse any Shareholder Indemnitee pursuant
to this Section 9, the Shareholders' Agent shall have the right, at his
election, to designate Parent to assume the defense of such claim or Legal
Proceeding at the sole expense of Parent. If the Shareholders' Agent so elects
to designate Parent to assume the defense of any such claim or Legal Proceeding:
(i) Parent shall proceed to defend such claim or Legal
Proceeding in a diligent manner with counsel satisfactory to the Shareholders'
Agent;
(ii) Parent shall keep the Shareholders' Agent informed of all
material developments and events relating to such claim or Legal Proceeding;
(iii) the Shareholders' Agent shall have the right to
participate in the defense of such claim or Legal Proceeding;
57.
<PAGE> 65
(iv) Parent shall not settle, adjust or compromise such claim or
Legal Proceeding without the prior written consent of the Shareholders' Agent;
and
(v) the Shareholders' Agent may at any time (notwithstanding the
prior designation of Parent to assume the defense of such claim or Legal
Proceeding but specifically excluding any claim or Legal Proceeding brought
against Parent) assume the defense of such claim or Legal Proceeding with
counsel selected by the Shareholders' Agent.
If the Shareholders' Agent does not elect to designate Parent to assume the
defense of any such claim or Legal Proceeding (or if, after initially
designating Parent Agent to assume such defense, the Shareholders' Agent elects
to assume such defense), the Shareholders' Agent may proceed with the defense of
such claim or Legal Proceeding on its own, with counsel selected by the
Shareholders' Agent. If the Shareholders' Agent so proceeds with the defense of
any such claim or Legal Proceeding:
(vi) all reasonable expenses relating to the defense of such
claim or Legal Proceeding shall be borne and paid exclusively by Parent;
(vii) Parent shall make available to the Shareholders' Agent any
documents and materials in its possession or control that may be necessary to
the defense of such claim or Legal Proceeding; and
(viii) the Shareholders' Agent shall have the right to settle,
adjust or compromise such claim or Legal Proceeding with the consent of Parent;
provided, however, that such consent shall not be unreasonably withheld.
The Shareholders' Agent shall give Parent prompt notice of the commencement of
any such Legal Proceeding against any Shareholder; provided, however, that any
failure on the part of the Shareholders' Agent to so notify Parent shall not
limit any of the obligations of Parent under this Section 9 (except to the
extent such failure materially prejudices the defense of such Legal Proceeding).
9.9 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT OR
SHAREHOLDERS. No Indemnitee (other than Parent or a Shareholder or any successor
thereto or assign thereof) shall be permitted to assert any indemnification
claim or exercise any other remedy under this Agreement unless Parent or the
Shareholder, as the case may be (or any successor thereto or assign thereof),
shall have consented to the assertion of such indemnification claim or the
exercise of such other remedy.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 SHAREHOLDERS' AGENT. The Shareholders hereby irrevocably appoint
Don Brown as their agent for purposes of Section 9 (the "Shareholders' Agent"),
and Don Brown hereby accepts his appointment as the Shareholders' Agent. Parent
shall be entitled to deal exclusively with the Shareholders' Agent on all
matters relating to Section 9 and the Escrow Agreement, and shall be entitled to
rely conclusively (without further evidence of any kind whatsoever) on any
document executed or purported to be executed on behalf of any Shareholder by
the Shareholders' Agent, and on any other action taken or purported to be taken
on behalf of any
58.
<PAGE> 66
Shareholder by the Shareholders' Agent, as fully binding upon such Shareholder.
If the Shareholders' Agent shall die, become disabled or otherwise be unable to
fulfill his responsibilities as agent of the Shareholders, then the Shareholders
shall, within ten days after such death or disability, appoint a successor agent
and, promptly thereafter, shall notify Parent of the identity of such successor.
Any such successor shall become the "Shareholders' Agent" for purposes of
Section 9 and this Section 10.1. If for any reason there is no Shareholders'
Agent at any time, all references herein to the Shareholders' Agent shall be
deemed to refer to the Shareholders.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to Parent
and its Representatives in connection with such investigation and review), (b)
the negotiation, preparation and review of this Agreement (including the
Disclosure Schedules) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, (c) the preparation and submission
of any filing or notice required to be made or given in connection with any of
the transactions contemplated by this Agreement, and the obtaining of any
Consent required to be obtained in connection with any of such transactions, and
(d) the consummation of the Merger; provided, however, that, to the extent the
total amount of all such fees, costs and expenses incurred by or for the benefit
of the Company (including all such fees, costs and expenses incurred prior to
the date of this Agreement) exceeds $150,000 in the aggregate, such fees, costs
and expenses shall be borne and paid by the Shareholders and not by the Company.
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
59.
<PAGE> 67
IF TO PARENT:
medibuy.com, Inc.
Attn: Chief Executive Officer
10120 Pacific Heights Boulevard, Suite 100
San Diego, CA 92121
Telephone Number: (619) 667-2880
Facsimile: (619) 667-2883
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE NOTICE):
Cooley Godward LLP
Attn: Jeremy D. Glaser, Esq.
4365 Executive Drive, Suite 1100
San Diego, CA 92121-2128
Telephone Number: (858) 550-6000
Facsimile: (858) 453-3555
IF TO THE COMPANY:
PartNET, INC.
Attn: President
615 Arapeen Drive, Suite 204
Salt Lake City, Utah 84108
Telephone Number: (801) 581-1118.
Facsimile: (801) 581-1785.
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE NOTICE):
Preston Gates & Ellis LLP
Attn: James Topinka, Esq.
One Maritime Plaza, Suite 2400
San Francisco, CA 94111-3514
Telephone Number: (415) 788-8822
Facsimile: (415) 788-8819
IF TO ANY OF THE SHAREHOLDERS:
c/o Don Brown
615 Arapeen Drive, Suite 204
Salt Lake City, Utah 84108
Telephone Number: (801) 581-1118.
Facsimile: (801) 581-1785.
10.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 5.4, on and at all times after the Closing Date, each
Shareholder shall keep confidential, and shall not use or disclose to any other
Person, any non-public document or other non-public
60.
<PAGE> 68
information in such Shareholder's possession that relates to the business of the
Company or Parent.
10.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.8 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.10 GOVERNING LAW. Except with respect to the effect of the Merger,
which shall be governed by Utah law, this Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of California (without giving effect to principles of conflicts of laws).
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Shareholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); Parent and its successors and assigns (if any);
and Merger Sub and its successors and assigns (if any). This Agreement shall
inure to the benefit of: the Company; the Company's shareholders (to the extent
set forth in Section 1.5); Parent; Merger Sub; the other Indemnitees (subject to
Section 9.9); and the respective successors and assigns (if any) of the
foregoing.
10.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly
61.
<PAGE> 69
executed and delivered on behalf of such Person; and any such waiver shall not
be applicable or have any effect except in the specific instance in which it is
given.
10.14 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.15 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.16 PARTIES IN INTEREST. Except for the provisions of Sections 1.6,
4.4 and 9, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
10.17 ENTIRE AGREEMENT. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
10.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
62.
<PAGE> 70
The parties hereto have caused this Agreement to be executed and delivered
as of the date first set forth above.
PARENT:
MEDIBUY.COM, INC.,
a Delaware corporation.
By: /s/ DENNIS J. MURPHY
---------------------------------
Name: Dennis J. Murphy
Title: CEO: President
MERGER SUB:
MEDIBUY ACQUISITION CORPORATION,
a Utah corporation.
By: /s/ DENNIS J. MURPHY
---------------------------------
Name: Dennis J. Murphy
Title: CEO: President
COMPANY:
PARTNET, INC.,
a Utah corporation.
By: /s/ DON R. BROWN
---------------------------------
Name: Don R. Brown
Title: CEO
SHAREHOLDERS:
/s/ Don R. Brown
DON BROWN
UNIVERSITY OF UTAH RESEARCH
FOUNDATION
By: /s/ RICHARD K. KOEHN
---------------------------------
Name: Richard K. Koehn
Title: President
63.
<PAGE> 71
HEWLETT PACKARD COMPANY*
By: /s/ ANN O. BASKINS
---------------------------------
Name: Ann O. Baskins
Title: Associate General Counsel
and Assistant Secretary
/s/ SYLVIA BENNION
------------------------------------
SYLVIA BENNION
Trustee of the Sylvia L. Bennion
Family Trust
/s/ MICHAEL NELSON
------------------------------------
MICHAEL NELSON
Trustee of the WFM
Profit Sharing Plan
* The signature marking the assent
of Hewlett-Packard Company does
not apply to Section 4.4 of this
Agreement and Plan of
Reorganization, which section
Hewlett-Packard Company expressly
declines to become a party to.
64.
<PAGE> 72
EXHIBIT A
SHAREHOLDERS
NAME
--------------------------------------
Don Brown
University of Utah Research Foundation
Hewlett Packard Corporation
Sylvia Bennion
Michael Nelson
65.
<PAGE> 73
EXHIBIT B
FORM OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF SURVIVING CORPORATION
1.
<PAGE> 74
EXHIBIT C
DIRECTORS AND OFFICERS
OF SURVIVING CORPORATION
DIRECTORS
Dennis Murphy
Norman Farquhar
Don Brown
OFFICERS
Dennis Murphy - Chief Executive Officer
Don Brown - President
Norman Farquhar - Chief Financial Officer, Vice President, Secretary and
Treasurer
1.
<PAGE> 75
EXHIBIT D
FORM OF ESCROW AGREEMENT
1.
<PAGE> 76
EXHIBIT E
PERSONS EXECUTING
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Don Brown
Steve Bowen
1.
<PAGE> 77
EXHIBIT F
FORM OF LEGAL OPINION OF PRESTON GATES & ELLIS LLP
1.
<PAGE> 78
EXHIBIT G
FORM OF LEGAL OPINION OF COOLEY GODWARD LLP
1.
<PAGE> 1
EXHIBIT 10.33
STRATEGIC RELATIONSHIP AGREEMENT
THIS STRATEGIC RELATIONSHIP AGREEMENT (this "Agreement") is entered
into as of January 7, 2000, by and among MEDIBUY.COM, INC., a Delaware
corporation having its principal place of business at 10120 Pacific Heights
Boulevard, Suite 100, San Diego, California 92121 (the "Company"), Allianz
Capital Partners, GmbH, and Jochen Noelke (each a "Strategic Partner" and
together the "Strategic Partners").
RECITALS
WHEREAS, the Company is in the business of providing web-based commerce
and content applications for the global healthcare community of buyers and
vendors (the "Business"), and desires to take steps to explore and potentially
expand the Business to include Europe; and
WHEREAS, each of the Strategic Partners severally has information,
knowledge and relationships which may be of assistance to the Company in
pursuing such expansion of the Business, which information, knowledge and
relationships the Company desires to obtain from the Strategic Partners and the
Strategic Partners desire to make available to the Company on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties agree as follows:
1. INFORMATION. Each of the Strategic Partners hereby severally agrees
that, from time to time during the "Term" (as defined below) upon the request of
the Company, each Strategic Partner shall use good faith efforts to provide the
Company on a timely basis with information and know-how concerning (i) European
health care markets generally, (ii) distribution channels for the sale of health
care related products in European markets, (iii) competitive enterprises in the
European markets as they are identified by the Company or either Strategic
Partner, (iv) practice and custom concerning the distribution and sale of health
care products in European markets, and (v) identification of, and introduction
to, additional sources of information regarding European markets. In addition,
during the Term and upon the request of the Company, each Strategic Partner
shall use good faith efforts to provide the Company on timely basis with
introductions to persons or entities which may be beneficial to the Company in
the European expansion of the Business.
The Company acknowledges that neither Strategic Partner makes any
representations or warranties regarding (i) the accuracy or completeness of any
information provided to the Company, (ii) the value of such information, or
(iii) any outcome or expected benefit to the Company from the use of such
information. The Company also acknowledges that neither Strategic Party shall be
obligated to provide any information if, in the reasonable opinion of such
Strategic Partner, the provision of such information would violate applicable
laws, rules or regulations, or any contract binding on such Strategic Partner
restricting the use or disclosure of such information. Each Strategic Partner
hereby disclaims any and all warranties concerning any information provided to
the Company.
<PAGE> 2
2. TERM. This Agreement shall commence on the date hereof and shall
terminate on the first anniversary hereof unless extended by the mutual written
agreement of the parties. The Company may terminate this Agreement at any time
with regard to a Strategic Partner upon delivery of written notice to such
Strategic Partner.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time. This Agreement and
the obligations hereunder may not be assigned without the prior written consent
of all of the parties.
3.2 ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
3.3 SEVERABILITY. In case any provision of the Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
3.4 AMENDMENT AND WAIVER. This Agreement may be amended or
modified only upon the written consent of the Company and the Strategic
Partners. The obligations and the rights of the parties under the Agreement may
be waived only with the written consent of the party from whom such waiver is
sought.
3.5 NOTICES. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified, (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day, (c) ten (10) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) four (4)
business days after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All
communications shall be sent to the parties at the addresses for such parties on
the books and records of the parties or at such other address as the any party
may desire to designate by ten (10) days advance written notice to the other
parties hereto.
3.6 EXPENSES. Each party shall bear its own expenses in the
negotiation, execution and performance of this Agreement.
3.7 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
<PAGE> 3
3.8 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
3.9 CONFIDENTIALITY. Each Strategic Partner and the Company
severally agrees that, except with the prior written consent of the party from
whom such information was obtained, it shall at all times keep confidential and
not divulge, furnish or make accessible to any third party any confidential
information, knowledge or data concerning or relating to the Business or
provided by a Strategic Partner pursuant to Section 1 above; provided, however,
that no party shall be under such obligation with respect to any information,
knowledge or data which (i) becomes publicly known and made generally available
through no wrongful act of such party or (ii) is publicly known and generally
available in the public domain prior to the time of disclosure.
3.10 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
3.11 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Strategic
Relationship Agreement as of the date first set forth above.
COMPANY:
MEDIBUY.COM, INC.
By: /S/ NORMAN FARQUHAR
-------------------------------
Name: Norman Farquhar
-----------------------------
Title: EVP & CFO
----------------------------
STRATEGIC PARTNERS:
ALLIANZ CAPITAL PARTNERS, GMBH
By: /S/ THOMAS PUTTER /S/ MARTIN ARNOLD
-------------------------------
Name: Thomas Putter Martin Arnold
-----------------------------
Title: CEO Sen. Inv. Manager
----------------------------
JOCHEN NOELKE
/S/ JOCHEN NOELKE
-----------------------------------
<PAGE> 1
EXHIBIT 10.34
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (I) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II)
AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED, (III) RECEIPT OF NO-ACTION LETTERS FROM
THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (IV) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
THIS WARRANT HAS BEEN ACQUIRED PURSUANT TO REGULATION S OF THE ACT, AND MAY NOT
BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH REGULATION S, PURSUANT TO A REGISTRATION UNDER THE ACT, OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. IN ADDITION, NO HEDGING
TRANSACTION MAY BE CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS SUCH
TRANSACTION IS IN COMPLIANCE WITH THE ACT.
MEDIBUY.COM, INC.
WARRANT TO PURCHASE 154,853 SHARES NO: C-1
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Allianz Capital Partners, GMBH
is entitled to subscribe for and purchase one hundred fifty-four thousand eight
hundred fifty-three (154,853) shares of the fully paid and nonassessable Common
Stock (as adjusted pursuant to Section 4 hereof, the "Shares") of MEDIBUY.COM,
INC., a Delaware corporation (the "Company"), at the price of $0.30 per share
(such price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to as the "Warrant
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein, the term "Date of Grant" shall mean January 7, 2000.
1. TERM; EXERCISABILITY.
(a) TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Effective Date (as defined in Section 1(b) below) through the second anniversary
of the Date of Grant; provided that the Warrant shall expire earlier upon the
Termination Date as defined under Section 1(c) below.
(b) EFFECTIVE DATE. No holder of this Warrant shall be
entitled to exercise this Warrant for all or any part of the Shares until the
occurrence of the earliest of (i) June 30, 2000, or the date on which the
Company's registration statement filed with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), (ii) in connection with the Company's initial public
offering, is declared effective by the SEC (the "Effective Date") or (iii) upon
a Reorganization Transaction (as defined below).
1.
<PAGE> 2
(c) TERMINATION DATE. Notwithstanding anything herein to the
contrary, this Warrant shall expire and shall be wholly void and have no effect
after 5:00 p.m., San Diego, California time, on the date (the "Termination
Date") which is the earlier of (i) the thirtieth (30th) calendar day following
the date on which the Company gives notice to the holder of this Warrant that
the average closing price of the Company's Common Stock for the immediately
preceding sixty (60) trading days on the Nasdaq National Market or on any
securities exchange (or if the Common Stock is traded in an over-the-counter
market, the average of the closing ask prices over such period) equals or
exceeds $41.08 per share (such dollar amount per share to be adjusted
proportionately for any stock split, combination or similar event); provided,
that in the event the Shares are not tradeable under Rule 144 under the
Securities Act, or covered by an effective registration statement under the
Securities Act on such Termination Date, then the Termination Date shall be
extended for purposes of this Section 1(c)(i) until the tenth (10th) day
following the first to occur of (A) the date on which the Shares may be sold
pursuant to Rule 144 under the Securities Act or the effective date of a
registration statement covering the resale of the Shares under the Securities
Act; or (ii) the closing date of a Reorganization Transaction (the first to
occur of such dates being hereinafter referred to as the "Termination Date").
For purposes of this Warrant, any of the following shall constitute a
"Reorganization Transaction": a merger or consolidation of the Company with or
into another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash, or otherwise, or any other similar transaction in
which the holders of voting power of the Company immediately prior to such
transaction hold less than a majority of the surviving or resulting entity
immediately following such transaction. The Company shall give the holder of
this Warrant notice of a Reorganization Transaction at least 20 calendar days
prior to the closing of such Reorganization Transaction.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof in whole or in part by the surrender of this
Warrant (with the notice of exercise form attached hereto as Exhibit A, or if
the Warrant is exercised pursuant to the net issuance provisions of Section 9
with the notice of exercise form attached hereto as Exhibit A-1, duly executed)
at the principal office of the Company and, if applicable, by the payment to the
Company, by check, of an amount equal to the then applicable Warrant Price
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Common Stock shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within fifteen (15) calendar days after such exercise (except that if the
Company's Common Stock is then publicly traded, such certificates shall be
delivered within three (3) business days) and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such fifteen (15) day period.
2.
<PAGE> 3
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) RECLASSIFICATION, ETC. If the Company, at any time while
this Warrant, or any portion hereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant 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 that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Warrant Price
therefor shall be appropriately adjusted, all subject to further adjustment as
provided in this Section 4.
(b) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Warrant, or any portion hereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as to
which purchase rights under this Warrant exist, into a different number of
securities as to which purchase rights under this Warrant exist, or into a
different number of securities of the same class, the number of shares of Common
Stock purchasable upon exercise immediately prior to such action shall be
adjusted so that the holder shall be entitled to receive the kind and number of
shares of Common Stock or other securities of the Company which it would have
owned or would have been entitled to receive immediately after such action had
the Warrant been exercised immediately prior to such action and the Warrant
Price shall be appropriately adjusted, all subject to further adjustment as
provided in this Section 4.
(c) ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR
PROPERTY. If while this Warrant, or any portion hereof, remains outstanding and
unexpired, the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would have been entitled to receive
immediately after such action had the Warrant been so exercised immediately
prior to such action, and the Warrant Price shall be appropriately reduced, all
subject to further adjustment as provided in this Section 4.
3.
<PAGE> 4
(d) ADJUSTMENTS FOR EXTRAORDINARY CASH DIVIDENDS OR
DISTRIBUTIONS. If while this Warrant, or any portion hereof, remains outstanding
and unexpired, but is not yet exercisable, the Company determines to make any
extraordinary cash dividends or distributions to its stockholders, including in
liquidation, then the appropriate adjustment (as determined in good faith by the
Board of Directors) shall be made in the application of the provisions of this
Warrant with respect to the rights of the holder after the transaction to the
end that the holder would be entitled to receive immediately after the
transaction such securities or other property as such holder would have been
entitled to receive had the Warrant been exercised immediately prior to such
action, with the Warrant Price appropriately adjusted, all subject to further
adjustment as provided in this Section 4.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make 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 such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed to the holder of this Warrant in
accordance with Section 12 of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Common Stock on the date of exercise as reasonably determined in
good faith by the Company's Board of Directors.
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR SHARES.
(a) COMPLIANCE WITH SECURITIES ACT. The holder of this
Warrant, by acceptance hereof, agrees that this Warrant, and the shares of
Common Stock to be issued upon exercise hereof are being acquired for investment
and that such holder will not offer, sell or otherwise dispose of this Warrant,
or any shares of Common Stock to be issued upon exercise hereof except under
circumstances which will not result in a violation of the Securities Act. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Securities Act or an exemption from such registration is available, the
holder hereof shall confirm in writing, by executing the form attached as
Schedule 1 to Exhibit A and Exhibit A-1 hereto, that the shares of Common Stock
so purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant and all shares of Common Stock issued upon
exercise of this Warrant (unless registered under the Securities Act) shall be
stamped or imprinted with a legend in substantially the following forms:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE
REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR
THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM
THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING
WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER
4.
<PAGE> 5
WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
PURSUANT TO REGULATION S OF THE ACT, AND MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH REGULATION S, PURSUANT TO A REGISTRATION UNDER THE ACT, OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS. IN ADDITION, NO HEDGING TRANSACTION
MAY BE CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS SUCH
TRANSACTION IS IN COMPLIANCE WITH THE ACT."
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 is aware of the Company's business
affairs and financial condition, and has 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 the resale in connection with, any
"distribution" thereof for purposes of the Securities Act.
(ii) The holder understands that this Warrant has not
been registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein. In this
connection, the holder understands that, in the view of the SEC, the statutory
basis for such exemption may be unavailable if the holder's representation was
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
Securities Act and any applicable state securities laws, or unless exemptions
from registration are otherwise available. Moreover, the holder understands that
the Company is under no obligation to register this Warrant.
(iv) The holder is aware of the provisions of Rule
144 and 144A, promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions, if
applicable, including, among other things: the availability of certain public
information about the Company, the resale occurring not less than one year after
the party has purchased and paid for the securities to be sold; the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
5.
<PAGE> 6
Securities Exchange Act of 1934, as amended) and the amount of securities being
sold during any three-month period not exceeding the specified limitations
stated therein.
(v) The holder further understands that at the
time it wishes to sell this Warrant there may be no public market upon which to
make such a sale, and that, even if such a public market then exists, the
Company may not be satisfying the current public information requirements of
Rule 144 and 144A, and that, in such event, the holder may be precluded from
selling this Warrant under Rule 144 and 144A even if the one-year minimum
holding period had been satisfied.
(vi) The holder further understands that in the
event all of the requirements of Rule 144 and 144A are not satisfied,
registration under the Securities Act or another registration exemption will be
required; and that, not withstanding the fact that Rule 144 and 144A are not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(b) DISPOSITION OF WARRANT OR SHARES. With respect to any
offer, sale or other disposition of this Warrant or any shares of Common Stock
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or shares, the holder hereof and each subsequent holder of this Warrant
agrees to give written notice to the Company prior thereto, describing briefly
the manner thereof, together with a written opinion of such holder's counsel, if
reasonably requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Securities Act as then in effect or any federal or state law then in effect)
of this Warrant or such shares of Common Stock and indicating whether or not
under the Securities Act certificates for this Warrant or such shares of Common
Stock to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
such law. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such holder that such holder may sell or otherwise dispose of this
Warrant or such shares of Common Stock, all in accordance with the terms of the
notice delivered to the Company. If a determination has been made pursuant to
this subsection (b) that the opinion of counsel for the holder is not reasonably
satisfactory to the Company, the Company shall so notify the holder promptly
after such determination has been made and shall specify in detail the legal
analysis supporting any such conclusion. Notwithstanding the foregoing, this
Warrant or such shares of Common Stock may, as to such federal laws, be offered,
sold or otherwise disposed of in accordance with Rule 144 or 144A under the
Securities Act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Common Stock thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
6.
<PAGE> 7
(c) EXCEPTED TRANSFERS. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer without any additional consideration of, or grant of a security
interest in, this Warrant or any part hereof (i) to a partner of the holder if
the holder is a partnership, (ii) by the holder to a partnership of which the
holder is a general partner, or (iii) to any affiliate of the holder if the
holder is a corporation; provided, however, in any such transfer, the transferee
shall on the Company's request agree in writing to be bound by the terms of this
Warrant as if an original signatory hereto.
(d) "MARKET STAND-OFF" AGREEMENT. Notwithstanding anything
herein to the contrary, if requested by the Company and an underwriter of Common
Stock (or other securities) of the Company, no holder shall sell or otherwise
transfer or dispose of any Shares (or other securities) of the Company then
owned by such holder (other than those that may be included in the registration,
if any) during the one hundred eighty (180) day period (or such lesser period as
is permitted by the underwriter) following the Effective Date, provided that:
(a) such agreement shall only apply to the first such
registration statement of the Company which covers securities to be sold on its
behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company then holding
securities of the Company are bound by and have entered into similar agreements.
The obligations described in this Section 7(d) shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to an SEC Rule 145 transaction on Form S-4 or similar forms that
may be promulgated in the future. In order to enforce the above covenant, the
Company shall have the right to place restrictive legends on the certificates
representing the Shares subject to this Section 7(d) and to impose stop-transfer
instructions with respect to the securities subject to the foregoing restriction
until the end of such one hundred eighty (180) day period.
8. RIGHTS AS STOCKHOLDERS; INFORMATION. Except only as otherwise
provided under Section 4(c) of this Warrant, no holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.
9. RIGHT TO CONVERT WARRANT INTO COMMON STOCK; NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Common Stock as provided in this Section 9 at any time or from
time to time during the term of this Warrant. Upon exercise of the Conversion
Right with respect to a particular number of shares subject to this Warrant (the
7.
<PAGE> 8
"Converted Warrant Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other consideration)
(X) that number of shares of fully paid and nonassessable Common Stock equal to
the quotient obtained by dividing the value of this Warrant (or the specified
portion hereof) on the Conversion Date (as defined in subsection (b) hereof),
which value shall be determined by subtracting (A) the aggregate Warrant Price
of the Converted Warrant Shares immediately prior to the exercise of the
Conversion Right from (B) the aggregate fair market value of the Converted
Warrant Shares issuable upon exercise of this Warrant (or the specified portion
hereof) on the Conversion Date (as herein defined), by (Y) the fair market value
of one share of Common Stock on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X=B-A
---
Y
Where: X = the number of shares of Common Stock that may be issued to holder
Y = the fair market value (FMV) of one share of Common Stock
A = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) METHOD OF EXERCISE. The Conversion Right may be exercised
by the holder by the surrender of this Warrant at the principal office of the
Company together with a notice of exercise substantially in the form attached
hereto as Exhibit A-1, specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
that are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid notice of exercise, or on such later date as is specified therein (the
"Conversion Date"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder within fifteen (15) calendar days
following the Conversion Date (except that if the Company's Common Stock is then
publicly traded, such certificates shall be delivered within three (3) business
days following the Conversion Date).
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of this
Section 9, "fair market value" of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If traded on a securities exchange or the
Nasdaq National Market, the fair market value of the Common Stock shall be
deemed to be the average of the closing or
8.
<PAGE> 9
last reported sale prices of the Common Stock on such exchange or market over
the ten (10) calendar day period ending five business days prior to the
Determination Date;
(ii) If otherwise traded in an over-the-counter
market, the fair market value of the Common Stock shall be deemed to be the
average of the closing ask prices of the Common Stock over the ten (10) calendar
day period ending five business days prior to the Determination Date;
(iii) If there is no public market for the Common
Stock, then fair market value shall be determined by mutual agreement of the
holder of this Warrant and the Company, and if the holder and the Company are
unable to so agree, at the Company's sole expense by an investment banker of
national reputation selected by the Company and reasonably acceptable to the
holder of this Warrant.
10. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to the holder of this Warrant 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, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies.
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable.
(c) The execution and delivery of this Warrant are not, and
the grant of the right to acquire the Shares upon exercise of this Warrant in
accordance with the terms hereof is not inconsistent with the Company's
certificate of incorporation or bylaws, and do not contravene any law,
governmental rule or regulation, judgment or order applicable to the Company,
and do not conflict with or contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument of which the
Company is a party or by which it is bound or 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 or local government authority
or agency or other person, except for the filing of notices pursuant to federal
and state securities laws, which filings will be effected by the time required
thereby.
(d) There currently are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against the Company in any court or before any governmental
commission, board or authority which, if adversely determined, will have a
material adverse effect on the ability of the Company to perform its obligations
under this Warrant.
11. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
9.
<PAGE> 10
12. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) ten (10) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) four (4) business days after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the holder at its address as shown on the books of the Company and to the
Company at the address indicated therefor on the signature page of this Warrant.
13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the covenants
and agreements of the Company hereunder shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise or conversion of this Warrant, in whole or in part, upon request of
the holder hereof but at the Company's expense, acknowledge in writing its
continuing obligation to the holder hereof in respect of any such rights.
14. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate representing any Shares and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity reasonably satisfactory to
the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate representing any Shares, the
Company will make and deliver a new Warrant or stock certificate, of like tenor,
in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
15. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
16. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
17. SURVIVAL OF REPRESENTATIONS WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
18. REMEDIES. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holder hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or 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 breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
19. ACCEPTANCE. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
10.
<PAGE> 11
20. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its
certificate of incorporation 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 action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
11.
<PAGE> 12
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officer thereunto as of the date set forth below.
MEDIBUY.COM, INC.
By:
--------------------------------------
Name:
Title:
Address: 10120 Pacific Heights Blvd.,
Suite 100
San Diego, CA 92121
Date: January ___, 2000
12.
<PAGE> 13
EXHIBIT A
NOTICE OF EXERCISE
To: MEDIBUY.COM, INC.
1. The undersigned hereby elects to purchase _____________ shares of
Common Stock of MEDIBUY.COM, INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
-------------------------------------
(Name)
-------------------------------------
-------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof and if required under Section 7(a) of the Warrant, the
undersigned has executed an Investment Representation Statement attached hereto
as Schedule 1.
-------------------------------------
(Signature)
- -------------------------------------
(Date)
<PAGE> 14
EXHIBIT A-1
NOTICE OF EXERCISE OF NET ISSUANCE CONVERSION RIGHTS
To: MEDIBUY.COM, INC.
1. The undersigned, the registered holder of the Warrant delivered
herewith (the "Warrant"), hereby elects to exercise the Conversion Right (as
defined in Section 9 of the Warrant) as provided herein. ___________ shares
subject to the Warrant are being surrendered hereby in exercise of the
Conversion Right. The number of shares to be issued pursuant to this exercise
shall be determined by reference to the formula in Section 9(a) of the Warrant,
which requires the use of the "fair market value" of the Company's stock. As of
the Determination Date (as defined in the Warrant), the "fair market value" of
one share of Common Stock shall be determined in the manner provided in Section
9(c) of the Warrant, which amount has been determined by the undersigned (or
agreed to by the holder of the Warrant and medibuy.com, Inc.) to be
$_____________ per share. Therefore, ____________ shares are to be issued to the
undersigned pursuant to this exercise.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
-------------------------------------
(Name)
-------------------------------------
-------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof and if required under Section 7(a) of the Warrant, the
undersigned has executed an Investment Representation Statement attached hereto
as Schedule 1.
-------------------------------------
(Signature)
- -------------------------------------
(Date)
<PAGE> 15
SCHEDULE 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
----------------------------------
Company: MEDIBUY.COM, INC.
Security: Common Stock
Amount:
-------------------------------------
Date:
-------------------------------------
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable derision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Act").
(b) The Purchaser understands that the Securities have 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
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is otherwise available. Moreover, the Purchaser understands
that the Company is under no obligation to register the Securities except as set
forth in the Warrant under which the Securities are being acquired. In addition,
the Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: the availability of certain public information about the Company; the
resale occurring not less than one year after the party has purchased and paid
for the securities to be
<PAGE> 16
sold; the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934, as amended); and the amount
of securities being sold during any three-month period not exceeding the
specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to
sell the Securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the two-year minimum holding period had been
satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act
or another registration exemption will be required; and that, notwithstanding
the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its
opinion that persons proposing to sell private placement securities other than
in a registered offering and otherwise than 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 such persons and their
respective brokers who participate in such transactions do so at their own risk.
Purchaser:
------------------------
Date:__________, 200__
<PAGE> 1
EXHIBIT 10.35
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (I) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II)
AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED, (III) RECEIPT OF NO-ACTION LETTERS FROM
THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (IV) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
THIS WARRANT HAS BEEN ACQUIRED PURSUANT TO REGULATION S OF THE ACT, AND MAY NOT
BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH REGULATION S, PURSUANT TO A REGISTRATION UNDER THE ACT, OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. IN ADDITION, NO HEDGING
TRANSACTION MAY BE CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS SUCH
TRANSACTION IS IN COMPLIANCE WITH THE ACT.
MEDIBUY.COM, INC.
WARRANT TO PURCHASE 35,131 SHARES NO: C-2
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Jochen Noelke is entitled to
subscribe for and purchase thirty-five thousand one hundred thirty-one (35,131)
shares of the fully paid and nonassessable Common Stock (as adjusted pursuant to
Section 4 hereof, the "Shares") of MEDIBUY.COM, INC., a Delaware corporation
(the "Company"), at the price of $0.30 per share (such price and such other
price as shall result, from time to time, from the adjustments specified in
Section 4 hereof is herein referred to as the "Warrant Price"), subject to the
provisions and upon the terms and conditions hereinafter set forth. As used
herein, the term "Date of Grant" shall mean January 7, 2000.
1. TERM; EXERCISABILITY.
(a) TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Effective Date (as defined in Section 1(b) below) through the second anniversary
of the Date of Grant; provided that the Warrant shall expire earlier upon the
Termination Date as defined under Section 1(c) below.
(b) EFFECTIVE DATE. No holder of this Warrant shall be
entitled to exercise this Warrant for all or any part of the Shares until the
occurrence of the earliest of (i) June 30, 2000, or the date on which the
Company's registration statement filed with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), (ii) in connection with the Company's initial public
offering, is declared effective by the SEC (the "Effective Date") or (iii) upon
a Reorganization Transaction (as defined below).
1.
<PAGE> 2
(c) TERMINATION DATE. Notwithstanding anything herein to the
contrary, this Warrant shall expire and shall be wholly void and have no effect
after 5:00 p.m., San Diego, California time, on the date (the "Termination
Date") which is the earlier of (i) the thirtieth (30th) calendar day following
the date on which the Company gives notice to the holder of this Warrant that
the average closing price of the Company's Common Stock for the immediately
preceding sixty (60) trading days on the Nasdaq National Market or on any
securities exchange (or if the Common Stock is traded in an over-the-counter
market, the average of the closing ask prices over such period) equals or
exceeds $41.08 per share (such dollar amount per share to be adjusted
proportionately for any stock split, combination or similar event); provided,
that in the event the Shares are not tradeable under Rule 144 under the
Securities Act, or covered by an effective registration statement under the
Securities Act on such Termination Date, then the Termination Date shall be
extended for purposes of this Section 1(c)(i) until the tenth (10th) day
following the first to occur of (A) the date on which the Shares may be sold
pursuant to Rule 144 under the Securities Act or the effective date of a
registration statement covering the resale of the Shares under the Securities
Act; or (ii) the closing date of a Reorganization Transaction (the first to
occur of such dates being hereinafter referred to as the "Termination Date").
For purposes of this Warrant, any of the following shall constitute a
"Reorganization Transaction": a merger or consolidation of the Company with or
into another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash, or otherwise, or any other similar transaction in
which the holders of voting power of the Company immediately prior to such
transaction hold less than a majority of the surviving or resulting entity
immediately following such transaction. The Company shall give the holder of
this Warrant notice of a Reorganization Transaction at least 20 calendar days
prior to the closing of such Reorganization Transaction.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof in whole or in part by the surrender of this
Warrant (with the notice of exercise form attached hereto as Exhibit A, or if
the Warrant is exercised pursuant to the net issuance provisions of Section 9
with the notice of exercise form attached hereto as Exhibit A-1, duly executed)
at the principal office of the Company and, if applicable, by the payment to the
Company, by check, of an amount equal to the then applicable Warrant Price
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Common Stock shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within fifteen (15) calendar days after such exercise (except that if the
Company's Common Stock is then publicly traded, such certificates shall be
delivered within three (3) business days) and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such fifteen (15) day period.
2.
<PAGE> 3
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) RECLASSIFICATION, ETC. If the Company, at any time while
this Warrant, or any portion hereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant 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 that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Warrant Price
therefor shall be appropriately adjusted, all subject to further adjustment as
provided in this Section 4.
(b) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Warrant, or any portion hereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as to
which purchase rights under this Warrant exist, into a different number of
securities as to which purchase rights under this Warrant exist, or into a
different number of securities of the same class, the number of shares of Common
Stock purchasable upon exercise immediately prior to such action shall be
adjusted so that the holder shall be entitled to receive the kind and number of
shares of Common Stock or other securities of the Company which it would have
owned or would have been entitled to receive immediately after such action had
the Warrant been exercised immediately prior to such action and the Warrant
Price shall be appropriately adjusted, all subject to further adjustment as
provided in this Section 4.
(c) ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR
PROPERTY. If while this Warrant, or any portion hereof, remains outstanding and
unexpired, the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would have been entitled to receive
immediately after such action had the Warrant been so exercised immediately
prior to such action, and the Warrant Price shall be appropriately reduced, all
subject to further adjustment as provided in this Section 4.
3.
<PAGE> 4
(d) ADJUSTMENTS FOR EXTRAORDINARY CASH DIVIDENDS OR
DISTRIBUTIONS. If while this Warrant, or any portion hereof, remains outstanding
and unexpired, but is not yet exercisable, the Company determines to make any
extraordinary cash dividends or distributions to its stockholders, including in
liquidation, then the appropriate adjustment (as determined in good faith by the
Board of Directors) shall be made in the application of the provisions of this
Warrant with respect to the rights of the holder after the transaction to the
end that the holder would be entitled to receive immediately after the
transaction such securities or other property as such holder would have been
entitled to receive had the Warrant been exercised immediately prior to such
action, with the Warrant Price appropriately adjusted, all subject to further
adjustment as provided in this Section 4.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make 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 such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed to the holder of this Warrant in
accordance with Section 12 of this Warrant.
6. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Common Stock on the date of exercise as reasonably determined in
good faith by the Company's Board of Directors.
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR SHARES.
(a) COMPLIANCE WITH SECURITIES ACT. The holder of this
Warrant, by acceptance hereof, agrees that this Warrant, and the shares of
Common Stock to be issued upon exercise hereof are being acquired for investment
and that such holder will not offer, sell or otherwise dispose of this Warrant,
or any shares of Common Stock to be issued upon exercise hereof except under
circumstances which will not result in a violation of the Securities Act. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Securities Act or an exemption from such registration is available, the
holder hereof shall confirm in writing, by executing the form attached as
Schedule 1 to Exhibit A and Exhibit A-1 hereto, that the shares of Common Stock
so purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant and all shares of Common Stock issued upon
exercise of this Warrant (unless registered under the Securities Act) shall be
stamped or imprinted with a legend in substantially the following forms:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE
REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR
THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM
THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING
WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER
4.
<PAGE> 5
WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
PURSUANT TO REGULATION S OF THE ACT, AND MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH REGULATION S, PURSUANT TO A REGISTRATION UNDER THE ACT, OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS. IN ADDITION, NO HEDGING TRANSACTION
MAY BE CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS SUCH
TRANSACTION IS IN COMPLIANCE WITH THE ACT."
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 is aware of the Company's business
affairs and financial condition, and has 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 the resale in connection with, any
"distribution" thereof for purposes of the Securities Act.
(ii) The holder understands that this Warrant has not
been registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein. In this
connection, the holder understands that, in the view of the SEC, the statutory
basis for such exemption may be unavailable if the holder's representation was
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
Securities Act and any applicable state securities laws, or unless exemptions
from registration are otherwise available. Moreover, the holder understands that
the Company is under no obligation to register this Warrant.
(iv) The holder is aware of the provisions of Rule
144 and 144A, promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions, if
applicable, including, among other things: the availability of certain public
information about the Company, the resale occurring not less than one year after
the party has purchased and paid for the securities to be sold; the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
5.
<PAGE> 6
Securities Exchange Act of 1934, as amended) and the amount of securities being
sold during any three-month period not exceeding the specified limitations
stated therein.
(v) The holder further understands that at the
time it wishes to sell this Warrant there may be no public market upon which to
make such a sale, and that, even if such a public market then exists, the
Company may not be satisfying the current public information requirements of
Rule 144 and 144A, and that, in such event, the holder may be precluded from
selling this Warrant under Rule 144 and 144A even if the one-year minimum
holding period had been satisfied.
(vi) The holder further understands that in the
event all of the requirements of Rule 144 and 144A are not satisfied,
registration under the Securities Act or another registration exemption will be
required; and that, not withstanding the fact that Rule 144 and 144A are not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(b) DISPOSITION OF WARRANT OR SHARES. With respect to any
offer, sale or other disposition of this Warrant or any shares of Common Stock
acquired pursuant to the exercise of this Warrant prior to registration of such
Warrant or shares, the holder hereof and each subsequent holder of this Warrant
agrees to give written notice to the Company prior thereto, describing briefly
the manner thereof, together with a written opinion of such holder's counsel, if
reasonably requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Securities Act as then in effect or any federal or state law then in effect)
of this Warrant or such shares of Common Stock and indicating whether or not
under the Securities Act certificates for this Warrant or such shares of Common
Stock to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
such law. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such holder that such holder may sell or otherwise dispose of this
Warrant or such shares of Common Stock, all in accordance with the terms of the
notice delivered to the Company. If a determination has been made pursuant to
this subsection (b) that the opinion of counsel for the holder is not reasonably
satisfactory to the Company, the Company shall so notify the holder promptly
after such determination has been made and shall specify in detail the legal
analysis supporting any such conclusion. Notwithstanding the foregoing, this
Warrant or such shares of Common Stock may, as to such federal laws, be offered,
sold or otherwise disposed of in accordance with Rule 144 or 144A under the
Securities Act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Common Stock thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
6.
<PAGE> 7
(c) EXCEPTED TRANSFERS. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer without any additional consideration of, or grant of a security
interest in, this Warrant or any part hereof (i) to a partner of the holder if
the holder is a partnership, (ii) by the holder to a partnership of which the
holder is a general partner, or (iii) to any affiliate of the holder if the
holder is a corporation; provided, however, in any such transfer, the transferee
shall on the Company's request agree in writing to be bound by the terms of this
Warrant as if an original signatory hereto.
(d) "MARKET STAND-OFF" AGREEMENT. Notwithstanding anything
herein to the contrary, if requested by the Company and an underwriter of Common
Stock (or other securities) of the Company, no holder shall sell or otherwise
transfer or dispose of any Shares (or other securities) of the Company then
owned by such holder (other than those that may be included in the registration,
if any) during the one hundred eighty (180) day period (or such lesser period as
is permitted by the underwriter) following the Effective Date, provided that:
(a) such agreement shall only apply to the first such
registration statement of the Company which covers securities to be sold on its
behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company then holding
securities of the Company are bound by and have entered into similar agreements.
The obligations described in this Section 7(d) shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to an SEC Rule 145 transaction on Form S-4 or similar forms that
may be promulgated in the future. In order to enforce the above covenant, the
Company shall have the right to place restrictive legends on the certificates
representing the Shares subject to this Section 7(d) and to impose stop-transfer
instructions with respect to the securities subject to the foregoing restriction
until the end of such one hundred eighty (180) day period.
8. RIGHTS AS STOCKHOLDERS; INFORMATION. Except only as otherwise
provided under Section 4(c) of this Warrant, no holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.
9. RIGHT TO CONVERT WARRANT INTO COMMON STOCK; NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Common Stock as provided in this Section 9 at any time or from
time to time during the term of this Warrant. Upon exercise of the Conversion
Right with respect to a particular number of shares subject to this Warrant (the
7.
<PAGE> 8
"Converted Warrant Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other consideration)
(X) that number of shares of fully paid and nonassessable Common Stock equal to
the quotient obtained by dividing the value of this Warrant (or the specified
portion hereof) on the Conversion Date (as defined in subsection (b) hereof),
which value shall be determined by subtracting (A) the aggregate Warrant Price
of the Converted Warrant Shares immediately prior to the exercise of the
Conversion Right from (B) the aggregate fair market value of the Converted
Warrant Shares issuable upon exercise of this Warrant (or the specified portion
hereof) on the Conversion Date (as herein defined), by (Y) the fair market value
of one share of Common Stock on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X=B-A
---
Y
Where: X = the number of shares of Common Stock that may be issued to holder
Y = the fair market value (FMV) of one share of Common Stock
A = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) METHOD OF EXERCISE. The Conversion Right may be exercised
by the holder by the surrender of this Warrant at the principal office of the
Company together with a notice of exercise substantially in the form attached
hereto as Exhibit A-1, specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
that are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid notice of exercise, or on such later date as is specified therein (the
"Conversion Date"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder within fifteen (15) calendar days
following the Conversion Date (except that if the Company's Common Stock is then
publicly traded, such certificates shall be delivered within three (3) business
days following the Conversion Date).
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of this
Section 9, "fair market value" of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If traded on a securities exchange or the
Nasdaq National Market, the fair market value of the Common Stock shall be
deemed to be the average of the closing or
8.
<PAGE> 9
last reported sale prices of the Common Stock on such exchange or market over
the ten (10) calendar day period ending five business days prior to the
Determination Date;
(ii) If otherwise traded in an over-the-counter
market, the fair market value of the Common Stock shall be deemed to be the
average of the closing ask prices of the Common Stock over the ten (10) calendar
day period ending five business days prior to the Determination Date;
(iii) If there is no public market for the Common
Stock, then fair market value shall be determined by mutual agreement of the
holder of this Warrant and the Company, and if the holder and the Company are
unable to so agree, at the Company's sole expense by an investment banker of
national reputation selected by the Company and reasonably acceptable to the
holder of this Warrant.
10. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to the holder of this Warrant 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, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies.
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable.
(c) The execution and delivery of this Warrant are not, and
the grant of the right to acquire the Shares upon exercise of this Warrant in
accordance with the terms hereof is not inconsistent with the Company's
certificate of incorporation or bylaws, and do not contravene any law,
governmental rule or regulation, judgment or order applicable to the Company,
and do not conflict with or contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument of which the
Company is a party or by which it is bound or 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 or local government authority
or agency or other person, except for the filing of notices pursuant to federal
and state securities laws, which filings will be effected by the time required
thereby.
(d) There currently are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against the Company in any court or before any governmental
commission, board or authority which, if adversely determined, will have a
material adverse effect on the ability of the Company to perform its obligations
under this Warrant.
11. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
9.
<PAGE> 10
12. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) ten (10) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) four (4) business days after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the holder at its address as shown on the books of the Company and to the
Company at the address indicated therefor on the signature page of this Warrant.
13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the covenants
and agreements of the Company hereunder shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at the time of
the exercise or conversion of this Warrant, in whole or in part, upon request of
the holder hereof but at the Company's expense, acknowledge in writing its
continuing obligation to the holder hereof in respect of any such rights.
14. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate representing any Shares and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity reasonably satisfactory to
the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate representing any Shares, the
Company will make and deliver a new Warrant or stock certificate, of like tenor,
in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
15. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
16. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
17. SURVIVAL OF REPRESENTATIONS WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
18. REMEDIES. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holder hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or 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 breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
19. ACCEPTANCE. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
10.
<PAGE> 11
20. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its
certificate of incorporation 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 action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
11.
<PAGE> 12
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officer thereunto as of the date set forth below.
MEDIBUY.COM, INC.
By:
--------------------------------------
Name:
Title:
Address: 10120 Pacific Heights Blvd.,
Suite 100
San Diego, CA 92121
Date: January ___, 2000
12.
<PAGE> 13
EXHIBIT A
NOTICE OF EXERCISE
To: MEDIBUY.COM, INC.
1. The undersigned hereby elects to purchase _____________ shares of
Common Stock of MEDIBUY.COM, INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
-------------------------------------
(Name)
-------------------------------------
-------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof and if required under Section 7(a) of the Warrant, the
undersigned has executed an Investment Representation Statement attached hereto
as Schedule 1.
-------------------------------------
(Signature)
- -------------------------------------
(Date)
<PAGE> 14
EXHIBIT A-1
NOTICE OF EXERCISE OF NET ISSUANCE CONVERSION RIGHTS
To: MEDIBUY.COM, INC.
1. The undersigned, the registered holder of the Warrant delivered
herewith (the "Warrant"), hereby elects to exercise the Conversion Right (as
defined in Section 9 of the Warrant) as provided herein. ___________ shares
subject to the Warrant are being surrendered hereby in exercise of the
Conversion Right. The number of shares to be issued pursuant to this exercise
shall be determined by reference to the formula in Section 9(a) of the Warrant,
which requires the use of the "fair market value" of the Company's stock. As of
the Determination Date (as defined in the Warrant), the "fair market value" of
one share of Common Stock shall be determined in the manner provided in Section
9(c) of the Warrant, which amount has been determined by the undersigned (or
agreed to by the holder of the Warrant and medibuy.com, Inc.) to be
$_____________ per share. Therefore, ____________ shares are to be issued to the
undersigned pursuant to this exercise.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
-------------------------------------
(Name)
-------------------------------------
-------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof and if required under Section 7(a) of the Warrant, the
undersigned has executed an Investment Representation Statement attached hereto
as Schedule 1.
-------------------------------------
(Signature)
- -------------------------------------
(Date)
<PAGE> 15
SCHEDULE 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
----------------------------------
Company: MEDIBUY.COM, INC.
Security: Common Stock
Amount:
-------------------------------------
Date:
-------------------------------------
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable derision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Act").
(b) The Purchaser understands that the Securities have 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
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is otherwise available. Moreover, the Purchaser understands
that the Company is under no obligation to register the Securities except as set
forth in the Warrant under which the Securities are being acquired. In addition,
the Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: the availability of certain public information about the Company; the
resale occurring not less than one year after the party has purchased and paid
for the securities to be
<PAGE> 16
sold; the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934, as amended); and the amount
of securities being sold during any three-month period not exceeding the
specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to
sell the Securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the two-year minimum holding period had been
satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act
or another registration exemption will be required; and that, notwithstanding
the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its
opinion that persons proposing to sell private placement securities other than
in a registered offering and otherwise than 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 such persons and their
respective brokers who participate in such transactions do so at their own risk.
Purchaser:
------------------------
Date:__________, 200__
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
1. Hippo.com, Inc.
2. PartNET, Inc.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated September 2, 1999 and dated November 5, 1999 relating to the
financial statements of medibuy.com, Inc. and PartNET, Inc., respectively, which
appear in such Registration Statement. We also consent to the references to us
under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
San Diego, California
January 11, 2000
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<S> <C> <C>
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<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> AUG-18-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
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0 6,000
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<NET-INCOME> (1,452,000) (21,359,000)
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