<PAGE>
As filed with the Securities and Exchange Commission on August 6, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IGO CORPORATION
(Exact name of Registrant as specified in its Charter)
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<CAPTION>
<S> <C> <C>
California (prior to 5961 94-3174623
reincorporation)
Delaware (after reincorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification Number)
(State or other jurisdiction of
incorporation or organization)
</TABLE>
2301 Robb Drive
Reno, Nevada 89523
(775) 746-6140
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Ken Hawk
President and Chief Executive Officer
2301 Robb Drive
Reno, Nevada 89523
(775) 746-6140
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
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<CAPTION>
<S> <C> <C>
Judith M. O'Brien David A. Garcia Nora L. Gibson
Alisande M. Rozynko Hale Lane Peek Dennison Brobeck Phleger & Harrison, LLP
Wilson Sonsini Goodrich & Rosati
Howard and Anderson One Market
Professional Corporation Professional Corporation Spear Street Tower
100 West Liberty Street, Tenth
650 Page Mill Road Floor San Francisco, California 94105
Palo Alto, California 94304-1050
Reno, Nevada 89501 (415) 442-0900
(650) 493-9300 (775) 327-3000
</TABLE>
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, 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 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. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
Title of Each Class of Aggregate Offering Amount of
Securities to be Registered Price(1)(2) Registration Fee
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<S> <C> <C>
Common Stock, $0.001 par value................. $63,250,000 $17,584
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</TABLE>
(1) Includes shares of common stock that the Underwriters have the option to
purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose determining the registration fee pursuant
to Rule 457(o) promulgated under the Securities Act.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, 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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1999
[iGo Logo]
Solutions for People on the Go(TM)
Shares
Common Stock
iGo Corporation is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares.
We have applied to list our common stock for quotation on the Nasdaq National
Market under the symbol "IGOC." We anticipate that our initial public offering
price will be between $ and $ per share.
---------------
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 8.
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<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to iGo................................................. $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of our common stock to cover over-allotments, if any.
---------------
BancBoston Robertson Stephens
Hambrecht & Quist
Thomas Weisel Partners LLC
The date of this prospectus is , 1999.
<PAGE>
[ARTWORK TO COME]
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in those jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of our common stock. In this prospectus, "iGo," "we,"
"us" and "our" refer to iGo Corporation.
Until , 1999 (25 days after commencement of the offering), all
dealers effecting transactions in our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
----------------
TABLE OF CONTENTS
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Page
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Summary.................................................................. 4
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 22
Dividend Policy.......................................................... 22
Capitalization........................................................... 23
Dilution................................................................. 24
Selected Financial Data.................................................. 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 26
Business................................................................. 33
Management............................................................... 46
Transactions with Directors, Officers and 5% Stockholders................ 52
Principal Stockholders................................................... 54
Description of Capital Stock............................................. 56
Shares Eligible for Future Sale.......................................... 59
Underwriting............................................................. 61
Legal Matters............................................................ 63
Change in Independent Accountants........................................ 64
Experts.................................................................. 64
Where You May Find Additional Information................................ 64
Index to Financial Statements............................................ F-1
</TABLE>
----------------
iGo, Solutions for People on the Go, and iGo's logo are our trademarks and
are pending registration in certain jurisdictions. This prospectus also
contains brand names, logos, servicemarks and trademarks of other companies.
Road Warrior is a registered trademark of Road Warrior International, Inc., and
is used by permission.
3
<PAGE>
SUMMARY
Because this is only a summary, it does not contain all of the information
that may be important to you. You should read the entire prospectus, including
"Risk Factors" and the financial statements and notes, before deciding to
invest in shares of common stock.
iGo Corporation
iGo is a leading provider of hard-to-find, model-specific accessories and
services for mobile electronic devices. Through our iGo.com website and
customer solutions representatives, we enable businesses and individual
consumers to efficiently identify, locate and purchase these products and
services. Our proprietary relational databases of over 6,500 products from more
than 350 suppliers, combined with our comprehensive industry knowledge and
service expertise, create a valuable one-stop solution for our customers. We
believe that our unique business model offers significant benefits to mobile
device manufacturers, business enterprises, mobile professionals and other
people on the go.
We provide a compelling electronic commerce solution for the highly
fragmented portable computing and mobile communications marketplace by
utilizing the convenience and functionality of the Internet. Our business
combines the following key elements:
. our proprietary product, supplier and compatibility databases;
. our use of search technology to simplify the ordering process;
. our capability to rapidly ship business-critical orders;
. our focus on a high repeat purchase and replacement market; and
. our ability to offer customized solutions for corporate customers.
As a result of these factors, we have rapidly grown our net revenues and our
customer database, maintained high gross margins and established a leading
online destination to serve our market. From 1995 to 1998, our net revenues
increased at an annual growth rate of more than 90%. Our gross margins grew
from 32% for the six months ended June 30, 1998 to 35% for the six months ended
June 30, 1999. Our customer database includes profiles of over 525,000 mobile
users and detailed transaction histories on over 150,000 buyers. Approximately
50% of the Fortune 500 have purchased products or services from us. In
addition, we have developed strategic relationships with key business partners
such as Ariba, Motorola and NEC.
Mobile Product Marketplace
The use of portable computers and mobile communications devices has grown
rapidly due to infrastructure and hardware improvements, which have simplified
use, increased portability and reduced equipment and cellular airtime cost.
Busy professionals and other time-constrained people are increasingly
incorporating these devices into their daily lives. As a result, businesses and
individuals are willing to spend more on mobile electronic devices, accessories
and services to increase productivity and add flexibility.
4
<PAGE>
The Internet has become an attractive channel to reach users of laptops,
cellular phones, personal digital assistants and other mobile electronic
devices. This is primarily due to the broad reach of the Internet, its useful
search functionality and the substantial demographic overlap between mobile
product users and Internet users. The marketplace for mobile devices,
accessories and batteries is not well served by traditional channels, which
include mobile device manufacturers, traditional retailers and large mail-order
companies, who are typically more focused on selling the newest "big ticket"
products such as desktop computers, laptops and printers. Most mobile
accessories and batteries are brand and model-specific and this lack of
standardization creates a complex customer service problem that cannot easily
be solved by traditional industry participants. Moreover, unlike the personal
computer, book and music markets, there is no major distributor that carries
even a fraction of the products needed to provide a comprehensive solution for
the mobile product marketplace.
Our Strategy
Our mission is to provide solutions that give people freedom and flexibility
over their lives and increase their business productivity. Our strategy is to
continue to offer a comprehensive Internet-based solution that provides
significant benefits to all participants in the mobile product marketplace,
including manufacturers, business enterprises, mobile professionals and other
people on the go. Our goal is to be the leading one-stop solution for the
mobile product marketplace, and to reach this goal, we plan to:
. aggressively build the iGo brand;
. improve the iGo.com shopping experience;
. enhance our proprietary databases;
. focus on the corporate market;
. pursue international opportunities; and
. pursue strategic acquisitions and alliances.
Corporate Information
In March 1993 we were incorporated under the name Battery Express, Inc. and
currently do business as iGo Corporation. We will reincorporate in Delaware
under the name iGo Corporation prior to the consummation of this offering. Our
principal executive offices are located at 2301 Robb Drive, Reno, Nevada 89523,
and our telephone number is (775) 746-6140. Information contained on our
website at www.iGo.com does not constitute part of this prospectus.
5
<PAGE>
The Offering
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Common stock offered by iGo........................... shares
Common stock to be outstanding after the offering..... shares
Use of proceeds....................................... We intend to use the net
proceeds for investment
in marketing and
promotion, and general
corporate purposes,
including working
capital and capital
expenditures, as well as
possible strategic
acquisitions or
investments.
Proposed Nasdaq National Market symbol................ IGOC
</TABLE>
Except as otherwise noted, all information in this prospectus:
. reflects the conversion of all outstanding shares of preferred stock into
shares of common stock at the closing of this offering;
. does not take into account the possible issuance of additional shares of
common stock to the underwriters pursuant to their right to purchase
additional shares to cover over-allotments; and
. reflects the reincorporation of our company into Delaware.
6
<PAGE>
Summary Financial Data
(in thousands, except per share data)
The statements of operations data for the years ended December 31, 1996, 1997
and 1998 are derived from our audited financial statements. The statements of
operations data for the six-month periods ended June 30, 1998 and 1999 and the
balance sheet data as of June 30, 1999 are derived from unaudited interim
financial statements not included in this prospectus. The summary financial
data should be read in conjunction with our financial statements and the
related notes included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Six-Month
Periods Ended
Years Ended December 31, June 30,
---------------------------------- ----------------
1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- -------
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Statement of Operations
Data:
Revenues:
Net product revenue.... $ 1,790 $ 4,508 $ 7,422 $12,318 $ 5,779 $ 7,718
Development revenue.... -- -- 665 502 502 --
------- ------- ------- ------- ------- -------
Total net revenues.... 1,790 4,508 8,087 12,820 6,281 7,718
Gross profit............ 575 1,531 2,767 4,218 2,006 2,705
Total operating
expenses............... 730 1,588 3,674 6,060 2,879 6,323
Loss from operations.... (155) (57) (907) (1,842) (873) (3,618)
Net loss attributable to
common stockholders.... $ (157) $ (116) $(1,026) $(2,133) $ (981) $(4,156)
Net loss per share--
basic and diluted...... $ (0.17) $ (0.13) $ (1.11) $ (2.13) $ (0.99) $ (3.93)
Weighted-average shares
outstanding............ 900 900 924 1,000 990 1,058
</TABLE>
The following table presents summary balance sheet data at June 30, 1999; pro
forma to reflect the sale of our Series C preferred stock in July 1999, the
incurrence of $1.2 million of subordinated convertible debt in August 1999 and
the issuance of common stock upon exercise of a warrant in July 1999; and pro
forma as adjusted for the assumed conversion of $980,000 of the subordinated
debt into Series C preferred stock prior to this offering, the conversion of
all of our preferred stock into 1,273,842 shares of common stock upon the
closing of this offering, and the sale of shares of our common stock
in this offering at an assumed initial public offering price of $ per
share and the application of the net proceeds after deducting the estimated
underwriting discounts and commissions and estimated offering expenses. See
"Use of Proceeds" and "Capitalization."
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June 30, 1999
------------------------------
Pro Pro Forma
Actual Forma As Adjusted
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Balance Sheet Data:
Cash and cash
equivalents............ $ -- $ 6,935 $
Working capital......... (43) 6,892
Total assets............ 5,138 12,073
Long-term portion of
capital lease
obligations............ 641 1,808
Mandatory redeemable
preferred stock........ 8,216 13,966
Total stockholders'
equity (deficit)....... (7,496) (7,478)
</TABLE>
7
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be harmed, the value of our
stock could decline and you may lose part or all of your investment.
Risks Related To Our Business
We have a limited operating history on which to evaluate our potential for
future success
We were incorporated in 1993 and did not begin to generate meaningful
revenues until 1995. Accordingly, we have only a limited operating history upon
which you can evaluate our business and prospects. You must consider the risks
and uncertainties frequently encountered by growth stage companies in new and
rapidly evolving markets, such as electronic commerce. These risks include our
ability to continue to:
. sustain historical growth rates;
. implement our business model;
. attract new customers, retain existing customers and maintain customer
satisfaction;
. maintain our gross margins in the event of price competition or rising
wholesale prices;
. minimize technical difficulties and system downtime;
. manage distribution of our direct marketing materials; and
. attract, train and retain employees.
If we are unsuccessful in addressing these risks and uncertainties, our
business, financial condition and results of operations will be harmed.
We have a history of losses and we expect losses for the foreseeable future
Since our inception in 1993, we have incurred significant net losses,
resulting primarily from costs related to developing our relational databases,
establishing our brand, building our customer contact center, developing
relationships with suppliers and attracting users to our website. At June 30,
1999, we had an accumulated deficit of approximately $7.7 million. Although we
have experienced an increase in net product revenue each period, this growth
may not be sustainable. Because of our plans to invest heavily in marketing and
promotion, hire additional employees and enhance our website and operating
infrastructure, we expect to incur increasing sales and marketing and general
and administrative expenses. As a result, we will need to generate
significantly higher revenues to achieve and maintain profitability, although
we may be unable to do so. If our revenue growth is slower than we anticipate
or our operating expenses exceed our expectations, our losses will be
significantly greater.
8
<PAGE>
Our stock price may be adversely affected by significant fluctuations in our
quarterly operating results
Our revenues for the foreseeable future will remain primarily dependent on
sales of mobile electronic devices, accessories, batteries and services through
our website and our customer contact center. We cannot forecast with any degree
of certainty the extent of our sales of these products or services. We expect
our operating results could fluctuate significantly from quarter to quarter as
a result of various factors including:
. our ability to attract new and repeat visitors to our website and convert
them into customers;
. the level of merchandise returns we experience;
. changes and seasonal fluctuations in the buying patterns of our
customers;
. our inability to obtain adequate supplies of high-demand products;
. unanticipated cost increases or delays in shipping, transaction
processing, or production and distribution of our direct marketing
materials;
. unanticipated delays with respect to product introductions; and
. the costs, timing and impact of our marketing and promotional
initiatives.
Because of these and other factors, we believe that quarter to quarter
comparisons of our results of operations are not good indicators of our future
performance. If our operating results fall below the expectations of securities
analysts and investors in some future periods, our stock price will likely
decline. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Quarterly Results of Operations" for more information on
our quarterly operating results.
Establishing the iGo brand is critical to our success
We recently launched our new iGo brand and with a portion of the proceeds of
this offering we plan to implement aggressive traditional and online marketing
programs to promote our brand in order to attract an increasing number of
visitors to our website. We believe that strengthening the iGo brand will be
critical to the success of our business. We cannot be certain that our brand
will attract new customers or retain existing customers. Additionally, our new
iGo brand may cause confusion to current and potential customers, or may
disrupt our business, either of which could harm our business, financial
condition and results of operations.
If we fail to manage expansion effectively, our business and prospects could be
seriously harmed
Our ability to execute our business model in a rapidly evolving market
requires an effective planning and management process. At December 31, 1998, we
had a total of 59 employees and at June 30, 1999, we had a total of 92
employees. We plan to continue to hire additional employees and to expand our
warehouse facilities. This growth has placed, and our anticipated growth will
continue to place, a significant strain on our management systems and
resources. To manage our growth, we must implement operational and financial
systems and controls, and recruit, train and retain new employees. Some key
members of our management team have recently been hired. These individuals have
had little experience working in our organization. We cannot be certain that we
will be able to integrate new executives or other employees into our
organization effectively. In addition, there will be significant administrative
burdens placed on our management team as a result of our status as a public
company. If we do not manage growth effectively, our business, financial
condition and results of operations could be harmed.
9
<PAGE>
We depend on our key personnel to manage our business and we may not be able to
hire enough additional management and other personnel as our business grows
Our performance is substantially dependent on the continued services and on
the performance of our executive officers and other key employees, particularly
Ken Hawk, our Chief Executive Officer. The loss of the services of any of our
executive officers could harm our business. Additionally, we will need to
attract, retain and motivate talented management and other highly skilled
employees to be successful. In particular, competition for employees that
possess knowledge of the Internet industry is intense. We may be unable to
retain our key employees or attract, assimilate and retain other highly
qualified employees in the future, which could harm our business, financial
condition and results of operations.
Competition may decrease our market share, net revenues and gross margins and
may cause our stock price to decline
The portable computing and mobile communications market is highly fragmented.
In addition, the electronic commerce market in which we operate is new, rapidly
evolving and highly competitive. We believe no single competitor competes
directly with us with respect to all of the products and services we offer;
however, we currently or potentially compete with a variety of companies in the
sale of products in specific categories, including:
. mobile products suppliers such as Targus;
. mass merchant retailers such as Circuit City and CompUSA;
. direct marketers such as Buy.com, Insight and Microwarehouse; and
. traditional mobile device manufacturers such as Fujitsu and Toshiba.
Many of these current and potential competitors may have the ability to
devote substantially more resources to marketing, and systems and website
development than we do. In addition, larger and more well-financed entities may
acquire, invest in or form joint ventures with our competitors. Some of our
competitors may be able to secure products from suppliers on more favorable
terms, fulfill customer orders more efficiently and adopt more aggressive
pricing or inventory availability policies then we can. Finally, new
technologies and the expansion of existing technologies, such as price
comparison programs that search for products from a variety of websites, may
direct customers to other online merchants.
The loss of our proprietary databases would seriously harm our business
Our proprietary databases are a key competitive advantage. If we fail to keep
these databases current or if the proprietary customer, product, supplier and
compatibility information contained in these databases is damaged or destroyed,
our business would be seriously harmed and our stock price would decline.
10
<PAGE>
The failure to successfully grow, manage and use our database of customers and
users would harm our business
We intend to continually expand our database of customers, potential
customers and website registrants to more effectively create targeted direct
marketing offers. We seek to expand our customer database by using information
we collect through our website and our customer contact center as well as from
purchased or rented lists. We must also continually develop and refine our
techniques for segmenting this information to maximize its usefulness. If we
are unable to expand our customer database or if we fail to utilize this
information successfully, our business model may not be successful. In
addition, if federal or state governments enact privacy legislation resulting
in the increased regulation of mailing lists, we could experience increased
costs in complying with potentially burdensome regulations concerning the
solicitation of consents to keep or add customer names to our mailing lists.
See "Business--Government Regulation."
Failure of our strategic relationships to attract customers could harm our
business
We intend to continue to establish, leverage and grow key strategic
relationships with manufacturers, suppliers and electronic commerce partners to
enable us to collect crucial product-specific information, ensure access to
adequate product supply and acquire new customers. For example, we recently
entered into a strategic relationship with the NEC Computer Systems Division,
or NEC, that provides us with priority access to new products and gives us the
ability to offer a more integrated electronic commerce solution for
enterprises. In addition, we plan to establish additional online partnerships
that create direct online links from other websites and from the portable
computing and mobile communications areas of major Internet portals. For
example, we recently launched our online affiliate program. We cannot be
certain that any of these strategic relationships or partnerships will be
successful in attracting new customers. If these programs fail to attract
additional customers, our business, financial condition and results of
operations could be harmed.
We must effectively manage our vendors to minimize inventory risk and maintain
our gross margins
In order to fulfill our orders, we depend upon our vendors to produce
sufficient quantities of products according to schedule. We may maintain high
inventory levels in some categories of merchandise in an effort to ensure that
these products are available to our customers. This may expose us to risks of
excess inventory and outdated merchandise, which could harm our business. If we
underestimate customer demand, we may disappoint customers who may purchase
from our competitors. We also negotiate with our vendors to get the best
quality available at the best prices in order to maintain and increase our
gross margins. Our failure to be able to manage our vendors effectively would
harm our operating results.
Failure of third party suppliers to ship products directly to our customers
could harm our business
For the six months ended June 30, 1999, approximately 15% of our net revenues
were from products shipped to our customers directly from our suppliers. The
failure of these suppliers to continue to ship products directly to our
customers or to ship products to our customers in a timely manner could result
in lost revenues, delays in customer acceptance of our solution and damage to
our reputation. In addition, if we could not depend on these suppliers to ship
products to our customers directly, we would have to carry the products in our
inventory, which would expose us to
11
<PAGE>
risks of excess inventory, outdated merchandise and increased warehouse costs,
all of which could harm our business.
Failure of third-party carriers to deliver our products on a timely and
consistent basis could harm our business
Our supply and distribution system is primarily dependent upon our
relationships with United Parcel Service, Federal Express and Airborne
Express. We ship substantially all of our orders with these carriers. Because
we do not have written agreements with these carriers that guarantee continued
service, we cannot be sure that our relationships with these carriers will
continue on terms favorable to us, or at all. If our relationship with one or
more of these carriers is terminated or impaired, or if one or more of these
carriers is unable to ship products for us, whether through labor shortage,
slow down or stoppage, deteriorating financial or business conditions or for
any other reason, we would be required to rely on the other carriers. These
carriers may not be able to accommodate the increased shipping volume, in
which case we may be required to use alternative carriers, with whom we may
have no prior business relationship, for the shipment of products to our
customers. We may be unable to engage an alternative carrier on a timely basis
or upon terms favorable to us. Changing carriers would likely harm our
business, financial condition and results of operations. Potential adverse
consequences include:
. reduced package tracking information;
. delays in order processing and product delivery;
. increased delivery costs, resulting in reduced gross margins; and
. reduced shipment quality, which may result in damaged products and
customer dissatisfaction.
We may not be able to protect and enforce our trademarks, Internet addresses
and intellectual property rights
We seek to protect our brand and our other intellectual property through a
combination of copyright, trade secret and trademark laws. Our iGo brand and
our Internet address, www.iGo.com, are important components of our business
strategy. We have filed federal trademark applications for "iGo" and
"iGo.com," among other trademark applications. We cannot guarantee that any of
these trademark applications will be granted. In July 1999, the United States
Patent and Trademark Office, or PTO, preliminarily declined registration of
"iGo" and "iGo.com" when used in connection with our services. We have had
telephonic discussions of this matter with the PTO and plan to formally
respond to the PTO's preliminary denial of registration. We believe it is
likely that the "iGo" and "iGo.com" marks will ultimately be accepted for
registration by the PTO. However, we cannot guarantee that we will be able to
secure registration of these marks. If we are unable to secure registration of
these marks and unable to make any alternative arrangements for their use, we
may be required to stop using these marks. This could cause confusion to our
customers and harm our business, financial condition and results of
operations. In addition, this could cause confusion to potential investors,
which could cause the price of our common stock to decline.
In addition, we currently hold various Internet domain names, including
iGo.com. The acquisition and maintenance of domain names generally is
regulated by Internet regulatory bodies. The regulation of domain names in the
United States and in foreign countries is subject to change. Governing bodies
may establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. As a result,
we may be unable to acquire or maintain
12
<PAGE>
relevant domain names in all countries in which we conduct business.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights continues to evolve.
Therefore, we may be unable to prevent third parties from acquiring domain
names that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights. See "Business--Intellectual Property."
The loss of our current toll-free telephone number and associated rights could
harm our business
On July 19, 1999, the company from whom we purchased the rights to the
1-800-Batteries toll-free telephone number and name gave us notice that they
believe we have failed to cure a material breach of our agreement with them.
The notice also stated that they are terminating their agreement with us and
demanding a return of their rights as well as unspecified monetary damages. At
the same time, they made a demand for arbitration of the matter with the
American Arbitration Association in Richmond, Virginia. We have not yet
responded to such demand. After a review of our actions with respect to our
agreement with them, we believe that we have not materially breached the
agreement. Accordingly, we consider our agreement with them to be in full force
and effect and intend to defend our position vigorously in any applicable
arbitration proceedings. While we believe that we will ultimately prevail in
this dispute, many of our customers may rely on the 1-800-Batteries phone
number to reach our customer solutions representatives and to the extent that
the arbitrator disagrees with our position and allows this agreement to
terminate, we could be harmed, although it is difficult to estimate the extent
or materiality of such harm. See "Business--Legal Proceedings."
We may be vulnerable to new tax obligations that could be imposed on electronic
commerce transactions
We do not expect to collect sales or other similar taxes or goods shipped
into most states. However, one or more states or the federal government may
seek to impose sales tax collection obligations on out-of-state companies, such
as ours, which engage in or facilitate electronic commerce. A number of
proposals have been made at the state and local levels that would impose
additional taxes on the sale of goods and services through the Internet. These
proposals, if adopted, could substantially impair the growth of electronic
commerce and cause purchasing through our website to be less attractive to
customers. In October 1998, the United States Congress passed legislation
limiting for three years the ability of the states to impose taxes on Internet-
based transactions. Failure to renew this legislation could result in the
imposition by various states of taxes on electronic commerce. Further, states
have attempted to impose sales tax collection obligations on direct marketing
sales from businesses such as ours. A successful assertion by one or more
states that we should have collected or be collecting sales taxes on the sale
of products could harm our business.
If we expand our business internationally, our business would become
increasingly susceptible to numerous international risks and challenges that
could affect our results of operations
Although we have not had meaningful international revenues to date, we intend
to increase our international sales efforts. International sales are subject to
inherent risks and challenges that could affect our results of operations,
including:
. the need to develop new supplier relationships;
. unexpected changes in international regulatory requirements and tariffs;
13
<PAGE>
. difficulties in staffing and managing foreign operations;
. potential adverse tax consequences;
. price controls or other restrictions on, or fluctuations in, foreign
currency; and
. difficulties in obtaining export and import licenses.
To the extent we generate international sales in the future, any negative
effects on our international business could harm our business, financial
condition and results of operations as a whole. In particular, gains and losses
on the conversion of foreign payments into U.S. dollars may contribute to
fluctuations in our results of operations, and fluctuating exchange rates could
cause reduced revenues and gross margins from dollar-denominated international
sales.
Any acquisitions we make could disrupt our business and harm our financial
condition
While we have no current agreements or negotiations underway, we may invest
in or buy complementary businesses, products or technologies in the future. In
the event of any investments or purchases, we could:
. issue stock that would dilute the percentage ownership of our current
stockholders;
. incur debt;
. assume liabilities;
. incur amortization expenses related to goodwill and other intangible
assets; or
. incur large and immediate write-offs.
These acquisitions also involve numerous operational risks, including:
. problems combining the purchased operations, products or technologies;
. unanticipated costs;
. diversion of management's attention from our core business;
. adverse effects on existing business relationships with suppliers and
customers;
. risks associated with entering markets in which we have no or limited
prior experience; and
. potential loss of key employees, particularly those of the purchased
organizations.
We cannot assure you that we will be able to successfully integrate any
businesses, products or technologies that we might acquire in the future.
The loss of technologies licensed from third parties could harm our business
We rely to a material extent on technology developed and licensed from third
parties. The loss of existing technology licenses could harm the performance of
our existing services until equivalent technology can be identified, obtained
and integrated. Failure to obtain new technology licenses may result in delays
or reductions in the introduction of new features, functions or services, which
would harm our business.
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<PAGE>
We would lose revenues and incur significant costs if our systems or those of
material third-parties are not Year 2000 compliant
The Year 2000 computer problem refers to the potential for system and
processing failures of date-related data as a result of computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may recognize a
date represented as "00" as the Year 1900 rather than the Year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
The failure of our internal systems, or any material third-party systems, to
be Year 2000 compliant could harm our business, financial condition and results
of operations. We have obtained assurances from a substantial number of our
suppliers that their systems or products are or will be Year 2000 compliant. We
have reviewed the Year 2000 readiness disclosures of our major suppliers and
service providers.
To date, we have not incurred any material costs in identifying or evaluating
Year 2000 compliance issues. However, we may fail to discover Year 2000
compliance problems in our systems that will require substantial revisions or
replacements. In the event that the fulfillment and operational facilities that
support our business, or our web-hosting facilities, are not Year 2000
compliant, portions of our website may become unavailable and we would be
unable to deliver services to our customers. In addition, there can be no
assurance that third-party software, hardware or services incorporated into our
internal systems will not need to be revised or replaced, which could be time-
consuming and expensive. Our inability to fix or replace third-party software,
hardware or services on a timely basis could result in lost revenues, increased
operating costs and other business interruptions, any of which could harm our
business, financial condition and results of operations. Moreover, the failure
to adequately address Year 2000 compliance issues in our software, hardware or
systems could result in claims of mismanagement, misrepresentation or breach of
contract and related litigation, which could be costly and time-consuming to
defend.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by these entities
to be Year 2000 compliant could result in a systemic failure beyond our
control, including, for example, a prolonged Internet, telecommunications or
electrical failure, which could also prevent us from delivering our services to
our users, decrease the use of the Internet or prevent users from accessing our
services, any of which would harm our business, financial condition and results
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000 Compliance."
Our business, financial condition and results of operations could be harmed if
we were to be liable for defects in the products we offer
We may be subject to product liability claims for the products we sell. While
we believe that our product liability coverage is currently adequate, our
coverage is limited, and we can provide no assurance that the insurance can be
maintained in the future at a reasonable cost or in amounts sufficient to
protect us against losses due to liability. A successful liability claim
brought against us in excess of relevant insurance coverage could harm our
business, financial condition and results of operations.
15
<PAGE>
Damage to or destruction of our warehouse could result in loss of our
inventory, which could harm our business, financial condition and results of
operations
If all or most of the inventory in our warehouse were damaged or destroyed,
we might be unable to replace the inventory in a timely manner and, as a
result, be unable to process orders in a timely manner or at all. Approximately
85% of the products we sell come from the inventory in our warehouse. We cannot
be certain that we would be able to replace the inventory as quickly as our
customer orders demand, which may result in the loss of revenue, which would
harm our business, financial condition and results of operations.
Risks Related To The Internet Industry
We are dependent on the continued development of the Internet infrastructure
Our industry is new and rapidly evolving. Our business would be harmed if
Internet usage does not continue to grow. Internet usage may be inhibited for a
number of reasons, including:
. inadequate Internet infrastructure;
. inconsistent quality of service; and
. unavailability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth, or its performance and
reliability may decline. In addition, websites, including ours, have
experienced a variety of interruptions in their service as a result of outages
and other delays occurring throughout the Internet network infrastructure. If
these outages or delays occur frequently in the future, Internet usage,
including usage of our website, could grow more slowly or decline.
Our long-term success depends on the development of the electronic commerce
market, which is uncertain
Our future revenues substantially depend upon the widespread acceptance and
use of the Internet as an effective medium of commerce by consumers. Demand for
recently introduced products and services over the Internet is subject to a
high level of uncertainty. The development of the Internet as a viable
commercial marketplace is subject to a number of risks. For example, electronic
commerce is at an early stage and potential customers may be unwilling to shift
their purchasing from traditional vendors to online vendors. In addition,
insufficient availability of or changes in telecommunications services could
result in slower response times, which could delay the acceptance of the
Internet as an effective commerce medium.
Rapid technological change could render our websites and systems obsolete and
require significant capital expenditures
The Internet and the electronic commerce industry are characterized by rapid
technological change, sudden changes in user and customer requirements and
preferences, frequent new product and service introductions incorporating new
technologies and the emergence of new industry standards and practices that
could render our existing website and transaction processing systems obsolete.
The emerging nature of these products and services and their rapid evolution
will require that we continually improve the performance, features and
reliability of our online services, particularly in response to competitive
offerings. Our success will depend, in part, on our ability:
. to enhance our existing products and services; and
. to respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
16
<PAGE>
The development of websites and other proprietary technology entails
significant technical and business risks and requires substantial expenditures
and lead time. We may be unable to use new technologies effectively or adapt
our website, proprietary technology and transaction-processing systems to
customer requirements or emerging industry standards. Updating our technology
internally and licensing new technology from third parties may require
significant additional capital expenditures and could affect our results of
operations.
We are exposed to risks associated with electronic commerce security and credit
card fraud, which may reduce collections and discourage online transactions
Consumer concerns about privacy or the security of transactions conducted on
the Internet may inhibit the growth of the Internet and electronic commerce. To
securely transmit confidential information, such as customer credit card
numbers, we rely on encryption and authentication technology that we license
from third parties. We cannot predict whether the algorithms we use to protect
customer transaction data will be compromised. Furthermore, our servers may be
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions. We may need to expend significant additional capital and other
resources to protect against a security breach or to alleviate problems caused
by any security breaches. The measures we take to protect against security
breaches may not be successful. Our failure to prevent security breaches could
harm our business.
To date, we have suffered minor losses as a result of orders placed with
fraudulent credit card data even though the associated financial institution
approved payment of the orders in each case. Under current credit card
practices, a merchant is liable for fraudulent credit card transactions where,
as is the case with the transactions we process, that merchant does not obtain
a cardholder's signature. A failure to adequately control fraudulent credit
card transactions could reduce our revenues and harm our business.
We could face liability for information displayed on and communications through
our website
We may be subject to claims for defamation, negligence, copyright or
trademark infringement or other claims relating to the information we publish
on our website. These types of claims have been brought, sometimes
successfully, against Internet companies as well as print publications in the
past. We also utilize email as a marketing medium, which may subject us to
potential risks, such as:
. liabilities or claims resulting from unsolicited email;
. lost or misdirected messages; or
. illegal or fraudulent use of email.
These claims could result in substantial costs and a diversion of our
management's attention and resources, which could harm our business.
Efforts to regulate or eliminate the use of mechanisms which automatically
collect information on users of our website may interfere with our ability to
target our marketing efforts
Websites typically place a small tracking program on a user's hard drive
without the user's knowledge or consent. These programs automatically collect
data about any visits that a user makes to various websites. Website operators
use these mechanisms for a variety of purposes, including the collection of
data derived from users' Internet activity. Most currently available Internet
browsers
17
<PAGE>
allow users to elect to remove these tracking programs at any time or to
prevent this information from being stored on their hard drive. In addition,
some commentators, privacy advocates and governmental bodies have suggested
limiting or eliminating the use of these tracking mechanisms. Any reduction or
limitation in the use of this software could limit the effectiveness of our
sales and marketing efforts.
We could face additional burdens associated with government regulation of and
legal uncertainties surrounding the Internet
New Internet legislation or regulation or the application of existing laws
and regulations to the Internet and electronic commerce could harm our
business, financial condition and results of operations. We are subject to
regulations applicable to businesses generally and laws or regulations directly
applicable to communications over the Internet and access to electronic
commerce. Although there are currently few laws and regulations directly
applicable to electronic commerce, it is possible that a number of laws and
regulations may be adopted with respect to the Internet covering issues such as
user privacy, pricing, content, copyrights, distribution, antitrust, taxation
and characteristics and quality of products and services. For example, the
United States Congress recently enacted Internet laws regarding children's
privacy, copyrights and transmission of sexually explicit material. In
addition, the European Union recently enacted its own Internet privacy
regulations. Furthermore, the growth and development of the market for
electronic commerce may prompt calls for more stringent consumer protection
laws that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations regarding the
Internet may decrease the growth of the Internet or electronic commerce, which
could, in turn, decrease the demand for our products and services and increase
our cost of doing business. In addition, if we were alleged to have violated
federal, state or foreign civil or criminal law, we could be subject to
liability, and even if we could successfully defend such claims, they may
involve significant legal compliance and litigation costs. See "Business--
Government Regulation."
Risks Related To This Offering
Management may apply the proceeds of this offering to uses that do not improve
our results of operations or increase our market value
Our management will have considerable discretion in the application of the
net proceeds, and you will not have the opportunity, as part of your investment
decision, to assess whether the proceeds are being used appropriately. The net
proceeds may be used for corporate purposes that do not increase our results of
operations or our market value. Pending application of the proceeds, they may
be placed in investments that do not produce income or that lose value. See
"Use of Proceeds."
There has been no prior market for our common stock and a public market for our
securities may not develop or be sustained
Prior to this offering, you could not buy or sell our common stock publicly.
An active public market for our common stock may not develop or be sustained
after this offering, and the market price might fall below the initial public
offering price. The initial public offering price may bear no relationship to
the price at which the common stock will trade upon completion of this
offering. The initial public offering price will be determined based on
negotiations between us and the representatives of the underwriters, based on
factors that may not be indicative of future market performance. See
"Underwriting."
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<PAGE>
Substantial sales of our common stock could cause our stock price to decline
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, in the
public market following this offering, then the market price of our common
stock could fall. Restrictions under the securities laws and lock-up agreements
limit the number of shares of common stock available for sale in the public
market. All holders of shares of common stock and the holders of warrants and
options exercisable into shares of common stock have agreed not to sell any of
these securities for 180 days after the effective date of the offering without
the prior written consent of BancBoston Robertson Stephens Inc. However,
BancBoston Robertson Stephens Inc. may, in its sole discretion, release all or
any portion of the securities subject to these lock-up agreements.
We may shortly file a registration statement to register all shares of common
stock under our stock option plan. After this registration statement is
effective and upon expiration or release of applicable lock-up restrictions,
shares issued upon exercise of stock options will be eligible for resale in the
public market without further restriction.
Because our officers and directors will own approximately % of the outstanding
common stock after this offering, you and other investors will have minimal
influence on stockholder decisions
We anticipate that the executive officers, directors and entities affiliated
with them will, in the aggregate, beneficially own approximately % of
our outstanding common stock following the completion of this offering. These
stockholders, if acting together, would be able to influence significantly all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions. As a result, these stockholders could approve or cause us to take
actions of which you disapprove or that are contrary to your interests and
those of other investors. See "Principal Stockholders."
Our growth and operating results would be impaired if we were unable to meet
our future capital requirements
We currently anticipate that the proceeds of this offering, together with our
existing cash balances and available credit will be sufficient to meet our
liquidity needs for at least the next 12 months. We expect that we will
continue to experience negative operating cash flow in the near term.
Accordingly, we may need to raise additional amounts of capital if our
estimates of revenues, working capital or capital expenditure requirements
change or prove inaccurate or in order for us to respond to unforeseen
technological or marketing hurdles or to take advantage of unanticipated
opportunities. Such funds may not be available at the time or times needed, or
available on terms acceptable to us. Raising funds by issuing equity securities
or convertible debt securities will dilute the percentage ownership of our
current stockholders, and any new securities we may issue may have rights
senior to the rights of our common stock. If adequate funds are not available,
or are not available on acceptable terms, our business could be harmed.
Anti-takeover provisions and our right to issue preferred stock could make a
third-party acquisition of us difficult
Prior to the consummation of this offering, we will reincorporate in and
become a Delaware corporation. Anti-takeover provisions of Delaware law could
make it more difficult for a third party to acquire control of us, even if the
change in control would be beneficial to our stockholders. Our certificate
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<PAGE>
of incorporation provides that our board of directors may issue preferred stock
without stockholder approval. The issuance of preferred stock could make it
more difficult for a third party to acquire us.
Our common stock price is likely to be highly volatile as is typical of
Internet-related companies
The market price of our common stock is likely to be highly volatile as is
the stock market in general, and the market for Internet-related companies in
particular. Investors may not be able to resell their shares of our common
stock following periods of volatility because of the market's adverse reaction
to volatility. The trading prices of the stock of many Internet-related
companies' stocks have reached historical highs during 1999 and have reflected
valuations substantially above historical levels. During the same period, the
market price of the stock of these companies has also been highly volatile. We
cannot assure you that our stock will trade at the same levels of other
Internet stocks, that Internet stocks in general will sustain their current
market prices or that our stock will sustain its initial public offering price.
Factors that could cause volatility may include, among other things:
. changes in financial estimates by securities analysts;
. any deviations in net revenues or in losses from levels expected by
securities analysts;
. conditions or trends in the Internet industry;
. changes in the market valuations of Internet-related companies;
. announcements by us or our competitors of new products or of significant
acquisitions, strategic partnerships or joint ventures;
. additions or departures of key personnel;
. future sales of common stock; and
. volume fluctuations, which are particularly common among highly volatile
securities of Internet-related companies.
We may be subject to litigation if our common stock price is volatile
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against the company. The institution of class action litigation
against us could result in substantial costs to us and a diversion of our
management's attention and resources which would harm our business, financial
condition and results of operations. Any adverse determination in this
litigation could also subject us to significant liabilities.
The purchasers in this offering will immediately experience substantial
dilution in net tangible book value
Because our common stock has been sold previously at prices substantially
less than the initial public offering price that you will pay, you will suffer
immediate and substantial dilution in pro forma net tangible book value. The
exercise of outstanding options and warrants may result in further dilution.
20
<PAGE>
This prospectus contains forward-looking statements that involve risks and
uncertainties
This prospectus contains forward-looking statements that relate to future
events or our future financial performance, which involve risks and
uncertainties. We use words such as "may," "will," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue" and similar expressions to identify forward-looking statements.
These statements are only predictions. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including the risk factors described above and
elsewhere in this prospectus.
21
<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of the shares of common stock in
the offering are estimated to be $ , assuming an initial public offering
price of $ per share and after deducting estimated underwriting discounts
and commissions and estimated offering expenses. If the underwriters' over-
allotment option is exercised in full, we estimate that our net proceeds will
be approximately $ million. The primary purposes of this offering are to
obtain additional capital, create a public market for our common stock and
facilitate further access to public markets. We intend to use the net proceeds
for investment in marketing and promotion, and general corporate purposes,
including working capital and capital expenditures, as well as possible
strategic acquisitions or investments. Although we may use a portion of the net
proceeds to acquire complementary businesses, products or technologies, we
currently have no commitments or agreements for any acquisitions or investments
and are not involved in negotiations regarding any acquisitions or investments.
Pending use of the net proceeds for the above purposes, we intend to invest the
net proceeds in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have not paid any cash dividends since inception and do not intend to pay
any cash dividends in the foreseeable future. In addition, the terms of our
credit agreement prohibit the payment of dividends on our capital stock.
22
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
. on an actual basis;
. on a pro forma basis to reflect the sale of our Series C preferred stock
in July 1999, the incurrence of $1.2 million of subordinated convertible
debt in August 1999 and the issuance of common stock upon exercise of a
warrant in July 1999; and
. on a pro forma basis as adjusted to reflect the assumed conversion of
$980,000 of the subordinated debt into Series C preferred stock prior to
this offering, the conversion upon the closing of the offering of all
outstanding shares of preferred stock into 1,273,842 shares of common
stock, and the sale of the common stock offered hereby at an assumed
initial public offering price of $ per share and the receipt of
the net proceeds therefrom, after deducting the estimated expenses and
underwriting discounts and commissions payable by iGo.
The outstanding share information excludes 160,063 shares of common stock
issuable on exercise of outstanding options as of June 30, 1999, with a
weighted-average exercise price of $1.11 per share, 9,438 shares of common
stock issuable upon exercise of outstanding warrants at a weighted-average
exercise price of $13.56 per share, and 323,396 shares of common stock, net of
outstanding options, available for future grant under our stock option plan as
of June 30, 1999. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and the notes to the financial statements. See "Use of
Proceeds" and "Management--Stock Plans."
<TABLE>
<CAPTION>
June 30, 1999
-----------------------------
Pro Pro Forma
Actual Forma As Adjusted
------- ------- -----------
(in thousands)
<S> <C> <C> <C>
Short-term debt and current portion of capital
lease obligations.............................. $ 676 $ 676 $ --
======= ======= =======
Long-term portion of debt and capital lease
obligations.................................... $ 641 $ 1,808 $
Mandatory redeemable preferred stock, no par
value, 1,120,450 shares authorized, 1,111,250
shares issued and outstanding, actual;
1,293,750 shares authorized, 1,253,012 shares
issued and outstanding pro forma; no shares
authorized, issued or outstanding, pro forma as
adjusted....................................... 8,216 13,966 --
Stockholders' equity (deficit):
Preferred stock, $0.001 par value, no shares
authorized, issued or outstanding, actual or
pro forma; 5,000,000 shares authorized, no
shares issued or outstanding, pro forma as
adjusted...................................... -- -- --
Common stock, no par value, 2,879,550 shares
authorized, 1,106,941 shares issued and
outstanding, actual; 8,706,250 shares
authorized, 1,113,691 shares issued and
outstanding, pro forma; $0.001 par value,
50,000,000 shares authorized, shares
issued and outstanding, pro forma
as adjusted................................... 108 126
Additional paid-in capital..................... 682 682
Receivable from stockholder.................... (48) (48)
Deferred compensation.......................... (585) (585)
Accumulated deficit............................ (7,653) (7,653)
------- ------- -------
Total stockholders' equity (deficit)............ (7,496) (7,478)
------- ------- -------
Total capitalization............................ $ 1,361 $ 8,295 $
======= ======= =======
</TABLE>
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<PAGE>
DILUTION
The pro forma net tangible book value of our common stock as of June 30,
1999, was approximately $7.3 million or $3.06 per share of common stock. Net
tangible book value per share represents the amount of stockholders' equity,
net of intangible assets of $174,000, divided by 2,387,533 shares of common
stock outstanding after giving effect to the sale of our Series C preferred
stock in July 1999, the issuance of $1.2 million of subordinated convertible
debt in August 1999 and assumed conversion of $980,000 of this debt into Series
C preferred stock prior to this offering, the issuance of common stock upon
exercise of a warrant in July 1997 and the conversion of all outstanding shares
of preferred stock into shares of common stock upon completion of this
offering.
Net tangible book value dilution per share to new investors represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering made hereby and the net tangible book value per share of
common stock immediately after completion of this offering. After giving effect
to our sale of shares of common stock in this offering at an assumed
initial offering price of $ per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses, our net
tangible book value as of June 30, 1999, would have been $ or $ per
share. This represents an immediate increase in net tangible book value of
$ per share to existing stockholders and an immediate dilution in net
tangible book value of $ per share to purchasers of common stock in this
offering, as illustrated in the following table:
<TABLE>
<S> <C>
Assumed initial public offering price per share...................... $
Pro forma net tangible book value per share as of June 30, 1999.....
Increase in pro forma net tangible book value per share attributable
to new investors...................................................
Pro forma net tangible book value per share after the offering.......
-----
Dilution per share to new investors.................................. $
=====
</TABLE>
The following table sets forth on a pro forma basis as of June 30, 1999,
after giving effect to the sale of our Series C preferred stock in July 1999,
the issuance of $1.2 million of subordinated convertible debt in August 1999
and assumed conversion of $980,000 of this debt into Series C preferred stock
prior to this offering, the issuance of common stock upon exercise of a warrant
in July 1997 and the conversion of all outstanding shares of preferred stock
into common stock upon completion of this offering, the differences between the
existing stockholders and the purchasers of shares in this offering, at the
assumed initial offering price of $ per share, with respect to the number
of shares purchased from us, the total consideration paid and the average price
paid per share:
<TABLE>
<CAPTION>
Shares Average
Purchased Total Consideration Price
-------------- ---------------------- Per
Number Percent Amount Percent Share
------ ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... % % $
New stockholders..............
--- --- --------- ---------
Total....................... 100% 100%
=== === ========= =========
</TABLE>
As of June 30, 1999, there were options outstanding to purchase a total of
160,063 shares of common stock at a weighted average exercise price of $1.11
per share. In addition, as of June 30, 1999, there were warrants outstanding to
purchase 9,438 shares of common stock (assuming the conversion of all preferred
stock into common stock) at a weighted average exercise price of approximately
$13.56 per share which are not expected to be exercised prior to the offering.
To the extent outstanding options or warrants are exercised, there will be
further dilution to new investors. See "Management--Stock Plans" and note 9 of
the notes to the financial statements.
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
financial statements and related notes to the financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The statements of operations data for the years ended December 31,
1996, 1997 and 1998 and the balance sheet data at December 31, 1997 and 1998
are derived from the Financial Statements included elsewhere in this prospectus
which have been audited by Deloitte & Touche LLP, independent auditors, as set
forth in their report appearing herein. The statements of operations data for
the years ended December 31, 1994 and 1995 and the six months ended June 30,
1998 and 1999 and the balance sheet data at December 31, 1994 and 1995 and June
30, 1999, actual and pro forma, are derived from unaudited financial statements
not included in this prospectus. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of financial condition, results of operations and cash flows have
been included. The pro forma balance sheet data at June 30, 1999 reflects the
sale of our Series C preferred stock in July 1999, the incurrence of $1.2
million of subordinated convertible debt in August 1999 and the issuance of
common stock upon exercise of a warrant in July 1999.
<TABLE>
<CAPTION>
Six-Month Periods
Years Ended December 31, Ended June 30,
---------------------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------- ------- ------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Net product revenue... $ 675 $1,790 $4,508 $ 7,422 $12,318 $ 5,779 $ 7,718
Development revenue... -- -- -- 665 502 502 --
------ ------ ------ ------- ------- ------- -------
Total net revenues.. 675 1,790 4,508 8,087 12,820 6,281 7,718
Cost of goods sold...... 448 1,215 2,977 5,320 8,602 4,275 5,013
------ ------ ------ ------- ------- ------- -------
Gross profit............ 227 575 1,531 2,767 4,218 2,006 2,705
Operating expenses:
Sales and marketing... 126 451 943 2,485 3,883 1,934 3,815
Product development... 48 33 87 113 511 160 712
General and
administrative....... 58 246 558 1,076 1,666 785 1,796
------ ------ ------ ------- ------- ------- -------
Total operating
expenses........... 232 730 1,588 3,674 6,060 2,879 6,323
------ ------ ------ ------- ------- ------- -------
Loss from operations.... (5) (155) (57) (907) (1,842) (873) (3,618)
Other income (expense),
net.................... (11) (2) 12 21 (44) (33) (211)
------ ------ ------ ------- ------- ------- -------
Net loss................ (16) (157) (45) (886) (1,886) (906) (3,829)
Preferred stock
dividends.............. -- -- (71) (140) (247) (75) (327)
------ ------ ------ ------- ------- ------- -------
Net loss attributable to
common stockholders.... $ (16) $ (157) $ (116) $(1,026) $(2,133) $ (981) $(4,156)
====== ====== ====== ======= ======= ======= =======
Net loss per share--
basic and diluted...... $(0.02) $(0.17) $(0.13) $ (1.11) $ (2.13) $ (0.99) $ (3.93)
====== ====== ====== ======= ======= ======= =======
Weighted-average shares
outstanding............ 900 900 900 924 1,000 990 1,058
====== ====== ====== ======= ======= ======= =======
<CAPTION>
December 31, June 30, 1999
---------------------------------------- ------------------
1994 1995 1996 1997 1998 Actual Pro Forma
------ ------ ------ ------- ------- ------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 29 $ 50 $1,012 $ -- $ 2,504 $ -- $ 6,935
Working capital......... 51 (218) 1,125 157 3,447 (43) 6,892
Total assets............ 187 330 1,886 2,384 5,536 5,138 12,073
Long-term portion of
capital lease
obligations............ -- -- -- 20 23 641 1,808
Mandatory redeemable
preferred stock........ -- -- 1,539 1,680 7,890 8,216 13,966
Total stockholders'
equity (deficit)....... (29) (172) (288) (1,314) (3,425) (7,496) (7,478)
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and the related Notes included elsewhere in this prospectus.
Overview
iGo is a leading provider of hard-to-find, model-specific accessories and
services for mobile electronic devices. We provide a one-stop solution for the
highly fragmented portable computing and mobile communications marketplace.
Through our website and customer solutions representatives, we enable
businesses and individual consumers to efficiently identify, locate and
purchase these mobile products and services.
We were incorporated in March 1993 and began offering products for sale later
that year, but did not generate meaningful revenues until 1995. For the period
from inception to 1995, our operating activities related primarily to the
development of our proprietary relational databases and to locating favorable
sources of supply. In 1995, we launched our first direct marketing campaign and
focused on building sales volume and fulfillment capabilities, and in 1996, we
launched our website. Since 1997, we have significantly increased the depth of
our management team to help implement our growth strategy. We have recently
expanded our senior management team to include a Vice President of Sales and
Marketing, Chief Information Officer, Vice President of Operations and Chief
Financial Officer. In June 1997, we relocated from San Jose, California to
Reno, Nevada to take advantage of lower operating costs for our customer
contact and fulfillment centers.
Revenues from sales of products and shipping fees are recognized at the time
the merchandise is shipped to customers, net of any discounts and reserves for
expected returns. The majority of orders are shipped the same day they are
received. To date, approximately 75% of customer purchases have been made with
credit cards. We generally receive payment from the credit card companies
within one to four business days after shipment of the product. We also extend
credit terms, typically net 30 days, to corporate accounts that we have
evaluated for creditworthiness. Inventory is carried at the lower of cost or
market. We use the first-in-first-out method to determine cost. Advertising and
promotional costs are expensed as incurred and are recorded net of any
cooperative advertising amounts we receive from our suppliers. This may produce
fluctuations in our quarterly results because revenues from direct mail
marketing are generally received over a two-month period.
We incurred net losses of $45,000 in 1996, $886,000 in 1997 and $1.9 million
in 1998. For the six months ended June 30, 1999, our net loss was $3.8 million.
At June 30, 1999, we had an accumulated deficit of approximately $7.7 million.
The net losses resulted from costs associated with marketing programs to
attract new customers, developing our website and proprietary relational
databases and the development of our operational infrastructure.
We plan to invest heavily in marketing and promotion, to hire additional
employees and to enhance our website and operating infrastructure, therefore we
expect to incur increasing sales and marketing, general and administrative and
product development expenses. As a result, we will need to generate
significantly higher revenues to achieve and maintain profitability, although
we may never be able to do so. If our revenue growth is slower than we
anticipate or our operating expenses exceed our expectations, our losses will
be significantly greater.
26
<PAGE>
Six Months Ended June 30, 1998 and 1999
Net Product Revenue. Net product revenue consists of product sales to
customers and outbound shipping charges, net of any discounts and reserves for
expected returns. Net product revenue increased from $5.8 million for the six
months ended June 30, 1998 to $7.7 million for the six months ended June 30,
1999. The increase in net product revenue reflects sales to new customers,
repeat purchases from existing customers and the overall growth in the
installed base of mobile devices requiring accessories and batteries.
Development Revenue. Development revenue represents sales of proprietary
products developed and manufactured for a specific customer. No product
development revenue was generated for the six months ended June 30, 1999, as
compared to $502,000 for the six months ended June 30, 1998. This decrease
reflects our strategy of focusing on the sale of products with broad appeal to
individuals and businesses rather than on proprietary products for a specific
customer's application. We do not anticipate generating significant development
revenue in the future.
Cost of Goods Sold. Cost of goods sold consists primarily of the cost of
products sold to customers, inbound shipping expense and outbound shipping
charges. Cost of goods sold increased from $4.3 million for the six months
ended June 30, 1998 to $5.0 million for the six months ended June 30, 1999. The
improvement in gross margin from 32% to 35% reflects improved sourcing and
purchasing capabilities and a shift to higher margin products in the overall
sales mix.
Sales and Marketing. Sales and marketing expenses consist primarily of
advertising costs, fulfillment expenses, credit card costs and the salary and
benefits of our sales, marketing and customer contact center personnel.
Advertising and promotional expenses include online marketing efforts, print
advertising, trade shows and direct marketing costs. Sales and marketing
expenses increased from $1.9 million for the six months ended June 30, 1998 to
$3.8 million for the six months ended June 30, 1999. The increase primarily
reflected an increase in advertising and promotional costs, including direct
campaigns to promote our website. Advertising and promotional expenses
increased from $1.1 million for the six months ended June 30, 1998 to $2.3
million for the six months ended June 30, 1999. All other sales and marketing
expenses consisting primarily of payroll expenses increased from $866,000 for
the six months ended June 30, 1998 to $1.5 million for the six months ended
June 30, 1999. We intend to continue to pursue an aggressive marketing strategy
to attract new customers. Therefore, we expect sales and marketing expenses to
increase significantly in absolute dollar terms in future periods.
Product Development. Product development expenses consist primarily of
payroll and related expenses for merchandising and website personnel, site
hosting fees and web content and design expenses. Product development expenses
increased from $160,000 for the six months ended June 30, 1998 to $712,000 for
the six months ended June 30, 1999. This increase is the result of expenses
incurred to improve our website interface, the introduction of new Internet-
based technology and the overall expansion of our mobile product offerings. We
intend to continue to build the infrastructure necessary to provide a high
level of service. Therefore, we expect product development expenses to
increase.
General and Administrative. General and administrative expenses consist of
salaries and related costs for our executive, administrative and finance
personnel, support services and professional fees, as well as general corporate
expenses such as rent and depreciation. General and administrative expenses
increased from $785,000 for the six months ended June 30, 1998 to $1.8 million
for the six months ended June 30, 1999. This increase was primarily
attributable to increased
27
<PAGE>
headcount as well as costs associated with the complete upgrade of our customer
contact database and finance systems including depreciation and service costs.
We upgraded these systems in January 1999 to increase functionality and to
provide for expected growth. In addition, for the six months ended June 30,
1999, we recorded $479,000 in deferred compensation for new option grants to
employees and directors and expensed $81,000, principally related to these
grants. This deferred compensation amount represents the difference between the
deemed fair value of the common stock and the exercise price at the time the
options were granted.
Other Income (Expense), Net. Other expense, net, consists primarily of net
interest income earned on cash and cash equivalents and loss resulting from
sale-leaseback transactions. Other expense, net, increased from $33,000 for the
six months ended June 30, 1998 to $211,000 for the six months ended June 30,
1999, primarily as a result of a $219,000 loss incurred on the sale and
leaseback of computer equipment and software, resulting from the system upgrade
in January 1999, partially offset by $32,000 in interest income for the period
ended June 30, 1999.
Fiscal Years Ended December 31, 1996, 1997 and 1998
Net Product Revenue. Net product revenue increased from $4.5 million in 1996
to $7.4 million in 1997 and to $12.3 million in 1998. The increase in net
product revenue reflects sales to new customers, repeat purchases from existing
customers and the overall growth in the installed base of mobile electronic
devices requiring accessories and batteries.
Development Revenue. In 1997, we received a contract from a major retailing
chain to develop a customized battery power and charging solution for mobile
cash register carts. These products were shipped between December 1997 and
February 1998. We do not anticipate generating significant development revenue
in the future.
Cost of Goods Sold. Cost of goods sold increased from $3.0 million in 1996 to
$5.3 million in 1997 and to $8.6 million in 1998 primarily as a result of
increased sales volume. In 1998, our gross margin decreased to 33% as a result
of a moderate shift in the sales mix to higher volume corporate accounts with
more aggressive multi-unit pricing.
Sales and Marketing. Sales and marketing expenses increased from $943,000 in
1996 to $2.5 million in 1997 and to $3.9 million in 1998. The overall increase
in sales and marketing expenses reflects expanded marketing efforts to attract
new customers and an increase in personnel to support our growing business.
Product Development. Product development expenses increased from $87,000 in
1996 to $113,000 in 1997 and to $511,000 in 1998. These increases were the
result of enhancements to our website to increase its functionality and ease of
use.
General and Administrative. General and administrative expenses increased
from $558,000 in 1996 to $1.1 million in 1997 and to $1.7 million in 1998. The
increase from 1996 to 1997 was primarily attributable to increased personnel.
The increase from 1997 to 1998 reflects additional personnel and costs related
to our relocation from San Jose, California to Reno, Nevada. During 1998, we
recorded total deferred stock compensation of $203,000 in connection with
option grants to employees and directors during the year. Of this total amount,
$15,000 was expensed during 1998 and included in general and administrative
expenses. The remaining $188,000 will be expensed on a straight-line basis over
the four-year vesting period of the options.
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<PAGE>
Other Income (Expense), Net. Other income, net, increased from $12,000 in
1996 to $21,000 in 1997 as a result of interest earned on the proceeds from our
Series A preferred stock offering in June 1996. In 1998, we incurred other
expense, net, of $44,000 on working capital advances under a revolving credit
facility through October 1998 offset by interest earned on the proceeds from
our Series B preferred stock offering in October 1998.
Income Taxes. As of December 31, 1998, we had net operating loss
carryforwards for federal income tax purposes of $2.8 million, which expire
beginning in 2011. We have provided a full valuation allowance on the deferred
tax asset because of uncertainty regarding its utilization. Changes in the
ownership of our common stock, as defined in the Internal Revenue Code of 1986,
as amended, may restrict our ability to realize the benefit of the
carryforwards. To date, we have not been required to make any federal income
tax payments.
Quarterly Results of Operations
The following table sets forth unaudited quarterly statements of operations
data for each of the six quarters in the period ended June 30, 1999. In the
opinion of management, this unaudited information has been prepared on the same
basis as the annual financial statements and includes all adjustments
(consisting only of normal recurring adjustments) necessary for the fair
presentation of our results of operations for those periods. This information
should be read in conjunction with the financial statements and related notes
appearing elsewhere in this prospectus. The results of operations for any
quarter are not necessarily indicative of the results of operations for any
future period.
<TABLE>
<CAPTION>
Three-Month Periods Ended
----------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30,
1998 1998 1998 1998 1999 1999
-------- -------- --------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net product revenue... $ 2,825 $ 2,954 $ 3,140 $ 3,399 $ 3,478 $ 4,240
Development revenue... 502 -- -- -- -- --
------- ------- ------- ------- ------- -------
Total net revenues.. 3,327 2,954 3,140 3,399 3,478 4,240
Cost of goods sold...... 2,273 2,002 2,079 2,248 2,274 2,739
------- ------- ------- ------- ------- -------
Gross profit............ 1,054 952 1,061 1,151 1,204 1,501
Operating expenses:
Sales and marketing... 758 1,176 939 1,010 2,033 1,782
Product development... 78 82 95 256 371 341
General and
administrative....... 373 412 409 472 741 1,055
------- ------- ------- ------- ------- -------
Total operating
expenses........... 1,209 1,670 1,443 1,738 3,145 3,178
------- ------- ------- ------- ------- -------
Loss from operations.... (155) (718) (382) (587) (1,941) (1,677)
Other income (expense),
net.................... (18) (15) (33) 22 21 (232)
------- ------- ------- ------- ------- -------
Net loss............ $ (173) $ (733) $ (415) $ (565) $(1,920) $(1,909)
======= ======= ======= ======= ======= =======
</TABLE>
Our net product revenue has increased successively each quarter as a result
of sales to new customers, repeat purchases by existing customers and overall
growth from the installed base of mobile electronic devices requiring
accessories and batteries. Gross margins have improved as we have found better
sources for products and leveraged our buying power. Our sales and marketing,
product development and general and administrative expenses have generally
increased as we have aggressively built our operational infrastructure and
marketed our solution to new customers. Our
29
<PAGE>
spending on marketing and promotional activities to attract new customers has
historically been influenced by our access to capital. For example, in the
third quarter of 1998 and the second quarter of 1999, the total amount spent on
sales and marketing declined compared to the preceding quarter. This also
impacts the comparability of our results of operations for the six quarters in
the period ended June 30, 1999.
We believe that we may experience seasonality in our business. Traditionally,
business-related purchases decline in the summer months and consumer purchasing
peaks in the fourth quarter. Internet usage also has seasonal patterns. Any
seasonality in our business may have been obscured due to our net product
revenue growth in each successive quarter, and the number of new customers
added each period. See "Risk Factors" for a discussion of other factors
affecting our quarterly results of operations.
Liquidity and Capital Resources
We have financed our operations primarily through the sale of preferred
stock, capital lease obligations and revolving credit facilities. As of June
30, 1999, we have received $7.4 million from the sale of preferred stock, net
of issuance costs. Of this amount, $1.4 million was received in June 1996 and
$6.0 million in October 1998. Proceeds from equipment financed under a sale-
leaseback transaction, net of principal repayments, amounted to $694,000 during
the six months ended June 30, 1999.
Net cash used in operating activities was $3.0 million for the six months
ended June 30, 1999, $2.5 million for the year ended December 31, 1998,
$798,000 for the year ended December 31, 1997 and $397,000 and for the year
ended December 31, 1996. Net cash used in operating activities consisted
primarily of net losses, as well as increased inventory balances in each of the
periods, partially offset by increased depreciation and reserve accounts.
Net cash used in investing activities was $774,000 for the six months ended
June 30, 1999. The majority of this amount was financed through sale-leaseback
transactions. The terms of the lease line provide a total facility of $2.0
million, of which $1.3 million was available at June 30, 1999 and requires
repayment over 30 to 36 months. Net cash used in investing activities was
$848,000 for the year ended December 31, 1998, $133,000 for the year ended
December 31, 1997 and $109,000 for the year ended December 31, 1996, and
reflects purchases of equipment commensurate with the overall growth of our
business. Net cash used in investing activities consists primarily of capital
expenditures for computers, software and office furniture, as well as costs to
acquire Internet domain names.
Net cash provided by financing activities was $1.3 million for the six months
ended June 30, 1999, $5.9 million for the year ended December 31, 1998 and $1.5
million for the year ended December 31, 1996. Cash provided by financing
activities reflected sales of preferred stock in 1996 and 1998 and equipment
leases and bank borrowings in 1999. Net cash used in financing activities was
$82,000 for the year ended December 31, 1997 and reflected the repayment of a
short-term note.
As of June 30, 1999, we had $583,000 outstanding under our line of credit
agreement that bears interest at 1.75% over prime (or 9.5% at June 30, 1999)
and expires on August 31, 1999. As of June 30, 1999, the aggregate obligation
under capital lease agreements was $734,000.
On July 30, 1999, we received gross proceeds of $5.8 million from the sale of
Series C preferred stock and entered into an agreement providing for up to an
additional $3.5 million of subordinated convertible debt of which $1.2 million
has been borrowed. The terms of the debt
30
<PAGE>
require interest-only payments for the first 12 months and interest and
principal repayments for the next 24 months. The conversion features allows the
debt holder to convert up to $980,000 of the outstanding principal to preferred
stock at a 15% premium over the price per share paid by the Series C investors.
We currently anticipate that the net proceeds of this offering, together with
our available funds, will be sufficient to meet our anticipated working capital
and capital expenditure needs for at least the next 12 months. We may need to
raise additional funds before the expiration of the 12 month period in the
event that we pursue strategic acquisitions or experience operating losses that
exceed our expectations. If we raise additional funds through the issuance of
equity securities or convertible debt securities, our existing stockholders may
experience significant dilution. Furthermore, additional financing may not be
available when needed or, if it is available, the terms may not favorable to
our stockholders or us.
Year 2000 Compliance
Impact of the Year 2000 Computer Problem. The Year 2000 computer problem
refers to the potential for system and processing failures of date-related data
as a result of computer-controlled systems using two digits rather than four to
define the applicable year. For example, computer programs that have time-
sensitive software may recognize a date represented as "00" as the Year 1900
rather than the Year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. To date, we have experienced no Year
2000 issues with any of our material internal systems, and we do not expect to
experience any. As a result, we have not adopted a specific Year 2000
contingency program.
State of Readiness of Our Internal Systems. We have been in the process of
obtaining assurances from our third-party vendors for all material systems in
use by us that such systems are Year 2000 compliant. In 1999, we upgraded our
customer contact and financial systems as part of the expansion of our
business. We have received Year 2000 certification from the vendors of these
upgraded systems. We are not currently aware of any Year 2000 problem relating
to any of our material internal systems.
State of Readiness of Our Operations. Our internal operations and business
are also dependent upon the computer-controlled systems of third parties such
as suppliers, customers and service providers. We believe that absent a
systemic failure outside our control, such as a prolonged loss of electrical or
telephone service, Year 2000 problems at such third-party facilities will not
have a material impact on our operations.
Cost of Year 2000 Compliance. Based on our assessment to date, we do not
anticipate that costs associated with remediating our internal systems will
exceed $50,000.
Additional Risks. Any failure by us to make our internal systems Year 2000
compliant could result in a decrease in sales of our products, an increase in
allocation of resources to address Year 2000 problems of our customers without
additional revenue commensurate with such dedication of resources, or an
increase in litigation costs relating to losses suffered by our customers due
to such Year 2000 problems. Failures of our internal systems could temporarily
prevent us from processing orders, issuing invoices, and developing products,
and could require us to devote significant resources to correcting such
problems. Due to the general uncertainty inherent in the Year 2000 computer
problem, resulting from the uncertainty of the Year 2000 readiness of third-
party suppliers and
31
<PAGE>
vendors, we are unable to determine at this time whether the consequences of
Year 2000 failures will have a material impact on our business, financial
condition, and results of operations.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective for all fiscal quarters for all fiscal years beginning after June 15,
2000. Although the Company does not believe SFAS No. 133 will have a material
impact on its financial statements, because of the complexity of SFAS No. 133,
the ultimate impact has not yet been determined.
Market Risk
Our exposure to market risk for changes in interest rates is limited to the
exposure related to our debt instruments which are tied to market rates. We
plan to ensure the safety and preservation of our invested principal funds by
limiting default risks, market risk and reinvestment risk. We plan to invest in
high-quality, investment-grade securities. As a result, we do not believe that
we are subject to material market risk.
32
<PAGE>
BUSINESS
Overview
iGo is a leading provider of hard-to-find, model-specific accessories and
services for mobile electronic devices. Through our iGo.com website and
customer solutions representatives, we enable businesses and individual
consumers to efficiently identify, locate and purchase these products and
services. Our proprietary relational databases of over 6,500 products from more
than 350 suppliers, combined with our comprehensive industry knowledge and
service expertise, create a valuable one-stop solution for our customers. We
believe that our unique business model offers significant benefits to mobile
device manufacturers, business enterprises, mobile professionals and other
people on the go.
We provide a compelling electronic commerce solution for the highly
fragmented portable computing and mobile communications marketplace by
utilizing the convenience and functionality of the Internet. Our business
combines the following key elements:
. our proprietary product, supplier and compatibility databases;
. our use of search technology to simplify the ordering process;
. our capability to rapidly ship business-critical orders;
. our focus on a high repeat purchase and replacement market; and
. our ability to offer customized solutions for corporate customers.
As a result of these factors, we have rapidly grown our net revenues and our
customer database, maintained high gross margins and established a leading
online destination to serve our market. From 1995 to 1998, our net revenues
increased at an annual growth rate of more than 90%. Our gross margins grew
from 32% for the six months ended June 30, 1998 to 35% for the six months ended
June 30, 1999. Our customer database includes profiles of over 525,000 mobile
users and detailed transaction histories on over 150,000 buyers. Approximately
50% of the Fortune 500 have purchased products or services from us. In
addition, we have developed strategic relationships with key business partners
such as Ariba, Motorola and NEC.
Industry Background
Portable Computing and Mobile Communications Marketplace
The use of portable computers and mobile communications devices has grown
rapidly due to infrastructure and hardware improvements which have simplified
use, increased portability and reduced equipment and cellular airtime cost.
International Data Corporation, or IDC, estimates that there were 15.5 million
portable personal computers, or PCs, shipped in 1998 and that 29.3 million
portable PCs will ship in 2003. Dataquest estimates that there were
approximately 187 million digital wireless subscribers worldwide at the end of
1998 and that the number of subscribers will grow to 590 million by the end of
2002. Sherwood Research Inc., an independent research firm focused on the
mobile products market, estimates that the market for accessories and batteries
for mobile electronic devices will grow from $5.4 billion in 1999 to
$8.1 billion in 2001.
33
<PAGE>
Busy professionals and other time-constrained people are increasingly
incorporating mobile electronic devices into their daily lives. The more these
individuals utilize the functionality of their mobile electronic devices, the
more dependent they become on these devices to maintain their lifestyles and
work patterns. Individuals and businesses are increasingly willing to spend
more on mobile devices, accessories, batteries and services to increase
productivity and add flexibility. Emerging handheld devices which combine
computing and communications functionality, such as email-capable pagers,
palmtop computers and personal digital assistants (PDAs) such as the 3Com Palm
Pilot, are likely to continue to be increasingly critical in the daily routines
of their users, even more so than single-function devices such as laptops and
cellular phones. As the number and utilization of these devices increases, the
demand for consistent and reliable accessories, batteries and other supporting
products will increase.
Growth of the Internet and Electronic Commerce
The Internet has emerged as a global communications medium, enabling millions
of users to obtain and share information, interact with each other and conduct
business electronically. IDC estimates that the number of Internet users
worldwide will increase from approximately 142 million at the end of 1998 to
approximately 502 million by the end of 2003. The increasing adoption of the
Internet as an important communications tool provides businesses with a new,
attractive vehicle to deliver product information, market and sell products and
services and provide ongoing customer support. IDC estimates that worldwide
electronic commerce revenue will increase from approximately $50 billion in
1998 to more than $1.3 trillion in 2003, representing a compound annual growth
rate of approximately 90%.
The widespread adoption of intranets and the acceptance of the Internet as a
business communications platform has also created a foundation for business-to-
business electronic commerce that offers the potential for organizations to
streamline complex processes, lower costs and improve productivity. Internet-
based, business-to-business electronic commerce is poised for rapid growth and
is expected to represent an even larger opportunity than business-to-consumer
electronic commerce. According to IDC, business-to-business electronic commerce
is expected to account for more than 80% of the dollar value of electronic
commerce in the United States by 2003. In addition, because business
transactions are typically recurring and nondiscretionary, the average order
size and lifetime value of a business-to-business customer is generally greater
than that of an individual consumer.
The Online Market Opportunity for Mobile Electronic Devices
The Internet represents an attractive medium to reach users of portable
computing and mobile communications products. In addition, these businesses and
individual consumers are not well served by traditional channels, which include
mobile device manufacturers, traditional retailers and mail-order companies.
There is a significant market opportunity for electronic commerce companies to
meet the needs of this large and underserved marketplace. This opportunity
stems from the capabilities created by the Internet medium and the nature of
the products and the limitations of the traditional buying process:
. The Nature of the Products. Most accessories and batteries for laptop
computers, cellular phones and handheld electronic devices are brand and
model-specific, creating a complex set of product/accessory combinations
that will continue to proliferate as new device models are introduced. In
addition, these products are peripheral and are often overlooked by
manufacturers and retailers in the industry, who typically focus on the
newest hardware models.
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<PAGE>
. No One-Stop Source. Laptop computers, cellular phones and other handheld
electronic devices are manufactured and distributed by many companies and
there is no one complete source for model-specific products and
accessories in this fragmented marketplace. Unlike the personal computer,
book and music markets, there is no major distributor that carries even a
fraction of the products needed to serve the mobile device and
accessories market. As the installed base of mobile electronic devices
continues to grow, it becomes increasingly difficult to maintain the
comprehensive selection of products and accessories essential to meet the
purchasing needs of individuals and businesses.
. Lack of Customer Service Capabilities. Consumers are interested in
obtaining the right accessories and batteries for their mobile electronic
devices quickly and easily. However, mobile device manufacturers and
traditional retailers are focused primarily on selling the newest "big
ticket" products and are therefore typically unable to adequately serve
peripheral markets, which include model-specific accessories and
batteries. Generally, manufacturers and retailers are not adequately
staffed or trained to handle the wide array of product availability and
compatibility questions.
Because online retailers can leverage centralized inventories and the data-
intensive nature of the Internet, they can overcome these limitations to offer
a solution that combines a broad product selection, convenient access, rapid
delivery and excellent customer service for mobile devices, model-specific
accessories, batteries and services.
The iGo Solution
We are a leading provider of hard-to-find, model-specific accessories and
services for mobile electronic devices. Through our iGo.com website and
customer solutions representatives, we enable businesses and individual
consumers to efficiently identify, locate and purchase these products and
services. Our proprietary relational databases of over 6,500 products from more
than 350 suppliers, combined with our comprehensive industry knowledge and
service expertise, create a valuable one-stop solution for our customers. We
believe that our unique business model offers significant benefits to mobile
device manufacturers, business enterprises, mobile professionals and other
people on the go.
Our mission is to provide solutions that give people freedom and flexibility
over their lives and increase their business productivity. We offer a
comprehensive Internet-based solution, and we believe that we offer value-added
services that provide significant benefits to mobile product manufacturers,
business enterprises, mobile professionals and other people on the go. As an
online merchant, we are not constrained by shelf space and can offer customers
a vast selection of mobile electronic devices and accessories. In addition, by
serving a large global market through centralized distribution and operations,
we can realize significant cost advantages relative to traditional retailers.
Using customized enterprise solutions, we also provide co-branded intranet
stores to meet the complete product and service needs of businesses that have
large mobile professional staffs and field personnel.
Key elements of the iGo solution include:
Comprehensive Selection of Mobile Products. We believe that we offer the
world's largest selection of portable computing and mobile communications
devices, batteries and accessories. We offer over 6,500 accessories and
batteries compatible with the majority of brands and models of mobile devices
sold over the past fifteen years. In addition, approximately 2,000 of our most
popular stock keeping units, or SKUs, are kept in inventory and can be
delivered overnight to customers throughout the United States.
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Proprietary Relational Databases. We have developed a proprietary relational
database architecture that enables our customers to accurately match their
mobile accessories to compatible device brands and models. Our databases
contain over 29,000 unique combinations of SKUs, brands and models, with unique
original equipment manufacturer part numbers, high resolution images and
detailed product specifications. Our supplier database includes information on
over 350 suppliers around the world. Our databases were assembled from primary
research conducted over six years and would be difficult for potential
competitors to replicate, especially since mobile device manufacturers often do
not maintain information on older model devices, accessories and batteries.
Authoritative Source for Mobile Product Information. We provide our customers
with solutions by answering important technical support questions and making
purchase recommendations for mobile devices and accessories. Our industry
knowledge enables us to better serve our customers. Our product reference guide
and our quality customer service encourage repeat purchases and word-of-mouth
referrals. By leveraging authoritative content such as our proprietary "High-
Tech Tips for Road Warriors(R)" book and our website resources, we have been
able to create commerce opportunities to attract and retain customers. Our
online support enables customers to efficiently find solutions to their
problems in the field.
Strong Direct Marketing Expertise. Our direct marketing experience has
allowed us to develop an effective customer acquisition and retention model.
Since our inception in 1993, we have assembled detailed profiles of over
525,000 mobile users. These profiles typically include the brands and models of
each user's portable devices along with the original advertising lead source
that prompted the user to contact us. In addition, this database contains
detailed transaction histories on over 150,000 of our customers. The knowledge
derived from these detailed transaction histories enables us to electronically
recommend model-specific and customer-specific accessories and devices.
Corporate and Manufacturer Benefits. Corporate purchasing managers use iGo to
simplify the process of purchasing mobile devices and accessories. We enable
enterprises to efficiently support their skilled mobile workforces and protect
their investment in expensive, productivity-enhancing computing and
communications devices. We also effectively solve the problem of how to support
older models of laptops. Manufacturers work closely with us to provide product
specification information and free customer referrals because we provide
quality service to their customers. We save manufacturers money on call center
and customer service costs by handling after-market battery and accessory sales
for their laptops and cell phones.
Strategy
Our strategy is to continue to offer a comprehensive, Internet-based solution
that provides significant benefits to all participants in the mobile product
marketplace, including manufacturers, business enterprises, mobile
professionals and other people on the go. Our goal is to be the leading one-
stop solution for the mobile product marketplace, and to reach this goal, we
plan to:
Aggressively Build the iGo Brand. We intend to capitalize on our early-market
entry advantage to become the leading electronic commerce solution for
individuals and businesses. We are pursuing an aggressive brand development
strategy through mass market advertising, targeted one-to-one marketing, online
promotions and iGo-branded products. In addition, we sticker many of our
products with our brand, our website address and our toll free telephone
number. As a result, we have a large and growing "sticker salesforce" in the
field working to drive direct sales when products wear out and need to be
replaced.
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Improve the iGo.com Shopping Experience. We believe our comprehensive
selection of hard-to-find, model-specific accessories, batteries, mobile
electronic devices, and services, together with our advanced search
functionality and highly-trained customer solutions representatives, provides
consumers with a compelling online shopping experience. We recently upgraded
the user interface and functionality of our website, and we plan to
continuously improve our customers' online shopping experience. We use our
knowledge base of the problems faced by people on the go to better target and
serve consumers. For example, we have published and distributed our "High-Tech
Tips for Road Warriors(R)" book, and we plan to add a fully searchable version
of this helpful content on our website to increase our customer support and
improve our customer loyalty.
Enhance Our Proprietary Databases. In order to offer the highest value to our
customers and extend our leadership position, we must continue to update our
proprietary product, supplier, compatibility and customer databases. New mobile
devices are introduced almost daily. We will continue to grow our relationships
with customers, suppliers and mobile product manufacturers in order to obtain
the data necessary to expand and update our compatability databases. For
example, we have agreements with suppliers that provide us detailed information
on and access to new products as they are released.
Focus on the Corporate Market. We intend to leverage our brand, our
electronic commerce platform and our operating infrastructure to pursue
additional opportunities in the corporate market. We have implemented a
customized enterprise purchasing solution for Dell Computer and Lucent
Technologies, and we plan to increase our online corporate sales by expanding
the number of customized corporate Internet stores that we operate. We have
also been approved as a launch partner for the new Ariba enterprise purchasing
system which will enable us to more readily reach Global 2000 enterprises with
the iGo solution.
Pursue International Opportunities. We believe the global reach of the
Internet, the international scope of many of our corporate customers and the
worldwide demand for mobile devices present opportunities for us to expand
internationally. A majority of our current product offering is compatible with
products used internationally. We plan to leverage our relational databases,
our industry expertise and our existing supplier infrastructure to expand into
Europe and Asia within the next 12 months.
Pursue Strategic Acquisitions and Alliances. There are many niche players and
larger businesses serving certain elements of the mobile device market. We
intend to pursue opportunities to acquire these companies to further enhance
our one-stop solution. We also plan to acquire customer lists or technologies
that extend our reach and service capabilities. For example, in 1997, we
acquired the mobile database of 61,000 customers from Hello Direct, a direct
marketer of telephone accessories. In addition, we intend to pursue strategic
alliances with electronic commerce companies and mobile product manufacturers
to create direct online links to iGo.com.
The iGo.com Experience
We offer a comprehensive online shopping destination for customers in search
of solutions to their portable computing and mobile communications needs. We
offer products, services and content geared to the unique requirements of
mobile professionals and other people on the go. Our proprietary relational
databases of over 6,500 products from more than 350 suppliers enable shoppers
to easily identify the exact products and services they need. Our customized
content contains recommendations for solutions to problems typically faced by
mobile professionals and others who use laptop computers, cell phones and other
portable electronic devices.
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iGo.com provides customers with a compelling shopping experience. Customers
shopping at iGo.com are greeted by a home page that is designed for efficient
shopping. We enable people to shop for mobile devices, accessories, batteries
and services in a number of ways. Depending on their preferences, customers can
shop by keyword search, accessory category, device category, product guide item
number, brand or model. Daily specials and other promotions are also
prominently featured on the iGo.com home page and elsewhere on our website.
Corporate customers are directed to information about corporate discounts and
customized buying programs. A graphical representation of our home page is
presented below:
[Screenprint of iGo's home page at www.iGo.com]
On our home page, we offer shoppers valuable advice tailored to their needs.
Our "Solutions for You" section answers frequently-asked questions and makes
purchase recommendations for "Frequent flyers," "Globe-trotters," "Road-sters,"
"Telecommuters" and "Train-trekkers" and other people on the go. Our
proprietary editorial section, entitled "High-Tech Tips for Road Warriors(R),"
answers frequently-asked questions about mobile devices and accessories. We
also offer real-time text chat with our customer solutions representatives for
our online customers who need technical support or purchase advice. Customers
can also contact our highly-trained customer solutions representatives via a
toll-free telephone number. The overall customer experience is designed to
provide expertise and responsiveness to customers who are often frustrated by
the traditional means of inquiring about and purchasing mobile electronic
devices and accessories.
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Product Offerings
We focus on providing a comprehensive selection of quality products for
mobile professionals and other people on the go. Prices typically range from
$69 to $269, but can be as low as $3 and as high as $4,300. We offer an
extensive selection of product categories, including:
. Laptop Computer Accessories and Services. We offer a broad selection of
model-specific laptop accessories including batteries, chargers, power
adapters, car cords, external storage media, modems, port replicators,
peripherals, mobile software and carrying cases. We also offer wireless
data services for laptop users.
. Cellular Phones, Accessories and Services. We offer the most popular
models of cellular phones from Nokia and Ericsson, as well as AT&T
cellular phone service. We offer model-specific accessories including
batteries, hands-free devices, chargers, power adapters, car cords,
laptop modem adapters and protective cases.
. Handheld Electronic Devices and Accessories. We offer a large selection
of handheld devices, including Palm and Windows CE devices, from
companies such as 3Com, Casio, Compaq, Everex, Motorola and Philips. We
also carry a wide selection of model-specific accessories for these
products, including batteries, modems, stylus tools, software and
peripherals.
. Other Mobile Devices and Travel-Related Products. We offer a large
selection of often hard-to-find mobile and travel accessories, including
two-way radios, Global Positioning Systems or GPS devices, presentation
equipment, camcorder batteries, digital cameras, carrying cases, and
international power and phone adapters. We also offer mobile and travel-
related software.
Strategic Relationships
We intend to continue to establish and leverage key strategic relationships
with mobile device manufacturers, suppliers and electronic commerce partners.
We recently entered into a strategic sourcing and marketing relationship with
the NEC Computer Systems Division, or NEC, a leading global supplier of
computer products. This relationship provides us with direct Internet and phone
links from NEC to our customer solutions representatives. In addition, our
relationship with NEC allows us to purchase products directly from NEC, which
increases our gross margin on those products, and gives us direct access to
detailed mobile product cross-reference information. We plan to replicate this
program with several of the top laptop manufacturers to continue to expand and
update our product and compatibility databases and to increase high gross
margin sales.
We have been approved as a launch partner for the new Ariba enterprise
purchasing system. This electronic commerce-based system allows global
enterprises to automate the requisition, approval, purchasing and delivery of
supplies and services. Our relationship with Ariba enables their customers to
quickly and easily order our entire range of products from within the Ariba
purchasing system. We plan to leverage this relationship with Ariba to further
penetrate Global 2000 enterprises with our solution.
Our strategic relationship with Motorola allows us early access to certain of
their newest products for Motorola's cellular telephones. For example, we are
one of only two direct marketers authorized to be a distributor for the new
Motorola StarTAC(R) Clip-on Organizer. Our relationship with Motorola also
includes product sourcing for our iGo-branded products. Motorola is currently
designing and manufacturing a number of cellular phone batteries exclusively
for iGo.
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Our strategic relationships are not subject to formal written agreements and,
consequently, will continue to evolve over time. We can provide no assurance
that such relationships will continue on their current terms or at all.
Marketing and Customer Acquisition
We employ a combination of traditional and online marketing programs to
acquire customers and build brand awareness. These programs are designed to
cost-effectively acquire high-value mobile users as customers and generate
online sales. We believe our marketing and advertising strategy efficiently
reaches mobile customers in the environments in which they use our products--at
home, at work and while traveling. In addition, because we sell devices,
accessories and batteries for leading national brands, we believe that we are
able to leverage the large advertising and promotional investments of mobile
device manufacturers to generate demand for the products we sell. Following the
completion of this offering, we expect to significantly increase our investment
in marketing, advertising and promotion to acquire and retain customers.
Offline Marketing and Promotion. Our offline advertising strategy is based on
multiple media, including print, radio, outdoor and direct mail. We advertise
in key business periodicals such as Business Week and Forbes; technology
magazines such as Mobile Computing and PC World; in-flight magazines such as
American Way and Sky; and national newspapers such as The Wall Street Journal
and USA Today. We also advertise in 30-second radio spots in metropolitan areas
with large numbers of mobile customers.
We use our product reference guide as a cost-effective vehicle to drive
customers to our website. We distribute approximately 13 million of these full-
color direct mail pieces annually. Mobile device manufacturers provide
cooperative advertising support to subsidize the cost of producing this guide.
Our product reference guide demonstrates our comprehensive mobile product
selection and creates strong brand awareness. We also use our direct mail
pieces to promote the benefits of shopping online in general, as well as the
specific benefits of shopping on our website, including special Internet
promotions.
Online Marketing and Promotion. Our online marketing and promotion strategy
is designed to build brand recognition, increase customer traffic to our
website, acquire new customers and encourage repeat purchasing behavior.
Through our advertising and promotions, we target mobile professionals and
other people on the go who are themselves purchasers or who influence the
purchase of mobile products and accessories at work. Our advertising campaigns
are designed to identify with the unique needs of these people, who typically
require products and services to simplify their lives, as well as complete
solutions to their everyday portable computing and mobile communications
problems.
We have developed four primary means of reaching our potential customers
online: banner advertising, sponsorships, outbound email marketing and an
online affiliate program. We place banner advertisements on websites targeted
to the needs and interests of mobile professionals. We also buy banners through
keyword searches on major online portals such as Lycos and Yahoo! We have
entered into marketing and sponsorship arrangements with electronic commerce
companies such as MSN, Portera.com and Stamps.com. These arrangements generally
provide for us to be the preferred mobile electronics product retailer on their
websites. Our affiliate program is designed to create incentives for others to
create inbound links that connect directly to our website. We pay our
registered affiliates a referral fee for any sale generated via their link to
our website. Finally, we
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attempt to maximize the value of our 525,000 person mobile user database by
delivering special product offerings to customers and prospects via email. For
example, we can send special promotions to all owners of cell phones or only to
owners of a certain brand, or we can send email to customers at a specified
time period after initial purchase to remind them to replace their laptop
batteries.
Corporate Sales
Our corporate sales team targets large corporations, medium-to-small
businesses and government agencies and educational institutions, in an effort
to generate large and recurring orders and to direct sales to our website. In
particular, our corporate sales representatives target enterprises with large
field salesforces or large installed bases of laptop computers or cell phones,
including pharmaceutical, insurance, financial, telecommunications and
consulting companies. To date, we have sold products to approximately 50% of
the Fortune 500.
Our corporate sales team generates leads from individual purchasers within
large organizations found in our user database, by conducting primary research
and outbound calls, by meeting corporate purchasing managers in the field and
by responding to corporate requests for proposals. In addition, we have begun
to enter into relationships with large companies, such as Dell Computer and
Lucent Technologies, in which we offer a secure extranet purchasing solution
dedicated to their authorized employees. In these customized Internet stores,
site design, product pricing and SKUs available for sale can all be tailored
and controlled to meet the needs of our corporate customers.
As of June 30, 1999, we employed 11 corporate account managers and a director
of corporate sales. Following completion of this offering, we plan to
significantly increase the number of corporate account managers.
Customer Service
Our goal is to provide our customers with the highest level of customer
support. Our customer solutions representatives are available in our customer
contact center 24 hours-per-day, 365 days-per-year. Representatives handle
contacts with customers, through telephone, fax, email and live text chat. We
will add voice over Internet protocol capabilities beginning in the fourth
quarter of 1999. Our support services include product inquiries, ordering,
technical support and customer service issues. We provide a high level of
support by utilizing our sophisticated product and compatibility databases and
by training our representatives with the in-depth knowledge required to meet
the needs of mobile professionals and other people on the go.
We have retained a third-party call center to handle overflow or possible
disaster conditions. Representatives in this third-party call center have been
trained in our customer service philosophy.
Technology and Operations
We have developed a scalable, secure and reliable technology infrastructure
to support our website and customer contact center, as well as to maintain and
integrate our proprietary databases, our supply chain, and our accounting,
finance and management reporting functions. Our website is designed to be
accessible from all standard browsers without the need for additional client
software. Our systems are designed to capture large amounts of customer-
specific data, which is important to our ability to provide superior post-sale
service and to target customers for future purchases. We also incorporate a
variety of encryption and fraud detection technologies designed to protect the
privacy of customer information and the integrity of customer transactions.
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Our software system architecture uses industry standard technologies to
maximize reliability and scalability. We use Secure Socket Layer for secure
transactions. Our applications run on arrays of Intel-based server systems
running Microsoft Windows NT and SQL Server. To scale our service as traffic
increases, we believe that we need only to install additional servers or
increase the number of processors per server. Our production data and hosting
center is located at Internet Emporium in Phoenix, Arizona, which provides
routing and high bandwidth communication lines to a variety of major Internet
backbone providers, as well as 24 hour-per-day monitoring and support. Our
production data center also includes multiple redundant backup systems and
power generators. We maintain server and bandwidth overcapacity at our hosting
center so that if traffic spikes or a server fails we can maintain service for
our entire user base.
We believe that our technology platform provides state-of-the-art electronic
commerce functionality and integration, including the following key systems:
. DB2 and MS Access relational databases;
. sophisticated enterprise accounting and logistics software;
. Onyx total customer relationship management software;
. real-time Internet customer service from Facetime;
. automated email response technology from Kana;
. automated call distribution through a Nortel phone switch; and
. the IBM Net.Commerce electronic commerce platform.
In addition, we plan to implement next-generation computer telephony
integration in the fourth quarter of 1999. This convergent solution will allow
us to manage all customer contacts, including live text chat, customer emails,
voice over Internet Protocol, incoming calls and outgoing calls through single
workstations. This system enables contacts to be routed to appropriate customer
support representatives based upon the inquiry and the appropriate skill level
of each representative. This system will also provide our customers, at their
option, Integrated Voice Response technology which will allow them to place an
order, check status of an existing order or determine their account balance
automatically.
We manage our own fulfillment center where we receive, pick, pack and ship
our products. We believe controlling the fulfillment process is important to
providing a high standard of customer care. Control of our fulfillment center
allows us to expedite shipments, balance resource needs and maintain direct
contact with our customers. We currently stock approximately 2,000 of our most
popular inventory items in our fulfillment center. We frequently evaluate
inventory sell-through, new product offerings and marketing forecasts to
balance inventory levels with the growth of our business.
Competition
The portable computing and mobile communications market is highly fragmented.
In addition, the electronic commerce market in which we operate is new, rapidly
evolving and highly competitive. Our competitors operate in a number of
different distribution channels, including electronic commerce, traditional
retailing, catalog retailing and direct selling. We believe no single
competitor competes directly with us with respect to all of the products and
services we offer; however, we currently or potentially compete with a variety
of other companies in the sale of products in specific categories, including:
. mobile products suppliers such as Targus;
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. mass merchant retailers such as Circuit City and CompUSA;
. direct marketers such as Buy.com, Insight and Microwarehouse; and
. traditional mobile device manufacturers such as Fujitsu and Toshiba.
Many of these current and potential competitors may have the ability to
devote substantially more resources to marketing, and systems and website
development than we do. In addition, larger and more well-financed entities may
acquire, invest in or form joint ventures with our competitors. Some of our
competitors may be able to secure products from suppliers on more favorable
terms, fulfill customer orders more efficiently and adopt more aggressive
pricing or inventory availability policies then we can. Finally, new
technologies and the expansion of existing technologies, such as price
comparison programs that search for products from a variety of websites, may
direct customers to other online merchants.
We believe that the principal competitive factors in our marketplace are
product selection and customer service. While there can be no assurance that we
will be able to compete successfully against current and future competitors, we
believe our ability to compete favorably is enhanced by our proprietary product
database, our strategic supplier relationships, and our sophisticated logistics
and supply management capabilities. We believe that any competitor that seeks
to establish an electronic commerce presence within our marketplace will
confront significant challenges. Among these challenges are developing the
required software and technology infrastructure, establishing an efficient
supply and logistics system, and most importantly, establishing a comprehensive
database of industry products, suppliers and customers.
Intellectual Property
We regard our brand and substantial elements of our website and relational
databases as proprietary and seek their protection through trademark, service
mark, copyright and trade secret laws as critical to our success. We enter into
non-disclosure agreements with our employees and consultants, and generally
with strategic partners. Despite these precautions, it may be possible for
third parties to copy or otherwise obtain and use our intellectual property
without our authorization.
Our iGo brand and our Internet address, www.iGo.com, are important components
of our business strategy. We have filed federal trademark applications for
"iGo" and "iGo.com," among other trademark applications. We cannot guarantee
that any of our trademark applications will be granted. In July 1999, the
United States Patent and Trademark Office, or PTO, preliminarily declined
registration of "iGo" and "iGo.com" when used in connection with our services.
We have had telephonic discussions of this matter with the PTO and plan to
formally respond to the PTO's preliminary denial of registration. We believe it
is likely that the "iGo" and "iGo.com" marks will ultimately be accepted for
registration by the PTO. However, we cannot guarantee that we will be able to
secure registration of these marks. See "Risk Factors--We may not be able to
protect and enforce our trademarks, Internet addresses and intellectual
property rights."
We also rely to a material extent on technology developed and licensed from
third parties. These licenses may not continue to be available to us on
commercially reasonable terms in the future. The loss of existing technology
licenses could harm the performance of our existing services until equivalent
technology can be identified, obtained and integrated. Failure to obtain new
technology licenses may result in delays or reductions in the introduction of
new features, functions or services, which would harm our business. We have not
been notified that our technologies infringe on the
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proprietary rights of others. However, there can be no assurances that third
parties will not claim infringement in the future. We expect that the continued
growth of the Internet will result in an increasing number of infringement
claims as legal standards related to our market continue to evolve. Any such
claim, with or without merit, could be time consuming, result in costly
litigation, and may have a material adverse effect on our business and results
of operations.
Government Regulation
Due to the increasing popularity and use of the Internet, it is possible that
a number of laws and regulations may be adopted with respect to the Internet
covering issues such as user privacy, freedom of expression, pricing, content
and quality of products and services, taxation, advertising, intellectual
property rights and information security. The nature of this legislation and
the manner in which it may be interpreted and enforced cannot be fully
determined and, therefore, this legislation could subject us to potential
liability, which in turn could harm our business. The adoption of any such laws
or regulations might also decrease the rate of growth of Internet use, which in
turn could decrease the demand for our products and services, or increase the
cost of doing business, or otherwise harm our business, financial condition and
results of operations. In addition, applicability to the Internet of existing
laws governing issues such as property ownership, copyrights and other
intellectual property issues, taxation, libel, obscenity and personal privacy
is uncertain. The vast majority of these laws were adopted prior to the advent
of the Internet and related technologies and, as a result, do not contemplate
or address the unique issues of electronic commerce.
Several states have also proposed legislation that would limit the use of
personal information gathered online or require websites to establish privacy
policies. The Federal Trade Commission has also initiated action against at
least one website regarding the manner in which information is collected from
users and provided to third parties. Changes to existing laws or the passage of
new laws intended to address these issues, including some recently proposed
changes, could create uncertainty in the marketplace that could reduce demand
for our products or services, increase the cost of doing business as a result
of litigation costs or increased service delivery costs. In addition, because
our products and services are accessible throughout the United States, other
jurisdictions may claim that we are required to qualify to do business as a
foreign corporation in a particular state. We are qualified to do business in
California and Nevada. Our failure to qualify as a foreign corporation in a
jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to qualify and could result in our inability to
enforce contracts in those jurisdictions. Any new legislation or regulation of
this kind, or the application of laws or regulations from jurisdictions whose
laws do not currently apply to our business, could harm our business, financial
condition or results of operations.
Employees
As of June 30, 1999, we had 92 full-time employees, including 36 in our
customer contact center, 22 in sales and marketing, 24 in technology and
operations, and 10 in executive management and administration. We devote, and
will continue to devote, substantial resources to attract high-quality
employees and build a strong corporate culture that encourages and rewards
success. We believe that our investments in recruiting and training help us
attract and retain key managers and productive employees. None of our employees
is represented by a labor union, we have never experienced a work stoppage and
we consider our employee relations to be good.
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Facilities
Our corporate offices are located in Reno, Nevada. We rent approximately
18,120 square feet under a five-year lease that expires in September 2002. The
lease also contains an option to renew for an additional five-year term. We
anticipate that we will require additional space in the near future and we are
negotiating with our landlord to add an additional 40,000 feet to our current
facility by February 2000.
Legal Proceedings
From time to time we are involved in litigation incidental to the conduct of
our business. We are not party to any lawsuit or proceeding that, in our
opinion, is likely to seriously harm our business.
On July 19, 1999, the company from whom we purchased the rights to the 1-800-
Batteries telephone number and name gave us notice that they believe we have
failed to cure a material breach of our agreement with them. The notice also
stated that they are terminating their agreement with us and demanding a return
of their rights as well as unspecified monetary damages. At the same time, they
made a demand for arbitration of the matter with the American Arbitration
Association in Richmond, Virginia. We have not yet responded to such demand.
After a review of our actions with respect to our agreement with them, we
believe that we have not materially breached the agreement. Accordingly, we
consider our agreement with them to be in full force and effect and intend to
defend our position vigorously in any applicable arbitration proceedings. While
we believe that we will ultimately prevail in this dispute, many of our
customers may rely on the 1-800-Batteries phone number to reach our customer
solutions representatives and to the extent that the arbitrator disagrees with
our position and allows this agreement to terminate, we could be harmed,
although it is difficult to estimate the extent or materiality of such harm.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding our executive
officers and directors as of July 31, 1999:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Ken Hawk.................... 35 Chairman of the Board, President, Chief
Executive Officer and Chief Energizing
Officer
Mick Delargy................ 35 Senior Vice President, Finance and Business
Development, Chief Financial Officer and
Secretary
Robert Bauer................ 48 Vice President, Sales and Marketing
Joe Bergeon................. 58 Chief Information Officer
Lou Borrego................. 33 Vice President, Operations
Darrell Boyle (1)........... 51 Director
David Callard (2)........... 61 Director
Peter Gotcher (1)(2)........ 39 Director
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Ken Hawk is the founder of iGo and has served as Chairman of our board of
directors, President, Chief Executive Officer and Chief Energizing Officer
since our incorporation in March 1993. Mr. Hawk was the Multimedia Product
Manager for Windows at Microsoft Corporation from June 1992 until September
1992 and ran North American Operations for Venture Manufacturing Singapore from
November 1988 until September 1991. From June 1986 until November 1988, he
served as Silicon Valley District Sales Manager for Silicon Systems, Inc., a
subsidiary of TDK. Mr. Hawk holds a B.S. in electrical engineering from the
University of Michigan and an M.B.A. from Stanford University.
Mick Delargy has served as our Senior Vice President, Finance and Business
Development, Chief Financial Officer and Secretary since July 1999. He also
served as our Vice President, Finance and Operations from May 1996 to June
1997. From August 1997 to July 1999, Mr. Delargy served as Senior Vice
President of Finance and Business Development for Accolade, Inc. (now
Infogrames North America). From April 1992 to May 1996, he served as Chief
Financial Officer of Storybook Heirlooms. From January 1987 to April 1992, Mr.
Delargy served as an Audit Manager for KPMG Peat Marwick. Mr. Delargy holds a
B.S. in business administration and a B.S. in accounting from the University of
Kansas and is a certified public accountant.
Robert Bauer has served as our Vice President, Sales and Marketing since
January 1999. From December 1997 to December 1998, Mr. Bauer served as Vice
President of Marketing for Intelogis Corporation. From January 1995 to August
1997, Mr. Bauer served as Vice President of the Mobile Computing Division for
US Robotics/3Com. From March 1984 to November 1994, he held a number of sales
and marketing positions with Compaq Computer Corporation, most recently as
Director of North American Product Marketing. Mr. Bauer holds a B.A. in design
from the University of California at Davis.
Joe Bergeon has served as our Chief Information Officer since June 1999. From
February 1997 to June 1999, Mr. Bergeon served as Project Manager/Business
Consultant at Howard Consulting Group. From September 1994 to January 1997, he
was Publisher of the Electronic Source Book, and from March 1983 to November
1993 served as President of Bertech Industries. Mr. Bergeon holds a B.S. in
engineering from the City University of New York and an M.B.A. from Arizona
State University.
46
<PAGE>
Lou Borrego has served as our Vice President, Operations since July 1999 and
served as our Chief Financial Officer from October 1997 to June 1999. From June
1996 to October 1997, Mr. Borrego served as Vice President of Corporate Lending
at Sun State Bank. From February 1994 to June 1996, he served as Vice President
of Corporate Lending at First Interstate Bank, where he served as Commercial
Finance Team Leader from June 1993 to February 1994. From March 1990 to March
1993, Mr. Borrego served as Controller/Director of Operations of Moran Brothers
Inc. Mr. Borrego holds a B.S. in accounting from the University of Southern
California.
Darrell Boyle has served as a member of our board of directors since January
1997. Mr. Boyle has served as President of Trailblazer Consultants since
October 1994. From March 1990 to September 1994, he served as the senior
marketing executive for the Graphics Business Unit of Microsoft Corporation.
Mr. Boyle holds a B.S. in business administration from the University of
Colorado and an M.B.A. from Capital University.
David Callard has served as a member of our board of directors since June
1996. Mr. Callard has served as the President of Wand Partners Inc. since
January 1991. From 1972 to 1989, he served in various capacities with Alex.
Brown & Sons Incorporated, including those of Director, Managing Director and
General Partner. Mr. Callard holds an A.B. from Princeton University and a J.D.
from New York University School of Law. He also serves on the boards of
directors of Panorama Trust, Information Management Associates, Inc. and
Chartwell Re Corporation.
Peter Gotcher has served as a member of our board of directors since October
1998. Mr. Gotcher has served as a Venture Partner with Institutional Venture
Partners since January 1997. Mr. Gotcher founded and served as President and
Chief Executive Officer of Digidesign Inc. from October 1983 until its merger
with Avid Technology, Inc. in January 1995, after which he served as the
General Manager of Digidesign and Executive Vice President of Avid until May
1996. Mr. Gotcher holds a B.A. in English literature from the University of
California at Berkeley. He also serves on the board of directors for Avid
Technology, Inc.
Board Composition
We currently have four directors. All directors hold office until the next
annual meeting of stockholders or until their successors are duly elected.
Board Committees
Our board of directors currently has an audit committee and a compensation
committee. The audit committee consists of Mr. Callard and Mr. Gotcher. The
audit committee makes recommendations to the board of directors regarding the
selection of independent auditors, makes inquiries about the scope of audit and
other services by our independent auditors, makes inquiries about the
accounting principles and auditing practices and procedures to be used for our
financial statements and reviews the results of those audits. The compensation
committee consists of Mr. Boyle and Mr. Gotcher. The compensation committee
makes recommendations to the board of directors regarding our stock plans and
the compensation of officers.
Director Compensation
Our non-employee directors are reimbursed for expenses incurred in connection
with attending board and committee meetings but are not compensated for their
services as board or committee members. In the past, we have granted Mr. Boyle
and Mr. Gotcher, both non-employee directors, options to purchase our common
stock pursuant to the terms of our Amended and Restated
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<PAGE>
1996 Stock Option Plan. Mr. Gotcher's option was granted during fiscal 1998 and
represents the right to purchase 23,938 shares of our common stock at an
exercise price of $1.20 per share. This option has a term of 10 years and may
be exercised in whole or in part at any time. However, any shares purchased
upon exercise of the option will be subject to a right of repurchase held by us
in the event that Mr. Gotcher's relationship with us terminates prior to the
lapse of our repurchase right. Our repurchase right on these shares will lapse
ratably over a four-year period from the date of grant. Both employee and non-
employee directors are eligible to receive options to purchase our common stock
pursuant to the terms of our Amended and Restated 1996 Stock Option Plan. See
"--Stock Plans."
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee is currently, or has ever
been at any time since our formation, one of our officers or employees. No
member of the compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more officers
serving as a member of our board of directors or compensation committee.
Executive Compensation
The following table sets forth information concerning compensation for
services rendered to us in all capacities earned in the fiscal year ending
December 31, 1998 by our Chief Executive Officer. No other officers of iGo
earned $100,000 or more in combined salary and bonus in fiscal 1998. We have
never granted any stock options to Mr. Hawk.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------
Other Annual
Name and Principal Position Salary Bonus Compensation
- --------------------------- -------- ------ ------------
<S> <C> <C> <C>
Ken Hawk, President, Chief Executive Officer and
Chief Energizing Officer........................ $150,000 $1,450 (1)
</TABLE>
- --------
(1) During 1998, we provided Mr. Hawk with additional employee benefits in an
amount not exceeding 10% of his combined salary and bonus. Through our
standard package of medical insurance, Mr. Hawk and all other iGo employees
have $15,000 in coverage amount of term life insurance. Our insurance
provider does not segregate amounts payable for this life insurance
coverage from our aggregate premiums for medical coverage and, accordingly,
we cannot attribute a specific dollar value to any premiums associated with
such life insurance coverage. As of December 31, 1998, Mr. Hawk held an
aggregate of 797,600 shares of restricted stock having an aggregate value
in excess of the amount paid for them of $4,615,748 based upon a deemed
fair value as of such date.
Stock Plans
Amended and Restated 1996 Stock Option Plan. Our Amended and Restated 1996
Stock Option Plan, was adopted by our board of directors in July 1999 and will
be submitted to our stockholders for approval in August 1999. This plan
provides for the grant of incentive stock options to our employees and
nonstatutory stock options to our employees, directors and consultants. We have
reserved an aggregate of 542,800 shares of common stock for issuance under this
plan. The number of shares reserved for issuance under this plan will be
subject to an annual increase on the first day of each fiscal year (beginning
January 1, 2001) equal to the lesser of (a) 150,000 shares, (b) 5% of the
outstanding shares on that date or (c) a lesser amount as determined by the
board of directors. As of July 31, 1999, options to purchase 212,590 shares of
common stock were outstanding, 59,341 shares had been issued upon exercise of
options, net of repurchases, and 270,869 shares were available for future
grant.
48
<PAGE>
After this offering, the compensation committee of our board of directors
will administer the stock option plan and determine the terms of options
granted, including the exercise price, the number of shares subject to
individual option awards and the vesting period of options or on shares
acquired upon exercise of options. The exercise price of nonstatutory options
must generally be at least 85% of the fair market value of our common stock on
the date of grant. The exercise price of incentive stock options cannot be
lower than 100% of the fair market value of our common stock on the date of
grant and, in the case of incentive stock options granted to holders of more
than 10% of our voting power, not less than 110% of the fair market value. The
term of an incentive stock option cannot exceed 10 years, and the term of an
incentive stock option granted to a holder of more than 10% of our voting power
cannot exceed five years.
Options granted under our stock option plan will accelerate and become fully
vested in the event we are acquired, unless the successor corporation assumes
or substitutes other options in their place. Our board of directors may not,
without the adversely affected optionee's prior written consent, amend, modify
or terminate the stock plan if the amendment, modification or termination would
impair the rights of optionees. Our stock option plan will terminate in 2006
unless terminated earlier by the board of directors.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan was
adopted by our board of directors in July 1999 and will be submitted to our
stockholders for approval in August 1999. This plan provides our employees with
an opportunity to purchase our common stock through accumulated payroll
deductions. We initially reserved 22,000 shares of common stock for issuance
under this purchase plan. We have not yet issued any shares under this plan.
The number of shares reserved for issuance under the purchase plan will be
subject to an annual increase on the first day of each fiscal year (beginning
January 1, 2001) equal to the lesser of (a) 20,000 shares, (b) 3/4% of the
outstanding shares on that date or (c) a lesser amount as determined by our
board of directors.
Our purchase plan will be administered by our board of directors or by a
committee appointed by the board of directors. The purchase plan permits
eligible employees to purchase our common stock through payroll deductions of
up to 10% of his or her compensation or up to 200 shares of common stock for
each offering period, up to a maximum of $25,000 for all purchases within the
same calendar year. Employees are eligible to participate in this purchase plan
if they are customarily employed by us at least 20 hours per week and more than
five months in any calendar year and only to the extent that they do not own
more than 5% of our outstanding shares.
Unless our board of directors or its committee determines otherwise, this
purchase plan will be implemented in a series of consecutive, overlapping
offering periods, each approximately six months in duration. Offering periods
will begin on the first trading day on or after May 1 and November 1 of every
year and terminate on the last trading day in the period six months later,
provided that the first offering period will commence on the effective date of
this offering and will end on October 31, 2001, or the last trading day prior
thereto. If we are acquired and the successor corporation does not assume all
outstanding options under this purchase plan, then the offering and purchase
periods then in progress will be shortened so that all options will be
automatically exercised immediately prior to the date of acquisition. The price
at which common stock will be purchased under this purchase plan is equal to at
least 85% of the fair market value of the common stock on the first day of the
applicable offering period or the last day of the applicable purchase period,
whichever is lower. Employees may end their participation in the offering
period at any time, and participation automatically ends on termination of
employment or on the 91st day following an extended leave of absence from which
they have not returned. Our board of directors may not, without the adversely
49
<PAGE>
affected optionee's prior written consent, amend, modify or terminate this
purchase plan at any time if the amendment, modification or termination would
impair the rights of plan participants. This purchase plan will terminate in
July 2009, unless terminated earlier in accordance with its provisions.
401(k) Plan. In July 1998, we adopted a Retirement Savings and Investment
Plan covering our full-time employees located in the United States. This plan
is intended to qualify under Section 401(k) of the Internal Revenue Code of
1986, as amended, so that contributions to this plan by employees, and the
investment earnings thereon, are not taxable to employees until withdrawn.
Pursuant to this plan, employees may elect to reduce their current compensation
by up to the lesser of 15% of their annual compensation or the statutorily
prescribed annual limit ($10,000 in calendar 1998) and to have the amount of
such reduction contributed to this plan. This plan permits but does not require
additional matching contributions by us on behalf of plan participants.
Change of Control Agreements
We have entered into change of control agreements with our executive officers
and those non-employee directors who hold stock options. In the event of a
change of control (as defined in the agreements), the unvested portion of any
outstanding stock options issued to our non-employee directors and to Mick
Delargy, our Senior Vice President and Chief Financial Officer, will be
accelerated and our repurchase right, if any, applicable to any common stock
held by them will immediately lapse. With respect to all other executive
officers, in the event that their employment with us is terminated without
cause within twelve months following a change of control, one year of vesting
on the unvested portion of any outstanding stock options issued to such
officers will be accelerated, and a similar proportion of our repurchase right,
if any, applicable to any common stock held by them will immediately lapse.
The change of control agreements provide that if the acceleration of vesting
or lapse of any applicable repurchase option would cause the transaction
resulting in the change of control not to be eligible for accounting treatment
as a "pooling of interests," then any applicable vesting will not accelerate
and any applicable repurchase options will not lapse.
Pursuant to the terms of his employment offer letter, we have agreed to pay
Robert Bauer, our Vice President, Sales and Marketing, six months salary in the
event that he is terminated in connection with a change of control.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for the following:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
50
<PAGE>
Our certificate of incorporation and bylaws provide that we shall indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions in such capacity,
regardless of whether the bylaws would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors
and executive officers for certain expenses, including attorneys' fees,
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in our rights, arising out of
such person's services as a director or executive officer to us, any of our
subsidiaries or any other company or enterprise to which the person provides
services at our request. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.
51
<PAGE>
TRANSACTIONS WITH DIRECTORS, OFFICERS AND 5% STOCKHOLDERS
Since our inception in March 1993, there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which we were or
are to be a party in which the amount involved exceeds $60,000, and in which
any director, executive officer, holder of more than 5% of our common stock or
any member of the immediate family of any of these people had or will have a
direct or indirect material interest other than compensation agreements and
other arrangements, which are described where required in "Management," and the
transactions described below.
On June 14 and 21, 1996, we sold an aggregate of 611,250 shares of Series A
preferred stock at a price per share of $2.67 to a group of private investors
that included the following 5% stockholders:
<TABLE>
<CAPTION>
Shares
of
Series A
Purchaser Stock
--------- --------
<S> <C>
Wand/Power Express Investments I L.P. .............................. 524,500
John Mackall........................................................ 18,750
</TABLE>
David Callard, one of our directors, is the President of Wand (Power Express)
Inc., the general partner of Wand/Power Investments I L.P. Mr. Callard
disclaims any beneficial ownership of the securities held by Wand/Power Express
Investments I L.P., except for his proportional partnership interest therein.
Simultaneous with the first closing of our sale of Series A preferred stock, we
granted a warrant to purchase up to 6,750 shares of common stock at an exercise
price of $2.67 per share to Malcolm Appelbaum, a Vice President of Wand (Power
Express) Inc. This warrant was exercised on July 26, 1999.
On October 22 and 29, 1998, we sold an aggregate of 500,000 shares of Series
B preferred stock at a price per share of $12.00 to a group of private
investors that included the following directors and 5% stockholders:
<TABLE>
<CAPTION>
Shares
of
Series B
Purchaser Stock
--------- --------
<S> <C>
Institutional Venture Partners VIII, L.P. .......................... 442,622
IVM Investment Fund VIII, LLC....................................... 4,766
IVM Investment Fund VIII-A, LLC..................................... 2,043
IVP Founders Fund I, L.P. .......................................... 4,450
Peter Gotcher....................................................... 21,029
John Mackall........................................................ 6,040
</TABLE>
Institutional Venture Partners VIII, L.P., IVM Investment Fund VIII, LLC, IVM
Investment Fund VIII-A, LLC and IVP Founders Fund I, L.P. are affiliated
entities and together are considered a greater than 5% stockholder. Peter
Gotcher, one of our directors, is a venture partner of Institutional Venture
Partners but does not have voting or dispository control over the shares held
by the Institutional Venture Partners' entities. Effective upon Mr. Gotcher
joining our board of directors upon the closing of our sale of Series B
preferred stock, we granted to Mr. Gotcher an option to purchase 23,938 shares
of our common stock at an exercise price of $1.20 per share. This option has a
term of 10 years and may be exercised in whole or in part at any time. However,
any shares purchased upon exercise of the option will be subject to a right of
repurchase held by us in the event that Mr. Gotcher's relationship with us
terminates prior to the lapse of our repurchase right. Our repurchase right on
these shares will lapse ratably over a four-year period from the date of grant.
52
<PAGE>
On November 24, 1998, pursuant to the terms of his employment offer letter,
we agreed to pay Robert Bauer, our Vice President, Sales and Marketing, six
months salary in the event that he is terminated in connection with a change of
control.
On July 30, 1999, we sold an aggregate of 141,762 shares of Series C
preferred stock at a price per share of $40.91 to a group of private investors
that included the following directors and 5% stockholders:
<TABLE>
<CAPTION>
Shares of
Series C
Purchaser Stock
--------- ---------
<S> <C>
Institutional Venture Partners VIII, L.P........................... 94,768
IVM Investment Fund VIII, LLC...................................... 1,786
Peter Gotcher...................................................... 1,222
Darrell Boyle...................................................... 2,445
John Mackall....................................................... 4,400
</TABLE>
As noted earlier, Institutional Venture Partners VIII, L.P., IVM Investment
Fund VIII, LLC, IVM Investment Fund VIII-A, LLC and IVP Founders Fund I, L.P.
are affiliated entities and together are considered a greater than 5%
stockholder and Peter Gotcher, one of our directors, is a venture partner of
Institutional Venture Partners.
On July 16, 1999, we granted an option to purchase up to 23,777 shares of our
common stock at an exercise price of $23.80 to Mick Delargy, our Senior Vice
President, Finance and Business Development and Chief Financial Officer. In
addition, on the same date we granted an option to purchase up to 10,000 shares
of our common stock at an exercise price of $23.80 per share to Darrell Boyle,
one of our non-employee directors. These options have a term of 10 years and
may be exercised in whole or in part at any time. However, any shares purchased
upon exercise of the options will be subject to a right of repurchase held by
us in the event that Mr. Delargy's or Mr. Boyle's relationship with us
terminates prior to the lapse of our repurchase right. Our repurchase right on
these shares will lapse ratably over a four-year period from the date of grant.
We have entered into indemnification agreements with each of our directors
and officers. Such indemnification agreements will require us to indemnify our
directors and officers to the fullest extent permitted by Delaware law. See
"Management--Limitations on Liability and Indemnification."
All future transactions, including any loans from our company to our
officers, directors, principal stockholders or affiliates, will be approved by
a majority of the board of directors, including a majority of the independent
and disinterested members of the board of directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to our company than could be obtained from unaffiliated third parties.
53
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the shares of our common stock as of July 31, 1999, after giving
effect to the conversion of all outstanding shares of preferred stock into
common stock and as adjusted to reflect the sale of the common stock offered by
us pursuant to this prospectus, by:
. each person who is known by us to own beneficially more than 5% of our
common stock on a fully-diluted basis;
. Ken Hawk, our President, Chief Executive Officer and Chief Energizing
Officer;
. each of our directors; and
. all current directors and executive officers as a group.
Except as otherwise noted, the address of each person listed in the table is
c/o iGo Corporation, 2301 Robb Drive, Reno, Nevada 89523. The table includes
all shares of common stock beneficially owned by the indicated stockholder as
of July 31, 1999. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission. In computing the number of
shares beneficially owned by a person and the percentage of ownership of that
person, shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of July 31, 1999 are deemed
outstanding. Such shares, however, are not deemed outstanding for the purposes
of computing the percentage of ownership of any other person. To our knowledge,
except as otherwise noted, 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.
The percent of beneficial ownership for each stockholder is based on
2,387,533 shares of common stock outstanding prior to this offering, on an as
converted basis and assuming the issuance of 20,830 shares upon conversion of a
portion of our outstanding subordinated indebtedness, and shares of
common stock outstanding after this offering. An "*" indicates ownership of
less than 1%.
<TABLE>
<CAPTION>
Percentage of Shares
Number of Outstanding
Shares ------------------------
Beneficially Before After
Name and Address Owned Offering Offering
- ---------------- ------------ -------- ----------
<S> <C> <C> <C>
Ken Hawk............................... 797,600 33.4%
Institutional Venture Partners (1)..... 550,525 23.1%
3000 Sand Hill Road, Bldg. 2, Ste. 290
Menlo Park, California 94025
Wand/Power Express Investments I L.P... 524,500 22.0%
630 Fifth Avenue, Ste. 2435
New York, New York 10111
John Mackall (2)....................... 216,690 9.1%
1332 Anacapa Street, Ste. 200
Santa Barbara, California 93101
Darrell Boyle (3)...................... 26,612 *
David Callard (4)...................... 524,500 22.0%
630 Fifth Avenue, Ste. 2435
New York, New York 10111
Peter Gotcher (5)...................... 42,857 1.8%
All directors and executive officers
as a group (8 persons) (6)............ 1,499,146 59.6%
</TABLE>
(See footnotes on following page.)
54
<PAGE>
- --------
(1) Represents 537,390 shares held by Institutional Venture Partners VIII,
L.P., 6,552 shares held by IVM Investment Fund VIII, LLC, 2,043 shares held
by IVM Investment Fund VIII-A, LLC and 4,540 shares held by IVP Founders
Fund I, L.P.
(2) Includes 10,440 shares held by Santa Barbara Tank & Trust as Trustee for
John R. Mackall SEPP-IRA over which Mr. Mackall exercises voting and
investment control.
(3) Includes 10,000 shares acquired upon exercise of a stock option, 3,750
shares of which as of July 31, 1999 remain subject to our right of
repurchase, which right lapses over time.
(4) Represents shares held by Wand/Power Express Investments I L.P. Mr. Callard
is a director of our company and the President of Wand (Power Express)
Inc., the general partner of Wand/Power Express Investments I L.P. Mr.
Callard disclaims beneficial ownership of shares held by this entity,
except for his proportional interest arising from his partnership interest
in such fund.
(5) Excludes all shares held by Institutional Venture Partners VIII, L.P., IVM
Investment Fund VIII, LLC, IVM Investment Fund VIII-A, LLC and IVP Founders
Fund I, L.P. Mr. Gotcher is a venture partner of Institutional Venture
Partners and a director of our company. Mr. Gotcher exercises no voting or
dispository control over the holdings of such funds. Includes 23,938 shares
issuable upon exercise of an option, all of which are exercisable but all
of which as of July 31, 1999 are subject to our right of repurchase, which
right lapses over time.
(6) Includes shares described in footnotes 3, 4 and 5. Also includes an
aggregate of 92,527 shares issuable upon exercise of options held by
executive officers exercisable within 60 days of July 31, 1999, of which
85,914 shares were subject to our right of repurchase as of July 31, 1999,
which right lapses over time.
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Upon the completion of this offering, we will be authorized to issue
50,000,000 shares of common stock, $0.001 par value per share, and 5,000,000
shares of undesignated preferred stock, $0.001 par value per share. The
following description of our capital stock does not purport to be complete.
This description is subject to and qualified in its entirety by our certificate
of incorporation and bylaws, which are included as exhibits to the registration
statement of which this prospectus forms a part, and by the provisions of
applicable Delaware law.
Common Stock
As of July 31, 1999, there were 2,387,533 shares of common stock outstanding
that were held of record by approximately 62 stockholders (assuming conversion
of all shares of preferred stock outstanding as of July 31, 1999 and the
issuance of 20,830 shares of common stock upon conversion of a portion of our
subordinated indebtedness in connection with this offering). There will be
shares of common stock outstanding (assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants) after
giving effect to the sale of common stock offered in this offering. There are
outstanding options to purchase a total of 212,590 shares of our common stock.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Our stockholders
do not have cumulative voting rights in the election of directors. Accordingly,
holders of a majority of the shares voting are able to elect all of the
directors. Subject to preferences that may be granted to any then outstanding
preferred stock, holders of common stock are entitled to receive ratably only
those dividends as may be declared by the board of directors out of funds
legally available therefor, as well as any distributions to the stockholders.
See "Dividend Policy." In the event of a liquidation, dissolution or winding up
of iGo, holders of common stock are entitled to share ratably in all of our
assets remaining after we pay our liabilities and distribute the liquidation
preference of any then outstanding preferred stock. Holders of common stock
have no preemptive or other subscription or conversion rights.
Preferred Stock
Our certificate of incorporation filed in connection with this offering
provides that our board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series. The rights,
preferences and privileges of each series of preferred stock may be greater
than the rights of our common stock. It is not possible to state the actual
effect of the issuance of any shares of preferred stock upon the rights of
holders of our common stock until the board of directors determines the
specific rights of the holders of any preferred stock that may be issued.
However, the effects might include, among other things: (1) restricting
dividends on the common stock, (2) diluting the voting power of the common
stock, (3) impairing the liquidation rights of the common stock and (4)
delaying or preventing a change in our control without further action by the
stockholders. Upon the closing of this offering, no shares of preferred stock
will be outstanding, and we have no present plans to issue any shares of
preferred stock.
56
<PAGE>
Warrants
As of the closing of this offering, there will be warrants to purchase 2,688
shares of our common stock at an exercise price of $40.91, which will remain
exercisable until three years following this offering. In addition, as of the
closing of this offering, there will be warrants to purchase 6,750 shares of
our common stock at an exercise price of $2.67, which will remain exercisable
until June 14, 2003.
Registration Rights
Pursuant to a registration and information rights agreement entered into
between us and holders of 1,054,350 shares of common stock, holders of
1,253,012 shares of common stock issuable upon conversion of our Series A,
Series B and Series C preferred stock and the holder of a warrant to purchase
6,750 shares of common stock, we are obligated, under limited circumstances and
subject to specified conditions and limitations, to use our best efforts to
register these shares.
We must use our best efforts to register these shares:
. if we receive written notice from holders of 66 2/3% or more of these
shares requesting that we effect a registration with respect to not less
than 25% of these shares;
. if we decide to register our own securities (except in connection with
this offering or any other offering in which the managing underwriter
determines that the inclusion of person's shares other than our own would
adversely affect the marketing of the securities to be sold by us); or
. if (1) we receive written notice from a holder or holders of these shares
requesting that we effect a registration on Form S-3 (a shortened form of
registration statement) with respect to shares of these shares, the
reasonably anticipated price to the public of which exceeds $560,000 and
(2) we are then eligible to use Form S-3 (which at the earliest will
occur twelve calendar months after the closing of this offering).
However, in addition to certain other conditions and limitations, if
requested to register shares of these shares, we can delay registration not
more than once in any 12-month period and for not more than 90 days. In
addition, unless the request is for a registration on Form S-3, we are
obligated to effect only two registrations requested by the holders of these
shares (and only once in any 12-month period). In any case where we decide to
register our own securities pursuant to an underwritten offering, the managing
underwriter may limit the registrable shares to be included in the registration
to not less than 10% of the total value of securities to be registered.
These registration rights terminate with respect to each of these shares when
the holder can transfer all of his or her registrable shares pursuant to Rule
144 within a 90-day period. In addition, the holders of these registration
rights have entered into lockup agreements and waived their registration rights
until 180 days following the date of this prospectus.
Delaware Law and Certain Provisions of Our Certificate of Incorporation and
Bylaws
Certain provisions of Delaware law and our certificate of incorporation and
bylaws could make it more difficult to acquire us by means of a tender offer, a
proxy contest or otherwise and the removal of incumbent officers and directors.
These provisions, summarized below, may discourage certain types of coercive
takeover practices and inadequate takeover bids and encourage persons seeking
to acquire control of our company to first negotiate with our company. We
believe that the
57
<PAGE>
benefits of increased protection of our company's potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure our company outweigh the disadvantages of discouraging
such proposals because, among other things, negotiation of such proposals could
result in an improvement of their terms.
We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became
an interested stockholder, unless (with certain exceptions) the "business
combination" or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior to the determination of
interested stockholder status, did own) 15% or more of a corporation's voting
stock. The existence of this provision would be expected to have an anti-
takeover effect with respect to transactions not approved in advance by the
board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders.
Our certificate of incorporation eliminates the right of stockholders to act
by written consent without a meeting. The certificate of incorporation and
bylaws do not provide for cumulative voting in the election of directors. The
authorization of undesignated preferred stock makes it possible for the board
of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
our company. These and other provisions may have the effect of deterring
hostile takeovers or delaying changes in control or management of our company.
The amendment of any of these provisions would require approval by holders of
at least 66 2/3% of our outstanding common stock.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is U.S. Stock Transfer
Corporation.
National Market Listing
We have applied to list our common stock for quotation on the Nasdaq National
Market under the symbol "IGOC."
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering there was no public market for our common
stock. Future sales of substantial amounts of common stock in the public market
could adversely affect the market price of the common stock. Furthermore, due
to contractual and legal restrictions on resale, only a limited number of
shares will be available for sale shortly after the offering. After these
restrictions lapse, sales of substantial amounts of our common stock in the
public market could adversely affect the prevailing market price and our
ability to raise capital equity.
Upon completion of this offering, based on shares outstanding as of July 31,
1999, we will have outstanding shares of common stock, assuming:
. the issuance of shares of common stock in this offering;
. the issuance of 20,830 shares of common stock upon conversion of a
portion of our subordinated indebtedness in connection with this
offering;
. no exercise of the underwriters' over-allotment option; and
. no exercise of options or warrants after July 31, 1999.
Of these shares, the shares sold in this offering, plus any shares
issued upon exercise of the underwriters' option to purchase additional shares,
will be freely tradable without restriction under the Securities Act, unless
purchased by our "affiliates," as that term is defined in Rule 144 of the
Securities Act.
The remaining 2,387,533 shares of common stock outstanding are "restricted
securities" within the meaning of Rule 144. Restricted shares may be sold in
the public market only if registered with the securities and Exchange
Commission or if they qualify for an exemption from registration under Rule
144. Rule 144(k), or Rule 701 of the Securities Act, all of which are
summarized below. Sales of the restricted shares in the public market, or the
availability of shares for sale, could adversely affect the market price of our
common stock.
Our stockholders have entered into agreements in which they have agreed that
they will not, without the prior written consent of BancBoston Robertson
Stephens Inc., offer, sell, contract to sell, or grant any option to purchase
or otherwise dispose of their shares of our common stock for a period of
180 days following the effective date of the registration statement filed
pursuant to this offering. These agreements, often referred to as lock-up
agreements, also apply to any securities owned by our stockholders that are
exercisable for or convertible into our common stock. As a result of these
contractual restrictions, shares subject to lock-up agreements may not be sold
until such lock-up agreements expire or are waived by BancBoston Robertson
Stephens Inc. In addition, at July 31, 1999, 9,460 restricted shares are
subject to our right of repurchase, which right lapses over time. Taking into
account the lock-up agreements, and assuming BancBoston Robertson Stephens Inc.
does not release stockholders from these agreements, the following shares will
be eligible for sale in the public market at the following times:
. beginning on the effective date, only the shares sold in the offering
will be immediately available for sale in the public market; and
. beginning 180 days after the effective date, approximately 2,211,542
shares will be eligible for sale pursuant to Rules 144, 144(k) and 701.
59
<PAGE>
Under Rule 144, the number of shares that may be sold by affiliates of our
stockholders are subject to volume restrictions. In general, under Rule 144,
and beginning after the expiration of the lock-up agreements, a person who has
beneficially owned restricted shares, including shares that are aggregated to
such person or persons, for at least one year would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of:
. one percent of the number of shares of common stock then outstanding,
which will equal approximately shares immediately after the
offering; or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale. In order to sell shares under Rule
144, the selling stockholder must comply with manner of sale provisions
and notice requirements and current public information about us must be
available.
Under Rule l44(k), the following persons may sell their shares without
complying with the manner of sale, public information, number of shares
limitation or notice provisions of Rule 144:
. not our affiliate during the three months preceding a sale; and
. beneficially owned the shares proposed to be sold for at least two years.
As part of the lock-up agreements, all of our employees holding common stock
or stock options may not sell shares acquired upon exercise of their options
until 180 days after the effective date. Beginning 180 days after the effective
date, any of our employees, officers, directors, or consultants who purchased
his or her shares pursuant to a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell their shares in reliance on Rule 144 without having to
comply with the holding period, public information, number of shares limitation
or notice provisions of Rule 144. In addition, we intend to file one or more
registration statements under the Securities Act as promptly as possible after
the effective date to register shares to be issued under our employee benefit
plans. As a result, any options exercised under our stock option plans or any
other benefit plan after the effectiveness of a registration statement will
also be freely tradable in the public market, unless the shares are held by
affiliates of ours. Shares held by our affiliates will still be subject to the
number of shares limitation, manner of sale, notice and public information
requirements of Rule 144 unless the shares may otherwise be sold under Rule
701. See "Management--Stock Plans" and "Description of Capital Stock--
Registration Rights."
As of July 31, 1999, there were a total of 212,590 shares of common stock
subject to outstanding options under our Amended and Restated 1996 Stock Option
Plan, all of which are exercisable, but 186,616 of which, as of July 31, 1999,
remain subject to our right of repurchase, which right lapses over time, and
all of which are subject to lock-up agreements. Immediately after the
completion of the offering, we intend to file registration statements on Form
S-8 under the Securities Act to register all of the shares of common stock
issued or reserved for future issuance under our Amended and Restated 1996
Stock Option Plan and our 1999 Employee Stock Purchase Plan. On the date 180
days after the effective date of the offering, the date that the lock-up
agreements expire, a total of 57,473 shares of our common stock subject to
options outstanding as of July 31, 1999 will be free from our right of
repurchase. After the effective dates of the registration statements on Form S-
8, shares purchased upon exercise of options granted pursuant to our Amended
and Restated 1996 Stock Option Plan and our 1999 Employee Stock Purchase Plan
generally would be available for resale in the public market.
60
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Hambrecht & Quist LLC and Thomas Weisel
Partners LLC, have severally agreed with us, subject to the terms and
conditions of the underwriting agreement, to purchase from us the number of
shares of common stock indicated opposite their names below. The underwriters
are committed to purchase and pay for all of the shares if any are purchased.
BancBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 1999.
<TABLE>
<CAPTION>
Number
of
Underwriters Shares
------------ ------
<S> <C>
BancBoston Robertson Stephens Inc.....................................
Hambrecht & Quist LLC.................................................
Thomas Weisel Partners LLC............................................
----
Total.............................................................
====
</TABLE>
We have been advised that the underwriters propose to offer the shares of
common stock to the public at the initial public offering price located on the
cover page of this prospectus and to certain dealers at that price less a
concession of not in excess of $ per share, of which $ may be
reallocated to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
representatives. No reduction in this price will change the amount of proceeds
to be received by us as indicated on the cover page of this prospectus.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise this option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage of additional shares that the number of shares of common
stock to be purchased by it shown in the above table represents as a percentage
of the shares offered by this prospectus. If purchased, the
additional shares will be sold by the underwriters on the same terms as those
on which the shares are being sold. We will be obligated, under
this option, to sell shares to the extent the option is exercised. The
underwriters may exercise the option only to cover over-allotments made in
connection with the sale of the shares of common stock offered by
this prospectus.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including
liabilities under the Securities Act of 1933 and liabilities arising from
breaches of representations and warranties contained in the underwriting
agreement.
61
<PAGE>
Lock-Up Agreements. Each of our executive officers, directors and other
significant stockholders of record has agreed with the representatives, for a
period of 180 days after the date of this prospectus, not to offer to sell,
contract to sell or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to any shares of common stock, any options or warrants to
purchase any shares of common stock, or any securities convertible into or
exchangeable for shares of common stock owned as of the date of this prospectus
or acquired directly from us by these holders or with respect to which they
have or may acquire the power of disposition, without the prior written consent
of BancBoston Robertson Stephens Inc. However, BancBoston Robertson Stephens
Inc. may, in its sole discretion and at any time without notice, release all or
any portion of the securities subject to lock-up agreements. There are no
agreements between the representatives and any of our stockholders providing
consent by the representatives to the sale of shares prior to the expiration of
the 180-day lock-up period.
Future Sales By Us. In addition, we have generally agreed that, during the
180-day lock-up period, we will not, without the prior written consent of
BancBoston Robertson Stephens Inc., (a) consent to the disposition of any
shares held by stockholders prior to the expiration of the 180-day lock-up
period or (b) issue, sell, contract to sell or otherwise dispose of, any shares
of common stock, any options or warrants to purchase any shares of common
stock, or any securities convertible into, exercisable for or exchangeable for
shares of common stock, other than our sale of shares in the offering, our
issuance of common stock upon the exercise of currently outstanding options and
warrants, and our issuance of incentive awards under our stock incentive plans.
See "Shares Eligible for Future Sale."
Directed Shares. We have requested that the underwriters reserve up to 10
percent of the shares of common stock for sale, at the initial public offering
price, to directors, officers, employees and other individuals designated by
iGo. As a result, the number of shares of common stock available for sale to
the general public in the offering will be reduced to the extent these
individuals and entities purchase the directed shares. Any directed shares not
so purchased will be offered by the underwriters to the general public on the
same terms as the other shares.
No Prior Public Market. Prior to this offering, there has been no public
market for the common stock. Consequently, the initial public offering price
for the common stock offered by this prospectus has been determined through
negotiations between us and the representatives. Among the factors considered
in these negotiations were prevailing market conditions, our financial
information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
Stabilization. The representatives have advised us that, under Regulation M
under the Securities Exchange Act, some participants in the offering may engage
in transactions, including stabilizing bids, syndicate covering transactions or
the imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of the common stock on behalf of the underwriters for the purpose
of fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by the underwriter or syndicate member is purchased by
62
<PAGE>
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by the underwriter or syndicate member. The
representatives have advised us that these transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
Share Purchases. Bayview 99 I, L.P. and Bayview 99 II, L.P., investment
partnerships affiliated with BancBoston Robertson Stephens Inc.; H&Q iGo
Investors, LLC, Hambrecht & Quist California and Hambrecht & Quist Employee
Venture Fund, LP II, investment partnerships affiliated with Hambrecht & Quist
LLC; and Tailwind Capital Partners L.P., an investment partnership affiliated
with Thomas Weisel Partners LLC, purchased 3,329, 2,782, 1,039, 611, 611 and
2,445 shares, respectively, of Series C preferred stock from us in July 1999,
at a price of $40.91 per share and on the same terms and conditions as all
other purchasers in our Series C preferred stock financing. In addition, 612
shares of Series C preferred stock were purchased at a price of $40.91 per
share by an individual affiliated with BancBoston Robertson Stephens Inc. and
an aggregate of 244 shares of Series C preferred stock were purchased by two
individuals affiliated with Thomas Weisel Partners LLC. Furthermore, 4,250
shares of our common stock issuable upon conversion of other series of our
preferred stock are held by an individual affiliated with BancBoston Robertson
Stephens Inc. As previously noted, all shares of our outstanding preferred
stock will convert into an equivalent number of shares of our common stock upon
the consummation of this offering.
Expenses of the Offering. The expenses of the offering are estimated at
$ and are payable entirely by us.
New Underwriters. 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 54 filed public offerings of equity securities, of which 31 have
been completed, and has acted as a syndicate member in an additional 27 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 with respect to its contractual relationship with
us under the underwriting agreement entered into in connection with this
offering.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for iGo
by Hale Lane Peek Dennison Howard and Anderson, Professional Corporation, Reno,
Nevada. Certain legal matters will be passed upon for iGo by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California and for the
underwriters by Brobeck Phleger & Harrison, LLP, San Francisco, California. As
of the date of this prospectus, WS Investment Company 99A, an investment
partnership composed of certain current and former members of and persons
associated with Wilson Sonsini Goodrich & Rosati, Professional Corporation,
beneficially owns 1,223 shares of our common stock. In addition, an individual
member of Hale Lane Peek Dennison Howard and Anderson, Professional
Corporation, beneficially owns 612 shares of our common stock.
63
<PAGE>
CHANGE IN INDEPENDENT ACCOUNTANTS
Effective January 1, 1999, Deloitte & Touche LLP was engaged as our
independent accountants and replaced other auditors who were dismissed as our
independent accountants on the same date. The decision to change accountants
was approved by our board of directors. The report of Grant Thornton LLP on our
financial statements for the year ended December 31, 1997 and the report of
Frank, Rimerman & Co. LLP on our balance sheet as of December 31, 1996 did not
contain an adverse opinion or a disclaimer of opinion and were not qualified or
modified as to any uncertainty, audit scope or accounting principles. During
our last two fiscal years, there were no disagreements with our former auditors
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of our former auditors, would have caused them to make
reference thereto in any of their reports. Our former auditors have not audited
or reported on any of the financial statements included in this prospectus.
Prior to January 1999, we had not consulted with Deloitte & Touche LLP on items
that involved our accounting principles or the form of audit opinion to be
issued on our financial statements.
EXPERTS
The financial statements as of December 31, 1997 and 1998, and for each of
the three years in the period ended December 31, 1998 included in this
prospectus and the related financial statement schedule included elsewhere in
the registration statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the registration statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU MAY FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1. This prospectus, which forms a part of the Registration
Statement, does not contain all the information included in the Registration
Statement. Certain information is omitted and you should refer to the
Registration Statement and its exhibits. With respect to references made in
this prospectus to any contract or other document of iGo, such references are
not necessarily complete and you should refer to the exhibits attached to the
Registration Statement for copies of the actual contract or document. You may
review a copy of the Registration Statement, including exhibits and schedule
filed therewith, at the Securities and Exchange Commission's public reference
room at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You
may also obtain copies of such materials from the Public References Section of
the Securities and Exchange Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. You may obtain
additional information on the operation of the public reference room by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains a website (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants, such as iGo, that file electronically with the Securities and
Exchange Commission.
64
<PAGE>
iGo CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Financial Statements:
Balance Sheets, December 31, 1997 and 1998; and June 30, 1999
(Unaudited).............................................................. F-3
Statements of Operations, Years Ended December 31, 1996, 1997, and 1998;
and Six-Month Periods Ended June 30, 1998 and 1999 (Unaudited)........... F-4
Statements of Stockholders' Deficit, Years Ended December 31, 1996, 1997,
and 1998; and Six-Month Period Ended June 30, 1999 (Unaudited)........... F-5
Statements of Cash Flows, Years Ended December 31, 1996, 1997, and 1998;
and Six-Month Periods Ended June 30, 1998 and 1999 (Unaudited)........... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of
Directors of iGo Corporation:
We have audited the accompanying balance sheets of iGo Corporation (the
"Company") as of December 31, 1997 and 1998, and the related statements of
operations, stockholders' deficit, and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997 and
1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Reno, Nevada
July 16, 1999 (July 30, 1999
as to paragraphs 5 through 7
of Note 10)
F-2
<PAGE>
iGo CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------ June 30,
1997 1998 1999
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ -- $ 2,504,351 $ --
Accounts receivable, net.............. 960,803 464,214 1,963,900
Inventory, net........................ 1,097,029 1,387,171 1,698,386
Prepaid expenses...................... 61,949 102,651 34,595
----------- ----------- -----------
Total current assets................ 2,119,781 4,458,387 3,696,881
Property and equipment, net............. 230,711 997,156 1,243,866
Intangibles and other assets............ 33,843 80,135 197,363
----------- ----------- -----------
Total............................. $ 2,384,335 $ 5,535,678 $ 5,138,110
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable ..................... $ 1,648,123 $ 780,565 $ 2,476,880
Accrued liabilities................... 304,797 194,012 586,806
Current portion of capital lease
obligations.......................... 10,302 16,504 92,581
Line of credit........................ -- -- 583,413
Short-term note payable............... -- 20,787 --
----------- ----------- -----------
Total current liabilities........... 1,963,222 1,011,868 3,739,680
Deferred rent........................... 35,032 36,379 37,052
Long-term portion of capital lease
obligations............................ 20,333 22,720 640,934
----------- ----------- -----------
Total liabilities................... 2,018,587 1,070,967 4,417,666
----------- ----------- -----------
Commitments and contingencies (notes 5
and 10)
Mandatory redeemable preferred stock.... 1,679,887 7,889,536 8,216,401
----------- ----------- -----------
Stockholders' deficit:
Common stock, no par value; 2,888,750
shares authorized; 1,063,586,
1,098,441, and 1,106,941 issued and
outstanding at December 31, 1997 and
1998 and June 30, 1999,
respectively......................... 94,168 103,580 107,818
Additional paid-in capital............ -- 203,013 681,978
Deferred compensation................. -- (187,534) (585,250)
Receivable from stockholder........... (43,683) (46,364) (47,765)
Accumulated deficit................... (1,364,624) (3,497,520) (7,652,738)
----------- ----------- -----------
Total stockholders' equity
(deficit).......................... (1,314,139) (3,424,825) (7,495,957)
----------- ----------- -----------
Total............................. $ 2,384,335 $ 5,535,678 $ 5,138,110
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
iGo CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six-Month
Years Ended December 31, Periods Ended June 30,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Net product revenue... $ 4,508,364 $ 7,421,631 $12,318,092 $ 5,779,002 $ 7,717,742
Development revenue... -- 665,716 502,004 502,004 --
----------- ----------- ----------- ----------- -----------
Total net revenues.. 4,508,364 8,087,347 12,820,096 6,281,006 7,717,742
Cost of goods sold...... 2,976,722 5,320,218 8,602,057 4,274,685 5,013,078
----------- ----------- ----------- ----------- -----------
Gross profit............ 1,531,642 2,767,129 4,218,039 2,006,321 2,704,664
----------- ----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing... 943,027 2,485,031 3,883,265 1,933,786 3,814,412
Product development... 87,157 112,851 510,762 160,607 711,855
General and
administrative....... 558,029 1,076,350 1,666,329 784,726 1,796,316
----------- ----------- ----------- ----------- -----------
Total operating
expenses........... 1,588,213 3,674,232 6,060,356 2,879,119 6,322,583
----------- ----------- ----------- ----------- -----------
Loss from operations.... (56,571) (907,103) (1,842,317) (872,798) (3,617,919)
Other income (expense):
Interest income....... 27,792 21,852 35,953 1,328 31,972
Interest expense...... (10,845) (2,931) (90,144) (42,525) (28,683)
Miscellaneous
(expense) income..... (5,060) 2,131 10,290 7,577 (214,107)
----------- ----------- ----------- ----------- -----------
Loss before provision
for income taxes....... (44,684) (886,051) (1,886,218) (906,418) (3,828,737)
Provision for income
taxes.................. -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net loss................ (44,684) (886,051) (1,886,218) (906,418) (3,828,737)
Preferred stock
dividends.............. (71,594) (140,434) (246,678) (74,502) (326,865)
----------- ----------- ----------- ----------- -----------
Net loss attributable to
common stockholders.... $ (116,278) $(1,026,485) $(2,132,896) $ (980,920) $(4,155,602)
=========== =========== =========== =========== ===========
Net loss per share--
basic and diluted...... $ (0.13) $ (1.11) $ (2.13) $ (0.99) $ (3.93)
=========== =========== =========== =========== ===========
Weighted-average shares
outstanding............ 900,000 923,927 999,591 989,786 1,057,750
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
iGo CORPORATION
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Stock Additional Receivable
------------------ Paid-in Deferred from Accumulated
Shares Amount Capital Compensation Stockholder Deficit Total
--------- -------- ---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1996................... 900,000 $ 50,000 $ -- $ -- $ -- $ (221,861) $ (171,861)
Net loss................ -- -- -- -- -- (44,684) (44,684)
Stock issued for note
receivable............. 147,600 39,852 -- -- (39,852) -- --
Mandatory redeemable
preferred stock
dividends.............. -- -- -- -- -- (71,594) (71,594)
--------- -------- -------- --------- -------- ----------- -----------
Balance, December 31,
1996................... 1,047,600 89,852 -- -- (39,852) (338,139) (288,139)
Net loss................ -- -- -- -- -- (886,051) (886,051)
Stock options
exercised.............. 15,986 4,316 -- -- -- -- 4,316
Accrued interest........ -- -- -- -- (3,831) -- (3,831)
Mandatory redeemable
preferred stock
dividends.............. -- -- -- -- -- (140,434) (140,434)
--------- -------- -------- --------- -------- ----------- -----------
Balance, December 31,
1997................... 1,063,586 94,168 -- -- (43,683) (1,364,624) (1,314,139)
Net loss................ -- -- -- -- -- (1,886,218) (1,886,218)
Deferred compensation on
stock options granted.. -- -- 203,013 (203,013) -- -- --
Compensation expense
related to stock
options................ -- -- -- 15,479 -- -- 15,479
Stock options
exercised.............. 34,855 9,412 -- -- -- -- 9,412
Accrued interest........ -- -- -- -- (2,681) -- (2,681)
Mandatory redeemable
preferred stock
dividends.............. -- -- -- -- -- (246,678) (246,678)
--------- -------- -------- --------- -------- ----------- -----------
Balance, December 31,
1998................... 1,098,441 103,580 203,013 (187,534) (46,364) (3,497,520) (3,424,825)
Net loss (unaudited).... -- -- -- -- -- (3,828,353) (3,828,353)
Deferred compensation on
stock options granted
(unaudited)............ -- -- 478,965 (478,965) -- -- --
Compensation expense
related to stock
options (unaudited).... -- -- -- 81,249 -- -- 81,249
Stock options exercised
(unaudited)............ 8,500 4,238 -- -- -- -- 4,238
Accrued interest
(unaudited)............ -- -- -- -- (1,401) -- (1,401)
Mandatory redeemable
preferred stock
dividends (unaudited).. -- -- -- -- -- (326,865) (326,865)
--------- -------- -------- --------- -------- ----------- -----------
Balance, June 30, 1999
(unaudited)............ 1,106,941 $107,818 $681,978 $(585,250) $(47,765) $(7,652,738) $(7,495,957)
========= ======== ======== ========= ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
iGo CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six-Month
Years Ended December 31, Periods Ended June 30,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss.............. $ (44,684) $ (886,051) $(1,886,218) $ (906,418) $(3,828,353)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Compensation expense
related to stock
options.............. -- -- 15,479 6,966 81,249
Accrued interest on
stockholder note
receivable........... -- (3,831) (2,681) (1,321) (1,401)
Provisions for bad
debt and inventory... -- 226,823 465,908 182,561 418,201
Loss on sale
leaseback............ -- -- -- -- 219,576
Depreciation and
amortization......... 16,790 48,305 137,148 55,262 190,123
Changes in:
Accounts receivable.. (198,928) (856,850) 139,820 291,182 (1,812,132)
Inventory............ (256,229) (752,465) (399,281) (504,932) (416,970)
Prepaid expenses..... (39,807) (1,802) (40,699) (26,269) 68,056
Accounts payable,
accrued liabilities
and deferred rent... 125,374 1,428,136 (976,996) (210,574) 2,089,782
----------- ----------- ----------- ----------- -----------
Net cash used in
operating
activities......... (397,484) (797,735) (2,547,520) (1,113,543) (2,991,869)
----------- ----------- ----------- ----------- -----------
Cash flows from
investing activities:
Acquisition of
property and
equipment............ (95,562) (108,698) (838,622) (64,708) (629,626)
Acquisition of
intangibles and other
assets............... (13,015) (23,970) (9,123) (3,749) (144,011)
----------- ----------- ----------- ----------- -----------
Net cash used in
investing
activities......... (108,577) (132,668) (847,745) (68,457) (773,637)
----------- ----------- ----------- ----------- -----------
Cash flows from
financing activities:
Principal payments on
short-term note and
capital leases....... -- (86,195) (72,765) (45,131) (28,873)
Proceeds from sale
leaseback............ -- -- -- -- 702,377
Proceeds from exercise
of stock options..... -- 4,316 9,412 -- 4,238
Net proceeds from
issuance of mandatory
redeemable preferred
stock................ 1,467,861 -- 5,962,969 -- --
Net proceeds from
borrowings under line
of credit............ -- -- -- 1,227,131 583,413
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities......... 1,467,861 (81,879) 5,899,616 1,182,000 1,261,155
----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents........... 961,800 (1,012,282) 2,504,351 -- (2,504,351)
Cash and cash
equivalents, beginning
of period............. 50,482 1,012,282 -- -- 2,504,351
----------- ----------- ----------- ----------- -----------
Cash and cash
equivalents, end of
period................ $ 1,012,282 $ -- $ 2,504,351 $ -- $ --
=========== =========== =========== =========== ===========
Supplemental disclosure
of cash flows
information:
Cash paid during the
period for interest.. $ -- $ 2,931 $ 90,144 $ 42,525 $ 28,683
=========== =========== =========== =========== ===========
Supplemental schedule
of noncash investing
and financing
activities:
Equipment acquired
through capital
leases............... $ -- $ 41,830 $ 18,993 $ 6,164 $ --
=========== =========== =========== =========== ===========
Mandatory redeemable
preferred stock
dividends accrued.... $ 71,594 $ 140,434 $ 246,678 $ 74,502 $ 326,865
=========== =========== =========== =========== ===========
Intangibles and other
assets acquired with
short-term notes..... $ -- $ -- $ 83,148 $ 83,148 $ --
=========== =========== =========== =========== ===========
Stock issued for note
receivables.......... $ 39,852 $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
Deferred compensation
on stock options
issued............... $ -- $ -- $ 203,013 $ -- $ 478,965
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
iGo Corporation (formerly Battery Express, Inc.) (the "Company") was
incorporated in California in 1993 and is headquartered in Reno, Nevada. The
Company is a leading provider of hard-to-find, model-specific accessories and
services for mobile electronic devices. Through its iGo.com website and
customer solutions representatives, the Company enables businesses and
individual consumers to efficiently identify, locate and purchase these
products and services. The Company's proprietary relational databases of over
6,500 products from more than 350 suppliers combined with its comprehensive
industry knowledge and service expertise, create a valuable one-stop solution
for its customers.
The Company's board of directors has authorized the filing of a registration
statement with the Securities and Exchange Commission that would permit the
Company to sell shares of the Company's common stock in connection with a
proposed initial public offering.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at date of purchase to be cash equivalents, and such items are
recorded at cost, which approximates fair market value.
Inventory
Inventory is stated at the lower of first-in, first-out cost or market, and
consists primarily of batteries and electronic accessories.
Property and Equipment
Depreciation is recorded under the straight-line method over the following
estimated useful lives: leasehold improvements, remaining life of the lease;
furniture and fixtures, four to seven years; and purchased software, four
years. Costs of normal repairs and maintenance are charged to expense as
incurred.
Intangibles and Other Assets
The costs of trademarks, and copyrights acquired are being amortized on the
straight-line method over their remaining lives ranging from one to 15 years.
Amortization expense charged to operations in 1996, 1997, and 1998 was $3,636,
$24,463, and $45,978, respectively.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
which requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Deferred income taxes reflect the net tax
effects of
F-7
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
(a) temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes and (b) operating loss and tax credit carry forwards.
Concentrations of Credit Risk
As of December 31, 1996, 1997, and 1998, there were no customers that
represented a significant percentage of sales or accounts receivable.
Concentrations with respect to trade receivables are limited due to the
Company's large number of customers and their geographic and economic
dispersion. Financial instruments that potentially subject the Company to
credit risks consist primarily of cash accounts on deposit with banks, which,
at times, may exceed federally insured limits. The Company believes it is not
exposed to any significant credit risk related to cash or accounts receivable.
Revenue Recognition
Revenues from sales of products and shipping fees are recognized at the time
the merchandise is shipped to customers, net of any discounts and reserves for
expected returns.
Advertising and Promotional Expenses
The Company expenses advertising and promotional costs as they are incurred.
Advertising and promotional expenses for the years ended December 31, 1996,
1997 and 1998 were $413,880, $1,507,735 and $2,055,436, respectively.
Retirement Plans
The Company provides a tax-qualified 401(k) retirement plan for the benefit
of eligible employees. The plan is designed to provide employees with
retirement funds on a tax-deferred basis and allows for discretionary matching
by the employer. Currently, the Company does not match employee contributions.
Common Stock-Based Compensation
The Company accounts for its employee stock-based compensation in accordance
with the provision of Accounting Principles Board ("APB") Opinion No. 25 and
provides pro forma disclosures of material amounts, if any, in the notes to
the financial statements, as if the measurement provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" had been adopted. The Company has
adopted SFAS No. 123 for stock-based compensation related to nonemployees.
Net Loss Per Share
Net loss per share--basic and diluted, is computed using the weighted-
average number of common shares outstanding during the period. Stock options
and warrants were not included in the computations because they would have
been antidilutive.
F-8
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
Fair Value of Financial Instruments
The Company's financial instruments include: accounts receivable, accounts
payable, notes payable and capital leases. The Company has estimated that the
carrying amount of accounts receivable, accounts payable and notes payable
approximates fair value due to the short-term maturities of these instruments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported in the financial statements. Actual amounts could
differ from those estimates.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective for all fiscal quarters for all fiscal years beginning after June 15,
2000. Although the Company does not believe SFAS No. 133 will have a material
impact on its financial statements, because of the complexity of SFAS No. 133,
the ultimate impact has not yet been determined.
Interim Financial Statements
The accompanying financial statements for the six-month periods ended June
30, 1998 and 1999 have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain interim information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of financial condition, results of operations, and cash flows
have been included. The results of operations for the interim periods should
not be considered indicative of results for a full calendar year. These
financial statements should be read in conjunction with the financial
statements, and notes thereto, in the Company's audited financial statements
for the year ended December 31, 1998.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
---------- ---------
<S> <C> <C>
Trade receivables................................... $1,088,416 $ 633,808
Allowance for bad debt.............................. (127,613) (169,594)
---------- ---------
Total accounts receivable, net.................... $ 960,803 $ 464,214
========== =========
</TABLE>
F-9
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. INVENTORY
Inventory consists of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Products on hand................................... $1,097,029 $1,496,310
Inventory reserve.................................. -- (109,139)
---------- ----------
Total inventory, net............................. $1,097,029 $1,387,171
========== ==========
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Leasehold improvements............................. $ 41,061 $ 37,418
Furniture and equipment............................ 236,844 498,956
Software........................................... 16,452 615,598
Accumulated depreciation........................... (63,646) (154,816)
---------- ----------
Total property and equipment, net................ $ 230,711 $ 997,156
========== ==========
</TABLE>
5. LEASE COMMITMENTS
Operating Leases
The Company leases certain equipment under non-cancelable operating leases.
Lease expense for all equipment operating leases was $859 for the years ended
December 31, 1996, 1997, and 1998.
The Company leases its facility under a non-cancelable operating lease
through September 2002. This lease requires monthly rental payments, which
increase over the lease term. The Company records rent expense on a straight-
line basis, resulting in deferred rent, which is reflected as a liability on
the accompanying balance sheet. The Company may extend the lease term for an
additional five years. The Company recorded rent expense for the years ended
December 31, 1996, 1997, and 1998 of $41,644, $92,112, and $138,615,
respectively.
The following is a schedule of the future minimum lease payments under the
equipment and facility operating leases as of December 31, 1998:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1999.............................................................. $141,552
2000.............................................................. 148,718
2001.............................................................. 151,546
2002.............................................................. 104,372
--------
$546,188
========
</TABLE>
F-10
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
Capital Leases
The Company conducts a portion of its operations with equipment under leases,
which have been capitalized. The leases are non-cancelable and expire on
various dates through October 2003. The capitalized value of the equipment is
approximately $64,937, and the related accumulated amortization is $3,004,
$3,600, and $13,547 as of December 31, 1996, 1997, and 1998, respectively. The
following is a schedule of the future minimum lease payments under capital
leases as of December 31, 1998:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1999............................................................. $ 19,900
2000............................................................. 15,625
2001............................................................. 3,084
2002............................................................. 3,084
2003............................................................. 2,569
--------
44,262
Amount representing interest..................................... (5,038)
--------
Net present value of future minimum lease payments............... 39,224
Current portion of capital lease obligation...................... (16,504)
--------
Noncurrent portion of capital lease obligations.................. $ 22,720
========
</TABLE>
6. LINE OF CREDIT
In January 1998, the Company entered into a $900,000 line of credit with
Wells Fargo Bank, funds from which are to be used for general working capital
expenditures. The agreement was amended in June 1998, to increase the line of
credit to $1.5 million, expiring on August 31, 1999. This line of credit is
secured by receivables, inventory, and intangibles. Interest is payable monthly
at a rate of 1.75% above the prime rate (9.50% as of December 31, 1998). As of
December 31, 1998, no amounts were outstanding on this line of credit.
7. INCOME TAXES
The provision for income taxes recognized for the years ended December 31
consists of the following:
<TABLE>
<CAPTION>
1996 1997 1998
-------- --------- ---------
<S> <C> <C> <C>
Tax benefit at U.S. statutory rates...... $ 10,993 $ 301,259 $ 734,529
Other items.............................. (1,352) (4,117) (5,708)
Earnings while the Company was taxed as
an S corporation........................ 2,060 -- --
Stock options............................ -- -- (5,263)
Increase in valuation allowance.......... (11,701) (297,142) (723,558)
-------- --------- ---------
Tax benefit.............................. $ -- $ -- $ --
======== ========= =========
</TABLE>
F-11
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following summarizes the effect of deferred income tax items and the
impact of temporary differences between amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws. The tax
items composing the Company's net deferred tax asset as of December 31 are as
follows:
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Current deferred tax asset:
Accrued liabilities............................... $ 71,946 $ 183,863
Other............................................. (272) --
Valuation allowance................................ (71,674) (183,863)
--------- ---------
Net current deferred tax asset..................... -- --
Non-current deferred tax asset:
Net operating loss................................ 277,162 943,067
Other............................................. 12,107 13,037
Non-current deferred tax liability:
Difference between book and tax basis of fixed
asset and intangibles............................ (10,278) (65,744)
Valuation allowance................................ (278,991) (890,360)
--------- ---------
Net non-current deferred tax asset................. -- --
--------- ---------
Net deferred tax asset............................. $ -- $ --
========= =========
</TABLE>
Due to the uncertainty of the realization of certain tax carryforward items,
a valuation allowance has been established in the aggregate amount of $350,665
and $1,074,223, at December 31, 1997 and 1998, respectively. Realization of a
significant portion of the assets offset by the valuation allowance is
dependent on the Company generating sufficient taxable income prior to the
expiration of the loss and credit carryforwards. As of December 31, 1997 and
1998, the Company had net operating loss carryforwards of approximately
$815,000 and $2,758,000, respectively, available to offset future taxable
income and credit carryforwards of approximately $2,000 available to offset
future taxes, which are available through 2018. The availability of the loss
and credit carryforwards may be subject to further limitation under Section 382
and 383 of the Internal Revenue Code in the event of a significant change of
ownership.
On June 14, 1996, the Company converted from an S corporation, which is taxed
at the stockholder level, to a C corporation. As the Company has generated
losses since inception, a pro forma tax benefit was not recorded for the period
prior to June 14, 1996.
8. EQUITY SECURITIES
Mandatory Redeemable Preferred Stock
The Company issued 611,250 shares of Series A mandatory redeemable preferred
stock ("Series A") during 1996 and 500,000 shares of Series B mandatory
redeemable preferred stock ("Series B") during 1998. Holders of Series A and
Series B are entitled to receive dividends at 8% per annum and may convert
their shares into common stock at a ratio of 1:1 excluding accrued dividends.
The conversion ratio for Series A is adjusted upon issuance of common stock at
less than
F-12
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
$2.67 per share. The conversion ratio for Series B is adjusted upon issuance of
common stock at less than $12.00 per share. Conversion is automatic upon an
initial public offering at a share price of not less than $7.50, with aggregate
proceeds of not less than $15.0 million.
If elected by the holders of 66 2/3% of the preferred stock then outstanding,
unconverted preferred stock is to be redeemed, on a quarterly basis, over eight
consecutive quarters beginning in June 2003 at the original issuance price plus
any declared but unpaid dividends, or upon a sale or merger of the Company
meeting certain criteria. Holders of Series A and Series B are also entitled to
a liquidation preference over common stock equal to the original price plus any
accrued but unpaid dividends.
No dividends have been declared or paid as of December 31, 1998. The Company
has recorded accrued dividends on Series A of $140,434 during the year ended
December 31, 1997 and $152,011 and $94,667 on Series A and Series B,
respectively, during the year ended December 31, 1998.
Warrants
In connection with the issuance of Series A, the Company issued warrants for
the purchase of 13,500 shares of common stock at $2.67 per share. The warrants
expire on June 14, 2003. The Company has reserved 13,500 shares of common stock
for issuance under outstanding warrants.
Issuance of Unvested Common Stock and Stockholder Loan
Also in connection with the issuance of Series A to an investor group, the
Company issued 147,600 shares of common stock to its president at $0.27 per
share in exchange for a note receivable of $39,852. These shares vest to the
president only upon the successful achievement of certain sales and
profitability performance goals or upon a sale of the Company at a price
sufficient to meet a specified internal rate of return criteria. At the
conclusion of the performance period, any unvested shares may be repurchased by
the Company, at the Company's discretion, at the original issuance price of the
stock. At December 31, 1998, the president had vested in 75% of the shares
issued under this arrangement.
The stockholder loan calls for interest to be accrued at 6% and is due upon
the sale of the Company or, if no sale occurs, on June 13, 2003. The
stockholder loan is secured by the stock issued under this arrangement.
9. STOCK OPTION PLAN
The Company has a stock option plan under which the board of directors has
reserved an aggregate of 271,400 shares of common stock for issuance. Under the
plan, the Company may grant incentive stock options to employees and non-
qualified stock options to employees, directors, and consultants.
Incentive stock options may be granted at a price not less than the estimated
fair market value of the common stock (110% of estimated fair value for options
granted to stockholders of 10% or more of the voting stock) at the date of
grant. Options are exercisable over periods not to exceed ten years
F-13
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
from the date of grant (five years for stockholders owning 10% or more of
common stock). Non-qualified options may be granted at a price not less than
85% of the estimated fair market value of the common stock at the date of grant
and are exercisable over periods not to exceed ten years. Estimated fair market
value of the Company's stock is determined annually by the Board of Directors.
Options can be exercised at any time following grant. The Company has the right
to repurchase at the option exercise price shares that have not vested. Options
granted to date vest over a four-year term, with 25% of the options vesting
after the first year and the remaining options vesting on a monthly basis
thereafter.
Stock option activity under the plan is as follows:
<TABLE>
<CAPTION>
Number Weighted-Average
of Options Exercise Price
---------- ----------------
<S> <C> <C>
Balance, January 1, 1996....................... -- $ --
Granted...................................... 147,853 0.27
Forfeited.................................... (15,000) 0.27
------- -----
Balance, December 31, 1996..................... 132,853 0.27
Granted...................................... 51,500 0.27
Exercised.................................... (15,986) 0.27
Forfeited.................................... (57,867) 0.27
------- -----
Balance, December 31, 1997..................... 110,500 0.27
Granted...................................... 68,313 0.94
Exercised.................................... (34,855) 0.27
Forfeited.................................... (38,145) 0.27
------- -----
Balance, December 31, 1998..................... 105,813 0.70
Granted (unaudited).......................... 63,750 1.72
Exercised (unaudited)........................ (8,500) 0.27
Forfeited (unaudited)........................ (1,000) 1.20
------- -----
Balance, June 30, 1999 (unaudited)............. 160,063 $1.11
======= =====
</TABLE>
The following table summarizes information about stock options outstanding
at:
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options Exercisable
------------------------------- --------------------------
Weighted-Average Weighted- Number Weighted-
Exercise Options Remaining Average of Options Average
Price Outstanding Contractual Life Exercise Price Exercisable Exercise Price
-------- ----------- ---------------- -------------- ----------- --------------
December 31, 1997:
<S> <C> <C> <C> <C> <C>
$0.27 110,500 9.1 years $0.27 15,000 $0.27
December 31, 1998:
$0.27 56,875 8.7 years $0.27 15,551 $0.27
$1.20 48,938 9.5 years $1.20 -- --
June 30, 1999 (unaudited):
$0.27 50,375 8.3 years $0.27 22,289 $0.27
$1.20 100,938 9.5 years $1.20 3,622 $1.20
$5.00 8,750 9.9 years $5.00 -- --
</TABLE>
F-14
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company recorded deferred compensation during 1998 aggregating $203,013
related to stock options. Compensation expense for 1998 totaled $15,479. The
remaining balance at December 31, 1998 will be recognized as expense over the
remaining vesting periods of the options as follows:
<TABLE>
<S> <C>
1999.............................................................. $ 50,751
2000.............................................................. 50,778
2001.............................................................. 49,076
2002.............................................................. 36,929
--------
$187,534
========
</TABLE>
Deferred compensation was computed as the difference between the deemed fair
value of the common stock and the option exercise price at the date of grant of
the options. Deemed fair value was derived from prices paid by independent
investors in the Series A and Series B financings.
10. SUBSEQUENT EVENTS
Stock Options
Subsequent to December 31, 1998, the Company issued 116,277 stock options.
The options vest over four years. Compensation expense related to such options
will be recorded as follows:
<TABLE>
<S> <C>
1999.............................................................. $176,902
2000.............................................................. 248,425
2001.............................................................. 247,746
2002.............................................................. 247,746
2003.............................................................. 70,165
--------
$990,984
========
</TABLE>
On July 16, 1999, the Board of Directors increased the aggregate number of
shares reserved for issuance under the stock option plan to 542,800, subject to
stockholder approval.
Lease Line of Credit
On June 28, 1999, the Company signed a $2.0 million equipment lease line of
credit with a leasing company. The line may be used to finance equipment
purchases. A portion of the line was used in a sale leaseback transaction of
certain computer hardware and software owned by the Company. The lease was
recorded as a capital lease, and resulted in a loss of $219,137 recorded in the
Company's statement of operations for the six-month period ended June 30, 1999.
In connection with this line, the Company issued a warrant to the leasing
company to purchase 2,688 shares of Series C mandatory redeemable preferred
stock ("Series C") at an exercise price of $40.91 (see below). The warrant
expires at the earlier of seven years from the date of the agreement or three
years following an initial public offering.
F-15
<PAGE>
iGo CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
Series C Mandatory Redeemable Preferred Stock
On July 30, 1999, the Company received gross proceeds of approximately $5.8
million on the sale of Series C at $40.91 per share. The Series C shareholders
have the same rights, preferences, and privileges as the Series A and Series B
shareholders (see Note 8).
Subordinated Convertible Debt
On July 30, 1999, the Company entered into a $3.5 million subordinated
convertible debt agreement with a leasing company. Amounts borrowed under such
agreement bear interest at an annual rate of 11%. Interest only is payable for
the first 12 months, then principal and interest for the final 24 months.
$980,000 of such debt is convertible (at the leasing company's option) into
Series C at a conversion price of approximately $47.05 per share (115% of the
Series C financing price). Conversion must occur no later than 30 days
following delivery of notice of the Company's intention to conduct an initial
public offering of its common stock or an acquisition, or if no such notice
occurs, conversion may occur at any time during the term of the agreement at
the option of the leasing company.
Legal Proceedings
On July 19, 1999, the firm from whom the Company purchased the rights to its
1-800-Batteries toll free telephone number and name gave the Company notice
that they believe the Company has failed to cure a material breach of the
agreement with them. The notice also stated that they are terminating their
agreement with the Company and demanding a return of their rights as well as
unspecified monetary damages. At the same time, they made a demand for
arbitration of the matter with the American Arbitration Association in
Richmond, Virginia. The Company has not yet responded to such demand. After a
review of the Company's actions with respect to its agreement with this firm,
management believes that the Company has not materially breached the agreement.
Accordingly, the Company considers its agreement with them to be in full force
and effect and intends to defend its position vigorously in any applicable
arbitration proceedings. While management believes that the Company will
ultimately prevail in this dispute, many of its customers may rely on the 1-
800-Batteries phone number to reach a customer solutions representative and to
the extent that the arbitrator disagrees with the Company's position and allows
this agreement to terminate, the Company could be harmed, although it is
difficult to estimate the extent or materiality of such harm.
F-16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by iGo in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC registration fee................................................. $17,584
NASD filing fee...................................................... 6,825
Nasdaq National Market listing fee...................................
Printing and engraving expenses......................................
Legal fees and expenses..............................................
Accounting fees and expenses.........................................
Blue sky qualification fees and expenses............................. 6,000
Transfer agent and registrar fees....................................
Miscellaneous expenses...............................................
-------
Total.............................................................. $
=======
</TABLE>
Item 14. Indemnification of Officers and Directors.
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article VI of iGo's restated certificate of incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
Article VI of iGo's bylaws provides for the indemnification of officers,
directors and third parties acting on behalf of iGo if such person acted in
good faith and in a manner reasonably believed to be in and not opposed to the
best interest of iGo, and, with respect to any criminal action or proceeding,
the indemnified party had no reason to believe his or her conduct was unlawful.
In addition to indemnification provided for in iGo's certificate of
incorporation and bylaws, iGo has entered into indemnification agreements with
its directors and executive officers. iGo intends to enter into indemnification
agreements with any new directors and executive officers in the future.
Item 15. Recent Sales of Unregistered Securities.
During the past three years, iGo has issued and sold the following
securities:
1. On October 22 and 29, 1998, iGo issued and sold, pursuant to a Series B
Preferred Stock Purchase Agreement, an aggregate of 500,000 shares of
Series B Preferred Stock to 14 investors at a purchase price of $12.00
per share for an aggregate offering price of $6,000,000.
II-1
<PAGE>
2. On June 23, 1999, the Company issued a warrant representing the right to
purchase up to 2,688 shares of Series C Preferred Stock at an exercise
price of $40.91 per share to Comdisco, Inc. in connection with iGo's
entry into a $2,000,000 equipment lease line of credit arrangement.
3. On July 30, 1999, iGo issued and sold, pursuant to a Series C Preferred
Stock Purchase Agreement, an aggregate of 141,762 shares of Series C
Preferred Stock to 24 investors at a per share price of $40.91 for an
aggregate offering price of $5,799,483.
4. From June 6, 1996 through July 31, 1999, iGo granted options under its
Amended and Restated 1996 Stock Option Plan to purchase an aggregate of
383,943 shares of Common Stock at exercise prices ranging from $0.27 to
$30.56 per share to 59 employees, directors and consultants.
5. From August 26, 1997 through July 31, 1999, iGo sold 59,341 shares of
Common Stock at purchase prices ranging from $0.27 to $1.20 per share to
11 employees, directors and consultants, pursuant to exercises of stock
options granted under its Amended and Restated 1996 Stock Option Plan.
The issuances of the securities in Items 1, 2 and 3 above were deemed to be
exempt from registration under the Act in reliance on Section 4(2) of such Act
as a transaction by an issuer not involving any public offering. The issuances
described in Items 4 and 5 above were deemed exempt from Registration under the
Act in reliance upon Rule 701 promulgated under the Act. The recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the
share certificates, options and warrants issued in such transactions. All
recipients had adequate access, through their relationships with iGo, to
information about iGo.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
2.1* Agreement and Plan of Merger between iGo Corporation (a Delaware
corporation) and Battery Express, Inc. (a California corporation)
3.1 Third Amended and Restated Articles of Incorporation of Battery
Express (California)
3.2* Second Amended and Restated Certificate of Incorporation of iGo
Corporation (Delaware)
3.3 Bylaws of Battery Express (California)
3.4 Bylaws of iGo Corporation (Delaware)
4.1* Specimen Common Stock Certificate
4.2 Stock Subscription Warrant dated June 14, 1996
4.3 Warrant Agreement to Purchase Shares of Preferred Stock dated June 23,
1999
4.4 Second Amended and Restated Registration Rights Agreement dated as of
July 30, 1999, between Registrant and certain of its stockholders and
a warrantholder
5.1* Opinion of Hale Lane Peek Dennison Howard and Anderson, P.C.
10.1 Amended and Restated 1996 Stock Option Plan
10.2 1999 Employee Stock Purchase Plan
10.3 Form of Indemnification Agreement
10.4 Form of Change of Control Agreement (Model A)
10.5 Form of Change of Control Agreement (Model B)
10.6 Master Lease Agreement dated June 23, 1999, between the Registrant and
Comdisco, Inc.
10.7 Subordinated Loan and Security Agreement dated July 30, 1999, between
the Registrant and Comdisco, Inc.
10.8 Lease Agreement dated June 5, 1997, as amended, for facilities at 2301
Robb Drive, Reno, Nevada, between the Registrant and Dermody Family
Limited Partnership II and Guila Gail Turville
10.9+ NEC Computer Systems Division Authorized Reseller Master Agreement
Number 306552 dated June 23, 1999 between NEC Computer Systems
Division and the Registrant and addendum thereto
10.10 Ariba Supplier Link Program Memorandum of Understanding dated November
3, 1998, between Ariba Technologies, Inc. and the Registrant
16.1 Letter of Grant Thornton LLP
16.2 Letter of Frank, Rimerman & Co. LLP
21.1 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see Page II-5)
27 Financial Data Schedule
</TABLE>
- --------
+Confidential treatment requested.
*To be filed by amendment.
II-3
<PAGE>
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts................... S-1
Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters
to permit prompt delivery to each purchaser.
(b) Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14
of this registration statement or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities
Act, 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 a director, officer or
controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Palo Alto, County of
Santa Clara, State of California, on the 6th day of August 1999.
iGo Corporation
/s/ Ken Hawk
By: _________________________________
Ken Hawk
Chairman of the Board, President,
Chief Executive Officer and
Chief Energizing Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Ken Hawk and Mick Delargy, and each of
them acting individually, as his attorney-in-fact, each with full power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Registration Statement (including post-effective amendments) and any
related registration statement pursuant to Rule 462(b), and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement. 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/ Ken Hawk Chairman of the Board, August 6, 1999
____________________________________ President, Chief Executive
(Ken Hawk) Officer and Chief Energizing
Officer (Principal Executive
Officer)
/s/ Mick Delargy Senior Vice President, August 6, 1999
____________________________________ Finance and Business
(Mick Delargy) Development, Chief Financial
Officer and Secretary
(Principal Financial and
Accounting Officer)
/s/ Darrell Boyle Director August 6, 1999
____________________________________
(Darrell Boyle)
/s/ David Callard Director August 6, 1999
____________________________________
(David Callard)
/s/ Peter Gotcher Director August 6, 1999
____________________________________
(Peter Gotcher)
</TABLE>
II-5
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Accounts Balance at
Beginning Written End of
of Period Provisions Off Period
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for Bad Debt:
Year ended 12/31/98.............. $ 127,613 $ 356,769 $ 314,788 $ 169,594
========== ========== ========== ==========
Year ended 12/31/97.............. $ 47,000 $ 226,823 $ 146,210 $ 127,613
========== ========== ========== ==========
Year ended 12/31/96.............. $ 47,000 $ 679 $ 679 $ 47,000
========== ========== ========== ==========
Allowance for Sales Returns:
Year ended 12/31/98.............. $ 62,937 $1,968,599 $1,794,727 $ 236,809
========== ========== ========== ==========
Year ended 12/31/97.............. $ 7,183 $ 559,246 $ 503,492 $ 62,937
========== ========== ========== ==========
Year ended 12/31/96.............. $ -- $ 191,831 $ 184,648 $ 7,183
========== ========== ========== ==========
Inventory Reserve:
Year ended 12/31/98.............. $ -- $ 109,139 $ -- $ 109,139
========== ========== ========== ==========
Year ended 12/31/97.............. $ -- $ -- $ -- $ --
========== ========== ========== ==========
Year ended 12/31/96.............. $ -- $ -- $ -- $ --
========== ========== ========== ==========
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.........................
2.1* Agreement and Plan of Merger between iGo Corporation (a
Delaware corporation) and Battery Express, Inc. (a
California corporation)................................
3.1 Third Amended and Restated Articles of Incorporation of
Battery Express (California)...........................
3.2* Second Amended and Restated Certificate of
Incorporation of iGo Corporation (Delaware)............
3.3 Bylaws of Battery Express (California).................
3.4 Bylaws of iGo Corporation (Delaware)...................
4.1* Specimen Common Stock Certificate......................
4.2 Stock Subscription Warrant dated June 14, 1996.........
4.3 Warrant Agreement to Purchase Shares of Preferred Stock
dated June 23, 1999....................................
4.4 Second Amended and Restated Registration Rights
Agreement dated as of July 30, 1999, between Registrant
and certain of its stockholders and a warrantholder....
5.1* Opinion of Hale Lane Peek Dennison Howard and Anderson,
P.C....................................................
10.1 Amended and Restated 1996 Stock Option Plan............
10.2 1999 Employee Stock Purchase Plan......................
10.3 Form of Indemnification Agreement......................
10.4 Form of Change of Control Agreement (Model A)..........
10.5 Form of Change of Control Agreement (Model B)..........
10.6 Master Lease Agreement dated June 23, 1999, between the
Registrant and Comdisco, Inc...........................
10.7 Subordinated Loan and Security Agreement dated July 30,
1999, between the Registrant and Comdisco, Inc.........
10.8 Lease Agreement dated June 5, 1997, as amended, for
facilities at 2301 Robb Drive, Reno, Nevada, between
the Registrant and Dermody Family Limited Partnership
II and Guila Gail Turville.............................
10.9+ NEC Computer Systems Division Authorized Reseller
Master Agreement Number 306552 dated June 23, 1999
between NEC Computer Systems Division and the
Registrant and addendum thereto........................
10.10 Ariba Supplier Link Program Memorandum of Understanding
dated November 3, 1998, between Ariba Technologies,
Inc. and the Registrant................................
16.1 Letter of Grant Thornton LLP...........................
16.2 Letter of Frank, Rimerman & Co. LLP....................
21.1 Subsidiaries of the Registrant.........................
23.1 Consent of Deloitte & Touche LLP, Independent
Auditors...............................................
23.2 Consent of Counsel (included in Exhibit 5.1)...........
24.1 Power of Attorney (see Page II-5)......................
27 Financial Data Schedule................................
</TABLE>
- --------
+Confidential treatment requested.
*To be filed by amendment.
<PAGE>
EXHIBIT 1.1
Draft of July 22, 1999
UNDERWRITING AGREEMENT
___________1999
BancBoston Robertson Stephens Inc.
Hambrecht & Quist LLC
Thomas Weisel Partners LLC
As Representatives of the several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
Introductory. iGo Corporation, a __________ corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of _____ shares (the "Firm Shares")
- ----------
of its Common Stock, par value $______ per share (the "Common Shares"). In
addition, the Company has granted to the Underwriters an option to purchase up
to an additional _____ Common Shares (the "Option Shares") as provided in
Section 2. The Firm Shares and, if and to the extent such option is exercised,
the Option Shares are collectively called the "Shares". BancBoston Robertson
Stephens Inc., Hambrecht & Quist LLC and Thomas Weisel Partners LLC have agreed
to act as representatives of the several Underwriters (in such capacity, the
"Representatives") in connection with the offering and sale of the Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1. (File No.
333-____), which contains a form of prospectus to be used in connection with the
public offering and sale of the Shares. Such registration statement, as
amended, including the financial statements, exhibits and schedules thereto, in
the form in which it was declared effective by the Commission under the
Securities Act of 1933 and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"), including any information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A or Rule 434
under the Securities Act, is called the "Registration Statement". Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement", and from and
after the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Shares, is called the "Prospectus"; provided, however, if
the Company has, with the consent of BancBoston Robertson Stephens Inc., elected
to rely upon Rule 434 under the Securities Act, the term "Prospectus" shall mean
1
<PAGE>
the Company's prospectus subject to completion (each, a "preliminary
prospectus") dated _____ (such preliminary prospectus is called the "Rule 434
preliminary prospectus"), together with the applicable term sheet (the "Term
Sheet") prepared and filed by the Company with the Commission under Rules 434
and 424(b) under the Securities Act and all references in this Agreement to the
date of the Prospectus shall mean the date of the Term Sheet. All references in
this Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a preliminary prospectus, the Prospectus or the Term Sheet, or any
amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR").
The Company hereby confirms its respective agreements with the
Underwriters as follows:
Section 1. Representations and Warranties of the Company. The Company
hereby represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any 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. The Prospectus, as
amended or supplemented, as of its date and at all subsequent times, did not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Representatives expressly
for use therein. There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives one complete conformed copy of the Registration
Statement and of each
2
<PAGE>
consent and certificate of experts filed as a part thereof, and conformed copies
of the Registration Statement (without exhibits) and preliminary prospectuses
and the Prospectus, as amended or supplemented, in such quantities and at such
places as the Representatives have reasonably requested for each of the
Underwriters.
(c) Distribution of Offering Material By the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Shares. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates as
of which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change or effect, where the
context so requires, is called a "Material Adverse Change" or a "Material
Adverse Effect"); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct
or contingent, not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary course of business; and
(iii) there has been no dividend or distribution of any kind declared, paid or
made by the Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital stock or
repurchase or redemption by the Company or any of its subsidiaries of any class
of capital stock.
(h) Independent Accountants. Deloitte & Touche who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) [and supporting schedules]
filed with the Commission as a part of the
3
<PAGE>
Registration Statement and included in the Prospectus, are independent public or
certified public accountants as required by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its subsidiaries as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. The supporting
schedules included in the Registration Statement present fairly the information
required to be stated herein. Such financial statements and supporting schedules
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial statements or
supporting schedules are required to be included in the Registration Statement.
The financial data set forth in the Prospectus under the captions "Summary--
Summary Selected Financial Data", "Selected Financial Data" and "Capitalization"
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration Statement.
(j) Company's Accounting System. The Company and each of its
subsidiaries maintain a system of accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles as applied in the United States and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(k) Subsidiaries of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiaries listed in Exhibit 21 to the Registration Statement.
----------
(l) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly organized
and is validly existing as a corporation or limited liability company, as the
case may be, in good standing under the laws of the jurisdiction in which it is
organized with full corporate power and authority to own its properties and
conduct its business as described in the prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification.
(m) Capitalization of the Subsidiaries. All the outstanding shares of
capital stock of each subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as otherwise set forth
in the Prospectus, all outstanding shares of capital stock of the subsidiaries
are owned by the Company either directly or through wholly owned subsidiaries
free and clear of any security interests, claims, liens or encumbrances.
(n) No Prohibition on Subsidiaries from Paying Dividends or Making
Other Distributions. No subsidiary of the Company is currently prohibited,
directly or indirectly, from
4
<PAGE>
paying any dividends to the Company, from making any other distribution on such
subsidiary's capital stock, from repaying to the Company any loans or advances
to such subsidiary from the Company or from transferring any of such
subsidiary's property or assets to the Company or any other subsidiary of the
Company, except as described in or contemplated by the Prospectus.
(o) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Common Shares (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Shares have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance with
federal and state securities laws. None of the outstanding Common Shares were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There are
no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company or any of its subsidiaries other than those accurately described in the
Prospectus. The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(p) Stock Exchange Listing. The Shares have been approved for listing
on the Nasdaq National Market, subject only to official notice of issuance.
(q) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, LLC and (iii) by the federal and
provincial laws of Canada.
(r) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, (i) the charter or by-laws of the Company or any of
its subsidiaries, (ii) the terms of any indenture, contract, lease, mortgage,
deed of trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company or any of its
subsidiaries is a party or bound or to which its or their property is subject or
(iii) any statute, law, rule, regulation, judgment, order or decree applicable
to the Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or any of its subsidiaries or any of its or their
properties.
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(s) No Defaults or Violations. Neither the Company nor any subsidiary
is in violation or default of (i) any provision of its charter or by-laws, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is subject
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or such subsidiary or any
of its properties, as applicable, except any such violation or default which
would not, singly or in the aggregate, result in a Material Adverse Change
except as otherwise disclosed in the Prospectus.
(t) No Actions, Suits or Proceedings. Except as otherwise disclosed
in the Prospectus, no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries or its or their property is pending or, to the best
knowledge of the Company, threatened that (i) could reasonably be expected to
have a Material Adverse Effect on the performance of this Agreement or the
consummation of any of the transactions contemplated hereby or (ii) could
reasonably be expected to result in a Material Adverse Effect.
(u) All Necessary Permits, Etc. The Company and each subsidiary
possess such valid and current certificates, authorizations or permits issued by
the appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct their respective businesses, and neither the Company nor
any subsidiary has received any notice of proceedings relating to the revocation
or modification of, or non-compliance with, any such certificate, authorization
or permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
(v) Title to Properties. The Company and each of its subsidiaries has
good and marketable title to all the properties and assets reflected as owned in
the financial statements referred to in Section 1(i) above (or elsewhere in the
Prospectus), in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by the
Company or such subsidiary. The real property, improvements, equipment and
personal property held under lease by the Company or any subsidiary are held
under valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made of such
real property, improvements, equipment or personal property by the Company or
such subsidiary.
(w) Tax Law Compliance. The Company and its subsidiaries have filed
all necessary federal, state and foreign income and franchise tax returns and
have paid all taxes required to be paid by any of them and, if due and payable,
any related or similar assessment, fine or penalty levied against any of them.
The Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in Section 1(i) above in respect of all
federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or any of its subsidiaries has not been
finally determined. The Company is not aware of any tax deficiency that has been
or might be asserted or threatened against the Company that could result in a
Material Adverse Change.
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(x) Intellectual Property Rights. Each of the Company and its
subsidiaries owns or possesses adequate rights to use all patents, patent rights
or licenses, inventions, collaborative research agreements, trade secrets, know-
how, trademarks, service marks, trade names and copyrights which are necessary
to conduct its businesses as described in the Registration Statement and
Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a Material Adverse Change. There is no
claim being made against the Company regarding patents, patent rights or
licenses, inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights. The Company and its
subsidiaries do not in the conduct of their business as now or proposed to be
conducted as described in the Prospectus infringe or conflict with any right or
patent of any third party, or any discovery, invention, product or process which
is the subject of a patent application filed by any third party, known to the
Company or any of its subsidiaries, which such infringement or conflict is
reasonably likely to result in a Material Adverse Change.
(y) Year 2000 Preparedness. There are no issues related to the
Company's, or any of its subsidiaries', preparedness for the Year 2000 that (i)
are of a character required to be described or referred to in the Registration
Statement or Prospectus by the Securities Act which have not been accurately
described in the Registration Statement or Prospectus or (ii) might reasonably
be expected to result in any Material Adverse Change or that might materially
affect their properties, assets or rights. All internal computer systems and
each Constituent Component (as defined below) of those systems and all computer-
related products and each Constituent Component (as defined below) of those
products of the Company and each of its subsidiaries fully comply with Year 2000
Qualification Requirements. "Year 2000 Qualifications Requirements" means that
the internal computer systems and each Constituent Component (as defined below)
of those systems and all computer-related products and each Constituent
Component (as defined below) of those products of the Company and each of its
Subsidiaries (i) have been reviewed to confirm that they store, process
(including sorting and performing mathematical operations, calculations and
computations), input and output data containing date and information correctly
regardless of whether the date contains dates and times before, on or after
January 1, 2000, (ii) have been designated to ensure date and time entry
recognition and calculations, and date data interface values that reflect the
century, (iii) accurately manage and manipulate data involving dates and times,
including single century formulas and multi-century formulas, and will not cause
an abnormal ending scenario within the application or generate incorrect values
or invalid results involving such dates, (iv) accurately process any date
rollover, and (v) accept and respond to two-digit year date input in a manner
that resolves any ambiguities as to the century. "Constituent Component" means
all software (including operating systems, programs, packages and utilities),
firmware, hardware, networking components, and peripherals provided as part of
the configuration. The Company has inquired of material vendors as to their
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preparedness for the Year 2000 and has disclosed in the Registration Statement
or Prospectus any issues that might reasonably be expected to result in any
Material Adverse Change.
(z) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the shares.
(aa) Company Not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after receipt of
payment for the Shares will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(bb) Insurance. Each of the Company and its subsidiaries are insured
by recognized, financially sound and reputable institutions with policies in
such amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes, general liability and Directors and Officers liability. The Company
has no reason to believe that it or any subsidiary will not be able (i) to renew
its existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
(cc) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, value added
resellers, original equipment manufacturers, that might be expected to result in
a Material Adverse Change.
(dd) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(ee) Lock-Up Agreements. Each officer and director of the company and
each beneficial owner of one or more percent of the outstanding issued share
capital of the Company has agreed to sign an agreement substantially in the form
attached hereto as Exhibit A (the "Lock-up Agreements"). The Company has
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provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the Lock-up Agreements presently in
effect or effected hereby. The Company hereby represents and warrants that it
will not release any of its officers,
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directors or other stockholders from any Lock-up Agreements currently existing
or hereafter effected without the prior written consent of BancBoston Robertson
Stephens Inc.
(ff) Related Party Transactions. There are no business relationships
or related-party transactions involving the Company or any subsidiary or any
other person required to be described in the Prospectus which have not been
described as required.
(gg) No Unlawful Contributions or Other Payments. Neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(hh) Environmental Laws. (i) The Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus; (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S) 9601, et
seq.), or otherwise designated as a contaminated site under applicable state or
local law.
(ii) ERISA Compliance. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the Company, its subsidiaries or their "ERISA Affiliates" (as defined below) are
in compliance in all material respects with ERISA. "ERISA Affiliate" means, with
respect to the Company or a subsidiary, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such subsidiary is a member. No "reportable
event" (as defined under ERISA) has occurred or is reasonably expected to occur
with respect to any "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company, its subsidiaries or any of their
ERISA Affiliates, if such "employee benefit plan" were terminated, would have
any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither
the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
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(jj) Financial Projections. The statements, (including the assumptions
described therein) included in the Registration Statement and the Prospectus
under the headings "Summary of Significant Projections and Assumptions" and
"Financial Projections" (i) are within the coverage of Rule 175(b) under the Act
to the extent such data constitute forward looking statements as defined in Rule
175(c) and (ii) were made by the Company with a reasonable basis and reflect the
Company's good faith estimate of the matters described therein.
Section 2. Purchase, Sale and Delivery of the Shares.
(a) The Firm Shares. The Company agrees to issue and sell to the
several Underwriters the Firm Shares upon the terms herein set forth. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Underwriters
agree, severally and not jointly, to purchase from the Company the respective
number of Firm Shares set forth opposite their names on Schedule A. The purchase
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price per Firm Share to be paid by the several Underwriters to the Company shall
be $___ per share.
(b) The First Closing Date. Delivery of the Firm Shares to be
purchased by the Underwriters and payment therefor shall be made by the Company
and the Representatives at 7:00 a.m. San Francisco time, at the offices of
Wilson Sonsini Goodrich Rosatti, 650 Page Mill Road, Palo Alto, CA 94304-1050
(or at such other place as may be agreed upon among the Representatives and the
Company), (i) on the third (3rd) full business day following the first day that
Shares are traded, (ii) if this Agreement is executed and delivered after 1:30
P.M., San Francisco time, the fourth (4th) full business day following the day
that this Agreement is executed and delivered or (iii) at such other time and
date not later that seven (7) full business days following the first day that
Shares are traded as the Representatives and the Company may determine (or at
such time and date to which payment and delivery shall have been postponed
pursuant to Section 8 hereof), such time and date of payment and delivery being
herein called the "Closing Date;" provided, however, that if the Company has not
made available to the Representatives copies of the Prospectus within the time
provided in Sections 2(g) and 3(e) hereof, the Representatives may, in their
sole discretion, postpone the Closing Date until no later that two (2) full
business days following delivery of copies of the Prospectus to the
Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of ____ Option Shares from the Company at the
purchase price per share to be paid by the Underwriters for the Firm Shares. The
option granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. The time and date of delivery of the
Option Shares, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Representatives and shall not be
earlier
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than three nor later than five full business days after delivery of such notice
of exercise. If any Option Shares are to be purchased, each Underwriter agrees,
severally and not jointly, to purchase the number of Option Shares (subject to
such adjustments to eliminate fractional shares as the Representatives may
determine) that bears the same proportion to the total number of Option Shares
to be purchased as the number of Firm Shares set forth on Schedule A opposite
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the name of such Underwriter bears to the total number of Firm Shares. The
Representatives may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
(d) Public Offering of the Shares. The Representatives hereby advise
the Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made at
the First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
It is understood that the Representatives have been authorized, for
their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
BancBoston Robertson Stephens Inc., individually and not as the Representatives
of the Underwriters, may (but shall not be obligated to) make payment for any
Shares to be purchased by any Underwriter whose funds shall not have been
received by the Representatives by the First Closing Date or the Second Closing
Date, as the case may be, for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from any of its obligations under
this Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered, a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
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Section 3. Covenants of the Company. The Company further covenants and
agrees with each Underwriter as follows:
(a) Registration Statement Matters. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Securities Act and (iii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been advised
and furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Securities Act. If
the Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) under the Securities Act prior to the time
confirmations are sent or given, as specified by Rule 462(b)(2) under the
Securities Act, and shall pay the applicable fees in accordance with Rule 111
under the Securities Act.
(b) Securities Act Compliance. The Company will advise the
Representatives promptly (i) when the Registration Statement or any post-
effective amendment thereto shall have become effective, (ii) of receipt of any
comments from the Commission, (iii) of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the use
of the Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(d) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. The Company will comply with the Securities Act and the Exchange
Act, and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event
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shall occur as a result of which, in the judgment of the Company or in the
reasonable opinion of the Representatives or counsel for the Underwriters, it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading, or, if it is necessary
at any time to amend or supplement the Prospectus to comply with any law, the
Company promptly will prepare and file with the Commission, and furnish at its
own expense to the Underwriters and to dealers, an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with the
law.
(e) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection with sales by an
Underwriter or dealer (the "Prospectus Delivery Period"), as many copies of the
Prospectus and any amendments and supplements thereto as the Representatives may
request.
(f) Insurance. The Company shall (i) obtain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) shall cause BancBoston Robertson
Stephens Inc. to be added as an additional insured to such policy in respect of
the offering contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety
(90) day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) Use of Proceeds. The Company shall apply the net proceeds from
the sale of the Shares sold by it in the manner described under the caption "Use
of Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [___] that satisfies the provisions of Section 11(a) of the Securities
Act.
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(k) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities. The Company
will not, without the prior written consent of BancBoston Robertson Stephens
Inc., for a period of 180 days following the date of the Prospectus, offer, sell
or contract to sell, or otherwise dispose of or enter into any transaction which
is designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, any other Common Shares or any
securities convertible into, or exchangeable for, Common Shares; provided,
however, that the Company may (i) issue and sell Common Shares pursuant to any
director or employee stock option plan, stock ownership plan or dividend
reinvestment plan of the Company in effect at the date of the Prospectus and
described in the Prospectus so long as none of those shares may be transferred
during the period of 180 days from the date that the Registration Statement is
declared effective (the "Lock-Up Period") and the Company shall enter stop
transfer instructions with its transfer agent and registrar against the transfer
of any such Common Shares and (ii) the Company may issue Common Shares issuable
upon the conversion of securities or the exercise of warrants outstanding at the
date of the Prospectus and described in the Prospectus.
(m) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
Section 4. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by the of its covenants and other
obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No
Objection from the National Association of Securities Dealers, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, or at such later date as shall be
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consented to in writing by you; and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose shall have
been initiated or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of Underwriters'
Counsel; and the National Association of Securities Dealers, LLC shall have
raised no objection to the fairness and reasonableness of the underwriting terms
and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement and prior to the First Closing Date, or the Second
Closing Date, as the case may be,
(i) there shall not have been any Material Adverse Change
in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries
considered as one enterprise from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and
adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as
contemplated by the Prospectus; and
(ii) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Act.
(d) Opinion of Counsel for the Company. You shall have received on
the First Closing Date, or the Second Closing Date, as the case may be, an
opinion of Wilson Sonsini Goodrich Rosatti, counsel for the Company,
substantially in the form of Exhibit B attached hereto, dated the First Closing
---------
Date, or the Second Closing Date, addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in Exhibit B may rely as to
---------
questions of law not involving the laws of the United States or the State of
California and Delaware upon opinions of local counsel, and as to questions of
fact upon representations or certificates of officers of the Company, and of
government officials, in which case their opinion is to state that they are so
relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. Copies of any
opinion, representation or
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<PAGE>
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) Opinion of Counsel for the Underwriters. You shall have received
on the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Brobeck, Phleger & Harrison LLP, substantially in the form of Exhibit
-------
C hereto. The Company shall have furnished to such counsel such documents as
- -
they may have requested for the purpose of enabling them to pass upon such
matters.
(f) Accountants' Comfort Letter. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
Deloitte & Touche addressed to the Underwriters, dated the First Closing Date or
the Second Closing Date, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations and based
upon the procedures described in such letter delivered to you concurrently with
the execution of this Agreement (herein called the "Original Letter"), but
carried out to a date not more than four (4) business days prior to the First
Closing Date or the Second Closing Date, as the case may be, (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the First Closing Date or the Second Closing Date, as
the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. The Original Letter from Deloitte & Touche
shall be addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the consolidated balance sheet of the Company as of ________, 1999 and related
consolidated statements of operations, shareholders' equity, and cash flows for
the twelve (12) months ended ________, 1999, (iii) state that Deloitte & Touche
has performed the procedures set out in Statement on Auditing Standards No. 71
("SAS 71") for a review of interim financial information and providing the
report of Deloitte & Touche as described in SAS 71 on the financial statements
for each of the quarters in the ____ quarter period ended ________, 1999 (the
"Quarterly Financial Statements"), (iv) state that in the course of such review,
nothing came to their attention that leads them to believe that any material
modifications need to be made to any of the Quarterly Financial Statements in
order for them to be in compliance with generally accepted accounting principles
consistently applied across the periods presented, and address other matters
agreed upon by Deloitte & Touche and you. In addition, you shall have received
from Deloitte & Touche a letter addressed to the Company and made available to
you for the use of the Underwriters stating that their review of the Company's
system of internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of
16
<PAGE>
the Company's consolidated financial statements as of ________, 1999, did not
disclose any weaknesses in internal controls that they considered to be material
weaknesses.
(g) Officers' Certificate. You shall have received on the First
Closing Date and the Second Closing Date, as the case may be, a certificate of
the Company, dated the First Closing Date or the Second Closing Date, as the
case may be, signed by the Chief Executive Officer and Chief Financial Officer
of the Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the First
Closing Date or the Second Closing Date, as the case may be, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
First Closing Date or the Second Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act;
(iii) When the Registration Statement became effective and
at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Prospectus, and any
amendments or supplements thereto, contained all material information
required to be included therein by the Securities Act and in all
material respects conformed to the requirements of the Securities Act
the Registration Statement and the Prospectus, and any amendments or
supplements thereto, did not and does not include any 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; and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
there has not been (a) any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one
enterprise, (b) any transaction that is material to the Company and
its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (c) any obligation,
direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or
its subsidiaries, except obligations incurred in the ordinary course
of business, (d) any change in the capital stock or outstanding
indebtedness of the Company or any of its subsidiaries that is
material to the Company and its subsidiaries considered as one
enterprise, (e) any dividend or distribution of any kind declared,
paid or made on the capital stock of the Company or any of its
subsidiaries, or (f) any loss or damage (whether or not
17
<PAGE>
insured) to the property of the Company or any of its subsidiaries
which has been sustained or will have been sustained which has a
material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise.
(h) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
---------
Company and each beneficial owner of one or more percent of the outstanding
issued share capital of the Company.
(i) Stock Exchange Listing. The Shares shall have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
(j) Compliance with Prospectus Delivery Requirements. The Company
shall have complied with the provisions of Sections 2(g) and 3(e) hereof with
respect to the furnishing of Prospectuses.
(k) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
Section 5. Payment of Expenses. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Shares to the Underwriters, (iv) all fees and expenses of the
Company's counsel, independent public or certified public accountants and other
advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), each preliminary prospectus and the Prospectus, and
all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Shares for
18
<PAGE>
offer and sale under the state securities or blue sky laws or the provincial
securities laws of Canada or any other country, and, if requested by the
Representatives, preparing and printing a "Blue Sky Survey", an "International
Blue Sky Survey" or other memorandum, and any supplements thereto, advising the
Underwriters of such qualifications, registrations and exemptions, (vii) the
filing fees incident to the National Association of Securities Dealers, LLC
review and approval of the Underwriters' participation in the offering and
distribution of the Common Shares, (viii) the fees and expenses associated with
listing the Common Shares on the Nasdaq National Market, and (ix) all other
fees, costs and expenses referred to in Item 13 and Item 14 of Part II of the
Registration Statement. Except as provided in this Section 5, Section 6, and
Section 7 hereof, the Underwriters shall pay their own expenses, including the
fees and disbursements of their counsel.
Section 6. Reimbursement of Underwriters' Expenses. If this Agreement
is terminated by the Representatives pursuant to Section 4, Section 8, or
Section 9, or if the sale to the Underwriters of the Shares on the First Closing
Date is not consummated because of any refusal, inability or failure on the part
of the Company to perform any agreement herein or to comply with any provision
hereof, the Company agrees to reimburse the Representatives and the other
Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the offering and sale
of the Shares, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.
Section 7. Indemnification and Contribution Indemnification of the
Underwriters. The Company agrees to indemnify and hold harmless each
Underwriter, its officers and employees, and each person, if any, who controls
any Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A or Rule 434 under the Securities Act, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading; or (ii) upon
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the Company to
perform its obligations hereunder or under law; or (v) any act or failure to act
or any alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated hereby,
19
<PAGE>
and which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon any matter covered by clause
(i), (ii), (iii) or (iv) above, provided that the Company shall not be liable
under this clause (v) to the extent that a court of competent jurisdiction shall
have determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling person
for any and all expenses (including the fees and disbursements of counsel chosen
by BancBoston Robertson Stephens Inc.) as such expenses are reasonably incurred
by such Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Representatives expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 7(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and
20
<PAGE>
other expense reasonably incurred by the Company, or any such director, officer
or controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. The indemnity agreement set forth in this Section 7(b) shall be in
addition to any liabilities that each Underwriter may otherwise have.
(c) Information Provided by the Underwriters. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the Company expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table in the paragraphs and table preceding the
paragraph titled "Option to Purchase Additional Shares," and in the paragraph
titled "Stabilization" in the Prospectus; and the Underwriters confirm that such
statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (BancBoston Robertson Stephens Inc. in the case of Section
7(b) and Section 8), representing the indemnified parties who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the
21
<PAGE>
indemnified party at the expense of the indemnifying party, in each of which
cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(e) Settlements. The indemnifying party under this Section 7 shall
not be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this Section
7 is unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bears to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
22
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The Company and Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(f) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 7(f) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (f), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 7(f) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than thirty
(30) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representations and warranties of the Company set forth
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or any persons controlling the Company, (ii) acceptance of any Shares and
payment therefor hereunder, and (iii) any termination of this Agreement. A
successor to any Underwriter, or to the Company, its directors or officers, or
any person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
7.
(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
Section 8. Default of One or More of the Several Underwriters. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase does not exceed
23
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10% of the aggregate number of the Shares to be purchased on such date, the
other Underwriters shall be obligated, severally, in the proportions that the
number of Firm Common Shares set forth opposite their respective names on
Schedule A bears to the aggregate number of Firm Shares set forth opposite the
- ----------
names of all such non-defaulting Underwriters, or in such other proportions as
may be specified by the Representatives with the consent of the non-defaulting
Underwriters, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the Underwriters shall fail or refuse to purchase Shares and the
aggregate number of Shares with respect to which such default occurs exceeds 10%
of the aggregate number of Shares to be purchased on such date, and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Shares are not made within 48 hours after such default, this Agreement shall
terminate without liability of any party to any other party except that the
provisions of Section 4 and Section 7 shall at all times be effective and shall
survive such termination. In any such case either the Representatives or the
Company shall have the right to postpone the First Closing Date or the Second
Closing Date, as the case may be, but in no event for longer than seven days in
order that the required changes, if any, to the Registration Statement and the
Prospectus or any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
8. Any action taken under this Section 8 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 9. Termination of this Agreement. Prior to the First Closing
Date, this Agreement may be terminated by the Representatives by notice given to
the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of federal, New York, Delaware or California authorities; (iii)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective change in United States' or international
political, financial or economic conditions, as in the judgment of the
Representatives is material and adverse and makes it impracticable or
inadvisable to market the Common Shares in the manner and on the terms described
in the Prospectus or to enforce contracts for the sale of securities; (iv) in
the judgment of the Representatives there shall have occurred any Material
Adverse Change; or (v) the Company shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as in the
judgment of the Representatives may interfere materially with the conduct of the
business and operations of the Company regardless of whether or not such loss
shall have been insured. Any termination pursuant to this Section 9 shall be
without liability on the part of (a) the Company to any Underwriter, except that
the Company shall be obligated to reimburse the expenses of the Representatives
and the Underwriters pursuant to Sections 5 and 6 hereof, (b)
24
<PAGE>
any Underwriter to the Company, or (c) of any party hereto to any other party
except that the provisions of Section 7 shall at all times be effective and
shall survive such termination.
Section 10. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
Section 11. Notices. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
BANCBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company:
iGo Corporation
2301 Robb Drive
Reno, NV 89523
Facsimile: (775) 746-6156
Attention: Ken Hawk
With a copy to:
Wilson Sonsini Goodrich Rosatti
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: ______________
Any party hereto may change the address for receipt of communications
by giving written notice to the others.
Section 12. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 9 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any
25
<PAGE>
right or obligation hereunder. The term "successors" shall not include any
purchaser of the Shares as such from any of the Underwriters merely by reason of
such purchase.
Section 13. Partial Unenforceability. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
Section 14. Governing Law Provisions. Governing Law. This agreement shall
be governed by and construed in accordance with the internal laws of the state
of New York applicable to agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby
("Related Proceedings") may be instituted in the federal courts of the United
States of America located in the City and County of San Francisco or the courts
of the State of California in each case located in the City and County of San
Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 49 Stevenson Street, San Francisco,
California 94105, United States of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
(c) Waiver of Immunity. With respect to any Related Proceeding, each party
irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment, including, without limitation, any immunity
pursuant to the United States Foreign Sovereign Immunities Act of 1976, as
amended.]
26
<PAGE>
Section 15. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
[The remainder of this page has been intentionally left blank.]
27
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
IGO CORPORATION
By:__________________________
[Title]
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representatives as of the date first above written.
BANCBOSTON ROBERTSON STEPHENS INC.
HAMBRECHT & QUIST LLC
THOMAS WEISEL PARTNERS LLC
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
- ----------
BY BANCBOSTON ROBERTSON STEPHENS INC.
By:_________________________________
Authorized Signatory
28
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Underwriters Number of Firm
Common Shares To
be Purchased
<S> <C>
BANCBOSTON ROBERTSON STEPHENS INC.................... [___]
HAMBRECHT & QUIST LLC................. [___]
THOMAS WEISEL PARTNERS LLC............ [___]
Total................................. [___]
</TABLE>
S-A
<PAGE>
EXHIBIT A
LOCK-UP AGREEMENT
BancBoston Robertson Stephens Inc.
Hambrecht & Quist LLC
Thomas Weisel Partners LLC
As Representatives of the Several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
RE: iGo Corporation (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain
shares of Common Stock of the Company ("Common Stock") or securities convertible
into or exchangeable or exercisable for Common Stock. The Company proposes to
carry out a public offering of Common Stock (the "Offering") for which you will
act as the representatives (the "Representatives") of the underwriters. The
undersigned recognizes that the Offering will be of benefit to the undersigned
and will benefit the Company by, among other things, raising additional capital
for its operations. The undersigned acknowledges that you and the other
underwriters are relying on the representations and agreements of the
undersigned contained in this letter in carrying out the Offering and in
entering into underwriting arrangements with the Company with respect to the
Offering. Prior to the Offering, the Company plans to reincorporate into the
state of Delaware and all references to "Common Stock" herein will refer both to
the Common Stock of Battery Express, Inc., a California corporation, as well as
to the Common Stock of its Delaware success corporation.
In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person has or
hereafter acquires the power of disposition, otherwise than (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be bound
by this restriction, (ii) as a distribution to partners or shareholders of such
person, provided that the distributees thereof agree in writing to be bound by
the terms of this restriction, (iii) pursuant to a transfer to any trust for the
direct or indirect benefit of the undersigned or the immediate family of the
undersigned, provided that the trustee
A-1
<PAGE>
of the trust agrees to be bound by the terms of this restriction, and provided
further that any such transfer shall not involve a disposition for value, (iv)
with respect to dispositions of Common Shares acquired on the open market or (v)
with the prior written consent of BancBoston Robertson Stephens Inc., for a
period commencing on the date hereof and continuing to a date 180 days after the
Registration Statement is declared effective by the Securities and Exchange
Commission (the "Lock-up Period"). The foregoing restriction has been expressly
agreed to preclude the holder of the Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that included, relates to or derives any significant
part of its value from Securities. The undersigned also agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of shares of Common Stock or Securities held by
the undersigned except in compliance with the foregoing restrictions. BancBoston
Robertson Stephens Inc., acting alone and in its sole discretion, may waive any
provisions of this Lock-Up Agreement without notice to any third party
This agreement is irrevocable and will be binding on the undersigned
and the respective successors, heirs, personal representatives, and assigns of
the undersigned. In the event that the Registration Statement shall not have
been declared effective on or before October 31, 1999, this Lock-Up Agreement
shall be of no further force or effect.
Dated:________________________________________
______________________________________________
Printed Name of Holder
By:___________________________________________
Signature
______________________________________________
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
A-2
<PAGE>
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF COMPANY COUNSEL
(i) The Company and each Significant Subsidiary (as that term is defined in
Regulation S-X of the Act) has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation;
(ii) The Company and each Significant Subsidiary has the corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus;
(iii) The Company and each Significant Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction,
if any, in which the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. To
such counsel's knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity other than [list
subsidiaries];
(iv) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein, the issued and outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid and nonassessable,
and, to such counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right;
(v) All issued and outstanding shares of capital stock of each Significant
Subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable, and, to such counsel's knowledge, have not been
issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right and are owned
by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest;
(vi) The Firm Shares or the Option Shares, as the case may be, to be issued
by the Company pursuant to the terms of this Agreement have been duly authorized
and, upon issuance and delivery against payment therefor in accordance with the
terms hereof, will be duly and validly issued and fully paid and nonassessable,
and will not have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or other
similar right.
(vii) The Company has the corporate power and authority to enter into this
Agreement and to issue, sell and deliver to the Underwriters the Shares to be
issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed and delivered by
the Company and, assuming due authorization, execution and delivery by you, is a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as rights to indemnification hereunder may be
B-1
<PAGE>
limited by applicable law and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally or by general equitable principles;
(ix) The Registration Statement has become effective under the Act and, to
such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Securities Act;
(x) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Firm Shares or
the Option Shares have been validly registered under the Securities Act and the
Rules and Regulations of the Exchange Act and the applicable rules and
regulations of the Commission thereunder;
(xi) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements (including supporting
schedules) and financial data derived therefrom as to which such counsel need
express no opinion), as of the effective date of the Registration Statement,
complied as to form in all material respects with the requirements of the Act
and the applicable Rules and Regulations;
(xii) The information in the Prospectus under the caption "Description of
Capital Stock," to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is a fair summary of such
matters and conclusions; and the forms of certificates evidencing the Common
Stock and filed as exhibits to the Registration Statement comply with Delaware
law;
(xiii) The description in the Registration Statement and the Prospectus of the
charter and bylaws of the Company and of statutes are accurate and fairly
present the information required to be presented by the Securities Act;
(xiv) To such counsel's knowledge, there are no agreements, contracts, leases
or documents to which the Company is a party of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
(xv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which the Company is a
party or by which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations;
B-2
<PAGE>
(xvi) No consent, approval, authorization or order of or qualification with
any court, government or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries, or over any of their properties or
operations is necessary in connection with the consummation by the Company of
the transactions herein contemplated, except (i) such as have been obtained
under the Securities Act, (ii) such as may be required under state or other
securities or Blue Sky laws in connection with the purchase and the distribution
of the Shares by the Underwriters, (iii) such as may be required by the National
Association of Securities Dealers, LLC and (iv) such as may be required under
the federal or provincial laws of Canada;
(xvii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company or any of its subsidiaries
of a character required to be disclosed in the Registration Statement or the
Prospectus by the Securities Act, other than those described therein;
(xviii) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is presently (a) in material violation of its respective charter or
bylaws, or (b) in material breach of any applicable statute, rule or regulation
known to such counsel or, to such counsel's knowledge, any order, writ or decree
of any court or governmental agency or body having jurisdiction over the Company
or any of its subsidiaries, or over any of their properties or operations; and
(xix) To such counsel's knowledge, except as set forth in the Registration
Statement and Prospectus, no holders of Company Shares or other securities of
the Company have registration rights with respect to securities of the Company
and, except as set forth in the Registration Statement and Prospectus, all
holders of securities of the Company having rights known to such counsel to
registration of such shares of Company Shares or other securities, because of
the filing of the Registration Statement by the Company have, with respect to
the offering contemplated thereby, waived such rights or such rights have
expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full satisfaction of
such rights.
(xx) The Company is not and, after giving effect to the offering and the sale
of the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(xxi) To such counsel's knowledge, the Company owns or possesses sufficient
trademarks, trade names, patent rights, copyrights, licenses, approvals, trade
secrets and other similar rights (collectively, "Intellectual Property Rights")
reasonably necessary to conduct their business as now conducted; and the
expected expiration of any such Intellectual Property Rights would not result in
a Material Adverse Effect. The Company has not received any notice of
infringement or conflict with asserted Intellectual Property Rights of others,
which infringement or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Effect. To such counsel's knowledge, the Company's
discoveries, inventions, products, or processes referred to in the Registration
Statement or Prospectus do not infringe or conflict with any right or patent
which is the subject of a patent application known to the Company.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives,
B-3
<PAGE>
Underwriters' Counsel and the independent certified public accountants of the
Company, at which such conferences the contents of the Registration Statement
and Prospectus and related matters were discussed, and although they have not
verified the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel which leads them to believe that, at the time the Registration
Statement became effective and at all times subsequent thereto up to and on the
First Closing Date or Second Closing Date, as the case may be, the Registration
Statement and any amendment or supplement thereto (other than the financial
statements including supporting schedules and other financial and statistical
information derived therefrom, as to which such counsel need express no comment)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or at the First Closing Date or the Second Closing Date, as the
case may be, the Registration Statement, the Prospectus and any amendment or
supplement thereto (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
B-4
<PAGE>
EXHIBIT C
MATTERS TO BE COVERED IN THE OPINION OF UNDERWRITERS' COUNSEL
(i) The Shares have been duly authorized and, upon issuance and
delivery and payment therefor in accordance with the terms of the Underwriting
Agreement, will be validly issued, fully paid and non-assessable.
(ii) The Registration Statement has become effective under the Act
and, to such counsel's knowledge, no stop order proceedings with respect thereto
have been instituted or threatened or are pending under the Securities Act.
(iii) The Underwriting Agreement has been duly authorized, executed
and delivered by the Company.
Such counsel shall state that such counsel has reviewed the opinion
addressed to the Representatives from Venture Law Group, dated the date hereof,
and furnished to you in accordance with the provisions of the Underwriting
Agreement. Such opinion appears on its face to be appropriately responsive to
the requirements of the Underwriting Agreement.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing Date,
as the case may be, the Registration Statement and any amendment or supplement
thereto (other than the financial statements including supporting schedules and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the First Closing
Date or the Second Closing Date, as the case may be, the Registration Statement,
the Prospectus and any amendment or supplement thereto (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
C-1
<PAGE>
EXHIBIT 3.1
THIRD AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
BATTERY EXPRESS, INC.
The undersigned, Ken Hawk and Mick Delargy, hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of Battery Express, Inc., a California corporation.
2. The Articles of Incorporation of this corporation shall be amended and
restated to read in full as follows:
ARTICLE I
---------
The name of this Corporation is Battery Express, Inc.
ARTICLE II
----------
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporation Code.
ARTICLE III
-----------
A. Classes of Stock. This Corporation is authorized to issue two classes
----------------
of stock, designated "Common Stock" and "Preferred Stock." The total number of
shares which this Corporation is authorized to issue is 10,000,000. The number
of shares of Common Stock which this Corporation is authorized to issue is
8,706,250 no par value. The number of shares of Preferred Stock which this
Corporation is authorized to issue is 1,293,750, no par value. Preferred Stock
may be issued from time to time in one or more Series.
B. Rights, Preferences and Restrictions of Preferred Stock. The Preferred
-------------------------------------------------------
Stock shall consist of 611,250 shares designated "Series A Preferred Stock" (the
"Series A"), 500,000 shares designated "Series B Preferred Stock" (the "Series
B"), and 182,500 shares designated "Series C Preferred Stock" (the "Series C"),
having the respective rights, preferences and privileges set forth herein. The
Series A, Series B and Series C are sometimes referred to herein collectively
the "Preferred Stock".
-1-
<PAGE>
The Corporation shall from time to time in accordance with the laws of the
State of California increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred Stock.
The relative rights, preferences, privileges and restrictions granted to or
imposed upon the respective classes of Common Stock and Preferred Stock or the
holders thereof are as follows:
ARTICLE IIIA
------------
PREFERRED STOCK
Except as otherwise expressly provided herein, all shares of Preferred
Stock shall entitle the holders thereof to the same rights and privileges.
1A. Dividends. The holders of outstanding shares of Preferred Stock
---------
shall be entitled to receive, out of funds legally available for such purpose,
cash dividends at the rate of 8% per annum (computed on the basis of a 360-day
year and a 90 day quarter) of the Stated Value (as defined below) of each such
share then held by them, payable quarterly in arrears on June 13, September 13,
December 13 and March 13 (each such payment date, a "Dividend Payment Date") of
each year (beginning, with respect to the Series A, on September 13, 1996, with
respect to the Series B, on December 13, 1998, and with respect to the Series C,
on September 13, 1999), or when and as declared by the Board of Directors of the
Corporation. The Board of Directors of the Corporation may fix a record date for
the determination of holders of Preferred Stock entitled to receive payment of a
dividend declared thereon, which record date shall be no more than 60 days prior
to the date fixed for the payment thereof.
1B. Stated Value. Notwithstanding anything to the contrary provided
------------
herein, in the event that any portion of the quarterly dividend on the Series A,
Series B or Series C is not declared and paid in cash on any Dividend Payment
Date, the amount of such accrued dividend which is not so paid on any share of
Series A, Series B or Series C shall be accumulated and shall automatically be
added to the Stated Value of such share on such Dividend Payment Date.
Accumulated dividends on shares of Series A, Series B or Series C that have
previously been added to the Stated Value thereof pursuant to the terms of this
subparagraph 1B, may, in the discretion of the Board of Directors of the
Corporation, be paid in cash on any Dividend Payment Date. Accumulated
dividends on any share of Series A, Series B or Series C which are added to the
Stated Value of such share pursuant to this subparagraph 1B shall not be deemed
to be in arrears for any purpose whatsoever.
As used herein, the "Stated Value" per share shall mean the sum of (i) with
respect to the Series A, $2.67, with respect to the Series B, $12.00, or with
respect to the Series C, $40.91, plus (ii) all accumulated and unpaid dividends,
if any, added pursuant to this subparagraph 1B, less (iii) all amounts paid in
cash in respect of such previously accumulated and unpaid dividends, if any,
that were originally added to such Stated Value pursuant to this subparagraph
1B.
-2-
<PAGE>
2A. Mandatory Redemption. Beginning at any time on or after June 13,
--------------------
2003, upon receipt of a written redemption election executed by the holders of
not less than 66 2/3% of the Preferred Stock then outstanding, the Corporation
shall, to the extent legally permitted, redeem (in the manner and with the
effect provided in subparagraphs 2C through 2D below) all shares of Preferred
Stock then outstanding in four equal annual installments, the first of which
shall occur sixty (60) days following the Corporation's receipt of the written
redemption election. Each date on which the Corporation shall be required to
redeem shares of Preferred Stock as provided in this subparagraph 2A shall be
referred to as a "Redemption Date". No written redemption election shall be
required with respect to any Redemption Date other than the initial Redemption
Date.
2B. Redemption Price. The Preferred Stock to be redeemed on a Redemption
----------------
Date shall be redeemed by paying for each share the sum of (i) the Stated Value
per share as of such Redemption Date, plus (ii) an amount equal to dividends
declared and unpaid thereon up to such Redemption Date, the sum, of (i) and (ii)
being herein sometimes referred to as the "Redemption Price". In the case of a
redemption pursuant to the first sentence of subparagraph 2A above, not less
than 30 days before such Redemption Date, written notice shall be given by mail,
postage prepaid to the holders of record of the Preferred Stock to be redeemed,
such notice to be addressed to each such shareholder at his post office address
as shown by the records of the Corporation, specifying the number of shares to
be redeemed, the Redemption Price and the place and date of such redemption,
which date shall not be a day on which banks in the City of New York are
required or authorized to close. If a notice of redemption shall have been duly
given under subparagraph 2A above or this subparagraph 2B and if on or before
such Redemption Date the funds necessary for redemption shall have been set
aside so as to be and continue to be available therefor, then, notwithstanding
that any certificate for shares of Preferred Stock to be redeemed shall not have
been surrendered for cancellation, after the close of business on such
Redemption Date, the shares so called for redemption shall no longer be deemed
outstanding, the dividends thereon shall cease to accrue, and all rights with
respect to such shares shall forthwith after the close of business on the
Redemption Date, cease, except only the right of the holders thereof to receive,
upon presentation of the certificate representing shares so called for
redemption, the Redemption Price therefor, without interest thereon.
2C. Redeemed or Otherwise Acquired Shares to Be Retired. Any shares of
---------------------------------------------------
the Preferred Stock redeemed pursuant to this paragraph 2 or otherwise acquired
by the Corporation in any manner whatsoever shall be permanently retired and
shall not under any circumstances be reissued; and the Corporation may from time
to time take such appropriate corporate action as may be necessary to reduce the
number of authorized shares of Preferred Stock accordingly.
2D. Shares to be Redeemed. In case of the redemption under subparagraph
---------------------
2A, for any reason, of only a part of the outstanding shares of the Preferred
Stock otherwise subject to redemption on a Redemption Date, all shares of
Preferred Stock to be redeemed shall be selected pro rata such that there shall
--------
be so redeemed from each registered holder in whole shares, as nearly as
practicable to the nearest share, that proportion of all the shares to be
redeemed which the number of shares held of record by such holder bears to the
total number of shares of Preferred Stock at the time outstanding, calculated as
a single class. Shares not redeemed on the scheduled Redemption
-3-
<PAGE>
Date therefor shall remain outstanding and shall be redeemed, to the extent
legally permissible, on the next ensuing Redemption Date.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Corporation, whether voluntary or involuntary, the holders of the shares of
Preferred Stock, before any distribution or payment is made upon Common Stock,
shall be entitled to be paid for each share the sum of (i) the Stated Value per
share as of such date of liquidation, dissolution or winding up (the
"Liquidation Date"), plus (ii) an amount equal to dividends accrued but unpaid
thereon up to the Liquidation Date (to the extent not accounted for in the
Stated Value of such share), the sum of (i) and (ii) being herein sometimes
referred to as the "Liquidation Payments". If, upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Preferred Stock shall be
insufficient to permit payment to such holders of the preferential amounts to
which they are entitled, then the entire assets of the Corporation to be so
distributed shall be distributed ratably among the holders of Preferred Stock
based upon the Liquidation Payments to which each such holder would otherwise be
entitled. Upon any such liquidation, dissolution or winding up of the
Corporation, after the holders of Preferred Stock shall have been paid in full
the amounts to which they shall be entitled, the remaining net assets of the
Corporation available for distribution to its shareholders shall be distributed
to the holders of Common Stock. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the Liquidation Payments,
the place where said Liquidation Payments shall be payable, shall be given by
mail, postage prepaid, not less than 30 days prior to the payment date stated
therein, to the holders of record of Preferred Stock, such notice to be
addressed to each such holder at his post office address as shown by the records
of the Corporation. The consolidation or merger of the Corporation into or with
any other corporation or corporations in which the shareholders of the
Corporation immediately prior to such consolidation, merger or reorganization
own less than 50% of the surviving entity's voting power immediately after such
consolidation, merger or reorganization, or any transaction or series of related
transactions to which the Corporation is a party in which greater than 50% of
the Corporation's voting power is transferred, or the sale or transfer by the
Corporation of all or substantially all of its assets, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
the provisions of this paragraph 3.
4A. Conversion. Subject to the terms and conditions of this paragraph 4,
----------
each share of Series A, Series B and Series C shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for such stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing (i) $2.67 in the case of the Series A, (ii) $12.00 in the
case of the Series B, or (iii) $40.91 in the case of the Series C, by the
Conversion Price applicable to such share, determined as hereafter provided, in
effect on the date the certificate is surrendered for conversion. The initial
Conversion Price per share shall be $2.67 for shares of Series A, $12.00 for
shares of Series B and $40.91 for shares of Series C. Such initial Conversion
Price shall be subject to adjustment as set forth in subparagraph 4D below. The
rights of conversion contained in this subparagraph 4A shall be exercised by the
holder of shares of Preferred Stock by giving written notice that such holder
elects to convert a stated number of shares of Preferred Stock into Common Stock
and by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office
-4-
<PAGE>
(or such other office or agency of the Corporation as the Corporation may
designate by notice in writing to the holder or holders of the Preferred Stock)
at any time during its usual business hours on the date set forth in such
notice, together with a statement or the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued.
4B. Issuance of Certificates; Time Conversion Effected. Promptly after
--------------------------------------------------
the receipt of the written notice referred to in subparagraph 4A and surrender
of the certificate or certificates for the share or shares of Preferred Stock to
be converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such holder may
direct, a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such share or shares of Preferred Stock.
To the extent permitted by law, such conversion shall be deemed to have been
effected, and the Conversion Price shall be determined, as of the close of
business on the date on which such written notice shall have been received by
the Corporation and the certificate or certificates for such share or shares
shall have been surrendered as aforesaid, and at such time the rights of the
holder of such share or shares of Preferred Stock shall cease, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby.
4C. Fractional Shares; Dividends; Partial Conversion. No fractional
------------------------------------------------
shares may be issued upon conversion of the Preferred Stock into Common Stock.
At the time of each conversion, the Corporation shall pay in cash an amount
equal to all dividends, if any, declared and unpaid on the shares surrendered
for conversion to the date upon which such conversion is deemed to take place as
provided in subparagraph 4B. In case the number of shares of Preferred Stock
represented by the certificate or certificates surrendered pursuant to
subparagraph 4A exceeds the number of shares converted, the Corporation shall,
upon such conversion, execute and deliver to the holder thereof, at the expense
of the Corporation, a new certificate or certificates for the number of shares
of Preferred Stock represented by the certificate or certificates surrendered
which are not to be converted. If any fractional interest in a share of Common
Stock would, except for the provisions of the first sentence of this
subparagraph 4C, be deliverable upon any such conversion, the Corporation, in
lieu of delivering the fractional share thereof, shall pay to the holder
surrendering the Preferred Stock for conversion an amount in cash equal to the
current market price of such fractional interest as determined in good faith by
the Board of Directors of the Corporation.
4D. Adjustment of Price Upon Issuance of Common Stock. Except as provided
-------------------------------------------------
in subparagraph 4F hereof, if and whenever the Corporation shall issue or sell,
or is in accordance with subparagraphs 4D(1) through 4D(6) deemed to have issued
or sold, any shares of its Common Stock for a consideration per share less than
the Conversion Price for the Preferred Stock in effect immediately prior to the
time of such issue or sale, then, forthwith upon such issue or sale, the
Conversion Price for such series in effect immediately prior to each such
issuance shall automatically (except as otherwise provided herein) be adjusted
to a price determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be equal to the sum of (i) Adjusted Outstanding Common
Stock (as defined below) multiplied by the then existing Conversion Price, plus
(ii) the consideration, if any, received by the Corporation upon such issue or
sale, and the
-5-
<PAGE>
denominator of which shall be an amount equal to the sum of Adjusted Outstanding
Common Stock plus the number of shares of Common Stock issued or sold.
For the purposes of this subparagraph 4D, "Adjusted Outstanding Common
Stock" shall mean the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issue or sale, plus (ii) the number of
shares of Common Stock issuable upon conversion of all outstanding shares of any
series of Preferred Stock of the Corporation convertible into Common Stock.
For purposes of this subparagraph 4D, the following subparagraphs 4D(l) to
4D(6) shall also be applicable:
4D(l) Issuance of Rights or Options. In case at any time the Corporation
-----------------------------
shall in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or securities being herein
called "Convertible Securities") whether or not such Options or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the applicable
Conversion Price in effect immediately prior to the time of the granting of such
Options, then the total maximum number of shares of Common Stock issuable upon
the exercise of such options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of the date of
granting of such Options and thereafter shall be deemed to be outstanding.
Except as otherwise provided in subparagraph 4D(3), no adjustment of a
Conversion Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such options or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.
4D(2) Issuance of Convertible Securities. In case the Corporation shall
----------------------------------
in any manner issue (whether directly or by assumption in a merger or otherwise)
or sell any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange
-6-
<PAGE>
of all such Convertible Securities) shall be less than the Conversion Price in
effect immediately prior to the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that (a)
except as otherwise provided in subparagraph 4D(3) below, no adjustment of a
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and (b) if any such issue
or sale of such Convertible Securities is made upon exercise of any option to
purchase any such Convertible Securities for which adjustments of the Conversion
Price have been or are to be made pursuant to other provisions of this
subparagraph 4D, no further adjustment of a Conversion Price shall be made by
reason of such issue or sale.
4D(3) Change in Option Price or Conversion Rate. If (i) the purchase
-----------------------------------------
price provided for in any Option referred to in subparagraph 4D(l), (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 4D(l) or 4D(2) or (iii) the
rate at which any Convertible Securities referred to in subparagraph 4D(l) or
4D(2) are convertible into or exchangeable for Common Stock shall change at any
time (in each case other than under or by reason of provisions designed to
protect against dilution), then the Conversion Price in effect at the time of
such event shall, as required, forthwith be readjusted to such Conversion Price
which would have been in effect at such time had such options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold; and on the expiration of any such option or
the termination of any such right to convert or exchange such Convertible
Securities, the Conversion Price then in effect hereunder shall, as required,
forthwith be increased to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable thereunder shall
no longer be deemed to be outstanding. If the purchase price provided for in any
such Option referred to in subparagraph 4D(l) or the rate at which any
Convertible Securities referred to in subparagraph 4D(l) or 4D(2) are
convertible into or exchangeable for Common Stock shall be reduced at any time
under or by reason of provisions with respect thereto assigned to protect
against dilution, then, in case of the delivery of Common Stock upon the
exercise of any such option or upon conversion or exchange of any such
Convertible Securities, the Conversion Price then in effect hereunder shall, as
required, forthwith be adjusted to such respective amount as would have been
obtained had such Option or Convertible Securities never been issued as to such
Common Stock and had adjustments been made upon the issuance of the shares of
Common Stock delivered as aforesaid, but only if as a result of such adjustment
the Conversion Price then in affect hereunder is thereby reduced.
4D(4) Stock Dividends. In case the Corporation shall declare a dividend
---------------
or make any other distribution upon any stock of the Corporation payable in
Common Stock, Options or Convertible Securities in which dividend or
distribution the Preferred Stock does not ratably participate, any Common Stock,
Options or Convertible Securities, as the case may be, issuable in payment of
such dividend or distribution, shall be deemed to have been issued or sold
without consideration, and the applicable Conversion Price shall be reduced as
if the Corporation had subdivided its outstanding shares of Common Stock into a
greater number of shares, as provided in subparagraph 4E hereof.
-7-
<PAGE>
4D(5) Consideration. In case any shares of Common Stock, Options or
-------------
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Corporation
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation in
connection therewith. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Corporation shall be
deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Corporation, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith. In case any options shall be issued
in connection with the issue and sale of other securities of the Corporation,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the Corporation, such Options shall be deemed to
have been issued without consideration, and the applicable Conversion Price
shall be reduced as if the Corporation had subdivided its outstanding shares of
Common Stock into a greater number of shares, as provided in subparagraph 4E
hereof.
4D(6) Record Date. In case the Corporation shall take a record of the
-----------
holders of its Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, options or Convertible
Securities, or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be, provided that such shares of Common Stock shall in
fact have been issued or sold.
4E. Subdivision or Combination of Stock. In case the Corporation shall
-----------------------------------
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Corporation shall be combined into a
smaller number of shares, the Conversion Prices in effect immediately prior to
such combination shall be proportionately increased.
4F. Certain Issues of Common Stock Excepted. Anything herein to the
---------------------------------------
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price for the Preferred Stock upon the occurrence
of any of the following events:
(i) the issuance of shares of Preferred Stock, the issuance of
Common Stock upon conversion of outstanding shares of Preferred Stock, or any
adjustment in the Conversion Price applicable to such conversion,
(ii) the issuance of shares of Common Stock, or options for the
purchase thereof, to employees, consultants or directors of the Corporation
pursuant to a stock option plan, restricted stock plan or other compensatory or
incentive arrangement approved by the Board of Directors of the Corporation,
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<PAGE>
(iii) the issuance to Malcolm P. Appelbaum and Vrolyk / Power
Express L.P. of warrants to acquire up to an aggregate 13,500 shares of Common
Stock and the issuance of up to an aggregate 13,500 shares of Common Stock upon
the exercise of such warrants,
(iv) the issuance to Ken Hawk of 147,600 shares of Common Stock
pursuant to that certain Restricted Stock Purchase Agreement dated on or about
June 13, 1996 between the Corporation and Ken Hawk,
(v) the issuance of capital stock, or options or warrants to
purchase capital stock, issued to financial institutions or lessors in
connection with commercial credit arrangements, equipment financings or similar
transactions in which the equity component is incidental to the primary purpose
of such transaction,
(vi) the issuance of capital stock or warrants or options to purchase
capital stock issued in connection with bona fide acquisitions, mergers or
similar transactions, the terms of which are approved by the Board of Directors
of the Corporation, and
(vii) the issuance of shares of Common Stock in a public offering
prior to or in connection with which all outstanding shares of Preferred Stock
will be converted to Common Stock.
4G. Reorganization, Reclassification, Consolidation, Merger or Sale. If
---------------------------------------------------------------
any capital reorganization or reclassification of the capital stock of the
Corporation or any consolidation or merger of the Corporation with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way (including, without limitation, by
way of consolidation or merger) that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions (in form
reasonably satisfactory to the holders of at least 66-2/3% of the outstanding
shares of Preferred Stock) shall be made whereby each holder of a share or
shares of Preferred Stock shall thereafter have the right to receive, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock of the Corporation immediately theretofore receivable
upon the conversion of such shares or shares of the Preferred Stock, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the applicable
Conversion Price) shall thereafter be applicable, as nearly practicable, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights (including, if necessary to effect
the adjustments contemplated herein, an immediate adjustment, by reason of such
reorganization, reclassification, consolidation, merger or sale, of the
applicable Conversion Price to the value for the Common Stock reflected by the
terms of such reorganization, reclassification, consolidation, merger or sale if
the value so reflected is less
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<PAGE>
than the applicable Conversion Price in effect immediately prior to such
reorganization, reclassification, consolidation, merger or sale). In the event
of a merger or consolidation of the Corporation as a result of which a greater
or lesser number of shares of Common Stock of the surviving corporation is
issuable to holders of Common Stock of the Corporation outstanding immediately
prior to such merger or consolidation, the Conversion Prices in effect
immediately prior to such merger or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
shares of Common Stock of the Corporation. The Corporation will not effect any
such consolidation or merger, or any sale of all or substantially all of its
assets and properties, unless prior to the consummation thereof the successor
corporation (if other than the Corporation) resulting from such consolidation or
merger or the corporation purchasing such assets shall assume by written
instrument (in form reasonably satisfactory to the holders of at least 66 2/3%
the shares of Preferred Stock at the time outstanding), executed and mailed or
delivered to each holder of shares of Preferred Stock at the last address of
such holder appearing on the books of the Corporation, the obligation to deliver
to such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to receive.
4H. Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such share immediately upon the earlier of (i) the
Corporation's sale of its Common Stock in a firm commitment underwritten public
offering pursuant to a registration statement under the Securities Act of 1933,
as amended, the public offering price of which is not less than $7.50 per share
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and which results in aggregate cash proceeds to the
corporation of $15,000,000 (net of underwriting discounts and commissions) or
(ii) the date specified by written consent or agreement of the holders of at
least 66 2/3% of the then outstanding shares of Preferred Stock, voting together
as a class.
4I. Notice of Adjustment. Upon any adjustment of an applicable Conversion
--------------------
Price, then and in each such case the Corporation shall give written notice
thereof, by first class mail, postage prepaid, addressed to each holder of
shares of Preferred Stock, as applicable, at the address of such holder as shown
on the books of the Corporation, which notice shall state the Conversion Price
resulting from such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
4J. Other Notices. In case at any time:
-------------
(1) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to the
--------
holders of its Common Stock any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with, or a sale of a substantial portion of its assets to,
another corporation;
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<PAGE>
(4) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Corporation; or
(5) the Corporation shall take any action or there shall be any event
which would result in an automatic conversion of the Preferred Stock
pursuant to subparagraph 4H, then, in any one or more of said cases, the
Corporation shall give, by first class mail, postage prepaid, addressed to
each holder of any shares of Preferred Stock at the address of such holder
as shown on the books of the Corporation, (a) at least 30 days' prior
written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend distribution or
subscription rights or for determining rights to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least 30 days' prior written notice of the
date when the same shall take place, and (c) in the case of any event which
would result in an automatic conversion of the Preferred Stock pursuant to
subparagraph 4H, at least 30 days prior written notice of the date on which
the same is expected to be completed. such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of
Common Stock shall be entitled thereto, and such notice in accordance with
the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
4K. Stock to be Reserved. The Corporation will at all times reserve and
--------------------
keep available out of its authorized Common Stock or its treasury shares, solely
for the purpose of issue upon the conversion of the Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
lions and charges with respect to the issue thereof and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the effective
Conversion Prices for the Preferred Stock. The Corporation will take all such
action as may be necessary to assure that all ouch shares of Common Stock may be
so issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common Stock of
the Corporation may be listed. The Corporation will not take any action which
results in any adjustment of the Conversion Price if the total number of shares
of Common Stock issued and issuable after such action upon conversion of the
Preferred Stock would exceed the total number of shares of Common Stock then
authorized by the Corporation's Articles of Incorporation.
4L. No Reissuance. Shares of Preferred Stock which are converted into
-------------
shares of Common Stock as provided herein shall not be reissued.
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<PAGE>
4M. Issue Tax. The issuance of certificates for shares of Common Stock
---------
upon conversion of the Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof.
4N. Closing of Books. The Corporation will at no time close its transfer
----------------
books against the transfer of any Series A, Series B, Series C or of any shares
of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock.
4O. Definition of Common Stock. As used in this paragraph 4, the term
--------------------------
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
no par value, as constituted on the date of the filing of these Amended and
Restated Articles of Incorporation and shall also include any capital stock of
any class of the Corporation thereafter authorized which shall not be limited to
a fixed sum or percentage of par value in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, provided, however, that such term, when used to describe the
-----------------
securities receivable upon conversion of shares of the Preferred Stock of the
Corporation, shall include only shares designated as Common Stock of the
Corporation on the date of filing of these Amended and Restated Articles of
Incorporation, any shares resulting from any combination or subdivision thereof
referred to in subparagraph 4E, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 4G.
5. Voting. Except as otherwise required by law or these Amended and
------
Restated Articles of Incorporation, (i) the holders of Preferred Stock shall
have one vote for each full share of Common Stock into which their respective
shares of Preferred Stock are convertible on the record date for the vote and
(ii) the holders of Common Stock shall have one vote per share of Common Stock.
6. Restrictions. At any time when shares of Preferred Stock are
------------
outstanding, without first obtaining the approval (by vote or written consent,
as provided by law) of the holders of at least 66 2/3% of the then outstanding
shares of Preferred Stock, voting together as a class (or such higher threshold
as may be required by law or by these Amended and Restated Articles of
Incorporation):
(A) the Corporation will not (i) create or authorize the creation of
any additional class or series of shares unless the same ranks junior to the
Preferred Stock as to the payment of dividends, redemption rights and the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation, (ii) increase the authorized amount of the Preferred Stock or the
authorized amount of any additional class or series of shares unless the same
ranks junior to the Preferred Stock as to the payment of dividends, redemption
rights and the distribution of assets upon the liquidation, dissolution or
winding up of the Corporation, or (iii) create or authorize any obligation or
security convertible into shares of Preferred Stock or into shares of any other
class or series unless the same ranks junior to the Preferred Stock as to the
payment of dividends, redemption rights and the distribution of assets upon the
liquidation; dissolution or winding up of the
-12-
<PAGE>
Corporation, whether any such creation or authorization or increase shall be by
means of amendment of these Amended and Restated Articles of Incorporation,
merger, consolidation or otherwise;
(B) the Corporation will not amend, alter or repeal the Corporation's
Articles of Incorporation or Bylaws in any manner, or file any directors'
resolutions pursuant to the General Corporation Law of California containing any
provision, in either case, which adversely affects the respective preferences,
qualifications, voting powers, special or relative rights or privileges of the
Preferred Stock or which in any manner adversely affects the Preferred Stock or
the holders thereof;
(C) the Corporation will not purchase or set aside any sums for the
purchase of any shares of stock of the Corporation or the purchase of any
options, warrants or other rights to acquire any shares of stock of the
Corporation, except for (i) the purchase of shares of Common Stock of the
Corporation from former employees of the Corporation who acquired such shares
directly from the Corporation, if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
employment of such former employee and the purchase price does not exceed the
original issue price-paid by such former employee to the Corporation for such
shares, and (ii) redemptions of Preferred Stock pursuant to paragraph 2 hereof;
(D) the Corporation will not declare, or set aside funds for the
payment of, dividends on any class of stock of the Corporation, other than
dividends on Preferred Stock pursuant to paragraph 1 hereof;
(E) the Corporation will not (i) consolidate or merge with or into any
other corporation, (ii) sell or otherwise dispose of all or substantially all of
the assets of the Corporation as an entirety to any other person or persons, or
(iii) consent to any liquidation, dissolution or winding up of the Corporation;
(F) the Corporation will not acquire in any one transaction or series
of transactions the capital stock, assets or business of any person or entity,
in an amount exceeding $750,000; and
(G) from and after the date of these Amended and Restated Articles of
Incorporation the Corporation, the Corporation will not issue to employees,
consultants or directors of the Corporation pursuant to a stock option plan,
restricted stock plan or other compensatory or incentive arrangement options
(net of any such options canceled) to purchase more than an aggregate of 483,990
shares of Common Stock (which figure is inclusive of stock options outstanding
as of the date of these Amended and Restated Articles of Incorporation), nor
will it issue more than an aggregate of 483,990 shares of Common Stock upon the
exercise of such options.
ARTICLE IIIB
------------
COMMON STOCK
-13-
<PAGE>
1. Dividends. The holders of shares of Common Stock shall be entitled to
---------
receive such dividends as from time to time may be declared by the Board of
Directors of the Corporation, subject to the provisions of Article IIIA hereof
with respect to the rights of holders of Preferred Stock.
2. Liquidation. In the event of any liquidation, dissolution or winding
-----------
up of the Corporation, whether voluntary or involuntary, after payment shall
have been made to holders of Preferred Stock of the full amounts to which they
shall be entitled as stated and expressed herein or as may be stated and
expressed pursuant hereto the holders of Common Stock shall be entitled, to the
exclusion of the holders of Preferred Stock, to share ratably according to the
number of shares of Common Stock held by them in the remaining assets of the
Corporation available for distribution to its shareholders.
3. Voting. Except as otherwise provided by law, voting rights shall be
------
governed by paragraph 5 of Article IIIA hereof.
ARTICLE IV
----------
A. Limitation of Director's Liability. The liability of the director of
----------------------------------
this Corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law. Unless applicable law otherwise provides, any
amendment, repeal or modification of this Section A shall not adversely affect
any right or protection of a director under this Section A that existed at or
prior to the time of such amendment, repeal or modification.
B. Indemnification of Agents. This Corporation is authorized to provide
-------------------------
indemnification of agents (as defined in Section 317 of the California
Corporations Code) to the fullest extent permissible under California law.
Unless applicable law otherwise provides, any amendment, repeal or modification
of this Section B shall not adversely affect any contract or other right to
indemnification of an agent the Corporation that existed at or prior to the time
of such amendment, repeal or modification.
C. Repeal or Modification. Any repeal or modification of the foregoing
----------------------
provisions of this Article IV shall not adversely affect any right of
indemnification or limitation of liability of a director or officer of this
Corporation relating to acts or omissions occurring prior to such repeal or
modification.
* * *
3. The foregoing amendment and restatement of this corporation's Articles
of Incorporation has been approved by the Board of Directors of this
Corporation.
4. The foregoing amendment and restatement of this corporation's Articles
of Incorporation was approved by the holders of the requisite number of shares
of this corporation in accordance with Sections 902 and 903 of the California
General Corporation Law. The total number of outstanding shares entitled to vote
with respect to the foregoing amendment was 1,106,941 shares of Common Stock,
611,250 shares of Series A Preferred Stock and 500,000 shares of Series B
-14-
<PAGE>
Preferred Stock. The number of shares voting in favor of the foregoing amendment
equaled or exceeded the vote required. The percentage vote required was a
majority of the outstanding shares of Common Stock and 66 2/3% of the
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a single class.
[signature page follows]
-15-
<PAGE>
The undersigned certify under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of their own knowledge.
Executed at Reno, Nevada on July 27, 1999.
/s/ Ken Hawk
------------------------------
Ken Hawk, President
/s/ Mick Delargy
------------------------------
Mick Delargy, Secretary
-16-
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
BATTERY EXPRESS, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I CORPORATE OFFICES.................................................. 1
1.1 Principal Office.................................................. 1
1.2 Other Offices..................................................... 1
ARTICLE II MEETINGS OF SHAREHOLDERS.......................................... 1
2.1 Place Of Meetings................................................. 1
2.2 Annual Meeting.................................................... 1
2.3 Special Meeting................................................... 1
2.4 Notice Of Shareholders' Meetings.................................. 2
2.5 Manner Of Giving Notice; Affidavit Of Notice...................... 2
2.6 Quorum............................................................ 3
2.7 Adjourned Meeting; Notice......................................... 3
2.8 Voting............................................................ 4
2.9 Validation Of Meetings; Waiver Of Notice; Consent................. 4
2.10 Shareholder Action By Written Consent Without A Meeting........... 5
2.11 Record Date For Shareholder Notice, Voting, Or Giving Consents.... 6
2.12 Proxies........................................................... 6
2.13 Inspectors Of Election............................................ 7
ARTICLE III DIRECTORS........................................................ 8
3.1 Powers............................................................ 8
3.2 Number Of Directors............................................... 8
3.3 Election And Term Of Office Of Directors.......................... 8
3.5 Place Of Meetings; Meetings By Telephone.......................... 9
3.6 Regular Meetings.................................................. 9
3.7 Special Meetings; Notice.......................................... 9
3.8 Quorum............................................................ 10
3.9 Waiver Of Notice.................................................. 10
3.10 Adjournment....................................................... 10
3.11 Notice Of Adjournment............................................. 10
3.12 Board Action By Written Consent Without A Meeting................. 11
3.13 Fees And Compensation Of Directors................................ 11
3.14 Approval Of Loans To Officers..................................... 11
ARTICLE IV COMMITTEES........................................................ 11
4.1 Committees Of Directors............................................ 11
4.2 Meetings And Action Of Committees.................................. 12
ARTICLE V OFFICERS 12
5.1 Officers........................................................... 12
5.2 Election Of Officers............................................... 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.3 Subordinate Officers............................................................. 13
5.4 Removal And Resignation Of Officers.............................................. 13
5.5 Vacancies In Offices............................................................. 13
5.6 Chairman Of The Board............................................................ 13
5.7 President........................................................................ 13
5.8 Vice Presidents.................................................................. 14
5.9 Secretary........................................................................ 14
5.10 Chief Financial Officer......................................................... 14
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS............. 15
6.1 Indemnification Of Directors And Officers........................................ 15
6.2 Indemnification Of Others........................................................ 15
6.3 Payment Of Expenses In Advance................................................... 15
6.4 Indemnity Not Exclusive.......................................................... 16
6.5 Insurance Indemnification........................................................ 16
6.6 Conflicts........................................................................ 16
ARTICLE VII RECORDS AND REPORTS............................................................ 16
7.1 Maintenance And Inspection Of Share Register..................................... 16
7.2 Maintenance And Inspection Of Bylaws............................................. 17
7.3 Maintenance And Inspection Of Other Corporate Records............................ 17
7.4 Inspection By Directors.......................................................... 17
7.5 Annual Report To Shareholders; Waiver............................................ 18
7.6 Financial Statements............................................................. 18
7.7 Representation Of Shares Of Other Corporations................................... 19
ARTICLE VIII GENERAL MATTERS............................................................... 19
8.1 Record Date For Purposes Other Than Notice And Voting............................ 19
8.2 Checks; Drafts; Evidences Of Indebtedness........................................ 19
8.3 Corporate Contracts And Instruments; How Executed............................... 19
8.4 Certificates For Shares.......................................................... 20
8.5 Lost Certificates................................................................ 20
8.6 Construction; Definitions........................................................ 20
ARTICLE IX AMENDMENTS...................................................................... 20
9.1 Amendment By Shareholders........................................................ 20
9.2 Amendment By Directors........................................................... 21
</TABLE>
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
BATTERY EXPRESS, INC.
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 Principal Office
----------------
The Board of Directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the Board
of Directors shall fix and designate a principal business office in the State of
California.
1.2 Other Offices.
--------------
The Board of Directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
2.1 Place Of Meetings.
-----------------
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the Board of Directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 Annual Meeting.
--------------
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the Board of Directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the third
Tuesday day of April. However, if such day falls on a legal holiday, then the
meeting shall be held at the same time and place on the next succeeding full
business day. At the meeting, directors shall be elected, and any other proper
business may be transacted.
<PAGE>
2.3 Special Meeting.
---------------
A special meeting of the shareholders may be called at any time by the
Board of Directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the Board of Directors may be held.
2.4 Notice Of Shareholders' Meetings.
--------------------------------
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10) (or,
if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty
(30)) nor more than sixty (60) days before the date of the meeting. The notice
shall specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the Board of Directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
2.5 Manner Of Giving Notice; Affidavit Of Notice.
--------------------------------------------
<PAGE>
Written notice of any meeting of shareholders shall be given either
(i) personally or (ii) by first-class mail or (iii) by third-class mail but only
if the corporation has outstanding shares held of record by five hundred (500)
or more persons (determined as provided in Section 605 of the Code) on the
record date for the shareholders' meeting, or (iv) by telegraphic or other
written communication. Notices not personally delivered shall be sent charges
prepaid and shall be addressed to the shareholder at the address of that
shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other means
of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 Quorum.
------
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 Adjourned Meeting; Notice.
-------------------------
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting is
fixed or if the adjournment is for more than forty-five (45) days from the date
set for the original meeting, then notice of the adjourned meeting shall be
given. Notice of any such adjourned meeting shall be given to each shareholder
of record entitled to vote at the adjourned meeting in
<PAGE>
accordance with the provisions of Sections 2.4 and 2.5 of these bylaws. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
2.8 Voting.
------
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as
may be otherwise provided in the articles of incorporation, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote of the shareholders. Any shareholder entitled to vote on any
matter may vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or, except when the matter is the election of
directors, may vote them against the proposal; but, if the shareholder fails to
specify the number of shares which the shareholder is voting affirmatively, it
will be conclusively presumed that the shareholder's approving vote is with
respect to all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit. The
candidates receiving the highest number of affirmative votes, up to the number
of directors to be elected, shall be elected; votes against any candidate and
votes withheld shall have no legal effect.
2.9 Validation Of Meetings; Waiver Of Notice; Consent.
-------------------------------------------------
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though taken at a meeting duly held after regular call and notice, if a quorum
is present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph
<PAGE>
of Section 2.4 of these bylaws, the waiver of notice or consent or approval
shall state the general nature of the proposal. All such waivers, consents, and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 Shareholder Action By Written Consent Without A Meeting.
-------------------------------------------------------
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors. However, a director may be elected at any
time to fill any vacancy on the Board of Directors, provided that it was not
created by removal of a director and that it has not been filled by the
directors, by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of the Code, or (iv) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, the notice shall be given at least ten (10) days before the
consummation of any action authorized by that approval.
2.11 Record Date For Shareholder Notice, Voting, Or Giving Consents.
--------------------------------------------------------------
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any
<PAGE>
shares on the books of the corporation after the record date, except as
otherwise provided in the Code.
If the Board of Directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the close of business on
the business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held; and
(b) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
2.12 Proxies.
-------
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's attorney-in-
fact. A validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) the person who executed the proxy
revokes it prior to the time of voting by delivering a writing to the
corporation stating that the proxy is revoked or by executing a subsequent proxy
and presenting it to the meeting or by voting in person at the meeting, or (ii)
written notice of the death or incapacity of the maker of that proxy is received
by the corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expiration of eleven (11) months
from the date of the proxy, unless otherwise provided in the proxy. The dates
contained on the forms of proxy presumptively determine the order of execution,
regardless of the postmark dates on the envelopes in which they are mailed. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Sections 705(e) and 705(f) of the Code.
2.13 Inspectors Of Election.
----------------------
Before any meeting of shareholders, the Board of Directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting pursuant to the request of one (1) or more shareholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any shareholder or
a shareholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
<PAGE>
(a) determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
---------
3.1 Powers.
------
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to actions required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board of Directors.
3.2 Number Of Directors.
-------------------
The number of directors of the corporation shall be not less than
three (3) nor more than five (5). The exact number of directors shall be
((NoofDirs)) until changed, within the limits specified above, by a bylaw
amending this Section 3.2, duly adopted by the Board of Directors or by the
shareholders. The indefinite number of directors may be changed, or a definite
number may be fixed without provision for an indefinite number, by a duly
adopted amendment to the articles of incorporation or by an amendment to this
bylaw duly adopted by the vote or written consent of holders of a majority of
the outstanding shares entitled to vote; provided, however, that an amendment
reducing the fixed number or the minimum number of directors to a number less
than five (5) cannot be adopted if the votes cast against its adoption at a
meeting, or the shares not consenting in the case of an action by written
consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of the
outstanding shares entitled to vote thereon. No amendment may change the stated
maximum number of authorized directors to a number greater than two (2) times
the stated minimum number of directors minus one (1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 Election And Term Of Office Of Directors.
----------------------------------------
<PAGE>
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 Resignation And Vacancies.
-------------------------
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the Board of Directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the Board of Directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
3.5 Place Of Meetings; Meetings By Telephone.
----------------------------------------
Regular meetings of the Board of Directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of California that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all directors participating in
the meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 Regular Meetings.
----------------
<PAGE>
Regular meetings of the Board of Directors may be held without notice
if the times of such meetings are fixed by the Board of Directors.
3.7 Special Meetings; Notice.
------------------------
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone (including a voice messaging system or other system
or technology designed to record and communicate messages), facsimile,
electronic mail, or other electronic means, to each director or sent by first-
class mail or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telegram, facsimile, electronic mail or
other electronic means, it shall be delivered at least forty-eight (48) hours
before the time of the holding of the meeting. Any oral notice given personally
or by telephone, facsimile or electronic mail may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.
3.8 Quorum.
------
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the Board of Directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 Waiver Of Notice.
----------------
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the Board of Directors.
3.10 Adjournment.
-----------
<PAGE>
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 Notice Of Adjournment.
---------------------
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 Board Action By Written Consent Without A Meeting.
-------------------------------------------------
Any action required or permitted to be taken by the Board of Directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
Board of Directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 Fees And Compensation Of Directors.
----------------------------------
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 Approval Of Loans To Officers.
-----------------------------
The corporation may, upon the approval of the Board of Directors
alone, make loans of money or property to, or guarantee the obligations of, any
officer of the corporation or its parent or subsidiary, whether or not a
director, or adopt an employee benefit plan or plans authorizing such loans or
guaranties provided that (i) the Board of Directors determines that such a loan
or guaranty or plan may reasonably be expected to benefit the corporation, (ii)
the corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the Board of Directors, and (iii) the approval of the Board of Directors is by a
vote sufficient without counting the vote of any interested director or
directors.
ARTICLE IV
COMMITTEES
----------
4.1 Committees Of Directors.
-----------------------
The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors,
<PAGE>
to serve at the pleasure of the board. The board may designate one (1) or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or alternate
members of a committee requires the vote of a majority of the authorized number
of directors. Any committee, to the extent provided in the resolution of the
board, shall have all the authority of the board, except with respect to:
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at
a rate or in a periodic amount or within a price range determined by the Board
of Directors; or
(g) the appointment of any other committees of the Board of Directors
or the members of such committees.
4.2 Meetings And Action Of Committees.
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the Board of
Directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the Board of Directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the Board of Directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
--------
5.1 Officers.
--------
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the Board of Directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
<PAGE>
5.2 Election Of Officers.
--------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment. Any contract of employment with an
officer shall be unenforceable unless in writing and specifically authorized by
the Board of Directors.
5.3 Subordinate Officers.
--------------------
The Board of Directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the Board of Directors may
from time to time determine.
5.4 Removal And Resignation Of Officers.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
Board of Directors at any regular or special meeting of the board or, except in
case of an officer chosen by the Board of Directors, by any officer upon whom
such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 Vacancies In Offices.
--------------------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 Chairman Of The Board.
---------------------
The chairman of the board, if such an officer is elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 President.
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if there is such an officer,
the president shall be the chief
<PAGE>
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 the officers of the corporation. He or She shall preside at all
meetings of the shareholders and, in the absence or nonexistence of a chairman
of the board, at all meetings of the Board of Directors. The President shall
have the general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these bylaws.
5.8 Vice Presidents.
---------------
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a vice president designated by the Board of Directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors, these bylaws,
the president or the chairman of the board.
5.9 Secretary.
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if any, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by these bylaws.
5.10 Chief Financial Officer.
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president and directors, whenever they request
it, an account of all of
<PAGE>
his or her transactions as chief financial officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
--------------------------------------------------
AND OTHER AGENTS
----------------
6.1 Indemnification Of Directors And Officers.
-----------------------------------------
The corporation shall, to the maximum extent and in the manner
permitted by the Code, indemnify each of its directors and officers against
expenses (as defined in Section 317(a) of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the Code), arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Article VI, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 Indemnification Of Others.
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article VI, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 Payment Of Expenses In Advance.
------------------------------
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or for
which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of Directors shall be paid by the corporation
in advance of the final disposition of such action or proceeding upon receipt of
an undertaking by or on behalf of the indemnified party to repay such amount if
it shall ultimately be determined that the indemnified party is not entitled to
be indemnified as authorized in this Article VI.
<PAGE>
6.4 Indemnity Not Exclusive.
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the articles of
incorporation.
6.5 Insurance Indemnification.
-------------------------
The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation against any liability asserted against or incurred by
such person in such capacity or arising out of such person's status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
6.6 Conflicts.
---------
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(1) That it would be inconsistent with a provision of the articles of
incorporation, these bylaws, a resolution of the shareholders or an agreement in
effect at the time of the accrual of the alleged cause of the action asserted in
the proceeding in which the expenses were incurred or other amounts were paid,
which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 Maintenance And Inspection Of Share Register.
--------------------------------------------
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either is appointed), as
determined by resolution of the Board of Directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent (1%) of such voting shares and have
filed a Schedule 14A with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the
<PAGE>
names and addresses of the shareholders who are entitled to vote for the
election of directors, and their shareholdings, as of the most recent record
date for which that list has been compiled or as of a date specified by the
shareholder after the date of demand. Such list shall be made available to any
such shareholder by the transfer agent on or before the later of five (5) days
after the demand is received or five (5) days after the date specified in the
demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in
person or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 Maintenance And Inspection Of Bylaws.
------------------------------------
The corporation shall keep at its principal executive office or, if
its principal executive office is not in the State of California, at its
principal business office in California the original or a copy of these bylaws
as amended to date, which bylaws shall be open to inspection by the shareholders
at all reasonable times during office hours. If the principal executive office
of the corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 Maintenance And Inspection Of Other Corporate Records.
-----------------------------------------------------
The accounting books and records and the minutes of proceedings of the
shareholders, of the Board of Directors, and of any committee or committees of
the Board of Directors shall be kept at such place or places as are designated
by the Board of Directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
7.4 Inspection By Directors.
-----------------------
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 Annual Report To Shareholders; Waiver.
-------------------------------------
<PAGE>
The Board of Directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than one hundred (100)
holders of record.
7.6 Financial Statements.
--------------------
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of 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.
If a shareholder or shareholders holding at least five percent (5%)
of the outstanding shares of any class of stock of the corporation makes a
written request to the corporation for an income statement of the corporation
for the three-month, six-month or nine-month period of the then current fiscal
year ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause such statement or statements to be prepared, if
not already prepared, and shall deliver personally or mail such statement or
statements to the person making the request within thirty (30) days after the
receipt of the request. If the corporation has not sent to the shareholders its
annual report for the last fiscal year, the statements referred to in the first
paragraph of this Section 7.6 shall likewise be delivered or mailed to the
shareholder or shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 Representation Of Shares Of Other Corporations.
----------------------------------------------
The chairman of the board, the president, any vice president, the
chief financial officer, the secretary or assistant secretary of this
corporation, or any other person authorized by the Board of Directors or the
president or a vice president, is authorized to vote, represent, and exercise on
behalf of this corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this corporation. The
authority herein granted may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly executed
by the person having such authority.
ARTICLE VIII
<PAGE>
GENERAL MATTERS
---------------
8.1 Record Date For Purposes Other Than Notice And Voting.
-----------------------------------------------------
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the Board of Directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable resolution
or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 Checks; Drafts; Evidences Of Indebtedness.
-----------------------------------------
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.3 Corporate Contracts And Instruments; How Executed.
--------------------------------------------------
The Board of Directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 Certificates For Shares.
-----------------------
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The Board of
Directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the chairman of the board or
the vice chairman of the board or the president or a vice president and by the
chief financial officer or an assistant treasurer or the secretary or an
assistant secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
<PAGE>
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5 Lost Certificates.
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The Board of
Directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; in such
case, the board may require indemnification of the corporation secured by a bond
or other adequate security sufficient to protect the corporation against any
claim that may be made against it, including any expense or liability, on
account of the alleged loss, theft or destruction of the certificate or the
issuance of the replacement certificate.
8.6 Construction; Definitions.
-------------------------
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Code shall govern the construction of
these bylaws. Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the singular, and the
term "person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
----------
9.1 Amendment By Shareholders.
-------------------------
New bylaws may be adopted or these bylaws may be amended or repealed
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that if the articles of
incorporation of the corporation set forth the number of authorized directors of
the corporation, then the authorized number of directors may be changed only by
an amendment of the articles of incorporation.
9.2 Amendment By Directors.
----------------------
Subject to the rights of the shareholders as provided in Section 9.1
of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing
the authorized number of directors (except to fix the authorized number of
directors pursuant to a bylaw providing for a variable number of directors), may
be adopted, amended or repealed by the Board of Directors.
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
IGO CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES........................................................ 1
1.1 Registered Office......................................................... 1
1.2 Other Offices............................................................. 1
ARTICLE II - MEETINGS OF STOCKHOLDERS................................................ 1
2.1 Place of Meetings......................................................... 1
2.2 Annual Meeting............................................................ 1
2.3 Special Meeting........................................................... 1
2.4 Notice of Stockholders' Meetings.......................................... 2
2.5 Manner of Giving Notice; Affidavit of Notice.............................. 2
2.6 Quorum.................................................................... 3
2.7 Adjourned Meeting; Notice................................................. 3
2.8 Conduct of Business....................................................... 3
2.9 Voting.................................................................... 3
2.10 Waiver of Notice.......................................................... 4
2.11 Stockholder Action by Written Consent Without a Meeting................... 4
2.12 Record Date for Stockholder Notice; Voting; Giving Consents............... 5
2.13 Proxies................................................................... 6
2.14 Inspectors of Election.................................................... 6
ARTICLE III - DIRECTORS.............................................................. 7
3.1 Powers.................................................................... 7
3.2 Number of Directors....................................................... 7
3.3 Election, Qualification and Term of Office of Directors................... 7
3.4 Resignation and Vacancies................................................. 7
3.5 Place of Meetings; Meetings by Telephone.................................. 8
3.6 Regular Meetings.......................................................... 9
3.7 Special Meetings; Notice.................................................. 9
3.8 Quorum.................................................................... 9
3.9 Waiver of Notice.......................................................... 9
3.10 Board Action by Written Consent Without a Meeting......................... 10
3.11 Fees and Compensation of Directors........................................ 10
3.12 Approval of Loans to Officers............................................. 10
3.13 Chairman of the Board of Directors........................................ 10
ARTICLE IV - COMMITTEES.............................................................. 11
4.1 Committees of Directors................................................... 11
4.2 Committee Minutes......................................................... 11
4.3 Meetings and Action of Committees......................................... 11
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V - OFFICERS................................................................. 12
5.1 Officers.................................................................. 12
5.2 Appointment of Officers................................................... 12
5.3 Subordinate Officers...................................................... 12
5.4 Removal and Resignation of Officers....................................... 12
5.5 Vacancies In Offices...................................................... 13
5.6 Chairman of the Board..................................................... 13
5.7 President................................................................. 13
5.8 Vice Presidents........................................................... 13
5.9 Secretary................................................................. 13
5.10 Chief Financial Officer................................................... 14
5.11 Representation of Shares of Other Corporations............................ 14
5.12 Authority and Duties of Officers.......................................... 14
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS..... 15
6.1 Indemnification of Directors and Officers................................. 15
6.2 Indemnification of Others................................................. 15
6.3 Payment of Expenses in Advance............................................ 15
6.4 Indemnity Not Exclusive................................................... 15
6.5 Insurance................................................................. 16
6.6 Conflicts................................................................. 16
ARTICLE VII - RECORDS AND REPORTS.................................................... 16
7.1 Maintenance and Inspection of Records..................................... 16
7.2 Inspection by Directors................................................... 17
7.3 Annual Statement to Stockholders.......................................... 17
7.4 Financial Statements...................................................... 17
ARTICLE VIII - GENERAL MATTERS....................................................... 18
8.1 Record Date for Purposes Other Than Notice and Voting..................... 18
8.2 Checks.................................................................... 18
8.3 Execution of Corporate Contracts and Instruments.......................... 18
8.4 Stock Certificates; Partly Paid Shares.................................... 19
8.5 Special Designation on Certificates....................................... 19
8.6 Lost Certificates......................................................... 19
8.7 Construction; Definitions................................................. 20
8.8 Dividends................................................................. 20
8.9 Fiscal Year............................................................... 20
8.10 Seal...................................................................... 20
8.11 Transfer of Stock......................................................... 21
8.12 Stock Transfer Agreements................................................. 21
8.13 Registered Stockholders................................................... 21
ARTICLE IX - AMENDMENTS.............................................................. 21
9.1 Amendment by Stockholders................................................. 21
</TABLE>
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<TABLE>
<S> <C>
9.2 Amendment by Directors..................................................... 21
</TABLE>
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EXHIBIT 3.4
BYLAWS
OF
IGO CORPORATION
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 Registered Office.
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of Newcastle, State of Delaware. The name of the registered
agent of the corporation at such location is CT Corporation.
1.2 Other Offices.
-------------
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 Place of Meetings.
-----------------
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 Annual Meeting.
--------------
The annual meeting of stockholders shall be held on such date, time
and place, either within or without the State of Delaware, as may be designated
by resolution of the Board of Directors each year. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Tuesday day of April. However, if such day falls on a legal holiday, then the
meeting shall be held at the same time and place on the next succeeding full
business day. At the meeting, directors shall be elected and any other proper
business may be transacted.
2.3 Special Meeting.
---------------
A special meeting of the stockholders may be called at any time by the
Board of Directors, or by the chairman of the board, or by the president, or by
one or more stockholders
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holding shares in the aggregate entitled to cast not less than fifty percent
(50%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the Board of Directors may be held.
2.4 Notice of Stockholders' Meetings.
All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the business to be transacted (no business other than that specified in
the notice may be transacted) or (ii) in the case of the annual meeting, those
matters which the Board of Directors, at the time of giving the notice, intends
to present for action by the stockholders (but subject to the provisions of the
next paragraph of this Section 2.4 any proper matter may be presented at the
meeting for such action). The notice of any meeting at which directors are to be
elected shall include the name of any nominee or nominees who, at the time of
the notice, the board intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director or officer has a direct or indirect
financial interest, pursuant to Section 144 of the Delaware General Corporation
Law (the "Code"), (ii) an amendment of the certificate of incorporation,
pursuant to Section 242 of the Code, (iii) a merger or consolidation of the
corporation, pursuant to Sections 251-253 of the Code, or (iv) a voluntary
dissolution of the corporation, pursuant to Section 275 of the Code, then the
notice shall also state the general nature of that proposal.
2.5 Manner of Giving Notice; Affidavit of Notice.
--------------------------------------------
Written notice of any meeting of stockholders shall be given either
(i) personally, or (ii) by mail, or (iii) by telegraphic, facsimile or other
written communication. If any such written notice is mailed, it shall be deemed
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit
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of the secretary or an assistant secretary or of the transfer agent of the
corporation that the notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. Notices not personally
delivered shall be sent charges prepaid and shall be addressed to the
stockholder at the address of that stockholder appearing on the books of the
corporation or given by the stockholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that stockholder by mail or
telegraphic or other written communication to the corporation's principal
executive office, or if published at least once in a newspaper of general
circulation in the county where that office is located. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written communication.
If any notice addressed to a stockholder at the address of that
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
stockholder on written demand of the stockholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
2.6 Quorum.
------
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. The stockholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum or such higher threshold
as may be required for such action. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders holding a majority of the shares present in
person or represented by proxy and entitled to vote thereat, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present or represented. At such adjourned meeting
at which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
2.7 Adjourned Meeting; Notice.
-------------------------
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than forty-five (45) 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.
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2.8 Conduct of Business.
-------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including the manner of voting and
the conduct of business.
2.9 Voting.
------
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
The stockholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
stockholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.9, or as
may be otherwise provided in the Certificate of Incorporation, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote of the stockholders. Any stockholder entitled to vote on any
matter may vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or, except when the matter is the election of
directors, may vote them against the proposal; but, if the stockholder fails to
specify the number of shares which the stockholder is voting affirmatively, it
will be conclusively presumed that the stockholder's approving vote is with
respect to all shares which the stockholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the stockholders, unless the vote of a greater number or a vote by
classes is required by the General Corporation Law of Delaware or by the
Certificate of Incorporation.
2.10 Validation Of Meetings; Waiver Of Notice; Consent.
-------------------------------------------------
The transactions of any meeting of stockholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though taken at a meeting duly held after regular call and notice, if a quorum
is present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
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Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.11 Stockholder Action by Written Consent Without a Meeting.
-------------------------------------------------------
Except as otherwise provided in this Section 2.11, any action which
may be taken at any annual or special meeting of stockholders may be taken
without a meeting and without prior notice, if a consent in writing, setting
forth the action so taken, is signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take that action at a meeting at which all shares entitled to vote on that
action were present and voted.
All such consents shall be maintained in the corporate records. Any
stockholder giving a written consent, or the stockholder's proxy holders, or a
transferee of the shares, or a personal representative of the stockholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
Notwithstanding the foregoing, effective upon the listing of the
Common Stock of the corporation on the Nasdaq Stock Market and the registration
of any class of securities of the corporation pursuant to the requirements of
the Securities Exchange Act of 1934, as amended, the stockholders of the
corporation may not take action by written consent without a meeting but must
take any such actions at a duly called annual or special meeting.
2.12 Record Date for Stockholder Notice; Voting; Giving Consents.
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days before any such action without a meeting,
and in such event only stockholders of record on the date so fixed are entitled
to notice and
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<PAGE>
to vote or to give consents, as the case may be, notwithstanding any transfer of
any shares on the books of the corporation after the record date, except as
otherwise provided in the Code.
If the Board of Directors does not so fix a record date:
(i) 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.
(ii) 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 necessary, shall be the day on which the first
written consent is delivered to the corporation.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
2.13 Proxies.
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
2.14 Inspectors of Election.
----------------------
Before any meeting of stockholders, the Board of Directors may
appoint an inspector or inspectors of election to act at the meeting or its
adjournment. If no inspector of election is so appointed, then the chairman of
the meeting may, and on the request of any stockholder or a stockholder's proxy
shall, appoint an inspector or inspectors of election to act at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting pursuant to the request of one (1) or more stockholders
or proxies, then the holders of a majority of shares or their proxies present at
the meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, then the chairman of the meeting may, and upon the request of
any stockholder or a stockholder's proxy shall, appoint a person to fill that
vacancy.
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Such inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
2.15 Advance Notice of Stockholder Nominees and Stockholder Business.
---------------------------------------------------------------
The provisions of this Section 2.15 shall not be effective before,
but shall be in full force and effect at all times after, the effectiveness of
the listing of the Common Stock of the corporation on the Nasdaq Stock Market
and the registration of any class of securities of the corporation pursuant to
the requirements of the Securities Exchange Act of 1934, as amended. To be
properly brought before an annual meeting or special meeting, nominations for
the election of director or other business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the board
of directors, (b) otherwise properly brought before the meeting by or at the
direction of the board of directors, or (c) otherwise properly brought before
the meeting by a stockholder. For such nominations or other business to be
considered properly brought before the meeting by a stockholder, such
stockholder must have given timely notice and in proper form of his intent to
bring such business before such meeting. To be timely, such stockholder's notice
must be delivered to or mailed and received by the secretary of the corporation
not less than 90 days prior to the meeting; provided, however, that in the event
that less than 100 days notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. To be in proper form, a stockholder's notice to
the secretary shall set forth:
(i) the name and address of the stockholder who intends to make
the nominations, propose the business, and, as the case may
be, the name and address of the person or persons to be
nominated or the nature of the business to be proposed;
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(ii) a representation that the stockholder is a holder of record
of stock of the corporation entitled to vote at such
meeting and, if applicable, intends to appear in person or
by proxy at the meeting to nominate the person or persons
specified in the notice or introduce the business specified
in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be
made by the stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as
would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to
be nominated, or the matter been proposed, or intended to
be proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
ARTICLE III
DIRECTORS
---------
3.1 Powers.
------
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
3.2 Number of Directors.
-------------------
The Board of Directors shall consist of not fewer than three (3) nor
more than five (5) persons. The exact number of directors shall be four (4)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the Board of Directors or by the stockholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
Certificate of Incorporation or by an amendment to this bylaw duly adopted by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed number
or the minimum number of directors to a number less than
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five (5) cannot be adopted if the votes cast against its adoption at a meeting,
or the shares not consenting in the case of an action by written consent, are
equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding
shares entitled to vote thereon. No amendment may change the stated maximum
number of authorized directors to a number greater than two (2) times the stated
minimum number of directors minus one (1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 Election, Qualification and Term of Office of Directors.
-------------------------------------------------------
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 Resignation and Vacancies.
-------------------------
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is 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 as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
Bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director; however, a vacancy created by the removal of a director
by the vote or written consent of the stockholders or by court order may be
filled only by the affirmative vote of a majority of the shares represented and
voting at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum), or by the
unanimous written consent of all shares entitled to vote thereon. Each director
so elected shall hold office until the next annual meeting of the stockholders
and until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the Board of Directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the
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stockholders fail, at any meeting of stockholders at which any director or
directors are elected, to elect the number of directors to be elected at that
meeting.
The stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If, at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 Place of Meetings; Meetings by Telephone.
----------------------------------------
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
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3.6 Regular Meetings.
----------------
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 Special Meetings; Notice.
------------------------
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone (including a voice messaging system or other system
or technology designed to record and communicate messages), facsimile,
electronic mail, or other electronic means, to each director or sent by first-
class mail or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telegram, facsimile, electronic mail or
other electronic means, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone,
facsimile or electronic mail may be communicated either to the director or to a
person at the office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The notice need not
specify the purpose or the place of the meeting, if the meeting is to be held at
the principal executive office of the corporation.
3.8 Quorum.
------
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these Bylaws, to
the directors who were not present at the time of the adjournment.
3.9 Waiver of Notice.
----------------
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Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 Board Action by Written Consent Without a Meeting.
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee. Written consents representing actions taken by the board
or committee may be executed by telex, telecopy or other facsimile transmission,
and such facsimile shall be valid and binding to the same extent as if it were
an original.
3.11 Fees and Compensation of Directors.
----------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
3.12 Approval of 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
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 Removal of Directors.
--------------------
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
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No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 Chairman of the Board of Directors.
----------------------------------
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
ARTICLE IV
COMMITTEES
----------
4.1 Committees of Directors.
-----------------------
The Board of Directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors or in the Bylaws of the corporation, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority to (i) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (ii) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, (v) amend or repeal the Bylaws of the corporation or adopt new
Bylaws; and, unless the board resolution establishing the committee, the Bylaws
or the certificate of incorporation expressly so provide, no such committee
shall have the power or authority to declare a dividend, to authorize the
issuance of stock, or to adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law of Delaware, (vi) the approval of any
action which, under the Code, also requires stockholders' approval or approval
of the outstanding shares; (vii) the filling of vacancies on the Board of
Directors or in any committee; (viii) the fixing of compensation of the
directors for serving on the board or any committee; (ix) the amendment or
repeal of any resolution of the Board of Directors which by its
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express terms is not so amendable or repealable; (x) a distribution to the
stockholders of the corporation, except at a rate or in a periodic amount or
within a price range determined by the Board of Directors; or (xi) the
appointment of any other committees of the Board of Directors or the members of
such committees.
4.2 Committee Minutes.
-----------------
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 Meetings and Action of Committees.
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
ARTICLE V
OFFICERS
--------
5.1 Officers.
--------
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the Board of Directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by the same
person.
5.2 Appointment of Officers.
-----------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment. Any contract of employment
with an officer shall be unenforceable unless in writing and specifically
authorized by the Board of Directors.
5.3 Subordinate Officers.
--------------------
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The Board of Directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these Bylaws or as the Board of
Directors may from time to time determine.
5.4 Removal and Resignation of Officers.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the Secretary of the corporation. Any resignation shall take effect
at the date of the receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation is
without prejudice to the rights, if any, of the corporation under any contract
to which the officer is a party.
5.5 Vacancies In Offices.
--------------------
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
5.6 Chairman of the Board.
---------------------
The chairman of the board, if such an officer is elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 Chief Executive Officer
-----------------------
The chief executive officer of the corporation shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business and the officers of the corporation. He or she shall
preside at all meetings of the stockholders and, in the absence or nonexistence
of a chairman of the board at all meetings of the Board of Directors. He or she
shall have the general powers and duties of management usually vested in the
chief executive officer of a corporation, including general supervision,
direction and control of the business and supervision of other officers of the
corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
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The chief executive officer shall, without limitation, have the
authority to execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the corporation.
5.8 President.
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board (if any) or chief executive
officer, the president shall have general supervision, direction, and control of
the business and other officers of the corporation. He or she shall have the
general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.9 Vice Presidents.
---------------
In the absence or disability of the president, the vice presidents,
if any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a vice president designated by the Board of Directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors, these Bylaws,
the president or the chairman of the board.
5.10 Secretary.
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to be given
by law or by these Bylaws. He or she shall keep the seal of the corporation, if
one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
Bylaws.
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5.11 Chief Financial Officer.
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president, or the directors, upon request, an
account of all his or her transactions as chief financial officer and of the
financial condition of the corporation, and shall have other powers and perform
such other duties as may be prescribed by the Board of Directors or the bylaws.
5.12 Representation of Shares of Other Corporations.
----------------------------------------------
The chairman of the board, the president, any vice president, the
chief financial officer, the secretary or assistant secretary of this
corporation, or any other person authorized by the Board of Directors or the
president or a vice president, is authorized to vote, represent, and exercise on
behalf of this corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this corporation. The
authority granted herein may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly executed
by the person having such authority.
5.13 Authority and Duties of Officers.
--------------------------------
In addition to the foregoing authority and duties, all officers of
the corporation shall respectively have such authority and perform such duties
in the management of the business of the corporation as may be designated from
time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
--------------------------------------------------
AND OTHER AGENTS
----------------
6.1 Indemnification of Directors and Officers.
-----------------------------------------
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
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partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 Indemnification of Others.
-------------------------
The corporation shall have the power, to the maximum extent and in
the manner permitted by the General Corporation Law of Delaware, to indemnify
each of its employees and agents (other than directors and officers) against
expenses (including attorneys' fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding,
arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Section 6.2, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 Payment of Expenses in Advance.
------------------------------
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 Indemnity Not Exclusive.
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation
6.5 Insurance.
---------
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.6 Conflicts.
---------
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No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the certificate
of incorporation, these Bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 Maintenance and Inspection of Records.
-------------------------------------
The corporation shall, either at its principal executive offices or
at such place or places as designated by the Board of Directors, keep a record
of its stockholders listing their names and addresses and the number and class
of shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 Inspection by Directors.
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 Annual Report to Stockholders; Waiver.
-------------------------------------
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The Board of Directors shall cause an annual report to be sent to the
stockholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of stockholders to be held during the next fiscal year
and in the manner specified in these bylaws for giving notice to stockholders of
the corporation.
The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than one hundred (100)
holders of record.
7.4 Financial Statements.
--------------------
If no annual report for the fiscal year has been sent to
stockholders, then the corporation shall, upon the written request of any
stockholder made more than one hundred twenty (120) days after the close of such
fiscal year, deliver or mail to the person making the request, within thirty
(30) days thereafter, a copy of 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.
If a stockholder or stockholders holding at least five percent (5%)
of the outstanding shares of any class of stock of the corporation makes a
written request to the corporation for an income statement of the corporation
for the three-month, six-month or nine-month period of the then current fiscal
year ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause such statement or statements to be prepared, if
not already prepared, and shall deliver personally or mail such statement or
statements to the person making the request within thirty (30) days after the
receipt of the request. If the corporation has not sent to the stockholders its
annual report for the last fiscal year, the statements referred to in the first
paragraph of this Section 7.4 shall likewise be delivered or mailed to the
stockholder or stockholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in
this section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 Record Date for Purposes Other Than Notice and Voting.
-----------------------------------------------------
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For purposes of determining 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 other lawful
action (other than action by stockholders by written consent without a meeting),
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the General Corporation Law of Delaware.
If the Board of Directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable resolution
or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 Checks.
------
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.3 Execution of Corporate Contracts and Instruments.
------------------------------------------------
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 Stock Certificates; Partly Paid Shares.
--------------------------------------
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar
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<PAGE>
before such certificate is issued, it may be issued by the corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.5 Special Designation on Certificates.
-----------------------------------
If the corporation is authorized to issue more than one class of
stock or more than one series of any class, then the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock; provided,
however, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may be
set forth on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
8.6 Lost Certificates.
-----------------
Except as provided in this Section 8.6, no new certificates for
shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the corporation and canceled at the same time. The
corporation may issue a new certificate of stock or uncertificated shares in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or the owner's legal representative, to give
the corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.7 Construction; Definitions.
-------------------------
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.8 Dividends.
---------
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<PAGE>
The directors of the corporation, subject to any restrictions
contained in (i) the General Corporation Law of Delaware or (ii) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the
funds of the corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve. Such purposes shall include but
not be limited to equalizing dividends, repairing or maintaining any property of
the corporation, and meeting contingencies.
8.9 Fiscal Year.
-----------
The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors and may be changed by the Board of Directors.
8.10 Seal.
----
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.11 Transfer of Stock.
-----------------
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.12 Stock Transfer Agreements.
-------------------------
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.13 Registered Stockholders.
-----------------------
The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
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<PAGE>
AMENDMENTS
----------
9.1 Amendment by Stockholders.
-------------------------
New bylaws may be adopted or these bylaws may be amended or repealed
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that if the Certificate of
Incorporation of the corporation set forth the number of authorized directors of
the corporation, then the authorized number of directors may be changed only by
an amendment of the Certificate of Incorporation.
9.2 Amendment by Directors.
----------------------
Subject to the rights of the stockholders as provided in Section 9.1
of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing
the authorized number of directors (except to fix the authorized number of
directors pursuant to a bylaw providing for a variable number of directors), may
be adopted, amended or repealed by the Board of Directors.
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<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
IGO CORPORATION
Adoption by Incorporator
The undersigned person appointed in the certificate of incorporation to act
as the Incorporator of IGO CORPORATION hereby adopts the foregoing bylaws as the
Bylaws of the corporation.
EXECUTED this 30th day of July, 1999.
________________________________________
David A. Garcia, Incorporator
CERTIFICATE BY SECRETARY OF ADOPTION BY INCORPORATOR
The undersigned hereby certifies that the undersigned is the duly elected,
qualified, and acting Secretary of IGO CORPORATION, and that the foregoing
Bylaws were adopted as the Bylaws of the corporation on July 30, 1999, by the
person appointed in the certificate of incorporation to act as the Incorporator
of the corporation.
EXECUTED this 30th day of July, 1999.
________________________________________
Mick Delargy, Secretary
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<PAGE>
EXHIBIT 4.2
THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE
HOLDER THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TOWARDS THE RESALE OR OTHER DISTRIBUTION THEREOF. NEITHER THIS WARRANT
NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
BATTERY EXPRESS, INC.
Stock Subscription Warrant
Warrant to Subscribe June 14,1996
for 6,750 shares
Void After June 14, 2003
------------------------
THIS CERTIFIES that, for value received, VROLYK / POWER EXPRESS L.P.,
or its registered assigns, is entitled to subscribe for and purchase from
BATTERY EXPRESS, INC., a California corporation (hereinafter, called the
"Corporation"), at the price of $2.67 per share (such price as from time to time
to be adjusted as hereinafter provided being hereinafter called the "Warrant
Exercise Price"), at any time prior to June 14, 2003, up 6,750 (subject to
adjustment as hereinafter provided) fully paid and nonassessable shares of
Common Stock, no par value, of the Corporation (hereinafter called the "Common
Stock"), subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. This Warrant and any warrant or warrants subsequently
issued upon exchange or transfer hereof are hereinafter collectively called the
"Warrants".
Section 1. Exercise of Warrant.
-------------------
(a) Method of Exercise. The rights represented by this Warrant may
------------------
be exercised by the holder hereof, in whole at any time or from time to
time in part, but not as to a fractional share of Common Stock, by the
surrender of this Warrant (properly endorsed) at the office of the
Corporation as it may designate by notice in writing to the holder hereof
at the address of such holder appearing on the books of the Corporation,
and by payment as provided in paragraph (b) hereof.
(b) The holder may make payment in respect of the exercise of this
Warrant as follows:
i) Cash Exercise. By payment to the Corporation of the Warrant
-------------
1
<PAGE>
Exercise Price in cash or by certified or official bank check, for
each share being purchased;
ii) Notes Exercise. By surrender to the Corporation of any
--------------
promissory notes or other obligations issued by the Corporation, with
all such notes or other obligations of the Corporation so surrendered
being credited against the Warrant Exercise Price in an amount equal
to the principal amount thereof plus the amount of any interest
thereon to the date of such surrender;
iii) Securities Exercise. By delivery to the Corporation of any
-------------------
other securities issued by the Corporation, with such securities being
credited against the Warrant Exercise Price in an amount equal to the
fair market value thereof;
iv) Net Issue Exercise. By an election to receive shares the
------------------
aggregate fair market value of which as of the date of exercise is
equal to the fair market value of this Warrant (or the portion thereof
being exercised) on such date, in which event the Corporation, upon
receipt of notice of such election shall issue to the holder hereof a
number of shares of Common Stock equal to (A) the number of shares of
Common Stock acquirable upon exercise of all or any portion of this
Warrant being exercised, as at such date, multiplied by (B) the
balance remaining after deducting (x) Warrant Exercise Price, as in
effect on such date, from (y) the fair market value of one share of
Common Stock as at such date and dividing the result by (C) such fair
market value; or
v) Combined Payment Method. By satisfaction of the Warrant
-----------------------
Exercise Price for each share being acquired in any combination of the
methods described in clauses (i) through (iv) above.
(c) Definition of Fair Market Value. For the purposes of paragraph (b)
-------------------------------
above, the fair market value of the Common Stock shall be determined as
follows: if the Common Stock is listed or admitted to trading on one or
more national securities exchanges, the average of the last reported sales
prices per share regular way or, in case no such reported sales takes place
on any such day, the average of the last reported bid and asked prices per
share regular way, in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, for
the twenty (20) trading days immediately preceding the date upon which the
fair market value is determined (the "Determination Date"); if the Common
Stock is not listed or admitted to trading on a national securities
exchange but is quoted by the NASD Automated Quotation System ("NASDAQ"),
the average of the last reported sales prices per share regular way or, in
case no reported sale takes place on any such day or the last reported
sales prices are not then quoted by NASDAQ, the average for each such day
of the last reported bid and asked prices per share, for the twenty (20)
trading days immediately preceding the Determination Date as furnished by
the National Quotation Bureau
2
<PAGE>
Incorporated or any similar successor organization; and if the Common Stock
is not listed or admitted to trading on a national securities exchange or
quoted by NASDAQ or any other nationally recognized quotation service, the
fair market value shall be the fair value thereof determined jointly by the
Board of Directors of the Corporation and the holders of Warrants
outstanding representing a majority of the shares of Common Stock
acquirable upon exercise of the Warrants; provided, however, that if such
-----------------
parties are unable to reach agreement within a reasonable time, the fair
market value shall be determined in good faith by an independent investment
banking firm selected jointly by the Board of Directors of the Corporation
and the holders of Warrants outstanding representing a majority of the
shares of Common Stock issuable upon exercise of the Warrants or, if that
selection cannot be made within fifteen (15) days, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules. Anything in this paragraph (c) to the contrary
notwithstanding, the fair market value of this Warrant or any portion
thereof as of any Determination Date shall be equal to (i) the fair market
value of the shares of Common Stock issuable upon exercise of this Warrant
(or such portion thereof), (determined in accordance with the foregoing
provisions of this paragraph (c)); minus (ii) the aggregate Warrant
Exercise Price of the Warrant (or such portion thereof).
(d) Delivery of Certificates. Etc. In the event of any exercise of the
-----------------------------
rights represented by this Warrant, a certificate or certificates for the
shares of Common Stock so purchased, registered in the name of the holder,
shall be delivered to the holder hereof within a reasonable time, not
exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired, a new Warrant
representing the number of shares (except a remaining fractional share), if
any, with respect to which this Warrant shall not then have been exercised
shall also be issued to the holder hereof within such time. The person in
whose name any certificate for shares of Common Stock is issued upon
exercise of this Warrant shall for all purposes be deemed to have become
the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Exercise Price and any applicable
taxes was made, except that, if the date of such surrender and payment is a
date on which the stock transfer books of the Corporation are closed, such
person shall be deemed to have become the holder of such shares at the
close of business on the next succeeding date on which the stock transfer
books are open.
Section 2. Adjustment of Number of Shares. Upon each adjustment of the
------------------------------
Warrant Exercise Price as provided in Section 3, the holder of this Warrant
shall thereafter be entitled to purchase, at the Warrant Exercise Price
resulting from such adjustment, the number of shares (calculated to the nearest
tenth of a share) obtained by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Warrant Exercise Price resulting from such adjustment.
3
<PAGE>
Section 3. Adjustment of Price Upon Issuance of Common Stock. If and
-------------------------------------------------
whenever the Corporation shall issue or sell any shares of its Common Stock for
a consideration per share less than the Warrant Exercise Price in effect
immediately prior or to the time of such issue or sale, then, forthwith upon
such issue or sale the Warrant Exercise Price shall be reduced to the price
(calculated to the nearest $.0l) determined by dividing (i) an amount equal to
the sum of (a) Adjusted Outstanding Common Stock (as defined below) multiplied
by the then existing Warrant Exercise Price, plus (b) the consideration, if any,
received by the Corporation upon such issue or sale, by (ii) an amount equal to
the sum of Adjusted Outstanding Common Stock plus the number of shares of Common
Stock issued or sold.
As used herein, "Adjusted Outstanding Common Stock shall mean the sum
of (i) the number of shares of Common Stock outstanding immediately prior to
such issue or sale (excluding any shares of Common Stock subject to contractual
repurchase rights held by the Corporation) divided by three, plus (ii) the
number of shares of Common Stock issuable upon conversion of all outstanding
shares of any series of Preferred Stock of the Corporation convertible into
Common Stock.
For purposes of this Section 3, the following paragraphs (a) to (p),
inclusive, shall also be applicable:
(a) Issuance of Rights or Options. In case at any time the Corporation
-----------------------------
shall in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any options for
the purchase of, Common Stock or any stock or securities convertible into
or exchangeable for Common Stock (such rights or options being herein
called "Options", and such convertible or exchangeable stock or securities
being herein called "Convertible Securities") whether or not such Options
or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or exchange
of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration
for the granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the corporation upon the exercise of
all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than
the Warrant Exercise Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Option shall be deemed to have been
issued for such price per share as of the date of granting of such Options
and
4
<PAGE>
thereafter shall be deemed to be outstanding. Except as otherwise provided
in paragraph (c), no adjustment of the Warrant Exercise Price shall be made
upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities.
(b) Issuance of Convertible Securities. In case the Corporation shall
----------------------------------
in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price
per share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange of all such Convertible Securities by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Warrant
Exercise Price in effect immediately prior to the time of such issue or
sale, then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be deemed
to have been issued for such price per share as of the date of the issue or
sale of such Convertible Securities and thereafter shall be deemed to be
outstanding, provided that (i) except as otherwise provided in paragraph
(c) below, no adjustment of the Warrant Exercise Price shall be made upon
the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and (ii) if any such issue or sale of such
Convertible Securities is made upon exercise of any Option to purchase any
such Convertible Securities for which adjustments of the Warrant Exercise
Price have been or are to be made pursuant to other provisions of this
Section 3, no further adjustment of the Warrant Exercise Price shall be
made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate. Upon the happening of
-----------------------------------------
any of the following events, namely, if the purchase price provided for in
any Option referred to in paragraph (a), the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in paragraph (a) or (b), or the rate at which any Convertible
Securities referred to in paragraph (a) or (b) are convertible into or
exchangeable for Common Stock shall change at any time (other than under or
by reason of provisions designed to protect against dilution), the Warrant
Exercise Price in effect at the time of such event shall forthwith be
readjusted to the Warrant Exercise Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued
or sold; and on the expiration any such Option or the termination of any
such right to convert or exchange such Convertible Securities, the Warrant
Exercise Price then in effect hereunder shall forthwith be increased to the
Warrant Exercise Price which would have been in effect at
5
<PAGE>
the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration
or termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding.
If the purchase price provided for in any such Option referred to in
paragraph (a) or the rate at which any Convertible Securities referred to
in paragraph (a) or (b) are convertible into or exchangeable for Common
Stock, shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of the
delivery of Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Security, the Warrant
Exercise Price then in effect hereunder shall forthwith be adjusted to such
respective amount as would have been obtained had such Option or
Convertible Security never been issued as to such Common Stock and had
adjustments been made upon the issuance of the shares of Common Stock
delivered as aforesaid, but only if as a result of such adjustment the
Warrant Exercise Price then in effect hereunder is thereby reduced.
(d) Stock Dividends. In case the Corporation shall declare a dividend
---------------
or make any other distribution upon any stock of the Corporation payable in
Common Stock, Options or Convertible Securities, any Common Stock, Options
or Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold
without consideration, and the Warrant Exercise Price shall be reduced as
if the Corporation had subdivided its outstanding shares of Common Stock
into a greater number of shares, as provided in paragraph (h).
(e) Consideration for Stock. In case any shares of Common Stock,
-----------------------
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received
by the Corporation therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by
the Corporation in connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be deemed to be the fair value of
such consideration as determined by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any underwriting
commissions on concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with the issue
and sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have
been issued without consideration, and the Warrant Exercise Price shall be
reduced as if the Corporation had subdivided its outstanding shares of
Common Stock into a greater number of shares as provided in paragraph (h).
(f) Record Date. In case the Corporation shall take a record of the
-----------
holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other
6
<PAGE>
distribution payable in Common Stock, Options or Convertible Securities,
or (ii) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be, provided that such shares of Common Stock
shall in fact have been issued or sold.
(g) Treasury Shares. The number of shares of Common Stock outstanding
---------------
at any given time shall not include shares owned or held by or for the
account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this
Section 3.
(h) Subdivision or Combination of Stock. In case the Corporation shall
-----------------------------------
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Warrant Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Corporation shall be combined
into a smaller number of shares, the Warrant Exercise Price in effect
immediately prior to such combination shall be proportionately increased.
(i) Certain Issues of Common Stock Excepted. Anything herein to the
---------------------------------------
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Warrant Exercise Price upon the occurrence of any of the
lowing events: (i) the issuance of Common Stock upon conversion of
outstanding shares of Series A Convertible Preferred Stock, no par value,
of the Corporation, (ii) the issuance to employees, officers and directors
of the Corporation of options (net of any such options cancelled) to
acquire up to 221,400 shares of Common Stock and the issuance of up to
221,400 shares of Common Stock upon the exercise of such options, (iii) the
issuance to Malcolm P. Appelbaum of a warrant to acquire up to an aggregate
6,750 shares of Common Stock and the issuance of up to an aggregate. 6,750
shares of Common Stock upon the exercise of such warrant, and (iv) the
issuance to Ken Hawk of 147,600 shares of Common Stock pursuant to that
certain Restricted Stock Purchase Agreement dated as of the date hereof,
between the Corporation and Ken Hawk.
(j) Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
If any capital reorganization or reclassification of the capital stock of
the Corporation or any consolidation or merger of the Corporation with
another corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby each holder of the Warrants shall
thereafter have the right to receive upon
7
<PAGE>
the basis and upon the terms and conditions specified herein and in lieu
of the shares of Common Stock of the Corporation immediately theretofore
receivable upon the exercise of such Warrants, such shares of stock,
securities or assets (including cash) as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the Warrant Exercise
Price) shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter deliverable upon
the exercise of such exercise rights (including an immediate adjustment,
by reason of such reorganization or reclassification, of the Warrant
Exercise Price to the value for the Common Stock reflected by the terms of
such reorganization or reclassification if the value so reflected is less
than the Warrant Exercise Price in effect immediately prior to such
reorganization or reclassification). In the event of a merger or
consolidation of the Corporation as result of which a greater or lesser
number of shares of common stock of the surviving corporation are issuable
to holders of Common Stock of the Corporation outstanding immediately prior
to such merger or consolidation, the Warrant Exercise Price in effect
immediately prior to such merger or consolidation shall be adjusted in the
same manner as though there were a subdivision or combination of the
outstanding shares of Common Stock of the Corporation. The Corporation will
not effect any such consolidation, merger or any sale of all or
substantially all of its assets of properties, unless prior to the
consummation thereof the successor corporation (if other than the
Corporation) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument executed and
mailed or delivered to each holder of the Warrants at the last address of
such holder appearing on the books of the Corporation, the obligation to
deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive.
(k) Notice of Adjustment. Upon any adjustment of the Warrant Exercise
--------------------
Price, then and in each such case, the Corporation shall give written
notice thereof, by first class mail, postage prepaid, addressed to each
holder of the Warrants at the address of such holder as shown on the books
of the Corporation, which notice shall state the Warrant Exercise Price
resulting from such adjustment, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
(l) Certain Events. If any event occurs as to which in the opinion of
--------------
the Board of Directors of the Corporation the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not
fairly protect the exercise rights of this Warrant, in accordance with the
essential intent and principles of such provisions to protect against
dilution, then such Board of Directors shall in good faith make an
adjustment in the application of such provisions, in accordance with such
essential intent
8
<PAGE>
and principles, so as to protect such exercise rights as aforesaid.
(m) Stock to Be Reserved. The Corporation will at all times reserve
--------------------
and keep available out of its authorized Common Stock or its treasury
shares, solely for the purpose of issue upon the exercise of this Warrant
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the exercise of this Warrant. The Corporation covenants that
all shares of Common Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all taxes,
liens, and charges with respect to the issue thereof, and, without limiting
the generality of the foregoing, the Corporation covenants that it will
from time to time take all such action may be requisite to assure that the
par value per share of the Common Stock is at all times equal to or less
than the effective Warrant Exercise Price. The Corporation will take all
such action as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable law or
regulation, or of any requirements of any national securities exchange upon
which the Common Stock of the Corporation may be listed. The Corporation
will not take any action which results in any adjustment of the Warrant
Exercise Price if the total number of shares of Common Stock issued and
issuable after such action upon exercise of this Warrant would exceed the
total number of shares of Common Stock then authorized by the Corporation's
Articles of Incorporation. The Corporation has not granted and will not
grant any right of first refusal with respect to shares issuable upon
exercise of this Warrant, and there are no preemptive rights associated
with such shares.
(n) Issue Tax. The issuance of certificates for shares of Common Stock
---------
upon exercise of the Warrants shall be made without charge to the holders
of such Warrants for any issuance tax in respect thereof provided that the
Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of any holder of the Warrants.
(o) Closing of Books. The Corporation will at no time close its
----------------
transfer books against the transfer of the shares of Common Stock issued or
issuable upon the exercise of this Warrant in any manner which interferes
with the timely exercise of this Warrant.
(p) Definition of Common Stock. As used herein the term "Common Stock"
--------------------------
shall mean and include the Common Stock, no par value, of the Corporation
as authorized on June 14, 1996, and also any capital stock of any class of
the Corporation hereinafter authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided, however, that the shares purchasable pursuant to
-----------------
this Warrant shall include only shares designated as Common Stock, no par
value, of the Corporation on June 14, 1996, or shares of any class or
classes resulting from any reclassification or reclassifications thereof
which are not limited to any such fixed sum or percentage and
9
<PAGE>
are not subject to redemption by the Corporation and, in case at any time
there shall be more than one such resulting class, the shares of each
class then so issuable shall be substantially in the proportion which the
total number of shares of such class resulting from all such
reclassifications bears the total number of shares of all such classes
resulting from all such reclassifications.
Section 4. Notices of Record Dates. In the event of
-----------------------
(1) 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 (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(2) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the
Corporation or any transfer of all or substantially all the assets of the
Corporation to or consolidation or merger of the Corporation with or into
any other corporation, or
(3) any voluntary or involuntary dissolution, liquidation or winding--
up of the Corporation,
then and in each such event the Corporation will give notice to the holder
of this Warrant specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and stating
the amount and character of such dividend, distribution or right, and (ii)
the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding-up is to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock will be entitled to exchange
their shares of Common Stock for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up. Such notice
shall be given at least twenty (20) days and not more than ninety (90) days
prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") or to a favorable vote of stockholders, if either is
required.
Section 5. Registration Rights. The rights of the holder hereof with
-------------------
respect to the registration under the Securities Act of the shares of Common
Stock issuable upon exercise of this Warrant are set forth in the Registration
Rights Agreement, dated as of the date hereof, among the Corporation and the
several parties thereto.
Section 6. No Stockholder Rights or Liabilities. This Warrant shall
------------------------------------
not entitle the
10
<PAGE>
holder hereof to any voting rights or other rights as a stockholder of the
Corporation. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Warrant Exercise Price or as a stockholder of
the Corporation, whether such liability is asserted by the Corporation or by
creditors of the Corporation.
Section 7. Investment Representation and Legend. The holder, by
------------------------------------
acceptance of the Warrant, represents and warrants to the Corporation that it is
acquiring the Warrant and the shares of Common Stock (or other securities)
issuable upon the exercise hereof for investment purposes only and not with a
view towards the resale or other distribution thereof and agrees that the
Corporation may affix upon this Warrant the following legend:
"This Warrant has been issued in reliance upon the representation of
the holder that it has been acquired for investment purposes and not
with a view towards the resale or other distribution thereof. Neither
this Warrant nor the shares issuable upon the exercise of this Warrant
have been registered under the Securities Act of 1933, as amended."
The holder, by acceptance of this Warrant, further agrees that the
Corporation may affix the following legend to certificates for shares of
Common Stock issued upon exercise of this Warrant:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THE ACT OR
UNLESS IN THE OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
Section 8. Lost. Stolen. Mutilated or Destroyed Warrant. If this
--------------------------------------------
Warrant is lost, stolen, mutilated or destroyed, the Corporation may, on such
terms as to indemnity or otherwise as it may in its discretion reasonably impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the Corporation, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
Section 9. Notices. All notices, requests and other communications
-------
required or permitted to be given or delivered hereunder shall be in writing,
and shall be delivered, or shall be sent by certified or registered mail,
postage prepaid and addressed, if to the holder to such holder at the address
shown on such holder's Warrant or Warrant Shares or at such other address
11
<PAGE>
as shall have been furnished to the Corporation by notice from such holder. All
notices, requests and other communications required or permitted to be given or
delivered hereunder shall be in writing, and shall be delivered, or shall be
sent by certified or registered mail, postage prepaid and addressed to the
Corporation at such address as shall have been furnished to the holder by
notice from the Corporation.
IN WITNESS WHEREOF, BATTERY EXPRESS, INC. has executed this Warrant on
and as of the day and year first above written.
BATTERY EXPRESS, INC.
By: /s/ Ken Hawk
------------------
Ken Hawk
President
12
<PAGE>
SUBSCRIPTION AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions of the Stock Subscription
Warrant (the "Warrant") issued by Battery Express, Inc. and held by the
undersigned, hereby agrees to subscribe for and purchase [ ] shares of
Common Stock covered by such Warrant, and
[ ] i) makes cash payment herewith in full therefor at the price per share
provided by such Warrant;
[ ] ii) surrenders to the Company promissory notes or other obligations issued
by the Company, in accordance with Section 1(b) (ii) of such Warrant, as payment
herewith in full therefor at the price per share provided by such Warrant;
[ ] iii) delivers to the Company other securities issued by the Company, in
accordance with Section 1(b) (iii) of such Warrant, as payment herewith in full
therefore at the price per share provided by such Warrant; and/or
[ ] iv) elects Net Issue Exercise as provided in Section 1(b)(iv) of such
Warrant.
(Check any combination of (i) through (iv) above.)
Name of Holder:
-------------------------------
Signature:
-----------------------------------
Address:
------------------------------------
13
<PAGE>
EXHIBIT 4.3
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of Preferred Stock of
BATTERY EXPRESS, INC.
Dated as of June 23, 1999 (the "Effective Date")
WHEREAS, Battery Express, inc., a California corporation (the 'Company')
has entered into a Master Lease Agreement dated as of June 23, 1999, Equipment
Schedule No. VL-1 and VL-2 dated as of June 23, 1999, and related Summary
Equipment Schedules (collectively, the Leases) with Comdisco, Inc., a Delaware
corporation (the 'Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Preferred Stock;
NOW, THEREFORE in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK
------------------ ---------------------------
For value received, the Company hereby grants to the Warrantholder, and the
Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe to and purchase from the Company that whole
number of fully paid and non-assessable shares of the Company's Series B
Preferred Stock (Preferred Stock") equal to One Hundred Ten Thousand and 00/100
Dollars ($110,000.00) (Aggregate Purchase Price") divided by the Exercise Price.
The Exercise Price shall be equal to $12.00 per share Notwithstanding the
foregoing, in the event of a Next Round (as defined below), the Preferred Stock
shall be deemed to refer to shares of the class of the equity security issued in
the Next Round and the Exercise Price therefor shall be equal to the price per
share at which such equity security is sold in the Next Round. For purposes of
this Agreement, the Next Round shall mean the earlier to occur of (I) the
complete closing of the Company's next round of private equity financing by
August 31, 1999, or (ii) the first closing of the Company's next round of
private equity financing by July 31,1999, provided, however, such first round
closes with a minimum investment from Institutional Venture Partners of at least
$2,000,000.00. For purposes of the Next Round, a private equity financing" shall
not be deemed to refer to the issuance of capital stock upon exercise of any
options or warrants outstanding as of the date of this Warrant Agreement or
pursuant to the grant of any option or purchase right under the Company's stock
option plan hereafter. The number and purchase price of such shares are subject
to adjustment as provided in Section 8 hereof.
1
<PAGE>
2. TERM OF THE WARRANT AGREEMENT
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shalt commence on
the Effective Date and shall be exercisable for a period of (i) seven (7) years
or (ii) three (3) years from the effective date of the Company's initial public
offering, whichever is earlier.
3. EXERCISE OF THE PURCHASE RIGHTS
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the WarranthoIder in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the 'Notice of Exercise'), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any. The Exercise Price may be paid at the
Warrantholder's election either (i) by cash or check, or (ii) by surrender of
Warrants ("Net Issuance") as determined below. If the Warrantholder elects the
Net Issuance method, the Company will issue Preferred Stock in accordance with
the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a five (5) day period ending three days before the day the
current fair market value of the securities is being
2
<PAGE>
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing
bid and asked prices quoted on the NASDAQ system (or similar system)
over the five (5) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly
issue an amended Warrant Agreement representing the remaining number of shares
purchasable hereunder. All other terms and conditions of such amended Warrant
Agreement shall be identical to those contained herein, including, but not
limited to the Effective Date hereof.
4. RESERVATION OF SHARES
---------------------
(a) Authorization and Reservation of Shares During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ('1933 Act'), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER
------------------------
3
<PAGE>
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes (including, without limitation, the automatic conversion
of the Company's outstanding preferred stock pursuant to the Company's Articles
of Incorporation as then in effect), this Warrant Agreement shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities which
were subject to the purchase rights under this Warrant Agreement immediately
prior to such combination, reclassification, exchange, subdivision or other
change.
(c) Subdivision or Combination of Shares If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase,
4
<PAGE>
at the Exercise Price resulting from such adjustment, the number of shares of
Preferred Stock (calculated to the nearest whole share) obtained by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of shares of Preferred Stock issuable upon the exercise hereof immediately prior
to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
(e) Right to Purchase Additional Stock If, the Warrantholder's total cost
----------------------------------
of equipment leased pursuant to the Leases exceeds $2,000,000, Warrantholder
shall have the right to purchase from the Company, at the Exercise Price
(adjusted as set forth herein), an additional number of shares, which number
shall be determined by (i) multiplying the amount by which the Warrantholder's
total equipment cost exceeds $2,000,000 by 5.5%, and (ii) dividing the product
thereof by the Exercise Price per share referenced above.
(f) Antidilution Rights Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter.
(g) Notice of Adjustments If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) there shall be any Merger Event; (iii) there shall be an
initial public offering; or (iv) there shall be any voluntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder: (A) at least twenty (20)
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution, subscription
rights (specifying the date on which the holders of Preferred Stock shall be
entitled thereto) or for determining rights to vote in respect of such Merger
Event, dissolution, liquidation or winding up; (B) in the case of any such
Merger Event, dissolution, liquidation or winding up, at least twenty (20) days'
prior written notice of the date when the same shall take place (and specifying
the date on which the holders of Preferred Stock shall be entitled to exchange
their Preferred Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up); and (C) in the case of a
public offering, the Company shall give the Warrantholder at least twenty (20)
days written notice prior to the effective date thereof. The delivery of this
Agreement shall be deemed notice of the Company's intention to reincorporate
into the State of Delaware by way of a merger of the Company with and into a
wholly owned Delaware subsidiary.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
--------------------------------------------------------
(a) Reservation of Preferred Stock The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
5
<PAGE>
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals No consent or approval of, giving of notice to,
----------------------
registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) 1,120,450 share of Preferred Stock, of which 611,250 shares have
been designated Series A Preferred Stock, all of which are issued and
outstanding, and 509,200 shares have been designated Series B Preferred
Stock, 500,000 shares of which are issued and outstanding. Each outstanding
share of Preferred Stock is currently convertible into one share of Common.
(ii) 2,879,550 shares of Common Stock, 1,098,441 shares of which are
issued and outstanding. All of the outstanding shares of Preferred Stock
and Common Stock have been duly authorized, fully paid and are
nonassessable and issued in compliance with all applicable federal and
state securities laws. The Company has reserved 1,111,250 shares of Common
Stock for issuance upon conversion of the outstanding Preferred Stock.
(iii) The Company has currently reserved 220,559 shares of Common
Stock for issuance to officers, directors, employees and consultants of the
Company pursuant to its 1996 Stock Option Plant (the "Stock Plan"). Of
such reserved shares of Common Stock 168,063 shares are currently subject
to outstanding stock options and 52,496 shares of Common Stock remain
available for grant and issuance.
(iv) Except for (i) outstanding options issued pursuant to the Stock
Plan, (ii) warrants to purchase up to an aggregate of 13,500 shares of
Common Stock issued to Malcolm P.
6
<PAGE>
Appelbaum and Vrolyk/Power Express L.P on June 14,1996, (iii) conversion
rights of the outstanding Series A and Series B Preferred Stock and (iv)
preemptive rights held by certain shareholders pursuant to the Amended and
Restated Shareholders Agreement dated October 22, 1998 (the "Shareholders
Agreement"), there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal or similar
rights) or agreements, orally or in writing, for the purchase or
acquisition from the Company for any shares of its capital stock.
(v) In accordance with the Company's Articles of Incorporation,
except as set forth in the Shareholders Agreement, no shareholder of the
Company has preemptive rights to purchase new issuances of the Company's
capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities Except as set forth in this
----------------------------------------
Warrant Agreement and the Amended and Restated Registration Rights Agreement
dated October 22, 1998, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144 At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (I) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
7
<PAGE>
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit Ill (the "Transfer Notice"), at its principal offices
and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer.
8
<PAGE>
12. MISCELLANEOUS
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention.: General Counsel, (and/or, if
by facsimile, (847) 518-5465 and (847)518-5088) and (ii) to the Company at 23O1
Robb Drive, Reno, NV 89523, Attention: Chief Financial Officer (and/or if by
facsimile, (775) 746-6156 or at such other address as any such party may
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments Any provision of this Warrant Agreement may be amended by a
----------
written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) and (b) of Section 9 above. The Company shall also supply such
other documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF the parties hereto have caused this Warrant Agreement to
be executed by its officers thereunto duly authorized as of the Effective Date.
Company: BATTERY EXPRESS, INC.
By: /s/ Ken Hawk
--------------------------------
Title: CEO
--------------------------------
Warrantholder: COMDISCO, INC.
By: /s/ Jill C. Hanses
--------------------------------
Title: Senior Vice President
--------------------------------
9
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: _________________________
(1) The undersigned Warrantholder hereby elects to purchase _____ shares of the
Series ____ Preferred Stock of ____________________, pursuant to the terms
of the Warrant Agreement dated the _____day of ________________, 19__,
(the "Warrant Agreement") between _____________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series _____ Preferred Stock of
___________________ the undersigned hereby confirms and acknowledges the
investment representations and warranties made in Section 10 of the Warrant
Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ______ Preferred Stock in the name of the undersigned or in such
other name as is specified below.
____________________________
(Name)
____________________________
(Address)
Warrantholder: COMDISCO, INC.
By: ________________________________
Title: ________________________________
Date: ________________________________
10
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ______________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Series ___ Preferred Stock of pursuant to the terms of the Warrant
Agreement, and further acknowledges that ________ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company:
By: ________________________________
Title: ________________________________
Date: ________________________________
11
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED the foregoing Warrant Agreement and all rights evidenced
thereby are hereby transferred and assigned to
________________________________________________________
(Please Print)
whose address is__________________________________________
________________________________________________________
Dated: __________________________________
Holder's Signature: _____________________
Holder's Address: _______________________
_________________________________________
Signature Guaranteed: __________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
12
<PAGE>
EXHIBIT 4.4
BATTERY EXPRESS, INC.
SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Second Amended and Restated Registration Rights Agreement (the
"Agreement") is made as of the 30th day of July, 1999, by and among Battery
---------
Express, Inc., a California corporation doing business as iGo Corporation (the
"Company"), the holders of Preferred Stock (as defined below) listed on Schedule
------- --------
I hereto (the "Purchasers"), Malcolm P. Appelbaum and Vrolyk / Power Express
- - ----------
L.P. (the "Warrant holders"), as owners of warrants to acquire an aggregate
---------------
13,500 shares of Common Stock (as such term is defined herein) of the Company
(the "Warrants") and the Company's founders set forth in Schedule II hereto
-------- -----------
(such shareholders being herein referred to individually as a "Founder" and
-------
collectively as the "Founders").
--------
WHEREAS, the Company and certain of the Purchasers entered into a
Registration Rights Agreement dated June 14, 1996 as amended and restated
October 22, 1998 (the "Original Agreement") in connection with the prior
Company's sales of Preferred Stock;
WHEREAS, the Company and certain of the Purchasers are entering into an
agreement of even date herewith with respect to the Company's sale and issuance
of Series C Preferred Stock; and
WHEREAS, the Company and such original Purchasers wish to make available
the registration rights set forth herein as a further inducement for the
remaining Purchasers to purchase such shares of Series C Preferred Stock from
the Company;
NOW THEREFORE, in consideration of the foregoing and the mutual agreements
set forth herein, the Company and the Purchasers hereby agrees that the Original
Agreement shall be amended and restated in its entirety to read as set forth
herein:
1. Certain Definitions. As used herein, the following terms shall have
-------------------
the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, no par value, of the
------------
Company, as constituted as of the date of this Agreement, subject to adjustment
pursuant to the provisions of Section 11 hereof.
"Conversion Shares" shall mean the shares of Common Stock issued upon
-----------------
conversion of the Preferred Stock.
-1-
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
------------
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Founders" shall have the meaning ascribed thereto in the introductory
--------
paragraph to this Agreement.
"Founders Stock" shall mean the 1,047,600 shares of Common Stock held
--------------
by the Founders as of the date of this Agreement, subject to the provisions of
Section 4 hereof.
"Public Sale" shall mean any sale of Common Stock to the public
-----------
pursuant to an offering registered under the Securities Act or to the public
pursuant to the provisions of Rule 144 (or any successor or similar rule)
adopted under the Securities Act.
"Preferred Stock" shall mean (a) 611,250 shares of Series A Preferred
---------------
outstanding as of the date hereof, (b) 500,000 shares of Series B Preferred
Stock outstanding as of the date hereof, and (c) up to 141,762 shares of Series
C Preferred Stock issued or issuable by the Company pursuant to a Series C
Preferred Stock Purchase Agreement of even date herewith by and among the
Company and certain of the Purchasers (provided that such Series C Preferred
Stock shall be included only to the extent that the purchaser thereof has
delivered to the Company an executed copy of this Agreement).
"Registration Expenses" shall mean the expenses so described in
---------------------
Section 9 hereof.
"Restricted Stock" shall mean, subject to the provisions of Section 4
----------------
hereof, (i) the Preferred Shares, (ii) the Conversion Shares, (iii) the Warrant
Shares, and (iv) any securities issued upon exchange, adjustment or transfer of
any such shares, the certificates for which are required by the provisions of
Section 2 hereof to bear the legend set forth in such Section.
"Securities Act" shall mean the Securities Act of 1933 or any similar
--------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 9
----------------
hereof.
"Warrant Shares" shall mean shares of Common Stock issued upon
--------------
exercise of the Warrants.
2. Restrictive Legend. Each certificate representing the Preferred
------------------
Stock, each certificate representing the Conversion Shares, each certificate
representing the Warrant Shares, each certificate representing the Founders
Stock, and, other than in a Public Sale or as otherwise provided in Section 3
hereof, each certificate issued upon exchange or transfer of any Preferred
Stock, Conversion Shares, Warrant Shares or Founders Stock, as the case may be,
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
-2-
<PAGE>
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
---------------------------
Restricted Stock or Founders Stock (other than under the circumstances described
in Section 5, 6 or 7 hereof) , the holder thereof shall give written notice to
the Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel reasonably satisfactory to the
Company (it being agreed that Reboul, MacMurray, Hewitt, Maynard & Kristol;
Wilson, Sonsini, Goodrich & Rosati; Cooley Godward LLP; and Hale Lane Peek
Dennison Howard and Anderson shall be satisfactory) to the effect that the
proposed transfer of such Restricted Stock or Founders Stock, as the case may
be, may be effected without registration under the Securities Act, whereupon the
holder of such Restricted Stock or Founders Stock, as the case may be, shall be
entitled to transfer such Restricted Stock or Founders Stock, as the case may
be, in accordance with the terms of its notice; provided, however, that in the
--------
case of any Purchaser that is a partnership, no such opinion or other
documentation shall be required if such notice shall cover a transfer by such
partnership to its partners. Each certificate representing the Restricted Stock
or Founders Stock, as the case may be, transferred as above provided shall bear
the legend set forth in Section 2, unless (i) such transfer is in accordance
with the provisions of Rule 144 (or any other rule permitting public sale
without registration under the Securities Act) or (ii) the opinion of counsel
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities without registration under the Securities Act.
The foregoing restrictions on transferability of Restricted Stock and
Founders Stock shall terminate as to any particular shares of Restricted Stock
or Founders Stock, as the case may be, when such shares shall have been
effectively registered under the Securities Act and sold or otherwise disposed
of in accordance with the intended method of disposition by the seller or
sellers thereof set forth in the registration statement concerning such shares.
Whenever a holder of Restricted Stock or Founders Stock is able to demonstrate
to the Company (and its counsel) that the provisions of Rule 144(k) of the
Securities Act are available to such holder without limitation, such holder of
Restricted Stock or Founders Stock, as the case may be, shall be entitled to
receive from the Company, without expense, a new certificate not bearing the
restrictive legend set forth in Section 2.
4. Unavailability of Registration Rights. The shares of Restricted Stock
-------------------------------------
or Founders Stock held by any current or subsequent holder shall not be deemed
Restricted Stock or Founders Stock for the purposes of Sections 5, 6 and 7
hereof, nor shall the registration rights granted pursuant to Sections 5, 6 and
7 hereof be available to any such holder of Restricted Stock or Founders Stock,
if, at the time such holder seeks to have his shares registered, the Company is
able to demonstrate to the satisfaction of such holder and such holder's
counsel, that such holder is able to transfer, in accordance with Rule 144 of
the Securities Act, all of the shares of Restricted Stock or Founders Stock, as
the case may be, owned by him in a public sale or sales over a 90-day period and
without registering such securities under the Securities Act.
-3-
<PAGE>
5. Required Registration.
---------------------
(a) At any time following the earlier to occur of (i) the date nine
months after the date on which the Company shall have completed an initial
public offering of shares of its Common Stock or shall have otherwise become
subject to the reporting requirements under the Securities Exchange Act of 1934,
and (ii) June 13, 2001, the holders of Restricted Stock constituting at least
66 2/3% of the total Restricted Stock outstanding at such time (treating for the
purpose of such computation the holders of Preferred Shares as the holders of
the Conversion Shares then issuable upon conversion of such Preferred Shares)
may request the Company to register under the Securities Act all or any portion
of the Restricted Stock held by such requesting holder or holders for sale in
the manner specified in such notice, provided, however, that, in the event that
-----------------
there is a registration, the shares requested to be registered shall not be less
than 25% of the Restricted Stock outstanding at such time; provided, further,
------------------
however, that the only securities which the Company shall be required to
- -------
register pursuant hereto shall be shares of Common Stock.
(b) Promptly following receipt of any notice under Section 5(a), the
Company shall notify any holders of Restricted Stock from whom notice has not
been received and holders of Founders Stock and shall use its reasonable best
efforts to register under the Securities Act, for public sale in accordance with
the method of disposition specified in such notice from requesting holders, the
number of shares of Restricted Stock specified in such notice (and in any
notices received from other holders of Restricted Stock and holders of Founders
Stock within 20 days after their receipt of such notice from the Company). If
such method of disposition shall be an underwritten public offering, (i) the
Company may designate the managing underwriter of such offering, subject to the
approval of the selling holders of a majority of the Restricted Stock (treating
for the purpose of such computation the holders of Preferred Shares as the
holders of the Conversion Shares then issuable upon conversion of such Preferred
Shares), which approval shall not be unreasonably withheld, and (ii) as and to
the extent that, in the opinion of the managing underwriter, the Restricted
Stock and Founders Stock so requested to be registered would adversely affect
the marketing of such Restricted Stock, the number of shares of Restricted Stock
or Founders Stock or both, as the case may be, so included shall be reduced,
first, pro rata among the requesting holders of Founders Stock based upon the
--------
number of shares of Founders Stock requested to be registered, and second, pro
---
rata among the requesting holders of Restricted Stock based upon the number of
- ----
shares of Restricted Stock requested to be registered. The Company shall be
obligated to register Restricted Stock capital pursuant to Section 5(a) on two
occasions only and no more than once in any twelve-month period.
Notwithstanding anything to the contrary contained herein, each obligation of
the Company to register capital stock under this Section 5 shall be deemed
satisfied only when a registration statement covering all shares of Restricted
Stock (and, if applicable, Founders Stock) specified in notices received as
aforesaid, for sale in accordance with the method of disposition specified by
the requesting holder, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares
shall have been sold pursuant thereto.
(c) In the event that the Board of Directors of the Company
determines in good faith that the filing of a registration statement pursuant to
Section 5(a) hereof would be detrimental
-4-
<PAGE>
to the Company, the Board of Directors may defer such filing for a period not to
exceed ninety (90) days. The Board of Directors may not effect more than one
such deferral during any twelve month period. The Board of Directors agrees to
promptly notify all requesting holders of any such deferral, and shall provide
to such holders an explanation therefor.
(d) The Company shall be entitled to include in any registration
statement referred to in this Section 5, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account, except as and to the extent that, in
the opinion of the managing underwriter (if such method of disposition shall be
an underwritten public offering), such inclusion would adversely affect the
marketing of the Restricted Stock (and, if applicable, Founders Stock) to be
sold. Except as provided in this paragraph (d), the Company will not effect any
other registration of its Common Stock, whether for its own account or that of
other holders, from the date of receipt of a notice from requesting holders
pursuant to this Section 5 until the completion of the period of distribution of
the registration contemplated thereby.
6. Form S-3 Registration.
---------------------
(a) If the Company shall receive from any holder or holders of
Restricted Stock, a written request or requests that the Company effect a
registration on Form S-3, at any time that the Company is entitled to use such
form, and any related qualification or compliance with respect to Restricted
Stock owned by such holder or holders, the reasonably anticipated aggregate
price to the public of which would equal at least $560,000, the Company will:
(i) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other holders of
Restricted Stock from whom notice has not been received and to holders of
Founders Stock; and
(ii) as soon as practicable, effect such registration (including,
without limitation, the execution of an undertaking to file post-effective
amendments appropriate qualifications under applicable blue sky or other
state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other government
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of, such
holder's or holders' Restricted Stock as are specified in such request,
together with all or such portion of the Restricted Stock or Founders Stock
of any holder or holders thereof joining in such request as are specified
in a written request given within thirty (30) days after receipt of such
written notice from the Company, provided, however, that the only
-----------------
securities which the Company shall be required to register pursuant hereto
shall be shares of Common Stock. Subject to the foregoing, the Company
shall file a registration statement covering the Restricted Stock or
Founders Stock or both, as the case may be, so requested to be registered
as soon as practicable after receipt of the request or requests of the
holders of the Restricted Stock and Founders Stock, as the case may be.
-5-
<PAGE>
(b) The Company shall be obligated to register capital stock under
Section 6(a) on four occasions only and no more than twice in any twelve-month
period. Registrations effected pursuant to this Section 6 shall not be counted
as requests for registration effected pursuant to Section 5.
7. Incidental Registration. If the Company at any time (other than
-----------------------
pursuant to Section 5 or Section 6 hereof) proposes to register any of its
Common Stock under the Securities Act for sale to the public, whether for its
own account or for the account of other security holders or both (except with
respect to registration statements on Form S-4 or S-8 or another form not
available for registering the Restricted Stock for sale to the public), it will
give written notice at such time to all holders of outstanding Restricted Stock
and Founders Stock of its intention to do so. Upon the written request of any
such holder, given within 20 days after receipt of any such notice by the
Company, to register any of its Restricted Stock or Founders Stock, as the case
may be (which request shall state the intended method of disposition thereof) ,
the Company will use its best efforts to cause the Restricted Stock or Founders
Stock or both, as the case may be, as to which registration shall have been so
requested to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition by the holder (in accordance with its
written request) of such Restricted Stock or Founders Stock, as the case may be,
so registered. In the event that any registration pursuant to this Section 7
shall be, in whole or in part, an underwritten public offering of Common Stock,
any request by a holder pursuant to this Section 7 to register Restricted Stock
or Founders Stock, as the case may be, shall specify that either (i) such
Restricted Stock or Founders Stock, as the case may be, is to be included in the
underwriting on the same terms and conditions as the shares of Common Stock
otherwise being sold through underwriters under such registration or (ii) such
Restricted Stock or Founders Stock, as the case may be, is to be sold in the
open market without any underwriting, on terms and conditions comparable to
those normally applicable to offerings of common stock in reasonably similar
circumstances. The number of shares of Restricted Stock or Founders Stock or
both, as the case may be, to be included in such an underwriting may be reduced
(pro rata among the requesting holders based upon the number of shares so
--------
requested to be registered) if and to the extent that the managing underwriter
shall be of the opinion that such inclusion would adversely affect the marketing
of the securities to be sold by the Company therein, provided, however, that
-----------------
such number of shares of Restricted Stock or Founders Stock or both, as the case
may be, shall not be reduced if any shares are to be included in such
underwriting for the account of any person other than the Company or other than
a holder of Restricted Stock or Founders Stock, as the case may be.
Notwithstanding anything to the contrary contained in this Section 7, in
the event of a firm commitment underwritten initial public offering of Common
Stock of the Company, reasonably expected by the underwriters thereof to result
(i) in aggregate net proceeds to the Company of at least $15,000,000 and (ii) a
price to the public of at least $7.50 per share (appropriately adjusted to
reflect stock splits and dividends and stock combinations after the date
hereof), and a holder of Restricted Stock or Founders Stock does not elect, or
is not allowed (at the discretion of the underwriters thereof), to sell his
Restricted Stock or Founders Stock, as the case may be, to such underwriters of
the Common Stock of the Company in connection with such offering, such holder
shall refrain from selling such Restricted Stock or Founders Stock, as the case
may be, so registered pursuant to this Section 7 during the period of
distribution of the Common Stock of the company by such
-6-
<PAGE>
underwriters and the period in which the underwriting syndicate participates in
the after market; provided, however, that (a) each person or group having
-----------------
beneficial ownership of five percent (5%) or more of the Company's capital stock
and each executive officer and director of the Company shall have executed a
written "lock-up" agreement required by the managing underwriter of such public
offering with the same "lock-up" restrictions as provided herein, and (ii) that
such holder shall, in any event, be entitled to sell his Restricted Stock or
Founders Stock, as the case may be, commencing on the 180th day after the
effective date of such registration statement.
8. Registration Procedures and Expenses. If and whenever the Company is
------------------------------------
required by the provisions of Section 5, 6 or 7 hereof to use its reasonable
best efforts to effect the registration of any of the Restricted Stock or
Founders Stock or both, as the case may be, under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare (and afford counsel for the selling holders reasonable
opportunity to review and comment thereon) and file with the Commission a
registration statement (which, in the case of an underwritten public offering
pursuant to Section 5 hereof, shall be on Form S-1 or other form of general
applicability satisfactory to the managing underwriter selected as therein
provided) with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare (and afford counsel for the selling holders reasonable
opportunity to review and comment thereon) and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (a) above and as shall
comply with the provisions of the Securities Act with respect to the disposition
of all Restricted Stock or Founders Stock or both, as the case may be, covered
by such registration statement in accordance with the sellers' intended method
of disposition set forth in such registration statement for such period;
(c) furnish to each seller and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons may reasonably request
in order to facilitate the public sale or other disposition of the Restricted
Stock or Founders Stock or both, as the case may be, covered by such
registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
or Founders Stock or both, as the case may be, covered by such registration
statement under the securities or blue sky laws of such jurisdictions as the
sellers of Restricted Stock or Founders Stock or both, as the case may be, or,
in the case of an underwritten public offering, the managing underwriter, shall
reasonably request, and use its best efforts to list all Restricted Stock and
Founders Stock covered by such registration statement on any securities exchange
on which any other securities of the same class as the Restricted Stock and
Founders Stock are then listed;
-7-
<PAGE>
(e) immediately notify each seller under such registration statement
and each underwriter, 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 contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(f) use its best efforts (if the offering is underwritten) to
furnish, at the request of any seller, on the date that Restricted Stock or
Founders Stock or both, as the case may be, is delivered to the underwriters for
sale pursuant to such registration: (i) an opinion dated such date of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters and to such seller, stating that such registration statement has
become effective under the Securities Act and that (A) to the best knowledge of
such counsel, no stop order suspending the effectiveness thereof has been issued
and no Proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the registration statement, the
related prospectus, and each amendment or supplement thereof, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder (except that such
counsel need express no opinion as to financial statements contained therein or
any information provided by the underwriters or the sellers) and (C) to such
other effects as may reasonably be requested by counsel for the underwriters or
by such seller or its counsel, and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in ail material respects with the applicable
accounting requirements-of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to the registration in respect of which such letter is being given
as such underwriters or seller may reasonably request; and
(g) make available for inspection by each seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by such seller or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement and permit
such seller, attorney, accountant or agent to participate in the preparation of
such registration statement.
For purposes of paragraphs (a) and (b) above and of Section 5(d) hereof,
the period of distribution of Restricted Stock or Founders Stock or both, as the
case may be, in a firm commitment underwritten public offering shall be deemed
to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Restricted Stock
or Founders Stock or both, as the case may be, in any other registration shall
be deemed to extend until the earlier of the sale of all Restricted Stock or
Founders Stock or both, as the case may be, covered thereby or six months after
the effective date thereof.
-8-
<PAGE>
In connection with each registration hereunder, the selling holders of
Restricted Stock or Founders Stock, as the case may be, will furnish to the
company in writing such information with respect to themselves and the proposed
distribution by them as shall be reasonably necessary in order to assure
compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Sections 5, 6 and 7 hereof
covering an underwritten public offering, the Company agrees to enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between underwriters and companies
of the Company's size and investment stature, provided that such agreement shall
--------
not contain any such provision applicable to the company which is inconsistent
with the provisions hereof and provided, further, that the time and place of the
-----------------
closing under said agreement shall be as mutually agreed upon among the Company,
such underwriter and the selling holders of Restricted Stock or Founders Stock,
as the-case may be.
9. Expenses. All expenses incurred by the Company in complying with
--------
Sections 5, 6 and 7 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees of the National Association
of Securities Dealers, Inc. or any successor thereto, transfer taxes, fees of
transfer agents and registrars, costs of insurance and fees and expenses of one
counsel for the sellers of Restricted Stock (excluding the fees and expenses of
such counsel in excess of $30,000 incurred in connection with each registration
of shares pursuant to Section 5 hereof, and excluding all fees and expenses of
such counsel incurred in connection with a registration of shares pursuant to
Section 7 hereof), but excluding any Selling Expenses, are herein called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock or Founders Stock or both, as the
case may be, are herein called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 5, 6 or 7 hereof (provided that
the Registration Expenses for each registration pursuant to Section 6 hereof
shall not exceed $30,000). All Selling Expenses and any Registration Expenses
not required to be paid by the Company in connection with any registration
statement filed pursuant to Section 5, 6 or 7 hereof shall be borne by the
participating sellers in proportion to the number of shares sold by each, or by
such persons other than the Company (except to the extent the company shall be a
seller) as they may agree.
10. Indemnification. In the event of a registration of any of the
---------------
Restricted Stock or Founders Stock or both, as the case may be, under the
Securities Act pursuant to Section 5, 6 or 7 hereof, to the extent permitted by
law, the Company will indemnify and hold harmless each seller of such Restricted
Stock or Founders Stock, as the case may be, thereunder and each underwriter of
Restricted Stock or Founders Stock or both, as the case may be, thereunder and
each officer, director and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller or
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are
-9-
<PAGE>
based upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Restricted Stock or
Founders Stock or both, as the case may be, was registered under the Securities
Act pursuant to Section 5, 6 or 7, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such seller, each such
underwriter and each such controlling person for any legal or other expenses as
and when reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-----------------
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission do
made in conformity with information furnished by such seller, such underwriter
or such controlling person in writing specifically for use in such registration
statement or prospectus.
In the event of a registration of any of the Restricted Stock or Founders
Stock or both, as the case may be, under the Securities Act pursuant to Section
5, 6 or 7 hereof, to the extent permitted by law, each seller of such Restricted
Stock or Founders Stock, as the case may be, thereunder, severally and not
jointly, will indemnify and hold harmless the Company and each officer, director
and each other person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer or director or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which such Restricted Stock or
Founders Stock or both, as the case may be, was registered under the Securities
Act pursuant to Section 5, 6 or 7, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and each such officer,
director, underwriter and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that such
-----------------
seller will be liable hereunder in any such case if and only to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller, as such, furnished in writing to the Company by such seller specifically
for use in such registration statement or prospectus; provided, further,
-----------------
however, that the liability of each seller hereunder shall be limited to the
- -------
proportion of any such loss, claim, damage, liability or expense which is equal
to the proportion that the proceeds of shares sold by such seller under such
registration statement bears to the total proceeds of all securities sold
thereunder, but not to exceed the proceeds received by such seller from the sale
of Restricted Stock or Founders stock, as the case may be, covered by such
registration statement.
-10-
<PAGE>
Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission to so notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 10. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 10 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
---------
however, that, if the defendants in any such action include both the indemnified
- -------
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party, or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel with the consent of the indemnifying party
(which consent shall not be unreasonably withheld) and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the right
to retain its own counsel in any such action, but the fees and disbursements of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party shall have failed to retain counsel for the indemnified
person as aforesaid or (ii) the indemnifying party and such indemnified party
shall have mutually agreed to the retention of such counsel. It is understood
that the indemnifying party shall not, in connection with any action or related
actions in the same jurisdiction, be liable for the fees and disbursements of
more than one separate firm qualified in such jurisdiction to act as counsel for
the indemnified parties hereunder. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its prior written consent,
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
If the indemnification provided for in the first two paragraphs of this
Section 10 is unavailable or insufficient to hold harmless an indemnified party
under such paragraphs in respect of any losses, claims, damages or liabilities
or actions in respect thereof referred to therein, then each indemnifying party
shall in lieu of indemnifying such indemnified party contribute to the amount
paid or Payable by such indemnified party as a result of such losses, claims,
damages, liabilities or actions in such proportion as appropriate to reflect the
relative fault of the Company, on the one hand, and the sellers of such
Restricted Stock or Founders Stock, as the case may be, on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or actions as well as any other relevant equitable
considerations, including without limitation the failure to give any notice
under the third paragraph of this Section 10. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue
-11-
<PAGE>
statement, or omission, of a material fact relates to information supplied by
the Company, on the one hand, or the sellers of such Restricted Stock or
Founders Stock, as the case may be, on the other, and to the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the sellers of Restricted Stock and
Founders Stock agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by pro rata allocation (even if all
--- ----
of the sellers of such Restricted Stock or Founders Stock, as the case may be,
were treated as one entity for such purpose) or by any other method of
allocation which did not take account of the equitable considerations referred
to above in this paragraph. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities or action in respect
thereof, referred to above in this paragraph, shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this paragraph, the sellers of Restricted
Stock and Founders Stock shall not be required to contribute any amount in
excess of the amount, if any, by which the total proceeds at which the Common
Stock sold by each of them was offered to the public exceeds the amount of any
damages which they would have otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act),
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 10 shall
be on such other terms and conditions as are at the time customary and
reasonably required by such underwriters. In the event that such
indemnification of underwriters is on such other terms and conditions, the
indemnification of the sellers of Restricted Stock in such underwriting shall,
at the sellers' request, be modified to conform to such terms and conditions.
11. Changes in Common Stock. If, and as often as, there are any changes
-----------------------
in the Common Stock by way of stock split, stock dividend, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.
12. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or Bylaws of the Company, or any
provision of any indenture, agreement or other instrument to which it or any of
its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
-12-
<PAGE>
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws from time to time
in affect affecting the enforcement of creditors rights generally and to general
equitable principles.
13. Rule 144 Reporting. The Company agrees with you as follows:
------------------
(a) The Company shall make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after the date it is first required to do so.
(b) The Company shall file with the Commission in a timely manner all
reports and other documents as the Commission may prescribe under Section 13(a)
or 15(d) of the Exchange Act at any time after the Company has become subject to
such reporting requirements of the Exchange Act.
(c) The Company shall furnish to such holder of Restricted Stock
forthwith upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after the date it first becomes subject to such reporting requirements), and of
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements), (ii) a copy of the most recent annual or
Quarterly report of the Company, and (iii) such other reports and documents so
filed as a holder may reasonably request to avail itself of any rule or
regulation of the Commission allowing a holder of Restricted Stock to sell any
such securities without registration.
14. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto, including without limitation the rights to
indemnification under Section 10 hereof, shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not. Without limiting the generality of the foregoing, the registration
rights conferred herein on the holders of Restricted Stock or Founders Stock, as
the case may be, shall inure to the benefit of any and all subsequent holders
from time to time of the Restricted Stock or of Founders Stock for so long as
the certificates representing the Restricted Stock or Founders Stock shall be
required to bear the legend specified in Section 2 hereof.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first-class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at Battery Express, Inc., 2301 Robb
Drive, Reno, Nevada 89523, Attention: President;
if to the Founders, at their addresses as set forth in Schedule
--------
II hereto;
--
-13-
<PAGE>
if to any Purchaser, at its address as set forth in Schedule I
----------
hereto, with copies to Mark P. Tanoury, Cooley Godward LLP, 3000 Sand
Hill Road, Bldg. 3, Suite 230, Menlo Park, California 94025 and
Joshua A. Leuchtenburg, Esq., Reboul, MacMurray, Hewitt, Maynard &
Kristol, 45 Rockefeller Plaza, New York, New York 10111; and
if to any subsequent holder of Restricted Stock or Founders
Stock, as the case may be, to it at such address as may have been
furnished to the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Restricted Stock or
Founders Stock) or to the holders of Restricted Stock or Founders Stock (in the
case of the Company). Any notice or other communication pursuant to this
Agreement shall be deemed to have been duly liven or made and to have become
effective when delivered in hand to the party to which directed or if sent by
first-class registered mail, postage prepaid and properly addressed as set forth
above, at the earlier of (i) the time when received by the addressee or (ii) the
fifth business day following the dispatch thereof.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
(d) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except in a writing executed by the holders of 66 2/3% of the Restricted Stock
then outstanding and, if such amendment adversely affects the rights of holders
of Founders Stock, by the holders of a majority in interest of the Founders
Stock. For the purposes of calculating the holdings of outstanding Restricted
Stock for purposes of this Section 14(d), holders of Preferred Stock shall be
treated as the holders of the number of shares of Conversion Stock then issuable
upon conversion of such shares.
(e) 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.
[Signature pages follow]
-14-
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Second Amended and
Restated Registration Rights Agreement as of the date first above written.
COMPANY:
BATTERY EXPRESS, INC.
d/b/a iGo Corporation
By:______________________
Title:___________________
PURCHASERS, WARRANT HOLDERS and
FOUNDERS:
INSTITUTIONAL VENTURE
PARTNERS VIII, L.P.
By: Institutional Venture Management VIII, LLC
Its: General Partner
By:_______________________
Managing Director
IVM INVESTMENT FUND VIII, LLC
By: Institutional Venture Management VIII, LLC
Its: Manager
By:_______________________
Managing Director
IVM INVESTMENT FUND VIII-A, LLC
By: Institutional Venture Management VIII, LLC
Its: Manager
By:_______________________
Managing Director
IVP FOUNDERS FUND I, L.P.
By: Institutional Venture Management VI, L.P.
Its: General Partner
By:_______________________
General Partner
- --------------------------
Peter Gotcher
-15-
<PAGE>
WAND/POWER EXPRESS
INVESTMENTS I L.P.
By: Wand (Power Express) Inc.,
as general partner
By:_______________________
Title:____________________
WAND/POWER EXPRESS
INVESTMENTS II L.P.
By: Wand (Power Express) Inc.,
as general partner
By:_______________________
Title:____________________
Malcolm P. Appelbaum
DRAPER RICHARDS L.P.
By: Draper Richards Management Company,
asgeneral partner
By:_______________________
William H. Draper, III, President
John Mackall
SANTA BARBARA BANK & TRUST AS
TRUSTEE FOR JOHN R. MACKALL
SEPP-IRA
By:_______________________
Title:____________________
VROLYK / POWER EXPRESS L.P.
By:_______________________
Anne K. Vrolyk, general partner
__________________________
Leigh A. Hudson
__________________________
Anne K. Vrolyk
__________________________
Steven D. Abbott
A. Dwight Abbott and Janet M. Abbott,
Trustees of the Abbott Trust, dated 12/9/93
By:_______________________
A. Dwight Abbott, Trustee
__________________________
Joanna Rees Gallanter
__________________________
Ira M. Ehrenpreis
__________________________
Glenn R. Baker
Vrolyk Family Trust - B, dated 6 July 1989
By: _______________________
John J. Vrolyk, Trustee
__________________________
Ken Hawk
-16-
<PAGE>
__________________________
Margaret Cragin
__________________________
Louis Mackall
__________________________
Darrell Boyle
GOFF GROUP INVESTMENTS, L.P.
By: ___________________________________
Robert Goff, General Partner
TYSON ENTERPRISES, INC.
By: ___________________________________
John E. Tyson, President
CORLEY PHILLIPS, AS TRUSTEE OF
THE PHILLIPS FAMILY TRUST
By: ___________________________________
Corley Phillips, Trustee
__________________________
Geoffrey Stuart Cragin
__________________________
Benjamin Mackall Cragin
__________________________
Grace Sherlock Cragin
RUPERT H. JOHNSON, JR., U/T/A F/B/O
MILES GOTCHER TRUST
By:
------------------------------------
Rupert H. Johnson, Jr., Trustee
RUPERT H. JOHNSON, JR., U/T/A F/B/O
JOHN GOTCHER TRUST
By: ___________________________________
Rupert H. Johnson, Jr., Trustee
RUPERT H. JOHNSON, JR., U/T/A F/B/O
WILLIAM GOTCHER TRUST
By: ___________________________________
Rupert H. Johnson, Jr., Trustee
RUPERT H. JOHNSON, JR., U/T/A F/B/O
NICHOLAS GOTCHER TRUST
By: ___________________________________
Rupert H. Johnson, Jr., Trustee
COMDISCO, INC.
By: ___________________________________
Title: ________________________________
HAMBRECHT & QUIST CALIFORNIA
By: ___________________________________
Title: ________________________________
HAMBRECHT & QUIST EMPLOYEE
VENTURE FUND, L.P. II
By: H&Q Venture Management, L.L.C.
Its: General Partner
By: ___________________________________
Title: ________________________________
-17-
<PAGE>
BAY VIEW 99 I, L.P.
By: ___________________________________
Title: ________________________________
WS INVESTMENT COMPANY ______
By: ___________________________________
Title: ________________________________
_______________________________________
Judith M. O'Brien
- -------------------------------
BLANK SIGNATURE BLOCKS:
- -------------------------------
(Print or type name of Purchaser)
By: ___________________________________
Title: ________________________________
(if applicable)
(Print or type name of Purchaser)
By: ___________________________________
Title: ________________________________
(if applicable)
(Print or type name of Purchaser)
By: ___________________________________
Title: ________________________________
(if applicable)
(Print or type name of Purchaser)
By: ___________________________________
Title: ________________________________
(if applicable)
-18-
<PAGE>
SCHEDULE I
----------
Purchasers
- ----------
Institutional Venture Partners VIII, L.P.
IVM Investment Fund VIII, LLC
IVM Investment Fund VIII-A, LLC
IVP Founders Fund I, L.P.
c/o Institutional Venture Partners
3000 Sand Hill Road, Building 2, Suite 290
Menlo Park, California 94025
Facsimile No. (650) 854-5762
Attn: Ruthann Quindlen
Peter Gotcher
c/o Institutional Venture Partners
3000 Sand Hill Road, Building 2, Suite 290
Menlo Park, California 94025
Facsimile No. (650) 854-5762
Wand/Power Express Investments I L.P.
Wand/Power Express Investments II L.P.
c/o Wand Partners Inc.
630 Fifth Avenue, Suite 2435
New York, New York 10111
Attn: David J. Callard
Facsimile No.: (212) 307-5599
Draper Richards L.P.
50 California Street, Suite 2925
San Francisco, California 94111
Attn: William H. Draper III
Facsimile No.: (415) 616-4060
Santa Barbara Bank & Trust as Trustee
for John R. Mackall SEPP-IRA
c/o John Mackall
1332 Anacapa Street, Suite 200
Santa Barbara, California 93101
Facsimile No: (805) 962-1404
Vrolyk / Power Express L.P.
Anne K. Vrolyk
Leigh A. Hudson
Leigh A. Hudson and Andy Sheehan,
BT Alex. Brown, Inc. Custodian FBO
_ Vrolyk & Company
433 California Street, Suite 210
San Francisco, California 94104
Facsimile No.: (415) 837-1036
Steven D. Abbott
1805 Mar West Street
Tiburon, California 94920
Facsimile No.: (415) 435-4384
Telephone: (415) 435-4348
[email protected]
A. Dwight Abbott and Janet M. Abbott
Trustees of the Abbott Trust,
dated 12/9/93
1825 Via Estudillo
Palos Verdes Estates, California 90274
Attn: A. Dwight Abbott, Trustee
Facsimile No.: (310) 336-1458
Joanne Rees Gallanter
1550 Bryant Street
San Francisco, California 94103
Facsimile No.: (415) 558-8686
Ira M. Ehrenpreis
3767 Bay Road
Menlo Park, California 94025
Facsimile No.: (650) 473-4978
Glenn R. Baker
10264 Vangol Place
Grass Valley, California 95949
Facsimile No.: (310) 829-1930
Vrolyk Family Trust - B
dated 6 July 1989
18817 Kilfinan Street
Northridge, California 91326
Attn: John J. Vrolyk, Trustee
Facsimile No.: (415) 837-1036
19
<PAGE>
Goff Group Investments, LP
Robert Goff
774 Mays Blvd., Suite 10
Incline Village, Nevada 89451
Tyson Enterprises, Inc.
John E. Tyson
P.O. Box 306
Crystal Bay, Nevada 89402
Facsimile No.: (775) 832-5355
Corley Phillips, as Trustee of
The Phillips Family Trust
9748 Weddington Circle
Granite Bay, California 95746
Facsimile No.: (916) 783-9308
Darrell Boyle
15231 Quito Road
Saratoga, California 95070
Facsimile No.: (408) 395-5853
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<PAGE>
SCHEDULE II
-----------
Ken Hawk
c/o iGo Corporation
2301 Robb Drive
Reno, Nevada 89523
Facsimile No.: (775) 746-6156
John Mackall
1332 Anacapa Street, Suite 200
Santa Barbara, California 93101
Facsimile No: (805) 962-1404
Margaret Cragin
108 Valley Road
Cos Cob, Connecticut 06807
Louis Mackall
190 Clark Avenue
Branford, Connecticut 06405
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<PAGE>
EXHIBIT 10.1
IGO CORPORATION
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
(Effective as of the Date of the Initial Public Offering of the Common Stock)
-----------------------------------------------------------------------------
1. Purposes of the Plan. The purposes of this Amended and Restated 1996
--------------------
Stock Option Plan are:
. to attract and retain the best available personnel for positions of
substantial responsibility,
. to provide additional incentive to Employees, Directors and Consultants,
and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the
---------
Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means iGo Corporation, a Delaware corporation.
-------
(h) "Consultant" means any person, including an advisor, engaged by
----------
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
--------
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
<PAGE>
(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three (3) months after the 91st day of such
leave any Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system on
the day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the day of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Inside Director" means a Director who is an Employee.
---------------
(p) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written or electronic notice evidencing
---------------
certain terms and conditions of an individual Option grant. The Notice of Grant
is part of the Option Agreement.
(r) "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.
-2-
<PAGE>
(s) "Option" means a stock option granted pursuant to the Plan.
------
(t) "Option Agreement" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(u) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(v) "Optionee" means the holder of an outstanding Option granted
--------
under the Plan.
(w) "Outside Director" means a Director who is not an Employee.
----------------
(x) "Plan" means this Amended and Restated 1996 Stock Option Plan.
----
(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(z) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------
(aa) "Service Provider" means an Employee, Director or Consultant.
----------------
(bb) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(cc) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 542,800 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year, beginning in January 2001, equal to the
lesser of (i) 150,000 shares, (ii) 5% of the outstanding Shares on the last day
of the immediately preceding fiscal year, or (iii) such lesser amount as may be
determined by the Board. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if unvested Shares are
repurchased by the Company at their original purchase price, and the original
purchaser of such Shares did not receive any benefits of ownership of such
Shares, such Shares shall become available for future grant under the Plan. For
purposes of the preceding sentence, voting rights shall not be considered a
benefit of Share ownership.
-3-
<PAGE>
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be administered
------------------------------
by different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may be
granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under subsection 10(e) instead of Common Stock;
-4-
<PAGE>
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred treatment under foreign
laws;
(x) to modify or amend each Option (subject to Section 15(c) of
the Plan), including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to (or
lesser than) the minimum amount required to be withheld. The Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined. All elections by an Optionee to have
Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously granted by
the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
----------------------------------
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options.
5. Eligibility. Nonstatutory Stock Options may be granted to Service
-----------
Providers. Incentive Stock Options may be granted only to Employees.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.
-5-
<PAGE>
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than sixty thousand (60,000) Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional one hundred
thousand (100,000) Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
------------
effective upon its adoption by the Board. It shall continue in effect for a
term of ten (10) years unless sooner terminated under Section 13 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be no more
than ten (10) years from the date of grant. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Option
Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
-6-
<PAGE>
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides in writing
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
-7-
<PAGE>
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. Subject to
-------------------------------------------------
Section 13, if an Optionee ceases to be a Service Provider, other than upon the
Optionee's death or Disability, the Optionee may exercise his or her Option for
a period of at least thirty (30) days following Optionee's termination of
service or within such longer period of time as is specified in the Option
Agreement (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement) to the extent that Optionee was
entitled to exercise it at the date of such termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may, but only
within twelve (12) months from the date of such termination (and in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option the extent the Option is vested on
the date of termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's designated
beneficiary, provided such beneficiary has been designated prior to Optionee's
death in a form acceptable by the Administrator. If no such beneficiary has
been designated by the Optionee, then each such Option may be exercised by the
executor or administrator of the Optionee's estate, or if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. The Option shall be exercisable following Optionee's death
-8-
<PAGE>
only to the extent that Optionee was entitled to exercise it at the date ofsuch
death. If, at the time of death, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If, after after Optionee's death, the Option is
not exercised within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Transferability of Options. Unless determined otherwise by the
--------------------------
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
12. [intentionally left blank]
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option and the number of shares of Common Stock which may be added to the
Plan each fiscal year (pursuant to Section 3), the number of shares that any
participant may be granted Options in any fiscal year (pursuant to subsection
6(c)), as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option shall lapse as to all such
-9-
<PAGE>
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
or right substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation refuses
to assume or substitute for the Option, the Optionee shall fully vest in and
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an
Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee in writing or electronically that the Option shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option shall terminate upon the expiration of such period. For
the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent eual in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
14. Date of Grant. The date of grant of an Option shall be, for all
-------------
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
-10-
<PAGE>
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.
17. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Stockholder Approval. The Plan, as amended and restated, shall be
--------------------
subject to approval by the stockholders of the Company within twelve (12) months
after the date such amendments are adopted. Such stockholder approval shall be
obtained in the manner and to the degree required under Applicable Laws.
-11-
<PAGE>
EXHIBIT 10.2
IGO CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
(Effective as of the Date of the Initial Public Offering of the Common Stock)
-----------------------------------------------------------------------------
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of iGo Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean iGo Corporation, a Delaware corporation, and
-------
any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all salary, wages (including amounts
------------
elected to be deferred by the employee, that would otherwise have been paid,
under a cash or deferred arrangement established by the Company), overtime pay,
commissions, bonuses and any other remuneration paid directly to the employee,
but excluding 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 recognized in connection with stock
options, contributions made by the Company under any employee benefit plan, and
similar items of compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.
<PAGE>
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
-------------
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system on
the date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately
----------------
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after May 1/st/ and
November 1/st/ of each year and terminating on the last Trading Day in the
periods ending twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on or
after the date on which the Securities and Exchange Commission declares the
Company's Registration Statement effective and ending on the last Trading Day on
or before October 31, 2001. The second Offering Period under the Plan shall
commence on the first Trading Day on or after May 1, 2000 and end on the last
Trading Day on or before April 30, 2002. The duration and timing of Offering
Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase Plan.
----
(m) "Purchase Period" shall mean the approximately six month period
---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date; provided however that
the first Purchase Period shall end on the last Trading Day on or before April
30, 2000.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
--------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
<PAGE>
(o) "Reserves" shall mean the number of shares of Common Stock
--------
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds twenty-five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1/st/ and November 1/st/ each year, or on such other
date as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 31, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced prior
to the scheduled beginning of the first Offering Period to be affected
thereafter.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
<PAGE>
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 200
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
<PAGE>
number of shares of the Company's Common Stock an Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall occur
as provided in Section 8 hereof, unless the participant has withdrawn pursuant
to Section 10 hereof. The option shall expire on the last day of the Offering
Period.
8. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
stockholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
--------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
<PAGE>
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be twenty-two thousand (22,000) shares, plus an annual increase to be
added on the first day of the Company's fiscal year beginning in January 2001,
equal to the lesser of (i) twenty thousand (20,000) shares, (ii) three quarters
of one percent (0.75%) of the outstanding shares on such date, or (iii) such
amount as may be determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
<PAGE>
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such 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 prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such 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 discretion, may deliver such shares and/or
cash to the spouse or to any one 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 designate.
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
<PAGE>
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
- --------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The Board
shall notify each participant in writing, at least ten (10) business days prior
to the New Exercise Date, that the Exercise Date for the participant's option
has been changed to the New Exercise Date and that the participant's option
shall be exercised automatically on the New Exercise Date, unless prior to such
date the participant has withdrawn from the Offering Period as provided in
Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
-8-
<PAGE>
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
-9-
<PAGE>
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
-10-
<PAGE>
EXHIBIT A
---------
IGO CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____Original Application Enrollment Date: ___________
_____Change in Payroll Deduction Rate
_____Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in iGo Corporation 1999
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to _____%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
<PAGE>
shares were purchased by me over the price which I paid for the shares.
I hereby agree to notify the Company in writing within 30 days after the
------------------------------------------------------------------------
date of any disposition of my shares and I will make adequate provision for
---------------------------------------------------------------------------
Federal, state or other tax withholding obligations, if any, which arise
------------------------------------------------------------------------
upon the disposition of the Common Stock. The Company may, but will not be
----------------------------------------
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)_____________________________________________________
(First) (Middle) (Last)
------------------------- ------------------------------------------
Relationship
(Address)
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<PAGE>
Employee's Social
Security Number:
-------------------------------
Employee's Address:
-------------------------------
-------------------------------
-------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________ _____________________________________________________
Signature of Employee
_____________________________________________________
Spouse's Signature (If beneficiary other than spouse)
-3-
<PAGE>
EXHIBIT B
---------
IGO CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of iGo Corporation 1999
Employee Stock Purchase Plan which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:____________________________
<PAGE>
EXHIBIT 10.3
IGO CORPORATION
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is effective as of
[__________], 1999, by and between iGo Corporation, a Delaware corporation (the
"Company"), and [_________] (the "Indemnitee").
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other
directors, officers, employees, agents and fiduciaries of the Company may not be
willing to continue to serve in such capacities without additional protection;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified by the Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. Certain Definitions.
-------------------
(a) "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding
<PAGE>
securities under an employee benefit plan of the Company acting in such capacity
or a corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Company representing more
than 50% of the total voting power represented by the Company's then outstanding
Voting Securities, (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean any threatened, pending or completed action,
suit, proceeding or alternative dispute resolution mechanism, or any hearing,
inquiry or investigation that Indemnitee in good faith believes might lead to
the institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative or
other.
(c) References to the "Company" shall include, in addition to iGo
Corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which iGo Corporation (or
any of its wholly owned subsidiaries) is a party which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees, agents or fiduciaries, so that if Indemnitee is
or was a director, officer, employee, agent or fiduciary of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(d) "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of any Claim
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<PAGE>
regarding any Indemnifiable Event and any federal, state, local or foreign taxes
imposed on the Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement.
(e) "Expense Advance" shall mean an advance payment of Expenses to
Indemnitee pursuant to Section 3(a).
(f) "Indemnifiable Event" shall mean any event or occurrence related
to the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or was serving
at the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action or inaction on the part of Indemnitee
while serving in such capacity.
(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(c) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
(h) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
(i) "Reviewing Party" shall mean any appropriate person or body
consisting of a member or members of the Company's Board of Directors or any
other person or body appointed by the Board of Directors who is not a party to
the particular Claim for which Indemnitee is seeking indemnification, or
Independent Legal Counsel.
(j) "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. Indemnification.
---------------
(a) Indemnification of Expenses. The Company shall indemnify
---------------------------
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any Claim by reason of (or
arising in part out of) any Indemnifiable Event against Expenses, including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses. Such
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<PAGE>
payment of Expenses shall be made by the Company as soon as practicable but in
any event no later than five (5) business days after written demand by
Indemnitee therefor is presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
---------------
obligations of the Company under Section 2(a) shall be subject to the condition
that the Reviewing Party shall not have determined (in a written opinion, in any
case in which the Independent Legal Counsel referred to in Section 2(c) hereof
is involved) that Indemnitee would not be permitted to be indemnified under
applicable law, and (ii) the obligation of the Company to make an Expense
Advance shall be subject to the condition that, if, when and to the extent that
the Reviewing Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be reimbursed
by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Indemnitee has commenced or
-------- -------
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee should be indemnified under applicable
law, any determination made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any Expense
Advance until a final judicial determination is made with respect thereto (as to
which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for any Expense Advance shall
be unsecured and no interest shall be charged thereon. If there has not been a
Change in Control, the Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), the
Reviewing Party shall be the Independent Legal Counsel. If there has been no
determination by the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by the Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
(c) Change in Control. The Company agrees that if there is a Change
-----------------
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), then with respect to all matters
thereafter arising concerning the rights of Indemnitee to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel, if desired by Indemnitee, shall be selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld). Such counsel, among other things, shall render its written opinion
to the Company and Indemnitee as to whether and to what extent Indemnitee would
be permitted to be indemnified under applicable law and the Company agrees to
abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding
-4-
<PAGE>
any other provision of this Agreement, the Company shall not be required to pay
Expenses of more than one Independent Legal Counsel in connection with all
matters concerning a single Indemnitee, and such Independent Legal Counsel shall
be the Independent Legal Counsel for any or all other Indemnitees unless (i) the
Company otherwise determines or (ii) any Indemnitee shall provide a written
statement setting forth in detail a reasonable objection to such Independent
Legal Counsel representing other Indemnitees.
(d) Mandatory Payment of Expenses. Notwithstanding any other
-----------------------------
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim regarding any Indemnifiable Event, Indemnitee shall be indemnified against
all Expenses incurred by Indemnitee in connection therewith.
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all Expenses
-----------------------
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than
seven (7) business days after written demand by Indemnitee therefor to the
Company. Expenses incurred in defending any proceeding may be advanced by the
Company prior to the final disposition of the proceeding upon receipt of an
undertaking by or on behalf of Indemnitee to repay the Expenses incurred, if it
shall be determined ultimately that Indemnitee is not entitled to be
indemnified.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement,
--------------------------------
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
---------------
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. In
addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief.
-5-
<PAGE>
(d) Notice to Insurers. If, at the time of the receipt by the Company
------------------
of a notice of a Claim pursuant to Section 3(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
hereunder to pay the Expenses of any Claim the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(not to be unreasonably withheld) upon the delivery to Indemnitee of written
notice of the Company's election so to do. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect to the same
Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitee's
separate counsel in any such Claim at Indemnitee's expense and (ii) if (A) the
employment of separate counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (C) the Company shall not continue to retain such counsel to
defend such Claim, then the fees and expenses of Indemnitee's separate counsel
shall be at the expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. The Company hereby agrees to indemnify the Indemnitee to
-----
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, such change, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 9(a) hereof.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any other agreement, any
vote of stockholders or disinterested directors, the General Corporation Law of
the State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though Indemnitee may have ceased
to serve in such capacity.
-6-
<PAGE>
5. No Duplication of Payments. The Company shall not be liable under this
--------------------------
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, bylaw or otherwise) of the amounts otherwise indemnifiable
hereunder.
6. Partial Indemnification. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee is entitled.
7. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
8. Liability Insurance. To the extent the Company maintains liability
-------------------
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
9. Exceptions. Notwithstanding any other provision of this Agreement, the
----------
Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for acts,
----------------------------
omissions or transactions from which Indemnitee may not be indemnified under
applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be.
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this
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<PAGE>
Agreement, if a court of competent jurisdiction determines that each of the
material assertions made by the Indemnitee in such proceeding was not made in
good faith or was frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. Period of Limitations. No legal action shall be brought and no cause
---------------------
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
-------- -------
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
--------------------------------------
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless as a part of such action a court
of competent jurisdiction over such action determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous. In the event of an action instituted by or in the name
of the Company under this Agreement to enforce or interpret any of the terms of
this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee in defense of such action (including costs and expenses incurred with
respect to Indemnitee's counterclaims and cross-claims made in such action), and
shall be entitled to the advancement of Expenses with respect to such action,
unless as a part of such action a court having
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<PAGE>
jurisdiction over such action determines that each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous.
14. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in
------------
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its provisions
-------------
construed and enforced in accordance with the laws of the State of Delaware as
applied to contracts between Delaware residents entered into and to be performed
entirely within the State of Delaware.
18. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
--------------------------------
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
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<PAGE>
21. No Construction as Employment Agreement. Nothing contained in this
---------------------------------------
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
"COMPANY" IGO CORPORATION
By: _____________________________
Name:
Title:
Address:
"INDEMNITEE" _________________________________
[NAME]
Address: ________________________
________________________
________________________
[SIGNATURE PAGE TO IGO CORPORATION INDEMNIFICATION AGREEMENT]
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<PAGE>
EXHIBIT 10.4
MODEL A - FULL VESTING
IGO CORPORATION
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (the "AGREEMENT") is made and entered into
by and between _____________________________ (the "AFFILIATE") and BATTERY
EXPRESS, INC., a California corporation doing business as IGO CORPORATION (the
"COMPANY"), effective as of the 31st day of July, 1999.
R E C I T A L S
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other Change of Control.
The Board of Directors of the Company (the "BOARD") recognizes that such
consideration can be a distraction to the Affiliate and can cause the Affiliate
to consider alternative opportunities. The Board has determined that it is in
the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Affiliate,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is imperative to provide the Affiliate with
certain benefits upon a Change of Control which provides the Affiliate with
incentive and encouragement to the Affiliate to remain with the Company
notwithstanding the possibility of a Change of Control.
The parties hereto agree as follows:
1. TERM OF AGREEMENT. This Agreement shall terminate on the earlier of (i) the
date that all obligations of the parties hereto with respect to this Agreement
have been satisfied or (ii) the date upon which this Agreement terminates by
consent of the parties hereto.
2. AT-WILL EMPLOYMENT. To the extent that the Affiliate is or hereafter
becomes an employee of the Company, the Company and the Affiliate acknowledge
that the Affiliate's employment is and shall continue to be at-will, as defined
under applicable law. If the Affiliate's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control,
unless the termination is to avoid this agreement, the Affiliate shall not be
titled to any payments, benefits, damages, awards or compensation other than as
provided by this Agreement, or as may otherwise be available in accordance with
the Company's established Affiliate plans and practice or pursuant to other
agreements with the Company.
3. DEFINITION OF CHANGE OF CONTROL. "CHANGE OF CONTROL" means the occurrence
of any of the following events:
<PAGE>
(a) Any "PERSON" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) is or becomes the"BENEFICIAL OWNER"
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 50% or more of the total voting power represented by
the Company's then outstanding voting securities other than in a private
financing transaction approved by the Board of Directors;
(b) the direct or indirect sale or exchange by the stockholders of the
Company of all or substantially all of the stock of the Company;
(c) a merger or consolidation in which the Company is a party and in which
the stockholders of the Company before such ownership change do not retain,
directly or indirectly, at a least majority of the beneficial interest in the
voting stock of the Company after such transaction; or
(d) an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
4. CHANGE OF CONTROL BENEFITS.
(a) Change of Control. The Affiliate shall be entitled to receive from the
-----------------
Company the benefits as provided in this Section 4 if there is a Change of
Control that occurs while the Affiliate is an officer or director of the
Company, regardless of whether Affiliate's employment or directoral relationship
with the Company continues following such Change of Control.
(b) Option and Restricted Stock Accelerated Vesting. In the event of a
-----------------------------------------------
Change of Control that occurs while Affiliate is employed by the Company, one
hundred percent (100%) of the unvested portion of any stock option or restricted
stock held by the Affiliate shall automatically be accelerated and any
repurchase option applicable thereto shall terminate so as to become completely
vested for such shares. Notwithstanding the foregoing, if such vesting
acceleration would cause a contemplated Change of Control transaction that was
intended to be accounted for as a "pooling-of-interests" transaction to become
ineligible for such accounting treatment under generally accepted accounting
principles, as determined by the Company's independent public accountants (the
"ACCOUNTANTS") prior to the Change of Control, Affiliate's stock options and
restricted stock shall not have their vesting so accelerated.
5. ATTORNEY FEES, COSTS AND EXPENSES. The prevailing party, determined without
regard to whether or not the action results in a final judgment, shall be
entitled to collect from the other party its reasonable attorneys' fees, costs
and expenses incurred in connection with any action brought by either party in
connection with the subject matter of this Agreement.
6. LIMITATION ON PAYMENTS. In the event that the benefits provided for in this
Agreement or otherwise payable to the Affiliate (i) constitute"parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and (ii) but for this Section, would be subject to
the excise tax imposed by Section 4999 of the Code, then the Affiliate's
severance benefits under subsection 3(b) shall be payable either
-2-
<PAGE>
(a) in full, or
(b) as to such lesser amount which would result in no portion of such
benefits being subject to excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, result
in the receipt by the Affiliate on an after-tax basis, of the greatest amount of
benefits under subsection 3(b), notwithstanding that all or some portion of such
benefits may be taxable under Section 4999 of the Code. Unless the Company and
the Affiliate otherwise agree in writing, any determination required under this
Section 6 shall be made in writing by the Accountants, whose determination shall
be conclusive and binding upon the Affiliate and the Company for all purposes.
For purposes of making the calculations required by this Section 6, the
Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. The Company
and the Affiliate shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 6.
7. SUCCESSORS.
(a) Company's Successors. Any successor to the Company (whether direct or
--------------------
indirect and whether by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "COMPANY" shall
include any successor to the Company's business and/or assets which executes and
delivers the assumption agreement described in this Section 7(a) or which
becomes bound by the terms of this Agreement by operation of law.
(b) Affiliate's Successors. The terms of this Agreement and all rights of
----------------------
the Affiliate hereunder shall inure to the benefit of, and be enforceable by,
the Affiliate's personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees and legatees.
8. NOTICE. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Affiliate, mailed
notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
-3-
<PAGE>
9. MISCELLANEOUS PROVISIONS.
(a) Waiver. No provision of this Agreement shall be modified, waived or
------
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Affiliate and by an authorized officer of the Company (other
than the Affiliate). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(b) Whole Agreement. No agreements, representations or understandings
---------------
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.
(c) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
Nevada as applied to agreements entered into and performed within Nevada solely
by residents of that state.
(d) Severability. The invalidity or unenforceability of any provision or
------------
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(e) Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the date set forth
above.
COMPANY:
BATTERY EXPRESS, INC.,
d/b/a IGO CORPORATION
_____________________________________________
Ken Hawk, President
AFFILIATE:
_____________________________________________
[name]
- --------------------
-4-
<PAGE>
EXHIBIT 10.5
MODEL B - PARTIAL VESTING
IGO CORPORATION
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (the "AGREEMENT") is made and entered into
by and between _____________________________ (the "AFFILIATE") and BATTERY
EXPRESS, INC., a California corporation doing business as IGO CORPORATION (the
"COMPANY"), effective as of the 31st day of July, 1999.
R E C I T A L S
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other Change of Control.
The Board of Directors of the Company (the "BOARD") recognizes that such
consideration can be a distraction to the Affiliate and can cause the Affiliate
to consider alternative opportunities. The Board has determined that it is in
the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Affiliate,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is imperative to provide the Affiliate with
certain benefits upon a Change of Control which provides the Affiliate with
incentive and encouragement to the Affiliate to remain with the Company
notwithstanding the possibility of a Change of Control.
The parties hereto agree as follows:
1. TERM OF AGREEMENT. This Agreement shall terminate on the earlier of (i) the
date that all obligations of the parties hereto with respect to this Agreement
have been satisfied or (ii) the date upon which this Agreement terminates by
consent of the parties hereto.
2. AT-WILL EMPLOYMENT. To the extent that the Affiliate is or hereafter
becomes an employee of the Company, the Company and the Affiliate acknowledge
that the Affiliate's employment is and shall continue to be at-will, as defined
under applicable law. If the Affiliate's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control,
unless the termination is to avoid this agreement, the Affiliate shall not be
titled to any payments, benefits, damages, awards or compensation other than as
provided by this Agreement, or as may otherwise be available in accordance with
the Company's established Affiliate plans and practice or pursuant to other
agreements with the Company.
3. DEFINITION OF CHANGE OF CONTROL. "CHANGE OF CONTROL" means the occurrence
of any of the following events:
<PAGE>
(a) Any "PERSON" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) is or becomes the"BENEFICIAL OWNER"
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 50% or more of the total voting power represented by
the Company's then outstanding voting securities other than in a private
financing transaction approved by the Board of Directors;
(b) the direct or indirect sale or exchange by the stockholders of the
Company of all or substantially all of the stock of the Company;
(c) a merger or consolidation in which the Company is a party and in which
the stockholders of the Company before such ownership change do not retain,
directly or indirectly, at a least majority of the beneficial interest in the
voting stock of the Company after such transaction; or
(d) an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
4. CHANGE OF CONTROL BENEFITS.
(a) Change of Control. The Affiliate shall be entitled to receive from the
-----------------
Company the benefits as provided in this Section 4 if (i) there is a Change of
Control that occurs while the Affiliate is an officer or director of the
Company, and (ii) Affiliate's employment with the Company is involuntarily
terminated without cause within twelve (12) months following such Change of
Control.
(b) Option and Restricted Stock Accelerated Vesting. In the event that
-----------------------------------------------
Affiliate's employment with the Company is involuntarily terminated without
cause within twelve (12) months following a Change of Control that occurs while
Affiliate is employed by the Company, an additional twelve (12) months of the
unvested portion of any stock option or restricted stock held by the Affiliate
as of the date of his or her termination shall automatically be accelerated and
a similar proportion of any repurchase option applicable thereto shall lapse
accordingly. For purposes of this paragraph, "cause" shall mean Affiliate's
gross negligence or willful misconduct where such gross negligence or willful
misconduct has resulted or is likely to result in substantial and material
damage to the Company or its subsidiaries. Notwithstanding the foregoing, if
such vesting acceleration would cause a contemplated Change of Control
transaction that was intended to be accounted for as a "pooling-of-interests"
transaction to become ineligible for such accounting treatment under generally
accepted accounting principles, as determined by the Company's independent
public accountants (the "ACCOUNTANTS") prior to the Change of Control,
Affiliate's stock options and restricted stock shall not have their vesting so
accelerated.
5. ATTORNEY FEES, COSTS AND EXPENSES. The prevailing party, determined without
regard to whether or not the action results in a final judgment, shall be
entitled to collect from the other party its reasonable attorneys' fees, costs
and expenses incurred in connection with any action brought by either party in
connection with the subject matter of this Agreement.
<PAGE>
6. LIMITATION ON PAYMENTS. In the event that the benefits provided for in this
Agreement or otherwise payable to the Affiliate (i) constitute"parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and (ii) but for this Section, would be subject to
the excise tax imposed by Section 4999 of the Code, then the Affiliate's
severance benefits under subsection 3(b) shall be payable either
(a) in full, or
(b) as to such lesser amount which would result in no portion of such
benefits being subject to excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, result
in the receipt by the Affiliate on an after-tax basis, of the greatest amount of
benefits under subsection 3(b), notwithstanding that all or some portion of such
benefits may be taxable under Section 4999 of the Code. Unless the Company and
the Affiliate otherwise agree in writing, any determination required under this
Section 6 shall be made in writing by the Accountants, whose determination shall
be conclusive and binding upon the Affiliate and the Company for all purposes.
For purposes of making the calculations required by this Section 6, the
Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. The Company
and the Affiliate shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 6.
7. SUCCESSORS.
(a) Company's Successors. Any successor to the Company (whether direct or
--------------------
indirect and whether by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "COMPANY" shall
include any successor to the Company's business and/or assets which executes and
delivers the assumption agreement described in this Section 7(a) or which
becomes bound by the terms of this Agreement by operation of law.
(b) Affiliate's Successors. The terms of this Agreement and all rights of
----------------------
the Affiliate hereunder shall inure to the benefit of, and be enforceable by,
the Affiliate's personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees and legatees.
8. NOTICE. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Affiliate, mailed
notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
-3-
<PAGE>
9. MISCELLANEOUS PROVISIONS.
(a) Waiver. No provision of this Agreement shall be modified, waived or
------
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Affiliate and by an authorized officer of the Company (other
than the Affiliate). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(b) Whole Agreement. No agreements, representations or understandings
---------------
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.
(c) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
Nevada as applied to agreements entered into and performed within Nevada solely
by residents of that state.
(d) Severability. The invalidity or unenforceability of any provision or
------------
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(e) Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the date set forth
above.
COMPANY:
BATTERY EXPRESS, INC.,
d/b/a IGO CORPORATION
______________________________________
Ken Hawk, President
AFFILIATE:
______________________________________
[name]
- ---------------------
-4-
<PAGE>
EXHIBIT 10.6
M A S T E R L E A S E A G R E E M E N T
MASTER LEASE AGREEMENT (the "Master Lease") dated June 23, 1999 by and between
COMDISCO, INC. ("Lessor") and Battery Express, Inc. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful posses-sion, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee. Lessee may
sublease the Equipment upon the reasonable consent of the Lessor and the Secured
Party. Such consent to sublease will be granted if: (i) Lessee meets the
relocation requirements set out above, (ii) the sublease is expressly subject
and subordinate to the terms of the Schedule, (iii) Lessee assigns its rights in
the sublease to Lessor and the Secured Party as additional collateral and
security, (iv) Lessee's obligation to maintain and insure the Equipment is not
altered, (v) all financing statements required to continue the Secured Party's
prior perfected security interest are filed, and (vi) Lessee executes sublease
documents acceptable to Lessor. No relocation or sublease will relieve Lessee
from any of its obligations under this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The Secured
Party will not disturb Lessee's quiet and peaceful possession and unrestricted
use of the Equipment so long as Lessee is not in default and the Secured Party
continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent
of the Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease. Lessee's
obligation to pay Rent and all other amounts due hereunder is absolute and
unconditional and is not subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. Care, Use and Maintenance; Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufac-turer or self maintains, Lessee agrees to pay any costs necessary
for the manufacturer to bring the Equipment to then current release, revision
and engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do
-1-
<PAGE>
business in each jurisdiction (including the jurisdiction where the Equipment
is, oris to be, located) where its ownership or lease of property or the conduct
of its business requires such qualification, except for where such lack of
qualification would not have a material adverse effect on the Company's
business; and has full corporate power and authority to hold property under the
Master Lease and each Schedule and to enter into and perform its obligations
under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and the Master Lease and each Schedule
constitute legal, valid and binding agreements of the Lessee, enforceable in
accordance with their terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and rules of law
concerning equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or, to
the knowledge of the Lessee, threatened against or affecting the Lessee 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
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the Lessee
will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is a
party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. Indemnity.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under thatinsurance will be credited
against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor. Lessee will promptly repair any damaged item of Equipment
unless such Equipment has suffered a Casualty Loss. Within fifteen (15) days of
a Casualty Loss, Lessee will provide written notice of that loss to Lessor and
Lessee will, at Lessee's option, either (a) replace the item of Equipment with
Like Equipment and marketable title to the Like Equipment will automatically
vest in Lessor or (b) pay the Casualty Value and after that payment and the
payment of all other amounts due and owing with respect to that item of
Equipment, Lessee's obligation to pay further Rent for the item of Equipment
will cease.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when
due if that failure continues for five (5) business days after written notice;
or
(b) Lessee's failure to perform any other term or condition of the Schedule
or the material inaccuracy of any representation or warranty made by the Lessee
in the Schedule or in any document or certificate furnished to the Lessor
hereunder if that failure or inaccuracy continues for ten (10) business days
after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee
or the filing against Lessee of any petition under any bankruptcy or insolvency
law or for the appointment of a trustee or other officer with similar powers,
the adjudication of Lessee as insolvent, the liquidation of Lessee, or the
taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default
Costs;
(c) with notice and demand, recover all sums due and accelerate and recover the
present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity. The above remedies, in
Lessor's discretion and to the extent permitted by law, are cumulative and may
be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
-2-
<PAGE>
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN
THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY
STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY
ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or
otherwise dispose of all or any part of the Equipment at a public or private
sale for cash or credit with the privilege of purchasing the Equipment. The
proceeds from any sale, lease or other disposition of the Equipment are defined
as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs; or
(b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. Additional Provisions.
14.1 Board Attendance. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of Directors meeting within thirty (30) days following the
date of such meeting held during the term of this Master Lease.
14.2 Financial Statements. As soon as practicable at the end of each month (and
in any event within thirty (30) days), Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 Obligation to Lease Additional Equipment. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 Merger and Sale Provisions. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
surviving entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 Entire Agreement. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 No Waiver. No action taken by Lessor or Lessee will be deemed to constitute
a waiver of compliance with any representation, warranty or covenant contained
in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach
of any provision of this Master Lease or a Schedule will not operate or be
construed as a waiver of any subsequent breach.
14.7 Binding Nature. Each Schedule is binding upon, and inures to the benefit of
Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 Survival of Obligations. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 Notices. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. 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 OR A SCHEDULE.
14.11 Severability. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 Counterparts. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 Licensed Products. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 Secretary's Certificate. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 Electronic Communications. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 Landlord/Mortgagee Waiver. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 Equipment Procurement Charges/Progress Payments. Lessee hereby
agrees that Lessor shall not, by virtue of its entering into this Master Lease,
be required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Master Lease.
14.18 Definitions.
Advance - means the amount due to Lessor by Lessee upon Lessee's execution of
each Schedule.
-3-
<PAGE>
Assignee - means an entity to whom Lessor has sold or assigned its rights as
owner and Lessor of Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
Casualty Value - means the greater of the aggregate Rent remaining to be paid
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
Commencement Date - is defined in each Schedule.
Default Costs - means reasonable attorney's fees and remarketing costs resulting
from a Lessee default or Lessor's enforcement of its remedies.
Delivery Date - means date of delivery of Inventory Equipment to Lessee's
address.
Equipment - means the property described on a Summary Equipment Schedule and any
replacement for that property required or permitted by this Master Lease or a
Schedule.
Event of Default - means the events described in Subsection 13.1.
Fair Market Value - means the aggregate amount which would be obtainable in an
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
Initial Term - means the period of time beginning on the first day of the first
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
Interim Rent - means the pro-rata portion of Rent due for the period from the
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
Late Charge - means the lesser of five percent (5%) of the payment due or the
maximum amount permitted by the law of the state where the Equipment is located.
Licensed Products - means any software or other licensed products attached to
the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the same
model, type, configuration and manufacture as Equipment.
Merger - means any consolidation or merger of the Lessee with or into any other
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the
surviving entity.
Notice Period - means not less than ninety (90) days nor more than twelve (12)
months prior to the expiration of the lease term.
Owner - means the owner of Equipment.
Rent - means the rent Lessee will pay for each item of Equipment expressed in a
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
Rent Interval - means a full calendar month or quarter as indicated on a
Schedule.
Schedule - means either an Equipment Schedule or a Licensed Products Schedule
which incorporates all of the terms and conditions of this Master Lease.
Secured Party - means an entity to whom Lessor has granted a security interest
for the purpose of securing a loan.
Summary Equipment Schedule - means a certificate provided by Lessor summarizing
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
BATTERY EXPRESS, INC. COMDISCO, INC.,
as Lessee as Lessor
By: /s/ Ken Hawk By: /s/ Jill C. Hanses
---------------------------------------- ---------------------------------
Title: CEO Title: Senior Vice President
------------------------------------- ------------------------------
</TABLE>
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<PAGE>
EQUIPMENT SCHEDULE VL-1
DATED AS OF JUNE 23, 1999
TO MASTER LEASE AGREEMENT
DATED AS OF JUNE 23, 1999 (THE "MASTER LEASE")
LESSEE: BATTERY EXPRESS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
------------------------ -----------------------
Contact: __________________________ 6111 North River Road
TEL: (775) 746-6140 Rosemont, Illinois 60018
FAX: (775) 746-6156 Attn: Venture Group
Address for Notices:
-------------------
2301 Robb Drive
Reno, NV 89523
Central Billing Location: Rent Interval: Monthly
------------------------ -------------
same as above
Attn:______________________________
Lessee Reference No.: ______________
(24 digits maximum)
Location of Equipment: Initial Term: 42 months
--------------------- ------------
same as above (Number of Rent Intervals)
Attn:_______________________________ Lease Rate Factor:
-----------------
Months 1-21 1.900%
Months 22-42 3.716%
EQUIPMENT (as defined below): Advance: $44,592.00
-------
Interim Rent: Interest Only (8.5%)
------------
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period June 23, 1999 through June 23, 2000
("Equipment Delivery Period"), for which Lessor receives vendor invoices
approved for payment, up to an aggregate purchase price of $1,200,000.00
("Commitment Amount"); excluding custom use equipment, leasehold improvements,
installation costs and delivery costs, rolling stock, special tooling,
"standalone" software, application software bundled into computer hardware, hand
held items, molds and fungible items. So long as no Event of Default has
occurred and is continuing hereunder, Lessor agrees that Lessee may decrease the
Commitment Amount under Equipment Schedule No. VL-2 and increase the Commitment
Amount under VL-1 accordingly at any time during the Equipment Delivery period.
-5-
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessors acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii), (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessees
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's prior
approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at Lessees
site and to which Lessee has clear title and ownership may be
considered by Lessor for inclusion under this Lease (the 'Sale-
Leaseback Transaction'). Any request for a Sale-Leaseback Transaction
must be submitted to Lessor in writing (along with accompanying
evidence of Lessees Equipment ownership satisfactory to Lessor for all
Equipment submitted) no later than July 23, 1999*. Lessor will not
perform a Sale-Leaseback Transaction for any request or accompanying
Equipment ownership documents which arrive after the date marked above
by an asterisk (*). Further, any sale-leaseback Equipment will be
placed on lease subject to: (1) Lessor prior approval of the
Equipment; and (2) if approved, at Lessors actual net appraised
Equipment value pursuant to the schedule below:
<TABLE>
<CAPTION>
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
-------------------------- ------------- -------------------
<S> <C>
Between 02/23/99 -- 07/23/99 (150 days) 100%
11/25198-- 02/22/99 (151 to 240 days) 85%
08/26/98 -- 11/24198 (240 to 330 days) 65%
</TABLE>
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which is
obtained from a third party by Lessee for its use subject to Lessor's
prior approval of the Equipment and at Lessors appraised value for
such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third party
or Lessor will supply new or used Equipment from its inventory for use
by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar month into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1 and the
Initial Term will begin the first day of the calendar month thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
-6-
<PAGE>
3. Option to Extend
So long as no Event of Default has occurred and is continuing hereunder, and
upon written notice no earlier than twelve (12) months and no later than ninety
(90) days prior to the expiration of the Initial Term of a Summary Equipment
Schedule, Lessee will have the right to extend the Initial Term of such Summary
Equipment Schedule for a period of one (1) year. In such event, the rent to be
paid during said extended period shall be mutually agreed upon and if the
parties cannot mutually agree, then the Summary Equipment Schedule shall
continue in full force and effect pursuant to the existing terms and conditions
until terminated in accordance with its terms. The Summary Equipment Schedule
will continue in effect following said extended period until terminated by
either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
4. Purchase Option
So long as no Event of Default has occurred and is continuing hereunder, and
upon written notice no earlier than twelve (12) months and no later than ninety
(90) days prior to the expiration of the Initial Term or the extended term of
the applicable Summary Equipment Schedule, Lessee will have the option at the
expiration of the Initial Term of the Summary Equipment Schedule to purchase
all, but not less than all, of the Equipment listed therein for a purchase price
not to exceed 15% of Lessor's cost hereunder and upon terms and conditions to be
mutually agreed upon by the parties following Lessee's written notice, plus any
taxes applicable at time of purchase. Said purchase price shall be paid to
Lessor at least thirty (30) days before the expiration date of the Initial Term
or extended term. Title to the Equipment shall automatically pass to Lessee upon
payment in full of the purchase price but, in no event, earlier than the
expiration of the fixed Initial Term or extended term, if applicable. If the
parties are unable to agree on the purchase price or the terms and conditions
with respect to said purchase, then the Summary Equipment Schedule with respect
to this Equipment shall remain in full force and effect. Notwithstanding the
exercise by Lessee of this option and payment of the purchase price, until all
obligations under the applicable Summary Equipment Schedule have been fulfilled,
it is agreed and understood that Lessor shall retain a purchase money security
interest in the Equipment listed therein and the Summary Equipment Schedule
shall constitute a Security Agreement under the Uniform Commercial Code of the
state in which the Equipment is located.
5. Technology Exchange Option
If Lessee is not in default, and there is no material adverse change in
Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option to replace any of the Equipment
subject to such summary Equipment Schedule with new technology equipment ("New
Technology Equipment") utilizing the following guidelines:
A. Equipment being replaced with New Technology Equipment shall have an
aggregate original cost equal to or greater than $20,000 and be comprised of
full configurations of equipment.
B. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software or any soft costs financed hereunder including but not limited
to tenant improvements and custom equipment.
C. The cost of the New Technology Equipment must be equal to or greater than
the original equipment cost of the replaced equipment, but in no event shall
exceed 150% of the original equipment cost.
D. The remaining lease payments applicable to the equipment being replaced by
the New Technology Equipment will be discounted to present value at 6%.
The wholesale market value of the equipment being replaced will be established
by Comdisco based upon then current market conditions. Upon the return of the
replaced equipment, the wholesale price will be deducted from the present value
of the remaining rentals and the differential will be added to the cost of the
New Technology Equipment in calculating the new rental. The lease for the New
Technology Equipment will contain terms and conditions substantially similar to
those for the replaced equipment and will have an Initial Term not less than the
balance of the remaining Initial Term for the replaced equipment.
6. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
(a) Section 14.18., Definitions
-----------
In the definition of "Interim Rent", delete "the pro-rata portion" and
-------------
replace with "interest only portion of".
-7-
<PAGE>
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
BATTERY EXPRESS, INC. COMDISCO, INC.
as Lessee as Lessor
By:__________________________ By:__________________________
By:__________________________ By:__________________________
Title:_______________________ Title:_______________________
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to Equipment
Schedule No. X to the Master Lease Agreement dated XXXX between Comdisco, Inc.
("Lessor") and XXXX ("Lessee"). All of the terms, conditions, representations
and warranties of the Master Lease Agreement and Equipment Schedule No. X are
incorporated herein and made a part hereof, and this Summary Equipment Schedule
constitutes a Schedule for the Equipment on the attached invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- ------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
9
<PAGE>
EQUIPMENT SCHEDULE VL-2
DATED AS OF JUNE 23, 1999
TO MASTER LEASE AGREEMENT
DATED AS OF JUNE 23,1999 (THE "MASTER LEASE)
LESSEE: BATTERY EXPRESS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
------------------------ -----------------------
Contact: ________________________ 6111 North River Road
TEL: (775) 746-6140 Rosemont, Illinois 60018
FAX: (775) 746-6156 Attn: Venture Group
Address for Notices:
-------------------
2301 Robb Drive
Reno, NV 89523
Central Billing Location: Rent Interval: Monthly
------------------------ -------------
same as above
Attn:__________________________________
Lessee Reference No.: ____________________
(24 digits maximum)
Location of Equipment: Initial Term: 30 months
--------------------- ------------
same as above (Number of Rent Intervals)
Attn:__________________________________ Lease Rate Factor:
-----------------
Months 1-21 1.90%
Months 22-30 8.321%
EQUIPMENT (as defined below): Advance: $66,568.00
-------
Interim Rent: Interest Only (8.5%)
------------
Software, tenant improvements, consulting fees (for PC implementation costs),
and other soft costs specifically approved by Lessor, which shall be delivered
to and accepted by Lessee during the period June 23, 1999 through June 23, 2000
("Equipment Delivery Period") for which Lessor receives vendor invoices approved
for payment, up to an aggregate purchase price of $800,000.00 ("Commitment
Amount"); excluding custom use equipment, installation costs and delivery costs,
roiling stock, special tooling, hand held items, molds and fungible items. So
long as no Event of Default has occurred and is continuing hereunder, Lessor
agrees that Lessee may decrease the Commitment Amount under Equipment Schedule
No. VL-2 and increase the Commitment Amount under VL-1 accordingly at any time
during the Equipment Delivery period.
10
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii), (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessees
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback Transaction
must be submitted to Lessor in writing (along with accompanying
evidence of Lessee's Equipment ownership satisfactory to Lessor for
all Equipment submitted) no later than July 23, 1999*. Lessor will
not perform a Sale-Leaseback Transaction for any request or
accompanying Equipment ownership documents which arrive after the
date marked above by an asterisk (*). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual
net appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
-------------------------- ---------------------------------
Between 02/23/99 - 07/23/99 (150 days) 100%
11/25/98 - 02/22/99 (151 to 240 days) 85%
08/26/98 - 11/24/98 (240 to 330 days) 65%
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which is
obtained from a third party by Lessee for its use subject to Lessor's
prior approval of the Equipment and at Lessor's appraised value for
such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar month into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar month thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
11
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3. Miscellaneous
In consideration of Lessor financing software, tenant improvements,
consulting fees, and other soft costs hereunder, Lessee agrees in addition to
its last Monthly Rent Payment to remit to Lessor an amount equal to 15% of
Lessor's aggregate cost of software, tenant improvements, consulting fees, and
other soft costs provided hereunder.
4. Special Terms.
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
(a) Section 14.18.. Definitions
---------------------------
In the definition of "Interim Rent", delete "the pro-rata portion" and
-------------
replace with "interest only portion of".
(b) Section 9. Delivery and Return of Equipment
-------------------------------------------
Delete second, third and fourth sentences in their entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
BATTERY EXPRESS, INC. COMDISCO, INC.
as Lessee as Lessor
By:_________________________ By:_________________________
By:_________________________ By:_________________________
Title:______________________ Title:______________________
12
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
----------------- --------
This Summary Equipment Schedule dated XXXX is executed pursuant to Equipment
Schedule No. X to the Master Lease Agreement dated XXXX between Comdisco, Inc.
("Lessor") and XXXX ("Lessee"). All of the terms, conditions, representations
and warranties of the Master Lease Agreement and Equipment Schedule No. X are
incorporated herein and made a part hereof, and this Summary Equipment Schedule
constitutes a Schedule for the Equipment on the attached invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- ------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
13
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ADDENDUM TO
MASTER LEASE AGREEMENT DATED AS OF JUNE 23, 1999
BETWEEN BATTERY EXPRESS, INC., AS LESSEE
AND COMDISCO, INC., AS LESSOR
The undersigned hereby agree that the terms and conditions of the
above-referenced Master Lease are hereby modified and amended as follows:
1) Section 3. "Rent and Payment"
----------------
Insert the following at the end of the third sentence after the word
"amount": "provided, however, that so long as payment is made within
five (5) days after the date such payment is due, no late charge will
be assessed for up to two (2) late payments under a particular Summary
Equipment Schedule in any twelve (12) month period."
2) Section 13.1 "Default"
-------
Paragraph (b), in line 1, after the word "other", insert "material".
3) Section 14.1 "Board Attendance"
----------------
Delete this section in its entirety.
4) Section 14.2 "Financial Statements"
--------------------
In the first sentence, change the words "month" and "monthly" to
"quarter" and "quarterly".
5) Section 14.4 "Merger and Sale Provisions"
--------------------------
First sentence, line 2, delete the words "sixty (60)" and replace with
"thirty (30)".
At the end of the paragraph, insert, "Notwithstanding the foregoing,
consent is not required for any reincorporations into another state."
Except as amended hereby, all other terms and conditions of the Master
Lease Agreement remain in full force and effect.
BATTERY EXPRESS, INC. COMDISCO, INC.
as LESSEE as LESSOR
By: _________________________ By:__________________________
Title: ______________________ Title:________________________
Date: _______________________ Date: _______________________
<PAGE>
EXHIBIT 10.7
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of July 30, 1999, is entered
into by and between Battery Express, a California corporation, with its chief
executive office and principal place of business located at 2301 Robb Drive,
Reno, NV 89523 (the "Borrower") and Comdisco, Inc., a Delaware corporation,
with its principal place of business located at 6111 North River Road, Rosemont,
Illinois 60018 (the "Lender" or sometimes, "Comdisco"). In consideration of the
mutual agreements contained herein, the parties hereto agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a loan
or loans up to an aggregate principal amount equal to the lesser of one hundred
twenty five percent (125%) of the total dollars invested by individuals and
entities affiliated with Institutional Venture Partners (collectively, "IVP") in
the Borrower's Next Round, up to a maximum of THREE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($3,500,000) (as the same may from time to time be amended,
modified, supplemented or revised, individually or collectively referred to as
the "Loan(s)"), which would be evidenced by Subordinated Promissory Note(s)
executed by Borrower substantially in the form of Exhibit A hereto (as the same
---------
may from time to time be amended, modified, supplemented or restated the
"Note(s)") as set forth in Section 2 herein;
WHEREAS, Lender is willing to make the Loan(s) on the terms and conditions
set forth in this Agreement;
WHEREAS, Lender and Borrower agree any Loan(s) hereunder shall be
subordinate to Senior Debt (as defined herein) to the extent set forth in the
Subordination Agreement (as defined herein); and
WHEREAS, Borrower has also given Lender certain rights to purchase the
Borrower's Preferred Stock under terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and the mutual agreements
contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall have
the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "Account" means any "account" as such term is defined in Section 9-106
of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now
holds or hereafter acquires any interest and, in any event, shall include,
without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Borrower (including, without limitation, under any trade
name, style or division
<PAGE>
thereof) whether arising out of goods sold or services rendered by Borrower or
from any other transaction, whether or not the same involves the sale of goods
or services by Borrower (including, without limitation, any such obligation
which may be characterized as an account or contract right under the UCC) and
all of Borrower's rights in, to and under all purchase orders or receipts now
owned or hereafter acquired by it for goods or services, and all of Borrower's
rights to any goods represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods), and
all monies due or to become due to Borrower under all purchase orders and
contracts for the sale of goods or the performance of services or both by
Borrower (whether or not yet earned by performance on the part of Borrower or in
connection with any other transaction), now in existence or hereafter occurring,
including, without limitation, the right to receive the proceeds of said
purchase orders and contracts, and all collateral security and guarantees of any
kind given by any Person with respect to any of the foregoing.
1.2 "Account Debtor" means any "account debtor," as such term is defined
in Section 9-105(1)(a) of the UCC.
1.3 "Advance" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.
1.4 "Advance Date" means the funding date of any Advance of the Loan.
1.5. "Advance Request" means the request by Borrower for an Advance under
the Loan, each to be substantially in the form of Exhibit C attached hereto, as
---------
submitted by Borrower to Lender from time to time.
1.6 "Chattel Paper" means any "chattel paper," as such term is defined in
Section 9-105(1)(b) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.7 "Closing Date" means the date hereof.
1.8 "Collateral" shall have the meaning assigned to such term in Section 3
of this Agreement.
1.9 "Contracts" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
1.10 "Conversion/Purchase Option" shall have the meaning assigned to such
term in Section 8 of this Agreement.
1.11 "Copyrights" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any
2
<PAGE>
other country; (iii) any continuations, renewals or extensions thereof; and (iv)
any registrations to be issued in any pending applications.
1.12 "Copyright License" means any written agreement granting any right to
use any Copyright or Copyright registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.13 "Documents" means any "documents," as such term is defined in Section
9-105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
1.14 "Equipment" means any "equipment," as such term is defined in Section
9-109(2) of the UCC, now or hereafter owned or acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
1.15 "Excluded Agreements" means (i) the Master Lease Agreement dated as
of June 23, 1999 between Borrower, as lessee, and Lender, as lessor, including,
without limitation, any Equipment Schedules and Summary Equipment Schedules to
the Master Lease Agreement executed or delivered by Borrower pursuant thereto
and any other modifications or amendments thereof, whereby Borrower (as lessee)
leases equipment, software, or goods from Lender (as lessor) to Borrower (as
lessee) and (ii) any warrant agreements between Borrower (as lessee) and Lender
(as lessor).
1.16 "Facility Fee" means one percent (1.0%) of the Maximum Available Loan
and due to Lender at the Closing Date, plus a transaction and due diligence fee
of $5,000.00.
1.17 "Fixtures" means any "fixtures," as such term is defined in Section
9-313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all purchases of the security constituted
thereby, immediately upon any acquisition or release thereof or any such
purchase, as the case may be.
1.18 "General Intangibles" means any "general intangibles," as such term
is defined in Section 9-106 of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest and,
in any event, shall include, without limitation and unless otherwise limited by
Section 3(h) below, all right, title and interest which Borrower may now or
hereafter have in or under any contract, all customer lists, Copyrights,
Trademarks, Patents, rights to Intellectual Property, interests in partnerships,
joint ventures and other business associations, Licenses, permits, trade
secrets, proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs, knowledge,
know-how, software, data bases, data, skill, expertise, recipes, experience,
processes, models, drawings, materials and records, goodwill (including, without
limitation, the goodwill associated with any Trademark, Trademark registration
or Trademark licensed under any Trademark License), claims in or under insurance
policies, including unearned premiums, uncertificated securities, cash
3
<PAGE>
and other forms of money or currency, deposit accounts (including as defined in
Section 9-105(e) of the UCC), rights to sue for past, present and future
infringement of Copyrights, Trademarks and Patents, rights to receive tax
refunds and other payments and rights of indemnification.
1.19 "Initial Public Offering" means an initial public offering of
Borrower's securities.
1.20 "Instruments" means any "instrument," as such term is defined in
Section 9-105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.
1.21 "Intellectual Property" means all Copyrights, Trademarks, Patents,
Licenses, trade secrets, source codes, customer lists, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, skill, expertise, experience, processes, models, drawings, materials and
records and goodwill and any rights to enforce or enjoy the benefits thereof.
1.22 "Inventory " means any "inventory," as such term is defined in
Section 9-109(4) of the UCC, wherever located, now or hereafter owned or
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest, and, in any event, shall include, without limitation, all inventory,
goods and other personal property which are held by or on behalf of Borrower for
sale or lease or are furnished or are to be furnished under a contract of
service or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in Borrower's business, or the processing,
packaging, promotion, delivery or shipping of the same, and all furnished goods
whether or not such inventory is listed on any schedules, assignments or reports
furnished to Lender from time to time and whether or not the same is in transit
or in the constructive, actual or exclusive occupancy or possession of Borrower
or is held by Borrower or by others for Borrower's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of Borrower or of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or other persons.
1.23 "License" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
1.24 "Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
1.25 "Loan Documents" shall mean and include this Agreement, the Note(s),
and any other documents executed in connection with the Secured Obligations or
the transactions contemplated hereby, as the same may from time to time be
amended, modified, supplemented or restated, provided, that the Loan Documents
--------
shall not include any of the Excluded Agreements.
---
1.26 "Material Adverse Effect" means a material adverse effect upon: (i)
the business, operations, properties, prospects, assets or conditions (financial
or otherwise) of
4
<PAGE>
Borrower; or (ii) the ability of Borrower to perform, or of Lender to enforce,
the Secured Obligations (other than limitations on Lender's ability to enforce
the Secured Obligations under the Subordination Agreement or any limitations
arising from conditions applicable to Lender but unrelated to Borrower's
performance hereunder).
1.27 "Maturity Date" means the date thirty-six (36) months from the
Advance Date of each installment of the Loan.
1.28 "Maximum Loan Amount" means one hundred twenty five percent (125%) of
the dollars invested by IVP in Borrower's Next Round not to exceed Three Million
Five Hundred Thousand and No/100 Dollars ($3,500,000.00).
1.29 "Merger Event" means a capital reorganization of the shares of the
Borrower's stock (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Borrower with or into another corporation whether or not
the Borrower is the surviving corporation, or the sale of all or substantially
all of the Borrower's properties and assets to any other person.
1.30 "Next Round" means the Borrower's first private round of equity
financing in consummated on or after the date hereof which IVP shall have
invested a minimum of Two Million Dollars ($2,000,000.00).
1.31 "Patent License" means any written agreement granting any right with
respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
1.32 "Patents" means all of the following now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest:
(a) letters patent of, or rights corresponding thereto in, the United States or
any other county, all registrations and recordings thereof, and all applications
for letters patent of, or rights corresponding thereto in the United States or
any other country, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country;
(b) all reissues, continuations, continuations-in-part or extensions thereof;
(c) all petty patents, divisionals, and patents of addition; and (d) all patents
to issue in any such applications.
1.33 "Permitted Liens" means any and all of the following: (i) liens in
favor of Lender, (ii) liens related to, or arising in connection with, Senior
Debt.
1.34 "Preferred Stock" means the Borrower's Series C Preferred Stock.
1.35 "Proceeds" means "proceeds," as such term is defined in Section 9-
306(1) of the UCC and, in any event, shall include, without limitation, (a) any
and all Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to Borrower from time to time in respect of
the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to Borrower from time to time with respect to any of the
Collateral, (c) any and all payments (in any form whatsoever) made or due and
payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any
5
<PAGE>
Person acting under color of governmental authority), (d) any claim of Borrower
against third parties (i) for past, present or future infringement of any
Copyright, Patent or Patent License or (ii) for past, present or future
infringement or dilution of any Trademark or Trademark License or for injury to
the goodwill associated with any Trademark, Trademark registration or Trademark
licensed under any Trademark License and (e) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
1.36 "Receivables" shall mean and include all of the Borrower's accounts,
instruments, documents, chattel paper and general intangibles whether secured or
unsecured, whether now existing or hereafter created or arising, and whether or
not specifically sold or assigned to Lender hereunder.
1.37 "Secured Obligations" shall mean and include all principal, interest,
fees, costs, or other liabilities or obligations for monetary amounts owed by
Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s), Agreement or other instrument, as the same may
from time to time be amended, modified, supplemented or restated, provided, that
the Secured Obligations shall not include any indebtedness or obligations of
Borrower arising under or in connection with the Excluded Agreements.
1.38 "Senior Creditor" means a bank, insurance company, pension fund, or
other institutional lender to be determined and identified to Lender in
accordance with the Subordination Agreement, or a syndication of such
institutional lenders that currently or in the future provides Senior Debt
financing to Borrower; provided, that Senior Creditor shall not include any
--------
officer, director, shareholder, venture capital investor, or insider of
Borrower, or any affiliate of the foregoing persons, except upon the express
written consent of Lender.
1.39 "Senior Debt" means any and all indebtedness and obligations for
borrowed money (including, without limitation, principal, premium (if any),
interest, fees charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor
under the Senior Loan Documents, including, but not limited to such amounts as
may accrue or be incurred before or after default or workout or the commencement
of any liquidation, dissolution, bankruptcy, receivership or reorganization by
or against Borrower provided, that Senior Debt shall not include debt exceeding
One Million Five Hundred Thousand Dollars ($1,500,000.00) outstanding at any one
time without Lender's prior approval.
1.40 "Senior Loan Documents" means the loan agreement between Borrower and
Senior Creditor and any other agreement, security agreement, document,
promissory note, UCC financing statement, or instrument executed by Borrower in
favor of Senior Creditor pursuant to or in connection with the Senior Debt or
the loan agreement, as the same may from time to time be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.41 "Subordination Agreement" means the Subordination Agreement of even
date herewith, entered into between Borrower and Lender for the benefit of
Senior.
6
<PAGE>
1.42 "Trademark License" means any written agreement granting any right to
use any Trademark or Trademark registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.43 "Trademarks" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.
1.44 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
SECTION 2. THE LOANS
2.1 Subject to the closing of the Next Round, Lender agrees to lend to
Borrower an amount equal to one hundred twenty five percent (125%) of the
dollars invested by IVP in the Borrower's Next Round not to exceed Three Million
Five Hundred Thousand and No/100 Dollars ($3,500,000.00) in the aggregate at any
one time outstanding for the purposes and upon the terms and subject to the
conditions contained in this Agreement.
2.2 The Loan(s) shall be available in three (3) equal installments. Each
Advance made by Lender to Borrower shall be evidenced by a Note in the original
principal amount of such Advance. The principal balance of each Note shall bear
interest thereon precomputed at the rate of eleven percent (11%) per annum, and
each such Note shall be due and payable in twelve (12) equal monthly
installments of interest only, payable on the first day of each month, followed
by twenty four (24) equal monthly installments of principal and interest,
payable on the first day of each month, to and including the Maturity Date
(each, a "Payment Date"). If any payment under a Note shall be payable on a day
other than a business day, then such payment shall be due and payable on the
next succeeding business day.
2.3 In order to obtain an Advance under the Loans, Borrower shall
complete, sign and deliver an Advance Request to Lender. Each Advance Request
shall identify an Advance Date which is no less than five (5) business days from
the date of such notice. Upon receipt of an Advance Request, Lender shall
verify the information contained in the Advance Request and so long as the
criteria set forth in Section 4 are met Lender shall deliver a Note dated the
Advance Date evidencing such Advance to Borrower for signature. Upon receipt of
the signed Note, Lender will fund the Advance in the manner requested by the
Advance Request. Borrower agrees that Lender may rely on any notice given by
any Person it reasonably believes to be an authorized officer of Borrower
without the necessity of independent investigation.
2.4 Borrower shall have the option to prepay any Note, in whole or in
part, without premium after twelve (12) months from the Closing Date by paying
the principal amount thereon
7
<PAGE>
together with all accrued and unpaid interest with respect to such principal
amount, as of the date of such prepayment. If Borrower prepays a Note within
twelve (12) months from the Closing Date, Borrower shall pay the principal
amount together with all accrued and unpaid interest and a prepayment premium
equal to one percent (1%) of the then outstanding principal amount.
Notwithstanding the foregoing, (a) any such prepayment by the Borrower shall not
affect Lender's right to purchase as described in Section 8 herein and (b) in
the event of a prepayment in conjunction with or subsequent to an Initial Public
Offering, no premium or penalty shall apply.
2.5 (a) Notwithstanding any provision in this Agreement, the Note(s), or
any other Loan Document, it is not the parties' intent to contract for, charge
or receive interest at a rate that is greater than the maximum rate permissible
by law which a court of competent jurisdiction shall deem applicable hereto
(which under the laws of the State of Illinois shall be deemed to be the laws
relating to permissible rates of interest on commercial loans) (the "Maximum
Rate"). If the Borrower actually pays Lender an amount of interest, chargeable
on the total aggregate principal Secured Obligations of Borrower under this
Agreement and the Note(s) (as said rate is calculated over a period of time from
the date of this Agreement through the end of time that any principal is
outstanding on the Note(s)), which amount of interest exceeds interest
calculated at the Maximum Rate on said principal chargeable over said period of
time, then such excess interest actually paid by Borrower shall be applied
first, to the payment of principal outstanding on the Note(s); second, after all
principal is repaid, to the payment of Lender's out of pocket costs, expenses,
and professional fees which are owed by Borrower to Lender under this Agreement
or the Loan Documents; and third, after all principal, costs, expenses, and
professional fees owed by Borrower to Lender are repaid, the excess (if any)
shall be refunded to Borrower, and the effective rate of interest will be
automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rate set forth in Section 2.2.
(c) Upon and during the continuation of an Event of Default hereunder,
all Secured Obligations, including principal, interest, compounded interest, and
professional fees, shall bear interest at a rate per annum equal to the rate set
forth in Section 2.2 plus five percent (5%) per annum ("Default Rate").
SECTION 3. SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan(s) upon the terms and subject to
the conditions of the Note(s), Borrower hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Lender for security purposes only, and
hereby grants to Lender a security interest in, all of Borrower's right, title
and interest in, to and under each of the following (all of which being
hereinafter collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
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(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether tangible
or intangible and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Borrower and wherever located; and
(g) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and
rents, profits and products of each of the foregoing.
(h) The foregoing Collateral excludes Intellectual Property currently
held or hereafter obtained, including without limitation, the Borrower's
right, title and interest in or licenses to all patents, trademarks,
service marks, tradenames, copyrights, trade secrets, database or other
information, and any other proprietary rights or processes and any rights
to enforce or enjoy the benefits thereof, provided, however, in the event
Borrower grants to any other party a security interest in its Intellectual
Property, without Lender's prior written consent, Lender's security
interest shall be deemed to include Intellectual Property without any
further action on the part of the parties.
SECTION 4. CONDITIONS PRECEDENT TO LOAN
The obligations of the Lender to make Loans hereunder are subject to the
satisfaction by Borrower, or waiver by Lender, of the following conditions:
4.1 (a) The Advance Date for any installment shall occur on or before
January 30, 2000.
(b) Borrower shall have closed the Next Round to occur no later than
October 31, 1999.
4.2 Borrower, on or prior to the Closing Date, shall have delivered to
Lender the following:
(a) executed originals of the Agreement, the Subordination Agreement,
and any other documents reasonably required by Lender to effectuate the
liens of Lender with respect to all Collateral;
(b) certified copy of resolutions of Borrower's board of directors
evidencing approval of the borrowing and other transactions evidenced by
the Loan Documents;
(c) certified copies of the Articles of Incorporation and the Bylaws,
as amended through the Closing Date, of Borrower;
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(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in
which it does business and where the failure to be qualified would have a
Material Adverse Effect;
(e) payment of the Facility Fee;
(f) such other documents as Lender may reasonably request.
4.2 On each Advance Date:
(a) The Lender shall have received (i) an Advance Request for such
Advance as required by Section 2.3, (ii) an executed Note evidencing such
Advance and (iii) any other documents Lender may reasonably request.
(b) The representations and warranties set forth in Section 5 hereof
shall be true and correct in all material respects on and as of the Advance Date
with the same effect as though made on and as of such date, except to the extent
such representations and warranties expressly relate to an earlier date.
(c) The Borrower shall be in compliance with all the terms and
provisions set forth herein and in each other Loan Document on its part to be
observed or performed, and at the time of and immediately after such Advance no
Event of Default shall have occurred and be continuing.
Each Advance Request shall be deemed to constitute a representation and warranty
by the Borrower on the Advance Date as to the matters specified in paragraphs
(b) and (c) of this Section 4.2.
4.3 Borrower shall deliver a certificate signed by its Chief Executive
Officer and Chief Financial Officer certifying that Borrower has achieved at
least seventy-five percent (75%) or more of its cumulative revenue and 125% or
less of its cumulative net loss projections as set forth in its Business Plan in
the six (6) month period prior to the Advance Date, attached hereto as Exhibit
-------
D.
- -
4.4 Perfection of Security Interests. Borrower shall have taken or caused
to be taken such actions requested by Lender to grant Lender a first priority
perfected security interest in the Collateral, subject only to Permitted Liens
(as to which Lender's interest will be secondary). Such actions shall include,
without limitation, the delivery to Lender of all appropriate financing
statements, executed by Borrower, as to the Collateral granted by Borrower for
all jurisdictions as may be necessary or desirable to perfect the security
interest of Lender in such Collateral.
4.5 Absence of Events of Defaults. As of the Closing Date or the Advance
Date, no fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute an Event of Default under this
Agreement or any of the Loan Documents and no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute a material default under the Senior Loan Documents between Borrower
and Senior Creditor.
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4.6 Material Adverse Effect. As of the Closing Date or the Advance Date,
no event which has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing.
4.7 Termination Date. Notwithstanding anything in this Agreement to the
contrary, Lender's obligations to provide the Loan(s) shall terminate on the
earlier of (i) January 30, 2000 or (ii) the occurrence of an Event of Default
pursuant to Section 9, and no Advance Requests shall be accepted after such
date.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that:
5.1 Borrower owns all right title and interest in and to the Collateral,
free of all liens, security interests, encumbrances and claims whatsoever,
except for Permitted Liens.
5.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, a perfected security interest (when the requisite
financing statements are properly filed) in the Collateral as security for the
Secured Obligations, free of all liens, security interests, encumbrances and
claims, other than Permitted Liens and shall execute such Uniform Commercial
Code financing statements in connection herewith as the Lender may reasonably
request. Except for Permitted Liens, no other lien, security interest, adverse
claim or encumbrance has been created by Borrower or is known by Borrower to
exist with respect to any Collateral.
5.3 Borrower is a corporation duly organized, legally existing and in good
standing under the laws of the State of California, and is duly qualified as a
foreign corporation in all jurisdictions in which the nature of its business or
location of its properties require such qualifications and where the failure to
be qualified would have a Material Adverse Effect.
5.4 Borrower's execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents, required to be
delivered or executed in connection herewith, have been duly authorized by all
necessary corporate action of Borrower, the individual or individuals executing
the Loan Documents were duly authorized to do so; and the Loan Documents
constitute legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization or other similar laws generally affecting the
enforcement of the rights of creditors.
5.5 This Agreement and the other Loan Documents do not and will not
violate any provisions of Borrower's Articles of Incorporation, bylaws or any
contract, agreement, law, regulation, order, injunction, judgment, decree or
writ to which the Borrower is subject, or result in the creation or imposition
of any lien, security interest or other encumbrance upon the Collateral, other
than those created by this Agreement.
5.6 The execution, delivery and performance of this Agreement and the
other Loan Documents do not require the consent or approval of any other person
or entity including, without limitation, any regulatory authority or
governmental body of the United States or any state thereof or any political
subdivision of the United States or any state thereof.
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5.7 No event which has had or could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing.
5.8 No fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute a material default under the
Senior Loan Documents.
5.9 (a) There are no actions, suits or proceedings at law or in equity or
by or before any governmental authority now pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any business, property
or rights of the Borrower (i) which involve any Loan Document or (ii) as to
which there is a reasonable possibility of an adverse determination and which,
if adversely determined, could, individually or in the aggregate, result in a
Material Adverse Effect.
(b) The Borrower is not in violation of any law, rule or regulation,
or in default with respect to any judgment, writ, injunction or decree of any
governmental authority, where such violation or default could result in a
Material Adverse Effect.
5.10 (a) The Borrower is not a party to any agreement or instrument or
subject to any corporate restriction that has resulted or could result in a
Material Adverse Effect.
(b) The Borrower is not in default in any manner under any provision
of any indenture or other agreement or instrument evidencing indebtedness, or
any other material agreement or instrument to which it is a party or by which it
or any of its properties or assets are or may be bound, where such default could
result in a Material Adverse Effect.
5.11 No information, report, financial statement, exhibit or schedule
furnished by or on behalf of the Borrower to the Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement of fact or
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading.
5.12. All issued and outstanding shares of Common Stock, Preferred Stock
or any other securities of the Borrower have been duly authorized and validly
issued and are fully paid and nonassessable. All outstanding shares of Common
Stock, Preferred Stock and any other securities were issued in full compliance
with all Federal and state securities laws. In addition as of the Closing Date:
(i) The authorized capital stock of the Borrower consists of 8,706,250
shares of Common Stock, no par value (the "Common Stock"), of which
1,106,941 shares shall be issued and outstanding, and 1,293,750 shares of
Preferred Stock, of which 611,250 shares shall have been designated as
Series A Preferred Stock, 500,000 shares shall have been designated as
Series B Preferred Stock and 182,500 shares shall have been designated as
Series C Preferred Stock. 611,250 shares of Series A Preferred Stock and
500,000 shares of Series B Preferred Stock are issued and outstanding. No
shares of Series C Preferred Stock are outstanding prior to the closing of
the Next Round. All of the issued and outstanding
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shares of Preferred Stock have been duly authorized and validly issued and
are fully paid and nonassessable. All of the issued and outstanding shares
of Preferred Stock have been duly authorized and validly issued and are
fully paid and nonassessable. All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable. There have been from time to time an aggregate of
542,800 shares of Common Stock reserved for issuance under the Borrower's
1996 Stock Option Plan, of which 59,341 shares have been issued upon the
exercise of options, 212,590 shares are subject to outstanding options and
270,869 shares remain available for issuance. The Company has reserved
1,111,250 shares of Common Stock for issuance upon conversion of the
outstanding Preferred Stock. Except as set forth in this Agreement or
Borrower's Articles of Incorporation, and (i) outstanding options issued
pursuant to the Stock Plan, (ii) warrants to purchase up to an aggregate of
13,500 shares of Common Stock issued to Malcolm P. Appelbaum and
Vrolyk/Power Express L.P on June 14, 1996, (iii) a warrant to purchase
preferred stock held by Lender , (iv)conversion rights of the outstanding
Series A and Series B Preferred Stock and (v) preemptive rights held by
certain shareholders pursuant to the Amended and Restated Shareholders
Agreement dated October 22, 1998 (the "Shareholders Agreement") (i) no
subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital
stock of the Borrower is authorized or outstanding, (ii) the Borrower has
no obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right or to issue or distribute
to holders of a share of its capital stock any evidences of indebtedness or
assets of the Borrower, and (iii) the Borrower has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend
to make any other distribution in respect thereof. All of the issued and
outstanding securities or the Borrower have been offered, issued and sold
by the Borrower is compliance with applicable federal and state securities
laws.
(ii) In accordance with the Borrower's Articles of Incorporation,
other than as set forth in the Shareholders Agreement, no shareholder of
the Borrower has preemptive rights to purchase new issuances of the
Borrower's capital stock.
5.13 Borrower has filed and will file all tax returns, federal, state and
local, which it is required to file and has duly paid or fully reserved for all
taxes or installments thereof (including any interest or penalties) as and when
due, which have or may become due pursuant to such returns or pursuant to any
assessment received by Borrower for the three (3) years preceding the Closing
Date, if any (including any taxes being contested in good faith and by
appropriate proceedings).
SECTION 6. INSURANCE
6.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained commercial general liability insurance
against risks customarily insured against in Borrower's line of business. Such
risks shall include, without limitation, the risks of death, bodily injury and
property damage. So long as there are any Secured Obligations outstanding,
Borrower shall also cause to be carried and maintained insurance upon the
Collateral and Borrower's business, covering casualty, hazard and such other
property risks in amounts equal to the full replacement cost of the Collateral.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee and additional insured. Borrower
shall use commercially reasonable efforts to cause all policies
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evidencing such insurance to provide for at least thirty (30) days prior written
notice by the underwriter or insurance company to Lender in the event of
cancellation or expiration. Such policies shall be issued by such insurers and
in such amounts as is customary in Borrower's industry.
6.2 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including, without limitation, such claims, costs,
expenses, damages and liabilities based on liability in tort, including without
limitation, strict liability in tort), including reasonable attorneys' fees,
arising out of the disposition or utilization of the Collateral, other than
claims arising at or caused by Lender's negligence or willful misconduct.
SECTION 7. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
7.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within forty-five (45)
days) after the end of each quarter, unaudited interim financial
statements as of the end of such quarter (prepared on a consolidated and
consolidating basis, if applicable), including balance sheet and related
statements of income and cash flows accompanied by a report detailing any
material contingencies (including the commencement of any material
litigation by or against Borrower) or any other occurrence that could
reasonably be expected to have a Material Adverse Effect, all certified by
Borrower's Chief Executive Officer or Chief Financial Officer to be true
and correct;
(b) as soon as practicable (and in any event within ninety (90) days)
after the end of each fiscal year, unqualified audited financial statements
as of the end of such year (prepared on a consolidated and consolidating
basis, if applicable), including balance sheet and related statements of
income and cash flows, and setting forth in comparative form the
corresponding figures for the preceding fiscal year, certified by a firm of
independent certified public accountants selected by Borrower and
reasonably acceptable to Lender, accompanied by any management report from
such accountants;
(c) promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports which
Borrower has made available to its shareholders and copies of any regular,
periodic and special reports or registration statements which Borrower
files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange which reports, to the extent setting forth quarterly or annual
financials results, may be furnished to Lender in lieu of the items
required under paragraph (a) and (b) above; and
(d) promptly, any additional information, financial or otherwise
(including, but not limited, to tax returns and names of principal
creditors) as Lender reasonably
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believes necessary to evaluate Borrower's continuing ability to meet its
financial obligations.
7.2 Borrower shall permit any authorized representative of Lender and its
attorneys and accountants on reasonable prior written notice to inspect, examine
and make copies and abstracts of the books of account and records of Borrower at
reasonable times during normal business hours. In addition, such representative
of Lender and its attorneys and accountants shall have the right to meet with
management and officers of the Borrower to discuss such books of account and
records.
7.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents;
procure any instruments or documents as may be reasonably requested by Lender;
and take all further action that may be necessary, or that Lender may reasonably
request, to confirm, perfect, preserve and protect the security interests
intended to be granted hereby, and in addition, and for such purposes only,
Borrower hereby authorizes Lender to execute and deliver on behalf of Borrower
and to file such financing statements, security agreement and other documents
without the signature of Borrower either in Lender's name or in the name of
Borrower as agent and attorney-in-fact for Borrower. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement and may be filed in any appropriate office in lieu
thereof.
7.4 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any legal process, liens or encumbrances whatsoever (except any placed
thereon by Lender or Permitted Liens) and shall give Lender immediate written
notice thereof.
7.5 Without Lender's prior written consent, Borrower shall not, except in
the ordinary course of business consistent with past practices, (a) grant any
material extension of the time of payment of any of the Receivables, (b) to any
material extent, compromise, compound or settle the same for less than the full
amount thereof, (c) release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
trade discounts granted in the ordinary course of business of Borrower.
7.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition (taking into consideration ordinary wear
and tear) and from time to time make or cause to be made all necessary and
proper repairs, renewals and replacements thereto and shall competently manage
and care for its property in accordance with prudent industry practices.
7.7 Borrower shall not merge with and into any other entity; or sell or
convey all or substantially all of its assets or stock to any other person or
entity without notifying Lender a minimum of thirty (30) days prior to the
closing date and requesting Lender's consent to the assignment of all of
Borrower's Secured Obligations hereunder to the successor entity in form and
substance satisfactory to Lender. In the event Lender does not consent to such
assignment the parties agree Borrower shall prepay the Loan in accordance with
Section 2.2 hereof provided that such consent by the Lender shall not be
required in any transaction in which the surviving entity has a Moody's Bond
rating of BA3 or better or a commercially acceptable equivalent
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measure of creditworthiness as reasonably determined by Lender. Notwithstanding
the foregoing, this paragraph shall not apply to any merger effected for
purposes of changing Borrower's domicile.
7.8 Borrower shall not, without the prior written consent of Lender, such
consent not to be unreasonably withheld, declare or pay any cash dividend or
make a distribution, other than in Borrower's capital stock, on any class of
stock, other than pursuant to employee repurchase plans upon an employee's death
or termination of employment or transfer, sell, lease, lend or in any other
manner convey any equitable, beneficial or legal interest in any material
portion of the assets of Borrower (except inventory sold in the normal course of
business).
7.9 Upon the written request of Lender delivered reasonably in advance,
Borrower shall, during business hours, make the Inventory and Equipment
available to Lender for inspection at the place where it is normally located and
shall make Borrower's log and maintenance records pertaining to the Inventory
and Equipment available to Lender for inspection. Borrower shall take all
action necessary to maintain such logs and maintenance records in a correct and
complete fashion.
7.10 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Collateral or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom, except to the extent that such non-payment could not be reasonably
expected to have a Material Adverse Effect provided Borrower maintains adequate
reserves in accordance with GAAP therefor and provided further that Borrower
shall not be responsible for any taxes, fees or other charges arising from the
income of Lender. Borrower shall file on or before the due date therefor all
personal property tax returns in respect of the Collateral. Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor.
7.11 Borrower shall not relocate any item of the Collateral (other than
sale of inventory in the ordinary course of business) except: (i) with the prior
written consent of the Lender not to be unreasonably withheld; and (ii) if such
relocation shall be within the continental United States. If permitted to
relocate Collateral pursuant to the foregoing sentence, unless otherwise agreed
in writing by Lender, Borrower shall first (a) cause to be filed and/or
delivered to the Lender all Uniform Commercial Code financing statements,
certificates or other documents or instruments necessary to continue in effect
the perfected security interest of the Lender in the Collateral, and (b) have
given the Lender no less than thirty (30) days prior written notice of such
relocation.
7.12 In addition to any other rights granted pursuant to Section 8 of this
Agreement, Lender shall have the right to purchase shares of Borrower securities
of up to ten percent of the Maximum Loan Amount upon the occurrence of the Next
Round. Such right shall be upon the same terms and conditions as the other
investors in the Next Round.
7.13 Borrower shall not sell, transfer, assign, hypothecate or otherwise
encumber its Intellectual Property without Lender's prior written consent. In
the event Borrower grants a first security interest in its intellectual property
to another party, Borrower shall grant Lender a
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secondary security interest in such intellectual property and shall execute the
necessary documents for Lender to perfect in such intellectual property.
SECTION 8. CONVERSION/PURCHASE OPTION
8.1 In addition to the right granted pursuant to Section 7.12 hereof,
Lender shall have the right to purchase shares of Borrower's Preferred Stock
with an aggregate value of up to twenty eight percent (28%) of the Maximum Loan
Amount (subject to increase as provided in Section 8.2) at any time subject to
the limits expressed herein, at Lender's sole and absolute discretion (the
"Conversion/Purchase Option"). The Conversion/Purchase Option shall be
exercisable by Lender at a purchase price as set forth below:
The Conversion/Purchase Option shall be exercisable by Lender at a
purchase price equal to one hundred fifteen (115%) of the price per
share of the Next Round, provided, however, IVP has invested a minimum
of Two Million Eight Hundred Thousand ($2,800,000) in the Next Round.
In the event that IVP invests less than Two Million Eight Hundred
Thousand ($2,800,000) in the Next Round, the price per share shall be
equal to the price per share paid by IVP in the Next Round.
Notwithstanding the foregoing, in the event that a corporate investor
invests at a lower price per share in the Next Round, the purchase
price will be equal to the per share paid by that corporate investor.
("Purchase Price ").
The number and purchase price of such shares are subject to adjustment as
provided in this Section 8.
The Conversion/Purchase Option will terminate upon the date thirty (30)
days from receipt by Lender of notice from Borrower of a Board of Directors'
approved Initial Public Offering or Merger Event, subject to the terms set
forth in Section 8.9 hereof.
8.2 If the Borrower has not repaid the outstanding principal amount under
a Note in its entirety by the Maturity Date (as defined in the applicable
Note(s)), then for each additional month, or portion thereof, thereafter that
the outstanding principal is not paid and during which time the Lender's
Conversion/Purchase Option is still outstanding, Lender shall have the right to
purchase from the Borrower, at the Purchase Price (adjusted, as set forth and
defined in Section 8.3 herein), an additional amount of Preferred Stock with a
value equal to the product of (x) the outstanding principal amount which is due
but unpaid and (y) one percent (1%).
8.3 The Purchase Price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) If the Borrower at any time shall, by combination,
reclassification, exchange or subdivision of the securities as to which purchase
rights under this Conversion/Purchase Option exist into the same or a different
number of securities of any other class or classes (including, without
limitation, the automatic conversion of the Borrower's outstanding Preferred
Stock pursuant to the Articles of Incorporation as then in effect), this
Conversion/Purchase Option 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
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securities which were subject to the purchase rights under this
Conversion/Purchase Option immediately prior to such classification, exchange,
subdivision or other change.
(b) If the Borrower at any time shall combine or subdivide its
Preferred Stock, the Purchase Price shall be proportionately decreased in the
case of a subdivision, or proportionately increased in the case of a
combination.
(c) If the Borrower at any time shall pay a dividend payable in, or
make any other distribution (except any distribution specifically provided for
in the foregoing subsections (a) or (b)) of the Borrower's stock to the holders
of Preferred Stock, then the Purchase Price shall be adjusted, from and after
the record date of such dividend or distribution, to that price determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all shares
of the Borrower's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of all
shares of the Borrower's stock outstanding immediately after such dividend or
distribution. The Lender shall thereafter be entitled to purchase, at the
Purchase Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Purchase Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Purchase Price resulting
from such adjustment.
(d) Additional antidilution rights applicable to the Preferred Stock
purchasable hereunder are as set forth in the Borrower's Articles of
Incorporation, as amended through the date of this Agreement, a true and
complete copy of which is attached hereto as Exhibit E (the "Charter"). The
---------
Borrower shall promptly provide the Lender with any restatement, amendment,
modification or waiver of the Charter. The Borrower shall provide Lender with
prior written notice of any issuance of its stock or other equity security to
occur after the Effective Date of this Conversion/Purchase Option which is a
dilutive event (excluding shares issued or issuable under the Borrower's equity
benefit plan from time to time in effect or pursuant to warrants outstanding as
of the Closing Date), which notice shall include (i) the price at which such
stock or security is to be sold, (ii) the number of shares to be issued, and
(iii) such other information as necessary for Lender to calculate the dilutive
effect.
(e) If prior to the termination of exercise of the Conversion/Purchase
Option: (i) the Borrower shall declare any dividend or distribution upon its
stock, whether in cash, property, stock or other securities; (ii) there shall be
any Merger Event; (iii) there shall be an Initial Public Offering; or (iv) there
shall be any voluntary dissolution, liquidation or winding up of the Borrower;
then, in connection with each such event, the Borrower shall send to the Lender:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Borrower shall close or a record shall be taken for such dividend,
distribution, (specifying the date on which the holders of Preferred Stock shall
be entitled thereto) or for determining rights to vote in respect of such
dissolution, liquidation or winding up; (B) in the case of any such dissolution,
liquidation or winding up, at least twenty (20) days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Preferred Stock shall be entitled to exchange their Preferred Stock
for securities or other property deliverable upon dissolution, liquidation or
winding up); and (C) in the case of a Initial Public Offering or Merger Event,
the Borrower shall give the Lender at least twenty (20) days written notice
prior to the effective date thereof.
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Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Purchase Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Lender, at the address as shown on the books of the Lender.
(f) Failure to timely provide such notice required by subsection (e)
above shall entitle Lender to retain the benefit of the applicable notice period
notwithstanding anything to the contrary contained in any insufficient notice
received by Lender. The notice period shall begin on the date Lender actually
receives a written notice containing all the information specified above.
8.5 The Conversion/Purchase Option is exercisable by the Lender, in whole
or in part, at any time, or from time to time, prior to the earlier of thirty
(30) days after receipt of notice from Borrower of a Board of Directors'
approved (i) Initial Public Offering, or (ii) Merger Event. Lender may exercise
its Conversion/Purchase Option by tendering to the Borrower at its principal
office a notice of exercise in the form attached hereto as Exhibit F (the
---------
"Notice of Purchase"), duly completed and executed together with payment of the
Purchase Price by tender of one or more Note(s), the outstanding principal and
interest of which shall be credited against the Purchase Price, with the
balance, of the Purchase Price after conversion of all outstanding Notes payable
in cash or by check as provided above. In such event, the Note(s) so tendered
will be deemed satisfied in full and will be cancelled by the Borrower and the
Borrower will have no further obligation to the Lender under such Note(s). It
is understood and agreed that in connection with any exercise of Lender's
Conversion/Purchase Option, Lender shall first be required to surrender and
convert the balance of any outstanding Notes in payment thereof before Lender
will be permitted to purchase shares through Lender's payment of additional
funds. To the extent that the Purchase Price is less than the balance of the
surrendered Notes(s), in connection with Lender's exercise of the
Conversion/Purchase Option, Borrower shall execute and deliver a replacement
Note reflecting the amount by which the outstanding balances on the converted
Note(s) exceeded the applicable Purchase Price.
Promptly upon receipt of the Notice of Purchase and the payment of the
Purchase Price in accordance with the terms set forth below, Borrower shall
execute the acknowledgment of exercise in the form attached hereto as Exhibit G
---------
(the "Acknowledgment of Purchase") indicating the number of shares which remain
subject to future purchases, if any. Subject to Lender's right of recission of
its election pursuant to Section 8.9, no later than twenty-one (21) days
thereafter, the Borrower shall issue to the Lender a certificate for the number
of shares of Preferred Stock purchased.
8.6 (a) During the term of this Conversion/Purchase Option, the Borrower
will at all times have authorized and reserved a sufficient number of shares of
its Preferred Stock (or other security for which the Purchase Option may then be
exercised)to provide for the exercise of the rights to purchase Preferred Stock
(or other security for which the Purchase Option may then be exercised) as
provided for herein.
(b) If any shares of Preferred Stock required to be reserved hereunder
require registration with or approval of any governmental authority under any
Federal or State law (other than any registration under the Securities Act of
1933, as amended ("1933 Act"), as then in
19
<PAGE>
effect, or any similar Federal statute then enforced, or any state securities
law, required by reason of any transfer involved in such purchase), or listing
on any domestic securities exchange, before such shares may be issued upon
purchase, the Borrower will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered, listed or
approved for listing on such domestic securities exchange, as the case may be.
8.7 No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Conversion/Purchase Option, but in lieu of such
fractional shares the Borrower shall make a cash payment therefor upon the basis
of the Purchase Price then in effect.
8.8 This Conversion/Purchase Option does not entitle the Lender to any
voting rights or other rights as a shareholder of the Borrower prior to the
exercise of the Conversion/Purchase Option.
8.9 In the event Lender has exercised the Conversion/Purchase Option based
upon receipt of notice from Borrower of a Board of Directors' approved Initial
Public Offering or Merger Event and if such transaction is not consummated, the
Borrower shall promptly notify the Lender that such proposed transaction has
been terminated, and the Lender may rescind any exercise of its
Conversion/Purchase Option promptly after such notice of termination of the
proposed transaction.
SECTION 9. DEFAULT
The occurrence of any one or more of the following events (herein called
"Events of Default") shall constitute a default hereunder and under the Note(s)
and other Loan Documents:
9.1 Borrower defaults in the payment of any principal, interest or other
Secured Obligation involving the payment of money under this Agreement, the
Note(s) or any of the other Loan Documents, and such default continues for more
than five (5) days after the due date thereof; or
9.2 Borrower defaults in the performance of any other covenant or Secured
Obligation of Borrower hereunder or under the Note(s) or any of the other Loan
Documents, and such default continues for more than twenty (20) days after
Lender has given notice of such default to Borrower.
9.3 Any representation or warranty made herein by Borrower shall prove to
have been false or misleading in any material respect; or
9.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation pertinent to such circumstances, or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver, or
liquidator of Borrower or of all or any substantial part (33-1/3% or more) of
the properties of Borrower; or Borrower or its directors or majority
shareholders shall take any action initiating the dissolution or liquidation of
Borrower; or
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<PAGE>
9.5 Sixty (60) days shall have expired after the commencement of an action
by or against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or Borrower shall file any answer admitting or not contesting the
material allegations of a petition filed against Borrower in any such
proceedings; or the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or
9.6 Sixty (60) days shall have expired after the appointment, without the
consent or acquiescence of Borrower, of any trustee, receiver or liquidator of
Borrower or of all or any substantial part of the properties of Borrower without
such appointment being vacated; or
9.7 The material default by Borrower under any Excluded Agreement(s), any
other promissory note or agreement for borrowed money, or any other agreement
between Borrower and Lender if such material default is not cured within the
applicable cure period or waived; or
9.8 The occurrence of any material default under any lease or other
agreement or obligation of Borrower involving an amount in excess of $100,000.00
or having a Material Adverse Effect if such material default is not cured within
the applicable cure period or waived; or the entry of any judgment against
Borrower involving an award in excess of $100,000.00 that would have a Material
Adverse Effect, that has not been bonded or stayed on appeal within thirty (30)
days; or
9.9 The occurrence of any material default under the Senior Loan
Documents if such material default is not cured within the applicable cure
period or waived.
SECTION 10. REMEDIES
Upon the occurrence of any one or more Events of Default, Lender, at its
option, may declare the Note and all of the other Secured Obligations to be
accelerated and immediately due and payable (provided, that upon the occurrence
--------
of an Event of Default of the type described in Sections 9.4 or 9.5, the Note(s)
and all of the other Secured Obligations shall automatically be accelerated and
made due and payable without any further act), whereupon the unpaid principal of
and accrued interest on such Note(s) and all other outstanding Secured
Obligations shall become immediately due and payable, and shall thereafter bear
interest at the Default Rate set forth in, and calculated according to, Section
2.5 (c) of this Agreement. Subject to the rights of any Senior Creditor, Lender
may exercise all rights and remedies with respect to the Collateral under the
Loan Documents or otherwise available to it under applicable law, including the
right to release, hold or otherwise dispose of all or any part of the Collateral
and the right to occupy, utilize, process and commingle the Collateral.
Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere.
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<PAGE>
Borrower agrees that any such public or private sale may occur upon ten (10)
calendar days' prior written notice to Borrower. Lender may require Borrower to
assemble the Collateral and make it available to Lender at a place designated by
Lender which is reasonably convenient to Lender and Borrower. The proceeds of
any sale, disposition or other realization upon all or any part of the
Collateral shall be distributed by Lender in the following order of priorities:
First, to Lender in an amount sufficient to pay in full Lender's costs and
professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in its
sole discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction may
direct.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under Section 9-207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
SECTION 11. MISCELLANEOUS
11.1 Continuation of Security Interest. This is a continuing Agreement
and the grant of a security interest hereunder shall remain in full force and
effect and all the rights, powers and remedies of Lender hereunder shall
continue to exist until the Secured Obligations are paid in full as the same
become due and payable and until Lender has executed a written termination
statement (which Lender shall execute within a reasonable time after full
payment of the Secured Obligations hereunder), reassigning to Borrower, without
recourse, the Collateral and all rights conveyed hereby and returning possession
of the Collateral to Borrower. The rights, powers and remedies of Lender
hereunder shall be in addition to all rights, powers and remedies given by
statute or rule of law and are cumulative. The Purchase of any one or more of
the rights, powers and remedies provided herein shall not be construed as a
waiver of or election of remedies with respect to any other rights, powers and
remedies of Lender.
11.2 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11.3 Notice. Except as otherwise provided herein, all notices and service
of process required, contemplated, or permitted hereunder or with respect to the
subject matter hereof shall be in writing, and shall be deemed to have been
validly served, given or delivered upon the earlier of: (i) the first business
day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the fifth
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
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(a) If to Lender:
------------
COMDISCO VENTURES
Attention: James P. Labe
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5088
With a copy to:
--------------
COMDISCO, INC.
Legal Department
Attention: General Counsel
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5088
COMDISCO, INC./COMDISCO VENTURES
6111 North River Road
Rosemont, IL 60018
Attention: Jill Hanses
Facsimile: (847) 518-5465
(b) If to Borrower:
--------------
BATTERY EXPRESS, INC.
Attention: Chief Financial Officer
2301 Robb Drive
Reno, NV 89523
Facsimile: (775) 746-6156
Phone: (775) 746-6140
or to such other address as each party may designate for itself by like notice.
11.4 Entire Agreement; Amendments. This Agreement, the Note(s), and the
other Loan Documents constitute the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof, and
supersede and replace in their entirety any prior proposals, term sheets,
letters, negotiations or other documents or agreements, whether written or oral,
with respect to the subject matter hereof or thereof (including, without
limitation, Lender's proposal letter dated July 16, 1999, all of which are
merged herein and therein. None of the terms of this Agreement, the Note(s) or
any of the other Loan Documents may be amended except by an instrument executed
by each of the parties hereto.
11.5 Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
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<PAGE>
11.6 No Waiver. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. No omission, or delay, by Lender at
any time to enforce any right or remedy reserved to it, or to require
performance of any of the terms, covenants or provisions hereof by Borrower at
any time designated, shall be a waiver of any such right or remedy to which
Lender is entitled, nor shall it in any way affect the right of Lender to
enforce such provisions thereafter.
11.7 Survival. All agreements, representations and warranties contained
in this Agreement, the Note(s) and the other Loan Documents or in any document
delivered pursuant hereto or thereto shall be for the benefit of Lender and
shall survive the execution and delivery of this Agreement and the expiration or
other termination of this Agreement.
11.8 Successor and Assigns. The provisions of this Agreement and the
other Loan Documents shall inure to the benefit of and be binding on Borrower
and its permitted assigns (if any). Borrower shall not assign its obligations
under this Agreement, the Note(s) or any of the other Loan Documents without
Lender's express written consent, and any such attempted assignment shall be
void and of no effect; provided that no consent shall be necessary with respect
to the assignment hereof in connection with Borrower's contemplated re-
incorporation into the State of Delaware. Lender may assign, transfer, or
endorse its rights hereunder and under the other Loan Documents without prior
notice to Borrower, and all of such rights shall inure to the benefit of
Lender's successors and assigns.
11.9 Further Indemnification. Borrower agrees to pay, and to save Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
11.10 Governing Law. This Agreement, the Note(s) and the other Loan
Documents have been negotiated and delivered to Lender in the State of Illinois,
and shall not become effective until accepted by Lender in the State of
Illinois. Payment to Lender by Borrower of the Secured Obligations is due in
the State of Illinois. This Agreement, the Note(s) and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Illinois, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
11.11 Consent To Jurisdiction And Venue. All judicial proceedings arising
in or under or related to this Agreement, the Note(s) or any of the other Loan
Documents may be brought in any state or federal court of competent jurisdiction
located in the State of Illinois. By execution and delivery of this Agreement,
each party hereto generally and unconditionally: (a) consents to personal
jurisdiction in Cook County, State of Illinois; (b) waives any objection as to
jurisdiction or venue in Cook County, State of Illinois; (c) agrees not to
assert any defense based on lack of jurisdiction or venue in the aforesaid
courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement, the Note(s) or the other Loan Documents.
Service of process on any party hereto in any action arising out of or relating
to this agreement shall be effective if given in accordance with the
requirements for notice set forth in Section 11.3, above and shall be deemed
effective and received as set forth in Section 11.3, above. Nothing herein
shall affect the right to serve process in any other manner permitted by
24
<PAGE>
law or shall limit the right of either party to bring proceedings in the courts
of any other jurisdiction.
11.12 Mutual Waiver Of Jury Trial. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced and expert person and the parties wish applicable state and
federal laws to apply (rather than arbitration rules), the parties desire that
their disputes be resolved by a judge applying such applicable laws. EACH OF
BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR
ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST LENDER OR
ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This waiver
extends to all such Claims, including, without limitation, Claims which involve
persons or entities other than Borrower and Lender; Claims which arise out of or
are in any way connected to the relationship between Borrower and Lender; and
any Claims for damages, breach of contract arising out of this Agreement, any
other Loan Document or any of the Excluded Agreements, specific performance, or
any equitable or legal relief of any kind.
11.13 Confidentiality. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property, and any Financial
Statements provided pursuant to Section 7 hereof, constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring, perfecting or foreclosing on the Collateral or
otherwise provided under this Agreement, provided such Confidential Information
is marked as confidential by Borrower at the time of disclosure, shall be
received in the strictest confidence and will not be disclosed to any other
person or entity in any manner whatsoever, in whole or in part, without the
prior written consent of the Borrower, unless and until Lender has acquired
indefeasible title thereto.
11.14 Counterparts. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
25
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IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and delivered
this Agreement as of the day and year first above written.
BORROWER: BATTERY EXPRESS, INC.
Signature: /s/ Mick Delargy
------------------------------
Print Name: Mick Delargy
------------------------------
Title: CFO
------------------------------
Accepted in Rosemont, Illinois:
- ------------------------------
LENDER: COMDISCO, INC.
Signature: /s/ Jill C. Hanses
------------------------------
Print Name: Jill C. Hanses
------------------------------
Title: Senior Vice President
------------------------------
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Exhibit C
Advance Request
Date: ___________, 1999
To: Lender:
Comdisco, Inc.
% Comdisco Ventures
3000 Sand Hill Road
Menlo Park, CA 94025
Attention: Vika Tonga
Facsimile (650) 854-4026
Borrower hereby requests from Comdisco, Inc. ("Lender") an Advance in the
amount of $__________________ on ______________, 1999 (the "Advance Date") under
that Subordinated Loan and Security Agreement between Borrower and Lender dated
July 30, 1999 (the "Agreement").
Please:
(a) Issue a check payable to Borrower ________
or
(b) Wire Funds to Borrower's account ________
Bank:_________________________________
Address:______________________________
______________________________
ABA Number:___________________________
Account Number:_______________________
Account Name:_________________________
Borrower hereby represents that the Conditions Precedent to Loan set forth
in Section 4 of the Agreement are satisfied and will be satisfied upon the
making of such Loans, except and to the extent described on Schedule 1 to this
Advance Request. Borrower understands and acknowledges that Lender has the
right to review such Schedule and based upon such review in its sole discretion
Lender may decline to fund the requested Advance.
Executed this ___ day of __________, 199__ by:
BORROWER: BATTERY EXPRESS, INC.
BY: ______________________________
TITLE:______________________________
PRINT:______________________________
27
<PAGE>
EXHIBIT F
NOTICE OF EXERCISE OF PURCHASE OPTION
TO: ________ ("Borrower")
(1) The undersigned Lender hereby elects to exercise its Purchase Option with
respect to _______ shares of the Series C Preferred Stock of Borrower,
pursuant to the terms of the Subordinated Loan and Security Agreement dated
the 30th day of July, 1999 (the "Loan Agreement") between Borrower and the
Lender, and tenders herewith payment of the purchase price for such shares
in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights with respect to the Purchase Option, the
undersigned hereby represents and warrants to Borrower as follows:
(a) The right to acquire Preferred Stock or the Preferred Stock issuable
upon exercise of the Lender's rights contained herein will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Lender has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption.
(b) The Lender understands (i) that the Preferred Stock issuable upon
exercise of its Purchase Option is not registered under the 1933 Act nor
qualified under applicable state securities laws on the ground that the issuance
contemplated by its Purchase Option will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Borrower's reliance on
such exemption is predicated on the representations set forth in this notice.
(c) The Lender has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment,
and has the ability to bear the economic risks of its investment.
(d) The Lender understands that if the Borrower does not register with the
Securities and Exchange Commission pursuant to Section 12 of the 1934 Act (the
"1934 Act"), or file reports pursuant to Section 15(d), of the 1934 Act, or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this its Purchase Option, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, if may be required to hold such securities
for an indefinite period. The Lender also understands that any sale of its
rights of the Lender to purchase Preferred Stock or Preferred Stock which might
be made by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(e) Lender is an "accredited investor" within the meaning of the Securities
and Exchange Rule 501 of Regulation D, as presently in effect.
(3) Subject to our review and acceptance of your Acknowledgement Certificate
with respect to this Notice, please issue a certificate or certificates
representing said shares of Series C Preferred Stock (or other security for
which our Purchase Option is currently exercisable
28
<PAGE>
under the terms of the Loan Agreement) in the name of the undersigned or in
such other name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Lender: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
29
<PAGE>
EXHIBIT G
ACKNOWLEDGMENT OF RECEIPT OF NOTICE
OF EXERCISE OF PURCHASE OPTION
The undersigned ________ ("Borrower") hereby acknowledges receipt of the
"Notice of Purchase" from Comdisco, Inc. ("Lender") to exercise its Purchase
Option with respect to ____ shares of the Series C Preferred Stock of
_________________, pursuant to the terms of the Subordinated Loan and Security
Agreement dated July 30, 1999 (the "Agreement"). Borrower further acknowledges
that ______ shares remain subject to purchase under the terms of the Agreement.
In connection with such Purchase Option the undersigned hereby represents,
warrants and agrees as follows:
(a) All representations and warranties of the Borrower made pursuant to the
Agreement are true and correct in all material respects on and as of the date of
this Acknowledgment with the same effect as though made on and as of this date
(except as set forth in Schedule 1 to this Acknowledgment or with respect to
representations made as to a particular date).
(b) The Preferred Stock issuable upon exercise of the Lender's rights has
been duly and validly reserved and, when issued in accordance with the
provisions of the Purchase Option, will be validly issued, fully paid and non-
assessable, and will be free of any taxes, liens, charges or encumbrances of any
nature whatsoever; provided, however, that the Preferred Stock issuable pursuant
to the Purchase Option may be subject to restrictions on transfer under state
and/or Federal securities laws. The Borrower has made available to the Lender
true, correct and complete copies of its Charter and Bylaws, as amended. The
issuance of certificates for shares of Preferred Stock upon Purchase of the
Purchase Option shall be made without charge to the Lender for any issuance tax
in respect thereof, or other cost incurred by the Borrower in connection with
such Purchase and the related issuance of shares of Preferred Stock. The
Borrower shall not be required to pay any tax which may be payable in respect of
any transfer involved and the issuance and delivery of any certificate in a name
other than that of the Lender.
(c) The issuance to Lender of the right to acquire the shares of Preferred
Stock, has been duly authorized by all necessary corporate action on the part of
the Borrower, and the Purchase Option is not inconsistent with the Borrower's
Charter or Bylaws, does not contravene any law or governmental rule, regulation
or order applicable to it, does not and will not contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound, and the Purchase
Option constitutes a legal, valid and binding agreement of the Borrower,
enforceable in accordance with its terms.
(d) No consent or approval of, giving of notice to, registration with, or
taking of any other action in respect of any state, Federal or other
governmental authority or agency is required with respect to the execution,
delivery and performance by the Borrower of its obligations under the Purchase
Option, except for the filing of notices pursuant to Regulation D
30
<PAGE>
under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(e) Except as set forth in Borrower's Amended and Restated Registration
Rights Agreement, the Borrower is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(f) Subject to the accuracy of the Lender's representations in its Notice,
the issuance of the Preferred Stock upon exercise of the Purchase Option will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) If Lender proposes to sell Preferred Stock issuable upon the exercise
of the Purchase Option in compliance with Rule 144 promulgated by the Securities
and Exchange Commission, the Borrower shall furnish to the Lender, within ten
days after receipt of a written request, a written statement confirming the
Borrower's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule, as such Rule may be amended from
time to time.
Borrower acknowledges that Lender has the right to review Schedule 1 to
this Certificate and that Lender may in its sole discretion withdraw its notice
of exercise of Purchase Option within the ten business days after Lender's
receipt of this Acknowledgment.
Borrower: BATTERY EXPRESS, INC.
By: _________________________
Title: _________________________
Date: _________________________
31
<PAGE>
EXHIBIT 10.8
LEASE AGREEMENT
BETWEEN
ELITE INSTRUMENTS, INC.,
a Nevada corporation
and
BATTERY EXPRESS, INC.,
a California corporation,
dba 1-800 BATTERIES
<PAGE>
TABLE OF CONTENTS
-----------------
Page No.
--------
1. BASIC LEASE TERMS...................................... 1
-----------------
2. PREMISES: TITLE........................................ 3
---------------
3. TERM, COMMENCEMENT DATE AND EXTENSION.................. 3
-------------------------------------
4. USE OF PREMISES........................................ 3
---------------
5. RENT: TRIPLE NET LEASE................................. 4
----------------------
6. SECURITY DEPOSIT....................................... 5
----------------
7. POSSESSION............................................. 6
----------
8. ACCEPTANCE AND INSPECTION.............................. 6
-------------------------
9. OCCUPANCY.............................................. 7
---------
10. QUIET ENJOYMENT........................................ 7
---------------
11. INSURANCE.............................................. 7
---------
12. TENANT'S PERSONAL PROPERTY............................. 8
--------------------------
13. INDEMNIFICATION........................................ 8
---------------
14. ALTERATIONS, DECORATIONS, ADDITIONS AND IMPROVEMENTS... 9
----------------------------------------------------
15. MAINTENANCE OF PREMISES................................ 9
-----------------------
16. SURRENDER OF PREMISES.................................. 9
---------------------
17. FREE FROM LINENS....................................... 10
----------------
18. UTILITIES.............................................. 10
---------
19. ENTRY BY LANDLORD...................................... 10
-----------------
20. TAXES.................................................. 10
-----
21. ASSIGNMENT AND SUBLETTING.............................. 11
-------------------------
<PAGE>
22. DEFAULT................................................ 11
-------
23. SURRENDER.............................................. 13
---------
24. TRANSFERS BY LANDLORD.................................. 13
---------------------
25. ESTOPPEL CERTIFICATES.................................. 13
---------------------
26. SUBORDINATION.......................................... 14
-------------
27. HOLDING OVER........................................... 14
------------
28. MISCELLANEOUS.......................................... 14
-------------
29. EMISSIONS: STORAGE, USE AND DISPOSAL OF WASTE.......... 17
---------------------------------------------
30. SIGNAGE................................................ 20
-------
31. MAINTENANCE AND REPAIR................................. 20
----------------------
32. DESTRUCTION............................................ 21
-----------
33. CONDEMNATION........................................... 21
------------
34. ENTRY ON PREMISES...................................... 22
-----------------
35. AMERICANS WITH DISABILITIES............................ 23
---------------------------
EXHIBITS:
--------
Property Description............................................. A
Memorandum of Lease.............................................. B
Repairs And Timetable............................................ C
Agency Disclosure................................................ D
Sign Design...................................................... E
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the
______ day of ________________________, 1997, by and among ELITE INSTRUMENTS,
INC., a Nevada corporation ("Landlord"), and BATTERY EXPRESS, INC., a California
corporation, dba 1-800 BATTERIES ("Tenant").
R E C I T A L S
- - - - - - - -
A. Landlord is the fee owner of that certain improved real property
located in the City of Reno, County of Washoe, State of Nevada, described with
particularity on Exhibit A attached hereto, whose street address is 2301 Robb
Drive, Reno, Nevada (the "Property").
B. Landlord is the owner of all buildings, structures, parking areas and
other improvements constructed on the Property (collectively, the
"Improvements").
C. Except as otherwise provided in this Lease, Landlord is the owner of
the fixtures and other items of personal property located on or attached to the
Improvements on the Property (collectively, "Personal Property").
D. As used in this Lease, the term "Premises" collectively denotes the
Property consisting of approximately EIGHTEEN THOUSAND ONE HUNDRED TWENTY
(18,120) square feet of ground floor space, the Improvements, the Personal
Property and all rights, title and interests of Landlord, if any, in and to all
streets, alleys, easements, rights-of-way in or to all streets, and any other
interest of Landlord in, on, across, in front of, abutting or adjoining the
Property.
E. Under the terms and provisions set forth in this Lease, Landlord
desires hereby to lease to Tenant, and Tenant desires hereby to lease from
Landlord, the Premises.
F. This Lease is entered into inasmuch as Tenant is willing to lease the
Premises from Landlord under the terms and provisions contained in this Lease.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, as consideration for the recitals stated above and the
mutual covenants, agreements, representations and warranties contained in this
Lease, as well as for other good and valuable consideration the receipt and
sufficiency of which hereby are acknowledged, Landlord and Tenant hereby agree
as follows:
1. BASIC LEASE TERMS.
-----------------
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1.1 DATE OF LEASE: _______________________________
1.2 TENANT: Battery Express, Inc., a California corporation, dba 1-800 Batteries.
Trade Name: 1-800 Batteries.
Address (Leased Premises): 2301 Robb Drive, Reno, Nevada.
Address (For Notices): Same. (Prior to Commencement Date:
14388 Union Street, San Jose, CA 95124)
1.3 LANDLORD: Elite Instruments, Inc., a Nevada corporation.
Address (For Notices): 16 Barcelona, Irvine, California 92714.
1.4 TENANT'S USE OF PREMISES: Office and distribution center.
1.5 PREMISES AREA: 18,120 Rentable Square Feet.
1.6 PARCEL: APN 204-010-19, as more particularly described on Exhibit "A".
1.7 TERM OF LEASE: Commencement: 6/15/97
Expiration: 9/15/2002
Number of Months: 63, subject to termination and
extension as specified in Section 3.
1.8 BASE MONTHLY RENT: $11,415,60
1.9 FIXED RENT ADJUSTMENT (Primary Term Only):
Effective Date of
-----------------
Fixed Rent Increase New Fixed Rent
------------------- --------------
September 15, 1999 $12,321.60
September 15, 2001 $13,046.60
1.10 PREPAID FIXED RENT: $11,415.60
1.11 SECURITY DEPOSIT: $22,831.20
1.12 BROKER(S):
Landlord:
---------
Duane J. Sanchez, Coldwell Banker Commercial
Plummer & Associates
209 E. Moana Lane, Suite 2, Reno, Nevada 89509
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Tenant:
------
D. Troy Miller, RPL Group Limited
6151 Lakeside Drive, Suite 1000, Reno, Nevada 89511
</TABLE>
1.13 CC&Rs: The Premises are subject to a declaration of covenants,
conditions and restrictions (CC&R's). Tenant agrees to comply with all
provisions of the CC&Rs, at Tenant's sole cost and expense. To Landlord's
knowledge, there are no assessments due and unpaid against the Premises pursuant
to the CC&R's.
1.14 MEMORANDUM OF LEASE: This Lease shall not be recorded, but a
Memorandum of Lease in a form substantially similar to Exhibit "B" shall be
recorded against the Premises in the office of the Recorder of Washoe County,
Nevada on or before the Commencement Date of the Lease.
1.15 ADDENDUM: The attached Addendum is a part of this Lease. Any
conflicts in the terms of the Addendum with the remaining terms of the Lease
shall be governed by the terms of the Addendum.
2. PREMISES: TITLE. Under the terms, conditions and covenants set
---------------
forth in this Lease, Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, the Premises. Landlord covenants and warrants that Landlord has
the full right and lawful authority to enter into this Lease for the full term
of this Lease and that Landlord has fee title to the Premises, free and clear of
all occupancies and tenancies.
3. TERM, COMMENCEMENT DATE AND EXTENSION.
-------------------------------------
3.1 The term of this Lease (the "Term") shall commence on June 15,
1997 (the "Commencement Date") and expire on the earlier of September 15, 2002
or the closing of Tenant's purchase of the Premises pursuant to Tenant's
exercise of Tenant's Option to Purchase. If this Lease has not been terminated
as provided in the preceding sentence, Tenant shall have the right to extend the
Term of this Lease from September 16, 2002 to September 15, 2007 provided:
Tenant delivers notice of its election to extend the Term not later than January
2, 2002, in which event all terms and conditions of this Lease shall remain in
full force and effect, except that the Fixed Rent shall increase as specified in
Subsection 3.2 below.
3.2 If the Lease Term is extended as provided in Subsection 3.1
above, the Fixed Rent shall be increased annually, commencing September 16, 2002
and continuing with subsequent increases on January 1st of each year thereafter.
4. USE OF PREMISES.
---------------
4.1 Subject to the terms of Subsection 4.2 of this Lease, Tenant may
use the Premises for any lawful purpose consistent with Subsection 1.4.
3
<PAGE>
4.2 Tenant shall not use the Premises or permit anything to be done
in or about the Premises that in any way will conflict with any law, statute,
zoning ordinance, regulation or requirement of duly constituted public
authorities that now are in force or hereafter may be in force or any Board of
Fire Underwriters requirements or other similar body now or hereafter
constituted, relating to or affecting the condition, use or occupancy of the
Premises.
5. RENT: TRIPLE NET LEASE.
----------------------
5.1 From the Commencement Date and continuing throughout the Term,
Tenant covenants and agrees to pay Landlord at the address of Landlord set forth
in Subsection 30.1 of this Lease, or as such other address as may be specified
in a notice given to Landlord or Tenant, the Fixed Rent (or "Rent") as specified
in Subsection 1.8 per month, in advance, on or before the 15th day of each month
during the Term, from the date of execution hereof. Rent for any partial month
shall be prorated at the rate of 1/28th, 1/29th, 1/30th or 1/31st of the monthly
rent per day, as the case may be, depending on the number of days in the month
for which such proration is required. The Tenant shall pay the first month's
Fixed Rent on or before June 15, 1997, and Landlord shall waive the payment of
the Fixed Rent for the period of July 15, 1997 through October 14, 1997.
5.2 Any failure on the part of Tenant to make any rent payment when
due and to cure such failure within the time and in the manner required by the
terms of Subsection 22.2 of this Lease shall constitute an Event of Default
under this Lease. If any check given to Landlord by Tenant is returned by the
bank for insufficient funds, Tenant shall pay Landlord the amount of any bank
charge actually levied against Landlord as a result of Tenant's returned check
and any returned check of Landlord, plus a TEN PERCENT (10%) penalty.
5.3 The Fixed Rent shall be in addition to and over and above all of
the payments to be made by Tenant as provided in this Lease. The Fixed Rent may
not be reduced below the initial Fixed Rent set forth in Subsection 5.1 of this
Lease. Any rent paid after the first twenty-five (25) business days of any
month during the Term shall include a TEN PERCENT (10%) penalty based on the
amount of such late payment. Landlord and Tenant agree that such a late charge
represents a reasonable estimate of the actual costs and expenses that Landlord
would incur because of Tenant's failure to pay timely all amounts required under
this Lease, the exact amount of which would be difficult or impracticable to
ascertain.
5.4 From the Commencement Date and continuing throughout the Term,
except as expressly set forth, however, it is the purpose and intention of
Landlord and Tenant (a) that the Fixed Rent shall be absolutely net to Landlord
without any abatement, deduction, counterclaim, set-off or offset whatsoever,
except as otherwise specifically provided in this Lease; (b) that all costs,
expenses and charges of every kind and nature incidental to Tenant's occupancy
and use of the Premises, which may arise or become due and payable during or
after (but attributable to a period falling within) the Term, including, without
limitation, all costs described in Subsections 5.5, 5.6 and 5.7 of this Lease,
shall be paid by Tenant to the appropriate third parties, and that Landlord
shall be
4
<PAGE>
indemnified and defended by Tenant against and held harmless by Tenant from the
same; and (c) that Tenant shall be solely responsible for the payment of real
property taxes (but only as pro-rated for the period of the Term) assessed
against the Premises as provided for in Section 20 of this Lease.
5.5 All of the amounts in addition to all payments of the Rents
referred to above in Section 5 that are payable by Tenant under this Lease,
including, without limitation, all payments for utilities, which include,
without limitation, electricity, gas, garbage collection, sewer and water
service; all payments for janitorial services, providing for basic office
maintenance and cleaning; all payments for cable television and alarm servicing
relating to the Premises; all payments for telephone services at the Premises;
all payments for property insurance, property maintenance, landscaping, HVAC
services and fire protection services; and every payment for any other sum,
cost, expense or deposit that Tenant in any of the provisions of this Lease
assumes or agrees to pay and/or deposit, including, without limitation, those
referred to in Section 18 of this Lease, shall constitute Rent under this Lease
and shall be payable without any abatement, deduction, counterclaim, set-off or
offset whatsoever, and, in the event of Tenant's failure to pay the same to
appropriate third parties, Landlord (in addition to all of Landlord's other
rights and remedies) shall have all of the rights and remedies provided for in
this Lease, in equity of by law in case of non-payment of Rent.
5.6 Tenant shall reimburse Landlord upon demand for all reasonable
costs and expenses, including, without limitation, all reasonable attorneys'
fees and disbursements, paid or incurred by Landlord in curing any Event of
Default under this Lease or arising out of any indemnity and/or hold-harmless
agreement given or made in this Lease by Tenant to Landlord.
5.7 Tenant shall not violate any provisions of the CC&Rs for the
Premises. Tenant shall pay when due all regular and special assessments and all
other financial obligations of any kind attributable to the Premises imposed by
the CC&Rs, except for obligations existing prior to the Commencement Date.
Landlord assigns to Tenant during the term of this Lease all voting rights and
other rights and benefits conferred by the CC&Rs arising from the Premises.
6. SECURITY DEPOSIT. On or before the Commencement Date, Tenant shall
----------------
deposit with Landlord the Security Deposit specified in Subsection 1.11 as
security for Tenant's full and faithful performance of every term, provision,
covenant and condition of this Lease (the"Security Deposit"). The Security
Deposit is not considered by the parties hereto to be liquidated damages, and
Tenant's responsibility under this Lease extends beyond the amount of the
Security Deposit. If Tenant breaches any of the terms and conditions of this
Lease, Landlord may use, apply or retain the whole or any part of the Security
Deposit for payment of any or all of the following specific purposes:
(a) Defaults in the payment of any monetary obligation or charge
imposed on Tenant under the Lease;
(b) Repairs for damages to the Premises caused by Tenant or Tenant's
guests or invitees; or
5
<PAGE>
(c) Costs for replacing keys to the Premises furnished by Landlord to
Tenant and lost by Tenant.
If Landlord uses all or any portion of the Security Deposit during the Term
for the purposes specified above, Tenant shall within three (3) business days of
written demand of Landlord pay Landlord the amount necessary to restore the
amount of the Security Deposit to its original amount. Upon the termination of
this Lease, the Security Deposit or any remaining portion of it, together with a
written accounting of any monies applied from it to unpaid obligations, damage
or lost keys, shall be forwarded to Tenant no later than FOURTEEN (14) days
after Tenant has surrendered possession of the Premises to Landlord by returning
to Landlord the keys to the Premises or after the closing of Tenant's purchase
of the Premises pursuant to Tenant's exercise of Tenant's Option to Purchase.
Landlord shall not be liable for the payment of any interest to Tenant on the
Security Deposit held by Landlord.
7. POSSESSION. Landlord shall deliver possession of the Premises to
----------
Tenant on the Commencement Date. After execution hereof and prior to the
Commencement Date, however, Tenant shall have access to the Property in order to
install tenant improvements, carpeting, painting, telephones and other
renovations needed for Tenant's occupancy, provided that Tenant does not
commence operation of Tenant's business or otherwise occupy the Property before
June 15, 1997. All renovations and tenant improvements made before the
Commencement Date on the Property must be approved in writing by Landlord prior
to performance of the work, said approval not to be unreasonable withheld. Such
early access shall be on the terms and conditions of this Lease, except the
obligation to pay rent.
8. ACCEPTANCE AND INSPECTION.
-------------------------
8.1 Except as otherwise provided in this Lease, Tenant hereby
declares that Tenant is leasing the Premises solely in reliance on Tenant's own
investigation. Tenant further declares that Tenant is aware of all zoning
regulations, other governmental requirements, including, without limitation,
laws regulating the site and physical condition of the Premises, and other
matters affecting the use and condition of the Premises, and Tenant agrees to
lease the Premises in the condition they are in on the Commencement Date on a
"where is," "as is" basis. By taking possession of the Premises, Tenant accepts
and acknowledges the Premises as being in good and sanitary order, condition and
repair. Tenant acknowledges that Landlord has NOT agreed to undertake any
modification, alteration or improvement of the Premises except as may be
expressly provided for elsewhere in this Lease, and Landlord shall not be
required to paint the exterior trim. Subject to the terms and provisions of this
Section 8, the taking of possession of the Premises by Tenant shall establish
conclusively that the Premises were at such time in satisfactory condition.
8.2 Notwithstanding the terms and provisions of Subsection 8.1 of
this Lease, Landlord shall perform all the following obligations:
(a) On or before July 15, 1997, Landlord shall have brought the
Premises
6
<PAGE>
into broom clean good and working order and condition, including the replacement
of any broken windows, removal of temporary walls and general cleaning.
(b) The parties of their representatives have conducted a walk
through inspection of the Premises to identify any aspects of the Premises
requiring repair in order for the Premises to be in good and working order and
condition. The list of repairs and timetable attached as Exhibit "C" is an
agreed description of work to be performed by Landlord. For sixty (60) days
after the Commencement Date, Tenant shall have the right to identify other
repairs of deficiencies which existed as of the Commencement Date for Landlord
to repair. Landlord shall repair, at Landlord's sole cost and expense, all
reasonable items identified by Tenant as provided in this Subsection in order to
bring the Premises into good and working order. Landlord shall perform all said
repairs as soon as possible, without any delay which could reasonably be
avoided, provided that Landlord shall have a minimum of thirty (30) days from
the date items are identified to perform repairs.
8.3 If Landlord is delayed in the commencement or completion of any
of Landlord's obligations under Subsection 8.2 above by an act or omission of
Tenant or by labor disputes, fire, acts of God, weather delays, unusual delay in
deliveries, unavoidable casualties or other causes beyond the Landlord's
reasonable control, or by delay authorized by Tenant, then the time to commence
and/or complete any such obligation shall be extended for such reasonable time
as said delay has caused.
9. OCCUPANCY. During the Term, only Tenant and Tenant's employees and
---------
invitees shall be permitted to occupy and use the Premises without the prior
written consent of Landlord.
10. QUIET ENJOYMENT. Landlord covenants that Landlord has the right to
---------------
make and enter into this Lease and that Tenant, upon performing the terms,
conditions and covenants of this Lease, shall have quiet and peaceful possession
of the Premises as against any person claiming the same by, through or under
Landlord.
11. INSURANCE.
---------
11.1 All-Risk Coverage. Tenant shall, at its sole expense, obtain and
-----------------
keep in force from the Commencement Date, and during the Term of this Lease,
"all-risk" coverage insurance naming Landlord and Tenant as their interests may
appear and such other parties as Landlord or Tenant may designate as additional
insureds, in the customary form in the City of Reno for buildings and
improvements of similar character, on all buildings and improvements now or
after this date located on the Premises. The amount of insurance will be
designated by Landlord no more frequently than once every twelve (12) months;
will be set forth on an "agreed amount endorsement" to the policy of insurance;
will not be less than the agreed rules of the American Arbitration Association
if Landlord and Tenant do not agree with regard to the value.
11.2 Commercial General Liability. Tenant will, at its sole expense,
----------------------------
obtain and
7
<PAGE>
keep in force during the term of this Lease commercial general liability
insurance with a combined single imit of not less than $3,000,000 for injury to
or death of any one person, for injury to or death of any number of persons in
one occurrence, and for damage to property, insuring against any and all
liability of Tenant, including without limitation coverage for contractual
liability, broad form property damage, host liquor liability, and non-owned
automobile liability, with respect to the Premises or arising out of
maintenance, use or occupance of the Premises. Such insurance will insure the
performance by Tenant of the indemnity agreement as to liability for injury to
or death of persons and damage to property set forth in Section 13 of this
Lease. Such insurance will be noncontributing with any insurance that may be
carried by Landlord and will contain a provision that Landlord, although named
as an additional insured, will nevertheless be entitled to recover under the
policy for any loss, injury, or damage to Landlord, its agents, and employees,
or the property of such persons. The limits and coverage of all such insurance
will be adjusted by agreement of Landlord and Tenant during every third Lease
year during the term of this Lease in conformity with the then prevailing custom
of insuring liability in the City of Reno, and any disagreement regarding such
adjustment will be submitted to arbitration in accordance with the applicable
rules of the American Arbitration Association.
11.3 Other Matter. All insurance required in this paragraph and all
------------
renewals of it will be issued by companies authorized to transact business in
the State of Nevada and rated at least A Class X by Best's Insurance Reports
(property liability) or approved by Landlord. The "all risk" coverage insurance
will be payable to Landlord, Tenant, and any lender as their interests may
appear. The "all-risk" coverage insurance will be carried in the joint names of
Tenant, Landlord, and such other parties having an interest in the Premises as
Landlord and Tenant may designate and Landlord and such other parties shall be
named as additional insured on the liability policy. All insurance policies
will be subject to approval by Landlord and any lender as to form and substance;
will expressly provide that such policies will not be canceled or reduced
without thirty (30) days' prior written notice to Landlord and any lender, in
the case of "all-risk" coverage insurance, and to Landlord, in the case of
general liability insurance; will, to the extent obtainable, provide that no act
or omission of Tenant that would otherwise result in forfeiture or reduction of
the insurance will affect or limit the obligation of the insurance company to
pay the amount of any loss sustained; and will, to the extent obtainable,
contain a waiver by the insurer of its rights of subrogation against Landlord.
Upon issuance, each insurance policy or a duplicate or certificate of such
policy will be delivered to Landlord and any lender whom Landlord designates.
Tenant may satisfy its obligation under this paragraph by appropriate
endorsements of its blanket insurance policies. Since the Tenant is in complete
control of the Premises, and a broad indemnification of the Landlord is
appropriate, contractual liability coverage shall be obtained by the Tenant.
11.4 Failure to Procure Insurance. If Tenant fails to procure and
----------------------------
maintain the insurance required under this Lease, then Landlord may, but shall
not be required to, order such insurance at Tenant's expense, and Tenant's
reimbursement to Landlord for such amounts shall be deemed additional Rent.
Such reimbursement shall include all sums disbursed, incurred or deposited by
Landlord, including Landlord's costs, expenses and reasonable attorney's fees,
together with interest thereon at TEN PERCENT (10%) per annum.
8
<PAGE>
11.5 Waiver of Coverage. Landlord and Tenant each hereby waives all
------------------
rights of recovery against the other on account of loss and damage occasioned to
such waiving party for Tenant's property or the property of others under
Tenant's control to the extent that such loss or damage is insured against under
any insurance policy that may be in force at the time of such loss or damage.
Tenant and Landlord shall, upon obtaining policies of insurance required under
this Lease, give notice to the insurance carrier that the foregoing mutual
waiver of subrogation is contained in this Lease, and Tenant and Landlord shall
cause each insurance policy obtained by such party to provide that the insurance
company waives all right of recovery by way of subrogation against either
Landlord or Tenant in connection with any damage covered by such policy.
12. TENANT'S PERSONAL PROPERTY. Tenant's personal property is NOT insured
--------------------------
by Landlord. Tenant shall purchase what is commonly known as "renter's
insurance" to protect Tenant's personal property with such amounts of insurance
coverage deemed by Tenant in Tenant's sole and absolute discretion to be
necessary or appropriate.
13. INDEMNIFICATION. Tenant shall defend (with attorneys reasonably
---------------
acceptable to Landlord), indemnify and hold Landlord and Landlord's officers,
agents, successors and assigns harmless from and against all damages, losses,
liabilities, judgments, costs or expenses, including, without limitation,
attorneys' fees and legal costs, suffered directly or by reason of any claim,
suit or judgment brought by or in favor of any person or persons for damage,
loss or expense due to, but not limited to, bodily injury, death and/or property
damage sustained by such person or persons that arises out of, is occasioned by
or in any way is attributable to the use or occupancy of the Premises or any
part thereof and adjacent areas by Tenant or the acts or omissions of Tenant,
Tenant's agents, employees, guests or any contractor or other invitee brought
onto the Premises by Tenant, except to the extent caused by the negligence or
misconduct of Landlord or Landlord's agents, successors and assigns. Tenant
agrees that Tenant's indemnification obligations under this Lease shall survive
this Lease.
14. ALTERATIONS, DECORATIONS, ADDITIONS AND IMPROVEMENTS. During the Term,
----------------------------------------------------
Tenant shall make no alterations, decorations, additions or improvements to the
Premises without the prior written consent of Landlord. Decoration includes,
without limitation, painting, wallpapering, fixturing, carpeting, drywalling,
hanging of murals, tile and posters and hanging of plants or other object from
the ceilings. All alterations, decorations, additions or improvements consented
to by Landlord shall be installed at Tenant's sole cost and expense in
compliance with all applicable laws. With the exception of furniture and trade
fixtures, all such alterations, decorations, additions and improvements,
including, without limitations, heating, lighting, electrical, air conditioning,
partitioning, drapery and carpentry installations made by Tenant, which become
an integral part of Premises or are affixed to the Premises so that they cannot
be removed without material damage to the Premises, shall be and become the
property of Landlord upon installation and shall not be deemed trade fixtures;
provided, however, that Tenant shall return the Premises to an undamaged and
broom-clean condition before the termination of the Lease. Tenant agrees that
all furnishings, trade fixtures and equipment removed shall be removed in such
9
<PAGE>
a manner that the Premises are returned to an undamaged condition before the
termination of this Lease.
15. MAINTENANCE OF PREMISES. Tenant, Tenant's sole cost and expense,
-----------------------
shall maintain the Premises in good condition and repair, to the level of
condition and repair existing as of the Commencement Date. Tenant agrees to
maintain the Premises as improved, including all landscaping, furniture and
furnishings, appliances and fixtures, in a safe, orderly, broom-clean and
sanitary condition at all times and otherwise to comply with any city or county
ordinance or state or federal law applicable to Tenant's occupancy of the
Premises. Tenant shall not commit waste or nuisance on or around the Premises
and shall not disturb, annoy, endanger or interfere with neighbors or other
tenants. Tenant shall be responsible for any damage caused by Tenant's
negligence or misuse of the Premises and the damage caused by the negligence or
misuse by Tenant's guests or invitees. Landlord acknowledges that most of the
landscaping is dead. Tenant shall not be obligated to install new landscaping,
only to maintain landscaping in its existing condition.
16. SURRENDER OF PREMISES. Upon the expiration or earlier termination of
---------------------
the Term, Tenant shall surrender the Premises to Landlord in an undamaged and
broom-clean condition, and Tenant shall remove all of Tenant's personal
property, trade fixtures and equipment from the Premises. All such property not
so removed shall be deemed abandoned by Tenant. If Tenant fails to remove any
trade fixture, equipment or other personal property, and such failure continues
after the termination of this Lease, Landlord may retain such property, and all
rights of Tenant with respect to such property shall cease, or Landlord may
place such property in public storage for Tenant's account. Tenant shall be
liable to Landlord for the costs of removal of any such trade fixture,
improvement or equipment of or installed by Tenant, the transportation and
storage costs of the same and the cost of returning the Premises to an undamaged
and broom-clean condition, together with interest at TEN PERCENT (10%) per annum
on all such expenses from the date of expenditure by Landlord. If the Premises
are not surrendered at the termination of this Lease, Tenant shall indemnify
Landlord against all loss or liability resulting from dely by Tenant in so
surrendering the Premises, including, without limitation, all of Landlord's
liability for all claims made by any succeeding tenant or losses to Landlord due
to lost opportunities to lease the Premises to succeeding tenants.
17. FREE FROM LIENS. Tenant hereby indemnifies and agrees to hold
---------------
Landlord free and harmless from all liens, claims and demands arising out of any
work performed or materials supplied in, on or about the Premises by or on
behalf of Tenant, Tenant's agents, employees or contractors. Tenant shall cause
any such lien imposed to be released of record by payment or posting of adequate
cash or of a proper bond within THIRTY (30) days after Tenant's actual notice of
imposition of the lien or upon written request by Landlord.
18. UTILITIES. Tenant shall be responsible for and shall pay promptly,
---------
as the same become due and payable, all charges for water, sewer, gas,
electricity, telephone, cable TV, refuse pickup, janitorial service and all
other utilities, materials and services furnished directly to or used
10
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by Tenant in, on or about the Premises during the Term, together with all taxes
thereon. Landlord shall not be liable in damages or otherwise for any failure or
interruption of any utility service or other service furnished to the Premises,
except that resulting from the negligence or willful misconduct of Landlord or
Landlord's agents, employees or invitees and not contributed to by the
negligence or misconduct of Tenant or Tenant's agents, employees or invitees. No
such failure or interruption shall entitle Tenant to terminate this Lease or
withhold rent or other sums due under this Lease.
19. ENTRY BY LANDLORD. Tenant shall permit Landlord and Landlord's agents
-----------------
to enter into and upon the Premises at all reasonable times during the Term for
the purpose of inspecting the Premises, for the purpose of making repairs and
for the purpose of showing the Premises to any prospective purchaser or tenant,
without any rebate of Rent and without any liability to Tenant for any loss of
occupation or quiet enjoyment of the Premises thereby occasioned. In an
emergency or when Tenant has abandoned or surrendered the Premises, Landlord or
Landlord's agents may enter the Premises at any time without securing prior
permission from Tenant.
20. TAXES.
-----
20.1 As pro-rated for the period of the Term only, Tenant shall pay
all real property taxes, as set forth on the county tax assessor's tax statement
for the Premises.
20.2 Tenant shall pay before delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenant contained in, on or about the Premises or elsewhere. When
possible, Tenant shall cause Tenant's trade fixtures, furnishings, equipment and
all other personal property to be assessed and billed separately from the real
or personal property of Landlord. Notwithstanding any other provision of this
Lease, Tenant shall have the right to contest in good faith any tax or
assessment that Tenant believes unreasonable or otherwise not applicable with
the appropriate governmental authority. Failure of Tenant to pay any of the
charges required to be paid under this Section 20 shall continue an Event of
Default under this Lease in like manner as failure to pay rental when due.
21. ASSIGNMENT AND SUBLETTING.
-------------------------
21.1 Tenant shall not have the power to transfer, sublet, assign,
enter into license or concession agreements, change ownership, mortgage or
hypothecate this Lease or Tenant's interest in this Lease or in and to the
Premises without the prior written consent of Landlord, which consent Landlord
shall be given in Landlord's sole discretion, subject to the following
conditions:
(a) Landlord, in Landlord's sole discretion, must approve the
financial strength and credibility of the subtenant or
assignee; and
(b) Any and all sums paid in consideration for the sublease or
assignment in excess of Rent required hereunder shall be
paid directly to
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Landlord, and shall be Landlord's property.
Any attempted or purported transfer of this Lease or Tenant's interest
in this Lease or in and to the Premises without Landlord's prior written consent
shall be void and confer no rights upon any third person and at Landlord's
election shall constitute an Event of Default under this Lease.
21.2 Each assignment, sublease or other act set out in Subsection
21.1 of this Lease, or similar act, to which Landlord has consented shall be by
instrument in writing in form satisfactory to Landlord and shall be executed by
all parties to the transaction. Each assignee shall agree in writing, for the
benefit of Landlord, to assume, to be bound by and to perform the terms,
conditions and covenants of this Lease to be performed by Tenant.
Notwithstanding anything contained in this Lease, Tenant shall not be released
from personal liability for the performance of each term, condition and covenant
of this Lease unless Landlord specifically consents to such release or executes
a Novation in writing. ONE (1) executed copy of such written instrument shall be
delivered to Landlord.
21.3 Consent by Landlord to any such assignment or subletting shall
not be deemed a consent to any subsequent assignment or subletting.
22. DEFAULT.
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22.1 Upon the occurrence of an "Event of Default" (as defined in this
Lease), Landlord shall have the following remedies in addition to all other
rights and remedies provided by law or otherwise provided in this Lease, to
which Landlord may resort cumulatively or in the alternative:
(a) Landlord can continue this Lease in full force and effect,
and this Lease will continue in effect as long as Landlord does not terminate
Tenant's right to possession, and Landlord shall have the right to collect Rent
when due. During the period in which Tenant is in default, Landlord can enter
the Premises and relet them, or any part of them, to third parties for Tenant's
account. Tenant shall be liable immediately to Landlord for all costs that
Landlord incurs in reletting the Premises, including, without limitation,
broker's commissions, expenses of remodeling the Premises required by the
reletting and all other similar costs. Reletting can be for a period shorter or
longer than the remaining period of the Term. Tenant shall pay to Landlord the
Rent and other sums due under this Lease on the dates on which the rent and such
other sums are due, less the rent and other sums Landlord receives from any
reletting. No act by Landlord allowed by this Section 22 shall terminate this
Lease unless Landlord notifies Tenant in writing that Landlord elects to
terminate this Lease.
(b) Landlord can terminate Tenant's right to possession of the
Premises at any time. No act by Landlord other than giving written notice to
Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the
Premises or the appointment of a receiver on
12
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Landlord's initiative to protect Landlord's interest under this Lease shall not
constitute a termination of Tenant's right to possession. On termination,
Landlord has the right to remove all personal property of Tenant and store such
property at Tenant's costs and to recover from Tenant as damages:
(1) The worth at the time of award of unpaid Rent and other
sums due and payable that had been earned at the time of termination; plus
(2) The worth at the time of award of the amount by which
the unpaid Rent and other sums due and payable that would have been payable
after termination until the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided; plus
(3) The worth at the time of award of the amount by which
the unpaid Rent and other sums due and payable 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; plus
(4) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would be
likely to result therefrom, including, without limitation, (a) all costs or
expenses incurred by Landlord (i) in retaking possession of the Premises,
including reasonable attorney's fees therefor, (ii) in maintaining or preserving
the Premises after such default and (iii) in preparing the Premises for
reletting to a new tenant; (b) leasing commissions; and (c) all other costs
necessary or appropriate to relet the Premises.
The "worth at the time of award" of the amounts referred to in
Subsections 22.1(b)(1) and 22.1(b)(2) of this Section is computed by allowing
interest at the rate of TEN PERCENT (10%) per annum on the unpaid rent and other
sums due and payable from the termination date through the date of award. The
"worth at the time of award" of the amount referred to in Subsection 22.1(b)(3)
of this Section is 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%).
22.2 At the option of Landlord, a breach of this Lease shall exist if
any of the following events (severally, an "Event of Default," and collectively,
"Events of Default") (or any other Event of Default referenced elsewhere in this
Lease) occurs:
(a) Tenant has failed to pay any monetary obligation or charge
imposed under this Lease within TEN (10) days of when due, unless said failure
is the first failure within a period of one (1) year, in which event Landlord
shall give Tenant written notice of the failure and an Event of Default shall
occur only if Tenant does not cure within five (5) days of receipt of the
notice;
(b) Tenant has failed to perform any term, covenant or condition
of this Lease except those requiring the payment of money, and Tenant has failed
to cure such breach within
13
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THIRTY (30) days after written notice from Landlord where such breach could
reasonably be cured within such THIRTY (30) day period; provided, however, that
where such failure could not reasonably be cured within such THIRTY (30) day
period Tenant shall not be in default unless Tenant has failed promptly to
commence and thereafter continue to make diligent and reasonable efforts to cure
such failure as soon as practicable; or
(c) Tenant has assigned Tenant's assets for the benefit of
Tenant's creditors; or
(d) A court has made or entered any decree or order other than
under the bankruptcy laws of the United States:
(1) appointing a receiver, trustee or assignee of Tenant in
bankruptcy or insolvency or for Tenant's property; or
(2) directing the winding up or liquidation of Tenant; and
such decree or order has continued for a period of THIRTY (30) days.
23. SURRENDER. No act or conduct of Landlord, whether consisting of the
---------
acceptance of the keys to the Premises or otherwise, shall be deemed to be
constitute an acceptance of the surrender of the Premises by Tenant before the
expiration of the Term, and such acceptance by Landlord of surrender by Tenant
shall only flow from and must be evidenced by a written acknowledgment of
acceptance of surrender signed by Landlord. The surrender of this Lease by
Tenant, voluntarily or otherwise, shall not work a merger but shall operate as
an assignment to Landlord of all existing subleases, or Landlord may, at
Landlord's option, terminate any or all of such subleases by notifying
sublessees of Landlord's election to do so within FIVE (5) days after such
surrender.
24. TRANSFERS BY LANDLORD. Landlord may voluntarily convey the Premises
---------------------
or assign or transfer Landlord's interest in this Lease or any underlying lease
without the prior consent of Tenant. In the event of such conveyance,
assignment or transfer, Landlord shall take reasonable precautions to ensure
that with respect to Tenant's Security Deposit Landlord's assignee or transferee
shall comply with the terms and provisions of Section 6 of this Lease.
25. ESTOPPEL CERTIFICATES. Each of the parties to this Lease shall,
---------------------
without charge, at any time and from time to time, within TEN (10) days after
receipt from the other party of written request therefor, deliver a duly
executed and acknowledged certificate to the other party hereto or any other
person, firm or corporation designated by the requesting party, certifying: (a)
that this Lease is unmodified and in full force and effect, or if there has been
any modification, that this Lease is in full force and effect as modified, and
stating any such modification; (b) whether or not there is then existing any
claim of default under this Lease and, if so, specifying the nature thereof; and
(c) the dates to which the Rent and other charges payable under this Lease by
Tenant have been paid. If Tenant fails to complete and execute the certificate
within the time provided for in this
14
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Lease, a purchaser or lender shall be entitled to rely on a certificate or
statement submitted by Landlord.
26. SUBORDINATION. This Lease is subject and subordinate to all mortgage
-------------
and deeds of trust that now affect the Premises and to all renewals,
modifications, consolidations, replacements and extensions thereof; provided,
however, that if the holder or holders of any such mortgage or deed of trust
advises Landlord that they desire or require this Lease to be prior and superior
thereto, upon written request of Landlord to Tenant, Tenant agrees to promptly
execute, acknowledge and deliver all documents or instruments that Landlord or
such lessor, holder or holders deem reasonably necessary or desirable for the
purposes thereof, so long as such documents and instruments impose no material
obligations on Tenant not imposed on Tenant by this Lease.
27. HOLDING OVER. Except as specified in this Section, any holding over
------------
after the expiration of the Term, without the consent of Landlord, shall be
construed to be tenancy from month to month, at the rate of $1.50 per square
foot of ground space, and shall otherwise be under the terms and conditions in
this Lease specified, so far as applicable and any holding over after the
expiration of the Term, with the consent of Landlord, shall be construed to be a
tenancy from month to month, at the rate of $1.50 per square foot of ground
floor space, and shall otherwise be under the terms and conditions in this Lease
specified, so far as applicable.
28. MISCELLANEOUS.
-------------
28.1 Notice. Any notice or communication required or permitted under
------
this Lease shall be in writing and shall be deemed to have been received by the
party to whom such notice or communication is addressed (a) upon delivery, if
delivered personally, or (b) one (1) business day after deposited, prepaid, in a
Federal Express or similar depository for expedited overnight delivery or (d)
TEN (10) business days after deposited in the United States mail, registered or
certified, postage prepaid, return receipt requested, addressed as follows:
If to Landlord: ELITE INSTRUMENTS, INC.
Attn: Sam Pu, President
16 Barcelona
Irvine, California 92714
or to such other person or address as Landlord from time to time may provide in
writing to Tenant.
After Commencement Date: Before Commencement Date:
------------------------ -------------------------
If to Tenant: 1-800 BATTERIES 1-800 BATTERIES
Attn: Chief Executive Officer Attn: CEO
2301 Robb Drive 14388 Union Street
Reno, Nevada 89523 San Jose, California 95124
15
<PAGE>
or to such other person or address as Tenant from time to time may provide in
writing to Landlord.
28.2 Invalidity. If any term or provision of this Lease or the
----------
application thereof to any person or circumstance is held, to any extent,
invalid or unenforceable, then the remainder of this Lease, or the application
of such term or provision to persons whose circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby.
28.3 Successors and Assigns. The terms, conditions and covenants of
----------------------
this Lease shall be binding on and inure to the benefit of each of the parties
hereto and their heirs, personal representatives, successors, executors,
administrators and permitted assigns, and all of such terms, conditions and
covenants shall run with the land. Where more than one party are lessors under
this Lease, the term "Landlord" whenever used in this Lease shall be deemed to
include all of such lessors jointly and severally.
28.4 Exhibits. All Exhibits referred to in this Lease are attached to
--------
this Lease and are incorporated in this Lease by reference.
28.5 Authority to Execute. The undersigned parties hereto hereby
--------------------
warrant that they have the proper authority and are empowered to execute this
Lease.
28.6 Governing Law. The validity, construction, interpretation and
-------------
enforceability of this Lease shall be determined and governed by the laws of the
State of Nevada. Notwithstanding the foregoing, if any law or set of laws of
the State of Nevada requires or otherwise dictates that the laws of another
state or jurisdiction be applied in any proceeding involving this Lease, then
such law or laws of the State of Nevada shall be superseded by this Subsection
28.6, and the remaining laws of the State of Nevada nonetheless shall be applied
in such proceeding.
28.7 Arbitration. All disputes arising in connection with this Lease
-----------
shall be exclusively and finally settled by binding arbitration in Washoe
County, Nevada in accordance with the rules of the American Arbitration
Association then existing. Judgment upon the award rendered in the arbitration
may be entered in any court having jurisdiction thereover. Upon the application
of either party to this Lease, and whether or not an arbitration proceeding has
yet been initiated, all courts having jurisdiction hereby are authorized
pursuant hereto (a) to issue and enforce in any lawful manner such temporary
restraining orders, preliminary injunctions and other interim measures of relief
as may be necessary to prevent harm to the interests of a party to this Lease or
as otherwise may be appropriate pending the conclusion of arbitration
proceedings pursuant to this Lease and (b) to enter and enforce in any lawful
manner such judgments for permanent equitable relief as may be necessary to
prevent harm to the interests of a party to this Lease or as otherwise may be
appropriate following the issuance of arbitral awards pursuant to this Lease.
28.8 Waiver. No failure on the part of either party to this Lease to
------
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof or as a waiver of any other right, power or remedy
hereunder or of the performance of any obligation of
16
<PAGE>
either party to this Lease; and no single or partial exercise by either party to
this Lease of any right, power or remedy hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
Landlord's acceptance of rent after a default under this Lease by Tenant shall
not be deemed to be a waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease, other than the failure of Tenant to pay the
particular rental or other sum so accepted, regardless of Landlord's knowledge
of such preceding breach at the time of acceptance of such payment. No covenant,
term or condition of this Lease shall be deemed to have been waived by Landlord
unless such waiver is in writing and signed by Landlord.
28.9 Modification. The terms and provisions of this Lease shall not
------------
be extended, varied, changed, modified, amended or supplemented other than by an
agreement in writing signed by the parties hereto.
28.10 No Strict Construction. The language used in this Lease shall be
----------------------
deemed to be the language chosen by the parties hereto in order to express their
mutual intent, and no rule of strict construction shall be applied against
either party to this Lease.
28.11 Headings and Captions. The captions and headings used in this
---------------------
Lease are for the convenience of reference only and do not constitute a part of
this Lease and shall not be deemed to limit, characterize or in any way affect
any term or provision of this Lease, and all terms and provisions of this Lease
shall be enforced and construed as if no captions or headings appeared in this
Lease.
28.12 Expenses. Except as otherwise provided herein, the parties
--------
hereto shall bear the expenses respectively incurred by each of them in
connection with the execution and delivery of this Lease and the consummation of
the transactions contemplated hereby.
28.13 Further Assurances. Each party to this Lease shall execute and
------------------
deliver such instruments and take such other actions as the other party to this
Lease reasonably may require in order to carry out the intents and purposes of
this Lease.
28.14 Non-Exclusivity. The rights, remedies, powers and privileges
---------------
provided in this Lease are cumulative and not exclusive and shall be in addition
to all rights, remedies, powers and privileges granted by law, rule, regulation
or instrument.
28.15 No Third Parties Benefitted. This Lease is made and entered into
---------------------------
for the sole protection and benefit of the parties hereto and their successors
and permitted assigns, and no other person or persons shall have any right of
action under this Lease.
28.16 Reliance on Legal Counsel and Other Advisors. Each party to this
--------------------------------------------
Lease has consulted such legal, financial, technical and other experts that it
has deemed necessary or desirable before entering into this Lease. Each party
to this Lease represents and warrants that it has read, knows, understands and
agrees with all of the terms and provisions of this Lease. Neither party to
17
<PAGE>
this Lease has relied on any oral representation of the other party to this
Lease in entering into this Lease. All discussions, estimates and projections
developed by any party to this Lease during the course of negotiating the terms
and conditions of this Lease were developed by way of illustration only and,
unless specifically contained in this Lease or in one or more of its Exhibits or
Schedules, are not binding on or enforceable against the other party to this
Lease in law or in equity.
28.17 Attorneys' Fees. If Landlord brings suit for the possession of
---------------
the Premises, for the recovery of any sum due under this Lease or because of the
breach of any other covenant contained in this Lease, or if Tenant or Landlord
brings any action for any relief, declaratory or otherwise, arising out of this
Lease, then the non-prevailing party in any such suit shall pay court costs and
reasonable attorneys' fees, which shall be deemed to have accrued on the
commencement of such action and shall be enforceable whether or not such action
is prosecuted to judgment. Such attorneys' fees and costs shall not be limited
to any court fee schedule but rather shall be awarded on the basis of all fees
and costs reasonably incurred in good faith. Such attorneys' fees and costs
shall be paid by the non-prevailing party in addition to all other relief to
which the prevailing party may be entitled.
28.18 Entire Lease. This Lease contains the entire agreement between
------------
Landlord and Tenant with respect to the Premises, and no other agreement
hereafter made shall be effective to change, modify or discharge this Lease in
whole or in part unless such agreement is in writing and signed by the party
against whom enforcement of the change, modification or discharge is sought.
28.19 Brokers. Landlord is represented in this transaction by Duane
-------
L. Sanchez of Coldwell Banker Plummer & Associates and Tenant is represented by
D. Troy Miller of RPL Group Limited. Broker commissions shall be paid by
Landlord pursuant to the provisions of a separate agreement. Except as specified
in this Section, the parties represent to each other that they have not used the
services of any real estate broker or person who may claim a commission or
finder's fee with respect to this transaction, and each agrees to indemnify,
defend and hold the other harmless from broker compensation claims or finder's
fees arising from allegations of an agreement with the indemnifying party. Any
agency disclosure form is attached as Exhibit "D".
28.20 Airport Noise Notice. Tenant acknowledges that the Premises are
--------------------
located near Reno-Cannon International Airport. As a consequence, Tenant
agrees noise normally associated with aviation is to be expected. Tenant, as a
material part of the consideration under this Lease, hereby waives all claims
against Landlord for property damages or personal injuries from any cause
arising at any time due to the noise associated with Reno-Cannon International
Airport. Tenant agrees to defend, indemnify and hold Landlord, its officers,
agents and employees, harmless from and on account of any claim, demands,
obligations or liabilities of Tenant's employees and agents of any kind or
nature, including, but without limitation, attorney's fees and costs of defense
for damage or injury to any person or property arising or in any way connected
with the noise occurring on the Premises associated with Reno-Cannon
International Airport.
28.21 Counterpart Execution. This Lease may be executed
---------------------
simultaneously in two
18
<PAGE>
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same original. Such counterpart
execution may occur via telex or facsimile machine, provided that executed
original counterparts of this Lease shall be delivered to the parties to this
Lease within FOURTEEN (14) days after the date of execution of this Lease.
29. EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE:
---------------------------------------------
29.1 Emissions. Tenant, its agents, employees, licensees and invitees
---------
shall not:
a) Permit any vehicle on the Premises to emit exhaust which is
in violation of any governmental law, rule, regulation or
requirement;
b) Discharge or emit any liquid, solid or gaseous matter, or
any combination thereof, into the atmosphere, the ground or
any body of water which matter, as reasonable determined by
Lessor or any governmental entity, does, or may, pollute or
contaminate same, or is, or may become, radioactive or does,
or may, adversely affect the: (a) health or safety or
persons, wherever located, whether on the Premises or
anywhere else; (b) condition, use or enjoyment of the
Premises or any other real or personal property, whether on
the Premises or anywhere else; or (c) Premises or any of the
improvements thereto or thereon including buildings,
foundations, pipes, utility lines, landscaping or parking
areas;
c) Produce, or permit to be produced, any intense glare, light
or heat except within an enclosed or screened area and then
only in such manner that the glare, light or hear shall not
be discernible from outside the Premises;
d) Create, or permit to be created, any sound pressure level
which will interfere with quiet enjoyment of any real
property outside the Premises, or which will create a
nuisance or violate any governmental law, rule, regulation
or requirement.
e) Create, or permit to be created, any ground vibration that
is discernible outside the Premises.
f) Transmit, receive or permit to be transmitted or received,
any electromagnetic, microwave or other radiation which is
harmful or hazardous to any person or property in, or about
the Premises, or anywhere else.
29.2 Storage and Use.
---------------
19
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a) Storage. Subject to the uses permitted and prohibited to
-------
Tenant under this Lease, Tenant shall store in appropriate
leak proof containers all solid, liquid or gaseous matter,
or any combination thereof, which matter, if discharged or
emitted into the atmosphere, the ground or any body of
water, does or may: (a) pollute or contaminate the same; or
(b) adversely affect the: (i) health or safety of persons,
whether on the Premises or anywhere else; (ii) condition,
use or enjoyment of the Premises or any real or personal
property, whether on the Premises or anywhere else; or (iii)
Premises or any of the improvements thereto or thereon.
b) Use. In addition, without Landlord's prior written consent,
---
Tenant shall not use, store or permit to remain on the
Premises any solid, liquid or gaseous matter which is, or
may become radioactive. If Landlord does give its consent,
Tenant shall store the materials in such a manner that no
radioactivity will be detectable outside a designated
storage area and Tenant shall use the materials in such a
manner that: (a) no real or personal property outside the
designated storage area shall become contaminated thereby;
and (b) there are and shall be no adverse effects on the:
(i) health or safety of persons, whether on the Premises or
anywhere else; (ii) condition, use or enjoyment of the
Premises or any real or personal property thereon or
therein; or (iii) Premises or any of the improvements
thereto or thereon.
29.3 Disposal of Waste.
-----------------
a) Refuse Disposal. Tenant shall not keep any trash, garbage,
---------------
waste or other refuse on the Premises except in sanitary
containers and shall regularly and frequently remove same
from the Premises. Tenant shall keep all incinerators,
containers or other equipment used for storage or disposal
of such materials in a clean and sanitary condition.
b) Sewage Disposal. Tenant shall properly dispose of all
---------------
sanitary sewage and shall not use the sewage disposal
system: (a) for the disposal of anything except sanitary
sewage; or (b) excess of the lesser amount: (i) reasonably
contemplated by the uses permitted under this Lease; or (ii)
permitted by any governmental entity. Tenant shall keep the
sewage disposal system free of all obstructions and in good
operating condition.
c) Disposal of Other Waste. Tenant shall properly dispose of
-----------------------
all other waster or other matter delivered to, stored upon,
used on, or removed
20
<PAGE>
from, the Premises by Tenant in such a manner that it does
not, and will not, adversely affect: (a) health or safety or
persons, wherever located, whether on the Premises or
elsewhere; (b) condition, use or enjoyment of the Premises
or any other real or personal property, wherever located,
whether on the Premises or anywhere else; or (c) Premises or
any of the improvements thereto or thereon including
buildings, foundations, pipes, utility lines, landscaping or
parking areas.
29.4 Information. Tenant shall provide Landlord with any and all
-----------
information regarding hazardous or toxic materials used by Tenant in the
Premises, including copies of all filings and reports to governmental entities
at the time they are originated, and any other information requested by
Landlord. In the event of any accident, spill or other incident involving
hazardous or toxic matter, Tenant shall immediately report the same to Landlord
and supply Landlord with all information and reports with respect to the same.
All information described herein shall be provided to Landlord regardless of any
claim by Tenant that it is confidential or privileged.
29.5 Compliance with Law. Notwithstanding any other provision in this
-------------------
Lease to the contrary, Tenant shall comply with all laws, statutes, ordinances,
regulations, rules and other governmental requirements in complying with its
obligations under this Lease, and in particular, relating to the storage, use
and disposal of hazardous or toxic matter by Tenant.
29.6 Indemnification. Tenant shall defend, indemnify and hold
---------------
Landlord harmless from any loss, claim, liability or expense, including
attorneys' fees and costs, arising out of or in connection with its failure to
observe or comply with the provisions of this Lease.
29.7 Hazardous Materials Defined. In this Lease, "hazardous
---------------------------
materials" includes substances defined as "hazardous substances," "hazardous
materials," or "toxic substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. #9601, et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. #1801, et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. #6901, et seq.; and those
substances defined as hazardous, toxic, hazardous wastes, toxic wastes, or as
hazardous or toxic substances by any law or statute now in effect in the State
of Nevada; and in the regulations adopted and publications promulgated pursuant
to those laws (all collectively "hazardous substance laws").
30. SIGNAGE: Tenant shall place no window covering (e.g., shades, blinds,
-------
curtains, drapes, screens, or tinting materials), stickers, signs, lettering,
banners or advertising or display material on or near exterior windows or doors
if such materials are visible from the exterior of the Premises, without
Landlord's prior written consent. Similarly, Tenant may not install any alarm
boxes, foil protection tape or other security equipment on the Premises without
Landlord's prior written consent. Any material violating this provision may be
destroyed by Landlord without compensation to Tenant.
21
<PAGE>
Except for signs that are located inside the building and are not
visible from outside the building, no signs will be placed at any place on the
Premises without the prior written consent of Landlord as to their size, design,
color, location, content, illumination, composition, materials and mobility.
All signs shall be maintained by Tenant in good condition during the term of
this Lease. Tenant shall remove all signs at the end of this Lease and repair
and restore any damage caused by their installation or removal; provided Tenant
first confers with Landlord regarding sign removal and Landlord, in Landlord's
sole discretion, designates any portion of the signage which Tenant shall not
remove. Landlord hereby approves of Tenant's installation of the sign described
in Exhibit "E" hereto, subject to approval of an appropriate sign permit by the
City of Reno.
31. MAINTENANCE AND REPAIR:
----------------------
31.1 Tenant Obligations. Except for structural repairs as stated in
------------------
Section 31.2 below, Tenant agrees at its own cost and expense to repair,
replace, and maintain in good and tenable condition, normal wear and tear
excepted, the Premises and every part thereof, and including without limitation
all plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities and equipment within the Premises. Repair and maintenance of all
glass, both exterior and interior, shall be the responsibility of Tenant, and
any glass broken shall be promptly replaced by Tenant with glass of same kind,
size, and quality. Janitorial or security services, if utilized, shall be at
the cost and expense of Tenant. Maintenance and irrigation of landscaping shall
be the responsibility of Tenant (excluding replanting of dead or dying trees,
shrubs and turf existing as of the Commencement Date) as well as cutting,
pruning, aeration and fertilizing. Cleaning and snow removal of outside areas
of the Premises shall also be Tenant's responsibility, as well as painting of
exterior trim and cleaning of exterior walls, walkways, parking and other areas.
31.2 Landlord Obligations. Landlord shall be solely responsible for
--------------------
any structural maintenance and repair and all roof repairs of the Premises,
except that Landlord shall not be required to make repairs necessitated by
reason of the negligence of Tenant or by reason of failure of Tenant to perform
or observe any conditions or agreements contained in this Lease, or caused by
alterations, additions, or improvements made by Tenant. Parking lot repair and
maintenance (excluding cleaning and snow removal) as well as repair and
maintenance of all underground utilities and irrigation lines shall be the
responsibility of Landlord. Landlord, however, shall not be liable to Tenant
for failure to make repairs unless Tenant has previously notified Landlord, in
writing, of the need for such repairs and Landlord has failed to commence and
complete such repairs within a reasonable period of time.
31.3 Tenant Performance of Landlord's Obligations. If Landlord
--------------------------------------------
refuses or neglects to make needed repairs or to maintain properly the Premises,
Tenant shall have the right upon giving Landlord reasonable prior written notice
of its election to do so to make such repairs or perform such maintenance on
behalf of and for the account of Landlord. In this event such work shall be
paid for by Tenant and charged back to Landlord as a deduction from rent after
Landlord's receipt of a bill therefor.
22
<PAGE>
31.4 Landlord Performance of Tenant's Obligations. If Tenant refuses
--------------------------------------------
or neglects to make needed repairs or maintain properly the Premises as required
herein in a manner reasonably satisfactory to Landlord, Landlord shall have the
right upon giving Tenant reasonable prior written notice of its election to do
so to enter upon the Premises in order to make such repairs or perform such
maintenance on behalf of and for the account of Tenant. In this event the work
shall be paid for by Tenant as additional rent promptly upon receipt of a bill
therefor.
32. DESTRUCTION. If during the term, the Premises is more than 33%
-----------
destroyed from any cause, Landlord may, in its sole discretion, terminate this
Lease by delivery of notice to Tenant within 30 days of such event without
compensation to Tenant. If in Landlord's estimation, the Premises cannot be
restored within 90 days following such destruction, the Landlord shall notify
Tenant and Tenant may terminate this Lease by delivery of notice to Landlord
within 30 days of receipt of Landlord's notice. If Landlord or Tenant does not
terminate this Lease, then Landlord shall commence to restore the Premises in
compliance with then existing laws and shall complete such restoration with due
diligence. In such event, this Lease shall remain in full force and effect, but
there shall be an abatement of rent between the date of destruction and the date
of completion of restoration, based on the extent to which destruction
interferes with Tenant's use of the Premises.
33. CONDEMNATION.
------------
33.1 Definitions. The following definitions shall apply: (1)
-----------
"Condemnation" means (a) the exercise of any governmental power of eminent
domain, whether by legal proceeding or otherwise by condemnor and (b) the
voluntary sale or transfer by Landlord to any condemnor either under threat of
condemnation or while legal proceedings for condemnation are proceeding; (2)
"Date of Taking" means the date the condemnor has right to possession of the
property being condemned; (3) "Award" means all compensation, sums or anything
of value awarded, paid or received on a total or partial condemnation; and (4)
"Condemnor" means any public or quasi-public authority, or private corporate or
individual, having power of condemnation.
33.2 Obligations to be Governed by Lease. If during the term of the
-----------------------------------
Lease there is any taking of all or any part of the Premises or the Project, the
rights and obligations of the parties shall be determined pursuant to this
Lease.
33.3 Total or Partial Taking. If the Premises are totally taken by
-----------------------
condemnation, this Lease shall terminate on the date of taking. If any portion
of the Premises is taken by condemnation, this Lease shall remain in effect,
except that Tenant can elect to terminate this Lease if the remaining portion of
the Premises is rendered unsuitable for Tenant's continued use of Premises. If
Tenant elects to terminate this Lease, Tenant must exercise its right to
terminate by giving notice to Landlord within 30 days after the nature and
extent of the taking have been finally determined. If Tenant elects to
terminate this Lease, Tenant shall also notify Landlord of the date of
termination, which date shall not be earlier than 30 days nor later than 90 days
after Tenant has notified Landlord of its election to terminate; except that
this Lease shall terminate on the date of taking if the date of taking falls on
a date before the date of termination as designated by Tenant.
23
<PAGE>
If any portion of the Premises is taken by condemnation and this Lease remains
in full force and effect, on the date of taking the rent shall be reduced by an
amount in the same ratio as the total number of square feet in the Premises
taken bears to the total number of square feet in the Premises immediately
before the date of taking.
34. ENTRY ON PREMISES. Landlord and its authorized representatives shall
-----------------
have the right to enter the Premises at all reasonable times for any of the
following purposes: (a) to determine whether the Premises are in good condition
and whether Tenant is complying with its obligations under this Lease; (b) to do
any necessary maintenance and to make any restoration to the Premises or the
Project that Landlord has the right or obligation to perform; (c) to post "for
sale" signs or to post "for Rent" or "for Lease" signs during the last nine (9)
months of the Term, or during any period while Tenant is in default; (d) to show
the Premises to prospective brokers, agents, buyers, Tenants or persons
interested in leasing or purchasing the Premises, at any time during the Term;
or (e) to repair, maintain or improve the Project and to erect scaffolding and
protective barricades around and about the Premises (but not so as to prevent
entry to the Premises) and to do any other act or thing necessary for the safety
or preservation of the Premises or the Project. Landlord shall not be liable in
any manner for any inconvenience, disturbance, loss of business, nuisance or
other damage arising out of Landlord's entry onto the Premises as provided in
this Section. Tenant shall not be entitled to an abatement or reduction of rent
of Landlord exercises any rights reserved in this Section. Landlord shall
conduct his activities on the Premises as provided herein in a manner that will
cause the least inconvenience, annoyance or disturbance to Tenant. For each of
these purposes, Landlord shall at all times have and retain a key with which to
unlock all the doors in, upon and about the Premises, excluding Tenant's vaults
and safes. Tenant shall not alter any lock or install a new or additional lock
or bolt on any door of the Premises without prior written consent of Landlord.
If Landlord gives its consent, Tenant shall furnish Landlord with a key for any
such lock.
35. AMERICANS WITH DISABILITIES. Upon commencement of the Lease, Landlord
---------------------------
warrants and represents that the Premises shall be in compliance with ADA
Requirements existing at that time.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date first written above.
"LANDLORD" "TENANT"
ELITE INSTRUMENTS, INC., BATTERY EXPRESS, INC.,
a Nevada corporation a California corporation
dba 1-800 BATTERIES
By: /s/ Sam Pu By: /s/ Ken Hawk
----------------------------- ---------------------------------------
Sam Pu, President Ken Hawk, Chief Executive Officer
24
<PAGE>
STATE OF NEVADA )
)ss.
COUNTY OF WASHOE )
This instrument was acknowledged before me on June 13, 1997 by SAM PU as
President of ELITE INSTRUMENTS, INC., a Nevada corporation.
[Notarial Seal of Debbie J. Wiltgen
State of Nevada, Appointment Recorded Notary: /s/ Debbie J. Wiltgen
in Washoe County. No. 93-0795-2 ----------------------
Expires Oct. 26, 2000]
STATE OF NEVADA )
)ss.
COUNTY OF WASHOE )
This instrument was acknowledged before me on 6-5-97 by KEN HAWK as Chief
Executive Officer of BATTERY EXPRESS, INC., a California corporation, dba 1-800
BATTERIES.
[Notarial Seal of Vicky Lynn Beattie
State of Nevada, Appointment Recorded Notary: /s/ Vicky Lynn Beattie
in Washoe County. ----------------------
Expires Sept. 24, 1998]
25
<PAGE>
FIRST ADDENDUM TO LEASE
-----------------------
THIS FIRST ADDENDUM TO LEASE (this "Addendum") is made by and between ELITE
INSTRUMENTS, INC., a Nevada corporation ("Landlord"), and BATTERY EXPRESS, INC.,
a California corporation, dba 1-800 BATTERIES ("Tenant"), to be a part of that
certain Lease of even date herewith between Landlord and Tenant (the "Lease")
concerning approximately 18,120 square feet of space, located at 2301 Robb
Drive, Reno, Nevada (the "Premises"). Landlord and Tenant agree that,
notwithstanding anything to the contrary in the Lease, the Lease is hereby
modified and supplemented as set forth below.
1. Rent Adjustment. Commencing September 16, 2002 and continuing on January 1
---------------
of each year thereafter (each such day, a "Rent Adjustment Date"), the Fixed
Rent shall be adjusted to equal the product of the Fixed Rent in effect for the
calendar month immediately preceding the Rent Adjustment Date multiplied by a
fraction, the numerator of which is the CPI published for the month immediately
preceding the Rent Adjustment Date in question and the denominator of which is
the CPI published for August 2002 (with respect to the first rent adjustment) or
the immediately preceding Rent Adjustment Date (with respect to each other rent
adjustment); provided, however, that any such increase in Fixed Rent on a Rent
Adjustment Date shall not be less than two and one-half percent (2.5%) nor
greater than five percent (5%) of the Fixed Rent due for the immediately
preceding period. As used herein, "CPI" shall mean the Consumer Price Index,
for All Urban Consumers, Subgroup "All Items", for San Francisco (Base Year
1982-84 = 100), which is currently being published by the United States
Department of Labor, Bureau of Labor Statistics ("USDL"). If, however, the CPI
is changed so that the base year is altered from that used as of the
Commencement Date, then the CPI shall be converted in accordance with the
conversion factor
1
<PAGE>
published by the USDL, to obtain the same results that would have been obtained
had the base year not be changed. If no conversion factor is available or if the
CPI is otherwise revised or discontinued for any reason, there shall be
substituted in lieu thereof the most nearly comparable official price index of
the United States Government to obtain substantially the same result as would
have been obtained had the original CPI not been revised or discontinued.
2. Waiver of Coverage. Notwithstanding anything to the contrary herein, the
------------------
parties hereto release each other and their respective agents, employees,
successors, assignees and subtenants from all liability for injury to any person
or damage to any property that is caused by or results from a risk which is
actually insured against, which is required to be insured against under the
Lease, without regard to the negligence or willful misconduct of the entity so
released. All of Landlord's and Tenant's repair and indemnity obligations under
the Lease shall be subject to the waiver in this paragraph.
3. Alterations. Tenant may construct nonstructural alterations, additions and
-----------
improvements ("Alternations") in the Premises without Landlord's prior approval,
if the cost of any such work does not exceed Five Thousand Dollars ($5,000.00).
Upon request, Landlord shall advise Tenant in writing whether it reserves the
right to require Tenant to remove any Alterations upon termination of the Lease.
All Alternations, trade fixtures and personal property installed in the Premises
at Tenant's expense ("Tenant's Property") shall at all times remain Tenant's
property. Except for Alterations which cannot be removed without structural
injury to the Premises, at any time Tenant may remove Tenant's Property,
provided Tenant repairs all damage caused by such removal. Landlord shall have
no lien or other interest whatsoever in any item of Tenant's Property.
2
<PAGE>
4. Surrender of Premises. Tenant's obligations with respect to the surrender
---------------------
of the Premises shall be fulfilled if Tenant surrenders possession of the
Premises in the condition existing at the Commencement Date, ordinary wear and
tear, casualties (which are addressed in Sections 32 and 33 of the Lease)
Hazardous Materials (other than those released or emitted by Tenant), and
Alterations which Landlord states may be surrendered at the termination of the
Lease, excepted.
5. Entry. Landlord shall not enter the Premises, except in the case of
-----
emergency, except upon one (1) business day's notice. Any entry by Landlord in
the Premises shall comply with all of Tenant's reasonable security measures and
shall not impair Tenant's use of the Premises more than reasonably necessary.
6. Assignment and Subletting. Tenant may, without Landlord's prior written
-------------------------
consent and without being subject to the provisions of Section 21.1 of the
Lease, sublet the Premises or assign the Lease to (a) a subsidiary, affiliate,
division or corporation controlling, controlled by or under common control with
Tenant; (b) a successor corporation related to Tenant by merger, consolidation,
nonbankruptcy reorganization, or governmental action; or (c) a purchaser of
substantially all corporate assets of Tenant. A sale or transfer of Tenant's
capital stock shall not be deemed an assignment, subletting or any other
transfer of the Lease of the Premises. Tenant shall not be required to pay to
Landlord any "excess" rent under an assignment or sublease until after deducting
therefrom the costs to Tenant to effectuate the assignment or sublease.
7. Subordination. Prior to the Commencement Date, Landlord shall obtain from
-------------
any lenders or ground lessors of the Premises a written agreement in form
subject to Tenant's approval, providing for recognition of Tenant's interests
under the Lease in the event of a foreclosure of the lender's security interest
or termination of the ground lease. Further, as a condition to Tenant's
3
<PAGE>
obligation to subordinate its leasehold interest to a ground lease or instrument
of security, Landlord shall obtain from any such ground lessors or lenders a
written recognition agreement in a form subject to Tenant's approval, providing
that Tenant's rights of occupancy shall not be disturbed and Tenant shall
receive all rights provided for under the Lease in the event of a termination of
the ground lease or a foreclosure of the loan.
8. Emissions: Wastes. To the best knowledge of Landlord, (a) no Hazardous
-----------------
Material is present on the Premises or the soil, surface water or groundwater
thereof; (b) no underground storage tanks are present on the Premises; and (c)
no action, proceeding or claim is pending or threatened regarding the Premises
concerning any Hazardous Material.
9. Approvals. Whenever the Lease requires an approval, consent, designation,
---------
determination or judgment by either Landlord or Tenant, such approval, consent,
designation, determination or judgment and any conditions imposed thereby shall
be reasonable and shall not be unreasonably withheld or delayed and, in
exercising any right or remedy hereunder, each party shall act reasonably and in
good faith.
10. Indemnification. Landlord shall not be released or indemnified from any
---------------
losses, damages, liabilities, judgments, claims, costs or expenses arising from
the negligence or willful misconduct of Landlord or its agents, contractors,
licensees or invitees, Landlord's violation of any law, order or regulation, or
a breach of Landlord's obligations or representations under the Lease.
11. Maintenance Of Premises. Tenant shall not be required to cause the
-----------------------
Premises to comply with any laws, rules or regulations including the Americans
With Disabilities Act, requiring capital improvements in the Premises unless the
compliance with any of the foregoing is necessitated either solely due to
Tenant's particular use of the Premises, or due to a proposed renovation,
alteration or
4
<PAGE>
repair of Tenant. Landlord shall perform and construct, and Tenant shall have no
responsibility to perform or construct, any repair, maintenance or improvements:
(a) occasioned by fire or other casualty or by the exercise of the power of
eminent domain (which is addressed in Sections 32 and 33 of the Lease); (b)
described in Section 31.2 of the Lease; and (c) which could be treated as a
"capital expenditure" under generally accepted accounting principles.
Notwithstanding the foregoing, Tenant shall pay for the cost of the improvements
described in the first sentence of this paragraph and Subsection (c) of the
second sentence of this paragraph as follows: (i) the cost of such improvements
shall be amortized over the useful life of the improvements in accordance with
generally accepted accounting principles and Landlord shall inform Tenant of the
monthly amortization payment required to so amortize such costs; and (ii) Tenant
shall pay such amortization payment for each month after such improvements is
completed at the same time the Fixed Rent is due until the first to occur of the
expiration of the Term and the end of the term over which such costs were
amortized.
10. Effect Of Addendum. All terms with initial capital letters used herein as
------------------
defined terms shall have the meanings ascribed to them in the Lease unless
specifically defined herein.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date first written above.
"LANDLORD" "TENANT"
ELITE INSTRUMENTS, INC., BATTERY EXPRESS, INC.,
a Nevada corporation a California corporation,
dba 1-800 BATTERIES
By: /s/ Sam Pu By:
----------------------------- -----------------------------------
Sam Pu, President Ken Hawk, Chief Executive Officer
5
<PAGE>
When Recorded, Return To:
- ------------------------
Elite Instruments, Inc.
c/o Robert M. Sader, Esq.
462 Court Street
Reno, Nevada 89501
MEMORANDUM OF LEASE
-------------------
NOTICE IS HEREBY GIVEN that the undersigned parties have entered into a
Lease Agreement of even date herewith whereby the real property located in
Washoe County, Nevada, more particularly described on Exhibit "A" attached
hereto, has been leased for a term commencing June 15, 1997 and ending September
15, 2002, with the right to extend the lease term from September 16, 2002 to
September 15, 2007.
DATED this 5th day of June, 1997.
LANDLORD/LESSOR: TENANT/LESSEE:
- --------------- -------------
ELITE INSTRUMENTS, INC., BATTERY EXPRESS, INC.,
a Nevada corporation a California corporation,
dba 1-800 BATTERIES
By: /s/ Sam Pu By: /s/ Ken Hawk
-------------------------- ------------------------------
Sam Pu, Ken Hawk,
President Chief Executive Officer
EXHIBIT "B"
6
<PAGE>
STATE OF NEVADA )
)ss.
COUNTY OF WASHOE )
This instrument was acknowledged before me on June 13, 1997 by SAM PU as
President of ELITE INSTRUMENTS, INC., a Nevada corporation.
[Notarial Seal of Debbie J. Wiltgen
State of Nevada, Appointment Recorded Notary: /s/ Debbie J. Wiltgen
in Washoe County. ----------------------
Expires Oct. 26, 2000]
STATE OF NEVADA )
)ss.
COUNTY OF WASHOE )
This instrument was acknowledged before me on 6-5-97, 1997 by KEN HAWK as
Chief Executive Officer of BATTERY EXPRESS, INC., a California corporation, dba
1-800 BATTERIES.
[Notarial Seal of Vicky Lynn Beattie
State of Nevada, Appointment Recorded Notary: /s/ Vicky Lynn Beattie
in Washoe County. ----------------------
Expires Sept. 24, 1998]
EXHIBIT "B"
7
<PAGE>
SCHEDULE A
----------
DESCRIPTION OF REAL PROPERTY
----------------------------
ASSESSOR'S PARCEL NO. 204-010-19
- --------------------------------
PARCEL 1 OF PARCEL MAP NO. 1848 FOR R.J.B. DEVELOPMENT CO., ACCORDING TO THE MAP
THEREOF, FILED IN THE OFFICE OF THE COUNTY RECORDER OF WASHOE COUNTY, STATE OF
NEVADA, ON JUNE 14, 1985, AS FILE NO. 1003823, OFFICIAL RECORDS.
EXHIBIT "A"
8
<PAGE>
SCHEDULE A
----------
DESCRIPTION OF REAL PROPERTY
----------------------------
ASSESSOR'S PARCEL NO. 204-010-19
- --------------------------------
PARCEL 1 OF PARCEL MAP NO. 1848 FOR R.J.B. DEVELOPMENT CO., ACCORDING TO THE MAP
THEREOF, FILED IN THE OFFICE OF THE COUNTY RECORDER OF WASHOE COUNTY, STATE OF
NEVADA, ON JUNE 14, 1985, AS FILE NO. 1003823, OFFICIAL RECORDS.
EXHIBIT "A"
OF EXHIBIT "B"
9
<PAGE>
LEASE AMENDMENT
This Agreement is made and entered into this 15th day of January, 1999, by
and between Dermody Family Limited Partnership II, a Washington limited
partnership, and Guila Gail Turville, (hereinafter referred to collectively as
"Landlord"), and Battery Express, Inc., a California corporation dba 1-800-
BATTERIES, (hereinafter referred to as "Tenant").
W I T N E S S E T H:
--------------------
WHEREAS, Landlord (by Assignment) and Tenant, entered into a Lease dated
June 5, 1997, for the premises located at 2301 Robb Drive, Reno, Nevada; and
WHEREAS, Landlord and Tenant desire to amend the above-mentioned Lease;
NOW, THEREFORE, said Lease is hereby amended so that the monthly rent
payments, which are currently due and payable in advance on the 15th of each
month, shall become due and payable in advance on the 1st day of each month
beginning February 1, 1999. The rent for the period from January 15, 1999,
through February 28, 1999, which represents one and one half months of rent due
in the amount of SEVENTEEN THOUSAND ONE HUNDRED TWENTY THREE AND 40/100 DOLLARS
($17,123.40), shall be due and payable on February 1, 1999. Thereafter,
beginning March 1, 1999, the monthly rent due shall revert back to its original
rate of ELEVEN THOUSAND FOUR HUNDRED FIFTEEN AND 60/100 DOLLARS ($11,415.60).
Any partial month at the end of the Lease term will be pro-rated.
All other terms and conditions of the above-mentioned Lease shall remain
unchanged and in full force and effect throughout the term of the Lease.
Dermody Family Limited Partnership II, Battery Express, Inc.,
a Washington limited partnership a California corporation
by: Dermody Family LLC II, a Washington LLC dba 1-800-BATTERIES
its: General Partner
by: /s/ John A. Dermody by: /s/ Lou Borrego
- ---------------------------------------- ------------------------------
John A. Dermody, its Member Signature
/s/ Guila Gail Turville its: CFO
- ---------------------------------------- ----------------------------
Guila Gail Turville Title
<PAGE>
EXHIBIT 10.9
AGREEMENT NUMBER: 306552
-----------------------------------------------
NEC COMPUTER SYSTEMS DIVISION
AUTHORIZED RESELLER MASTER AGREEMENT
This Agreement is made as of June 23, 1999 by and between NEC Computer
---------- --
Systems Division, a division of Packard Bell NEC, Inc. having its principal
place of business at 1 Packard Bell Way, Sacramento, California 95828
(hereinafter referred to as "NECCSD"), and
Battery Express, Inc. (DBA iGo)
- -----------------------------------------------------
having its principal place of business at
2301 Robb Drive
- -----------------------------------------------------
Reno, NV 89523
- -----------------------------------------------------
(hereinafter referred to as "RESELLER"
The following are the terms and conditions under which NECCSD will sell and
license its computer equipment, including related peripheral equipment and
Licensed Programs (hereinafter referred to as "PRODUCTS") to RESELLER or will
pay commissions to RESELLER for NECCSD end-user sales, as may be further defined
in the applicable Reseller Class Addendum, and facilitated by RESELLER. The
PRODUCTS to be supplied under this Agreement shall be those PRODUCTS listed in
the then current appropriate NECCSD Price Matrix or as defined in the applicable
Reseller Class Addendum.
1. APPOINTMENT AND ACCEPTANCE
1.1 NECCSD appoints RESELLER as an authorized, non-exclusive representative
of NECCSD PRODUCTS. RESELLER's appointment is made for the purpose of RESELLER's
resale of the PRODUCTS to end-user customers, as may be further defined in the
Reseller Class Addendum, and to other NECCSD resellers as set forth in Section
1.2, within the RESELLER Territory as defined in Section 8. NECCSD agrees to pay
commissions to RESELLER, in accordance with Section 6 of this Agreement and
further defined by the applicable Reseller Class Addendum, for direct end-user
sales facilitated by RESELLER.
1.2 In addition to RESELLER's right to sell or otherwise transfer PRODUCTS to
end-user customers, as set forth in Section 1.1, RESELLER is authorized to sell
or otherwise transfer PRODUCTS to other Resellers appointed by RESELLER directly
or indirectly. This authorization from NECCSD is contingent upon RESELLER
obtaining from its Resellers monthly Customer Sales Reports, as defined in
Section 3.3 of this Agreement, which will be provided monthly to NECCSD with the
RESELLER's monthly Customer Sales Report.
1.3 Other specified products may be added as PRODUCTS by NECCSD during the
Term of this Agreement or any renewal thereof. Such PRODUCTS may be subject to
additional terms and requirements as determined by NECCSD. NECCSD reserves the
right at any time to change, modify or discontinue any model or type of
PRODUCTS.
1.4 NECCSD shall have the right, from time to time, at its sole discretion,
to increase or decrease the number of NECCSD representatives in the vicinity of
RESELLER's authorized location(s) or elsewhere without notice to RESELLER.
1.5 RESELLER accepts its appointment hereunder.
2. RESELLER RESTRICTIONS
2.1 The parties recognize and acknowledge the following:
2.1.1 It is in their mutual best interest that the PRODUCTS be sold through an
effective Reseller network whereby all locations selling the PRODUCTS meet the
standards established by NECCSD for it Authorized Resellers as outlined in
Section 3 and 4 herein, as well as other standard published by NECCSD from time
to time; and
2.1.2 The PRODUCTS are offered only through a limited number of representatives
appointed by NECCSD to sell the PRODUCTS. RESELLER will be encouraged to offer
the maximum amount of services with respect to the PRODUCTS, both prior and
subsequent to sale.
2.2 RESELLER warrants and represents that each of its selling locations shall
meet and maintain the sales and support requirements as stated in Section 3.
3. SALES PROMOTION AND SUPPORT
3.1 RESELLER agrees that each of the requirements expressed in this Section
shall be fulfilled by RESELLER.
3.1.1 RESELLER shall maintain a minimum staff of two (2) competent sales
representatives who are knowledgeable concerning computer products in general,
and who are thoroughly familiar with the specifications, features and technical
advantages of NECCSD PRODUCTS. RESELLER must also maintain a minimum staff of
two (2) trained technical support representative (CNE/MSCE). RESELLER shall
conduct any training of its sales and technical personnel that may be necessary
to impact such knowledge and shall cooperate fully in any PRODUCT education
programs which NECCSD may establish.
3.1.2 RESELLER shall conduct it operations in a manner that will not adversely
affect the high image, credibility or reputation of NECCSD or NECCSD PRODUCTS.
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3.1.3 RESELLER shall use its best efforts to stimulate and increase interest in
the PRODUCTS, shall consistently encourage the purchase of the PRODUCTS by
RESELLER's customers, and shall represent the PRODUCTS fairly at all times in
comparison with competitive products from other suppliers. RESELLER at no time
shall engage in "bait and switch" or any other unfair trade practices with
regard to NECCSD PRODUCTS, and shall make no false or misleading representations
with regard to NECCSD or NECCSD PRODUCTS. RESELLER shall make no representations
to customers or to the trade with respect to NECCSD PRODUCT specifications,
features, or performance except such as may be approved in writing or published
by NECCSD.
3.2 RESELLER, at the time of purchase order submission, shall indicated to
NECCSD within the body of the purchase order it's customer's zip code or other
data as required by NECCSD.
3.3 RESELLER shall submit to NECCSD monthly Customer Sales Reports which
shall include the customer name and address, customer and RESELLER purchase
order numbers, PRODUCT configuration, and PRODUCT quantity, and as may be
further defined in the applicable Reseller Class Addendum.
3.3.1 RESELLER shall submit monthly reports to the address as indicated in the
Reseller Resource Guide within five (5) business days after the end of the
reporting month.
3.4 RESELLER will comply with NECCSD programs for in-warranty repairs and
post-warranty support for PRODUCTS.
3.5 RESELLER will permit NECCSD to perform an initial inspection of the sales
and service facilities of RESELLER prior to authorization.
4. COMMITMENT
4.1 RESELLER hereby commits and agrees to accept delivery and/or facilitate
the sale of an Annual Net Dollar Volume Commitment as stated in Addendum A.
4.2 For the Initial Term only, Agreements executed after January 1 of the
current year shall be prorated, based on the proportion of the Agreement year
remaining until the first occurrence of the 31st of December. (For example: An
Agreement approved on June 30 has an Initial Term of 6 months remaining until
the first occurrence of the 31st of December. (For example: An Agreement
approved on June 30 has an Initial Term of 6 months remaining = 180 days, or 50%
of the Annual Net Dollar Volume Commitment).
4.3 On a Semi-Annual basis, July and January, NECCSD shall review RESELLER's
achievement of the Annual Net Dollar Volume Commitment. If, at the end of any
such review RESELLER fails to achieve fifty percent (50%) of the revenue
commitment, then RESELLER shall identify the problem areas, develop appropriate
action plans and implement said action plans to resolve outstanding problem
issues. However, if, after the completion of any term, RESELLER fails to
achieve the Annual Net Dollar Volume Commitment, NECCSD reserves the rights to
immediately terminate this Agreement.
4.4 NECCSD may, upon thirty (30) days prior written notice, modify the Annual
Net Dollar Volume Commitments.
5. TERM
5.1 This Agreement shall become effective on the date a duly authorized
officer or designated party of NECCSD executes this Agreement and unless
terminated as provided herein, it shall continue in full force and effect until
the first occurrence of the 31st of December ("Initial Term"). Thereafter, the
term shall be renewed as provided in Section 5.2, below.
5.2 This Agreement will be automatically renewed for additional twelve (12)
month successive term(s) commencing January 1 of the current year through
December 31 of the same year, provided RESELLER has achieved the required
commitment(s) during the initial term or current renewal term, unless this
Agreement is terminated by either party by written notice to the other not less
than thirty (30) days prior to the annual renewal date, unless this Agreement is
terminated as otherwise provided herein.
6. COMMISSIONS
6.1 NECCSD will pay a commission for the sales of NECCSD PRODUCT facilitated
by RESELLER but ordered directly by the end-user customer, as may be further
defined in the applicable Reseller Class Addendum. Subject to the provisions,
terms and conditions of this Agreement and the applicable Reseller Class
Addendum, and as RESELLER's sole and exclusive compensation for all of its
efforts, services and activities for facilitated sales to said defined class of
end-user, NECCSD shall pay RESELLER a commission in accordance with this Section
6, and the applicable Reseller Class Addendum. NECCSD agrees to pay RESELLER, as
its sole compensation for those services, a commission based on the Net Invoice
Price. The customer must include the RESELLER's name and address and Agreement
Number within the body of the purchase order. This is a requirement for RESELLER
to qualify for a commission. In addition, RESELLER agrees, upon request, to
provide any and all documents to substantiate claims for commission payments.
NECCSD reserves the right to be final arbiter in any dispute regarding
commissions due RESELLER. RESELLER agrees to be bound by any decision made by
NECCSD regarding commissions.
6.2 "Net Invoice Price" shall be the total price for which an order is
invoiced to the end-user customer but exclude installation fees, maintenance,
shipping and mailing costs, taxes, tariffs, insurance, and any allowance and/or
discounts granted to the reseller customer by NECCSD.
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6.3 RESELLER understands that NECCSD shall not pay commissions against any
order where the Customer has failed to reference the RESELLER.
6.4 Commissions due and payable to RESELLER will be paid no later than the
30th day of each month after payment is received by NECCSD for shipments made in
the previous month within the "Territory" as defined in Section 8. RESELLER
shall not be entitled to and shall not receive any commission(s) or
any payment(s) other than amounts invoiced by NECCSD for the PRODUCTS, as set
forth herein, and accepted by the defined end-user.
6.5 NECCSD shall charge back against RESELLER's commission account the amount
of any commission already credited or paid to RESELLER in condition with (i)
PRODUCTS that are returned to NECCSD; (ii) orders that are canceled by the end-
user; and (iii) transactions that require or result in refunds or credits to
customers. Any net amount due from NECCSD to RESELLER after any such charge
shall be deducted from RESELLER's then due and payable commission payment. Any
amount due from RESELLER to NECCSD upon termination of this Agreement, in excess
of commissions then due or to become due shall be paid by RESELLER to NECCSD
within thirty (30) days of the termination date.
6.6 If RESELLER requests expedited shipment to a customer, RESELLER shall be
responsible for paying the difference between the cost of ordinary shipment and
the cost of expedited shipment. Such freight charges shall be deducted from the
RESELLER's commission payment.
6.7 RESELLER agrees not to assign any commission due or to become due under
this Agreement, but all commissions properly due RESELLER shall in any event
inure to the benefit of RESELLER's legal successors.
6.8 Under no circumstances will NECCSD be responsible for paying any
commissions to RESELLER for: (i) sales made outside the designated Territory,
(ii) sales made to any customer other than the customer class as defined in the
applicable Reseller Class Addendum prices, terms and conditions.
6.9 With payment of commissions to RESELLER, NECCSD will send RESELLER a
commission statement showing:
(i) Commissions due to RESELLER (listing the end-user invoices and purchase
orders on which the commissions are being paid); and
(ii) If applicable, deductions for PRODUCT returns, will be made from the
current statement's earned commissions due to RESELLER.
6.10 NECCSD may upon 30 day written notice modify the commission structure.
7. DISCOUNT
7.1 Prices paid by RESELLER for PRODUCT purchased for resale shall be the
appropriate then-current NECCSD published end-user price less the appropriate
then-current Reseller Discount (hereinafter referred to as "STANDARD DISCOUNT")
as defined in the Reseller Resource Guide, or may be further defined in the
applicable Reseller Class Addendum.
7.2 NECCSD may upon 30 day written notice modify the discount structure.
8. TERRITORY
8.1 Subject to Sections 1 and 2 of this Agreement, RESELLER will have the
non-exclusive right within the United States of America, or as further defined
in the applicable Reseller Class Addendum, (the "Territory") to market, sell,
and promote the PRODUCTS.
8.2 NECCSD expressly reserves the right to market, solicit sales and sell,
lease, rent or otherwise dispose of the PRODUCTS to others in the Territory,
including but not limited to, NECCSD national accounts, commercial customers,
value added resellers, other resellers, or representatives. Such right may be
exercised directly through other representatives or thorough any other channel
or form of distribution at any time. RESELLER will not be entitled to any
commission, discount, or any other compensation with respect to or on account of
any such sale, lease rent or other disposition. Nothing herein shall be
construed so as to require NECCSD to issue letters of supply or similar
authorizations to RESELLER or third parties on RESELLER's behalf; the issuance
of any such document shall lie within NECCSD's sole discretion.
9. PURCHASE ORDERS
9.1 Each of RESELLER's orders is subject to NECCSD's acceptance or rejection
at the NECCSD address indicated in the Reseller Resource Guide. In addition to
any specific rights of rejection set forth in this Agreement, NECCSD shall have
the right, for any reason whatsoever, to reject any order, in whole or in part.
9.2 To receive PRODUCTS, RESELLER must deliver to NECCSD pursuant to Section
9.1 and the Reseller Ordering instructions in the Reseller Resource Guide a hard
copy purchase order or follow the procedure set forth in Section 9.2.2.
9.2.1 All RESELLER purchase orders must reference the assigned RESELLER
Agreement Number. NECCSD reserves the right to reject any order which is not
NECCSD credit-approved or does not conform with the provisions of this
Agreement. All orders accepted for delivery will be governed exclusively by the
terms and conditions of this Agreement. Unless NECCSD expressly agrees in
writing, no additional or different terms and conditions appearing on the face
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different terms and conditions appearing on the face or reverse side of any
order issued by RESELLER shall become part of such order. Acknowledgment of
RESELLER purchase order by NECCSD shall not constitute acceptance of any
additional or different terms and conditions.
9.2.2 In the event that RESELLER elects the following procedure, then in lieu
of submitting a hard copy purchase order, RESELLER may order PRODUCTS by
submitting a purchase order via facsimile machine or such other electronic means
acceptable to NECCSD. By executing this Agreement, RESELLER authorizes NECCSD
to accept orders communicated to NECCSD by facsimile machine, electronic data
interchange or such other electronic means acceptable to NECCSD. All such orders
as described above shall be binding upon RESELLER and are subject to acceptance
by NECCSD.
9.2.3 The authorization to accept orders as described in Section 9.2.2 shall
remain in effect until NECCSD receives written notification by certified mail
terminating said procedure. Unless NECCSD agrees otherwise in writing, no
termination of this procedure shall affect or cancel any order which has been
accepted or shipped by NECCSD.
10. SHIPMENTS, PACKING CANCELLATIONS, AND CHANGES
10.1 For standard PRODUCT, unless otherwise stated herein, RESELLER may cancel
a shipment or request changes in scheduled shipment date at no charge up to five
(5) business days prior to shipment. In the event RESELLER cancels or requests
changes within five (5) business days prior to shipment, a charge of five
percent (5%) of the shipment's price will be levied. No cancellation or change
may be made after shipment.
10.2 Shipments are subject to availability. NECCSD will use reasonable efforts
to meet any scheduled shipment date, but reserves the right to schedule and/or
reschedule any order, at its discretion. NECCSD will not be liable for delay in
meeting a scheduled shipment date for any reason. If PRODUCTS are in short
supply, NECCSD will allocate them equitably, at NECCSD's discretion, amount
Resellers and all others sales channels. NECCSD shall have the right to make
partial shipments with respect to RESELLER's orders, which shipments shall be
invoiced separately and paid for when due, without regard to subsequent
shipments. Delay in shipment or delivery of any particular installment shall not
relieve RESELLER of its obligation to accept the remaining installments. NECCSD
SHALL NOT BE LIABLE TO RESELLER FOR ANY DAMAGES WHETHER INCIDENTAL,
CONSEQUENTIAL OR OTHERWISE FOR FAILURE TO FILL ORDERS. DELAYS IN SHIPMENT OR
DELIVERY OR ANY ERROR IN THE FILLING OF ORDERS REGARDLESS OF THE CAUSE THEREFOR.
10.3 NECCSD shall prepay the freight, provided that the PRODUCT is shipped via
standard ground transportation, common carrier of NECCSD's choice. All
insurance, rigging, and drayage charges shall be paid by RESELLER. All
additional costs due to events occurring after the time the goods have been
delivered to the first common carrier are transferred from NECCSD to RESELLER
when the PRODUCTS have been delivered into the custody of the carrier.
10.4 Upon delivery to first common carrier, Title to and Risk of Loss for all
PRODUCTS shall pass to RESELLER (except that Title to all Licensed Programs
remains in NECCSD or its licenser). RESELLER shall assume responsibility for
promptly advising the carrier and insurer of the loss. NECCSD will assist to
the extent reasonably possible in establishing any such claim.
10.5 It is understood and agreed that NECCSD will select the carrier but will
not thereby assume any liability in connection with the shipment, nor will the
carrier be construed to be an agent of NECCSD.
10.6 NECCSD may, upon thirty (30) days prior notice, modify these shipping
terms.
10.7 Packaging will be in accordance with NECCSD's commercial practices for
domestic shipment.
11. PRICE AND PAYMENT TERMS
11.1 Prices for the PRODUCTS purchased and/or licensed under this Agreement
shall be as specified in the applicable NECCSD Reseller Price Matrix prevailing
at the time NECCSD receives a purchase order. NECCSD may change prices at any
time upon notice to RESELLER and such changes shall apply to any orders that
have not been shipped. In the event of a price increase, RESELLER may cancel
any unshipped orders by written notice to NECCSD within ten (10) business days
of receipt of notice of the price increase.
11.2 Regardless of the party paying the freight and subject to credit approval
by NECCSD, payment is due within thirty (30) days from the date of shipment.
11.3 Prices are exclusive of all sales, use and like taxes. RESELLER shall pay
all taxes associated with the sale and licensing of all NECCSD PRODUCTS
purchased or licensed under this Agreement exclusive of taxes based on NECCSD's
income. Any taxes shall be in addition to the prices of the PRODUCTS and if
required to be collected or paid by NECCSD, shall be reimbursed by RESELLER to
NECCSD. If claiming a sales tax exemption, RESELLER must provide NECCSD with
valid tax exemption certificates for those states where deliveries are to be
made at the time RESELLER's purchase order is submitted.
12. CREDIT AND FINANCIAL REQUIREMENTS
12.1 RESELLER represents and warrants to NECCSD that RESELLER is in good and
substantial financial condition and is able to pay all bills when due. RESELLER
shall, from time to time, furnish any financial statements or additional
information as may be requested by NECCSD to enable NECCSD to determine
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RESELLER's financial condition. RESELLER, at all times, shall comply with the
terms, conditions and policies established by the Credit Department of NECCSD,
including, but not limited to, those set forth in the NECCSD Credit Application,
applicable Guarantees and Security Agreement(s).
12.2 NECCSD, at its option, may extend credit to RESELLER or may require, at
any time, that sales be made on an advance-payment basis if, in NECCSD's sole
judgment, RESELLER does not qualify for credit. If credit limits for RESELLER
and to change such credit limits or any other financial requirements, from time
to time, at NECCSD's sole discretion.
12.3 Sales will be made on the payment terms in effect at the time that an
order is accepted, and RESELLER shall pay all invoices when due. Receipt of any
check, draft or other commercial paper shall not constitute payment unless and
until such instrument has been honored by the appropriate financial
institution(s). RESELLER shall not make deductions of any kind from any payments
due NECCSD unless credit memorandum has been issued by NECCSD to RESELLER. No
payment by RESELLER to NECCSD of any lesser amount than that due to NECCSD shall
be deemed to be other than a payment on account, and no endorsement or statement
on any check or in any letter accompanying any check or other payment shall be
deemed an accord and satisfaction. NECCSD may accept any payment without
prejudice to NECCSD's right to recover any remaining balance or to pursue any
other remedy provided in this Agreement, in any Security Agreement(s) executed
by the parties, or by applicable law.
12.4 If RESELLER becomes delinquent in payment obligations or other credit or
financial requirements established by NECCSD, or if in the sole judgment of
NECCSD, RESELLER's credit becomes impaired, NECCSD shall have any or all of the
following rights and remedies in addition to any other rights and remedies
provided in this Agreement, in any Security Agreement(s) executed by the
parties, or by applicable law:
12.4.1 NECCSD may refuse to accept any new orders, may cancel or delay
shipment of any orders accepted previously, or may stop any shipments in
transit.
12.4.2 If NECCSD previously has extended credit to RESELLER and NECCSD elects
to make further sales to RESELLER, NECCSD may refuse to extend further credit
and may require payment on an advance-payment basis.
12.4.3 NECCSD may declare all outstanding amounts immediately due and payable,
notwithstanding any credit terms previously in effect.
12.5 NECCSD SHALL NOT BE LIABLE TO RESELLER FOR LOSSES OR DAMAGES OF ANY KIND
AS A RESULT OF THE EXERCISE BY NECCSD OF ITS RIGHTS AND REMEDIES HEREUNDER.
12.6 NECCSD reserves the right to assess interest on all delinquent amounts at
the rate of one and one-half percent (1 1/2%) per month (eighteen percent [18%]
per annum) from the due date of invoice. However, if the maximum rate of
interest permitted by applicable law or regulations is less than that provided
for herein, then the interest shall be reduced to the maximum allowable rate.
12.7 Unless otherwise expressly agreed to in writing, RESELLER agrees that if
and when NECCSD establishes a line of credit for RESELLER or permits RESELLER to
purchase on open account, NECCSD shall have a security interest in all of the
PRODUCTS purchased by RESELLER (and all proceeds thereof) to secure the payment
of all indebtedness owed by RESELLER to NECCSD. RESELLER agrees that a copy of
this document may be filed in lieu of a financing statement, and agrees to
execute additional documents relating to said security interest as may be
requested by NECCSD.
12.8 In the event that it becomes necessary for NECCSD to institute litigation
to collect sums owed by RESELLER, NECCSD shall be entitled to an award of
reasonable attorneys' fees and costs incurred by NECCSD in connection with the
litigation, if a judgment in NECCSD's favor is entered in the litigation.
13. RELATIONSHIP
13.1 RESELLER's relationship to NECCSD will be that of an independent
contractor engaged in purchasing and licensing PRODUCTS for resale to RESELLER's
customers. RESELLER and its employees are not agents or legal representatives of
NECCSD for any purpose and have no authority to act for, bind or commit NECCSD.
RESELLER and NECCSD agree that this Agreement does not establish a franchise,
joint venture or partnership.
13.2 Any commitment made by RESELLER to its customers with respect to
quantities, delivery, modification, interfacing capability, suitability of
software, or suitability in specific applications will be RESELLER's sole
responsibility, unless prior written approval is obtained from NECCSD's
principal place of business. RESELLER has no authority to modify any warranty
contained in this Agreement or issued by NECCSD or make any other commitment on
behalf of NECCSD, and RESELLER will indemnify, defend and hold NECCSD harmless
from any liability, suit or proceeding for any such modified warranty or other
commitment by RESELLER or its selling locations.
14. TRADEMARKS
14.1 RESELLER shall not attach any additional trademarks or trade names to the
PRODUCTS, and shall refrain from affixing any NECCSD owned or licensed trademark
or trade name to products other than the appropriate NECCSD PRODUCTS.
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14.2 RESELLER shall not use any NECCSD owned or licensed trademark or trade
name in a way that implies RESELLER is an agency or branch of NECCSD. RESELLER
will immediately change or discontinue any use as requested by NECCSD.
14.3 RESELLER shall not register or use any NECCSD owned or licensed trademark
or trade name, in whole or in part, as a domain name on the Internet without
prior written approval of NECCSD.
14.4 RESELLER has no right, title or interest in any NECCSD trademark or trade
name and is not authorized to use any NECCSD trademark or trade name other than
the designated trademarks. Any rights in any NECCSD trademark or trade name
other than the designated trademarks. Any right in any NECCSD trademark or
trade name acquired through RESELLER's use belong solely to NECCSD. Upon
termination of this Agreement, RESELLER will discontinue any representations
that is an Authorized Reseller of NECCSD PRODUCTS.
15. INTELLECTUAL PROPERTY INDEMNITY
15.1 NECCSD hereby represents and warrants that the PRODUCTS and the sale and
use of the PRODUCTS do not infringe upon any U.S. or Canadian patent, copyright,
trade secret, trademark or other proprietary or intellectual property right of
any third party. NECCSD will defend RESELLER against any claim that a PRODUCT
supplied hereunder infringes a U.S. or Canadian patent, copyright, trade secret,
trademark or other proprietary or intellectual property right, or that the
PRODUCT operation pursuant to software supplied by NECCSD infringes on an
intellectual property right and NECCSD will pay any resulting costs, damages,
and reasonable attorneys' fees finally awarded, provided that (i) RESELLER
promptly notifies NECCSD in writing of the claim upon receipt of service of
process; (ii) NECCSD has sole control of the defense and all related settlement
negotiations; and (iii) RESELLER provides NECCSD complete information concerning
the claim. RESELLER shall have the right, but not the obligation, to
participate in the defense of any such suit or proceeding at RESELLER's expense.
15.2 NECCSD's obligation hereunder is conditioned on RESELLER's agreement that
if any PRODUCT becomes or in NECCSD's opinion is likely to become the subject of
such a claim, RESELLER will permit NECCSD, at its option and expense, either to
procure the right for RESELLER to continue using the PRODUCT or to replace or
modify the same so that it becomes non-infringing; and if neither of the
foregoing alternatives is available on terms that are reasonable in NECCSD's
judgement, RESELLER will return the PRODUCT on written request by NECCSD.
NECCSD agrees to grant RESELLER a credit for returned PRODUCTS as depreciated.
The depreciation shall be an equal amount per year over the life of the PRODUCT
as established by NECCSD.
15.3 NECCSD shall have no obligation to RESELLER under this Section 15, if any
patent copyright infringement or claim thereof is based upon: (i) use of any
PRODUCT delivered hereunder in connection or in combination with equipment,
software or devices not supplied by NECCSD; (ii) use of a PRODUCT in the
practicing of any process or in a manner for which the PRODUCT was not designed;
or (iii) NECCSD compliance with RESELLER shall indemnify, defend and hold NECCSD
harmless from any loss, cost or expense suffered or incurred in connection with
any suit, claim or proceeding brought against NECCSD which arises from, or is in
connection with, the manufacturer, use, sale or licensing of any PRODUCT which
as been modified, altered or combined with any equipment, device or software not
supplied by NECCSD to the extent that such suit, claim or proceeding is due to
such modification, alteration orcombination or (2) which arise from NECCSD's
compliance with RESELLER's designs, specifications or instructions.
15.4 The foregoing states NECCSD's entire liability for patent, copyright,
trade secret, trademark or proprietary or intellectual right infringements by
PRODUCTS furnished under this Agreement.
16. RIGHT TO SELL
16.1 NECCSD hereby represents and warrants that NECCSD has all right, title,
ownership interest and marketing rights necessary to provide the PRODUCT to
RESELLER. NECCSD further represents and warrants that (i) it has not entered
into any agreements or commitments which are inconsistent with or in conflict
with the rights granted to RESELLER in this Agreement; (ii) the PRODUCT shall be
new or warranted as new PRODUCT, in the instance "new PRODUCT" means that the
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operating system has not been registered by an end-user; (iii) the PRODUCT shall
be free and clear of all liens and encumbrances; and (iv) RESELLER and its end-
users shall be entitled to use the PRODUCTS without disturbance.
17. LIMITED WARRANTY
17.1 NECCSD extends a limited warranty solely to RESELLER's end-user customers
when the PRODUCTS are installed in the United States of America, only as set
forth in the Limited Warranty Statement accompanying each PRODUCT. RESELLER will
make no warranty representation on NECCSD's behalf beyond those contained in the
applicable Limited Warranty Statement. The warranty shall commence when the
PRODUCTS are resold and/or licensed to the end-user by the RESELLER subject to
the terms and conditions of the Limited Warranty Statement. NECCSD makes no
warranty to the RESELLER with respect to the PRODUCTS. In the event any PRODUCT
fails to operate, according to NECCSD's specifications, prior to being resold to
an end-user, RESELLER's exclusive remedy and NECCSD's sole responsibility shall
be (1) to repair the PRODUCT and obtain warranty reimbursement in accordance
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with the then current NECCSD Authorized Service Center (NASC) procedures, or
(2) the return and replacement of the PRODUCT in accordance with NECCSD's then
prevailing policy.
17.2 The above warranty is contingent upon the proper use of the PRODUCTS and
will not apply to PRODUCTS on which the original identification marks have been
removed or altered. In addition, this warranty shall not apply to defects or
failure due to: (i) accident, neglect or misuse; (ii) failure or defect of
electrical power, external electrical circuitry, air-conditioning or humidity
control; (iii) the use of items not provided by NECCSD or any authorized NECCSD
representative modifying adjusting, repairing, servicing or installing the
PRODUCT.
17.3 NECCSD'S PRODUCTS ARE NOT DESIGNED INTENDED OR AUTHORIZED FOR USE IN ANY
MEDICAL, LIFE SAVING OR LIFE SUSTAINING SYSTEMS, OR FORANY OTHER APPLICATION IN
WHICH THE FAILURE OF THE NECCSD PRODUCT COULD CREATE A SITUATION WHERE PERSONAL
INJURY OR DEATH MAY OCCUR. ANYONE USING OR SELLING NECCSD PRODUCTS FOR USE IN
SUCH SYSTEMS DOES SO AT ITS OWN RISK.
17.4 Should the end-user purchase or use NECCSD PRODUCT for any such
unintended or unauthorized use, the end-user shall indemnify and hold NECCSD and
its officers, subsidiaries and affiliates harmless against all claims, costs,
damages, and expenses, and reasonable attorneys' fees arising out of, directly
or indirectly, any claim of product liability, personal injury or death
associated with such unintended or unauthorized use, even if such claim alleges
NECCSD was negligent regarding the design or manufacture of the PRODUCT.
17.5 EXCEPT FOR THE EXPRESS WARRANTY CONTAINED IN THE LIMITED WARRANTY
STATEMENT ACCOMPANYING THE PRODUCT, NECCSD DISCLAIMS ALL WARRANTIES AND IMPLIED
CONDITIONS, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE. NO REPRESENTATION OR OTHER AFFIRMATION OF FACT, INCLUDING,
BUT NOT LIMITED TO, STATEMENTS REGARDING CAPACITY, SUITABILITY FOR USE OR
PERFORMANCE OF PRODUCTS, WHETHER MADE BY NECCSD'S EMPLOYEES OR OTHERWISE, WHICH
IS NOT CONTAINED IN THIS AGREEMENT, SHALL BE DEEMED TO BE A WARRANTY BE NECCSD
FOR ANY PURPOSE, OR GIVE RISE TO ANY LIABILITY OF NECCSD WHATSOEVER. THE
WARRANTIES AND CORRESPONDING REMEDIES AS STATED IN THIS SECTION ARE EXCLUSIVE
AND IN LIEU OF ALL OTHERS WRITTEN OR ORAL.
18. PROGRAM LICENSE PROVISIONS
18.1 RESELLER shall distribute only Licensed Program materials which are
packaged with the end-user Program License Agreements that were originally
packaged with the Licensed Programs when shipped by NECCSD. If Licensed
Programs are received from NECCSD inside the packaging for a PRODUCT, the
RESELLER shall distribute the Licensed Programs in the PRODUCT's packaging. In
addition to the Licensed Program software and documentation with each such
PRODUCT. RESELLER shall also comply with any additional provisions with respect
to the distribution of the License Program(s) contained in the end-user Program
License Agreements. No title or ownership of the Licensed Programs or any of
its parts or related documentation (with the exception of the media on which it
is contained) is transferred to RESELLER. Title to all applicable rights in
patents, copyrights and trade secrets in the Licensed Programs shall remain in
NECCSD or its Licenser.
18.2 RESELLER shall present the ultimate end-user or each Licensed Program
with the Licensed Program will be subject to the terms of that Licensed Program
Agreement.
18.3 RESELLER will safeguard the Licensed Program from disclosure to third
parties by using the same degree of care to prevent unauthorized disclosure as
RESELLER uses with its own trade secrets and those of other suppliers. RESELLER
is granted a license to use the Licensed Program materials for marketing
demonstration purposes provided that it complies with the terms of the
applicable Program License Agreement packaged with the Licensed Program.
18.4 Unless prior written consent is granted by NECCSD, RESELLER will not copy
or modify any Licensed Program or its related materials supplied under this
Agreement. RESELLER will not removed or omit any copyright notice or other
proprietary notice contained in or packaged with a Licensed Program.
18.5 Any commercial computer software and technical data supplied under this
Agreement is provided to RESELLER with Restricted Rights. Use, duplication or
disclosure by the United States Government is subject to the end-user license
granted with such software and the restriction as set forth in subparagraph (b)
of the rights in Technical Data Commercial Items clause at DFARS 252.227-7015,
or as set forth in the particular department or agency regulations, such as
DFARS 227.7702-3, or rules which provide protection equivalent to or grater than
the above-cited rule. RESELLER shall comply with any requirements of the
Government to obtain such protection, including without limitation, the
placement of any restrictive legends on the Licensed Programs(s) when supplying
to the Government.
19. LIMITATION OF LIABILITY
19.1 Except as expressly provided herein, NECCSD shall not be liable for any
loss or damages claimed to have resulted from the use, operation, or performance
of the PRODUCTS, regardless of the form of action. Notwithstanding any provision
contained herein to the contrary, the maximum liability of NECCSD to RESELLER or
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any person whatsoever arising out of or in connection with any sale, license,
use or other employment of any PRODUCT deliver to RESELLER hereunder, whether
such liability arises from any claim based upon contract, warranty, tort, or
otherwise, shall in no case exceed the actual amount paid to NECCSD by the
RESELLER hereunder for the specific PRODUCT unit(s) that caused the damages. The
foregoing limitations of liability will not apply to claims for personal injury
caused by NECCSD's negligence.
19.2 NECCSD and RESELLER may not institute any action in any form arising out
of this Agreement more than eighteen (18) months after the cause of action has
arisen, or in the case of nonpayment, more than eighteen (18) months from the
date of last payment or promise to pay, except that this limitation does not
apply to any action for payment of taxes.
19.3 IN NO EVENT SHALL NECCSD BE LIABLE TO RESELLER FOR SPECIAL, INDIRECT,
RELIANCE, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR ANY DAMAGES RESULTING FROM
LOSS OF USE, DATAOR PROFITS WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR
OTHERWISE.
20. DURATION OF AGREEMENT/TERMINATION
20.1 Either RESELLER or NECCSD may terminate this Agreement which may include
any and all Addendum(s) and Amendments, if the other party commits a breach of
any obligation hereunder which is not remedied within thirty (30) days of
receipt of written notice specifying such breach.
20.2 Cause shall exist for termination by either party if the other party
attempts to assign this Agreement, except under circumstances permitted under
this Agreement, liquidates or terminates its business, is adjudicated a
bankrupt, makes an assignment for the benefit of creditors, invokes the
provisions of any law for the relief of debtors, or files or has filed against
it any similar proceeding.
20.3 In the event that RESELLER fails to act in accordance with the terms of
this Agreement and any NECCSD Programs, and RESELLER fails to cure such
violations within such period (if any) as may be provided by NECCSD in its sole
discretion, then NECCSD may terminate this Agreement and/or Addendum(s) in
accordance with Section 20.1 above.
20.4 Each party acknowledges that the other has made not commitments regarding
the term or renewal of this Agreement beyond those expressly stated herein.
Either party may terminate this Agreement or any Addendum(s) with or without
cause, at any time upon sixty (60) days written notice. EACH PARTY ACKNOWLEDGES
THAT SUCH A PERIOD IS ADEQUATE TO ALLOW IT TO TAKE ALL ACTIONS REQUIRED TO
ADJUST ITS BUSINESS OPERATIONS IN ANTICIPATION OF TERMINATION.
20.5 Upon termination of this Agreement for any reason, RESELLER will
immediately cease to represent itself as a NECCSD Authorized Reseller and form
using any NECCSD trademark or trade name.
20.6 Termination of this Agreement and/or Addendum(s) shall not affect any of
RESELLER's pre-termination obligations, including but not limited to, any
outstanding payment obligations hereunder. Any termination of this Agreement
and/or Addendum(s) shall be without prejudice to the enforcement of any
undischarged obligations owing NECCSD existing at the time of termination.
20.7 Upon termination of this Agreement, any orders outstanding and unshipped
as of the termination date shall be deemed canceled, and NECCSD shall have no
obligation to fill same. If this Agreement is terminated by either party with
advance notice, NECCSD shall have the right to reject all or part of any orders
received from RESELLER during the period after notice but prior to the effective
date of termination (hereinafter called "the final period" ) if availability of
----------------
the PRODUCTS is insufficient atthat time to meet the needs of NECCSD and its
customers fully. In any event, NECCSD may limit shipments during the final
period to an amount not exceeding RESELLER's average monthly purchases form
NECCSD during the three (3) months prior to the month in which notice of
termination is provided. Notwithstanding any credit terms made available to
RESELLER prior to that time, any of the PRODUCTS shipped by NECCSD to RESELLER
during the final period must be paid for by certified or cashier's check prior
to shipment.
20.8 THIS AGREEMENT IS BEING EXECUTED BY THE PARTIES WITH THE UNDERSTANDING
THAT IT MAY BE TERMINATED AT ANY TIME AS PROVIDED HEREIN. NEITHER PARTY SHALL BE
LIABLE TO THE OTHER UNDER ANY LEGAL OR EQUITABLE THEORY, FOR COMPENSATION,
REIMBURSEMENT FOR INVESTMENTS OR EXPENSES, LOST PROFITS, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OF ANY OTHER KIND OR CHARACTER AS A RESULT OF
ANY TERMINATION OF THIS AGREEMENT.
20.9 RESELLER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT IT SHALL NOT BE
ENTITLED TO ANY TERMINATION COMPENSATION FOR GOODWILL OR FOR ORDERS FROM END-
USER CUSTOMERS OBTAINED BY RESELLER AFTER TERMINATION OF THIS AGREEMENT,
REGARDLESS OF PRIOR SALES EFFORT OR EXPENSE INCURRED BY RESELLER DURING THE TERM
OF THIS AGREEMENT.
21. OPTIONAL PROGRAMS
21.1 NECCSD may, from time to time, but with not obligation to do so, offer
various Programs to its RESELLERS. If RESELLER elects to participate in any
type of Program(s) offered by NECCSD to its Resellers, then RESELLER agrees to
comply with and be governed by the terms and conditions of such Programs(s),
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including any policies and procedures applicable thereto. In all cases where
participating in such Program(s) may require RESELLER to enter into separate
agreements with third parties, or where those Programs are administered by third
parties, RESELLER agrees that NECCSD shall have not liability arising out or in
connection with said Program.
21.2 In order to be eligible to participate in NECCSD's Reseller "Optional
Programs", RESELLER shall provide NECCSD with electronic or media Point of Sale
reporting prior to the fifth business day of each calendar month. The Point of
Sale report is to include RESELLER'S prior month's sales of NECCSD PRODUCTS
identified by end-user name and address, order code/part number, and product
quantity sold. This specific format for such reports will be provided by the
Sales Program Administrator to the RESELLER.
22. CONFIDENTIALITY AND PROPRIETARY RIGHTS
22.1 Certain data or portions thereof which may be supplied by NECCSD relating
to the PRODUCTS are confidential and proprietary to NECCSD and will be so
marked. RESELLER shall abide by such markings and it shall not reproduce, use
or disclose the above described data to third parties, except as may be
authorized by NECCSD.
23. GOVERNMENT EXPORT RESTRICTION
23.1 RESELLER agrees that the PRODUCTS purchased hereunder will not be
exported directly or indirectly, separately or as part of a system without first
obtaining a license from the U.S. Department of Commerce or any other
appropriate agency of the U.S. Government, as required.
24. GOVERNMENT PROCUREMENT
24.1 No United States Government procurement terms and conditions will be
deemed included hereunder or binding on either party, unless specifically
accepted in writing and signed by both parties, or by mutual execution of the
Reseller Class Addendum - Federal.
25. INDEMNITY
25.1 RESELLER agrees to defend NECCSD against any actions, suits, or other
proceedings asserted or instituted against NECCSD and to indemnify and hold
NECCSD harmless from any and all claims, damages, and expenses of every kind and
nature, including reasonable attorney's fees, arising out of or related to (1)
any actions taken by RESELLER or any party acting on its behalf in relation to
the PRODUCTS provided under this Agreement, or (2) any claim arising out of any
negligent or wilful act of RESELLER or out of a breach or alleged breach by
RESELLER or any party acting on its behalf of the warranty of the PRODUCTS.
26. INSURANCE
26.1 The parties shall be responsible for providing Worker's Compensation
insurance in the statutory amounts required by the applicable state laws.
26.2 Each party shall maintain Commercial General Liability and/or
Comprehensive General Liability Insurance in such amounts as is reasonable and
standard for the industry. The policies should contain the following coverage:
Personal and Advertising Injury, Broad Form Property Damage, Products and
Completed Operations, Contractual Liability, employees as Insured and Fire Legal
Liability.
26.3 If requested, each party will provide evidence of the existence of
insurance coverage referred to in this Section by certificates of insurance
which should also provide for at least thirty (30) days notice of cancellation,
non-renewal or material change of coverage to the other party.
27. FORCE MAJEURE
27.1 Neither NECCSD nor RESELLER shall be liable for its failure to perform
hereunder due to "Force Majeure" conditions which shall be defined as
contingencies beyond a party's reasonable control, including, but not limited
to, weather conditions, strikes, riots, wars, fire, acts of God, or acts in
compliance with any law, order proclamation, regulation, ordinance, demand or
requirement of any governmental agency.
27.2 A party whose performance is prevented, restricted or interfered with by
reason of a Force Majeure condition so long as such party provides the other
party with prompt written notice describing the Force Majeure condition and
immediately continues performance whenever and to the extent such causes are
removed.
27.3 If, due to a Force Majeure condition, the scheduled time of delivery or
performance is or will be delayed for more than ninety (90) days after the
scheduled date, the party not relying upon the Force Majeure condition may
terminate, without liability to the other party, any purchase order or portion
thereof covering the delayed PRODUCTS.
28. APPLICABLE LAW
28.1 This Agreement will be governed by the laws of the State of California,
excluding its conflict of laws provisions.
29. ASSIGNMENT
29.1 NECCSD has entered into this Agreement with RESELLER based on NECCSD's
confidence in RESELLER, which confidence is personal in nature. RESELLER may
not assign, transfer or sell all or any of its rights under this Agreement (or
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delegate all or any of its obligations hereunder) without the written consent of
NECCSD. Any other attempted assignment or transfer of all or any part of the
business conducted by RESELLER is contemplated (whether by transfer of stock,
assets or otherwise), RESELLER shall notify NECCSD in writing not less than
thirty (30) days prior to effecting such transfer, but such notice shall not
obligate NECCSD to deal with the transferee, NECCSD may assign this Agreement to
a parent, a subsidiary or an affiliated firm or to any other entity in
connection with the sale or transfer of all or substantially all of its business
assets. Subject to these restrictions, the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties, their successors and their
permitted assigns.
30. NOTICES
30.1 Unless otherwise agreed to by the parties, all notices required under
this Agreement shall be made personally or by certified mail, return receipt
requested, and all notices shall be addressed to the attention of the party
executing the Agreement or its successor; provided, however, that notices of
PRODUCT, price and/or discount/commission changes shall be made by regular
first-class mail.
30.2 All notices regarding this agreement shall be addressed
to:
NEC Computer Systems Division
Packard Bell NEC, Inc.
M.S. 150-116/Contracts
1 Packard Bell Way
Sacramento, CA 95828
With a copy to:
NEC Computer Systems Division
Packard Bell NEC, Inc.
M.S. 150-116/Legal
1 Packard Bell Way
Sacramento, CA 95828
Notices under this Agreement from NECCSD to RESELLER shall be addressed as
follows:
Denise Cloutier
- ---------------------------------------------------
c/o iGo Corp
- ---------------------------------------------------
2301 Robb Drive
- ---------------------------------------------------
Reno, NV 89523
- ---------------------------------------------------
31. WAIVER
31.1 Either party's failure to enforce any provision of this Agreement will
not be deemed a waiver of that provision or of the right to enforce it in the
future.
32. SEVERABILITY
32.1 In the event that any of the provisions of this Agreement or of the
application of any such provisions to the parties hereto with respect to their
obligations hereunder shall be held by a court of competent jurisdiction to be
unlawful or unenforceable, the remaining provisions of this Agreement shall
remain in full force and effect, and shall not be affected, impaired, or
invalidated in any manner.
33. PARAGRAPH HEADINGS AND LANGUAGE INTERPRETATIONS
33.1 The paragraph headings contained herein are for reference only and shall
not be considered as substantive parts of this Agreement. The use of a singular
or plural form in this Agreement shall include the other form, and the use of a
masculine, feminine or neuter gender shall include the other genders.
34. ENTIRE AGREEMENT
34.1 This Agreement, including any Addendum(s), contains the entire and only
understanding between the parties and supersedes all prior agreements, either
written or oral, relating to the subject matter hereof. No modifications of
this Agreement, with the exception of those relating to Section 4, 6, 7, and 10,
will be binding on either party unless made in writing and signed by persons
authorized to sign agreements on behalf of RESELLER and NECCSD.
35. FORUM FOR DISPUTES AND WAIVER OF JURY TRIAL
35.1 If, during the term of this Agreement or at any time after its
termination, either NECCSD or RESELLER commences a suit, action, or other legal
proceedings against the other arising out of or in connection with this
Agreement, the breach thereof or to its termination, whether or not other
parties are also named therein, the forum of the same, including, but not
limited to, the form of the trial, shall take place in accordance with this
Section. Any action brought by either party against the other, including any
against its officers, agents, employees or ex-employees, shall be brought
exclusively in the appropriate state or federal courts located in the State of
California.
35.2 In the event that either NECCSD or RESELLER brings suit against the other
party for any matter arising out of or in connection with this Agreement and the
party which is sued is ultimately adjudicated to not have liability, then the
party bringing suit agrees to pay the other party's reasonable attorneys' fees
and litigation costs.
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35.3 THE PARTIES MUTUALLY ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY RELATING
IN ANY MANNER TO THIS AGREEMENT, ANY BREACH OF THIS AGREEMENT OR ITS TERMINATION
MAY INVOLVED DIFFICULT OR COMPLEX ISSUES WHICH MAY BETTER BE UNDERSTOOD BY A
JUDGE RATHER THAN A JURY. ACCORDINGLY, THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL IN CONNECTION WITH ANY SUCH
LITIGATION AND CONSENT TO A TRIAL BEFORE A JUDGE, SITTING WITHOUT A JURY.
36. AUTHORITY
36.1 If RESELLER is a sole proprietorship, the person executing this Agreement
represents that he or she is the sole proprietor thereof. If RESELLER is a
partnership or corporation, the person executing this Agreement represents that
he or she is either a general partner or a duly authorized corporate officer, as
the case may be, and that he or she has full authority to enter into this
Agreement on behalf of such partnership or corporation.
37. ORDER OF PRECEDENCE
37.1 Each purchase Order issued under this Agreement shall be incorporated by
reference. In the event of conflict between any of the provisions of this
Agreement, the Order of Precedence shall be as follows:
a) Reseller Class Addendum(s)
b) The Master Reseller Agreement
c) Addendum A - Commitment
d) Special Addend (when applicable)
e) Purchase Orders
NOTE: THIS AGREEMENT, INCLUDING THE WAIVER OFJURY TRIAL PROVISION, SHOULD BE
REVIEWED BY LEGAL COUNSEL BEFORE EXECUTION.
ACCEPTED BY:
Battery Express, Inc.
- ----------------------------------------------
RESELLER's Full Legal Name
iGo Corp
- ----------------------------------------------
D/B/A (if Applicable)
A Corporation
- ----------------------------------------------
(Corporation, Partnership, Sole Proprietorship)
of the State of ______________________________
/s/ R. Bauer
- ----------------------------------------------
Authorized Signature
Robert W. Bauer Jr.
- ----------------------------------------------
Typed or Printed Name
VP Sales & Marketing
- ----------------------------------------------
Title
6/18/99
- ----------------------------------------------
Date
NEC COMPUTER SYSTEMS DIVISION
PACKARD BELL NEC, INC.
/s/ Jeff Cooke
- ----------------------------------------------
Authorized Signature
Jeff Cooke
- ----------------------------------------------
Type or Print Name
Executive VP, General Manager
- ----------------------------------------------
Title
6/23/99
- ----------------------------------------------
Date
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NEC COMPUTER SYSTEMS DIVISION
AUTHORIZED RESELLER AGREEMENT
RESELLER CLASS ADDENDUM/
ADDENDUM A
ACCESSORIES PROGRAM - [*] LEVEL
This Addendum is hereby made part of the NEC Computer Systems Division
Authorized RESELLER Master Agreement Number 306552 and states the additional
-----------
Terms and Conditions under which NECCSD sells and licenses its PRODUCTS
applicable to the NECCSD Accessories Program-[*] Level ("Agreement").
The RESELLER agrees to resell NECCSD PRODUCT in accordance with the terms of
this Addendum and the RESELLER Master Agreement.
1. APPOINTMENT AND ACCEPTANCE
1.1 RESELLER's appointment as a participant in the NECCSD Accessories
Program - [*] Level is made contingent on the following criteria:
1.1.1 RESELLER is an NECCSD Authorized RESELLER and hereby agrees to an
annual net dollar volume purchase commitment level of [*].
1.1.2 The indicated commitment shall be for all purchases by RESELLER within
the "Territory" designated in the Master Agreement.
1.1.3 All PRODUCTS purchased by RESELLER, less returns and other
adjustments, will apply toward the annual net dollar volume commitment level.
1.1.4 NECCSD may, upon thirty (30) days written notice, modify the terms and
conditions of this Addendum.
1.1.5 All terms and conditions of the above-referenced Agreement shall
apply.
1.1.6 Additional programs as may be further defined in the Reseller Resource
Guide shall apply except that price protection and stock balancing will not
apply on sales of all Notebook and Mobile accessories.
2. TERM
2.1 This Addendum shall become effective on the date a duly authorized
officer or designated party of NECCSD executes this Addendum. The definition of
the initial term and criteria for automatic renewal are defined in Section 5.1
and Section 5.2 of the Reseller Master Agreement referenced above.
3. DISCOUNT
3.1 The DISCOUNT allowed for purchases by the RESELLER shall be as indicated
below:
<TABLE>
<CAPTION>
PRODUCT PRODUCT DISCOUNT
CATEGORY LINE
<S> <C> <C>
[*] [*] [*]
[*] [*] [*]
</TABLE>
These DISCOUNTS are not applicable to special pricing opportunities.
4. RELATIONSHIP
4.1 RESELLER and NECCSD agree that this Addendum does not establish a
franchise, joint venture, or partnership. RESELLER's relationship to NECCSD
remains as defined in Section 13.1 of the Reseller Master Agreement referenced
above.
5. DEFINITIONS
5.1 The definitions set forth in this Section shall apply to the respective
capitalized terms and supersede any definitions of these same terms as may be
found in the Master Agreement:
(a) "PRODUCTS" are defined as: 1) [*] and 2) [*], as listed in the then
current appropriate NECCSD Price Matrix.
(b) "DISCOUNT" is defined as the percentage listed in Section 3.1 above
deducted from the then-current Commercial Price List.
6. RESELLER OBLIGATIONS & RESPONSIBILITIES
6.1 No later than ten (10) calendar days prior to the end of each calendar
month, RESELLER shall provide NECCSD's Regional Sales Manger, or his designee, a
[*] day rolling forecast for all PRODUCT to be ordered. Orders placed for the
first month following each forecast shall be firm, non-cancelable orders which
RESELLER may not reschedule or return (subject RESELLER'S end-users rights to
return product pursuant to the NECCSD limited warranty included with the PRODUCT
and to Section 17 of the Agreement).
RCA-ADDENDUM A-ACCESSORIES PROGRAM-[*] LEVEL
1 of 2
<PAGE>
RESELLER CLASS ADDENDUM/ACCESSORIES PROGRAM - [*] LEVEL
- -------------------------------------------------------
6.2 RESELLER shall provide NECCSD with Sales Reports as defined in the
Reseller Resource Guide.
6.3 RESELLER shall provide a Third Party Accessories Report quarterly to
NECCSD's Regional Sales Manager, or his designee, listing all NEC accessories
sold in comparison to all third party accessories sold for NEC PRODUCTS.
6.4 RESELLER shall provide a Metrics Report quarterly to NECCSD's Regional
Sales Manager, or his designee, to include, but not limited to, average product
delivery cycle time. Measurement is from order receipt to customer ship date.
6.5 The forecast referenced in Section 6.1 and the reports referenced in
Section 6.3 and 6.4 shall be in a format as defined by NECCSD and shall be
submitted to NECCSD by a mutually agreed upon electronic delivery method.
7. NECCSD OBLIGATIONS & RESPONSIBILITIES
7.1 Incentive Rebates (IR).
7.1.1 IR of [*] will be paid to Reseller based on net purchases of PRODUCT
less returns, discounts, and any other adjustments, for Direct Reseller net
sell-in.
7.1.2 RESELLER must attain [*] of quarterly quota to receive IR for the
quarter; however, at calendar year end, if RESELLER has attained [*] of yearly
quota, NECCSD will pay IR retroactively for those quarters in which [*] of quota
was not attained and the IR was not paid.
7.1.3 IR will be paid [*] days after the end of each fiscal quarter via
check to the Reseller, or another mutually agreed upon form of reimbursement.
7.1.4 NECCSD reserves the right to withhold IR payments in the event
Reseller has an outstanding debt with NECCSD.
7.2 Shipment of PRODUCT
7.2.1 NECCSD will ship all PRODUCT ordered to a single ship-to-point within
the U.S.A. provided by RESELLER. RESELLER may, upon thirty (30) days prior
written notice to NECCSD, modify this single ship-to-point.
7.2.2 All PRODUCT ordered by RESELLER over and above the forecast volume
identified by RESELLER in accordance with Section 6.1 above, will ship on an as
available basis.
ACCEPTED BY:
Battery Express, Inc.
- -------------------------------------------------------
RESELLER'S Full Legal Name
iGo Corp.
- -------------------------------------------------------
D/B/A (if applicable)
A Corporation
-----------------------------------------------------
(Corporation, Partnership, Sole Proprietorship)
of the State of California
---------------------------------------
/s/ R W Bauer
- -------------------------------------------------------
Authorized Signature
Robert W. Bauer Jr.
- -------------------------------------------------------
Type or Print Name
VP Sales & Marketing
- -------------------------------------------------------
Title
6/18/99
- -------------------------------------------------------
Date
NEC COMPUTER SYSTEMS DIVISION
PACKARD BELL, NEC, INC.
/s/ Jeff Cooke
- -------------------------------------------------------
Authorized Signature
Jeff Cooke
- -------------------------------------------------------
Type or Print Name
Executive VP, General Manager
- -------------------------------------------------------
Title
6/23/99
- -------------------------------------------------------
Date
RCA-ADDENDUM A-ACCESSORIES PROGRAM-[*] LEVEL
2 of 2
<PAGE>
EXHIBIT 10.10
Ariba Supplier Link Program
Memorandum of Understanding
This Memorandum of Understanding ("MOU") is a non-binding document entered into
this date to summarize the understanding of collaboration efforts between Ariba
Technologies, Inc. ("Ariba") a Delaware corporation, headquartered at 1314
Chesapeake Terrace, Sunnyvale CA 94089 and the Ariba Supplier Link (ASL) Partner
("ASL Partner") named below.
Date: November 3, 1998
---------- -
Ariba Supplier Link (ASL) Partner:
Company name: 1-800-Batteries
---------------
Corporate headquarters location: 2301 Robb Drive
---------------
Reno, NV 89523
--------------
_________________________________
WHEREAS, ASL Partner is in the business of selling goods and services, or
providing services or technology for the supply chain, or selling information
about goods and services, to businesses;
WHEREAS, Ariba is a developer and supplier of enterprise application software
for Operating Resource Management;
WHEREAS, Ariba and ASL Partner wish to establish a relationship under which
Ariba and ASL Partner work together to meet the needs of their customers;
NOW THEREFORE, the parties set forth their mutual non-binding intent and
understanding as follows:
I) ASL Partner shall:
A) Support open standards for integration via the Internet between the
Ariba Operating Resource Management System (ORMS) and the ASL
Partner's system, where;
1) Customer implementation requirements or ASL Partner interests
drive the integration timing.
2) ASL Partner agrees to provide a technical liaison to facilitate
integration with Ariba.
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B) Allow Ariba or the ASL Partner to issue a mutually-acceptable and pre-
approved press release announcing that the ASL Partner has joined the
ASL Program and is, or will be capable of working with Ariba ORMS
customers. As part of this obligation, ASL Partner further agrees to:
1) Provide Ariba a quote to be used in said press release; and,
2) Make appropriate executives available to be interviewed by press
and analysts that may wish to further understand the significance
of the announcement.
C) Allow Ariba to promote the ASL Partner to Ariba's customers as an
Ariba ORMS-capable supplier.
D) Allow Ariba to promote the ASL Partner on www.ariba.com.
-------------
E) Solely on its own best business judgement, the ASL Partner further
agrees to participate in public relations, promotions, and advertising
sponsored by Ariba.
II) Ariba shall:
A) Promote the ASL Partner to its customers and prospects through the
following methods, the exact form of which shall be Ariba's decision
alone based solely on Ariba's business judgement;
1) Announce that Ariba and the ASL Partner have entered into this
Ariba Supplier Link program memorandum of understanding with a
press release and press activities.
2) List ASL Partner on its public web site: www.ariba.com.
-------------
3) Provide information on ASL Partner to its world-wide sales force
and implementation partners.
4) Provide ASL Partner the opportunity to exhibit and or sponsor
various Ariba-sponsored customer events including but not limited
to the Ariba Advisory Council and User Group. There may be a cost
associated with some of these exhibit activities.
5) Include ASL Partner in corporate presentations, literature, and
advertising.
B) Provide technical assistance to the ASL Partner, the extent of which
is up to the sole business judgement of Ariba.
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C) Seek the advice of the ASL Partner in its product development planning
efforts.
III) Contact Information
For Ariba: ASL Program Manager
Ariba Technologies, Inc.
1314 Chesapeake Terrace
Sunnyvale, CA 94089
(408)543-3800
[email protected]
-------------
For ASL Partner: 1-800-Batteries
-------------------------------
Contact
Ken Hawk
-------------------------------
Name
2301 Robb Drive
-------------------------------
Address 1
-------------------------------
Address 2
Reno, NV 89523
-------------------------------
City, State, ZIP
702-746-6140
-------------------------------
Phone
[email protected]
-------------------------------
e-mail
IV) Approvals
All materials, whether printed or made available electronically, that are
prepared by either party and in any way mention the Ariba Supplier Link
Program (other than licensed use of the Ariba Supplier Link Logo) or the
other party must be approved by both parties in writing prior to use.
V) Term and Termination
A) The term of this MOU is one year from the date noted above unless
terminated by notice.
B) This MOU may be terminated by either party with thirty (30) days
notice to the other party.
C) Any changes to this MOU must be in writing and signed by the parties.
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D) This MOU is not intended to create a legal partnership or suggest that
the parties activities are directed to that purpose. The parties agree
that any formal legal relationship must be evidenced by a separate
document executed between the corporate officers of the respective
parties.
VI) Signatures
Ariba Technologies Inc.: ASL Partner:
By: /s/ Edward P. Kinsey By: /s/ Ken Hawk
-------------------------- ----------------------------
Signature Signature
Edward P. Kinsey Ken Hawk
-------------------------- ----------------------------
Name (Typed/printed) Name (Typed/Printed)
Chief Financial Officer CEO
-------------------------- ----------------------------
Title (Typed) Title (Typed)
11/3/98 11-3-98
-------------------------- ----------------------------
Date Date
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EXHIBIT 16.1
August 6, 1999
Securities and Exchange Commission
Washington, D.C. 20549
Re: iGo Corporation
File No. 333-
Dear Sir or Madam:
We have read the disclosures made in response to Item 304(a) of Regulation S-K
as presented in the Form S-1 registration statement of iGo Corporation dated
August 6, 1999, and agree with the statements contained therein.
Very truly yours,
GRANT THORNTON LLP
<PAGE>
EXHIBIT 16.2
Securities and Exchange Commission
c/o Lou Borrego
Vice President Operations
IGO Corporation
2301 Robb Drive
Reno, Nevada 89523
Dear Sir or Madam:
We were the auditors for IGO Corporation (formerly Battery Express, Inc.) as of
December 31, 1996. We performed an audit of the company's balance sheet for
1996 and issued our report thereon dated July 18, 1997. We have not performed
any audit procedures subsequent to July 18, 1997.
We have no disagreements with respect to language contained the Change in
Independent Accountants paragraph in the S-1 filing for IGO Corporation.
However, our representation extends only to the period of time we were engaged
as the company's auditors and, therefore, does not extend to periods beyond July
18, 1997.
FRANK, RIMERMAN & CO. LLP
August 5, 1999
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
iGo Corporation, a Delaware corporation, is a wholly-owned subsidiary
of the Registrant.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and
Stockholders of iGo Corporation
Reno, Nevada
We consent to the use in this Registration Statement of iGo Corporation (the
"Company") on Form S-1 of our report dated July 16, 1999 (July 30, 1999 as to
paragraphs 5 through 7 of Note 10), appearing in the Prospectus, which is a
part of this Registration Statement, and to the references to us under the
headings "Selected Financial Data" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of iGo Corporation, listed in
Item 16. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Reno, Nevada
August 6, 1999
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<PAGE>
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<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1996 DEC-31-1997 DEC-31-1998 JUN-30-1999
<CASH> 0 0 2,504,351 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 1,088,416 633,808 2,486,545
<ALLOWANCES> 0 127,613 169,594 522,645
<INVENTORY> 0 1,097,029 1,387,171 1,698,386
<CURRENT-ASSETS> 0 2,119,781 4,458,387 3,696,881
<PP&E> 0 294,357 1,151,972 1,376,494
<DEPRECIATION> 0 63,646 154,816 132,628
<TOTAL-ASSETS> 0 2,384,335 5,535,678 5,138,110
<CURRENT-LIABILITIES> 0 1,963,222 1,011,868 3,739,680
<BONDS> 0 0 0 0
0 1,679,887 7,889,536 8,216,401
0 0 0 0
<COMMON> 0 94,168 103,580 107,818
<OTHER-SE> 0 (1,408,307) (3,528,405) (7,603,775)
<TOTAL-LIABILITY-AND-EQUITY> 0 2,384,335 5,535,678 5,138,110
<SALES> 4,508,364 7,421,631 12,318,092 7,717,742
<TOTAL-REVENUES> 4,508,364 8,087,347 12,820,096 7,717,742
<CGS> 2,976,722 5,320,218 8,602,057 5,013,078
<TOTAL-COSTS> 2,976,722 5,320,218 8,602,057 5,013,078
<OTHER-EXPENSES> 1,588,213 3,674,232 6,060,356 6,322,583
<LOSS-PROVISION> 679 226,823 356,769 312,446
<INTEREST-EXPENSE> 10,845 2,931 90,144 28,683
<INCOME-PRETAX> (44,684) (886,051) (1,886,218) (3,828,737)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (44,684) (886,051) (1,886,218) (3,828,737)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (44,684) (886,051) (1,886,218) (3,828,737)
<EPS-BASIC> (0.13) (1.11) (2.13) (3.93)
<EPS-DILUTED> (0.13) (1.11) (2.13) (3.93)
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