<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 2000
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
VASTERA, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7373 54-1616513
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
45025 AVIATION DRIVE, SUITE 200
DULLES, VIRGINIA 20166-7554
(703) 661-9006
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
MR. ARJUN RISHI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VASTERA, INC.
45025 AVIATION DRIVE, SUITE 200
DULLES, VIRGINIA 20166-7554
(703) 661-9006
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
BRIAN D. HENDERSON, ESQ. KEITH F. HIGGINS, ESQ.
MICHAEL C. TODD, ESQ. JANE D. GOLDSTEIN, ESQ.
BROBECK, PHLEGER & HARRISON LLP ROPES & GRAY
701 PENNSYLVANIA AVENUE, SUITE 220 ONE INTERNATIONAL PLACE
WASHINGTON, D.C. 20004 BOSTON, MA 02110-2624
(202) 220-6000 (617) 951-7000
</TABLE>
------------------------
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, check the following box./ /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering./ /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box./ /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(1)
<S> <C> <C>
Common Stock, par value $.01 per share.... $70,000,000 $18,480
</TABLE>
(1) Includes shares that the underwriters have the option to purchase from the
Company to cover over-allotments, if any. Estimated solely for purposes of
calculating the registration fee in accordance with Rule 457(o) under the
Securities Act of 1933, as amended.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED , 2000.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[LOGO]
SHARES
COMMON STOCK
This is the initial public offering of shares of common stock of
Vastera, Inc. and we are offering shares of common stock. We estimate
that the initial public offering price per share will be between $ and $ .
We have applied to have the shares we are offering approved for quotation on
the Nasdaq National Market under the symbol "VAST."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS VASTERA, INC.
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to
additional shares of common stock to cover any over-allotments.
DEUTSCHE BANC ALEX. BROWN
CHASE H&Q
BANC OF AMERICA SECURITIES LLC
The date of this prospectus is , 2000.
<PAGE>
[Description of Inside Front Cover]
VASTERA GLOBAL TRADE MANAGEMENT
Our Global Trade Management solutions: TradeSphere, Global eContent,
TradeValue and TradeVantage offer organizations the opportunity to optimize
global trade processes by centrally automating trade data and enabling
collaboration among trading partners. All solutions can be accessed through
TradePrism.com.
TradeSphere B2B Solutions - Global eContent - Global eContent
Our comprehensive suite of is an intelligent, real-time
Web-based B2B solutions provides library of country-specific rules
access to Global eContent data and regulations that govern the
and enables the centralization movement of goods around the
of global trade operations, world. It represents hundreds of
including landed cost years of global trade domain
calculations, restricted party expertise and is the foundation
screening, shipment of all Vastera solutions.
documentation, global tracking
and tracing, sourcing
optimization and duty
management.
[Graphic of Prism]
TRADESPHERE
B2B Solutions
GLOBAL
eCONTENT
TRADEVALUE TRADEVANTAGE
Management Solution
Consulting Services
TRADEPRISM.COM
TradeValue Management Consulting - TradeVantage Solution Services -
Our consulting services backed Our outsourcing services support
by extensive global trade domain our clients' global trade
expertise and our proprietary operations by managing the
methodology, provide analysis business processes, application
of customers' existing trade solutions or their entire trade
procedures and help them operations so they may focus on
improve their overall their core business.
trading operations.
VASTERA
<PAGE>
[DESCRIPTION OF INSIDE FOLD OUT]
VASTERA ENABLES TRADING PARTNERS TO COLLABORATE LIKE NEVER BEFORE.
Collaboration among trading partners in the global trade network has become a
cornerstone for improving profitability and establishing competitive
advantage. Through TradePrism.com the global trade network of partners from
exporters such as retailers and manufacturers to shippers, forwarders,
carriers, brokers, bankers, custom agencies and importers such as automotive
and technology manufacturers can easily access Vastera's Global Trade
Management solutions. TradePrism.com also represents an engine used to power
other B(2)B and B(2)C marketplaces to close the loop on moving goods globally.
The combination of collaboration, accessibility and power is what enables
trading partners to share the information that promotes the expedient
movement of goods from country to country.
The result: A streamlined flow of information, goods and money across
international borders.
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY, THE COMMON STOCK BEING SOLD IN THIS OFFERING
AND OUR CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES TO THOSE
STATEMENTS, APPEARING ELSEWHERE IN THIS PROSPECTUS.
OUR BUSINESS
We are a leading provider of solutions for global trade management. Our
offerings include an extensive online library of global trade content, web-based
business-to-business, or B2B, solutions, management consulting and solution
services. Global trade involves the physical movement of goods across country
borders, the management of information and processes required to enable global
trade and the financial exchange processes required to complete related
transactions. Our solutions focus on the management of information required to
enable global trade and enhance collaboration across a client's global trade
network. Our primary Internet-based delivery mechanism for our solutions is our
web-based portal, TradePrism.com.
Forrester Research estimates that B2B commerce will grow from approximately
$406 billion in 2000 to approximately $2.7 trillion in 2004, forcing many
companies to streamline and automate their trading practices. The Internet
allows businesses to penetrate global markets effectively. We believe that while
many companies have invested in the technologies to help streamline and automate
business practices for their domestic operations, they continue to operate
inefficiently across global supply chains or lose new market opportunities
entirely. For example, Forrester Research estimates that over 46% of
Internet-based orders to the U.S. from international clients go unfilled because
companies lack the procedures to fill them.
The modern global marketplace is a fast-paced, complex trade network that
includes exporters, forwarders, carriers, brokers, importers, banks and customs
and regulatory agencies. As a result, the resources and expertise necessary to
manage global trade have increased significantly. Today, companies need access
to:
- comprehensive, up-to-date and Internet-accessible global trade content
(regulations, data and documentation required to execute cross-border
transactions);
- software applications that automate cross-border B2B and
business-to-consumer, or B2C, transactions; and
- reliable global trade expertise and advice to optimize their global trade
practices.
We believe that we are the only company offering a comprehensive suite of
global trade management solutions that addresses all of these needs. Our
offerings enable companies to leverage our extensive and actively managed
library of country-specific trade requirements to improve their global trade
operations. Our comprehensive suite of web-based, B2B solutions enables clients
to automate and optimize information management procedures across their entire
global trade network. These solutions also address the needs of multiple members
of this network and enable collaboration among all of its participants. Our
management consulting services assist companies in analyzing and addressing
their global trade practices and opportunities. We also provide solution
services that enable clients to outsource their trade management procedures in
order to focus on their core competencies and realize financial benefits
associated with efficient and effective global trade management.
We serve an international client base of over 200 companies, including Dell,
Lucent, Microsoft, the New Zealand Dairy Board, Nike, Nortel, Robert Bosch and
Silicon Graphics. Our clients currently utilize our solutions to ship to over
120 countries worldwide. We also provide integrated B2B solutions for vertical
Internet trading markets such as Arzoon.com, CatalogCity.com, RightFreight.com
and SupplierMarket.com and are continuing to develop our B2B solutions to meet
the needs of specific vertical industries. To facilitate the marketing and
delivery of our solutions, we also maintain relationships with a number of
leading technology companies, including IBM, JD Edwards, Oracle and Sun
Microsystems.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered......................... shares
Common stock to be outstanding after this shares
offering...................................
Use of proceeds.............................. For general corporate purposes, principally
working capital and possible acquisitions.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol....... "VAST"
</TABLE>
The number of shares of our common stock that will be outstanding after this
offering is based on the number of shares outstanding on March 31, 2000 and
assumes no exercise of the underwriters' over-allotment option and the
conversion into common stock of all of our preferred stock outstanding on that
date. It excludes 16,429,075 shares of common stock available for issuance
pursuant to our employee stock option plans, of which 6,253,677 shares are
subject to outstanding options as of March 31, 2000, and 5,000,000 shares of
common stock available for issuance pursuant to our employee stock purchase
plan. It also excludes 640,461 shares of common stock issuable upon the exercise
of warrants outstanding after this offering.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
REVENUES:
Subscription/transaction revenues.................... $ 635 $ 1,222 $ 2,200 $ 4,088 $ 7,261
Services revenues.................................... 402 917 1,545 4,778 11,869
------ ------- ------- ------- --------
Total revenues..................................... 1,037 2,139 3,745 8,866 19,130
Gross profit........................................... 397 971 1,506 3,952 8,360
Loss from operations................................... (758) (3,079) (9,209) (8,099) (10,660)
Net loss............................................... $ (783) $(3,086) $(9,307) $(8,256) $(10,479)
====== ======= ======= ======= ========
Per share information:.................................
Pro forma basic and diluted net loss per share....... $ (.64)
Pro forma weighted average common shares
outstanding........................................ 16,277
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 961 $22,724
Working capital........................................... (3,826) (3,826)
Total assets.............................................. 17,152 38,915
Long-term debt............................................ 2,326 2,326
Redeemable convertible preferred stock.................... 46,117 --
Total stockholders' equity (deficit)...................... (49,928) 17,952
</TABLE>
The pro forma balance sheet data gives effect to the automatic conversion of
all outstanding shares of convertible preferred stock into 10,326,843 shares of
common stock, the issuance of
4
<PAGE>
1,474,658 shares of common stock issuable upon exercise of certain outstanding
warrants prior to this offering and the issuance and conversion of our Series E
convertible preferred stock into 2,354,365 shares of common stock. The pro forma
as adjusted balance sheet data gives effect to the sale of shares
of common stock at an assumed initial public offering price of $ per share,
less the estimated underwriting discounts, commissions, and estimated offering
price.
We were incorporated in Virginia in November 1991 under the name Export
Software International, Inc. We reincorporated in Delaware in July 1996 and we
changed our name to Vastera, Inc. in June 1997. Our principal executive offices
are located at 45025 Aviation Drive, Suite 200, Dulles, Virginia 20166, and our
telephone number is (703) 661-9006. Our web site is WWW.VASTERA.COM. Information
contained on our web site does not constitute a part of this prospectus.
Vastera is a registered U.S. trademark of Vastera, Inc. Global Trade
Management, Global Trade Value Chain, TradeSphere, TradeValue, TradeVantage,
TradePrism, Global eContent, TradeAxiom, Opening the World to eBusiness, Global
Passport, SmarteCommerce, SmarteContent, SmarteMethods and SmarteWare are
trademarks of Vastera, Inc. that are the subject of pending federal trademark
registration applications. The Vastera logo is also a trademark of
Vastera, Inc. All other brand names and trademarks appearing in this prospectus
are the property of their respective holders.
------------------------
EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS IS BASED ON
THE FOLLOWING ASSUMPTIONS:
- THE UNDERWRITERS DO NOT EXERCISE THEIR OVER-ALLOTMENT OPTION;
- THE CONVERSION OF OUR OUTSTANDING SHARES OF PREFERRED STOCK INTO AN
AGGREGATE 12,681,207 SHARES OF COMMON STOCK UPON THE CLOSING OF THIS
OFFERING;
- THE ISSUANCE OF 1,474,658 SHARES OF COMMON STOCK ISSUED UPON EXERCISE OF
CERTAIN OUTSTANDING WARRANTS PRIOR TO THE CLOSING OF THIS OFFERING; AND
- THE COMPLETION OF A 3-FOR-2 STOCK SPLIT TO BE EFFECTED UPON THE CLOSING OF
THIS OFFERING.
5
<PAGE>
RISK FACTORS
THIS OFFERING AND YOUR INVESTMENT IN OUR COMMON STOCK INVOLVE A HIGH DEGREE
OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK. IF
ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED, THE VALUE OF
OUR STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT. THE
RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE FACE.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE
CURRENTLY DEEM IMMATERIAL ALSO MAY IMPAIR OUR BUSINESS OPERATIONS.
RISKS RELATED TO OUR BUSINESS
OUR FUTURE SUCCESS IS UNCERTAIN BECAUSE OUR WEB-BASED SOLUTIONS ARE UNPROVEN,
HAVE ONLY BEEN RECENTLY DEVELOPED OR ARE CURRENTLY IN DEVELOPMENT.
We have recently commercially released our TradeSphere solutions, our
web-based suite of products and services developed from our existing global
trade management solutions. Our web-based portal, TradePrism.com, is also
currently in the development stage. Because our portal and many of our
TradeSphere modules are in the early stages of development, there can be no
assurance that they will be successfully integrated into our web-based B2B
solutions. Many of these solutions require further product development to
achieve our expected level of functionality. If we fail to successfully complete
this development or if the market does not commercially accept our solutions
once they are fully developed, our business would be adversely impacted.
Furthermore, because our web-based solutions are in their early stages of
development, we have limited insight into trends that may emerge and affect our
business. We face many challenges, risks and difficulties that are frequently
encountered by companies transitioning to a new product line and using a new
business strategy. If we are unable to successfully implement our new business
strategy and overcome these challenges, risks and difficulties, our operating
results will suffer.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES IN THE FUTURE.
We incurred net losses of $9.3 million in 1997, $8.3 million in 1998 and
$10.5 million in 1999. We expect to continue to incur losses in the foreseeable
future. We expect those losses to increase significantly from current levels as
we continue to develop our products and services. We believe that our business
depends on our ability to significantly increase revenue. If our revenues fail
to grow at anticipated rates or our operating expenses increase without a
commensurate increase in our revenues, or we fail to adjust operating expense
levels appropriately, we may not be able to achieve and maintain profitability,
which would increase the possibility that the value of your investment will
decline.
THE MARKET FOR OUR RECENTLY DEVELOPED WEB-BASED SOLUTIONS IS NEWLY EMERGING AND
CLIENT DEMAND MAY NOT EVOLVE AND DEPENDS IN LARGE PART UPON THE GROWTH OF THE
INTERNET, WHICH MAY NOT GROW AS FAST OR AS EFFECTIVELY AS WE ANTICIPATE.
The market for our recently developed web-based, B2B solutions is newly
emerging and we cannot be certain that this market will continue to develop and
grow or that companies will choose to use our solutions rather than attempt to
develop alternative platforms and applications internally or through other
sources. To improve our operating results, we must keep pace with the evolving
industry standards that are characterized by rapid technological advances and
changing customer needs. If we fail in the development and marketing of either
enhancements to our current
6
<PAGE>
TradeSphere and TradePrism.com solutions or new solutions that respond to
technological advances in a timely and cost-effective basis, our ability to
generate revenues may be reduced. In addition, the anticipated growth of the
global trade market may depend on the growth of the Internet. Increased use of
the Internet largely depends upon available Internet security, bandwidth and
reliability. If use of the Internet by businesses does not increase as fast and
as effectively as we currently anticipate, the market for our web-based global
solutions may not grow as we expect and our business may be harmed.
ANY RESTRICTION ON OUR ABILITY TO COST EFFECTIVELY ACCESS A FOREIGN COUNTRY'S
RULES AND REGULATIONS THAT ARE INCORPORATED INTO OUR GLOBAL TRADE CONTENT,
GLOBAL ECONTENT, OR ANY FAILURE TO TIMELY UPDATE GLOBAL ECONTENT TO INCLUDE
CHANGES IN SUCH RULES AND REGULATIONS, MAY HARM OUR BUSINESS.
The success of our global trade management solutions for our clients depends
on our ability to access the complex rules and regulations published by foreign
governments governing a particular country's import and export of goods. The
foundation of our global trade solution, Global eContent, is subject to rapid
change at the initiative of foreign governments, based on factors beyond our
control. Any changes in a country's rules and regulations relating to global
trade that we are unable to include in our Global eContent library may result in
dissatisfied clients and possible litigation. In addition, to the extent a
foreign government restricts our access to its rules and regulations, charges a
fee for such access or grants proprietary rights to such information to one or
more of our competitors, our business may be harmed and our revenues could
decrease.
FLUCTUATIONS IN OUR OPERATING RESULTS, PARTICULARLY COMPARED TO THE EXPECTATIONS
OF MARKET ANALYSTS AND INVESTORS, MAY LEAD TO A REDUCED PRICE OF OUR COMMON
STOCK.
Our operating results have varied in the past, and we expect that they will
continue to vary in the future as a result of a number of factors, many of which
are beyond our control. These factors include:
- Demand for our products and services;
- Increases in our operating expenses;
- Competition in our industry;
- Variability in the mix of our subscription and transaction revenues and
our consulting revenues;
- Timing of new solution introductions and enhancements to our TradeSphere
and TradePrism.com solutions;
- Continued business from our existing clients;
- The loss of any key employees and timing of our new hires; and
- Significant downturns in the U.S. and international economies.
Due to the foregoing factors, our annual or quarterly results of operations
may not meet the expectations of securities analysts and investors, which could
cause the price of our common stock to decline.
In addition, seasonal trends with respect to our revenue derived from our
consulting services may harm our quarterly operating results. For example, in
the fourth quarter of our 1999 fiscal year our revenues were lower than our
revenues in each of the prior three quarters. We believe that the primary cause
of this fluctuation is the decrease in the amount of services that we provided
to our
7
<PAGE>
clients in the fourth quarter due to year-end client holiday schedules and
client postponements of new service engagements in order to concentrate on Year
2000 readiness.
WE ARE GROWING RAPIDLY AND EFFECTIVELY MANAGING OUR GROWTH MAY BE DIFFICULT.
We have significantly increased our employee base to meet increasing demand
for our client solutions. The number of our employees has increased from 104 as
of December 31, 1998 to 230 as of March 31, 2000. As we expand our operations,
we expect to continue to increase the size of our employee base. Our management
and operations have been strained by this growth and will continue to be
strained by our anticipated growth. To compete effectively and to manage future
growth, we must continue to improve our financial and management controls,
reporting systems and procedures on a timely basis. We must also expand, train
and manage our employee base. If we are not successful in managing our growth,
our business may be harmed.
SEVERAL KEY EXECUTIVE OFFICERS HAVE RECENTLY JOINED OUR MANAGEMENT TEAM AND THE
INABILITY OF OUR MANAGEMENT TEAM TO SUCCESSFULLY WORK TOGETHER COULD HARM OUR
BUSINESS.
Some members of our current management team have been in place for only a
relatively short period of time. Our Chief Operating Officer, Senior Vice
President of Worldwide Sales, Senior Vice President of Global Services, Vice
President of Marketing and Vice President of Technology all joined us within the
last nine months. Accordingly, each of these individuals has limited experience
with our company. Our new executive officers may not be able to integrate
themselves into our daily operations and to work effectively as a team, which
could harm our business by impairing our ability to implement our business
strategy.
WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL, WHICH WOULD ADVERSELY
AFFECT OUR BUSINESS.
Our future performance will depend largely on the efforts and abilities of
our senior executives, key technical, professional services, sales and marketing
and managerial personnel. Our success will depend on our ability to attract and
retain these key employees in the future. The employment of our key personnel,
including our executives, is at will. The market for such persons is extremely
competitive and we may not find qualified replacements for personnel who leave
us. In the past, we have experienced difficulty in hiring qualified technical,
professional services, sales, marketing and managerial personnel. In addition,
we do not maintain key person life insurance on any of our key personnel, and
have no plans to do so. The loss of, or the inability to attract, any one or
more of our key personnel may harm our business and adversely affect your
investment in our common stock.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL AS NEEDED IN THE FUTURE, OUR
BUSINESS MAY BE ADVERSELY AFFECTED AND THE MARKET PRICE FOR OUR COMMON STOCK
COULD DECLINE.
We have historically financed our operations primarily through the sale of
our securities. We may need to raise additional debt or equity capital to fund
the expansion of our operations, to enhance our products and services, or to
acquire or invest in complementary products, services, businesses or
technologies. If we raise additional funds through further issuances of equity
or convertible debt or equity securities, our existing stockholders could suffer
significant dilution, and any new equity securities we issue could have rights,
preferences and privileges superior to those of holders of our common stock,
including shares of common stock sold in the offering. In addition, we may not
be able to obtain additional financing on terms favorable to us, if at all. If
adequate funds are not available on terms favorable to us, our business may be
adversely affected and the market price for our common stock could decline.
8
<PAGE>
OUR INTERNATIONAL OPERATIONS AND PLANNED EXPANSION EXPOSE US TO BUSINESS RISKS
THAT COULD CAUSE OUR OPERATING RESULTS TO SUFFER.
We opened an office in the United Kingdom in January 1999, and intend to
expand substantially our international operations and enter new international
markets. This expansion will require significant management attention and
financial resources to successfully translate our software products into various
languages, to develop compliance expertise relating to international regulatory
agencies and to develop direct and indirect international sales and support
channels. We face a number of risks associated with conducting our business
internationally that could negatively impact our operating results, including:
- language barriers, conflicting international business practices and other
difficulties relating to the management and administration of a global
business;
- longer sales cycles associated with educating foreign clients about the
benefits of our products and services;
- currency fluctuations and exchange rates;
- multiple and possibly overlapping tax structures and the burdens of
complying with a wide variety of foreign laws;
- the need to consider characteristics unique to technology systems used
internationally; and
- economic or political instability in some international markets.
We may be unable to establish, maintain or increase international market
demand for our solutions and, if we are unable to do so, international sales may
be limited, and our business may be harmed. We also may not succeed in our
efforts to enter new international markets and expand our international
operations, which may harm our business.
IF OUR EXISTING CLIENTS DO NOT PURCHASE ADDITIONAL COMPONENTS OF OUR SOLUTIONS,
WE MAY NOT ACHIEVE GROWTH IN OUR REVENUES.
Our clients' initial implementations often include only one or two
components of our global trade management solutions. Clients may subsequently
add other components of our solutions and may eventually purchase and use the
full suite of our TradeSphere offerings. If our clients are not satisfied with
their initial implementations and they decline to purchase additional components
of our solutions, our business would be adversely impacted.
WE MAY BE UNABLE TO SELL OUR WEB-BASED SOLUTIONS IF OUR TARGET CLIENTS DO NOT
ACCEPT OUR SUBSCRIPTION AND TRANSACTION-BASED PRICING MODEL.
Our new subscription and transaction-based pricing model for our web-based
solutions is untested and will require our clients to make recurring
subscription and transaction fee payments instead of a one-time capital
investment followed by the payment of fees for maintenance and support. Our
current and future clients may not accept our pricing model. If we are unable to
receive acceptance by our current and future clients of this pricing model, our
sales could suffer.
OUR LENGTHY AND VARIABLE SALES CYCLE MAKES IT DIFFICULT FOR US TO PREDICT WHEN
OR IF SALES WILL OCCUR AND THEREFORE WE MAY EXPERIENCE AN UNPLANNED SHORTFALL IN
REVENUES.
Our products have a lengthy and unpredictable sales cycle that contributes
to the uncertainty of our operating results. Clients typically view the purchase
of our solutions as a significant and strategic decision. As a result, clients
generally evaluate our solutions and determine their impact on existing
infrastructure over a lengthy period of time. Our sales cycle has historically
ranged from
9
<PAGE>
approximately one to nine months depending on a particular client's need to
rapidly implement a solution and whether the client is new or is extending an
existing implementation. The license of our software products may be subject to
delays if the customer has lengthy internal budgeting, approval and evaluation
processes. We may incur significant selling and marketing expenses during a
client's evaluation period, including the costs of developing a full proposal
and completing a rapid proof of concept or custom demonstration, before the
client engages us. Larger clients may purchase our solutions as a part of
multiple simultaneous purchasing decisions, which may result in additional
unplanned administrative processing and other delays. If revenues forecasted
from a specific client for a particular quarter are not realized or are delayed
to another quarter, we may experience an unplanned shortfall in revenues, which
could adversely affect our operating results.
ANY LOSS OF OUR STRATEGIC RELATIONSHIPS OR FAILURE TO DEVELOP NEW RELATIONSHIPS
WOULD HARM OUR BUSINESS.
We have established strategic relationships with a number of third parties
including Arzoon.com, i2 Technologies, JD Edwards, Oracle, RightFreight.com, SAP
and SupplierMarket.com. These relationships are important to the worldwide
implementation, integration, development and promotion of our solutions. We
expect these relationships to provide us with marketing and sales opportunities.
If we are unable to maintain successfully our existing relationships or develop
new relationships, our business may be harmed.
ANY LOSS OF OUR LICENSED THIRD-PARTY TECHNOLOGY MAY RESULT IN INCREASED COSTS OF
OR DELAYS IN PROVIDING OUR SOLUTIONS, WHICH WOULD HARM OUR OPERATING RESULTS.
We license technology from several companies on a non-exclusive basis that
is integrated into our TradeSphere product suite, including database technology
from Oracle and Microsoft, development tools and facilities from IBM (WebSphere
and MQ Series) and Forte, which was acquired by Sun Microsystems. We anticipate
that we will continue to license technology from these and other third parties
in the future. This software may not continue to be available on commercially
reasonable terms, or at all. Some of the software we license from third parties
would be difficult and time-consuming to replace. The loss of any of these
technology licenses could result in delays in the licensing of our TradeSphere
products until equivalent technology, if available, is identified, licensed and
integrated. In addition, the effective implementation of our products may depend
upon the successful operation of third-party licensed products in conjunction
with our products, and therefore any undetected errors in these licensed
products may prevent the implementation or impair the functionality of our
products, delay new product introductions and injure our reputation.
WE MAY FACE PRODUCT LIABILITY CLAIMS, WHICH MAY HARM OUR FINANCIAL CONDITION.
The foundation of our TradeSphere solutions, Global eContent, consists of
the complex and continually changing country-specific rules and regulations
published by foreign governments in connection with the import and export of
goods. The organic and complex nature of Global eContent increases the
likelihood that we may face product liability claims in connection with our
current products and future products. A successful product liability claim
brought against us could harm our financial condition. Even if unsuccessful, any
product liability claim could result in costly litigation and divert
management's attention and resources. Any provisions in our license agreements
designed to limit our exposure to potential product liability claims and any
product liability insurance may not be adequate to protect us from such claims.
10
<PAGE>
THE UNCERTAINTY OF FUTURE GOVERNMENT REGULATION OF THE INTERNET AND GLOBAL TRADE
MAY ADD TO OUR OPERATING COSTS.
Like many businesses engaging in Internet-related business activities, we
may face unanticipated operating costs because of the current uncertainty
surrounding potential government regulation of the Internet and e-commerce. We
believe that we are not currently subject to direct regulation of online
commerce, other than regulations applicable to businesses generally. However,
the Internet has rapidly emerged as a commerce medium, and governmental agencies
have not yet been able to adapt all existing regulations to the Internet
environment. Laws and regulations may be introduced and court decisions reached
that affect the Internet or other online services, covering issues such as user
pricing, user privacy, freedom of expression, access charges, content and
quality of products and services, advertising, intellectual property rights and
information security. As an Internet company, it is unclear in which
jurisdictions we are actually conducting business. Our failure to qualify to do
business in a jurisdiction that requires us to do so could subject us to fines
or penalties and could result in our inability to enforce contracts in that
jurisdiction. Even if we were able to ascertain correctly in which jurisdictions
we conduct business, many of these jurisdictions have yet to determine the
application of their existing laws to web-based global trade or develop laws
that apply to such trade.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WHICH COULD
RESULT IN THEIR UNAUTHORIZED USE AND HARM OUR BUSINESS.
Our success depends on our ability to protect our proprietary rights. We
rely primarily on:
- Copyright, trade secret and trademark laws;
- Confidentiality agreements with employees and third parties; and
- Protective contractual provisions such as those contained in license
agreements with consultants, vendors and clients, although we have not
signed such agreements in every case.
Despite our efforts to protect our proprietary rights, unauthorized parties
may copy aspects of our products and obtain and use information we regard as
proprietary. Other parties may breach confidentiality agreements and other
protective contracts. We may not become aware of these breaches or have adequate
remedies available. We may need to litigate claims against third parties who
infringe our intellectual property rights, which could be costly.
We have not secured registration of all our marks in the United States and
have not pursued registration of our intellectual property in any foreign
country. The laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States. Effective
copyright, trademark and trade secret protection may not be available in other
jurisdictions. If we cannot adequately protect our proprietary rights, our
business may be harmed.
OUR PATENT STRATEGY IS IN DEVELOPMENT CURRENTLY AND ANY INADEQUACY IN THE
PROTECTION OF OUR TECHNOLOGY COULD HURT OUR BUSINESS.
We may also rely on patents to protect our proprietary rights in the future.
Any patent strategy we attempt to implement may not be successful and could harm
our business by disclosing unpatentable trade secrets. The laws that apply to
the types of patents we may seek are evolving and are subject to change. We
presently have filed provisional patent applications in the United States. These
applications may not result in patents or may take longer than we expect to
result in patents. We may also decide to not file patent applications in all the
countries in which we operate or intend to operate. Our decision to do so may
inhibit our ability to protect our proprietary rights in those countries. Even
if we are issued patents, we cannot assure you that they will provide us any
11
<PAGE>
meaningful protection or competitive advantage. If we try to enforce our
patents, third parties may challenge our patents in court or before the United
States Patent and Trademark Office. An unfavorable outcome in any such
proceeding could require us to cease using the technology or to license rights
from prevailing third parties. There is no guarantee that any prevailing party
would offer us a license or that we could acquire any license made available to
us on commercially acceptable terms, which may harm our business.
COMPETITION IN OUR MARKET COULD MAKE IT DIFFICULT TO ATTRACT CUSTOMERS, CAUSE US
TO REDUCE PRICES, RESULTING IN REDUCED GROSS MARGINS, OR CAUSE US TO FAIL TO
GAIN MARKET SHARE OR EXPERIENCE A LOSS OF MARKET SHARE, ANY OF WHICH WOULD HARM
OUR BUSINESS.
The market for our products and services is competitive, dynamic and subject
to frequent technological changes. The intensity of competition and the pace of
change are expected to increase in the future. Our solutions face competition
from a number of competitors offering products and services that vary in
functionality including:
- Content aggregators such as Dun & Bradstreet and TradeCompass;
- International trade logistics providers such as Capstan, Nextlink,
Rockport and Syntra;
- Trade consultants such as management consulting firms, law firms and
boutique consulting firms; and
- Outsourcing service providers, such as third party logistics providers,
fourth party logistics providers and carriers.
We expect additional competition from other established and emerging
companies as the market for global trade solutions evolves. Increased
competition could result in price reductions, reduced gross margins, loss of
market share or failure to gain market share, any of which would seriously harm
our business. We may not be able to compete successfully against current and
future competitors, which may lower the value of your investment in our common
stock.
OUR PRODUCTS ARE COMPLEX AND MAY CONTAIN DEFECTS OR ERRORS.
Some of the software products may contain undetected errors or defects,
especially when first introduced or when new versions are released. Our new
products or releases may not be free from errors after commercial shipment. Any
errors discovered after commercial release could result in loss of revenues or
delay in market acceptance of our products, diversion of development resources,
damage to our reputation, lawsuits or increased service costs, all of which
could harm our business.
ANY FUTURE ACQUISITIONS MAY BE DIFFICULT AND DISRUPTIVE, AND WE MAY NOT REALIZE
THE EXPECTED BENEFITS FROM THOSE ACQUISITIONS.
We may expand our operations or market presence by acquiring or investing in
companies, assets or technologies that complement our business and offer
opportunities for growth. These transactions involve many risks and challenges
that we might not successfully overcome, including:
- Difficulties in assimilating technologies, products, personnel and
operations;
- Disruption of our ongoing business and diversion of management's attention
from other business concerns;
- Risks of entering markets in which we have no or limited prior experience;
- Issuances of equity securities that may dilute your ownership interest in
our common stock;
12
<PAGE>
- Cash payments to or the assumption of debt or other liabilities of the
companies we acquire; and
- Large write-offs and amortization expenses related to goodwill and other
intangible assets.
Our inability to address these risks could negatively impact our operating
results. Moreover, any future acquisitions or investments, even if successfully
completed, may not generate any additional revenue or provide any benefit to our
business.
POTENTIAL YEAR 2000 PROBLEMS WITH OUR PRODUCTS OR INTERNAL SYSTEMS MAY INVOLVE
SIGNIFICANT TIME AND EXPENSE AND MAY HARM OUR BUSINESS.
Although no material year 2000 problems with our solutions have been brought
to our attention to date, year 2000 problems emerging in the future could
subject us to liability claims and disrupt our clients' purchasing patterns,
either of which could harm our business. Our solutions rely on computer systems
and software products which operate in complex network environments. Our
solutions, directly or indirectly, interact with a number of other hardware and
software systems that we cannot adequately evaluate for year 2000 compliance. We
may face claims based on year 2000 problems in other companies' products, or
issues arising from the integration of multiple products within an overall
system. We may in the future be required to defend our applications, services
and product offerings in such proceedings, or to negotiate resolutions of claims
based on year 2000 issues. Defending and resolving any year 2000 related
problems or disputes could be expensive to us and reduce our operating results.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE AND MAY SUBJECT US TO SECURITIES LITIGATION,
WHICH IS EXPENSIVE AND COULD DIVERT OUR RESOURCES.
The market price for our shares of common stock is likely to be volatile
and, if you decide to purchase our shares, you may be unable to resell your
shares at or above the initial public offering price due to a number of factors,
including:
- Actual or anticipated variations in our operating results;
- Changes in earnings estimates by analysts;
- Announcements of technological innovations or new products by our
competitors; and
- General economic conditions in global trade and e-commerce industries.
In addition, the stock market has experienced extreme price and volume
fluctuations that affected the market price of many companies in our industry
and that have been unrelated to these companies' operating performances. These
broad market fluctuations could reduce the market price of our common stock and,
in some instances, we may become subject to securities litigation. If we become
involved in this type of litigation, regardless of the outcome, we could incur
substantial legal costs and our management's attention could be diverted,
causing our business to suffer.
OUR OFFICERS, DIRECTORS AND AFFILIATES WILL BE ABLE TO CONTROL MATTERS REQUIRING
STOCKHOLDER APPROVAL AND MAY HAVE INTERESTS THAT DIFFER FROM YOURS.
Following the closing of this offering, our officers, directors and
affiliated entities together will beneficially own approximately % of the
outstanding shares of our common stock, % if the
13
<PAGE>
underwriters' over-allotment option is exercised in full. Accordingly, these
stockholders will be able to control all matters requiring stockholder approval
and, thereby, our management and affairs. In addition, this concentration of
ownership may delay, deter or prevent acts that would result in a change of
control, which in turn could reduce the market price of our common stock. These
stockholders may have interests that differ from your interests and their
decisions may negatively impact our business.
OUR MANAGEMENT HAS BROAD DISCRETION OVER HOW TO USE THE PROCEEDS OF THIS
OFFERING; WE MAY NOT USE THE PROCEEDS IN WAYS THAT HELP OUR BUSINESS SUCCEED.
We estimate that our net proceeds from this offering will be $ million,
at an assumed initial public offering price of $ per share and after deducting
the estimated underwriting discount and offering expenses. Our primary purposes
in making this offering are to increase our working capital, create a public
market for our common stock, facilitate our future access to the public capital
markets and increase our visibility in the marketplace. We have no specific
plans for the net proceeds of this offering other than working capital and
general corporate purposes, although we may use a portion of the net proceeds to
acquire or invest in additional businesses, products and technologies.
Accordingly, our management will have broad discretion as to how to apply the
net proceeds of this offering. If we fail to use these proceeds effectively, our
business may not grow and our revenues may decline.
OTHER COMPANIES MAY HAVE DIFFICULTY ACQUIRING US, EVEN IF DOING SO WOULD BENEFIT
OUR STOCKHOLDERS, DUE TO PROVISIONS OF OUR CORPORATE CHARTER AND BYLAWS AND
DELAWARE LAW.
Provisions in our certificate of incorporation, in our bylaws and under
Delaware law could make it more difficult for other companies to acquire us,
even if doing so would benefit our stockholders. Our certificate of
incorporation and bylaws contain the following provisions, among others, which
may inhibit an acquisition of our company by a third party:
- a staggered board of directors, where stockholders elect only a minority
of the board each year;
- advance notification procedures for matters to be brought before
stockholder meetings;
- a limitation on who may call stockholder meetings; and
- a prohibition on stockholder action by written consent.
We are also subject to provisions of Delaware law that prohibit us from
engaging in any business combination with any "interested stockholder," meaning
generally a stockholder who beneficially owns more than 15% of our stock, for a
period of three years from the date this person became an interested
stockholder, unless various conditions are met, such as approval of the
transaction by our board. This could have the effect of delaying or preventing a
change in control. For a more complete discussion of these provisions of
Delaware law, please see "Description of Capital Stock--Delaware Anti-Takeover
Law and Provisions in Our Charter and Bylaws."
14
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that address, among
other things, market acceptance of our solutions, expansion into new targeted
industries, product development, sales and marketing strategies, development and
maintenance of strategic alliances, technological advancement, global expansion,
use of proceeds, projected capital expenditures, liquidity and availability of
additional funding sources. These statements may be found in the sections of
this prospectus entitled "Prospectus Summary," "Risk Factors," "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Our Business" and in this prospectus generally. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue" or the negative of such terms or other
comparable terminology. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including all the risks discussed in "Risk Factors" and elsewhere in this
prospectus. We undertake no obligation to update publicly any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.
15
<PAGE>
USE OF PROCEEDS
We expect to receive approximately $ million in net proceeds from
the sale of the shares of common stock in this offering, assuming that the
initial public offering price is $ per share and after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by us. We expect to receive approximately $ million if the
underwriters' over-allotment option is exercised in full.
We intend to use the net proceeds of this offering for general corporate
purposes, principally working capital for increased domestic and international
sales and marketing expenditures, product development expenditures, expenditures
related to the expansion of our consulting services organization and capital
expenditures made in the ordinary course of business. We may also use a portion
of the net proceeds to acquire or invest in additional businesses, products and
technologies that we believe will complement our current or future business.
However, we have no specific plans, agreements or commitments, oral or written,
to do so. We are not currently engaged in any negotiations for any acquisition
or strategic investment. The amounts that we actually expend for working capital
purposes will vary significantly depending on a number of factors, including
future revenue growth, if any, the amount of cash we generate from operations
and the progress of our product development efforts. As a result, we will retain
broad discretion in the allocation of the net proceeds of this offering. Pending
the uses described above, we will invest the net proceeds in short-term,
interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business, and we do not anticipate paying any cash dividends in the future.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999. We
present capitalization:
- on an actual basis;
- on a pro forma basis to reflect the issuance of 1,569,577 shares of our
Series E convertible preferred stock in February 2000, including the
recognition of a beneficial conversion feature, the issuance of 1,474,658
shares of common stock issuable upon exercise of outstanding warrants
prior to the offering and the automatic conversion of all outstanding
shares of preferred stock into 12,681,208 shares of common stock upon the
consummation of the offering; and
- on a pro forma as adjusted basis to give effect to the automatic
conversion of all outstanding shares of preferred stock into common stock
and the filing of our amended and restated certificate of incorporation
upon the consummation of the offering, and to reflect our receipt of the
estimated net proceeds from the sale of shares of common stock offered
in the offering at an assumed initial public offering price of $
per share, after deducting underwriting discounts and commissions and
estimated offering expenses.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Line of credit and capital lease obligations......... $ 2,717 $ 2,717 $
Redeemable convertible preferred stock
$0.01 par value; 7,351 shares authorized and 6,085
outstanding (actual), and no shares issued and
outstanding (pro forma and pro forma as
adjusted).......................................... $46,117 --
Stockholders' equity (deficit):
Common stock
$0.01 par value; 100,000 shares authorized and
6,430 shares issued and outstanding (actual),
20,586 shares issued and outstanding (pro
forma), issued and outstanding (pro forma as
adjusted).......................................... 64 206
Additional paid-in capital........................... 9,765 85,618
Accumulated other comprehensive income............... (41) (41)
Deferred compensation................................ (6,043) (6,043)
Accumulated deficit.................................. (53,673) (61,788)
------- ------- -------
Total stockholders' equity (deficit)................. (49,928) 17,952
------- ------- -------
Total capitalization................................. $(1,094) $20,669 $
======= ======= =======
</TABLE>
Our capitalization information represented above excludes:
- 16,429,075 shares of common stock available for issuance pursuant to our
employee stock option plans, of which 6,253,677 shares are subject to
outstanding options as of March 31, 2000.
- 5,000,000 shares of common stock reserved for future issuances under our
employee stock purchase plan; and
- 640,461 shares of common stock issuable upon the exercise of warrants to
purchase our common stock outstanding after this offering.
17
<PAGE>
DILUTION
As of December 31, 1999, our net tangible book value on a pro forma basis
giving effect to the conversion of our preferred stock into common stock upon
consummation of this offering was approximately $ million or
$ per share of common stock. "Net tangible book value" per share
represents the amount of our total tangible assets reduced by the amount of our
total liabilities, divided by the number of shares of common stock outstanding.
As of December 31,1999, our net tangible book value, on a pro forma basis as
adjusted for the sale of shares of our common stock, based on an assumed
initial public offering price of $ per share and after deducting the
underwriting discounts and commissions and other estimated offering expenses,
would have been approximately $ per share. This represents an
immediate increase of $ per share to existing stockholders and an
immediate dilution of $ per share to new investors. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at December
31, 1999................................................ $
Pro forma increase per share attributable to new
investors...............................................
------
Pro forma net tangible book value per share after the
offering................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following summarizes on a pro forma basis as of December 31, 1999, the
differences between the total consideration paid and the average price per share
paid by the existing stockholders and the new investors with respect to the
number of shares of common stock purchased from us based on an assumed initial
public offering price of $ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED CONSIDERATION
------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 20,586 $50,948 $ 2.47
New investors..........................
Total..................................
======= ======= ======= =======
</TABLE>
The preceding table excludes:
- 16,429,075 shares of common stock available for issuance pursuant to our
employee stock option plans, of which 6,253,677 shares are subject to
outstanding options as of March 31, 2000.
- 5,000,000 shares of common stock reserved for future issuances under our
employee stock purchase plan; and
- 640,461 shares of common stock issuable upon the exercise of outstanding
warrants to purchase our common stock.
To the extent all of these options and warrants had been exercised as of
December 31, 1999, pro forma net tangible book value per share after this
offering would be $ and total dilution per share to new investors would be
$ .
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The tables that follow present portions of our financial statements and are
not complete. You should read the following selected financial data in
conjunction with our financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. We derived the statement of operations
data for the years ended December 31, 1997, 1998 and 1999, and the balance sheet
data as of December 31, 1998 and 1999 from our financial statements that have
been audited by Arthur Andersen LLP, independent public accountants, which are
included elsewhere in this prospectus. We derived the statement of operations
data for the years ended December 31, 1995 and 1996 and the balance sheet data
as of December 31, 1995 and 1996 from unaudited financial statements that are
not included in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
REVENUES:
Subscription/transaction
revenues......................... $ 635 $ 1,222 $ 2,200 $ 4,088 $ 7,261
Services revenues.................. 402 917 1,545 4,778 11,869
------- ------- -------- -------- --------
Total revenues................... 1,037 2,139 3,745 8,866 19,130
COST OF REVENUES:
Cost of subscription/transaction
revenues......................... 1 398 766 708 692
Cost of services revenues.......... 639 770 1,473 4,206 10,078
------- ------- -------- -------- --------
Total cost of revenues........... 640 1,168 2,239 4,914 10,770
------- ------- -------- -------- --------
Gross profit......................... 397 971 1,506 3,952 8,360
OPERATING EXPENSES:
Sales and marketing................ 358 837 4,442 4,581 7,143
Research and development........... 403 1,548 4,137 4,271 6,194
General and administrative......... 329 1,498 1,710 2,562 3,680
Depreciation and amortization...... 65 167 426 637 1,625
Stock option compensation.......... -- -- -- -- 378
------- ------- -------- -------- --------
Total operating expenses......... 1,155 4,050 10,715 12,051 19,020
------- ------- -------- -------- --------
Loss from operations............. (758) (3,079) (9,209) (8,099) (10,660)
Other income (expense)............... (25) (7) (98) (157) 181
------- ------- -------- -------- --------
Net loss....................... $ (783) $(3,086) $ (9,307) $ (8,256) $(10,479)
======= ======= ======== ======== ========
Per share information................
Pro forma basic and diluted net
loss per share................... $ (.64)
Pro forma weighted-average common
shares outstanding............... 16,277
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 77 $ 1,283 $ 1,388 $ 7,792 $ 961
Working capital.................... (612) (1,022) (2,892) 3,199 (3,826)
Total assets....................... 844 2,859 5,486 16,282 17,152
Long-term debt..................... 24 148 514 996 2,326
Redeemable convertible preferred
stock............................ -- 3,801 10,240 24,431 46,117
Total stockholders' equity
(deficit)........................ (1,528) (4,394) (13,865) (22,763) (49,928)
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF VASTERA, INC. SHOULD BE READ IN CONJUNCTION WITH "SELECTED
CONSOLIDATED FINANCIAL DATA" AND VASTERA'S CONSOLIDATED FINANCIAL STATEMENTS AND
RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS WHICH ARE DEEMED TO BE
INCORPORATED INTO THIS SECTION. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS DUE TO VARIOUS FACTORS,
INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We are a leading provider of solutions for global trade management. Our
offerings include an extensive online library of global trade content, B2B
solutions, management consulting and solution services. In 1992, we introduced
EMS-2000, a U.S.-centric, DOS based export management solution. In 1994, we
introduced EMS-2000 Version 4, a multi-country, two-tier, Windows-based export
management solution. In 1997, we introduced Global Passport, a multi-country,
three-tier, client-server based, import/export management solution. In 1999, we
introduced TradeSphere, a multi-country, multi-module suite of web-based global
trade management solutions. In 2000, we introduced TradePrism.com, a trade
portal that provides a web-based delivery mechanism for our global trade
management capabilities. Since our inception, we have continued to develop a
comprehensive suite of solutions with features, functionality and services that
allow companies to manage the complexities of global trade.
In January 1999, we acquired Deltac Ltd., a provider of trade content and
management consulting expertise for the United Kingdom (UK) and European Union
(EU). In addition, in June 1999, we acquired Quantum Consulting Associates, Inc.
of Denver, Colorado to enhance our trade process consulting services and trade
expertise. We provide our products and services from our offices in the United
States and United Kingdom to over 200 clients. Our clients typically acquire a
limited number of server and user subscriptions or licenses to implement in a
division or department. As they expand implementation of our products globally
and to their customers, suppliers, and business partners, additional
subscriptions or licenses are acquired. We currently market our products and
services on a global basis through our direct sales force and other channels,
such as strategic alliances and partners. We expect revenues from our
international operations to increase as we continue to expand our international
sales and services organizations.
We have incurred significant losses in order to grow our business and as of
December 31, 1999 had an accumulated deficit of approximately $53.7 million. We
believe our future success depends on increasing our client base, further
developing additional global trade data and content and introducing new products
and services to the marketplace. Prior to 1999, we have derived substantially
all of our revenues from sales of our client-server based solutions EMS-2000 and
Global Passport. As we continue to focus our development and marketing efforts
on TradeSphere and TradePrism.com, we expect to derive an increasingly higher
percentage of revenues from these web-based B2B solutions. Because these
solutions are new in the marketplace, we expect our revenues to be increasingly
uncertain and subject to fluctuations. In addition, to complete the development
of our web-based solutions, we intend to continue to invest heavily in research
and development, sales, marketing and management consulting services; therefore,
we expect to continue to incur substantial operating losses in the foreseeable
future.
SOURCE OF REVENUES AND REVENUE RECOGNITION POLICY
Our revenues consist of subscription/transaction revenues and service
revenues. Revenues classified as subscription/transaction consist of
subscriptions, transactions and sales of perpetual
20
<PAGE>
software licenses, maintenance and solution services. Revenues from software
licenses, maintenance contracts, and subscription arrangements are recognized
ratably over the estimated economic life of the product (three years) or, if
stated, the contract term. Certain agreements provide for transaction fees based
on usage of our products and revenues are recognized when transactions occur.
Maintenance contracts include the right to unspecified enhancements on a
when-and-if available basis, ongoing support, and content update services. In
general, all of our active clients renew these maintenance contracts to obtain
access to these regular content updates, which are critical to the continued
maintenance of such clients' systems. Historically, we have not experienced
significant returns or exchanges of our products. As we continue to focus our
marketing efforts on our web-based, B2B solutions, we expect
subscription/transaction revenues to increase as a percentage of total revenues.
Service revenues are derived from implementation, management consulting and
training services. Our service revenues are provided on a time-and-materials or
on a fixed-price basis and are recognized as the services are performed or on a
percentage-of-completion basis. Our service revenues have increased due to the
growth in our customer base, expansion of our implementation organization and
expansion of our management consulting organization. In the future we expect
service revenues to decrease as a percentage of total revenues.
Our product sales cycle is typically one to nine months. Furthermore, we
have experienced, and expect to continue to experience, significant variation in
the size of individual sales. As a result of this and other factors, our results
have varied significantly in the past and are likely to be subject to
significant fluctuations in the future. Since subscription/transaction revenues
are recognized ratably, typically over three years, and the timing of service
revenues is dependent on the scope of the engagement, we believe that
period-to-period comparisons of the results of operations are not necessarily
indicative of the results we expect for any future period.
DEFERRED REVENUES
Deferred revenues include amounts billed to clients for which revenues have
not been recognized and generally result from billed, but deferred
subscription/transaction revenues and deferred services not yet rendered.
Deferred revenues will be recognized on a monthly basis over the remaining
economic life of the product or recognized as revenues when the service is
performed.
COST OF REVENUES
Cost of revenues includes the cost of our subscription/transaction revenues
and the cost of our service revenues. Cost of subscription/transaction revenues
includes royalties due to third parties for technology products integrated into
our software products. It also includes the cost of salaries and related
expenses for our client support function. The cost of subscription/transaction
revenues also includes the costs related to solution services offerings. As we
further develop our solution services, we expect our cost of revenues to
increase due to the increase in our providing hosting and outsourcing services
to our clients. We expect the cost of subscription/transaction revenues to
increase as we expand our solution services offerings and integrate other
technology products into our offerings.
Cost of service revenues includes the cost of salaries and related expenses
for implementation, management consulting, and training services provided to
customers, as well as, the cost of third parties contracted to provide either
application consulting or implementation services to our customers. Because our
cost of service revenues is greater than the cost of subscription/transaction
revenues, total cost of revenues may fluctuate based on the mix of products and
services sold.
21
<PAGE>
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses consist of the depreciation expense
associated with our computer equipment; purchased software; furniture, fixtures
and equipment; and leasehold improvements and the amortization of goodwill
acquired through business combinations. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally
three to five years. Assets acquired under capital leases and leasehold
improvements are depreciated using the straight-line method over the shorter of
the estimated useful lives of the assets or the terms of the leases.
In January 1999, we acquired Deltac Ltd., a provider of trade content and
management consulting expertise for the UK and the EU. In addition, in
June 1999, we acquired Quantum Consulting Associates, Inc. of Denver, Colorado
to enhance our trade process consulting services and trade expertise. We
recorded these acquisitions under the purchase method of accounting. The excess
of the consideration over the fair value of the acquired assets and liabilities,
approximately $2.4 million, was accounted for as goodwill. Goodwill is being
amortized on a straight-line basis over five years and resulted in charges to
operations of approximately $313,000 for year ended December 31, 1999.
Amortization for future periods will be approximately $480,000 for the years
ending December 31, 2000, 2001, 2002, 2003 and approximately $167,000 in 2004.
STOCK OPTION COMPENSATION
We recorded deferred compensation of approximately $6.4 million in the last
three months of 1999. During the first three months of 2000, the Company expects
to record deferred compensation of approximately $11.8 million. These amounts
represents the difference between the exercise price and the fair value for
accounting purposes of the underlying common stock at the date of grant. This
amount is included as a component of stockholders' equity and is being amortized
on an accelerated basis over the applicable vesting period.
For the year ended December 31, 1999, we amortized approximately $378,000 of
deferred compensation. We expect to amortize deferred compensation of
approximately $8.2 million, $5.4 million, $2.8 million, $1.3 million and
$133,000 for the years ended December 31, 2000, 2001, 2002, 2003 and 2004. The
amount of stock option compensation expense to be recorded in future periods
could decrease if options are forfeited for which accrued but unvested
compensation has been recorded.
BENEFICIAL CONVERSION
On February 4, 2000, pursuant to a stock purchase agreement with new and
existing investors, we issued approximately 1,570,000 shares of Series E
convertible preferred stock for approximately $17.0 million. The Company expects
to record a beneficial conversion feature of approximately $8.1 million in the
first quarter of 2000 to reflect the difference between the underlying
convertible price per share of common stock and the estimated fair market value
of the common stock on the date of issuance.
RESEARCH AND DEVELOPMENT
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed", we have evaluated the establishment of technological feasibility of
our products during the development phase. The time period during which costs
could be capitalized from the point of reaching technological feasibility until
the time of general product release is very short and, consequently, the amounts
that could be capitalized are not material to our financial position or results
of operations.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the consolidated statement of operations
data, expressed as a percentage of total revenues for each period indicated. The
historical results are not necessarily indicative of results to be expected for
any future period.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF TOTAL REVENUES:
REVENUES:
Subscription/transaction revenues....... 61% 57% 59% 46% 38%
Service revenues........................ 39 43 41 54 62
------ ------ ------ ------ ------
Total revenues...................... 100 100 100 100 100
COST OF REVENUES:
Cost of subscription/transaction
revenues.............................. -- 19 20 8 4
Cost of service revenues................ 62 36 39 47 53
------ ------ ------ ------ ------
Total cost of revenues.............. 62 55 59 55 57
------ ------ ------ ------ ------
Gross margin................................ 38 45 41 45 43
------ ------ ------ ------ ------
OPERATING EXPENSES:
Sales and marketing..................... 35 39 119 52 38
Research and development................ 39 72 110 48 32
General and administrative.............. 31 70 46 29 19
Depreciation and amortization........... 6 8 11 7 8
Stock option compensation............... -- -- -- -- 2
------ ------ ------ ------ ------
Total operating expenses............ 111 189 286 136 99
------ ------ ------ ------ ------
Loss from operations........................ (73) (144) (245) (91) (56)
Other income (expense), net................. (2) 0 (3) (2) 1
------ ------ ------ ------ ------
Net loss.................................... (75)% (144)% (248)% (93)% (55)%
====== ====== ====== ====== ======
</TABLE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1999
REVENUES
TOTAL REVENUES. Total revenues increased 116% from approximately
$8.9 million for the year ended December 31, 1998 to approximately
$19.1 million for the year ended December 31, 1999.
SUBSCRIPTION/TRANSACTION REVENUES. Subscription/transaction revenues
increased 78% from approximately $4.1 million for the year ended December 31,
1998 to approximately $7.3 million for the year ended December 31, 1999. We
attribute this increase primarily to growth in our client base resulting from
increased market acceptance of our product offerings and our increased sales and
marketing efforts. As we continue to focus our development and marketing efforts
on our web-based, B2B solutions, we expect that subscription/transaction
revenues will increase as a percentage of total revenues.
SERVICE REVENUES. Service revenues increased 148% from approximately
$4.8 million for the year ended December 31, 1998 to approximately
$11.9 million for the year ended December 31, 1999. This increase resulted
primarily from increases in our customer base and increases in our average
billing rates. The increase in service revenues as a percentage of total
revenues was also
23
<PAGE>
attributable to the acquisitions of Deltac, Ltd. and Quantum Consulting
Associates. We expect the proportion of service revenues to total revenues to
decrease.
COST OF REVENUES
COST OF SUBSCRIPTION/TRANSACTION REVENUES. The cost of
subscription/transaction revenues decreased 2% from approximately $708,000 for
the year ended December 31, 1998 to approximately $692,000 for the year ended
December 31, 1999. While we had an increase in our customer support costs, it
was more than offset by our ability to negotiate more favorable royalty rates
for technology products integrated into our software products. The cost of
subscription/ transaction revenues, as a percentage of subscription/transaction
revenues, was 17% for the year ended December 31, 1998 and 10% for the year
ended December 31, 1999. We expect the cost of subscription/transaction revenues
to increase as a percentage of subscription/transaction revenues as we expand
our solution services offerings and integrate other technology products into our
offerings.
COST OF SERVICE REVENUES. The cost of service revenues increased 140% from
approximately $4.2 million for the year ended December 31, 1998 to approximately
$10.1 million for the year ended December 31, 1999. This increase resulted
primarily from the hiring and training of consulting and training personnel to
support our increased customer base. The cost of service revenues, as a
percentage of service revenues was 88% for the year ended December 31, 1998 and
85% for the year ended December 31, 1999. This decrease reflects productivity
improvements in our implementation and training organizations in 1999. However,
this decrease was offset by our hiring and investment in our management
consulting organization. We expect the cost of service revenues to decrease as a
percentage of service revenues as we continue to make productivity improvements
in both our management consulting as well as our implementation and training
organizations.
GROSS PROFIT
Gross profit increased 112% from approximately $4.0 million for the year
ended December 31, 1998 to approximately $8.4 million for the year ended
December 31, 1999. This increase is attributable to the growth in our customer
base, which increased subscription/transaction revenues and service revenues.
Gross margin decreased from 45% for the year ended December 31, 1998 to 43% in
the year ended December 31, 1999. This decrease was due primarily to the
investments made in our management consulting organization. We expect gross
margin to increase as we are able to make productivity improvements in our
management consulting organization.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel, sales
training events, public relations, advertising, trade shows, and travel expenses
related to both promotional events and direct sales efforts. Sales and marketing
expenses increased 56% from approximately $4.6 million for the year ended
December 31, 1998 to approximately $7.1 million for the year ended December 31,
1999. This increase resulted primarily from our increased investment in sales
and marketing infrastructure, both domestically and internationally, in the
anticipation of future market growth. The investments included significant
personnel related expenses, recruiting fees, travel expenses, and related
facility and equipment costs. In addition, we increased marketing activities,
including trade shows, public relations, direct mail campaigns and other
promotional activities. Sales and marketing expenses represented 52% of our
total revenues for the year ended December 31, 1998 and 38% for the year ended
December 31, 1999. This decrease reflects the higher revenue base, as well as
improvements achieved in productivity of our sales organization.
24
<PAGE>
We believe that we will need to significantly increase our sales and marketing
expenses to expand our market position. As a result, we anticipate that sales
and marketing expenses will continue to increase in absolute dollar amounts in
future years but decrease as a percentage of total revenues.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries, benefits, and equipment for software developers, quality
assurance personnel, program managers, and technical writers. Research and
development expenses increased 45% from approximately $4.3 million for the year
ended December 31, 1998 to approximately $6.2 million for the year ended
December 31, 1999. This increase resulted from an increase in the number of
software developers and quality assurance personnel needed to support our
product development and testing activities. Research and development expenses
represented 48% of our total revenues for the year ended December 31, 1998 and
32% for the year ended December 31, 1999. However, we believe that we must
continue to invest in research and development in order to develop new products
and services. As a result, we anticipate that research and development expenses
will continue to increase in absolute dollar amounts in future years but
decrease as a percentage of total revenues.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries, benefits and related costs for executive, finance,
administrative and information services personnel. These expenses also include
fees for legal, audit and accounting, and other professional services. General
and administrative expenses increased 44% from approximately $2.6 million for
the year ended December 31, 1998 to approximately $3.7 million for the year
ended December 31, 1999. This increase resulted primarily from the addition of
executive, finance, and administrative personnel to support the growth of our
business. General and administrative expenses represented 29% of our total
revenues for the year ended December 31, 1998 and 19% for the year ended
December 31, 1999. The decrease as a percentage of total revenues reflected
efficiencies gained throughout our administrative processes as we have grown as
a company. We believe our general and administrative expenses will continue to
increase in absolute dollar amounts as we expand our administrative staff,
domestically and internationally, and incur expenses associated with becoming a
public company. We expect these expenses to include annual and other public
reporting costs, directors' and officers' liability insurance, investor
relations programs and additional legal, accounting, and consulting fees.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased 155% from approximately $600,000 for the year ended December 31, 1998
to approximately $1.6 million for the year ended December 31, 1999. This
increase resulted primarily from purchases of fixed assets to build the
infrastructure needed to support the growth of our business and the amortization
of goodwill from the acquisition of Deltac Ltd. in February 1999 and Quantum
Consulting Associates, Inc. in June 1999. This amortization was zero for the
year ended December 31, 1998 and approximately $313,000 for the year ended
December 31, 1999. Depreciation and amortization expenses represented 7% of our
total revenues for the year ended December 31, 1998 and 8% for the year ended
December 31, 1999.
STOCK OPTION COMPENSATION. Stock option compensation expense increased from
zero for the year ended December 31, 1998 to approximately $378,000 for the year
ended December 31, 1999. Deferred compensation of approximately $6.4 million at
December 31, 1999 will be amortized on an accelerated basis over the applicable
vesting period.
OTHER INCOME (EXPENSES), NET. Other income (expenses), net fluctuates based
on the amount of cash balances available for investment, borrowings under our
line of credit, interest expense related to our term loans and realized gains
and losses on investments. Other income (expenses), net increased from
approximately ($157,000) for the year ended December 31, 1998 to
25
<PAGE>
$181,000 for the year ended December 31, 1999. This increase reflects the
investment income earned on the proceeds of our private placement during 1998.
INCOME TAXES. No provision for income taxes has been recorded for either
the year ended December 31, 1998 or the year ended December 31, 1999 due to
accumulated net operating losses. We have recorded a valuation allowance for the
full amount of our net deferred tax assets as a result of the uncertainty
surrounding the timing of the realization of these future tax benefits.
As of December 31, 1999, we had net operating loss carry-forwards for
federal tax purposes of approximately $19.5 million. These federal tax loss
carry-forwards are available to reduce future taxable income and begin to expire
in 2011. Under the provisions of the Internal Revenue Code, certain substantial
changes in our ownership have occurred, and as a result, our future utilization
of these net operating carry-forwards, that we accumulated prior to the change
in ownership, may be subject to a limitation per year. We may generate
additional net operating loss carry-forwards in the future.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 AND YEAR ENDED DECEMBER 31, 1998
REVENUES
TOTAL REVENUES. Total revenues increased 137% from approximately
$3.7 million for the year ended December 31, 1997 to approximately $8.9 million
for the year ended December 31, 1998.
SUBSCRIPTION/TRANSACTION REVENUES. Subscriptions/transaction revenues
increased 86% from approximately $2.2 million for the year ended December 31,
1997 to approximately $4.1 million for the year ended December 31, 1998. This
increase is primarily attributed to increased market acceptance of our product
offerings.
SERVICE REVENUES. Service revenues increased 209% from approximately
$1.5 million for the year ended December 31, 1997 to approximately $4.8 million
for the year ended December 31, 1998. This increase in service revenues is
primarily attributed to our increased sales of our software applications and
overall growth of our installed base of customers.
COST OF REVENUES
COST OF SUBSCRIPTION/TRANSACTION REVENUES. Cost of subscription/transaction
revenues decreased 8% from approximately $766,000 for the year ended
December 31, 1997 to approximately $708,000 for the year ended December 31,
1998. Cost of subscription/transaction revenues as a percentage of
subscription/transaction revenues was 35% for the year ended December 31, 1997
and 17% for the year ended December 31, 1998. This decrease was due to our
ability to negotiate during the year more favorable royalty rates for technology
products integrated into our software products.
COST OF SERVICE REVENUES. Cost of service revenues increased 186% from
approximately $1.5 million for the year ended December 31, 1997 to approximately
$4.2 million for the year ended December 31, 1998. This increase resulted from
the hiring and training of professional service personnel to support our growing
customer base. Cost of service revenues as a percentage of service revenues was
95% for the year ended December 31, 1997 and 88% for the year ended
December 31,1998. This decrease primarily reflected increased utilization of
professional service personnel.
GROSS PROFIT
Gross profit increased 162% from approximately $1.5 million for the year
ended December 31, 1997 to approximately $4.0 million for the year ended
December 31, 1998. This increase is
26
<PAGE>
attributable to the growth in our customer base, which increased
subscription/transaction revenues and service revenues. Gross margin increased
from 41% for the year ended December 31, 1997 to 45% for the year ended
December 31, 1998. This increase was due primarily to the increase in
subscription/transaction revenues and improved productivity in our service
organization.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses increased 3% from
approximately $4.4 million for the year ended December 31, 1997 to approximately
$4.6 million for the year ended December 31, 1998. The increases in sales and
marketing expenses resulted from our investment in sales and marketing
infrastructure, which primarily included personnel related expenses. Sales and
marketing expenses represented 119% of our total revenues for the year ended
December 31, 1997 and 52% for the year ended December 31, 1998. The decrease in
sales and marketing expenses as a percentage of total revenues resulted
primarily from increased revenues in 1998.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 3%
from approximately $4.1 million for the year ended December 31, 1997 to
approximately $4.3 million for the year ended December 31, 1998. The increases
in research and development expenses related primarily to the increase in the
number of software developers and quality assurance personnel needed to support
our product development and testing activities. Research and development costs
represented 110% of our total revenues for the year ended December 31, 1997 and
48% for the year ended December 31, 1998. This decrease is due to the completion
of a product upgrade in June 1997 and from increased revenues in 1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
50% from approximately $1.7 million for the year ended December 31, 1997 to
approximately $2.6 million for the year ended December 31, 1998. The increase in
general and administrative expenses resulted primarily from the addition of
executive, finance, and administrative personnel to support the growth of our
business during these periods. General and administrative costs represented 46%
of our total revenues for the year ended December 31, 1997 and 29% for the year
ended December 31, 1998. The decrease as a percentage of total revenues
reflected efficiencies gained throughout our general and administrative
functions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased 50% from approximately $426,000 for the year ended December 31, 1997
to approximately $637,000 for the year ended December 31, 1998. This increase
resulted primarily from purchases of fixed assets to build the infrastructure
needed to support the growth of our business. Depreciation and amortization
expenses represented 11% of our total revenues for the year ended December 31,
1997 and 7% for the year ended December 31, 1998.
OTHER INCOME (EXPENSES), NET. Other income (expenses), net decreased from
approximately ($98,000) for the year ended December 31, 1997 to approximately
($157,000) for the year ended December 31, 1998. This decrease resulted from the
interest expense incurred from capital equipment leases entered into during the
last part of 1997 and the early part of 1998.
INCOME TAXES. No provision for income taxes has been recorded for either
the year ended December 31, 1997 or the year ended December 31, 1998 due to
accumulated net operating losses. We have recorded a valuation allowance for the
full amount of our net deferred tax assets as a result of the uncertainty
surrounding the timing of the realization of these future tax benefits.
27
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth unaudited quarterly results for the eight
fiscal quarters ended December 31, 1999, as well as, such data expressed as a
percentage of our net revenues for each quarter. This information has been
presented on the same basis as our audited consolidated financial statements
appearing elsewhere in this prospectus and, in our opinion, include all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary to present fairly the unaudited quarterly results. This information
should be read in conjunction with our audited consolidated financial statements
and the related notes appearing elsewhere in this prospectus. The operating
results for any quarter are not necessarily indicative of results for any future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
CONSOLIDATED STATEMENT OF OPERATIONS 1998 1998 1998 1998 1999 1999 1999 1999
DATA: ---------- --------- --------- -------- ---------- --------- --------- --------
(IN THOUSANDS, UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Subscription/transaction
revenues........................ $ 795 $ 939 $ 1,123 $ 1,231 $ 1,373 $ 1,572 $ 1,984 $ 2,332
Services revenues................. 560 837 1,355 2,026 3,125 3,065 3,393 2,286
------- ------- ------- ------- ------- ------- ------- -------
Total revenues.................. 1,355 1,776 2,478 3,257 4,498 4,637 5,377 4,618
COST OF REVENUES:
Cost of subscription/transaction
revenues........................ 179 188 154 187 130 179 172 211
Cost of services revenues......... 558 652 1,186 1,810 2,065 2,200 2,695 3,118
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenues:......... 737 840 1,340 1,997 2,195 2,379 2,867 3,329
Gross profit........................ 618 936 1,138 1,260 2,303 2,258 2,510 1,289
OPERATING EXPENSES:
Sales and marketing............... 1,100 1,010 1,086 1,385 1,340 1,567 1,976 2,260
Research and development.......... 1,004 1,092 977 1,198 1,121 1,256 1,670 2,147
General and administrative........ 478 725 706 653 619 753 1,068 1,240
Depreciation and amortization..... 83 84 220 250 281 362 456 526
Stock option compensation......... -- -- -- -- -- -- 89 289
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses........ 2,665 2,911 2,989 3,486 3,361 3,938 5,259 6,462
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations................ (2,047) (1,975) (1,851) (2,226) (1,058) (1,680) (2,749) (5,173)
Other income (expense).............. (39) 3 (91) (30) 52 71 49 9
------- ------- ------- ------- ------- ------- ------- -------
Net loss...................... $(2,086) $(1,972) $(1,942) $(2,256) $(1,006) $(1,609) $(2,700) $(5,164)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
PERCENTAGE OF REVENUES ---------- --------- --------- -------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Subscription/transaction
revenues...................... 58.7% 52.9% 45.3% 37.8% 30.5% 33.9% 36.9% 50.5%
Services revenues............... 41.3% 47.1% 54.7% 62.2% 69.5% 66.1% 63.1% 49.5%
------- ------- ------- ------- ------- ------- ------ -------
Total revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
COST OF REVENUES:
Cost of subscription/transaction
revenues...................... 13.2% 10.6% 6.2% 5.7% 2.9% 3.9% 3.2% 4.6%
Cost of services revenues....... 41.2% 36.7% 47.9% 55.6% 45.9% 47.4% 50.1% 67.5%
------- ------- ------- ------- ------- ------- ------ -------
Total cost of revenues:....... 54.4% 47.3% 54.1% 61.3% 48.8% 51.3% 53.3% 72.1%
Gross margin...................... 45.6% 52.7% 45.9% 38.7% 51.2% 48.7% 46.7% 27.9%
OPERATING EXPENSES:
Sales and marketing............. 81.2% 56.9% 43.8% 42.5% 29.8% 33.8% 36.7% 48.9%
Research and development........ 74.1% 61.5% 39.4% 36.8% 24.9% 27.1% 31.1% 46.5%
General and administrative...... 35.3% 40.8% 28.5% 20.0% 13.8% 16.2% 19.9% 26.9%
Depreciation and amortization... 6.1% 4.7% 8.9% 7.7% 6.2% 7.8% 8.5% 11.4%
Stock option compensation....... -- -- -- -- -- -- 1.7% 6.3%
------- ------- ------- ------- ------- ------- ------ -------
Total operating expenses...... 196.7% 163.9% 120.6% 107.0% 74.7% 84.9% 97.9% 140.0%
------- ------- ------- ------- ------- ------- ------ -------
Loss from operations.............. (151.1)% (111.2)% (74.7)% (68.3)% (23.5)% (36.2)% (51.2)% (112.1)%
Other income (expense)............ (2.9)% 0.2% (3.7)% (0.9)% 1.2% 1.5% 0.9% 0.2%
------- ------- ------- ------- ------- ------- ------ -------
Net loss.................... (154.0)% (111.0)% (78.4)% (69.2)% (22.3)% (34.7)% (50.3)% (111.9)%
======= ======= ======= ======= ======= ======= ====== =======
</TABLE>
28
<PAGE>
Our operating results have varied on a quarterly basis and may fluctuate
significantly in the future. In addition the quarterly results of any quarter do
not indicate results to be expected for a full fiscal year.
For the three months ended December 31, 1999, service revenues decreased
sequentially due to the effect of Year 2000 issues. Many clients postponed the
start of any new service engagements scheduled to begin in November and
December 1999 and instead started these engagements in the first quarter of
2000. Training revenues, which are a component of service revenues, also
decreased for the same reasons. The overall gross margin decreased in quarters
ending June 1999 through December 1999 as a result of increased costs related to
our acquisition of Quantum Consulting Associates, Inc. The acquisition of
Quantum allowed us to enhance our offering of management consulting services. We
have continued to hire personnel and enhance our capabilities in this area
through December 1999. Our gross margin was most negatively affected in the
quarter ended December 1999 as a combined result of decreased service revenues
related to Year 2000 issues and increased costs related to our acquisition of
Quantum.
Other factors that could affect our quarterly operating results include
those described below and elsewhere in this prospectus:
- Our ability to attract new clients and retain current clients which could
lead to changes in our revenues;
- The announcement or introduction of new products or services by us or our
competitors which could also lead to changes in our revenues;
- Changes in the pricing of our products and services or those of our
competitors;
- Variability in the mix of our subscription/transaction and service
revenues in any quarter which could affect our margins; and
- The amount and timing of operating expenses and capital expenditures
relating to expansion of our business.
We believe that, while the quarterly period to period comparisons furnish
important information about our revenues and expenses, these comparisons are not
necessarily meaningful and should not be relied upon as indicators of future
performance. Finally, as a result of these foregoing factors, our annual or
quarterly results of operations may be below the expectations of the public
market analysts or investors. If this occurs, the market price of our common
stock may decline.
LIQUIDITY AND CAPITAL RESOURCES
We have primarily financed our operations through private sales of
convertible preferred stock, borrowings under our line of credit and capital
lease obligations, and net revenues generated from our business. Through
December 31, 1999 we have raised cumulative net proceeds of approximately
$26.2 million through convertible preferred stock offerings. As of December 31,
1999 we had cash and cash equivalents of approximately $961,000 plus short term
investments of approximately $3.9 million, an accumulated deficit of
approximately $53.5 million and a working capital deficit of approximately
$3.8 million. In February 2000, we raised additional funds of approximately
$17.0 million from the issuance of Series E convertible preferred stock.
Net cash used in operating activities totaled approximately $5.5 million in
1997, $3.9 million in 1998, and $5.7 million in 1999. Net cash flows from
operating activities in each period reflect net losses of approximately
$9.3 million in 1997, $8.3 million in 1998, and $10.5 million in 1999, and to a
lesser extent, are offset by the non-cash expenses relating to depreciation and
amortization, provision for allowance for doubtful accounts, and stock option
compensation. In addition the net
29
<PAGE>
cash used in operations was increased by the growth in accounts receivable and
decreased by the growth in accounts payable, accrued compensation and deferred
revenues.
Net cash used in investing activities totaled approximately $1.2 million in
1997, $3.8 million in 1998, and $5.0 million in 1999. Our investing activities
reflect the additions of property and equipment, purchases of investments, and
the acquisition of subsidiaries completed during 1999. We also anticipate that
our capital expenditures will increase over the next several years as we expand
our facilities and acquire equipment to support expansion of our sales,
marketing, and research and development activities.
Our financing activities provided cash of approximately $6.8 million in
1997, $14.0 million in 1998, and $3.8 million in 1999. These positive financing
cash flows primarily reflect the net proceeds from the issuance of redeemable
convertible preferred stock, and from the issuance of the line of credit and
capital lease obligations.
Amounts borrowed from one lending institution for capital leases are due
over 36 to 48 month repayment periods and are collateralized by our software
products. As of December 31, 1997, 1998, and 1999 the outstanding balance under
this equipment line of credit was approximately $612,000, $1.3 million, and
$940,000, respectively.
In March 1999, we terminated the line of credit and negotiated with a
different bank a $2.5 million secured revolving credit facility and a
$1.5 million equipment line of credit. The line bears interest at prime rate
plus 0.75% percent for the secured revolving credit facility and prime rate plus
0.85% percent for the equipment line of credit. In September 1999, we negotiated
to increase the equipment line to $3.0 million. As of December 31, 1999 the
outstanding balance under this equipment line of credit was approximately
$1.7 million.
In March 2000, we renegotiated the financial covenants applicable to our
secured revolving credit facility and increased our aggregate borrowing limit
under the equipment line of credit to $4.8 million. One of these financial
covenants restricts us from incurring operating losses in excess of $5,000,000
for each of the second, third and fourth quarters of 2000, and $2,000,000 in any
quarters thereafter. Commencing with the first quarter of 2002, we are
restricted from incurring operating losses in any two consecutive quarters.
Additionally, we are required to maintain a "quick ratio," as defined in the
loan documents, of at least 1.25 at all times, as well as specific minimum
tangible net worth amounts on specified future dates.
Our secured revolving credit facility expires on September 5, 2000. The
amounts borrowed under the equipment line are initially subject to interest-only
payments and after the interest-only period will be repayable over a three-year
time period.
We intend to continue the investment in the business, particularly in the
areas of research and development, sales, and marketing. Our future liquidity
and capital requirements will depend on numerous factors, including:
- The costs and timing of expansion of sales and marketing activities;
- The costs and timing of product development efforts and the success of
these development efforts;
- The extent to which our existing and new products and services gain market
acceptance;
- The level and timing of revenues;
- The costs involved in maintaining and enforcing intellectual property
rights;
- The timing of market developments; and
- Available borrowings under line of credit and capital lease arrangements.
30
<PAGE>
In addition, we may use cash resources to fund acquisitions of complementary
businesses and technologies; however, we currently have no commitments or
agreements and are not involved in any negotiations regarding any of these
transactions. We believe that the net proceeds from this offering, combined with
current cash resources, will be sufficient to meet our working capital and
capital expenditures for at least the next 12 months. Thereafter, we may find it
necessary to obtain additional equity or debt financing. In the event that
additional financing is required, we may not be able to raise it on terms
acceptable to us, if at all.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative securities
instruments and hedging activities. It requires an entity to recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. As we do not engage in derivative or hedging
activities, we do not expect the adoption of this standard to have a significant
impact on our financial statements.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We develop products in the United States and market our products in North
America, and to a lesser extent, Europe and the Asia-Pacific region. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
As a majority of sales are currently made in U.S. dollars, a strengthening of
the dollar could make our products less competitive in foreign markets. We do
not expect any material adverse effect on our consolidated financial position,
results of operations or cash flows due to movements in any specific foreign
currency.
We currently do not use financial instruments to hedge operating expenses by
our European subsidiary. We intend to assess the need to utilize financial
instruments to hedge currency exposures on an ongoing basis. Our interest income
is sensitive to changes in the general level of U.S. interest rates,
particularly since the majority of our investments are in short-term
instruments. Due to the short-term nature of our investments, we believe that
there is no material risk exposure. Therefore, no quantitative tabular
disclosures are required.
31
<PAGE>
OUR BUSINESS
OVERVIEW
We are a leading provider of solutions for global trade management. Our
offerings include an extensive library of global trade content, web-based B2B
solutions, management consulting and solution services. Global trade involves
the physical movement of goods across country borders, the management of the
information and processes required to enable global trade and the financial
exchange process required to complete related transactions. Our solutions focus
on the management of information and processes required to enable global trade
while enhancing collaboration across a client's global trade network, which
consists of exporters, forwarders, carriers, brokers, importers, banks and
customs or regulatory agencies. These offerings address the need for all members
of the global trade network to automate and optimize the multiple functions
associated with global trade. The core of our entire solutions suite is our
extensive library of trade content that leverages a sophisticated, rules-based
engine and unique trade expertise to deliver a web-based solution that enables
clients to automate their complex import and export needs. Our primary
Internet-based delivery mechanism for our solutions is our web-based portal,
TradePrism.com.
We believe the dynamics of global trade present both compelling
opportunities and challenges for companies participating in the global
marketplace. Global trade is complex and resource-intensive and has largely
remained a manual and inefficient process. The Internet and e-commerce provide
further opportunities for global expansion but also present significant
operational challenges. Our solutions enable clients to address these
difficulties and inefficiencies in order to capitalize on the large, highly
fragmented and rapidly growing opportunity that global e-commerce presents.
We serve an international client base of over 200 companies, some of whom
include Dell, Lucent, Microsoft, Nike, the New Zealand Dairy Board, Nortel,
Robert Bosch and Silicon Graphics. We provide comprehensive import and export
content to enable global trade management for transactions accounting for
approximately $4.1 trillion of all global trade in 1999. In addition, our
clients currently utilize our solutions to ship to over 120 countries worldwide.
We provide integrated B2B solutions for vertical Internet trading markets
such as CatalogCity.com, RightFreight.com, SupplierMarket.com and Arzoon.com and
are continuing to develop our B2B solutions to meet the needs of specific
vertical industries. To facilitate the marketing and delivery of our solutions,
we also maintain relationships with a number of leading technology companies,
including IBM, JD Edwards, Oracle and Sun Microsystems.
INDUSTRY BACKGROUND
The impact of multilateral trade agreements, the expansion of the modern
supply chain, competitive pressures and the rapid growth of e-commerce are
accelerating the pace of corporate globalization. The volume of global trade has
increased significantly over the last several decades and has reached an
unprecedented level in terms of both the number and size of transactions. The
World Trade Organization reported that world trade increased from $4.1 trillion
in 1980 to nearly $11.0 trillion in 1998. The U.S. Customs Service predicts that
U.S. imports alone will rise from more than $1 trillion in 1999 to approximately
$2 trillion by 2005. The U.S. Customs Service also projects that formal customs
entries will increase from approximately 18 million in 1999 to over 30 million
in 2005. As a result of this globalization, we believe the resources and
expertise necessary to manage global trade will increase significantly.
32
<PAGE>
DIFFICULTIES OF GLOBAL TRADE
COMPLEX NETWORK. The modern global marketplace is a fast-paced, complex
trade network. Global trade involves an extended and geographically disperse
network of exporters, forwarders, carriers, brokers, importers, banks and
customs and regulatory agencies. These participants must be coordinated to
manage difficult physical, financial and information flows while satisfying
extensive country-specific trade requirements. These complex processes include
classifying and screening orders, determining and applying for required
licenses, generating and submitting extensive documentation, managing and
minimizing country-specific tariffs and duties, and tracking and tracing
shipments across the entire global trade network. Furthermore, trade
requirements are unique for every country, often undocumented, constantly
changing and difficult to interpret.
COMPLIANCE BURDEN. The burden of responsibility for regulatory compliance
and documentation weighs heavily on all members of the global trade network. The
U.S. Customs Service audits companies engaging in global trade. These audits
take an average of 15 months to complete and require an average of 1900 audit
hours. If caught in violation of international trade regulations, companies face
a variety of possible penalties and negative consequences, including fines, loss
of import/export privileges and adverse publicity. As a result, companies must
maintain an appropriate global trade compliance program to understand who is
buying their products and the end use of their products.
INEFFICIENCIES OF GLOBAL TRADE
INADEQUATE INFRASTRUCTURE AND PROCEDURES. Intense global competition is
requiring businesses to collaborate effectively with members of their global
trade network and to efficiently manage, optimize and utilize information flows.
For example, companies are finding it necessary to collaborate with trading
partners to take advantage of preferential trade programs such as those
promulgated under the North American Free Trade Agreement, or NAFTA. In
addition, companies are maintaining buffer inventory because their clients
demand heightened predictability and timely delivery. Customers are also
demanding heightened predictability and timely delivery, including real-time
tracking of shipments. Historically, businesses have lacked the technology and
procedures necessary to capitalize fully on the growth opportunities presented
by globalization. For example, Forrester Research estimates that 46% of
Internet-based orders to the U.S. from international clients go unfilled because
companies lack the procedures for international fulfillment.
RESOURCE-INTENSIVE. The resource demands for global trade management are
extensive, and existing trade compliance procedures, which are largely manual
and paper-based, tend to be highly inefficient and error-prone. Many companies
engaging in global trade cannot maintain large in-house staffs. Therefore, they
are required to outsource trade compliance and documentation processes to
third-party logistics firms or forwarders/brokers for a substantial fee. While
trade agreements such as NAFTA have removed barriers to global trade,
record-keeping requirements continue to increase substantially. Furthermore,
Benchmarking Partners estimates that up to 25% of a company's international
inventory is maintained as surplus stock due primarily to the inefficiencies of
global trade.
THE ROLE OF THE INTERNET
The rapid growth of the Internet as a global medium through which businesses
communicate, share information and conduct business internally and directly with
their customers, suppliers and other business partners worldwide has further
hastened this era of escalating global competition. Forrester Research estimates
that B2B commerce will grow from approximately $406 billion in 2000 to
approximately $2.7 trillion in 2004. Furthermore, the Internet provides the
opportunity for
33
<PAGE>
organizations to pursue solutions which automate and optimize the global trade
management processes.
MARKET OPPORTUNITY
We believe companies seeking to realize the benefits of global trade
management require solutions that address the following concerns:
LACK OF CENTRALIZED, COMPREHENSIVE AND CURRENT GLOBAL TRADE CONTENT. A
central, up-to-date library of global trade content is difficult to create and
maintain. As a result, there is a lack of a central source for this information.
Consequently, many multi-national companies resort to purchasing niche trade
solutions that cover only a limited number of countries or engage consulting
organizations specializing in selected countries to improve their global trade
practices. Given these deficiencies, we believe that companies are unable to
optimize decision-making based on access to dynamic centralized global trade
information.
LIMITED FUNCTIONAL SOLUTIONS FOR GLOBAL TRADE MANAGEMENT. In addition to
lacking comprehensive global trade content, currently available solutions lack
the breadth of functionality for clients to effectively manage their global
trade processes. For example, these solutions may address only limited global
trade functions, such as export document generation or import duty calculation.
Furthermore, these solutions may address the requirements of only one or a few
of the participants within the global trade network. Finally, many of these
solutions lack the technical architecture to operate over the Internet and do
not provide the portal capabilities necessary to facilitate global collaboration
of the trade network.
TRADE EXPERTISE ACROSS GEOGRAPHIC AND VERTICAL MARKETS. Companies offering
global trade consulting services typically focus on only one part of the
process, such as logistics or trade regulations, or only on a limited number of
industries, with very little understanding of the trade-specific implications of
their recommendations. Traditional consulting firms do not possess the
operational knowledge required to optimize global trade practices for clients
across the entire global trade network.
NEED FOR COMPREHENSIVE SOLUTION SERVICES. The resources required to manage
global trade effectively are extensive and include global trade expertise,
software solutions and related information technology infrastructure and
personnel to implement these solutions. Companies are frequently seeking
comprehensive outsourced solutions from third parties to satisfy their global
trade management needs because of the high costs and resource demands associated
with maintaining an in-house global trade department.
OUR SOLUTIONS
We believe that we are the only company offering a comprehensive suite of
global trade management solutions that address all of these needs. The
fundamental elements of our solutions include:
CENTRALIZED, COMPREHENSIVE AND CURRENT GLOBAL TRADE CONTENT. Our extensive
and actively managed library of country-specific trade requirements is the core
of our entire suite of global trade management solutions. We leverage our unique
global trade expertise and a sophisticated rules-based engine to deliver
accurate, comprehensive, up-to-date global trade information to our clients via
a web-based portal.
SOPHISTICATED, WEB-BASED B2B SOLUTIONS. We offer a sophisticated suite of
web-based, B2B solutions for global trade management. Our B2B solutions enable
clients to automate and optimize information management procedures across their
entire global trade networks. In addition, our
34
<PAGE>
solutions address the requirements of multiple members of a client's extended
global trade network and enable collaboration among all of these participants.
INDUSTRY AND COUNTRY-SPECIFIC GLOBAL TRADE EXPERTISE. Our management
consulting professionals analyze and address the global trade practices and
opportunities of our clients. Our consulting services help companies effectively
enter new geographic markets, better serve existing markets and address areas of
compliance risk. As part of our consulting offerings, we design, recommend and
implement process improvements for our clients.
COMPREHENSIVE SOLUTION SERVICES. Our solution services leverage
sophisticated technology, intellectual property and trade expertise to enable
our clients to outsource the information and process management required to
trade globally. These services enable clients to outsource all or parts of their
trade management procedures which allows them to focus on their core
competencies and realize financial benefits associated with efficient and
effective global trade management.
Our suite of global trade management solutions provides our clients with the
following benefits:
INFRASTRUCTURE TO PURSUE GLOBAL GROWTH OPPORTUNITIES. Our global trade
solutions leverage our global trade expertise and web-based functionality to
simplify many of the complexities associated with global trade management.
Because our web-based solutions are flexible and modular, our clients can select
specific components, or engines, to address their particular global trade needs.
They may also choose to outsource the management of all or parts of their global
trade network to us. Because our solutions automate these processes, our clients
can focus on their core competencies and compete more effectively in the global
marketplace.
EASY ACCESS TO RELIABLE GLOBAL TRADE CONTENT. We constantly monitor and
interpret global trade rules and regulations and deliver them to our clients
through a dynamic web-based portal, which fully integrates with our B2B
solutions. We believe that our ability to provide our clients with access to
current, centralized and standardized trade requirements differentiates us in
the marketplace.
TECHNOLOGY ENHANCING B2B COLLABORATION. Our solutions suite provides a
platform for clients to collaborate in real-time over the Internet with members
of their global trade network. Our Internet architecture includes XML technology
that enables our clients to exchange information with their trade partners,
regardless of differing information technology infrastructures, systems or
software. Our web-based solutions are flexible, scalable and user-friendly,
which we believe will facilitate their acceptance across extended members of a
company's global trade network. This improved collaboration enables our clients
to more effectively move goods globally and strategically manage information
required in their global trade process.
AUTOMATION AND OPTIMIZATION OF RESOURCE-INTENSIVE PROCEDURES. By automating
and optimizing currently inefficient procedures, our solutions enable companies
to enhance revenue opportunities, increase operational efficiencies and reduce
the costs of global sourcing. These benefits enable clients to more effectively
and efficiently compete in the global marketplace.
MANAGEMENT OF THE GLOBAL TRADE COMPLIANCE BURDEN. By automating regulatory
compliance and documentation procedures, our solutions help clients protect
against potential fines, sanctions and business risks that may result from
noncompliant or inefficient global trade management systems.
LEVERAGING OF INFORMATION TECHNOLOGY INVESTMENTS. Our web-based platform is
designed to integrate existing information management systems and software
applications and work within the capacity of existing networks. The ability of
our products to integrate existing information systems
35
<PAGE>
and software applications enables our clients to preserve and build upon their
corporate knowledge and information technology investments, while realizing the
benefits of our web-based solutions.
OUR STRATEGY
We seek to be the leading provider of web-based, B2B solutions for global
trade information management. The key elements of our strategy include:
BECOME THE STANDARD AND PREEMINENT BRAND FOR GLOBAL TRADE MANAGEMENT. We
seek to serve as the information backbone for global trade management. We expect
to expand our offerings of web-based trade information to cover countries
engaged in over 75% of the world's global trade transactions. We plan to
complement our solutions suite with an aggressive global branding campaign that
leverages our strategic alliances and relationships with clients, governments
and industry consultants. Moreover, we intend to provide solutions to all
members of the global trade network, positioning us to be recognized as the
standard for global trade management.
EXPAND GLOBAL TRADE CONTENT AND ENHANCE SOLUTIONS OFFERINGS. We intend to
continue to develop a comprehensive suite of solutions with features,
functionality and services that allow companies of all sizes to manage the
complexities of global trade. Because access to reliable, up-to-date
country-specific trade requirements is essential to companies engaging in global
trade, we intend to fortify our trade content by continuing to hire top global
trade experts worldwide. We plan to continue developing various components of
our B2B solutions to address the specific needs of various industries and trade
participants. We also intend to provide packaged solutions that are tailored to
provide immediate value to companies in specific industries, as well as
mid-market solutions that are competitively priced, quickly deployed and easily
managed. In addition to in-house product development, we intend to supplement
these initiatives by evaluating opportunities for acquisitions and strategic
investments.
ENHANCE TRANSACTION-BASED REVENUE STREAM. We will continue to provide
integrated solutions for industry-leading web-based B2B and B2C e-commerce
marketplaces. These marketplaces require global trade management solutions to
enable the cross-border movement of goods between buyers and sellers. We plan to
derive primarily transaction-based revenues from these Internet trading markets.
As these marketplaces add new clients that trade globally, we will, in turn,
receive a recurring revenue benefit of those new clients executing transactions
using our engines.
EXPAND OUR REACH AND RANGE. We intend to continue expanding our global
presence to enhance our competitive position worldwide and our ability to serve
and support our clients. We anticipate expanding our sales, marketing and
services presence in strategically important geographic markets. In addition, we
intend to utilize our strategic alliances and our relationships with leaders
within specific vertical markets that have strong potential for global
expansion. We also intend to evaluate opportunities for acquisitions and
investments that can accelerate our global expansion.
EXPAND OUR SOLUTION SERVICES CAPABILITIES. We intend to invest actively in
our solution services offerings in order to capitalize on a growing demand for
outsourced trade management solutions. We will continue to provide solution
services that will enable companies to outsource all or parts of their global
trade functions. These offerings target clients ranging from the Fortune 500 to
Internet start-ups and will be customized to an individual client or provided as
a shared service.
PRODUCTS AND SERVICES
Our comprehensive web-based solutions for global trade management consist of
our library of trade regulations, called Global eContent, our web-based B2B
solutions, including TradeSphere and TradePrism.com, our management consulting
services, called TradeValue, and our solution services,
36
<PAGE>
called TradeVantage. Clients can select elements of each product and service to
address their specific issues and opportunities. This flexibility offers our
clients a unique solution to automate and optimize their global trade process.
GLOBAL ECONTENT
Global eContent is a dynamic library of country-specific trade requirements
that is available to our clients. This extensive base of electronic content
serves as the platform for our entire suite of global trade management
solutions. Because of the global trade expertise and specialization required to
interpret and fully understand the impact of country-specific trade regulations,
we employ a full-time content and compliance team dedicated exclusively to
tracking and managing trade regulations, trade content and international
regulatory data. These full-time Global eContent experts also design
intelligence into the data to be leveraged by our B2B solutions (e.g.,
algorithms which can detect restricted parties even if names or addresses are
misspelled, or logic which can search for lower duty rates given preferential
programs such as NAFTA and others). This team consists of former government
compliance officials, international lawyers, licensed customs brokers,
in-country data experts, industry consultants and individuals with previous
responsibility for managing import and export functions within multi-national
organizations in various industries.
Periodic regulatory and policy changes require that our B2B solutions be
updated on a regular basis to keep current with the latest country-specific
trade regulations. To meet this need, daily updates and postings are made
available through TradePrism.com, our web-based portal, from which updates and
changes can be electronically downloaded and applied. Information provided in
our Global eContent library includes trade data, regulation updates, regulation
notices, trade committee meeting information, requests for public comment on
regulatory issues and final rulings on proposed regulation.
The following table lists the countries for which we provide Global eContent
support. The level of data we provide varies by country and ranges from simple
references to extensive import and export regulations.
Australia
Austria
Belgium
Brazil
Canada
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hong Kong
Hungary
Ireland
Italy
Japan
Kazakhstan
Latvia
Lithuania
Luxembourg
Netherlands
New Zealand
Norway
Poland
Portugal
Romania
Russia
Singapore
South Africa
South Korea
Spain
Sweden
Switzerland
Turkey
Ukraine
United Kingdom
United States
B2B SOLUTIONS
Our suite of web-based, B2B solutions includes TradeSphere, TradePrism.com
and our TradeSphere Services.
TRADESPHERE
TradeSphere intelligently automates and optimizes the information exchanges
required to move goods across international borders. TradeSphere components
facilitate specific global trade functions, strategically manage the information
required to trade globally and enhance collaboration among extended members of a
client's global trade network. TradeSphere is flexible, modular and highly
scalable and is offered in multiple languages. Components of TradeSphere include
restricted
37
<PAGE>
party and boycott/embargo screening, landed cost calculation, shipment
documentation, global tracking and tracing, sourcing optimization, and tariff
management. Clients may use our TradeSphere components on either a subscription
or transaction fee basis. We also offer these components as a hosted solution.
We provide TradeSphere as an integrated solution for vertical Internet trading
market providers such as Arzoon.com, CatalogCity.com, RightFreight.com and
SupplierMarket.com. We are continuing to develop TradeSphere to meet the
specific needs of targeted vertical industries.
The following table summarizes the key functions that we offer as a part of
our current TradeSphere business plan. We also continue to develop additional
TradeSphere components to meet the growing needs of extended members of the
global trade network.
<TABLE>
<S> <C> <C>
OPERATIONAL MODULES--PROVIDE SHORT TO MEDIUM RANGE PLANNING OF GLOBAL TRADE PRACTICES.
TradeSphere Exporter - Manages export process for companies trading
globally.
- Manages transactions to ensure compliance with export
laws and international trade agreements before goods
are exported.
- Performs checks and calculations on orders and
shipments.
TradeSphere Broker - Provides collaboration between brokers and global
trade partners.
- Manages the import entry information provided by the
broker.
TradeSphere Importer - Manages import process for companies trading
globally.
- Electronically files import entries.
- Performs checks and calculations on pre-entries and
commercial invoices.
- Manages transactions to ensure compliance with import
laws and international trade agreements before goods
are imported.
</TABLE>
38
<PAGE>
<TABLE>
<S> <C> <C>
EXECUTION MODULES--PROVIDE MANAGEMENT OF THE DAY-TO-DAY GLOBAL TRADE PRACTICES.
Restricted Party Screening - Screens transaction parties against a government
maintained list of restricted parties.
- Places holds on transactions in which restricted
parties are identified.
Landed Cost Calculator - Calculates total landed cost, including duties, taxes
and fees.
- Optimizes supply sourcing decisions associated with
international shipments.
Document Director - Produces the required documents for international
shipments.
- Tracks the status of documents as they flow among
participants in international shipments.
- Determines the delivery method for each document such
as fax, email or printer.
Tariff Agent - Maintains current duty rates, tariff codes and FTZ
(free trade zone) information for clients to
reference.
</TABLE>
Our TradeSphere solutions leverage components of our client-server software
solution for import and export management named Global Passport. Global
Passport's capabilities include generating international shipping documents,
calculating import duties, ensuring adherence to trade regulations,
electronically filing entries with customs and tracking and tracing
international shipments. Its intelligent algorithms and global trade data serve
as the import/export engines within our TradeSphere solution.
TRADEPRISM.COM
TradePrism.com is our global trade management portal that allows our clients
to access TradeSphere solutions via the Internet, gather global trade data from
our Global eContent library and collaborate with other members of their global
trade network from a public or private exchange portal.
TRADESPHERE SERVICES
Our TradeSphere Services are provided to our clients to complement our
TradeSphere solutions and include the following:
IMPLEMENTATION SERVICES. Our implementation consultants assist our
TradeSphere clients with the development and management of a project and with
the technical activities during the installation phase, provide them with
comprehensive documentation instructions and offer training classes to help our
clients understand the functions of TradeSphere.
APPLICATION SERVICES. These services facilitate data integration with
existing third-party applications and enable information to be shared between
TradeSphere and our clients' other enterprise systems. These services result in
cost-effective implementation of our solutions by
39
<PAGE>
enabling our clients to undertake the required integration tasks themselves and
to leverage our alliances with our service partners.
POST IMPLEMENTATION SUPPORT. Client support specialists are available
on a daily basis and tend to develop ongoing relationships with our clients to
better understand their needs. To facilitate troubleshooting, we maintain
dial-in access to the client's production environment. We also give clients
opportunities to provide feedback on our solutions through meetings of our
Client Council, which is comprised of eight to twelve of our key clients, and
our annual user conference, which is open to our full client base.
MANAGEMENT CONSULTING
Our management consulting services, called TradeValue, leverage our
extensive global trade expertise and our proprietary analytical methodology. Our
TradeValue services range from operational assessments to detailed strategic
analyses designed to enable clients to improve their global trade practices.
Each consulting engagement is based on focused objectives and deliverables that
are specifically tailored to our clients' needs. The size and length of a
management consulting engagement depends on the scope of work and the size and
complexity of the client.
Our TradeValue clients range from Fortune 500 companies to early stage
emerging companies. These clients include leading technology firms, Internet
companies, retail and consumer products companies, logistics providers and
automotive and industrial companies. Our TradeValue consultants provide
extensive, hands-on experience gained from careers in a variety of industry
sectors with specific areas of expertise including import and export operations
and compliance, international transportation, logistics and distribution, trade
finance, pricing, international marketing, training and manufacturing. All of
our consultants are trained in TradeValue proprietary assessment and
implementation consulting methodologies. Our initiatives tend to focus on
skill-set and knowledge transfer to the employees of our clients, thus resulting
in significant long-term value to clients after engagements have concluded.
Our TradeValue consulting services are divided into the following areas:
STRATEGIC CONSULTING. Our strategic consulting services are designed to
help an organization assess its global market potential, identify new revenue
opportunities and identify current areas of compliance risk. Some of these
offerings include:
- Quantifying and analyzing existing global trade management processes;
- Identifying and recommending import/export compliance processes;
- Developing global trade management processes, systems and organizational
structures; and
- Analyzing and quantifying global growth opportunities.
40
<PAGE>
OPERATIONAL CONSULTING. Our operational consulting services are designed to
define and improve the operational efficiencies of an organization's global
trade management practices. These services focus on import and export trade
processes, global trade information solutions and implementation of operational
global trade initiatives. Specific offerings include assisting clients in
licensing foreign nationals, accelerating customs clearance, minimizing duty
payments and expediting collection of accounts payable.
SOLUTION SERVICES
Our solution services, called TradeVantage, enable clients to leverage our
expertise to manage all or parts of their global trade operations. By hosting
our clients' global trade operations and providing additional resources and
expertise, we enable clients to focus on their core competencies and realize
financial benefits associated with efficient and effective global trade
management. Our solutions services are highly scalable and can range from:
- Managing specific components of a client's trade operations; to
- Hosting our solutions via the web, which clients can access on a
transaction or subscription basis through our TradePrism.com portal; to
- Managing a client's entire global trade operation.
SALES AND MARKETING
We market and sell our solutions through our direct sales force, resellers,
B2B marketplaces and strategic alliances. Our marketing organization is
responsible for educating the marketplace, generating leads, communicating with
market analysts, working with complementary technology and consulting partners
and creating sales programs and literature. In addition to our internal
resources, we rely on third parties such as public relations firms and graphic
design firms to assist us with our marketing campaigns.
As of March 31, 2000, our direct sales organization consisted of a total of
46 sales and marketing personnel. In addition to the direct sales force, members
from other departments within Vastera contribute to the sales effort at various
stages in the sales cycle.
Our marketing professionals assist in generating new sales opportunities by
creating various marketing programs, updating our web site and hosting or
sponsoring various events. We participate in a number of trade shows and
industry events. We also provide speakers from our company and our clients to
represent us in a number of industry forums. We host monthly teleconferences led
by individual experts focused on educating individuals involved in global trade
operations for companies worldwide. Our public relations plan is designed to
convey our messages to appropriate audiences and we reinforce these efforts
through our ongoing communications with a number of key industry analysts and
press representatives.
STRATEGIC ALLIANCES
The principal goals of our strategic alliances are to accelerate the global
market acceptance of our solutions, to extend our global resources and to help
our clients realize the benefits of our solutions quickly. Our strategic
alliances are summarized as follows:
- We have technology alliances with Sun Microsystems, Hewlett-Packard and
Microsoft, and serve as an original equipment manufacturer, or OEM, for
IBM WebSphere.
- We have marketing certifications of varying degrees from a number of
enterprise resource planning, or ERP, companies including SAP, Oracle,
Baan and JD Edwards.
41
<PAGE>
- We have reseller agreements with i2 Technologies and EXE Technologies.
- Components of our web-based, B2B solutions are incorporated into a number
of trade exchanges including Arzoon.com, CatalogCity.com, RightFreight.com
and SupplierMarket.com.
- We have strategic alliances with a number of consulting companies
including Andersen Consulting and KPMG Peat Marwick.
PRODUCT DEVELOPMENT
Our product engineering team is made up of over 68 professionals focused on
new and developing B2B solutions. Our product engineers are organized into the
following groups: quality assurance, documentation, release management, solution
development and sustaining engineering. Our solution development is structured
around project teams that are comprised of developers led by a senior
development manager responsible for delivering a defined solution engine. This
structure allows for the organization to quickly scale and allows us to
outsource non-critical development activities when necessary to bring products
to market quickly. These dedicated product engineers are partnered with a
product management team consisting of experienced global trade professionals who
set the product plan and requirements based on our business plan and market
dynamics. Our engines are tied into the complete TradeSphere suite through
process and specifications defined and managed by our infrastructure and
integration team.
In addition, our Global eContent development methodology and approach allows
us to deliver market leading solutions for import and export management for
specific countries. This effort requires synthesizing an often lengthy export or
import manual into a set of requirements that then are integrated with our
rules-based Global eContent engine. In addition, these solutions are designed so
that we can readily provide updates for frequent country regulation changes. We
believe our product development professionals, teamed with our 35 product
management trade professionals, allow us to provide robust, market-driven,
web-based technology solutions that are reliable and scalable.
Our research and development expenses totaled $6.2 million for the year
ended December 31, 1999, which represented 32% of our total revenues. We expect
to significantly increase our research and development efforts in future years.
42
<PAGE>
CLIENTS
We have over 200 clients utilizing some or all of our B2B solutions, Global
eContent, management consulting and solution services offerings. The following
is a partial list of our clients categorized by industry.
<TABLE>
<CAPTION>
TECHNOLOGY CONSUMER AND RETAIL PRODUCTS
- ---------- ----------------------------
<S> <C>
Dell Herman Miller
Hughes Network Systems Ortho-Clinical Diagnostics, a division of
Lucent Johnson & Johnson
Matsushita New Zealand Dairy Board
Microsoft Nike
Motorola S.C. Johnson
Nortel Sony
Novell
Silicon Graphics INTERNET MARKETPLACES
Sun Microsystems Arzoon.com
CatalogCity.com
INDUSTRIAL & AUTOMOTIVE PRODUCTS Fasturn.com
Garlock Sealing Technologies, a division RightFreight.com
of
Coltec Industries SupplierMarket.com
Ingersoll-Rand
Gates Rubber Company LOGISTICS
Mallinckrodt BAX Global
Robert Bosch Crowley Maritime
Schenker International
</TABLE>
Our long-standing relationships with clients such as Nortel and more recent
successes with clients, such as the New Zealand Dairy Board and a B2B solutions
provider, RightFreight.com, demonstrate our ability to service a variety of
large multi-national corporations with complex trade management networks as well
as emerging Internet portals and marketplaces.
CASE STUDIES
NORTEL
CHALLENGE: Prior to implementing our solutions, Nortel handled its global
trade management functions either manually or through a variety of internally
developed systems. As Nortel's business increased and the number of
international shipments grew, Nortel experienced challenges generating the
volume of global trade documentation required, which resulted in delayed
deliveries as goods were held up in customs. Another issue was the lack of
product visibility within Nortel's own global network of over 90 shipping sites
as well as across its global trade network.
SOLUTION: Our solutions were first implemented in 1993 and are now Nortel's
standard for global trade management. Our solutions have been deployed in the
United States, Canada, UK, Mexico, Brazil, Malaysia and Singapore. In late 1999,
Nortel purchased a subscription for TradeSphere and other web-based global trade
collaboration capabilities.
RESULTS: Our solutions have reduced Nortel's costs and improved global
trade information and time to market, resulting in more than $9.4 million of
value over two years. Our solutions were cited by Nortel as the project with the
highest return on investment for 1997.
43
<PAGE>
NEW ZEALAND DAIRY BOARD
CHALLENGE: The New Zealand Dairy Board (NZDB) is the world's largest single
dairy exporter, shipping more than 4,000 products to over 1,000 destination
ports in over 120 countries across six continents. Prior to implementing our
solutions, the NZDB maintained a 10-year-old legacy system and relied heavily on
contractors to modify this system. It also relied on frequent manual
intervention to handle business functions not addressed by its legacy system.
Each of the NZDB's international shipments averaged 12 documents. Adding further
complexity to the NZDB's global trade operations were frequent changes to
international shipping documents and regulations imposed by governments around
the world in an effort to protect their local dairy businesses. The NZDB
recognized that it could not continue to generate and update the necessary
country-specific shipping documents and trade regulations by simply adding
personnel.
SOLUTION: Our solutions were implemented in 1998 as the NZDB worldwide
standard for global trade management. The implementation of our solutions was
completed in less than six months.
RESULTS: Our solutions reduced the total number of source shipping
documents at the NZDB from over 5,000 to fewer than 300. In 1999, unlike
previous years, there were no late shipment dispatches caused by export
documentation errors. By utilizing our global trade solutions, the NZDB was able
to manage an estimated 300,000 ton increase in exports to approximately
1.3 million tons for the fiscal year ending in May 2000.
RIGHTFREIGHT.COM
CHALLENGE: RightFreight.com is an Internet-based B2B airfreight services
exchange, providing reverse auctions for carrier services including contract and
spot shipment proposal processing. To differentiate its offering,
RightFreight.com needed to determine how to address global trade in its business
processes and offer more value-added services to its clients.
SOLUTION: In December 1999, RightFreight.com selected our solution to
provide embedded and hosted global trade management capabilities. Our
TradeSphere solutions allowed for fast time-to-market and provided mission
critical global trade functions and value-added services such as restricted
party screening, landed-cost information and international document generation.
RESULTS: In less than eight weeks, RightFreight.com was able to create a
B2B exchange that included global trade capabilities by leveraging our global
trade expertise and extensive research and development investment.
COMPETITION
Our market is intensely competitive, evolving and highly fragmented. We
expect the intensity of competition to increase in the future. We face
competition from third-party development efforts, consulting companies and
in-house development efforts. We expect that these parties will continue to be a
principal source of competition for the foreseeable future. Our principal
competitors by solution segment include:
- Content aggregators such as Dun & Bradstreet and TradeCompass;
- International trade logistics providers such as Capstan, Nextlinx,
Rockport and Syntra;
- Trade consultants such as management consulting firms, law firms and
boutique consulting firms; and
- Outsourcing service providers such as third party logistics providers,
fourth party logistics providers and carriers.
44
<PAGE>
We believe that the principal competitive factors affecting our market
include a referenceable client base, the breadth and depth of a given solution,
product quality and performance, customer service, core technology, product
scalability and reliability, product features, the ability to implement
solutions and the value of a given solution. Although we believe our solutions
currently compete favorably with respect to these factors, our market is
relatively new and is evolving rapidly. We may not be able to maintain our
competitive position against current and potential competitors, especially those
with significantly greater financial, marketing, service, support, technical and
other resources.
Many of our competitors and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, greater name recognition, global presence and established channel
partners, a broader range of products to offer, and a larger installed base of
clients than us, each of which could provide them with a significant competitive
advantage over us. In addition, we expect to experience increased price
competition as competitors compete for market share. It is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. We may not be able to compete successfully with
existing or new competitors and this competition may have a material adverse
effect on our business.
TECHNOLOGY
Our B2B solutions are based on leading edge technology, enabling us to
deliver high performance, scalable, flexible and interoperable B2B solutions.
Our B2B solutions are built using a browser-based user interface, or UI, XML
integration technology and are also offered with a traditional Windows or
Motif-based UI. Our TradeSphere architecture supports the client demand for
configurability, electronic updates to country-specific content and plug-in
additions for new countries, functions and content.
For our web-based solutions infrastructure, we utilize IBM's WebSphere,
HTML/DHTML, Java and Enterprise Java Beans, MQ Systems Integration Series and
XML. We incorporate a SmarteLink architecture that facilitates XML integration
and also leverages our repository of Forte-developed C++ applications allowing
interoperability with our web-based applications.
Unique to the TradeSphere design and implementation approach is that both
content rules and configurations or installation-specific options are stored as
metadata within the solution's database. This approach supports a single source
solution which is able to operate on multiple hardware platforms, operating
environments and database platforms. Currently supported environments include
Windows NT and UNIX operating environments based on Sun Solaris, IBM AIX and
HP-UX platforms. Currently supported relational databases include either the
Oracle or SQL Server. Current user interfaces include a web-browser, Windows NT
and Motif. The system also supports multiple languages including double byte
languages.
45
<PAGE>
[Graphic showing TradeSphere Architecture including Web Browser, firewall,
Web Server Application Server--IBM WebSphere, Server Manager and firewall.]
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
We rely primarily on a combination of copyright, trade secret and trademark
laws, confidentiality agreements with employees and third parties, and
protective contractual provisions contained in license agreements with
consultants, vendors and clients to protect our proprietary rights.
We have registered the trademark Vastera in the United States. We have also
filed federal trademark applications with respect to Global Trade Management,
Global Trade Value Chain, TradeSphere, TradeValue, TradeVantage, TradePrism,
Global eContent, TradeAxiom, Opening the World to eBusiness, Global Passport,
Smarte Commerce, Smarte Contents, Smarte Methods and SmartWare. The Vastera logo
is also a trademark of Vastera, Inc.
We believe the strength of our trademarks and service marks benefits our
business and we intend to continue to protect our registered and common law
trademarks and service marks in the United States and abroad. We have not
secured registration of all of our marks in the United States and have not
pursued registration in any foreign country.
We also protect our proprietary rights by requiring employees to agree not
to reveal any proprietary information to our competitors and to sign a
confidentiality agreement. Employees also are required to execute a
non-competition agreement, which restricts them from working for a competitor
for one year after termination of employment with us. However, we may not obtain
these agreements in every case.
We incorporate technology from third parties into our software. We currently
have non-exclusive license agreements with Forte Software, Inc. and IBM for the
use of their technology in our global trade management solutions.
EMPLOYEES
As of March 31, 2000, we had 230 employees. Our employees are not
represented by any collective bargaining agreement and we have never experienced
a work stoppage. We believe our relations with our employees are good.
46
<PAGE>
FACILITIES
Our principal administrative, sales, marketing, technical support and
product development facilities are located at our headquarters in Dulles,
Virginia. We currently occupy approximately 50,000 square feet of office space
in the Dulles facility under a lease that terminates on October 31, 2002. We
also lease office space for sales, marketing and consulting activities outside
of San Francisco, outside of Denver and outside of London in the United Kingdom.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
47
<PAGE>
MANAGEMENT
Our directors, executive officers and other management employees and their
respective ages and positions as of December 31, 1999, are as follows.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Executive Officers and Directors
Richard A. Lefebvre....................... 51 Chairman of the Board of Directors
Arjun Rishi............................... 36 Chief Executive Officer, President and Director
Mark J. Ferrer............................ 40 Chief Operating Officer and Director
Philip J. Balsamo......................... 38 Chief Financial Officer
Robert G. Barrett......................... 53 Director
Richard H. Kimball........................ 41 Director
James D. Robinson IV...................... 38 Director
Timothy Davenport......................... 44 Director
Nicolas C. Nierenberg..................... 43 Director
Other Management Employees
Laurent F. Ferrere, II.................... 40 Senior Vice President, Business Development
Mark E. Palomba........................... 41 Senior Vice President, Global Services
David M. Pierce........................... 45 Senior Vice President, Worldwide Sales
Thomas E. Bright.......................... 40 Vice President, Product Engineering
Gregory E. Stock.......................... 35 Vice President, Marketing
Kimberly A. Walsh......................... 30 Vice President, Human Resources
</TABLE>
EXECUTIVE OFFICERS AND DIRECTORS
RICHARD A. LEFEBVRE has served as Chairman of our board of directors since
June 1998 and a member of our board of directors since 1997. From January 1989
to July 1997, Mr. Lefebvre served as Chairman of the Board of AXENT
Technologies, Inc. ("AXENT"), a computer network security company. He also
served as AXENT's Chief Executive Officer from January 1989 to July 1997.
ARJUN RISHI co-founded Vastera in 1992 and has served as President, Chief
Executive Officer and a member of our board of directors since its inception.
Mr. Rishi has been responsible for our direction and vision. From 1990 to 1992,
Mr. Rishi worked as a consultant with Electronic Data Systems, a computer
software company, developing a credit card validation system. From 1987 to 1989,
Mr. Rishi was an employee of PRC, a computer software company.
MARK J. FERRER joined Vastera in December 1999 as Chief Operating Officer
and is responsible for our day-to-day operations. Mr. Ferrer was appointed to
our board of directors in March 2000. From October 1998 to December 1999,
Mr. Ferrer served as President, Baan Americas where he held fiscal
responsibility for Baan operations in North and South America. From April 1998
to October 1998, Mr. Ferrer served as Chief Operating Officer for Aurum Software
(A Baan Company) where he was responsible for sales, marketing, services and
development. From 1982 to April 1998, Mr. Ferrer held numerous positions with
IBM, the most recent as Vice President, Software Marketing and Sales.
PHILIP J. BALSAMO joined Vastera in May 1998, and he currently serves as our
Chief Financial Officer. From May 1997 to May 1998, Mr. Balsamo was Business
Advisor and Controller of the SCM and Data Connectivity Business Units of
INTERSOLV, Inc., now known as Merant. From May 1992 to May 1997, Mr. Balsamo was
Director of Financial Reporting and Assistant Controller of INTERSOLV. From 1987
to 1992, he served as Treasurer and Controller of Government Marketing
Services, Inc., a computer reseller. From 1984 to November 1986, he served as
Senior Accountant
48
<PAGE>
to MBI Business Centers and to Buchanan & Company. Mr. Balsamo is a certified
public accountant.
ROBERT G. BARRETT has served as one of our directors since 1996. Since 1984,
he was a founding partner of Battery Ventures and is a General Partner of
Battery Ventures III, L.P. Mr. Barrett serves on the board of directors of
Brooktrout Technology, Inc., Interspeed, Inc. and Peerless Corporation and
several privately owned companies.
RICHARD H. KIMBALL has served as one of our directors since 1997. Since
1995, Mr. Kimball co-founded Technology Crossover Ventures in 1995 and is a
Managing General Partner. Prior to that, Mr. Kimball spent over 10 years at
Montgomery Securities serving as a securities analyst and Managing Director. He
is currently on the board of directors of Copper Mountain Networks, Inc. and
several private companies.
JAMES D. ROBINSON IV has served as one of our directors since
November 1998. Since 1994, Mr. Robinson has served as a General Partner of RRE
Ventures GP II, L.L.C. Mr. Robinson was one of the founders of RRE Ventures.
Mr. Robinson currently serves on the Board of Directors of Callware
Technologies, Evoke Software, Fandom.com, indulge.com, Invention Machine
Corporation, Quixi, Vocera, GoldPocket.com, M4 Financial and the New York City
Investment Fund's Education and Information Services Sector Group. From 1992 to
1994, Mr. Robinson served in various capacities for Hambrecht & Quist Venture
Capital.
TIMOTHY DAVENPORT has served as one of our directors since April 2000.
Mr. Davenport served as President, Chief Executive Officer and a director of
Best Software, Inc. from June 1995 until Best Software's acquisition by the Sage
Group plc. From March 1987 to June 1995, Mr. Davenport served as Vice President,
Developer Tools Group, and Vice President, Graphics Division, of Lotus
Development Corporation.
NICOLAS C. NIERENBERG has served as one of our directors since April 2000.
Mr. Nierenberg is a co-founder of Actuate Corporation and has been its Chief
Executive Officer and Chairman of the Board since December 1993. Mr. Nierenberg
was also President of Actuate Corporation until October 1998. Prior to
co-founding Actuate, from April 1993 to November 1993, Mr. Nierenberg worked as
a consultant for Accel Partners, a venture capital firm. Mr. Nierenberg
co-founded Unify Corporation, which develops and markets relational database
development tools. Mr. Nierenberg held a number of positions at Unify, including
Chairman of the Board of Directors, Chief Executive Officer, President, Vice
President Engineering and Chief Technology Officer.
OTHER MANAGEMENT EMPLOYEES
LAURENT F. FERRERE, II joined Vastera in January 1997. Mr. Ferrere has
served as Senior Vice President, Business Development since August 1999 and is
responsible for product requirements and alliances. From January 1997 to
August 1999, Mr. Ferrere served as Vastera's Vice President, Marketing and
Business Development where he was responsible for marketing. From August 1992 to
January 1997, Mr. Ferrere was Director, Industry Marketing at J.D. Edwards. From
June 1981 to August 1992, Mr. Ferrere held numerous management positions with
Andersen Consulting.
MARK E. PALOMBA joined Vastera in February 2000 as Senior Vice President,
Global Services and is responsible for our global service operations. Prior to
joining Vastera, Mr. Palomba served as Senior Vice President of Consulting for
Baan Americas from January 1999 to February 2000 and as Vice President of
Consulting, Client Services from July 1998 to January 1999. From 1982 to
July 1998, Mr. Palomba held numerous positions with IBM, the most recent as
Global Solutions Segment Executive.
DAVID M. PIERCE joined Vastera in March 2000 as Senior Vice President,
Worldwide Sales. From 1979 to March 2000, Mr. Pierce held numerous positions
with IBM where, since August 1996,
49
<PAGE>
he served as Vice President Sales and Marketing for Software and eBusiness.
Prior to that assignment, Mr. Pierce held numerous positions relating to the
sales and marketing growth of the software and services provided by IBM.
THOMAS E. BRIGHT joined Vastera in August 1999 as Vice President, Product
Engineering and is responsible for the development of our applications. From May
1996 to August 1999, Mr. Bright served as Vice President of Engineering &
Product Operations for Fidelity Investments Systems Company where he was
responsible for an organization of over 70 engineers working in a multi-
project, multi-site, engineering and product operations environment. From 1993
to 1996, Mr. Bright served as General Manager, Engineering for Progress Software
and from 1984 to 1993, Mr. Bright held numerous positions with Lotus Development
Corporation.
GREGORY E. STOCK joined Vastera in September 1999 as Vice President,
Marketing and is responsible for all marketing communication activities,
including lead generation, public relations and advertising. From November 1998
to October 1999, Mr. Stock served as Vice President, Sales and Marketing,
Consumer Packaged Goods for POMS Corporation where he was responsible for global
sales and marketing for the POMS manufacturing execution product suite. From
1993 to 1998, Mr. Stock held numerous positions with Manugistics, the most
recent as Director, Business Development where he organized a global business
consulting organization for seven geographies and four industrial segments. From
1987 to 1993, Mr. Stock held a number of logistics positions with IBM, Rohm &
Haas and Chrysler Motors Corporation.
KIMBERLY A. WALSH joined Vastera in December 1995 and currently serves as
Vice President, Human Resources. From 1992 to December 1995, Ms. Walsh was Human
Resource and Training Manager at Servus Financial Corporation where she was
responsible for all human resource activities, including recruitment, employee
benefit programs, training and corporate development.
BOARD COMMITTEES
The audit committee of the board of directors makes recommendations
concerning the engagement of independent public accountants. In addition the
committee reviews the plans, results and fees of the audit engagement with our
independent public accountants, and any independence issues with our independent
public accountants. The audit committee also reviews the adequacy of our
internal accounting controls. Current members of the audit committee are Timothy
Davenport, Richard H. Kimball and James D. Robinson IV.
The compensation committee of the board of directors determines compensation
for our executive officers and administers our 1996 Stock Option Plan and our
2000 Stock Option Plan. The compensation committee currently consists of Richard
A. Lefebvre, Robert G. Barrett and Richard H. Kimball.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the compensation committee serves as a member of the board of
directors or compensation committee of any other entity that has one or more
executive officers serving as a member of our board of directors or compensation
committee.
DIRECTOR COMPENSATION
We reimburse each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. We intend to pay
each member of our board who is not an employee a director fee for attending
meetings of the board of directors and committee meetings.
50
<PAGE>
EXECUTIVE COMPENSATION
The table below summarizes information concerning the compensation earned
for services rendered to us in all capacities by our executive officers during
the fiscal year ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
- --------------------------- --------- --------- -------------
<S> <C> <C> <C> <C>
Arjun Rishi........................... CEO, President $203,077 $80,000 --
Mark J. Ferrer........................ Chief Operating Officer 12,500* -- 675,000
Philip J. Balsamo..................... Chief Financial Officer 122,974 38,273 120,000
</TABLE>
- --------------------------
* Mark J. Ferrer joined Vastera as Chief Operating Officer in
December 1999. Mr. Ferrer's annual base salary is $300,000 and his targeted
bonus is $150,000.
OPTION GRANTS DURING FISCAL YEAR ENDED DECEMBER 31, 1999
The following table sets forth information regarding the stock options
grants made to each of the named executive officers in the fiscal year ended
December 31, 1999. All of our options generally vest over a period of four
years, with 25% of the shares subject to the option vesting on the first
anniversary of the grant date, and the remaining option shares vesting ratably
monthly thereafter.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
-------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS EXERCISE ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO PRICE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES IN PER EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ---- ---------- ------------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arjun Rishi.................. -- -- -- -- -- --
Mark J. Ferrer............... 675,000 22.02% $4.00 12/31/2009 1,698,015 4,303,105
Philip J. Balsamo............ 60,000 1.96 2.17 4/30/2009 81,882 207,505
Philip J. Balsamo............ 60,000 1.96 2.67 8/31/2009 100,749 255,318
</TABLE>
The exercise price per share of each option was equal to the fair market
value of the common stock on the grant date as determined by the board of
directors. We have never granted any stock appreciation rights. The potential
realizable values assume that the options' price per share was the fair market
value of the common stock on the date of grant. This potential realizable value
also assumes that the price of the stock appreciates at rates of 5% and 10%
compounded annually from the date the options were granted until their
expiration date. These numbers are calculated based on the requirements of the
Securities and Exchange Commission and do not reflect our estimate of future
stock price growth. Actual gains, if any, on stock option exercises will depend
on the future performance of the common stock and the date on which the options
are exercised.
AGGREGATED OPTION EXERCISES AND VALUES IN FISCAL YEAR ENDED DECEMBER 31, 1999
The following table sets forth information containing the value realized
upon exercise of options during the fiscal year ended December 31, 1999 and the
number and value of unexercised options held by the executive officers named in
the Summary Compensation Table above. As of December 31, 1999, there was no
public market for the common stock. The "Value of Unexercised
51
<PAGE>
In-the-Money Options at Fiscal Year End" is based upon a value per share, the
assumed initial public offering price per share of $ , minus the per
share exercise price, multiplied by the number of shares underlying the option.
FISCAL YEAR-END OPTIONS VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1999 DECEMBER 31, 1999
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arjun Rishi........................ -- -- -- -- -- --
Mark J. Ferrer..................... -- -- -- 675,000 --
Philip J. Balsamo.................. -- -- 23,751 156,249
</TABLE>
1996 STOCK OPTION PLAN
Our board of directors and stockholders adopted and approved the 1996 Stock
Option Plan on July 26, 1996. The 1996 Plan provides for grants of incentive
stock options, nonqualified stock options and stock awards to employees,
directors, consultants and advisors. Members of the non-employee director
administrative committee are not eligible to receive options and awards. We may
issue options to purchase a maximum of 6,750,000 shares of common stock under
the 1996 Plan. The board of directors may not increase the maximum number of
shares without obtaining the approval of the stockholders. No options or awards
may be granted under the 1996 Plan after July 26, 2006.
The 1996 Plan may be administered by the board of directors or by a
committee of non-employee directors. The plan administrator has the power to
determine the persons to whom, the times at which, and the price at which the
options and awards shall be granted, and to determine the type of option or
award to be granted and the number of shares subject to options and awards.
The plan administrator determines the option price for options. For a
nonqualified stock option, the price shall be at least equal to 85% of the fair
market value of the shares on the date the option is granted. For an incentive
stock option, the price shall be at least 100% of the fair market value on the
date the option is granted. If a recipient of an incentive stock option owns
shares possessing more than 10% of the total voting power of all classes of
stock, the option price shall be at least 110% of the fair market value on the
grant date.
Options expire not later than 10 years after the date of the grant or five
years after the date of grant if the recipient owns shares possessing more than
10% of the combined voting power of all classes of stock. Options expire
90 days from the date the recipient's employment or service with Vastera
terminates or 12 months after disability or death, unless the grant agreement or
plan administrator provides otherwise. Options are not transferable during the
lifetime of the recipient, except that a nonqualified stock option may be
transferred pursuant to the terms of a domestic relation's order, or otherwise
as provided in the grant agreement.
The 1996 Plan provides that in the event of a change of control, the plan
administrator may take any appropriate action with respect to options, including
terminating options with 15 days' notice or causing options to become
immediately exercisable in full. In the event of a merger of Vastera into
another company or a sale of all or substantially all of the assets of Vastera,
options shall become immediately exercisable unless the successor company agrees
to assume the options or provide equivalent options.
52
<PAGE>
Awards of stock granted pursuant to the 1996 Plan shall be in the form of
written award agreements approved by the plan administrator. The plan
administrator may impose appropriate restrictions and forfeiture conditions on
stock awards.
In the event that the outstanding shares are modified by reason of a
reorganization, merger, consolidation, recapitalization, reclassification, stock
split, combination or exchange of shares, the plan administrator shall make
appropriate adjustments to the aggregate number of shares available under the
1996 Plan, the number of shares outstanding and price per share of outstanding
options.
2000 STOCK OPTION/STOCK ISSUANCE PLAN
INTRODUCTION. Our 2000 Stock Option/Stock Issuance Plan is intended to
serve as the successor equity incentive program to our 1996 Plan. Our 2000 Plan
was adopted by our board on April 4, 2000 and approved by the stockholders in
April 2000. Our 2000 Plan will become effective on the date the underwriting
agreement for this offering is signed. At that time, all options available for
grant under the 1996 Plan will be transferred to our 2000 Plan, and no further
option grants will be made under that predecessor plan. The transferred options
will continue to be governed by their existing terms, unless our compensation
committee elects to extend one or more features of our 2000 Plan to those
options. Except as otherwise noted below, the transferred options will have
substantially the same terms as are in effect for grants made under the
discretionary option grant program of our 2000 Plan.
SHARE RESERVE. Under our 2000 Plan, 16,750,000 shares of common stock have
been authorized for issuance. This share reserve consists of the number of
shares we estimate will be carried over from our 1996 Plan, including the shares
subject to outstanding options thereunder, plus an additional increase of
approximately 10,000,000 shares. The number of shares of common stock reserved
for issuance under our 2000 Plan will automatically increase on the first
trading day in January each calendar year, beginning in calendar year 2001, by
an amount equal to 1.5% of the total number of shares of common stock
outstanding on the last trading day in December of the preceding calendar year,
but in no event will any such annual increase exceed 750,000 shares. In
addition, no participant in our 2000 Plan may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 500,000 shares of common stock per calendar year.
EQUITY INCENTIVE PROGRAMS. Our 2000 Plan is divided into five separate
components:
- the discretionary option grant program, under which eligible individuals
in our employ or service may be granted options to purchase shares of
common stock at an exercise price not less than 100% of the fair market
value of those shares on the grant date;
- the stock issuance program, under which such individuals may be issued
shares of common stock directly, through the purchase of such shares at a
price not less than 100% of their fair market value at the time of
issuance or as a bonus tied to the attainment of performance milestones or
the completion of a specified period of service;
- the salary investment option grant program, under which our executive
officers and other highly compensated employees may be given the
opportunity to apply a portion of their base salary to the acquisition of
special below-market value stock option grants;
- the automatic option grant program, under which option grants will
automatically be made at periodic intervals to our non-employee board
members to purchase shares of common stock at an exercise price equal to
100% of the fair market value of those shares on the grant date; and
53
<PAGE>
- the director fee option grant program, under which our non-employee board
members may be given the opportunity to apply a portion of the annual
retainer fee otherwise payable to them in cash each year to the
acquisition of special below-market value option grants.
ELIGIBILITY. The individuals eligible to participate in our 2000 Plan
include our officers and other employees, our non-employee board members and any
consultants we hire.
ADMINISTRATION. The discretionary option grant program and the stock
issuance program will be administered by the compensation committee. This
committee will determine which eligible individuals are to receive option grants
or stock issuances under those programs, the time or times when such option
grants or stock issuances are to be made, the number of shares subject to each
such grant or issuance, the status of any granted option as either an incentive
stock option or a nonstatutory stock option under the federal tax laws, the
vesting schedule to be in effect for the option grant or stock issuance and the
maximum term for which any granted option is to remain outstanding. The
compensation committee will also have the exclusive authority to select the
executive officers and other highly compensated employees who may participate in
the salary investment option grant program in the event that program is
activated for one or more calendar years.
PLAN FEATURES. Our 2000 Plan will include the following features:
- The exercise price for the shares of common stock subject to option grants
made under our 2000 Plan may be paid in cash or in shares of common stock
valued at fair market value on the exercise date. The option may also be
exercised through a same-day sale program without any cash outlay by the
optionee. In addition, the plan administrator may provide financial
assistance to one or more optionees in the exercise of their outstanding
options or the purchase of their unvested shares by allowing such
individuals to deliver a full-recourse, interest-bearing promissory note
in payment of the exercise price and any associated withholding taxes
incurred in connection with such exercise or purchase.
- The compensation committee will have the authority to cancel outstanding
options under the discretionary option grant program, including options
transferred from the 1996 Plan, in return for the grant of new options for
the same or a different number of option shares with an exercise price per
share based upon the fair market value of our common stock on the new
grant date.
- Stock appreciation rights are authorized for issuance under the
discretionary option grant program. Such rights will provide the holders
with the election to surrender their outstanding options for an
appreciation distribution from us equal to the fair market value of the
vested shares of common stock subject to the surrendered option, less the
aggregate exercise price payable for those shares. Such appreciation
distribution may be made in cash or in shares of common stock. None of the
outstanding options under our 1996 Plan contain any stock appreciation
rights.
- The 2000 Plan will include the following change in control provisions
which may result in the accelerated vesting of outstanding option grants
and stock issuances:
- In the event that we are acquired by merger or asset sale, each
outstanding option under the discretionary option grant program which
is not to be assumed by the successor corporation will automatically
accelerate in full, and all unvested shares under the discretionary
option grant and stock issuance programs will immediately vest, except
to the extent our repurchase rights with respect to those shares are to
be assigned to the successor corporation.
54
<PAGE>
- The compensation committee will have complete discretion to structure
one or more options under the discretionary option grant program so
those options will vest as to all the option shares in the event those
options are assumed in the acquisition but the optionee's service with
us or the acquiring entity is subsequently terminated. The vesting of
outstanding shares under the stock issuance program may be accelerated
upon similar terms and conditions.
- The compensation committee will also have the authority to grant
options which will immediately vest in the event we are acquired,
whether or not those options are assumed by the successor corporation.
- The compensation committee may grant options and structure repurchase
rights so that the shares subject to those options or repurchase rights
will immediately vest in connection with a successful tender offer for
more than 50% of our outstanding voting stock or a change in the
majority of our board through one or more contested elections for board
membership. Such accelerated vesting may occur either at the time of
such transaction or upon the subsequent termination of the individual's
service.
- The options currently outstanding under our 1996 Plan will immediately
vest in the event we are acquired by merger or sale of substantially
all our assets, unless those options are assumed by the acquiring
entity or our repurchase rights with respect to any unvested shares
subject to those options are assigned to such entity.
SALARY INVESTMENT OPTION GRANT PROGRAM. In the event the compensation
committee elects to activate the salary investment option grant program for one
or more calendar years, each of our executive officers and other highly
compensated employees selected for participation may elect, prior to the start
of the calendar year, to reduce his or her base salary for that calendar year by
a specified dollar amount not less than $10,000 nor more than $50,000. Each
selected individual who files such a timely election will automatically be
granted, on the first trading day in January of the calendar year for which his
or her salary reduction is to be in effect, an option to purchase that number of
shares of common stock determined by dividing the salary reduction amount by
two-thirds of the fair market value per share of our common stock on the grant
date. The option will be exercisable at a price per share equal to one-third of
the fair market value of the option shares on the grant date. As a result, the
option will be structured so that the fair market value of the option shares on
the grant date less the exercise price payable for those shares will be equal to
the amount by which the optionee's salary is reduced under the program. The
option will become exercisable in a series of 12 equal monthly installments over
the calendar year for which the salary reduction is to be in effect.
AUTOMATIC OPTION GRANT PROGRAM. Under the automatic option grant program,
each individual who first becomes a non-employee board member at any time after
the completion of this offering will automatically receive an option grant for
shares on the date such individual joins the board, provided such
individual has not been in our prior employ. In addition, on the date of each
annual stockholders meeting held after the completion of this offering, each
non-employee board member who is to continue to serve as a non-employee board
member, including each of our current non-employee board members, will
automatically be granted an option to purchase shares of common stock,
provided such individual has served on our board for at least six months.
Each automatic grant will have an exercise price per share equal to the fair
market value per share of our common stock on the grant date and will have a
term of 10 years, subject to earlier termination following the optionee's
cessation of board service. The option will be immediately exercisable for all
of the option shares; however, we may repurchase, at the exercise price paid per
share, any shares purchased under the option which are not vested at the time of
the optionee's
55
<PAGE>
cessation of board service. The shares subject to each initial -share
automatic option grant will vest in a series of four successive annual
installments upon the optionee's completion of each year of board service over
the four-year period measured from the grant date. The shares subject to each
annual -share automatic option grant will vest upon the optionee's
completion of one year of board service measured from the grant date. However,
the shares will immediately vest in full upon certain changes in control or
ownership or upon the optionee's death or disability while a board member.
DIRECTOR FEE OPTION GRANT PROGRAM. Should the director fee option grant
program be activated in the future, each non-employee board member will have the
opportunity to apply all or a portion of any cash retainer fee for the year to
the acquisition of a below-market value option grant. The option grant will
automatically be made on the first trading day in January in the year for which
the retainer fee would otherwise be payable in cash. The option will have an
exercise price per share equal to one-third of the fair market value of the
option shares on the grant date, and the number of shares subject to the option
will be determined by dividing the amount of the retainer fee applied to the
program by two-thirds of the fair market value per share of our common stock on
the grant date. As a result, the option will be structured so that the fair
market value of the option shares on the grant date less the exercise price
payable for those shares will be equal to the portion of the retainer fee
applied to that option. The option will become exercisable in a series of 12
equal monthly installments over the calendar year for which the election is to
be in effect. However, the option will become immediately exercisable for all
the option shares upon the optionee's death or disability while serving as a
board member.
Our 2000 Plan will also have the following features:
- Outstanding options under the salary investment and director fee option
grant programs will immediately vest if we are acquired by a merger or
asset sale or if there is a successful tender offer for more than 50% of
our outstanding voting stock or a change in the majority of our board
through one or more contested elections.
- Limited stock appreciation rights will automatically be included as part
of each grant made under the salary investment option grant program and
the automatic and director fee option grant programs, and these rights may
also be granted to one or more officers as part of their option grants
under the discretionary option grant program. Options with this feature
may be surrendered to us upon the successful completion of a hostile
tender offer for more than 50% of our outstanding voting stock. In return
for the surrendered option, the optionee will be entitled to a cash
distribution from us in an amount per surrendered option share based upon
the highest price per share of our common stock paid in that tender offer.
The board may amend or modify the 2000 Plan at any time, subject to any
required stockholder approval. The 2000 Plan will terminate no later than
, 2010.
2000 EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION. Our 2000 Employee Stock Purchase Plan was adopted by the
board of directors on April 4, 2000 and approved by the stockholders in
2000. The plan is administered by the Compensation Committee. The
plan will become effective immediately upon the signing of the underwriting
agreement for this offering. The plan is designed to allow our eligible
employees and the eligible employees of our participating subsidiaries to
purchase shares of common stock, at semi-annual intervals, with their
accumulated payroll deductions.
SHARE RESERVE. 5,000,000 shares of our common stock will initially be
reserved for issuance. The reserve will automatically increase on the first
trading day in January each calendar year, beginning in calendar year 2001, by
an amount equal to 1.0% of the total number of outstanding
56
<PAGE>
shares of our common stock on the last trading day in December in the prior
calendar year. In no event will any such annual increase exceed 500,000 shares.
OFFERING PERIODS. The plan will have a series of successive overlapping
offering periods, with a new offering period beginning on the first business day
of May and November each year. Each offering period will have a duration of
24 months, unless otherwise determined by the compensation committee. However,
the initial offering period may have a duration in excess of 24 months and will
start on the date the underwriting agreement for this offering is signed and
will end on the last business day in April 2002. The next offering period will
start on the first business day in May 2000.
ELIGIBLE EMPLOYEES. Individuals scheduled to work more than 20 hours per
week for more than 5 calendar months per year may join an offering period on the
start date of that period. However, employees may participate in only one
offering period at a time.
PAYROLL DEDUCTIONS. A participant may contribute up to 15% of his or her
cash earnings through payroll deductions, and the accumulated deductions will be
applied to the purchase of shares on each semi-annual purchase date. The
purchase price per share will be equal to 85% of the fair market value per share
on the participant's date of entry into the offering period or, if lower, 85% of
the fair market value per share on the semi-annual purchase date. Semi-annual
purchase dates will occur on the last business day of April and October each
year. However, a participant may not purchase more than shares on any
purchase date, and not more than shares may be purchased in total by all
participants on any purchase date. Our compensation committee will have the
authority to change these limitations for any subsequent offering period.
RESET FEATURE. If the fair market value per share of our common stock on
any purchase date is less than the fair market value per share on the start date
of the two-year offering period, then that offering period will automatically
terminate, and a new two-year offering period will begin on the next business
day. All participants in the terminated offering will be transferred to the new
offering period.
CHANGE IN CONTROL. Should we be acquired by merger or sale of substantially
all of our assets or more than fifty percent of our voting securities, then all
outstanding purchase rights will automatically be exercised immediately prior to
the effective date of the acquisition. The purchase price will be equal to 85%
of the market value per share on the participant's date of entry into the
offering period in which an acquisition occurs or, if lower, 85% of the fair
market value per share immediately prior to the acquisition.
PLAN PROVISIONS. The following provisions will also be in effect under the
plan:
The plan will terminate no later than the last business day of April 2010.
The board may at any time amend, suspend or discontinue the plan. However,
certain amendments may require stockholder approval.
401(K) PROFIT SHARING PLAN
We have adopted a tax-qualified employee savings and retirement plan, the
401(k) Profit Sharing Plan, for eligible U.S. employees. Eligible employees may
elect to defer a portion of their eligible compensation, subject to the
statutorily prescribed annual limit. We may make matching contributions on
behalf of all participants who have elected to make deferrals to the 401(k)
Profit Sharing Plan in an amount determined annually by the Company. Any
contributions to the plan by the company or the participants are paid to a
trustee. The contributions made by the company, if any, are subject to a vesting
schedule; all other contributions are fully vested at all times. The 401(k)
Profit Sharing Plan, and the accompanying trust, are intended to qualify under
Sections
57
<PAGE>
401(k) and 501 of the Internal Revenue Code, so that contributions by us or by
employees and income earned (if any) on plan contributions are not taxable to
employees until withdrawn and contributions by us, if any, will be deductible by
the company when made. At the direction of each participant, the trustee invests
the contributions made to the 401(k) Profit Sharing Plan in any number of
investment options.
LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS AND INDEMNIFICATION
LIMITATION OF LIABILITY. Our certificate of incorporation provides that our
officers and directors will not be personally liable to us or our stockholders
for monetary damages resulting from a breach of fiduciary duty, to the maximum
extent permitted by Delaware law. Under Delaware law, directors of a corporation
will not be personally liable for monetary damages for breach of their fiduciary
duties as directors, except for:
- Any breach of the 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 non-monetary remedies that
may be available, such as injunctive relief or rescission, nor does it relieve
our officers and directors from complying with federal or state securities laws.
INDEMNIFICATION. Our certificate of incorporation and bylaws provide that
we shall indemnify our directors and executive officers, and may indemnify our
other corporate agents, to the fullest extent permitted by law. This provision
deters transactions not approved by the board, including transactions which may
offer a premium over market price for shares of common stock. An officer or
director shall not be entitled to indemnification if:
- The officer or director did not act in good faith and in a manner
reasonably believed to be in, or not opposed to our best interests; or
- The officer or director is subject to criminal action or proceedings and
had reasonable cause to believe the conduct was unlawful.
We intend to enter into agreements to indemnify our directors and officers
in addition to the indemnification provided for in our certificate of
incorporation and our bylaws. These agreements, among other things, provide for
indemnification of our directors and officers for expenses specified in the
agreements, including attorneys' fees, judgments, fines and settlement amounts
incurred by any of these persons in any action or proceeding arising out of
these persons' services as a director or officer for us, any of our subsidiaries
or any other entity 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 officers.
58
<PAGE>
CERTAIN TRANSACTIONS
EQUITY FINANCINGS
On July 29, 1996, we sold 800,000 shares of our Series A convertible
preferred stock for $5.00 per share. Each share of Series A convertible
preferred stock will convert into three shares of common stock upon the closing
of this offering. The purchaser of our Series A convertible preferred stock is:
<TABLE>
<CAPTION>
SHARES OF SERIES A
CONVERTIBLE PREFERRED AS CONVERTED
PURCHASER STOCK SHARES OF COMMON STOCK
- --------- ------------------------- -----------------------
<S> <C> <C>
Battery Ventures III, L.P................ 800,000 2,400,000
</TABLE>
In addition, we granted to the above-listed purchaser a warrant to purchase
150,376 shares of Series B convertible preferred stock at an exercise price of
$6.65 per share. Each share of Series B convertible preferred stock will convert
into three shares of our common stock upon the closing of this offering. We
also, contemporaneously with our sale of Series A convertible preferred stock,
redeemed an aggregate of 660,000 shares of common stock for $1.1 million from
the following people: 252,000 shares from Arjun Rishi, one of our founders, for
$420,000; 195,000 shares from Punkaj Rishi, Mr. Rishi's brother, for $325,000;
21,000 shares from Sonja Rishi, Mr. Rishi's sister, for $35,000; and 192,000
shares from other stockholders for $320,000.
From August 7, 1997 to May 28, 1998, we sold 2,310,813 shares of our
Series C convertible preferred stock for $3.70 per share. Each share of
Series C convertible preferred stock will convert into 1.50 shares of common
stock upon the closing of this offering. The purchasers of the Series C
convertible preferred stock are:
<TABLE>
<CAPTION>
SHARES OF SERIES C
CONVERTIBLE PREFERRED AS CONVERTED
PURCHASER STOCK SHARES OF COMMON STOCK
- --------- ------------------------- -----------------------
<S> <C> <C>
Battery Ventures III, L.P................ 540,541 810,811
Technology Crossover Ventures and its
affiliates............................. 1,081,082 1,621,622
Vertex Technology Fund Pte. Ltd.......... 540,541 810,811
Other Purchasers......................... 148,649 222,973
</TABLE>
Pursuant to a prior agreement, the holders of shares of our Series C
convertible preferred stock are entitled to purchase in this offering $3.0
million of common stock. In addition, we also issued to the above-listed
purchasers warrants to purchase an aggregate of 405,488 shares of our
Series C-1 convertible preferred stock at an exercise price of $4.92 per share.
Each share of Series C-1 convertible preferred stock will convert into 1.50
shares of our common stock upon the closing of this offering. We issued warrants
to the purchasers as follows:
<TABLE>
<CAPTION>
SHARES OF SERIES C-1
CONVERTIBLE PREFERRED AS CONVERTED
WARRANTHOLDER STOCK UNDERLYING WARRANT SHARES OF COMMON STOCK
- ------------- ------------------------ -----------------------
<S> <C> <C>
Battery Ventures III, L.P.................. 94,851 142,276
Technology Crossover Ventures and its
affiliates............................... 189,702 284,551
Vertex Technology Fund Pte. Ltd............ 94,851 142,276
Other Purchasers........................... 26,084 39,125
</TABLE>
59
<PAGE>
On November 24, 1998 and February 26, 1999, we sold 2,461,034 shares and
512,715 shares, respectively, of our Series D convertible preferred stock for
$4.876 per share. Each share of Series D convertible preferred stock will
convert into 1.50 shares of common stock upon the closing of this offering. The
purchaser of the Series D convertible preferred stock are:
<TABLE>
<CAPTION>
SHARES OF SERIES D
CONVERTIBLE PREFERRED AS CONVERTED
PURCHASER STOCK SHARES OF COMMON STOCK
- --------- ------------------------- -----------------------
<S> <C> <C>
Battery Ventures III, L.P................ 205,086 307,629
FedEx Corporation........................ 512,715 769,072
MSD Portfolio Capital, L.P. and its
affiliates............................. 820,345 1,230,517
RRE Investors, L.P. and its affiliate.... 615,258 922,886
Teachers Insurance and Annuity
Association of America................. 615,258 922,887
Technology Crossover Ventures and its
affiliates............................. 140,485 210,726
Vertex Technology Fund Pte. Ltd.......... 64,602 96,903
</TABLE>
Banc of America Securities LLC (formerly, NationsBanc Montgomery Securities
L.L.C.), as placement agent for our Series D convertible preferred stock
offering, was issued a warrant to purchase 30,763 shares of our Series D
convertible preferred stock at an exercise price of $5.61 per share. Banc of
America Securities LLC will hold 46,144 shares of common stock upon the exercise
of their warrant and the conversion of their Series D convertible preferred
stock. In addition, we also issued to the above-listed purchasers warrants to
purchase an aggregate of 631,608 shares of our Series D-1 convertible preferred
sock at an exercise price of $6.485 per share. Each share of Series D-1
convertible preferred stock will convert into 1.50 shares of our common stock
upon the closing of this offering. We issued warrants to the purchasers as
follows:
<TABLE>
<CAPTION>
SHARES OF SERIES D-1
CONVERTIBLE PREFERRED AS CONVERTED
WARRANTHOLDER STOCK UNDERLYING WARRANT SHARES OF COMMON STOCK
- ------------- ------------------------ -----------------------
<S> <C> <C>
Battery Ventures III, L.P.................. 20,509 30,763
FedEx Corporation.......................... 385,505 578,257
MSD Portfolio Capital, L.P. and its
affiliates............................... 82,034 123,050
RRE Investors, L.P. and its affiliate...... 61,526 92,289
Teachers Insurance and Annuity Association
of America............................... 61,526 92,289
Technology Crossover Ventures and its
affiliates............................... 14,048 21,071
Vertex Technology Fund Pte. Ltd............ 6,460 9,690
</TABLE>
On February 4, 2000 and February 29, 2000, we sold 1,569,577 shares of our
Series E convertible preferred stock for $10.83 per share. Each share of
Series E convertible preferred stock
60
<PAGE>
will convert into 1.50 shares of common stock upon the closing of this offering.
The purchasers of the Series E convertible preferred stock are:
<TABLE>
<CAPTION>
SHARES OF SERIES E
CONVERTIBLE PREFERRED AS CONVERTED
PURCHASER STOCK SHARES OF COMMON STOCK
- --------- ------------------------- -----------------------
<S> <C> <C>
Battery Ventures III, L.P................ 92,336 138,504
MSD Portfolio Capital, L.P. and its
affiliates............................. 84,576 126,864
RRE Investors, L.P. and its affiliate.... 63,432 95,148
Teachers Insurance and Annuity
Association of America................. 738,689 1,108,034
Technology Crossover Ventures and its
affiliates............................. 218,278 327,417
Vertex Technology Fund II Ltd............ 62,389 93,583
Other Purchasers......................... 309,877 464,815
</TABLE>
Battery Ventures III, L.P., FedEx Corporation, MSD Portfolio Capital, L.P.
and its affiliate, RRE Investors L.P. and its affiliate, Technology Crossover
Ventures and its affiliates and Teachers Insurance and Annuity Association of
America are considered each a holder of more than 5% of our common stock. Vertex
Technology Fund Pte. Ltd. and Vertex Technology Fund II Ltd. are affiliated
entities and together are considered a holder of more than 5% of our common
stock. Mr. Barrett, one of our directors, is a partner of Battery Ventures III,
L.P. Mr. Kimball, one of our directors, is a partner of Technology Crossover
Ventures and its affiliate. Mr. Robinson, another one of our directors, is a
partner of RRE Ventures, L.P. and its affiliate. Messrs. Barrett, Kimball and
Robinson disclaim beneficial ownership of the securities held by their
respective entities, except for their respective pecuniary interests in their
entities.
TRANSACTIONS WITH FEDEX CORPORATION
On August 24, 1998, we entered into a software license and services
agreement with Federal Express Corporation, a subsidiary of FedEx Corporation.
The agreement provides Federal Express Corporation with certain licenses to use
our software products as well as installation, configuration, training, testing
and maintenance services for the software products licensed to Federal Express
Corporation.
On April 1, 1999, we entered into a development use agreement with FedEx
Corporation. We granted FedEx Corporation the right to use our software product
to aid in the design, development and testing of a web site that FedEx
Corporation was developing.
On September 1, 1999, we entered a marketing alliance agreement and
professional services agreement with FedEx Corporation. These agreements were
intended to govern the relationship between Vastera and FedEx Corporation in
developing and supporting a web site that FedEx Corporation planned to create.
For 1999, we received a total of $1,610,204 from FedEx Corporation and
Federal Express Corporation under these agreements. FedEx Corporation has
notified us of its intent to terminate the marketing alliance agreement,
effective September 1, 2000.
TRANSACTION WITH DELL PRODUCTS L.P.
On June 28, 1996 and April 14, 1999, we entered into software license
agreements with Dell Products L.P., or Dell, an affiliate of Dell Computer
Corporation. The agreements provide certain licenses to use our software
products. Michael S. Dell, the Chairman of the board of directors and the Chief
Executive Officer of Dell Computer Corporation, holds a controlling ownership
interest in MSD Portfolio Capital, L.P. and two of its affiliates, significant
investors in Vastera, Inc. For 1999, we received a total of $594,801 from Dell
Products L.P. under these agreements.
61
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of March 31, 2000 regarding
the beneficial ownership of our common stock by:
- each person or entity who is known by us to own beneficially more than 5%
of our outstanding common stock;
- each of our executive officers named in the Summary Compensation Table;
- each of our directors; and
- all directors and executive officers as a group.
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 ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or will become exercisable within 60 days after
March 31, 2000, are deemed outstanding, while the shares are not deemed
outstanding for purposes of computing percentage ownership of any other person.
Unless otherwise indicated in the footnotes below, the persons and entities
named in the table have sole voting or investment power with respect to all
shares beneficially owned, subject to community property laws where applicable.
The number and percentage of shares beneficially owned are based on the
aggregate of (i) 20,692,509 shares of common stock outstanding as of March 31,
2000, assuming conversion of all outstanding shares of preferred stock into
common stock and the issuance of 1,474,658 shares of common stock issuable upon
exercise of certain outstanding warrants prior to this offering, and
(ii) shares of common stock issued in this offering.
62
<PAGE>
Unless otherwise indicated, the principal address of each of the
stockholders below is c/o Vastera, Inc., 45025 Aviation Drive, Suite 200,
Dulles, Virginia 20166.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED
SHARES BENEFICIALLY -----------------------
OWNED PRIOR TO BEFORE AFTER
NAME OF BENEFICIAL OWNER OFFERING OFFERING OFFERING
- ------------------------ ------------------- -------- --------
<S> <C> <C> <C>
Battery Ventures III, L.P. (1)...................... 4,326,447 20.9%
901 Mariner's Island Blvd., Suite 475
San Mateo, CA 94404
FedEx Corporation (2)............................... 1,347,329 6.3%
942 South Shady Grove Road
Memphis, TN 38120
MSD Portfolio Capital, L.P. and its affiliates 1,515,046 7.3%
(3)...............................................
599 Lexington Ave., Suite 2300
New York, NY 10022
RRE Investors, L.P. and its affiliate (4)........... 1,136,283 5.5%
126 East 56th Street
New York, NY 10022
Technology Crossover Ventures and its affiliates 2,498,559 12.1%
(5)...............................................
575 High Street, Suite 400
Palo Alto, CA 94301
Teachers Insurance and Annuity Association of 2,123,209 10.3%
America (6).......................................
730 Third Avenue
New York, NY 10017-3206
Vertex Technology Fund Pte. Ltd. and its affiliate 1,153,263 5.6%
(7)...............................................
Three Lagoon Drive, Suite 220
Redwood City, CA 94065
Arjun Rishi......................................... 1,038,740 5.0%
Philip J. Balsamo (8)............................... 46,250 *
Richard A. Lefebvre (9)............................. 123,413 *
Nicolas C. Nierenberg (10).......................... 67,500 *
Robert G. Barrett (11).............................. 4,326,447 20.9%
Richard H. Kimball (12)............................. 2,498,559 12.1%
James D. Robinson IV (13)........................... 1,136,283 5.5%
Mark J. Ferrer...................................... -- --
Timothy Davenport................................... -- --
All directors and executive officers as a group 9,232,197 44.1%
(9 people) (14)...................................
Punkaj Rishi........................................ 1,634,685 7.9%
Ramona Rishi........................................ 1,072,651 5.2%
</TABLE>
63
<PAGE>
- ------------------------
* Represents beneficial ownership of less than 1%.
(1) Includes 4,314,285 shares held by Battery Ventures III, L.P. and 12,162
shares subject to warrants held by Battery Ventures III, L.P.
(2) Includes 769,072 shares held by FedEx Corporation and 578,257 shares subject
to a warrant held by FedEx Corporation.
(3) Includes (a) 1,325,666 shares held by MSD Portfolio Capital, L.P.,
(b) 94,690 shares held by RPKS Investment, L.L.C. and (c) 94,690 shares held
by Triple Marlin Investments, L.L.C.
(4) Includes (a) 673,309 shares held by RRE Investors, L.P., and 370,685 shares
held by RRE Investors Fund, L.P.
(5) Includes (a) 1,195,247 shares held by Technology Crossover Ventures II,
L.P., (b) 182,488 shares held by Technology Crossover Ventures II, C.V.,
(c) 163,075 shares held by TCV II Strategic Partners, L.P., (d) 918,924
shares held by TCV II (Q), L.P. and (e) 38,825 shares held by TCV II, V.O.F.
(6) Includes 123,209 shares held by Teachers Insurance and Annuity Association
of America.
(7) Includes 1,059,680 shares held by Vertex Technology Fund Pte. Ltd. and
93,583 shares held by Vertex Technology Fund II Ltd.
(8) Includes 46,250 shares subject to stock options exercisable within 60 days
of March 31, 2000.
(9) Includes 123,413 shares subject to stock options exercisable within 60 days
of March 31, 2000.
(10) Includes 67,500 shares subject to stock options exercisable within 60 days
of March 31, 2000.
(11) Includes 4,314,285 shares held by Battery Ventures III, L.P. and 12,162
shares subject to warrants held by Battery Ventures III, L.P. Mr. Barrett is
a general partner of Battery Ventures III, L.P. Mr. Barrett disclaims
beneficial ownership of the shares held by Battery Ventures III, L.P.,
except to the extent of his pecuniary interest in the shares held.
(12) Includes (a) 1,195,247 shares held by Technology Crossover Ventures II,
L.P., (b) 182,488 shares held by Technology Crossover Ventures II, C.V.,
(c) 163,075 shares held by TCV II Strategic Partners, L.P., (d) 918,924
shares held by TCV II (Q), L.P., and (e) 38,825 shares held by TCV II,
V.O.F. Mr. Kimball is a general partner of Technology Crossover Ventures.
Mr. Kimball disclaims beneficial ownership of the shares held by Technology
Crossover Ventures and its affiliates, except to the extent of his pecuniary
interest in the shares held.
(13) Includes (a) 732,829 shares held by RRE Investors, L.P. and 403,454 shares
held by RRE Investors Fund, L.P. Mr. Robinson is a general partner of RRE
Investors, L.P. and RRE Investors Fund, L.P. Mr. Robinson disclaims
beneficial ownership of the shares held by RRE Investors, L.P. and RRE
Investors Fund, L.P., except to the extent of his pecuniary interest in the
shares held.
(14) Includes 237,163 shares subject to stock options exercisable within
60 days of March 31, 2000.
64
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our common stock and preferred stock and the
relevant provisions of our amended and restated certificate of incorporation and
amended and restated bylaws as will be in effect upon the closing of this
offering are summaries and are qualified by reference to these documents. Forms
have been filed with the Securities and Exchange Commission as exhibits to our
registration statement, of which this prospectus forms a part.
Upon the closing of this offering, our authorized capital stock will consist
of 100,000,000 shares of common stock, par value $0.01 per share, and 10,000,000
shares of preferred stock, par value $0.01 per share.
COMMON STOCK
As of March 31, 2000, there were 6,536,644 shares of common stock
outstanding held of record by 52 stockholders. Based upon the number of shares
outstanding as of that date and giving effect to the automatic conversion of all
previously outstanding preferred stock into shares of common stock, the assumed
exercise of all outstanding preferred stock warrants, the conversion into common
stock of the preferred stock issued upon the exercise of the warrants and the
sale of shares of common stock in this offering, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options after
March 31, 2000, there will be approximately shares of common stock
outstanding at the closing of this offering.
Holders of common stock are entitled to one vote per share on all matters
submitted to a vote of stockholders. Holders of common stock do not have
cumulative voting rights. Holders of common stock are entitled to receive
dividends as may be declared from time to time by the board of directors out of
funds legally available for the payment of dividends, subject to the preferences
that apply to any outstanding preferred stock. See "Dividend Policy." Upon a
liquidation, dissolution or winding up of Vastera, the holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities and after giving effect to the liquidation preference of any
outstanding preferred stock. The common stock has no preemptive or conversion
rights and no additional subscription rights. There are no redemption or sinking
fund provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable. The shares issued in this offering will
be fully paid and nonassessable.
PREFERRED STOCK
Our amended and restated certificate of incorporation authorizes the board
of directors, without stockholder action, to designate and issue from time to
time shares of preferred stock in one or more series. The board of directors may
designate the price, rights, preferences and privileges of the shares of each
series of preferred stock, which may be greater than the rights of the 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 common stock until the
board of directors determines the specific rights of the preferred stock.
However, possible effects of issuing preferred stock with voting and conversion
rights include:
- Restricting dividends on common stock;
- Diluting the voting power of common stock;
- Impairing the liquidation rights of the common stock;
- Delaying or preventing a change of control of Vastera without stockholder
action; and
- Harming the market price of common stock.
65
<PAGE>
Upon the closing of this offering, no shares of our preferred stock will be
outstanding. We have no present plans to issue any shares of preferred stock.
WARRANTS
As of March 31, 2000, we had outstanding the following warrants to purchase
our stock:
<TABLE>
<CAPTION>
TOTAL NUMBER
OF SHARES EXERCISE AS CONVERTED
SUBJECT TO PRICE PER SHARES OF
TYPE OF STOCK WARRANTS SHARE COMMON STOCK EXPIRATION DATE
- ------------- ------------- --------- --------------- ------------------
<S> <C> <C> <C> <C>
Series A convertible preferred stock............ 7,000 $5.000 21,000 January 31, 2002
Series B convertible preferred stock............ 150,376 $6.650 451,128 Upon this offering
Series B convertible preferred stock............ 4,511 $6.650 13,533 March 31, 2002
Series C convertible preferred stock............ 14,324 $3.700 21,486 August 7, 2007
Series C convertible preferred stock............ 4,122 $3.700 6,183 January 31, 2003
Series C-1 convertible preferred stock.......... 405,488 $4.920 608,232 Upon this offering
Series D convertible preferred stock............ 30,763 $5.610 46,144 Upon this offering
Series D-1 convertible preferred stock.......... 246,103 $6.485 369,154 May 24, 2000
Series D-1 convertible preferred stock.......... 385,505 $6.485 578,257 March 1, 2001
</TABLE>
After the closing of this offering, all of the warrants that have not
expired will become exercisable for that number of shares of common stock as is
indicated in the table.
OPTIONS
In 1996, Vastera adopted the 1996 Stock Option Plan. Under the 1996 Plan,
6,750,000 shares of common stock are reserved for issuance to employees at the
discretion of our board of directors. At March 31, 2000, there were 175,398
shares of common stock available for future grant under the 1996 Plan. The
exercise price of all options outstanding under the 1996 Plan range from $1.00
to $6.67 with a weighted average exercise price of $4.77 and these options are
exercisable in the aggregate for 6,253,677 shares of common stock. Please see
"Management--Employee Benefit Plans" for a detailed description of the plan.
REGISTRATION RIGHTS
Upon closing of this offering, the holders of 14,796,327 shares of common
stock, assuming the exercise of all outstanding preferred stock warrants and the
conversion into common stock of the preferred stock issued upon the exercise of
the warrants, will be entitled to demand registration rights requiring us to
register the sale of their shares under the Securities Act of 1933, under the
terms of an agreement between us and the holders of these shares. The holders of
40% or more of these shares are entitled to demand that Vastera register their
shares under the Securities Act, subject to various limitations. Vastera is not
required to effect more than two registrations pursuant to these demand
registration rights. In addition, these holders are entitled to piggyback
registration rights with respect to the registration of their shares under the
Securities Act, subject to various limitations. Further, at any time after
Vastera becomes eligible to file a registration statement on Form S-3, these
holders may require Vastera to file registration statements under the Securities
Act on Form S-3 with respect to their shares of common stock. These registration
rights are subject to certain conditions and limitations, among them the right
of the underwriters of an offering to limit the number of shares of common stock
held by these holders with registration rights to be included in a registration.
Vastera is generally required to bear all of the expenses of all of these
registrations, except underwriting discounts and selling commissions.
Registration of any of the shares of common stock held by these holders with
registration rights would result in shares becoming freely tradable without
restriction under the Securities Act immediately upon effectiveness of such
registration.
66
<PAGE>
DELAWARE ANTI-TAKEOVER LAW AND PROVISIONS IN OUR CHARTER AND BYLAWS
DELAWARE ANTI-TAKEOVER STATUTE. We are subject to Section 203 of the
Delaware General Corporation Law. In general, these provisions prohibit a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that the
stockholder became an interested stockholder, unless the transaction in which
the person became an interested stockholder is approved in a manner presented in
Section 203 of the Delaware General Corporation Law. Generally, a "business
combination" is defined to include mergers, asset sales and other transactions
resulting in financial benefit to a stockholder. In general, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years, did own, 15% or more of a corporation's voting stock.
CERTIFICATE OF INCORPORATION. Our amended and restated certificate of
incorporation provides that:
- Our board of directors may issue, without further action by the
stockholders, up to 10,000,000 shares of undesignated preferred stock;
- Any action to be taken by our stockholders must be effected at a duly
called annual or special meeting and not by a consent in writing;
- Our board of directors shall be divided into three classes, with each
class serving for a term of three years;
- Vacancies on the board, including newly created directorships, can be
filled by a majority of the directors then in office; and
- Our directors may be removed only for cause.
BYLAWS. Our amended and restated bylaws provide that stockholders seeking
to bring business before an annual meeting of stockholders or to nominate
candidates for election as directors at an annual meeting of stockholders, must
provide timely notice to us in writing. To be timely, a stockholder's notice
must be received at our principal executive offices not less than 90 days nor
more than 120 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders. In the event that the annual meeting is called
for a date that is not within 30 days before or 60 days after the anniversary
date, in order to be timely notice from the stockholder must be received:
- not earlier than 120 days prior to the annual meeting of stockholders; and
- not later than 90 days prior to the annual meeting of stockholders or the
tenth day following the date on which notice of the annual meeting was
made public.
In the case of a special meeting of stockholders called for the purpose of
electing directors, notice by the stockholder, in order to be timely, must be
received:
- not earlier than 120 days prior to the special meeting; and
- not later than 90 days prior to the special meeting or the close of
business on the tenth day following the day on which public disclosure of
the date of the special meeting was made.
Our amended and restated bylaws also specify requirements as to the form and
content of a stockholder's notice. These provisions may preclude stockholders
from bringing matters before an annual or special meeting of stockholders, from
making nominations for directors at an annual or special meeting of stockholders
or from making nominations for directors at an annual or special meeting of
stockholders. In addition, a two-thirds supermajority vote of stockholders will
be required to amend our amended and restated bylaws.
67
<PAGE>
The provisions in our amended and restated certificate of incorporation and
our amended and restated bylaws are intended to enhance the likelihood of
continuity and stability in the composition of the board of directors and in the
policies formulated by the board of directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of
Vastera. These provisions also are designed to reduce our vulnerability to an
unsolicited proposal for a takeover of Vastera that does not contemplate the
acquisition of all of its outstanding shares or an unsolicited proposal for the
restructuring or sale of all or parts of Vastera. These provisions, however,
could discourage potential acquisition proposals and could delay or prevent a
change in control of Vastera. They may also have the effect of preventing
changes in our management.
TRANSFER AGENT
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.
68
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of common stock in the public market following
the offering could adversely affect the market price of the common stock and
adversely affect our ability to raise capital at a time and on terms favorable
to us.
Of the shares to be outstanding after the offering,
shares of common stock will be freely tradable unless they are
purchased by our "affiliates," as that term is defined in Rule 144 under the
Securities Act. The remaining shares, assuming no exercise of outstanding
options and warrants, will be eligible for sale in the public market as follows:
<TABLE>
<CAPTION>
DAYS AFTER DATE SHARES
OF THIS PROSPECTUS ELIGIBLE FOR SALE COMMENT
------------------ ----------------- -------
<S> <C> <C>
Upon effectiveness.................. Freely tradable shares sold in this
offering
180 days............................ 18,338,144 Lock-up released; shares saleable
under Rule 144, 144(k) or 701
Various dates thereafter............ 2,354,365 Restricted securities held for one
year or less as of 180 days
following effectiveness
</TABLE>
RULE 144. In general, under Rule 144 as currently in effect, a person who
has beneficially owned shares for at least one year, including an "affiliate,"
as that term is defined in the Securities Act, is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of:
- one percent of the then outstanding shares of our common stock
(approximately shares immediately following the offering), or
- the average weekly trading volume during the four calendar weeks preceding
filing of notice of such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about us.
A shareholder who is deemed not to have been an "affiliate" of ours at any time
during the 90 days preceding a sale, and who has beneficially owned restricted
shares for at least two years, would be entitled to sell such shares under
Rule 144(k) without regard to the volume, limitations, manner of sale provisions
or public information requirements. For purposes of Rule 144, an "affiliate" of
an issuer is a person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
such issuer. All of our affiliates have agreed to further restrict their shares
by entering into lock-up arrangements discussed above.
RULE 701. In general, under Rule 701 of the Securities Act as currently in
effect, each of our directors, officers, employees, consultants or advisors who
purchased shares from us before the date of this prospectus in connection with a
compensatory stock plan or other written compensatory agreement is eligible to
resell such shares 90 days after the effective date of this offering in reliance
on Rule 144, but without compliance with certain restrictions, including the
holding period, contained in Rule 144.
STOCK PLANS. As of March 31, 2000, options to purchase 6,253,677 shares of
our common stock were outstanding under our 1996 Stock Option Plan. After this
offering, we intend to file registration statements on Form S-8 under the
Securities Act of 1933 covering shares of common stock reserved for issuance
under our 1996 Plan, our 2000 Stock Option/Stock Issuance Plan and our 2000
Employee Stock Purchase Plan. Based on the number of options outstanding and
shares
69
<PAGE>
reserved for issuance under our 1996 Plan, our 2000 Plan and our 2000 Stock
Purchase Plan, the registration statements on Form S-8 will cover
shares. The Form S-8 registration statements will become effective immediately
upon filing, whereupon, subject to the satisfaction of applicable exercisability
periods, Rule 144 volume limitations applicable to affiliates and the lock-up
agreements with the underwriters referred to above, shares of common stock to be
issued upon exercise of outstanding options granted pursuant to our 1996 Plan,
our 2000 Plan and our 2000 Stock Purchase Plan (to the extent that such shares
were not held by affiliates) will be available for immediate resale in the
public market.
LOCK-UP AGREEMENT. Each of our officers and directors, and substantially
all of our stockholders and holders of options and warrants to purchase our
stock have agreed not to sell or otherwise dispose of any shares of common stock
for a period of 180 days after the date of this prospectus without the prior
written consent of Deutsche Bank Securities Inc. Transfers or dispositions can
be made during the lock-up period in the case of gifts or for estate planning
purposes where the donee signs a lock-up agreement. Upon the expiration of these
lock-up agreements, additional shares will be available for sale in the public
market.
REGISTRATION RIGHTS. After this offering, the holders of 14,796,327 shares
of our common stock will be entitled to certain rights with respect to the
registration of their shares under the Securities Act. See "Description of
Capital Stock--Registration Rights." After any such registration of these
shares, such shares will be freely tradeable without restriction under the
Securities Act. These sales could cause the market price of our common stock to
decline.
70
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank Securities
Inc., Chase Securities Inc. and Banc of America Securities LLC, have severally
agreed to purchase from Vastera the following respective number of shares of
common stock at a public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
Deutsche Bank Securities Inc................................
Chase Securities Inc........................................
Banc of America Securities LLC..............................
---------
Total Underwriters ( ).................................
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than $ per share to other dealers.
After the initial public offering, representatives of the underwriters may
change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than 30
days after the date of this prospectus, to purchase up to additional
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. To the extent that
the underwriters exercise this option, each of the underwriters will become
obligated, subject to conditions, to purchase approximately the same percentage
of additional shares of common stock as the number of shares of common stock to
be purchased by it in the above table bears to the total number of shares of
common stock offered hereby. We will be obligated, pursuant to the option, to
sell these additional shares of common stock to the underwriters to the extent
the option is exercised. If any additional shares of common stock are purchased,
the underwriters will offer the additional shares on the same terms as those on
which the shares are being offered.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is % of the initial public offering price. We have
agreed to pay the underwriters the following fees, assuming either no exercise
or full exercise by the underwriters of the underwriters' over-allotment option:
<TABLE>
<CAPTION>
TOTAL FEES
---------------------------------------------
WITHOUT EXERCISE OF WITH FULL EXERCISE OF
FEE PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
------------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by Vastera.............. $ $ $
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ .
71
<PAGE>
We have agreed to indemnify the underwriters against some specified types of
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
Each of our officers and directors, and substantially all of our
stockholders and holders of options and warrants to purchase our stock, have
agreed not to offer, sell, contract to sell or otherwise dispose of, or enter
into any transaction that is designed to, or could be expected to, result in the
disposition of any shares of our common stock or other securities convertible
into or exchangeable or exercisable for shares of our common stock or
derivatives of our common stock owned by these persons prior to this offering or
common stock issuable upon exercise of options or warrants held by these persons
for a period of 180 days after the effective date of the registration statement
of which this prospectus is a part without the prior written consent of Deutsche
Bank Securities Inc. This consent may be given at any time without public
notice. Transfers or dispositions can be made during the lock-up period in the
case of gifts or for estate planning purposes where the donee signs a lock-up
agreement. We have entered into a similar agreement with the representatives of
the underwriters, except that without such consent we may grant options and sell
shares pursuant to our 1996 Stock Option Plan, our 2000 Stock Option/Stock
Issuance Plan and our 2000 Employee Stock Purchase Plan, and may issue shares of
our common stock in connection with a strategic partnering transaction or in
exchange for all or substantially all of the equity or assets of a company in
connection with a merger or acquisition. There are no agreements between the
representatives and any of our stockholders or affiliates releasing them from
these lock-up agreements prior to the expiration of the 180-day period.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these
over-allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares for our vendors, employees, family
members of employees, customers and other third parties. Pursuant to a prior
agreement, the holders of shares of our Series C convertible preferred stock are
entitled to purchase in this offering $3.0 million of common stock. The number
of shares of our common stock available for sale to the general public will be
reduced to the extent these reserved shares are purchased. Any reserved shares
that are not purchased by these persons will be offered by the underwriters to
the general public on the same basis as the other shares in this offering.
In February 2000, we sold shares of our Series E convertible preferred stock
in a private placement at a price of $10.83 per share. In this private
placement, BT Investment Partners, Inc., an affiliate of Deutsche Bank
Securities Inc., purchased 46,168 shares of Series E convertible preferred
72
<PAGE>
stock for an aggregate purchase price of $499,999.44. Additionally, Hambrecht &
Quist California, H&Q Employee Venture Fund 2000, L.P., Access Technology
Partners, L.P. and Access Technology Partners Brokers Fund, L.P., affiliates of
Chase Securities Inc., purchased 6,186 shares, 2,308 shares, 36,935 shares and
739 shares, respectively, of Series E convertible preferred stock for an
aggregate purchase price of $499,999.44.
In November 1998 we issued a warrant for 30,763 shares of our Series D
convertible preferred stock in a private placement to Banc of America Securities
LLC (formerly, NationsBanc Montgomery Securities L.L.C.). Banc of America
Securities LLC acted as placement agent in this private placement.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stage of development of other companies that
we and the representatives of the underwriters believe to be comparable to
our business; and
- estimates of our business potential.
73
<PAGE>
LEGAL MATTERS
Brobeck, Phleger & Harrison LLP, Washington, D.C. will provide Vastera an
opinion relating to the validity of the common stock issued in this offering.
Legal matters will be passed upon for the underwriters by Ropes & Gray, Boston,
Massachusetts.
EXPERTS
The financial statements and schedules included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
OTHER MATTERS
On March 26, 1999, our board of directors dismissed PricewaterhouseCoopers
LLP as its independent accountants. From our inception through March 26, 1999,
the former auditors did not disagree with us on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure which disagreements, if not resolved to their satisfaction, would have
caused them to make reference thereto in their report on the financial
statements for such years. During the period from our inception to the date of
their dismissal, there have been no reportable events as defined in
Regulation S-K Item 304(a)(1)(iv). In response to our request,
PricewaterhouseCoopers LLP has furnished us with a letter addressed to the
Securities and Exchange Commission stating whether or not PricewaterhouseCoopers
LLP agrees with the above statements. We have filed a copy of such letter dated
April 5, 2000 as Exhibit 16 to the registration statement of which this
Prospectus is a part.
In March 26, 1999, our board of directors retained Arthur Andersen LLP as
our independent public accountants. Prior to retaining Arthur Andersen LLP, we
had not consulted with Arthur Andersen LLP on any accounting, auditing or
reporting matter.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, or SEC, a
registration statement on Form S-1 with respect to the common stock offered
hereby. This prospectus, which constitutes a part of the registration statement,
does not contain all of the information set forth in the registration statement
or the exhibits and schedules which are part of the registration statement. For
further information with respect us and the common stock, reference is made to
the registration statement and the exhibits and schedules thereto. You may read
and copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information about the public reference rooms. Our SEC
filings are also available to the public from the SEC's web site at
HTTP://WWW.SEC.GOV. Upon completion of this offering, we will become subject to
the information and periodic reporting requirements of the Securities Exchange
Act and, in accordance therewith, will file periodic reports, proxy statements
and other information with the SEC. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the SEC's
public reference rooms and the Web site of the SEC referred to above.
74
<PAGE>
VASTERA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Changes in Stockholders' Equity
(Deficit)................................................. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to the Consolidated Financial Statements.............. F-7
</TABLE>
F-1
<PAGE>
After the three-for-two stock split and the increase in authorized shares
discussed in Note 6 to Vastera, Inc.'s consolidated financial statements is
effected, we expect to be in a position to render the following audit report.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Vienna, Virginia
April 5, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vastera, Inc.:
We have audited the accompanying consolidated balance sheets of
Vastera, Inc. (a Delaware corporation) and its subsidiary as of December 31,
1998 and 1999, and the related consolidated statements of operations and changes
in stockholders' equity (deficit) and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Vastera, Inc. and its
subsidiary as of December 31, 1998 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
As explained in Note 2 to the consolidated financial statements, the Company
has given retroactive effect to the change in accounting for software license
revenues.
Vienna, Virginia
April 5, 2000
F-2
<PAGE>
VASTERA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------- DECEMBER 31,
1998 1999 1999
-------- -------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,792 $ 961
Short-term investments.................................... 1,892 3,908
Accounts receivable, net of allowance for doubtful
accounts of $339 and $589, respectively................. 3,612 5,237
Prepaid expenses and other current assets................. 115 816
------- -------
Total current assets.................................. 13,411 10,922
Property and equipment, net................................. 2,232 3,859
Goodwill, net............................................... -- 2,079
Deposits and other assets................................... 639 292
------- -------
Total assets.......................................... $16,282 $17,152
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Line of credit and capital lease obligations, current..... $ 392 $ 391
Accounts payable.......................................... 1,648 2,440
Accrued expenses.......................................... 1,908 2,979
Accrued compensation and benefits......................... 1,245 1,736
Deferred revenue.......................................... 5,019 7,202
------- -------
Total current liabilities............................. 10,212 14,748
Long-term liabilities:
Line of credit and capital lease obligations.............. 996 2,326
Deferred revenue, net of current portion.................. 3,406 3,889
------- -------
Total liabilities..................................... 14,614 20,963
------- -------
Commitments and contingencies
Redeemable convertible preferred stock:
Series A, Series B, Series C, Series C-1, Series D, and
Series D-1; $0.01 par value; 7,351 shares authorized in
aggregate; 5,572 and 6,085 shares issued and outstanding
in aggregate as of December 31, 1998 and 1999,
respectively; and no shares outstanding on a pro forma
basis (aggregate liquidation preference of $26,293 and
$30,926, as of December 31, 1998 and 1999,
respectively)........................................... 24,431 46,117 --
Stockholders' equity (deficit):
Common stock, $0.01 par value; 100,000 shares authorized;
5,502 and 6,430 shares issued and outstanding as of
December 31, 1998 and 1999, respectively, and 16,757 on
a pro forma basis....................................... 55 64 168
Additional paid-in capital................................ 1,029 9,765 55,779
Accumulated other comprehensive loss...................... -- (41) (41)
Deferred compensation..................................... -- (6,043) (6,043)
Accumulated deficit....................................... (23,847) (53,673) (53,673)
------- ------- -------
Total stockholders' equity (deficit).................. (22,763) (49,928) (3,810)
------- -------
Total liabilities and stockholders' equity
(deficit)........................................... $16,282 $17,152
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
VASTERA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Subscription/transaction revenues......................... $ 2,200 $ 4,088 $ 7,261
Services revenues......................................... 1,545 4,778 11,869
-------- -------- --------
Total revenues........................................ 3,745 8,866 19,130
-------- -------- --------
COST OF REVENUES:
Cost of subscription/transaction revenues................. 766 708 692
Cost of services revenues................................. 1,473 4,206 10,078
-------- -------- --------
Total cost of revenues................................ 2,239 4,914 10,770
-------- -------- --------
GROSS PROFIT................................................ 1,506 3,952 8,360
OPERATING EXPENSES:
Sales and marketing....................................... 4,442 4,581 7,143
Research and development.................................. 4,137 4,271 6,194
General and administrative................................ 1,710 2,562 3,680
Depreciation and amortization............................. 426 637 1,625
Stock option compensation................................. -- -- 378
-------- -------- --------
Total operating expenses.............................. 10,715 12,051 19,020
-------- -------- --------
Loss from operations........................................ (9,209) (8,099) (10,660)
Other income(expense):
Interest income........................................... 48 51 421
Interest expense.......................................... (146) (208) (240)
-------- -------- --------
Total other income (expense).......................... (98) (157) 181
-------- -------- --------
Net loss.................................................... $ (9,307) $ (8,256) $(10,479)
Dividends and accretion on redeemable convertible preferred
stock..................................................... (668) (1,184) (19,347)
-------- -------- --------
Net loss applicable to common stockholders.................. $ (9,975) $ (9,440) $(29,826)
======== ======== ========
Pro forma basic and diluted loss per common share........... $ (.64)
========
Pro forma weighted-average common shares outstanding........ 16,277
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
VASTERA, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
REDEEMABLE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
COMPREHENSIVE ------------------- ------------------- PAID-IN
INCOME (LOSS) SHARES AMOUNT SHARES AMOUNT CAPITAL
--------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996........................ 800 $ 3,801 6,000 $ 60 $ 308
Net loss........................................ -- -- -- -- --
Issuance of Series C preferred stock............ 1,703 5,771 -- -- --
Issuance of warrants to purchase Series C-1
preferred stock............................... -- -- -- -- 477
Exercise of stock options....................... -- -- 27 -- 27
Dividends and accretion on redeemable
convertible preferred stock................... -- 668 -- -- --
------- ------- ------- ---- --------
BALANCE, December 31, 1997........................ 2,503 10,240 6,027 60 812
Net loss........................................ -- -- -- -- --
Issuance of Series C preferred stock............ 608 2,076 -- -- --
Issuance of warrants to purchase Series C-1
preferred stock............................... -- -- -- -- 171
Issuance of Series D preferred stock............ 2,461 10,931 -- -- --
Issuance of warrants to purchase Series D
preferred stock............................... -- -- -- -- 40
Issuance of warrants to purchase Series D-1
preferred stock............................... -- -- -- -- 197
Issuance of common stock in legal settlement.... -- -- 120 1 119
Exercise of stock options....................... -- -- 15 -- 14
Retirement of treasury stock.................... -- -- (660) (6) (324)
Dividends and accretion on redeemable
convertible preferred stock................... -- 1,184 -- -- --
------- ------- ------- ---- --------
BALANCE, December 31, 1998........................ 5,572 24,431 5,502 55 1,029
Net loss........................................ $(10,479) -- -- -- -- --
Unrealized gains and losses on investments...... (41) -- -- -- -- --
--------
Comprehensive loss.............................. $(10,520)
========
Issuance of Series D preferred stock............ 513 2,339 -- -- --
Issuance of warrants to purchase Series D-1
preferred stock............................... -- -- -- -- 231
Exercise of stock options....................... -- -- 172 2 170
Deferred stock compensation..................... -- -- -- -- 6,421
Amortization of deferred stock compensation.....
Stock issued for acquisition of subsidiaries.... -- -- 756 7 1,914
Dividends and accretion on redeemable
convertible preferred stock................... -- 19,347 -- -- --
------- ------- ------- ---- --------
BALANCE, December 31, 1999........................ 6,085 46,117 6,430 64 9,765
Pro forma adjustments........................... (6,085) (46,117) 10,327 104 46,014
------- ------- ------- ---- --------
PRO FORMA BALANCE, December 31, 1999.............. -- $ -- 16,757 $168 $ 55,779
======= ======= ======= ==== ========
<CAPTION>
ACCUMULATED OTHER TREASURY STOCK
COMPREHENSIVE DEFERRED ACCUMULATED -------------------
LOSS COMPENSATION DEFICIT SHARES AMOUNT
------------------- -------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996........................ $ -- $ -- $ 4,432) 660 $(330)
Net loss........................................ -- -- (9,307) -- --
Issuance of Series C preferred stock............ -- -- -- -- --
Issuance of warrants to purchase Series C-1
preferred stock............................... -- -- -- -- --
Exercise of stock options....................... -- -- -- -- --
Dividends and accretion on redeemable
convertible preferred stock................... -- (668) -- --
---- ------- -------- ---- -----
BALANCE, December 31, 1997........................ -- (14,407) 660 (330)
Net loss........................................ -- (8,256) -- --
Issuance of Series C preferred stock............ -- -- -- -- --
Issuance of warrants to purchase Series C-1
preferred stock............................... -- -- -- -- --
Issuance of Series D preferred stock............ -- -- -- -- --
Issuance of warrants to purchase Series D
preferred stock............................... -- -- -- -- --
Issuance of warrants to purchase Series D-1
preferred stock............................... -- -- -- -- --
Issuance of common stock in legal settlement.... -- -- -- -- --
Exercise of stock options....................... -- -- -- -- --
Retirement of treasury stock.................... -- -- -- (660) 330
Dividends and accretion on redeemable
convertible preferred stock................... -- (1,184) -- --
---- ------- -------- ---- -----
BALANCE, December 31, 1998........................ -- -- (23,847) -- --
Net loss........................................ -- -- (10,479) -- --
Unrealized gains and losses on investments...... (41) -- -- -- --
Comprehensive loss..............................
Issuance of Series D preferred stock............ -- -- -- -- --
Issuance of warrants to purchase Series D-1
preferred stock............................... -- -- -- -- --
Exercise of stock options....................... -- -- -- -- --
Deferred stock compensation..................... -- (6,421) -- -- --
Amortization of deferred stock compensation..... 378
Stock issued for acquisition of subsidiaries.... -- -- -- -- --
Dividends and accretion on redeemable
convertible preferred stock................... -- -- (19,347) -- --
---- ------- -------- ---- -----
BALANCE, December 31, 1999........................ (41) (6,043) (53,673) -- --
Pro forma adjustments........................... -- -- -- -- --
---- ------- -------- ---- -----
PRO FORMA BALANCE, December 31, 1999.............. $(41) $(6,043) $(53,673) -- $ --
==== ======= ======== ==== =====
<CAPTION>
TOTAL
--------
<S> <C>
BALANCE, December 31, 1996........................ $ (4,394)
Net loss........................................ (9,307)
Issuance of Series C preferred stock............ --
Issuance of warrants to purchase Series C-1
preferred stock............................... 477
Exercise of stock options....................... 27
Dividends and accretion on redeemable
convertible preferred stock................... (668)
--------
BALANCE, December 31, 1997........................ (13,865)
Net loss........................................ (8,256)
Issuance of Series C preferred stock............ --
Issuance of warrants to purchase Series C-1
preferred stock............................... 171
Issuance of Series D preferred stock............ --
Issuance of warrants to purchase Series D
preferred stock............................... 40
Issuance of warrants to purchase Series D-1
preferred stock............................... 197
Issuance of common stock in legal settlement.... 120
Exercise of stock options....................... 14
Retirement of treasury stock.................... --
Dividends and accretion on redeemable
convertible preferred stock................... (1,184)
--------
BALANCE, December 31, 1998........................ (22,763)
Net loss........................................ (10,479)
Unrealized gains and losses on investments...... (41)
Comprehensive loss..............................
Issuance of Series D preferred stock............ --
Issuance of warrants to purchase Series D-1
preferred stock............................... 231
Exercise of stock options....................... 172
Deferred stock compensation..................... --
Amortization of deferred stock compensation..... 378
Stock issued for acquisition of subsidiaries.... 1,921
Dividends and accretion on redeemable
convertible preferred stock................... (19,347)
--------
BALANCE, December 31, 1999........................ (49,928)
Pro forma adjustments........................... 46,118
--------
PRO FORMA BALANCE, December 31, 1999.............. $ (3,810)
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
VASTERA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (9,307) $ (8,256) $(10,479)
Adjustments to reconcile net loss to net cash used in
operating activities--
Stock option compensation............................... -- -- 378
Depreciation and amortization........................... 407 637 1,625
Provision for allowance for doubtful accounts........... 313 61 300
Provision for litigation settlement..................... 120 -- --
Amortization of discount related to warrants............ -- -- 6
Changes in operating assets and liabilities:
Accounts receivable................................... (2,047) (1,215) (1,925)
Prepaid expenses and other current assets............. 5 (50) (476)
Deposits and other assets............................. 10 (44) (162)
Accounts payable and accrued expenses................. 1,431 1,489 1,863
Accrued compensation and benefits..................... 328 611 491
Deferred revenue...................................... 3,261 2,905 2,666
-------- -------- --------
Net cash used in operating activities............... (5,479) (3,862) (5,713)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries............................... -- -- (539)
Purchase of debt securities............................... -- (2,401) (1,548)
Acquisition of property and equipment..................... (1,210) (1,380) (2,871)
-------- -------- --------
Net cash used in investing activities............... (1,210) (3,781) (4,958)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of redeemable convertible preferred
stock................................................... 5,248 13,415 2,339
Proceeds from the exercise of stock options............... 27 14 172
Proceeds from the issuance of long-term debt.............. 3,200 2,547 1,873
Principal payments on long-term debt...................... (1,681) (1,929) (544)
-------- -------- --------
Net cash provided by financing activities........... 6,794 14,047 3,840
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 105 6,404 (6,831)
Cash and cash equivalents, beginning of year................ 1,283 1,388 7,792
-------- -------- --------
Cash and cash equivalents, end of year...................... $ 1,388 $ 7,792 $ 961
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY:
NATURE OF THE BUSINESS
Vastera, Inc. ("Vastera" or the "Company") is a provider of solutions for
global trade management. The Company's offerings include a library of global
trade content, web-based business-to-business, or B2B, solutions and management
consulting and solution services. Global trade involves the physical movement of
goods across borders, the management of information required to enable global
trade and the financial exchange processes required to complete related
transactions. The Company's solutions focus on the management of information
required to enable global trade and enhance collaboration across a client's
global trade network.
The Company's operations are subject to certain risks and uncertainties,
including among others, uncertainties relating to product development, rapidly
changing technology, current and potential competitors with greater financial,
technological, production, and marketing resources, dependence on key management
personnel, limited protection of intellectual property and proprietary rights,
uncertainty of future profitability and possible fluctuations in financial
results.
ACQUISITIONS
On January 31, 1999, the Company acquired Deltac Limited ("Deltac"), located
in Wales, United Kingdom, a privately owned company and provider of
international trade consulting. The purchase method of accounting has been
applied to this acquisition, and accordingly, the results of operations of
Deltac are included in the Company's operations from the date of acquisition. In
connection with this transaction, the Company changed the name of Deltac to
Vastera, Ltd.
The shareholders of Deltac received $100,000 in cash and 189,000 shares of
common stock of Vastera, valued at $409,000, in exchange for all of the
outstanding common stock of Deltac. The excess of the purchase price over the
fair value of the net assets of Deltac was approximately $512,000. This amount
was allocated to goodwill and is being amortized on a straight-line basis over
five years.
On June 1, 1999, the Company acquired Quantum Consulting Associates, Inc.
("Quantum"), located in Denver, Colorado, a privately owned international trade
consulting company. The purchase method of accounting has been applied to this
acquisition, and accordingly, the results of operations of Quantum are included
in the Company's operations from the date of acquisition.
The shareholders of Quantum received approximately $439,000 in cash and
567,000 shares of common stock of Vastera, valued at approximately $1,511,000,
in exchange for all of the outstanding common stock of Quantum. The excess of
the purchase price over the fair value of the net assets of Quantum was
approximately $1,880,000. This amount was allocated to goodwill and is being
amortized on a straight-line basis over five years.
F-7
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY: (CONTINUED)
The following unaudited pro forma information has been prepared as if the
acquisitions of Deltac and Quantum had occurred as of January 1, 1998 and 1999,
respectively:
<TABLE>
<CAPTION>
PRO FORMA FOR THE PRO FORMA FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1999
------------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Total revenues....................................... $11,329 $ 19,708
Net loss............................................. (8,366) (10,684)
Pro forma loss per common and common equivalent
share.............................................. $ (.66)
</TABLE>
The unaudited pro forma information is not necessarily indicative of the
results of operations that would have occurred had the purchase been made at the
beginning of the periods presented or the future results of the combined
operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Vastera, Ltd., from the date of acquisition.
All significant intercompany balances and transactions have been eliminated in
consolidation.
UNAUDITED PRO FORMA BALANCE SHEET INFORMATION
The unaudited pro forma balance sheet information is being presented to show
the mandatory conversion of all shares of redeemable convertible preferred stock
outstanding at December 31, 1999 into shares of common stock upon a qualified
initial public offering. All of the Company's preferred stock will automatically
convert into shares of common stock if the initial public offering is
consummated under terms presently anticipated.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
The Company's revenues consist of subscription/transaction revenues and
services revenues.
Revenues classified as subscription/transaction revenues are derived from
subscription/ transaction arrangements and sales of perpetual software licenses
and maintenance services. Revenues from software licenses, maintenance
contracts, and subscription arrangements are recognized as
subscription/transaction revenue ratably over the estimated economic life of the
F-8
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
product (three years) or, if stated, the contract term. Maintenance contracts
include the right to unspecified enhancements on a when-and-if available basis,
ongoing support, and content update services. Transaction fees are recognized as
revenue when earned based on the usage of the Company's product. Revenue
recognition begins upon the execution of a software license and maintenance
agreement and delivery of the product.
Services revenues are derived from implementation, management consulting and
training services. Services are performed on a time and materials basis or under
fixed price arrangements and are recognized as the services are performed or
using percentage of completion.
ACCOUNTING CHANGE
In 1999, the Company changed its method of recognizing revenue under
software license arrangements. The Company has accounted for software licenses
as a subscription arrangement over the term of the contract or the estimated
economic life of the product (three years) if the contract term is not
specified. Prior to the change, license fees were recognized upon delivery of
the software. The new method of accounting for software license fees was adopted
since the content updates provided under maintenance arrangements are essential
to the continued functionality of the software product. The financial statements
of prior years have been restated to apply the new method retroactively.
The direct effect of the change in accounting principle on net losses and
pro forma loss per share for the years ending December 31, 1997, 1998, and 1999
is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
NET LOSS (IN THOUSANDS)
Subscription accounting..................................... $(9,307) $(8,256) $(10,479)
Up-front license fee recognition............................ (7,703) (5,314) (9,068)
------- ------- --------
Increase in net loss due to accounting change............... $(1,604) $(2,942) $ (1,411)
------- ------- --------
PRO FORMA LOSS PER SHARE
Subscription accounting..................................... $(.64)
Up-front license fee recognition............................ (.56)
--------
Increase in loss per share due to accounting change......... (.07)
--------
</TABLE>
SOFTWARE DEVELOPMENT COSTS
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed," software development costs are expensed as incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers. To
date, the establishment of technological feasibility of the Company's products
and general release of such software have substantially coincided. As a result,
software development costs qualifying for capitalization have been
insignificant, and therefore, the Company has not capitalized any software
development costs.
F-9
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires disclosures of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from these disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company. The carrying amounts reported in the consolidated balance sheets
approximate the fair value for cash and cash equivalents, investments, accounts
receivable, accounts payable, and capital lease obligations.
INVESTMENTS
The Company accounts for investments in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." In 1998 and
1999, the Company used its existing cash on hand to invest in certain debt
securities. The Company considers all of its investments as of December 31, 1998
and 1999, to be available-for-sale.
As of December 31, 1998, there were no material unrealized gains and losses.
As of December 31, 1999, the Company recognized approximately $41,000 of net
unrealized losses on investments in debt securities as a component of
stockholders' equity.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash equivalents and accounts receivable.
The Company limits the amount of investment exposure in any one financial
instrument and does not have any foreign currency investments. The Company sells
products and services to customers across several industries throughout the
world without requiring collateral. However, the Company routinely assesses the
financial strength of its customers and maintains allowances for anticipated
losses.
There were no customers that represented 10 percent or more of accounts
receivable as of December 31, 1998. As of December 31, 1999, one customer
accounted for 16 percent of total accounts receivable.
DEPRECIATION AND AMORTIZATION
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally three to five years. Assets acquired under
capital leases and leasehold improvements are amortized using the straight-line
method over the shorter of the estimated useful lives of the assets or the terms
of the leases. For the years ended December 31, 1997, 1998, and 1999,
depreciation and amortization expense was approximately $407,000, $637,000, and
$1,625,000, respectively.
F-10
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
LONG-LIVED ASSETS
The Company reviews its long-lived assets, including property and equipment
and goodwill for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable. To determine
recoverability of its long-lived assets, the Company evaluates the future,
undiscounted, net cash flows compared to the carrying amount of the assets.
INCOME TAXES
Deferred taxes are provided utilizing the liability method as prescribed by
SFAS No. 109, "Accounting for Income Taxes," whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
PRO FORMA LOSS PER COMMON SHARE
Pro forma loss per common share is computed using the pro forma
weighted-average number of common shares outstanding for the year ended
December 31, 1999. Pro forma weighted-average common shares include the assumed
conversion of all outstanding convertible preferred stock into common stock.
Since the conversion of the preferred stock has a significant effect on the loss
per share calculation, the historical loss per share has not been presented.
Basic earnings per share includes no dilution and is computed by dividing
net loss available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share includes
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. As of
December 31, 1999, options to purchase approximately 4,727,000 shares of common
stock and warrants to purchase 1,248,000 shares of redeemable convertible
preferred stock were outstanding. Due to the anti-dilutive nature of the options
and warrants there is no effect on the calculation of weighted-average shares
for diluted earnings per share. As a result, the basic and diluted loss per
share amounts are identical.
FOREIGN CURRENCY TRANSLATION
The Company uses the U.S. dollar as its functional currency in all foreign
locations. Assets and liabilities are translated into U. S. dollars as of the
balance sheet date. Revenues, expenses, gains, and losses are translated at the
average exchange rates in effect during each period. There were no material
gains or losses resulting from translation or foreign currency exchange
transactions during 1999.
COMPREHENSIVE INCOME
As of December 31, 1999, accumulated other comprehensive income includes
unrealized gains and losses on investments. As of December 31, 1997 and 1998,
the Company did not have any
F-11
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
material items of comprehensive income other than net loss, as the components of
accumulated other comprehensive income were immaterial to the financial
statements.
3. PROPERTY AND EQUIPMENT AND GOODWILL:
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Computer equipment......................................... $1,526 $2,649
Software................................................... 1,369 1,939
Furniture and equipment.................................... 600 1,677
Leasehold improvements..................................... 33 230
------ ------
3,528 6,495
Less--Accumulated depreciation............................. (1,296) (2,636)
------ ------
Property and equipment, net................................ $2,232 $3,859
====== ======
</TABLE>
As of December 31, 1999, goodwill of approximately $2,079,000 relates to the
Company's 1999 acquisitions. Accumulated amortization as of December 31, 1999,
was approximately $313,000.
4. LONG-TERM DEBT:
LINE OF CREDIT
In June 1997, the Company received a $1,000,000 convertible bridge loan (the
"Bridge Loan") from an equity investor (the "Investor"). The loan had an
interest rate of 10 percent. In August 1997, the $1,000,000 principal bridge
loan was converted into approximately 270,000 shares of Series C redeemable
convertible preferred stock.
On April 28, 1998, the Company obtained a line of credit from a bank for
$2,500,000 with a $500,000 sublimit for equipment purchases, subject to
borrowing base restrictions. During 1998 the equipment line of credit was
increased to $1,000,000. The line bears interest at prime plus 1.25 percent. The
line of credit is collateralized by the first lien on all corporate assets,
including intangible assets. As of December 31, 1998, there were no borrowings
outstanding under this line of credit. The Company terminated this line of
credit in March 1999.
In March 1999, the Company negotiated a $2,500,000 secured revolving credit
facility and a $1,500,000 equipment line of credit with a different bank. The
line bears interest at the prime rate plus .75 percent for the secured revolving
credit facility and the prime rate plus .85 percent for the equipment line of
credit. In September 1999, the equipment line was increased to $3,000,000. As of
December 31, 1999, the outstanding balance under the equipment line was
approximately $1,723,000 and there were no amounts outstanding under the
revolving line of credit. The revolving line of credit expires on September 5,
2000. Amounts borrowed under the equipment line are initially subject to
interest-only payments and after the interest-only period will be repayable over
three years.
F-12
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT: (CONTINUED)
The terms of the line of credit require the Company to comply with certain
financial covenants. As of December 31, 1999, the Company was in violation of
these covenants. On February 3, 2000, the bank granted the Company a waiver of
past covenant violations and waived its right to call the line of credit for
these covenant violations.
On March 3, 2000, the Company amended the existing financial covenants and
increased the equipment line of credit to $4,800,000. The most restrictive of
the amended financial covenants is that the Company's operating losses will not
exceed $5,000,000 for the second, third, and fourth fiscal quarters of 2000 and
$2,000,000 in any quarter thereafter, and, beginning in the first quarter of
2002, the Company is not permitted to have two consecutive quarters with
operating losses. Other financial covenants require that the Company maintain a
quick ratio, as defined, of at least 1.25 at all times and that the Company's
maintain a minimum tangible net worth, as defined, as follows (in thousands):
<TABLE>
<CAPTION>
MINIMUM TANGIBLE
AS OF THE QUARTER ENDED, NET WORTH
- ------------------------ ----------------
<S> <C>
March 31, 2000............................................ $ 800
June 30, 2000............................................. (3,000)
September 30, 2000........................................ (6,200)
December 31, 2000......................................... (9,100)
March 31, 2001............................................ (11,500)
June 30, 2001............................................. (13,000)
September 30, 2001........................................ (13,100)
Thereafter................................................ (12,600)
</TABLE>
CAPITAL LEASE OBLIGATIONS
The Company leases office equipment under various noncancelable capital
leases. The Company obtained an equipment leasing arrangement in the aggregate
of $1,400,000 in 1997 and an additional $250,000 in 1998 from a lending
institution (the "Lender"). Amounts borrowed from the equipment leasing
arrangement are due over 36- to 48-month repayment periods and are
collateralized by the Company's software product.
In connection with the capital lease arrangement from the Lender and the
Bridge Loan from the Investor during 1997, the Company issued the Lender and the
Investor warrants to purchase an aggregate of appoximately 7,000, 5,000, and
18,000 shares of Series A preferred stock, Series B preferred stock, and
Series C preferred stock, respectively. The fair value of these warrants was
immaterial to the consolidated financial statements.
Property and equipment includes approximately $1,914,000 and $1,798,000 of
equipment under capital lease arrangements at December 31, 1998 and 1999,
respectively. Related accumulated depreciation was approximately $904,000 and
$1,437,000 at December 31, 1998 and 1999, respectively.
F-13
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT: (CONTINUED)
Future minimum payments under the Company's line of credit and capital lease
arrangements at December 31, 1999, are as follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $1,190
2001........................................................ 1,199
2002........................................................ 704
------
Total minimum payments.................................. 3,093
Less--Amounts representing interest......................... 376
------
Present value of net minimum payments....................... 2,717
Less--Current obligations................................... 391
------
Long-term debt.............................................. $2,326
======
</TABLE>
F-14
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
As of December 31, 1999, the Company had a total of 7,351,000 shares of
authorized redeemable convertible preferred stock, which has been designated as
Series A, B, C, C-1, D, and D-1 redeemable convertible preferred stock. As of
December 31, 1999 there have been no Series B, C-1, or D-1 shares issued. The
following table details the number of shares issued and liquidation preference
for each series of the redeemable convertible preferred stock outstanding (in
thousands):
<TABLE>
<CAPTION>
SHARES OUTSTANDING AMOUNT LIQUIDATION PREFERENCE
--------------------------- --------------------------- ---------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1998 1999 1998 1999
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Series A............. 800 800 $ 4,533 $ 7,055 $ 4,773 $ 5,093
Series C............. 2,311 2,311 8,845 15,287 9,407 10,091
Series D............. 2,461 2,974 11,053 18,474 12,113 15,742
----- ----- ------- ------- ------- -------
5,572 6,085 $24,431 $40,816 $26,293 $30,926
===== ===== ======= ======= ======= =======
</TABLE>
On July 29, 1996, pursuant to a stock purchase agreement with an investor,
the Company issued 800,000 shares of Series A redeemable convertible preferred
stock ("Series A") and warrants to purchase approximately 150,000 shares of
Series B redeemable convertible preferred stock ("Series B") for total
consideration of $4,000,000. The warrants were valued at approximately $328,000.
On August 7, 1997, pursuant to a stock purchase agreement with a new and an
existing investor, the Company issued approximately 1,622,000 shares of
Series C redeemable convertible preferred stock ("Series C") and warrants to
purchase approximately 285,000 shares of Series C-1 redeemable convertible
preferred stock ("Series C-1") for total consideration of $6,000,000, which
includes the $1,000,000 Bridge Loan (see Note 4) that was converted into
approximately 270,000 shares of Series C. On September 3, 1997, the Company
issued approximately 81,000 shares of Series C and warrants to purchase
approximately 14,000 shares of Series C-1 to new investors for total
consideration of $300,000. The Series C-1 warrants were valued at approximately
$477,000.
On February 12, 1998, and May 28, 1998, pursuant to stock purchase
agreements with various new investors, the Company issued approximately 540,000
and 68,000 shares of Series C and warrants to purchase approximately 95,000 and
11,000 shares of Series C-1 for total consideration of $2,000,000 and $250,000,
respectively. The warrants were valued at approximately $171,000.
On November 24, 1998, pursuant to a stock purchase agreement with various
investors, the Company issued approximately 2,461,000 shares of Series D
redeemable convertible preferred stock ("Series D") and warrants to purchase
approximately 246,000 shares of Series D-1 redeemable convertible preferred
stock ("Series D-1") for total consideration of $12,000,000. The warrants to
purchase shares of Series D-1 were valued at approximately $197,000. The Company
paid approximately $832,000 in legal and broker fees related to these issuances,
which has been reflected as a reduction in the proceeds from the sale of
Series D. In connection with the sale of Series D, the Company issued warrants
to purchase approximately 31,000 shares of Series D to a securities company as a
fee related to the transaction. The fair value of these warrants was
approximately $40,000.
F-15
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK: (CONTINUED)
On February 26, 1999, pursuant to a stock purchase agreement with a new
investor, the Company issued approximately 513,000 shares of Series D for total
consideration of approximately $2,500,000. On September 1, 1999, the Company
issued this new investor warrants to purchase approximately 386,000 shares of
Series D-1 in connection with the signing of a subscription agreement. The
warrants issued to this customer were valued at approximately $231,000 and are
accounted for as a discount to revenue over the term of the subscription
agreement. On February 22, 2000, the investor notified the Company that they
will terminate the subscription agreement, effective September 1, 2000.
Accordingly, the remaining sales discount will be amortized through
September 1, 2000.
On February 4, 2000 and February 29, 2000, pursuant to a stock purchase
agreement with new and existing investors, the Company issued approximately
1,570,000 shares of Series E redeemable convertible preferred stock ("Series E")
for approximately $16,999,000. The Company expects to record a beneficial
conversion feature of approximately $8.1 million in the first quarter of 2000 to
reflect the difference between the underlying convertible price per share of
common stock and the estimated fair market value of the common stock on the date
of issuance. In connection with the sale of Series E shares, the Company
increased the common shares authorized to 40,000,000 shares.
In connection with the various stock purchase agreements, the Company and
the various investors entered into a stockholders agreement. The stockholders
agreement, among other things, prescribes certain limitations on the transfer of
stock, grants the various investors certain rights of first refusal and co-sale
rights with respect to the sales of stock, and provides for voting rights with
respect to the election of the directors under certain circumstances.
Holders of Series A, Series B, Series C, Series C-1, Series D, Series D-1,
and Series E are entitled to cumulative dividends at the rate per annum of
$0.40, $0.53, $0.30, $0.39, $0.39, $0.52 and $0.86 per share, respectively.
WARRANTS
In connection with the sales of the Series A, Series C, and Series D, the
Company issued warrants to investors to purchase an aggregate of approximately
150,000, 405,000, and 632,000 shares of Series B, Series C-1 and Series D-1,
respectively, at exercise prices of $6.65, $4.92, and $6.49 per share. In
connection with the sale of Series D, the Company also issued warrants to
purchase approximately 31,000 shares of Series D at $5.61 per share. The
warrants are immediately exercisable and may be exercised only in their
entirety.
The warrants to purchase Series B will expire on the earlier of
(i) July 31, 2001, or upon ten days prior written notice by the Company to the
warrant holder, (ii) on the date of the closing of an initial public offering
where the price is at least $5.00 per share and the net proceeds to the Company
are at least $15 million, or (iii) 30 days after written notice from the Company
informing the warrant holder that the Company has completed a 12-month operating
period during which gross revenues equal or exceed $20 million.
The warrants to purchase Series C-1 and Series D will expire on the earlier
of (i) the fifth anniversary of the issuance date, (ii) on the date of the
closing of an initial public offering where the price per share is at least
$7.40 per share and the net proceeds to the Company are at least
F-16
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK: (CONTINUED)
$15 million, or (iii) 30 days after written notice from the Company informing
the warrant holder that the Company has completed a 12-month operating period
during which gross revenues equal or exceed $30 million.
The warrants to purchase 246,000 shares of Series D-1 will expire on
May 24, 2000, and warrants to purchase 386,000 shares of Series D-1 will expire
on March 1, 2001.
CONVERSION
Each share of redeemable convertible preferred stock is convertible into
common stock at the option of the holder and converts automatically at the
consummation date of a qualified initial public offering. As of December 31,
1999, each share of Series A and Series B was convertible into three shares of
common stock, and each share of Series C, Series C-1, Series D, Series D-1, and
Series E was convertible into one and a half shares of common stock. The
conversion rates are subject to adjustments for events such as stock splits,
stock dividends, or issuances of stock.
LIQUIDATION PREFERENCE
In the event of liquidation, dissolution, or winding up of the Company, the
holders of Series A, Series B, Series C, Series C-1, Series D, Series D-1, and
Series E are entitled to a liquidation preference over the holders of the
Company's common stock. The liquidation preference equals the original issuance
price plus any unpaid dividends. No dividends have been declared or paid through
December 31, 1999.
Holders of Series D, Series D-1, and Series E shares have partial
liquidation preferences, which are preferential to other shares of redeemable
convertible preferred stock. This partial preference is limited to accrued
dividends of $.79, $1.86, and $4.75 per share, subject to stock dividends and
stock splits, for Series D, Series D-1, and Series E, respectively.
If the holders of shares of redeemable convertible preferred stock would be
entitled to receive an amount per share greater than two times the original
issuance price for each share of redeemable convertible preferred stock, subject
to adjustment in the event of any stock dividend or stock split, then the
holders of the shares of redeemable convertible preferred stock shall be
entitled to share only with the holders of the common stock on an
as-if-converted basis, and such holders of shares of redeemable convertible
preferred stock shall not be entitled to receive the liquidation preference.
REDEMPTION
At the option of the holders of a majority of the aggregate number of shares
of each series of redeemable convertible preferred stock, the Company shall
redeem, commencing on August 7, 2002, and continuing on the immediately
succeeding two anniversaries thereof in three installments, taking into effect
the prior redemptions, the number of shares of that series held by the holders.
In the event that the holders of a majority of the aggregate number of shares of
the particular series do not elect to exercise their redemption rights, they may
elect to exercise such rights at a subsequent anniversary, subject to certain
defined limitations. The redemption price shall be the greater of the fair
market value of such shares or the liquidation preference. The Company records
periodic accretion under the effective interest method on the redeemable
convertible preferred
F-17
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK: (CONTINUED)
stock to recognize the excess of the redemption price over the carrying value.
As of December 31, 1999, the redemption price is calculated based on the fair
market value of such shares as it is greater than the liquidation preference.
6. STOCKHOLDERS' EQUITY (DEFICIT):
STOCK SPLITS AND INCREASE IN AUTHORIZED SHARES
On February 10, 1997, the Company declared a two-for-one stock split
effected in the form of a stock dividend for each common share. On April 4,
2000, the board of directors voted to approve a three-for-two stock split which
will be effected in the form of a stock dividend for each common share just
prior to the closing of the offering. The Board also approved an increase in
authorized shares of common stock from 23,250,000 to 100,000,000 which will be
effected prior to the closing of the offering. All share information has been
adjusted retroactively in these consolidated financial statements for all
periods presented.
COMMON STOCK
Dividends may be declared and paid on common stock shares at the discretion
of the Company's Board of Directors and are subject to any preferential dividend
rights of any current outstanding Preferred Stock. No common stock dividends
have been declared or paid as of December 31, 1999.
Subject to the voting rights of the holders of preferred stock shares, the
holder of each share of common stock is entitled to one vote on all matters
voted on by the stockholders of the Company.
STOCK OPTION PLAN
On July 26, 1996, the Company adopted a Stock Option Plan (the "Plan") in
order to provide an incentive to eligible employees, consultants, and officers
of the Company. The Plan provides for grants of incentive stock options,
nonqualified stock options, and stock awards to employees, directors,
consultants and advisors. Under the Plan, 6,000,000 shares of common stock are
reserved and available for distribution at December 31, 1999. For incentive
stock options, the exercise price may not be less than the determined fair
market value at the date of grant. For nonqualified stock options, the exercise
price shall be at least equal to 85 percent of the fair market value of the
shares at the date of grant. Stock options granted under the Plan vest over a
four to six-year period and expire ten years after the grant date. Approximately
1,057,000 options are available for future grant as of December 31, 1999.
F-18
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (DEFICIT): (CONTINUED)
The following table summarizes activity for the stock options granted to
employees pursuant to the Plan for the three years ended December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF RANGE OF WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE EXERCISE PRICE
---------- -------------- ----------------
<S> <C> <C> <C>
Options outstanding, December 31, 1996......... 663,000 $1.00 $1.00
--------- ----------- -----
Granted...................................... 1,137,000 1.00 1.00
Exercised.................................... (27,000) 1.00 1.00
Forfeited.................................... (273,000) 1.00 1.00
--------- ----------- -----
Options outstanding, December 31, 1997......... 1,500,000 1.00 1.00
--------- ----------- -----
Granted...................................... 1,251,000 1.00-2.17 1.01
Exercised.................................... (15,000) 1.00 1.00
Forfeited.................................... (269,000) 1.00 1.00
--------- ----------- -----
Options outstanding, December 31, 1998......... 2,467,000 1.00-2.17 1.00
--------- ----------- -----
Granted...................................... 3,083,000 1.00-5.33 3.17
Exercised.................................... (172,000) 1.00 1.00
Forfeited.................................... (650,000) 1.00-2.67 1.08
--------- ----------- -----
Options outstanding, December 31, 1999......... 4,728,000 $1.00-$5.33 $2.40
========= =========== =====
</TABLE>
The weighted-average grant date fair value of options granted during the
years ended December 31, 1997, 1998, and 1999, was $0.27, $0.21, and $0.71,
respectively. As of December 31, 1999, options to purchase approximately
1,151,000 shares of common stock were exercisable with a weighted-average per
share exercise price of $1.01.
The weighted-average remaining contractual life and weighted-average
exercise price of options outstanding and options exercisable at December 31,
1999, for selected exercise price ranges is as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS WEIGHTED-AVERAGE
OUTSTANDING AT REMAINING
RANGE OF DECEMBER 31, CONTRACTUAL LIFE WEIGHTED-AVERAGE
EXERCISE PRICES 1999 (IN YEARS) EXERCISE PRICE
--------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
$1.00 1,674,000 7.70 $1.00
2.17-3.33 1,932,000 9.50 2.51
4.00-5.33 1,122,000 9.70 4.01
--------- ---- -----
$1.00-$5.33 4,728,000 8.90 $2.40
========= ==== =====
</TABLE>
During 1996, the Company adopted the disclosure requirements of SFAS
No. 123, "Accounting for Stock-Based Compensation." The Company applies
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations in accounting for its Plan.
Accordingly, deferred compensation cost of approximately $6,421,000 has been
recorded for its Plan based on the deemed intrinsic value of the stock option at
the date of the grant. The deferred compensation will be recognized over the
vesting period of the related
F-19
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (DEFICIT): (CONTINUED)
options. No compensation expense related to options granted during 1997 and 1998
has been included in the consolidated financial statements because the exercise
prices were equal to the fair market value at the time the options were granted.
For the year ended December 31, 1999, the Company recognized compensation
expense of approximately $378,000.
Stock option compensation expense, which has been separately identified in
the accompanying consolidated statement of operations for the year ended
December 31, 1999 has not been included in cost of revenues, sales and
marketing, research and development, and general and administrative expense as
indicated below:
<TABLE>
<S> <C>
Cost of services revenues................................... $ 27,000
Sales and marketing......................................... 135,000
Research and development.................................... 56,000
General and administrative.................................. 160,000
Total stock option compensation........................... $378,000
</TABLE>
Had compensation expense for the Company's Plan been determined based on the
fair value at the grant dates for awards under the Plans consistent with the
method of SFAS No. 123, the Company's net loss would have been increased to the
pro forma amounts indicated below (in thousands).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net loss, as reported.......................... $(9,307) $(8,256) $(10,479)
Net loss, pro forma............................ $(9,526) $(8,509) $(10,932)
Net loss per share, as reported................ $ (0.64)
Pro forma net loss per common and common
equivalent share............................. $ (0.67)
</TABLE>
For purposes of the SFAS No. 123 disclosure, the fair value of each option
is estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions used for grants issued during the years ended
December 31, 1997, 1998, and 1999:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Dividend yield................................... 0% 0% 0%
Expected volatility.............................. 0% 0% 0%
Average risk-free interest rate.................. 6.18% 5.09% 5.59%
Expected term.................................... 5 years 4 years 4 years
</TABLE>
Subsequent to year-end, approximately 1,907,000 options were granted under
the Plan, with exercise prices ranging from $4.00 to $6.67 and a weighted
average exercise price of $5.11 per share. The Company expects to record
deferred compensation of approximately $11,756,000 in the first quarter of 2000
related to these option grants, based on the deemed intrinsic value of the stock
option at the date of grant. The deferred compensation will be recognized over
the vesting period of the related options.
F-20
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (DEFICIT): (CONTINUED)
2000 STOCK OPTION/STOCK ISSUANCE PLAN
On April 4, 2000 the Company adopted a 2000 Stock Option/Stock Issuance Plan
(the "2000 Plan") to replace the 1996 Stock Option Plan, effective upon the
completion of the offering. 10,000,000 shares of common stock have been
authorized for issuance under the 2000 Plan. The 2000 Plan provides for grants
of options to purchase common stock and issuance of shares of common stock to
employees, directors, consultants and advisors.
2000 EMPLOYEE STOCK PURCHASE PLAN
On April 4, 2000 the Company adopted a 2000 Employee Stock Purchase Plan
(the "ESP Plan") to be effective upon the completion of the offering. 5,000,000
shares of common stock have been authorized for issuance under the ESP Plan.
Employees who work more than 20 hours a week for more than five calendar months
per year are eligible to participate in the ESP Plan. A participant may
contribute up to 15 percent of their salary. Shares of common stock will be
purchased semi-annually at a price per share equal to the lower of 85 percent of
the fair market value on the participants date of entry into the offering period
or 85 percent of the fair market value on the semi-annual purchase date.
7. INCOME TAXES:
For the years ended December 31, 1997, 1998, and 1999, the tax provision was
comprised primarily of a deferred tax benefit which was offset by a valuation
allowance of the same amount. The tax provision differed from the expected tax
benefit, computed by applying the U.S. Federal statutory rate of 35% to the loss
before income taxes, principally due to the effect of increases in the valuation
allowance.
Deferred tax assets are comprised of the following (in thousands):
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Depreciation and amortization.............................. $ (73) $ (104)
Allowance for doubtful accounts............................ 129 224
Deferred revenue........................................... 3,201 4,214
Accrual to cash adjustment................................. 280 210
Net operating loss carryforwards........................... 4,695 7,411
Research and development credit............................ 379 590
------ -------
8,611 12,545
Valuation allowance........................................ (8,611) (12,545)
------ -------
Net deferred tax asset..................................... $ -- $ --
====== =======
</TABLE>
Management believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realizability of
the deferred tax assets such that a full valuation allowance is required. Such
factors include the lack of a significant history of material profits, recent
increases in expense levels to support the Company's growth, the fact that the
market in which the Company competes is intensely competitive and characterized
by rapidly changing technology, the materiality of revenues from indirect
channel partners, the lack of
F-21
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES: (CONTINUED)
carryback capacity to realize deferred tax assets, and the uncertainty regarding
market acceptance of new versions of the Company's software.
As of December 31, 1998 and 1999, the Company had approximately
$12.4 million and $19.5 million, respectively, of federal net operating losses,
which will be carried forward to offset future taxable income, subject to
ownership change limitations. As of December 31, 1998 and 1999, the Company had
research and development tax credit carryforwards of approximately $379,000 and
$590,000, respectively. The net operating loss and research and development tax
credit carryforwards will begin to expire in 2011.
8. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases various equipment and office space under operating lease
agreements expiring at various dates through 2004. In addition to base rent, the
Company is responsible for certain taxes, utilities, and maintenance costs.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1999, are as follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 774
2001........................................................ 753
2002........................................................ 623
2003........................................................ 535
2004........................................................ 376
------
$3,061
======
</TABLE>
Total rental expense for the years ended December 31, 1997, 1998, and 1999,
was approximately $281,000, $322,000, and $860,000, respectively.
LITIGATION
On April 6, 1998, the Company settled an employment-related lawsuit with a
former employee by issuing 120,000 shares of common stock valued at $120,000.
The estimated settlement cost, including legal costs associated with the case,
was accrued as of December 31, 1997.
The Company is periodically a party to disputes arising from normal business
activities. In the opinion of management, resolution of these matters will not
have a material adverse effect upon the financial position or future operating
results of the Company.
9. EMPLOYEE BENEFIT PLAN:
The Company sponsors a 401(k) profit sharing plan to provide retirement and
incidental benefits for its employees (the "401(k) Plan"). As allowed under
Section 401(k) of the Internal Revenue Code, the 401(k) Plan provides
tax-deferred salary deductions for eligible employees. The Company may make
matching contributions to the 401(k) Plan. The Company contributed
F-22
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFIT PLAN: (CONTINUED)
approximately $148,000, $131,000, and $248,000 to the 401(k) Plan for the years
ended December 31, 1997, 1998, and 1999, respectively.
10. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest was $144,000, $208,000, and $231,000 for the years
ended December 31, 1997, 1998, and 1999, respectively.
Noncash activities were as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Noncash investing and financing activities:
Capitalized lease obligations incurred....... 700 947 1,873
Conversion of bridge loan to Series C........ 1,000 -- --
Dividends and accretion on redeemable
convertible preferred stock................ 668 1,184 19,347
Issuance of common stock in legal
settlement................................. -- 120 --
Retirement of treasury shares................ -- 330 --
</TABLE>
11. SEGMENT INFORMATION:
For the year ended December 31, 1999, the Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." The
Company has two reportable operating segments: subscription/transactions and
services. The subscription/transaction segment generates revenues from
subscription software license agreements of its Global Trade Solution Products.
The services segment provides implementation, management consulting and training
services for its customers. The Company evaluates its segments' performance
based on revenues and gross profit. The Company's unallocated costs include
corporate and other costs not allocated to the segments for management's
reporting purposes.
F-23
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SEGMENT INFORMATION: (CONTINUED)
The following table summarizes the Company's two segments (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Subscription/transaction................... $ 2,200 $ 4,088 $ 7,261
Services................................... 1,545 4,778 11,869
------- ------- --------
Total revenues......................... $ 3,745 $ 8,866 $ 19,130
------- ------- --------
Net loss:
Subscription/transaction................... $ 1,434 $ 3,380 $ 6,569
Services................................... 72 572 1,791
------- ------- --------
Gross profit........................... 1,506 3,952 8,360
------- ------- --------
Unallocated expense........................ (10,715) (12,051) (19,020)
Interest income............................ 48 51 421
Interest expense........................... (146) (208) (240)
------- ------- --------
Net loss............................... $(9,307) $(8,256) $(10,479)
======= ======= ========
</TABLE>
Under SFAS No. 131, the Company is required to provide enterprise-wide
disclosures about revenues by product and services, long-lived assets by
geographic area, and revenues from significant customers.
REVENUES
All of the Company's product revenues are from the subscription and
transaction sales of its global trade solutions products.
GEOGRAPHIC INFORMATION
The Company sells its product and services through its offices in the United
States and through a subsidiary in the United Kingdom. Information regarding
revenues and long-lived assets attributable to the United States and to all
foreign countries is stated below. The geographic classification of product and
service revenues was based upon the location of the customer. Vastera's product
and service revenues for the years ended December 31, 1997, 1998, and 1999, were
generated in the following geographic regions (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
United States............................... $3,741 $8,154 $17,145
Europe and Asia............................. 4 470 1,433
Other international operations.............. -- 242 552
------ ------ -------
Total revenues........................ $3,745 $8,866 $19,130
====== ====== =======
</TABLE>
F-24
<PAGE>
VASTERA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SEGMENT INFORMATION: (CONTINUED)
Vastera's long-lived assets were located as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
United States.............................................. $2,232 $5,099
Europe and Asia............................................ -- 839
Other international operations............................. -- --
------ ------
Total long-lived assets................................ $2,232 $5,938
====== ======
</TABLE>
SIGNIFICANT CUSTOMERS
For the years ended December 31, 1999, the Company did not have any revenues
greater than 10 percent of total revenues to any specific customer. For the year
ended December 31, 1998, one customer accounted for 10 percent of total
revenues. For the year ended December 31, 1997, two customers accounted for
23 percent (12 percent and 11 percent, respectively) of total revenues.
F-25
<PAGE>
[DESCRIPTION OF INSIDE BACK COVER]
VASTERA TRADEPRISM.COM
[GRAPHIC OF TradePrism WEB PAGE]
Before TradePrism.com, order details, international shipping documents,
shipment status information and regulatory data was often re-entered manually
into disparate systems by each member of the global trade network. This not
only increased the margin for error, but lengthened the fulfillment process.
TradePrism.com, Vastera's global trade exchange portal, provides our clients
with quick accessibility to our comprehensive solutions for Global Trade
Management-TM- - B(2)B Solutions, Global eContent, Management Consulting and
Solution Services. It also provides communication with trading partners,
creating a collaborative environment that gives our clients better control
over the global trading process. By intelligently automating the global trade
functions required to execute an international transaction, TradePrism.com
offers sellers and buyers faster access to global markets which increases
global delivery speed and improves customer satisfaction.
VASTERA
Opening the world to e-business
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF
COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF OUR COMMON STOCK.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Forward-Looking Statements............ 15
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Consolidated
Financial Data...................... 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........... 20
Our Business.......................... 32
Management............................ 48
Certain Transactions.................. 59
Principal Stockholders................ 62
Description of Capital Stock.......... 65
Shares Eligible for Future Sale....... 69
Underwriting.......................... 71
Legal Matters......................... 74
Experts............................... 74
Other Matters......................... 74
Additional Information................ 74
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
THROUGH AND INCLUDING , 2000 (THE 25TH DAY AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO A DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO AN UNSOLD ALLOTMENT OR SUBSCRIPTIONS.
[VASTERA LOGO]
SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
CHASE H&Q
BANK OF AMERICA SECURITIES LLC
PROSPECTUS
, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses (other than underwriting discounts and commissions and the
underwriters' non-accountable expense allowance) payable in connection with the
sale of the common stock offered in this Registration Statement are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 18,480
NASD filing fee............................................. 7,500
Nasdaq filing fee........................................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses (including legal fees)........... *
Transfer agent and rights agent and registrar fees and
expenses.................................................. *
Miscellaneous............................................... *
Total..................................................... $ *
</TABLE>
- ------------------------
* To be filed by amendment
All expenses are estimated except for the SEC fee and the NASD fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact that
he is or was a director, officer, employee or agent of Vastera may and, in
certain cases, must be indemnified by Vastera against, in the case of a
non-derivative action, judgments, fines, amounts paid in settlement and
reasonable expenses (including attorneys' fees) incurred by him as a result of
such action, and in the case of a derivative action, against expenses (including
attorneys' fees), if in either type of action he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
Vastera. This indemnification does not apply, in a derivative action, to matters
as to which it is adjudged that the director, officer, employee or agent is
liable to Vastera, unless upon court order it is determined that, despite such
adjudication of liability, but in view of all the circumstances of the case, he
is fairly and reasonably entitled to indemnity for expenses, and, in a
non-derivative action, to any criminal proceeding in which such person had
reasonable cause to believe his conduct was unlawful.
Article VI of Vastera's certificate of incorporation, as amended, provides
that no director of Vastera shall be liable to Vastera or its stockholders for
monetary damages for breach of fiduciary duty as a director to the fullest
extent permitted by the DGCL.
Article VII of Vastera's certificate of incorporation, as amended, also
provides that Vastera shall indemnify to the fullest extent permitted by
Delaware law any and all of its directors and officers, or former directors and
officers, or any person who may have served at Vastera's request as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise.
II-1
<PAGE>
Reference is made to Section 8 of the underwriting agreement to be filed as
Exhibit 1.1 hereto, pursuant to which the Underwriters have agreed to indemnify
officers and directors of Vastera against certain liabilities under the
Securities Act.
Vastera has entered into Indemnification Agreements with each director of
Vastera, a form of which is filed as Exhibit 10.7 to this Registration
Statement. Pursuant to such agreements, Vastera will be obligated, to the extent
permitted by applicable law, to indemnify such directors against all expenses,
judgments, fines and penalties incurred in connection with the defense or
settlement of any actions brought against them by reason of the fact that they
were directors of Vastera or assumed certain responsibilities at the direction
of Vastera. Vastera also intends to purchase directors and officers liability
insurance in order to limit its exposure to liability for indemnification of
directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(A) STOCK SPLITS.
We have effected and will effect the following splits of our common stock:
- On February 19, 1997, we effected a 2-for-1 stock split of our common
stock in the form of a stock dividend of one share of common stock paid on
each share of common stock outstanding and held of record by a stockholder
as of February 19, 1997. All common share and per share amounts herein
have been retroactively adjusted to reflect the stock split.
- On April 4, 2000, we approved a 3-for-2 stock split of our common stock
effective immediately prior to the closing of this offering in the form of
a stock dividend of two shares of common stock to be paid on each share of
common stock outstanding as of March , 2000. All common share and per
share amounts herein have been retroactively adjusted to reflect the stock
split.
(B) CERTAIN SALES OF SECURITIES.
In the three years preceding the filing of this registration statement, the
registrant has issued the following securities that were not registered under
the Securities Act:
- On March 31, 1997, we issued a warrant to Lighthouse Capital Partners,
L.P. in connection with a working capital line of credit to purchase 4,511
shares of Series B convertible preferred stock at an exercise price of
$6.65 per share.
- On April 7, 1997, we issued a warrant to Lighthouse Capital Partners, L.P.
in connection with an equipment lease line to purchase 7,000 shares of
Series A convertible preferred stock at an exercise price of $5.00 per
share.
- On May 16, 1997 and June 11, 1997, we issued warrants to Lighthouse
Capital Partners, L.P. and Battery Ventures III, L.P. in connection with a
bridge financing to purchase 6,216 shares and 8,108 shares, respectively,
of Series C convertible preferred stock at an exercise price of $3.70 per
share.
- From August 7, 1997 to May 28, 1998, we issued and sold an aggregate of
2,310,813 shares of our Series C convertible preferred stock to ten
accredited investors at a price of $3.70 per share. In addition, we also
issued to these investors warrants to purchase an aggregate of 405,488
shares of our Series C-1 convertible preferred stock at an exercise price
of $4.92 per share.
- On January 31, 1998, we issued a warrant to Lighthouse Capital Partners,
L.P. in connection with an equipment lease line to purchase 4,122 shares
of Series C convertible preferred stock at an exercise price of $3.70 per
share.
II-2
<PAGE>
- On April 10, 1998, we issued 80,000 shares of common stock at a fair
market value of $1.50 per share to one of our employees in connection with
a settlement agreement with such employee.
- On November 24, 1998 and February 26, 1999, we issued and sold an
aggregate of 2,973,749 shares of Series D convertible preferred stock to
14 accredited investors at a price of $4.876 per share. In addition, we
issued to these investors warrants to purchase an aggregate of 631,608
shares of our Series D-1 convertible preferred stock at an exercise price
of $6.485 per share. NationsBanc Montgomery Securities L.L.C., our
placement agent for this Series D convertible preferred stock offering,
was issued a warrant to purchase 30,763 shares of Series D convertible
preferred stock at an exercise price of $5.61 per share.
- On January 31, 1999, we issued 126,000 shares of common stock to Peter F.
Taylor and John Thurton, as shareholders of Deltac Limited, in connection
with our purchase of Deltac Limited.
- On June 1, 1999, we issued 377,813 shares of common stock to stockholders
of Quantum Consulting Associates, Inc. in connection with our purchase of
Quantum Consulting Associates, Inc.
- On February 4, 2000 and February 29, 2000, we issued and sold an aggregate
of 1,569,577 shares of Series E convertible preferred stock to 24
accredited investors at a price of $10.83 per share.
The foregoing sales of securities were made in reliance upon the exemption
from the registration provisions of the Securities Act provided for by
Section 4(2) thereof for transactions not involving a public offering. All of
the foregoing securities are deemed restricted securities for the purposes of
the Securities Act.
Between February 10, 1997 and February 29, 2000, Vastera issued an aggregate
of 320,925 shares of common stock to 22 people, all of whom were employees or
directors of, or consultants to, Vastera. Such shares were issued upon exercise
of stock options, all with exercise prices of $1.00 per share, granted under our
1996 Stock Option Plan.
For a more detailed description of this plan, see "Management--Employee
Benefit Plans" in this registration statement. In granting the options and
selling the underlying securities upon exercise of the options, the Company is
relying upon exemptions from registration set forth in Rule 701 and
Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS.
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation, as amended.
3.2 Form of Amended and Restated Certificate of Incorporation
(to be filed with the Delaware Secretary of State
immediately prior to the closing of the offering covered by
this Registration Statement).
3.3 Bylaws, as amended.
3.4 Form of Amended and Restated Bylaws (to be adopted
immediately prior to the closing of the offering covered by
this Registration Statement).
4.1* Specimen common stock certificate.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
4.2 Second Amended and Restated Investors' Rights Agreement, as
amended, dated November 24, 1998.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Value-Added Reseller License and Services Agreement with
Forte Software, Inc., as amended, dated July 19, 1996.
10.2 Lease Agreement with RHI Holdings, Inc., dated August 20,
1996, as amended, for property located at 45025 Aviation
Drive, Dulles, Virginia.
10.3 Lease Agreement with Pratt Land, LLC, dated December 13,
1993, for property located at 1375 Ken Pratt Blvd.,
Longmont, Colorado.
10.4* Lease with Axon Solutions Limited for property located at
188 High Street, Engham, Surrey.
10.5 Form of Indemnification Agreement between Vastera, Inc. and
members of its board of directors.
10.6 1996 Stock Option Plan, as amended.
10.7 Form of Stock Option Agreement for 1996 Plan.
10.8* 2000 Employee Stock Purchase Plan.
10.9* 2000 Stock Option/Stock Issuance Plan.
10.10* Form of Stock Option Agreement for 2000 Stock Option/Stock
Issuance Plan.
16.1 Letter from former auditors.
21.1 List of subsidiaries.
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (Included in
Exhibit 5.1).
24.1 Power of Attorney (contained in the signature page to this
Registration Statement).
27.1* Financial data schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule I--Report of Independent Public Accountants
Schedule II--Valuation and Qualifying Accounts
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriter at the closing specified in the standby underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Act, the information omitted
from the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be
deemed to be part of this registration statement as of the time it was declared
effective; and (3) that for the purpose of determining any liability under the
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement
II-5
<PAGE>
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.
The undersigned registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Dulles, Virginia, on April 6, 2000.
<TABLE>
<S> <C> <C>
VASTERA, INC.
By: /s/ ARJUN RISHI
-----------------------------------------
Arjun Rishi
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY. Know All Men By These Presents, that each person whose
signature appears below constitutes and appoints Arjun Rishi and Philip J.
Balsamo or either of them acting alone, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and revocation, for
him or her and in his or her name, place and stead, in any and all capacities,
to sign (i) any and all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith and (ii) any registration statement and any
and all amendments thereto, relating to the offer covered hereby filed pursuant
to Rule 462(b) under the Securities Act of 1933, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ARJUN RISHI President, Chief Executive Officer
--------------------------------- and Director (principal Executive April 6, 2000
Arjun Rishi Officer)
/s/ PHILIP J. BALSAMO Chief Financial Officer (Principal
--------------------------------- Financial and Accounting Officer) April 6, 2000
Philip J. Balsamo
/s/ MARK J. FERRER Chief Operating Officer and
--------------------------------- Director April 6, 2000
Mark J. Ferrer
/s/ RICHARD A. LEFEBVRE Director
--------------------------------- April 6, 2000
Richard A. Lefebvre
/s/ ROBERT G. BARRETT Director
--------------------------------- April 6, 2000
Robert G. Barrett
/s/ RICHARD H. KIMBALL Director
--------------------------------- April 6, 2000
Richard H. Kimball
/s/ JAMES D. ROBINSON IV Director
--------------------------------- April 6, 2000
James D. Robinson IV
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ TIMOTHY DAVENPORT Director
--------------------------------- April 6, 2000
Timothy Davenport
/s/ NICOLAS C. NIERENBERG Director
--------------------------------- April 6, 2000
Nicolas C. Nierenberg
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation, as amended.
3.2 Form of Amended and Restated Certificate of Incorporation
(to be filed with the Delaware Secretary of State
immediately prior to the closing of the offering covered by
this Registration Statement).
3.3 Bylaws, as amended.
3.4 Form of Bylaws (to be adopted immediately prior to the
closing of the offering covered by this Registration
Statement).
4.1* Specimen common stock certificate.
4.2 Second Amended and Restated Investors' Rights Agreement, as
amended, dated November 24, 1998.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Value-Added Reseller License and Services Agreement with
Forte Software, Inc., as amended, dated July 19, 1996.
10.2 Lease Agreement with RHI Holdings, Inc., dated August 20,
1996, as amended, for property located at 45025 Aviation
Drive, Dulles, Virginia.
10.3 Lease Agreement with Pratt Land, LLC, dated December 13,
1993, for property located at 1375 Ken Pratt Blvd.,
Longmont, Colorado.
10.4* Lease with Axon Solutions Limited for property located at
188 High Street, Engham, Surrey.
10.5 Form of Indemnification Agreement between Vastera, Inc. and
members of its board of directors.
10.6 1996 Stock Option Plan, as amended.
10.7 Form of Stock Option Agreement for 1996 Plan.
10.8* 2000 Employee Stock Purchase Plan.
10.9* 2000 Stock Option/Stock Issuance Plan.
10.10* Form of Stock Option Agreement for 2000 Stock Option/Stock
Issuance Plan.
16.1 Letter from former auditors.
21.1 List of subsidiaries.
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (Included in
Exhibit 5.1).
24.1 Power of Attorney (contained in the signature page to this
Registration Statement).
27.1* Financial data schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
II-9
<PAGE>
SCHEDULE I
After the three-for-two stock split and the increase in authorized shares
discussed in Note 6 to Vastera, Inc.'s consolidated financial statements is
effected, we expect to be in a position to render the following audit report.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Vienna, Virginia
April 5, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vastera, Inc.:
We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of Vastera, Inc. included in this
registration statement and have issued our report thereon dated April 5, 2000.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a part
of the basic financial statements. The information as of December 31, 1997, 1998
and 1999, and for the three years in the period ended December 31, 1999 included
in the schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states, in
all material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Vienna, Virginia
April 5, 2000
S-1
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS DEDUCTIONS
BEGINNING OF CHARGED FROM BALANCE AT
DESCRIPTION YEAR TO EXPENSE RESERVES END OF YEAR
- ----------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
December 31, 1997.................. 16,000 313,000 -- 329,000
December 31, 1998.................. 329,000 61,000 (51,000) 339,000
December 31, 1999.................. 339,000 300,000 (50,000) 589,000
</TABLE>
S-2
<PAGE>
Exhibit 1.1
VASTERA, INC.
COMMON STOCK ($.01 PAR VALUE PER SHARE)
UNDERWRITING AGREEMENT
________ __, 2000
Deutsche Bank Securities Inc.
Chase Securities Inc.
Banc of America Securities LLC
As representatives of the several Underwriters
named in Schedule I hereto,
Deutsche Bank Securities Inc.
One South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
Vastera, Inc., a Delaware corporation (the "Company"), proposes, subject to
the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of ........ shares
(the "Firm Shares") and, at the election of the Underwriters, up to ........
additional shares (the "Optional Shares") of Common Stock, $.01 par value
("Stock") of the Company (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof being collectively
called the "Shares").
Deutsche Bank Securities Inc. ("DBSI") has agreed to reserve up
to ____________ of the Firm Shares to be purchased by it under this Agreement
for sale to the Company's directors, officers, employees and business associates
and other parties related to the Company (collectively, "Participants"), as set
forth in the Prospectus under the heading "Underwriting" (the "Directed Share
Program"). The Firm Shares to be sold by DBSI and its affiliates pursuant to the
Directed Share Program are referred to hereinafter as the "Directed Shares". Any
Directed Shares not orally confirmed for purchase by any Participants by the end
of the business day on which this Agreement is executed will be offered to the
public by the Underwriters as set forth in the Prospectus.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 33-....) (the "Initial
Registration Statement") in respect of the Shares has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form; other
than a registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became effective upon
filing, no other document with respect to the Initial Registration Statement has
heretofore been filed with the Commission; and no stop order suspending the
effectiveness of the
<PAGE>
Initial Registration Statement, any post-effective amendment thereto or the Rule
462(b) Registration Statement, if any, has been issued and no proceeding for
that purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as amended at
the time such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or hereafter
becomes effective, are hereinafter collectively called the "Registration
Statement"; and such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus";
(b) No order preventing or suspending the use of any Preliminary Prospectus
has been issued by the Commission, and each Preliminary Prospectus, at the time
of filing thereof, conformed in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder, and did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through DBSI expressly for
use therein;
(c) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus will
conform, in all material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto, and as of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by an Underwriter through DBSI expressly for use therein;
(d) Neither the Company nor any of its subsidiaries has sustained since the
date of the latest audited financial statements included in the Prospectus any
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree that would have a material adverse
effect on the general affairs, management, the current or future consolidated
financial position, stockholders' equity or results of operations of the Company
and its subsidiaries (a "Material Adverse Effect"), otherwise than as set forth
or contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any change in the capital stock (other than pursuant to the grant or
exercise of options or warrants described in the Prospectus) or long-term debt
of the Company or any of its subsidiaries or any change or development having a
Material Adverse Effect, otherwise than as set forth or contemplated in the
Prospectus;
(e) The Company and its subsidiaries do not own any real property and have
good and marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not
2
<PAGE>
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries;
(f) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is subject to
no material liability or disability by reason of the failure to be so qualified
in any such jurisdiction; and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation;
(g) The Company has/will have an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares) are owned directly
or indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims;
(h) The Shares have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly and validly
issued and fully paid and non-assessable and will conform to the description of
the Stock contained in the Prospectus;
(i) The issue and sale of the Shares by the Company and the compliance by
the Company with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement, except the registration
under the Act of the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the Shares by
the Underwriters;
(j) Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents referred to
3
<PAGE>
therein, are accurate, complete and fair;
(l) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect; and, to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others;
(m) The Company is not and, after giving effect to the offering and sale of
the Shares, will not be an "investment company", as such term is defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(n) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes;
(o) Arthur Andersen LLP, who have certified certain financial statements of
the Company and its subsidiaries, are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder;
(p) The Company has reviewed its operations and that of its subsidiaries
and any third parties with which the Company or any of its subsidiaries has a
material relationship to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries has been or will be affected by the
Year 2000 Problem. As a result of such review, the Company has no reason to
believe, and does not believe, that the Year 2000 Problem has had or will have a
Material Adverse Effect or has resulted or will result in any material loss or
interference with the Company's business or operations. The "Year 2000 Problem"
as used herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of mechanical or
electrical systems of any kind is not functioning or will not function, in the
case of dates or time periods occurring after December 31, 1999, at least as
effectively as in the case of dates or time periods occurring prior to January
1, 2000.
(q) Other than as set forth in the Prospectus, the Company and its
subsidiaries have sufficient interests in all patents, trademarks, service
marks, trade names, copyrights, trade secrets, information, proprietary rights
and processes ("Intellectual Property") necessary for their business as
described in the Prospectus and, to the Company's knowledge, necessary in
connection with the products and services under development, without any
conflict with or infringement of the interests of others, except for such
conflicts which, individually or in the aggregate, have not had and are not
reasonably likely to result in, a Material Adverse Effect, and have taken all
reasonable steps necessary to secure interests in such Intellectual Property
from their contractors; except as set forth in the Prospectus, the Company is
not aware of outstanding options, licenses or agreements of any kind relating to
the Intellectual Property of the Company which are required to be set forth in
the Prospectus, and, except as set forth in the Prospectus, neither the Company
nor any of its subsidiaries is a party to or bound by an options, licenses or
agreements with respect to the Intellectual Property of any other person or
entity which are required to be set forth in the Prospectus; none of the
technology employed by the Company has been obtained or is being used by the
Company or its subsidiaries in violation of any contractual fiduciary obligation
binding on the Company or any of its subsidiaries or any of its directors or
executive officers or, to the Company's knowledge, any of its employees or
otherwise in violation of the rights of any persons; except as disclosed in the
Prospectus, neither the Company nor any of its subsidiaries has received any
written or, to the Company's knowledge, oral communications alleging that the
Company or any of its subsidiaries has violated, infringed or conflicted with,
or, by conducting its business as set forth in the Prospectus,
4
<PAGE>
would violate, infringe or conflict with any of the Intellectual Property of any
other person or entity other than any such violations, infringements or
conflicts which, individually or in the aggregate, have not had, and are not
reasonably likely to result in a Material Adverse Effect; and the Company and
its subsidiaries have taken and will maintain reasonable measures to prevent the
unauthorized dissemination or publication of their confidential information and,
to the extent contractually required to do so, the confidential information of
third parties in their possession.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $................, the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I hereto and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the purchase price per share set
forth in clause (a) of this Section 2, that portion of the number of Optional
Shares as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares) determined by multiplying such number
of Optional Shares by a fraction, the numerator of which is the maximum number
of Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to ................... Optional Shares, at the purchase price
per share set forth in the paragraph above, for the sole purpose of covering
sales of shares in excess of the number of Firm Shares. Any such election to
purchase Optional Shares may be exercised only by written notice from you to the
Company, given within a period of 30 calendar days after the date of this
Agreement, setting forth the aggregate number of Optional Shares to be purchased
and the date on which such Optional Shares are to be delivered, as determined by
you but in no event earlier than the First Time of Delivery (as defined in
Section 4 hereof) or, unless you and the Company otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as DBSI may request upon at least forty- eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company
to DBSI, through the facilities of the Depository Trust Company
("DTC"), for the account of such Underwriter, against payment by or on
behalf of such Underwriter of the purchase price therefor by wire
transfer of Federal (same-day) funds to the account specified by the
Company to DBSI at least forty-eight hours in advance. The Company will
cause the certificates representing the Shares to be made available for
checking and packaging at least twenty-four hours prior to the Time of
Delivery (as defined below) with respect thereto at the office of DTC
or its designated custodian (the "Designated Office"). The time and
date of such delivery and payment shall be, with respect to the Firm
Shares, 9:30 a.m., Boston, Massachusetts time, on .............,2000 or
such other time and date as DBSI and the Company may agree upon in
writing, and, with respect to the Optional Shares, 9:30 a.m., Boston,
Massachusetts time, on the date specified by DBSI in the written notice
given by DBSI of the Underwriters' election to purchase such Optional
Shares, or such other time and date as DBSI and the Company may agree
upon in writing. Such time and date for delivery of the Firm
5
<PAGE>
Shares is herein called the "First Time of Delivery", such time and
date for delivery of the Optional Shares, if not the First Time of
Delivery, is herein called the "Second Time of Delivery", and each such
time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including
the cross receipt for the Shares and any additional documents requested
by the Underwriters pursuant to Section 7(k) hereof, will be delivered
at the offices of Ropes & Gray, One International Place, Boston, MA
02110 (the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held
at the Closing Location at .......p.m., Boston, Massachusetts time, on
the Boston Business Day next preceding such Time of Delivery, at which
meeting the final drafts of the documents to be delivered pursuant to
the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "Boston Business Day" shall
mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not
a day on which banking institutions in Boston, Massachusetts are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than
the Commission's close of business on the second business day following
the execution and delivery of this Agreement, or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Act; to
make no further amendment or any supplement to the Registration
Statement or Prospectus which shall be disapproved by you promptly
after reasonable notice thereof; to advise you, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you with copies thereof; to advise you, promptly after
it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith 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;
(c) Prior to 10:00 A.M., Boston, Massachusetts time, on the Boston
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
the city and in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any event shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state
6
<PAGE>
any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and upon your
request to prepare and furnish without charge to each Underwriter and
to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time
nine months or more after the time of issue of the Prospectus, upon
your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an
amended or supplemented Prospectus complying with Section 10(a)(3) of
the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus,
not to offer, sell, contract to sell or otherwise dispose of, except as
provided hereunder any securities of the Company that are substantially
similar to the Shares, including but not limited to any securities that
are convertible into or exchangeable for, or that represent the right
to receive, Stock or any such substantially similar securities (other
than pursuant to employee stock option plans existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior
written consent except that the Company may issue such securities in
exchange for all of the equity or substantially all of the equity or
assets of a company in connection with a merger or acquisition,
provided that prior to any such issuance the recipients of such
securities shall have agreed with DBSI in writing to be bound by this
provision for the remainder of the 180-day period;
(f) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus, to
enforce the transfer restriction provisions contained in the stock
option agreements between the Company and each of its stockholders and
option holders and to place stop transfer orders on any shares of its
Stock necessary to ensure compliance with any lock-up or transfer
restriction provision contained in such option agreements;
(g) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each
of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the Registration
Statement), to make available to its stockholders consolidated summary
financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
(h) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
7
<PAGE>
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished
to its stockholders generally or to the Commission);
(i) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(j) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations
National Market System ("NASDAQ");
(k) To file with the Commission such information on Form 10-Q or
Form 10-K as may be required by Rule 463 under the Act; and
(l) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on
the date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, the Blue Sky Memorandum, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey (iv) all fees and
expenses in connection with listing the Shares on the NASDAQ; (v) the filing
fees incident to, and the fees and disbursements of counsel for the Underwriters
in connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost
of preparing stock certificates; (vii) the cost and charges of any transfer
agent or registrar; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
stock transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00
8
<PAGE>
P.M., Washington, D.C. time, on the date of this Agreement; no stop
order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all
requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
(b) Ropes & Gray, counsel for the Underwriters, shall have furnished
to you such written opinion or opinions (a draft of each such opinion
is attached as Annex II(a) hereto), dated such Time of Delivery, with
respect to the matters covered in paragraphs (i), (ii), (vii), (xi),
and (xiii) of subsection (c) below as well as such other related
matters as you may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Brobeck, Phleger & Harrison, LLP, counsel for the Company, shall
have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b) hereto), dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the State of Delaware, with power and authority (corporate
and other) to own its properties and conduct its business as
described in the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of
capital stock of the Company (including the Shares being
delivered at such Time of Delivery) have been duly and
validly authorized and issued and, upon payment therefor in
accordance with the terms hereof, will be fully paid and
non-assessable; and the Shares conform to the description of
the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each jurisdiction listed on a
schedule to such opinions (such counsel being entitled to
rely in respect of the opinion in this clause upon opinions
of local counsel and in respect of matters of fact upon
certificates of officers of the Company, provided that such
counsel shall state that they believe that both you and they
are justified in relying upon such opinions and
certificates);
(iv) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation; and all of the issued shares of capital stock
of each such subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable,
and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims (such counsel being
entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and in respect to matters of
fact upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that
they believe that both you and they are justified in relying
upon such opinions and certificates);
(v) Any real property and buildings held under lease by
the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and
buildings by the Company and its subsidiaries (in giving the
opinion in this clause, such counsel may state that no
9
<PAGE>
examination of record titles for the purpose of such opinion
has been made, and that they are relying upon a general
review of the titles of the Company and its subsidiaries,
upon opinions of local counsel and abstracts, reports and
policies of title companies rendered or issued at or
subsequent to the time of acquisition of such property by
the Company or its subsidiaries, upon opinions of counsel to
the lessors of such property and, in respect to matters of
fact, upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that
they believe that both you and they are justified in relying
upon such opinions, abstracts, reports, policies and
certificates);
(vi) To such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
Material Adverse Effect and, to such counsel's knowledge, no
such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(vii) This Agreement has been duly authorized, executed
and delivered by the Company;
(viii) The issue and sale of the Shares being delivered
at such Time of Delivery by the Company and the compliance
by the Company with all of the provisions of this Agreement
and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument which is filed as
an exhibit to or referred to in the Registration Statement
(in giving such opinion, counsel may attach to such opinion
a listing of the foregoing agreements and instruments), nor
will such action result in any violation of the provisions
of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its
subsidiaries or any of their properties;
(ix) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and
sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the
registration of the Shares under the Act and the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(x) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they
purport to constitute a summary of the terms of the Stock
and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair;
(xi) The Company is not an "investment company", as such
term is defined in the Investment Company Act (in providing
such opinion, counsel shall be entitled to rely upon an
opinion of counsel specializing in the Investment Company
Act); and
10
<PAGE>
(xii) The Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the
Act and the rules and regulations thereunder; although they
do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (xi) of this
section 7(c), they have no reason to believe that, as of its
effective date, the Registration Statement or any further
amendment thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) contained an 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 that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such
counsel need express no opinion) contained an 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 or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need
express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to
make the statements therein, in the light of the
circumstances under which they were made, not misleading;
and they do not know of any amendment to the Registration
Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit
to the Registration Statement or required to be described in
the Registration Statement or the Prospectus which are not
filed or described as required;
(d) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., Boston, Massachusetts time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Arthur Andersen LLP shall have furnished to you
a letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in
Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a
draft of the form of letter to be delivered on the effective date of
any post-effective amendment to the Registration Statement and as of
each Time of Delivery is attached as Annex I(b) hereto);
(e) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in
the Prospectus, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any of
its subsidiaries or
11
<PAGE>
any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause
(i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(f) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or
preferred stock by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes
of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's debt
securities or preferred stock;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on NASDAQ; (ii)
a suspension or material limitation in trading in the Company's
securities on NASDAQ; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York, Virginia or
Massachusetts State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such
event specified in this clause (iv) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered at
such Time of Delivery on the terms and in the manner contemplated in
the Prospectus;
(h) The Shares to be sold at such Time of Delivery shall have been
duly listed, subject to notice of issuance, on NASDAQ;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from all stockholders and option
holders, substantially to the effect set forth in Subsection 5(e)
hereof in form and substance satisfactory to you;
(j) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the
Boston Business Day next succeeding the date of this Agreement; and
(k) The Company shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as
to the performance by the Company of all of its obligations hereunder
to be performed at or prior to such Time of Delivery, as to the matters
set forth in subsections (a) and (e) of this Section and as to such
other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, 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 Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action
12
<PAGE>
or claim as such expenses are incurred; PROVIDED, HOWEVER, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through DBSI expressly for use
therein.
(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, 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, 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 any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through DBSI expressly for use
therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above 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 under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. 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
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim 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.
(d) The Company and each subsidiary of the Company, whether direct or
indirect, jointly and severally, agree to indemnify and hold harmless DBSI and
its affiliates and each person, if any, who controls DBSI or its affiliates
within the meaning of either Section 15 of the Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) (i)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any material prepared by or with the consent of the Company for
13
<PAGE>
distribution to Participants in connection with the Directed Share Program, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; (ii) caused by the failure of any Participant to pay for and accept
delivery of Directed Shares that the Participant has agreed to purchase; or
(iii) related to, arising out of, or in connection with the Directed Share
Program other than losses, claims, damages or liabilities (or expenses relating
thereto) that are finally judicially determined to have resulted from the bad
faith or gross negligence of DBSI.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
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 or if the indemnified
party failed to give the notice required under subsection (c) above, 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 in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
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
bear 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. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (e) 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 subsection (e). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (e) 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 (e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective
14
<PAGE>
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall
15
<PAGE>
not then be under any liability to any Underwriter except as provided in
Sections 6 and 8 hereof; but, if for any other reason, any Shares are not
delivered by or on behalf of the Company as provided herein, the Company will
reimburse the Underwriters through you for all out-of-pocket expenses approved
in writing by you, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company shall then be under no
further liability to any Underwriter except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by DBSI on behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Deutsche Bank
Securities Inc., One South Street, Baltimore, Maryland 21202, Attention:
_________________; with a copy to Deutsche Bank Securities Inc., 31 West 52nd
Street, New York, New York 10019, Attention: General Counsel; and if to the
Company shall be delivered or sent by mail to the address of the Company set
forth in the Registration Statement, Attention: Secretary; provided, however,
that any notice to an Underwriter pursuant to Section 8(c) hereof shall be
delivered or sent by mail, telex or facsimile transmission to such Underwriter
at its address set forth in its Underwriters' Questionnaire, or telex
constituting such Questionnaire, which address will be supplied to the Company
by you upon request. Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us six counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
Vastera, Inc.
16
<PAGE>
By:____________________________
Name:
Title:
Accepted as of the date hereof:
Deutsche Bank Securities Inc.
Chase Securities Inc.
Bank of America Securities LLC
By:_______________________________________
(Deutsche Bank Securities Inc.)
On behalf of each of the Underwriters
17
<PAGE>
SCHEDULE I
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ---------
Deutsche Bank Securities Inc
Chase Securities Inc
Banc of America Securities LLC
18
<PAGE>
ANNEX 1
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been furnished to the representatives of
the Underwriters (the "Representatives")and are attached hereto;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus as indicated in their reports thereon copies
of which are attached hereto and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility
for financial and accounting matters regarding whether the unaudited
condensed consolidated financial statements referred to in paragraph
(vi)(A)(i) below comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations, nothing came to their attention that cause them
to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for
such five fiscal years which were included or incorporated by reference
in the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the foregoing procedures that
caused them to believe that this information does not conform in all
material respects with the disclosure requirements of Items 301, 302,
402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim
19
<PAGE>
financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of
the latest audited financial statements included in the Prospectus,
inquiries of officials of the Company and its subsidiaries responsible
for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations, or (ii) any material modifications should be
made to the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them
to be in conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and
any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial
statements included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in
clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred
to in clause (B) were not determined on a basis
substantially consistent with the basis for the audited
consolidated financial statements included in the
Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not
comply as to form in all material respects with the
applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in
the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares
and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial
statements included in the Prospectus) or any increase in
the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by
the Representatives, or any increases in any items specified
by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in clause (E) there were any decreases in
20
<PAGE>
consolidated net revenues or operating profit or the total
or per share amounts of consolidated net income or other
items specified by the Representatives, or any increases in
any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year
and with any other period of corresponding length specified
by the Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of
minute books, inquiries and other procedures referred to in paragraphs
(iii) and (vi) above, they have carried out certain specified
procedures, not constituting an examination in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company
and its subsidiaries, which appear in the Prospectus, or in Part II of,
or in exhibits and schedules to, the Registration Statement specified
by the Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in
agreement.
21
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
VASTERA, INC.
Pursuant to Section 245
of the General Corporation Law of
the State of Delaware
Vastera, Inc. (the "Corporation"), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify as follows:
1. The name of the Corporation is Vastera, Inc. and the name under
which the Corporation was originally incorporated is Export Software
International, Inc. The date of the filing of its original Certificate of
Incorporation with the Secretary of State was July 25, 1996.
2. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of the Corporation as heretofore amended or supplemented and there
is not discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or changes
to read in full as set forth in Exhibit A attached hereto and is hereby
incorporated herein by this reference
4. This Restated Certificate of Incorporation in the form attached
hereto as Exhibit A was duly adopted by the Board of Directors in accordance
with Section 245 of the General Corporation Law of the State of Delaware.
5. This Restated Certificate of Incorporation shall be effective as of
the date set forth below.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Arjun Rishi, its President this _____ day of April, 2000.
---------------------------
Arjun Rishi, President
ATTEST:
- -------------------------------------------
Brian D. Henderson, Assistant Secretary
2
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
VASTERA, INC.
FIRST.___ The name of the corporation (the "Corporation") is Vastera,
Inc.
SECOND.__ The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, Delaware 19801. The name of the Corporation's registered agent as such
address is The Corporation Trust Company.
THIRD.___ The nature of the business of the Corporation is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware and to possess and exercise all
of the powers and privileges granted under such law and the other laws of the
State of Delaware.
FOURTH.__ AUTHORIZED CAPITAL. The total number of shares of all classes
of stock which the Corporation shall have authority to issue is 29,197,589 in
the designated classes and series as follows:
Class Number of Shares
- ----- ----------------
Common Stock, $.01 par value per share 20,000,000
("Common Stock")
Preferred Stock, $.01 par value per share 9,197,589
("Preferred Stock")
Comprised of:
Series A Convertible Preferred Stock, 807,000
$.01 par value per share
("Series A Preferred Stock")
Series B Convertible Preferred Stock, 173,000
$.01 par value per share
("Series B Preferred Stock")
Series C Convertible Preferred Stock, 2,329,259
$.01 par value per share
("Series C Preferred Stock")
Series C-1 Convertible Preferred Stock, 405,488
$.01 par value per share
("Series C-1 Preferred Stock")
<PAGE>
Series D Convertible Preferred Stock, 3,004,512
$.01 par value per share
("Series D Preferred Stock")
Series D-1 Convertible Preferred Stock 631,608
$.01 par value per share
("Series D-1 Preferred Stock")
Series E Convertible Preferred Stock 1,846,722
$.01 par value per share
("Series E Preferred Stock")
As used herein, the term "Preferred Stock" used without specific reference to
the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Series C-1 Preferred Stock, the Series D Preferred Stock,
the Series D-1 Preferred Stock or the Series E Preferred Stock means,
collectively, all the Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series C-1 Preferred Stock, Series D Preferred Stock, Series
D-1 Preferred Stock and Series E Preferred Stock share-for-share alike and
without distinction, except as the context otherwise requires.
The following is a statement of the rights, preferences, powers,
privileges and restrictions, qualifications and limitations thereof, in respect
of each class of capital stock of the Corporation.
A. COMMON STOCK
1. GENERAL. The voting, dividend and liquidation rights of the holders
of shares of Common Stock are subject to, and qualified by, the rights of the
holders of shares of Preferred Stock of any series as may be designated by the
Board of Directors.
2. VOTING. Subject to the voting rights of the holders of shares of
Preferred Stock set forth in Section B.3., or as set forth in any agreement
between the Corporation and holder of shares of the Preferred Stock, the holders
of the Common Stock are entitled to one vote for each share held at all meetings
of stockholders (and written actions in lieu of meetings). There shall be no
cumulative voting and at any meeting held for the purpose of electing directors,
the presence in person or by proxy of the holders of a majority of the shares of
Common Stock then outstanding shall constitute a quorum of the Common Stock for
the purpose of electing directors by holders of the Common Stock.
For so long as the number of directors constituting the Corporation's
Board of Directors equals seven (7), subject to the provisions of Section
B(6)(f), the holders of shares of Common Stock, voting together as a single
class shall be entitled to elect three directors.
2
<PAGE>
3. DIVIDENDS. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as, if and when determined by the Board
of Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. LIQUIDATION. Upon the voluntary or involuntary liquidation, sale,
merger, consolidation, dissolution or winding up of the Corporation or a
consolidation or merger of the Corporation where the holders of Common Stock and
Preferred Stock do not continue to hold more than a 50% equity interest in the
successor entity, or a transaction or series of related transactions in which
holders of Common Stock and Preferred Stock transfer more than 50% of the voting
power of the Corporation, or a sale of all or substantially of the Corporation's
assets (any such event, a "Liquidation"), holders of shares of Common Stock will
be entitled to receive all assets of the Corporation available for distribution
to its stockholders, subject to the preferential rights of any then outstanding
Preferred Stock.
5. REDEMPTION. The Common Stock is not redeemable, except as and when
approved by the Board of Directors and the holders in interest of a majority of
the shares of issued and outstanding shares of Preferred Stock, voting as a
single class.
B. PREFERRED STOCK
The Preferred Stock shall have the following rights, preferences,
powers, privileges and restrictions, qualifications and limitations.
1. DIVIDENDS. The holders of shares of Preferred Stock shall be
entitled to receive, as, if and when determined and declared by the Board of
Directors, in cash, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of the Corporation ) on the Common
Stock of the Corporation, cumulative dividends, which shall accrue on an annual
basis at the rate per annum of $.40 per share of Series A Preferred Stock, $.532
per share of Series B Preferred Stock, $.296 per share of Series C Preferred
Stock, $.3936 per share of Series C-1 Preferred Stock, $.3901 per share of
Series D Preferred Stock, $.5188 per share of Series D-1 Preferred Stock and
$.8664 per share of Series E Preferred Stock, as adjusted for stock splits,
stock dividends, recapitalizations, reclassifications and similar events that
affect the number of outstanding shares of the Preferred Stock ("Cumulative
Dividends"). Cumulative Dividends will accrue regardless of whether there are
profits, surplus or other funds of the Corporation's legally available for the
payment of dividends. Dividends shall be payable pro rata for partial year
periods.
So long as any shares of Preferred Stock shall be outstanding, no
dividend, whether in cash or property, shall be declared or paid, nor shall any
other distribution be made on the Common Stock, nor shall any shares of any
Common Stock of the Corporation be purchased, redeemed or otherwise acquired for
value by the Corporation (except for acquisitions of Common Stock by the
Corporation pursuant to agreements that permit the Corporation to repurchase
such shares upon termination of services to the Corporation or in the exercise
of the Corporation's right of first refusal upon a proposed transfer of shares
of Preferred Stock) until all dividends set forth in this Section B.1 on the
shares of Preferred Stock have been paid or declared and set apart, unless the
holders of a majority of the issued and outstanding shares of
3
<PAGE>
Preferred Stock, voting together as a single class, approve of the payment of
such dividends or the redemption of shares of the Corporation's Common Stock. In
the event that dividends are paid on any shares of Common Stock, an additional
dividend shall be paid with respect to all outstanding shares of Preferred Stock
in an amount equal per share (on an as-if-converted basis) to the amount paid or
set aside for each share of Common Stock.
2. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Other than as set forth in subsections (c) and (d) of this
Section 2, in the event of any Liquidation, before any distribution of assets
shall be made to the holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series C-1 Preferred Stock and the Common
Stock (collectively referred to as the "Series D Junior Securities"), the holder
of each share of Series D Preferred Stock, Series D-1 Preferred Stock and Series
E Preferred (collectively, the "Combined Series D and E Preferred Stock") then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount equal to (X) $1.176,
$2.785 and $7.13 per share, respectively (subject to appropriate adjustment in
the event of any stock dividend, stock split, combination or other similar
recapitalizations affecting such shares of Combined Series D and E Preferred
Stock) plus (Y) all dividends, including the dividends set forth in Section B.1
above, accrued and unpaid on each such share up to the date of distribution of
the assets of the Corporation to the holders of shares of Combined Series D and
E Preferred Stock to which they are entitled (such amount being referred to as
the "Special Liquidation Preference"). If, upon any such Liquidation, the assets
available for distribution shall be insufficient to pay the holders of shares of
Combined Series D and E Preferred Stock the full amount of the Special
Liquidation Preference to which they shall be entitled, the holders of shares of
Combined Series D and E Preferred Stock, shall share ratably in the distribution
of the assets available therefor in proportion to the respective amounts that
would otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full;
(b) Other than as set forth in subsections (c) and (d) of this
Section 2, in the event of a Liquidation, after distribution is made in full
pursuant to subsection (a) of this Section 2, before any distribution of assets
shall be made to the holders of shares of Common Stock, the holder of each share
of Preferred Stock then outstanding shall be entitled to be paid pari passu with
each other holder of shares of Preferred Stock out of the remaining assets of
the Corporation available for distribution to its stockholders an amount
calculated as follows:
(i) Each holder of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock shall
receive an amount equal to (X) the applicable Original Purchase Price (as
defined hereinbelow) of each share of such series of Preferred Stock (subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalizations affecting such shares of
Preferred Stock) plus (Y) all dividends, including the dividends set forth in
Section B.1 above, accrued and unpaid on such share up to the date of
distribution of the assets of the Corporation to the holders of Preferred Stock
to which they are entitled (such amount being referred to as the "Liquidation
Preference"). For purposes of this Certificate of Amendment, the "Original
Purchase Price" of each share of Series A Preferred Stock, Series B Preferred
Stock, Series C
4
<PAGE>
Preferred Stock and Series C-1 Preferred Stock shall be $5.00, $6.65, $3.70 and
$4.92 per share, respectively; and
(ii) Each holder of shares of Series D Preferred Stock and
Series D-1 Preferred Stock shall receive an amount equal to $3.70 per share
(subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalizations affecting such shares of
Preferred Stock). The "Original Purchase Price" for shares of Series D Preferred
Stock and Series D-1 Preferred Stock shall be $4.876 and $6.485 per share,
respectively (also referred to as the "Liquidation Preference").
(iii) Each holder of shares of Series E Preferred Stock shall
receive an amount equal to $3.70 per share (subject to appropriate adjustment in
the event of any stock dividend, stock split, combination or other similar
recapitalizations affecting such shares of Preferred Stock). The "Original
Purchase Price" for shares of Series E Preferred Stock shall be $10.83 per share
(also referred to as the "Liquidation Preference").
If upon any such Liquidation, the assets available for distribution
shall be insufficient to pay the holders of shares of Preferred Stock the full
amount to which they shall be entitled, under this subsection (b), the holders
of shares of Preferred Stock shall share ratably in the distribution of the
assets available therefor in proportion to the respective amounts that would
otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.
(c) Upon the completion of the distribution of the Special
Liquidation Preference and the Liquidation Preference required by subsections
(a) and (b) of this Section 2 and any other distribution that may be required
with respect to shares of Preferred Stock that may from time to time come into
existence, the assets available for distribution shall be distributed among the
holders of shares of Preferred Stock and Common Stock pro rata, based on the
number of shares of Common Stock held by each, treating such shares of Preferred
Stock on an as-if-converted basis (the "Total Shares").
(d) Notwithstanding anything to the contrary contained in
subsections B(2)(a) and B(2)(b) above, if, upon the occurrence of a Liquidation,
the holders of the Common Stock would be entitled to receive:
(i) an amount per share greater than $7.50, as adjusted for
stock splits, stock dividends, recapitalizations, reclassifications and similar
events that affect the number of outstanding shares of the Common Stock
(calculated, for purposes of this subsection B(2)(d)(i), as if the amount of
assets available for distribution, less the Special Liquidation Preferences and
the Liquidation Preferences for the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series C-1 Preferred Stock (collectively, with
the Series C Preferred Stock, the "Combined C Preferred Stock"), the Series D
Preferred Stock, the Series D-1 Preferred Stock and the Series E Preferred
Stock, as applicable, were divided by the Total Shares), then the holders of
shares of Series A Preferred Stock shall only be entitled to share with the
holders of the Common Stock on an as-if converted basis and such holders of
shares of Series A Preferred Stock shall not be entitled to receive the Series A
Preferred Stock Liquidation Preference;
5
<PAGE>
(ii) an amount per share greater than $9.98, as adjusted for
stock splits, stock dividends, recapitalizations, reclassifications and similar
events that affect the number of outstanding shares of the Common Stock
(calculated, for purposes of this subsection B(2)(d)(ii), as if the amount of
assets available for distribution, less the Special Liquidation Preferences and
the Liquidation Preferences for the Series B Preferred Stock, Combined C
Preferred Stock, the Series D Preferred Stock, the Series D-1 Preferred Stock
and the Series E Preferred Stock, as applicable, were divided by the Total
Shares), then the holders of shares of Series B Preferred Stock shall only be
entitled to share with the holders of the Common Stock on an as-if converted
basis and such holders of shares of Series B Preferred Stock shall not be
entitled to receive the Series B Preferred Stock Liquidation Preference;
(iii) an amount per share greater than $11.10, as adjusted for
stock splits, stock dividends, recapitalizations, reclassifications and similar
events that affect the number of outstanding shares of the Common Stock
(calculated, for purposes of this subsection B(2)(d)(iii), as if the amount of
assets available for distribution, less the Special Liquidation Preferences and
the Liquidation Preferences for the Combined C Preferred Stock, the Series D
Preferred Stock, the Series D-1 Preferred Stock and the Series E Preferred
Stock, as applicable, were divided by the Total Shares), then the holders of
shares of Series C Preferred Stock shall only be entitled to share with the
holders of the Common Stock on an as-if converted basis and such holders of
shares of Series C Preferred Stock shall not be entitled to receive the Series C
Preferred Stock Liquidation Preference;
(iv) an amount per share greater than $14.76, as adjusted for
stock splits, stock dividends, recapitalizations, reclassifications and similar
events that affect the number of outstanding shares of the Common Stock
(calculated, for purposes of this subsection B(2)(d)(iv), as if the amount of
assets available for distribution, less the Special Liquidation Preferences and
the Liquidation Preferences for the Series C-1 Preferred Stock, the Series D
Preferred Stock, the Series D-1 Preferred Stock and the Series E Preferred
Stock, as applicable, were divided by the Total Shares), then the holders of
shares of Series C-1 Preferred Stock shall only be entitled to share with the
holders of the Common Stock on an as-if converted basis and such holders of
shares of Series C-1 Preferred Stock shall not be entitled to receive the Series
C-1 Preferred Stock Liquidation Preference;
(v) an amount per share greater than $14.628, as adjusted for
stock splits, stock dividends, recapitalizations, reclassifications and similar
events that affect the number of outstanding shares of the Common Stock
(calculated, for purposes of this subsection B(2)(d)(v), as if the amount of
assets available for distribution, less the Special Liquidation Preferences and
the Liquidation Preferences for the Series D Preferred Stock, the Series D-1
Preferred Stock and the Series E Preferred Stock, as applicable, were divided by
the Total Shares), then the holders of shares of Series D Preferred Stock shall
only be entitled to share with the holders of the Common Stock on an as-if
converted basis and such holders of shares of Series D Preferred Stock shall not
be entitled to receive the Series D Preferred Stock Liquidation Preference; and
(vi) an amount per share greater than $19.46, as adjusted for
stock splits, stock dividends, recapitalizations, reclassifications and similar
events that affect the number of outstanding shares of the Common Stock
(calculated, for purposes of this subsection
6
<PAGE>
B(2)(d)(vi), as if the amount of assets available for distribution, less the
Special Liquidation Preferences and the Liquidation Preferences for the Series
D-1 Preferred Stock and the Series E Preferred Stock, as applicable, were
divided by the Total Shares), then the holders of shares of Series D-1 Preferred
Stock shall only be entitled to share with the holders of the Common Stock on an
as-if converted basis and such holders of shares of Series D-1 Preferred Stock
shall not be entitled to receive the Series D-1 Preferred Stock Liquidation
Preference.
(vii) an amount per share greater than $32.49, as adjusted for
stock splits, stock dividends, recapitalizations, reclassifications and similar
events that affect the number of outstanding shares of the Common Stock
(calculated, for purposes of this subsection B(2)(d)(vi), as if the amount of
assets available for distribution, less the Special Liquidation Preferences and
the Liquidation Preferences for the Series E Preferred Stock, as applicable,
were divided by the Total Shares), then the holders of shares of Series E
Preferred Stock shall only be entitled to share with the holders of the Common
Stock on an as-if converted basis and such holders of shares of Series E
Preferred Stock shall not be entitled to receive the Series E Preferred Stock
Liquidation Preference.
(e) The amount deemed distributed to the holders of shares of
Preferred Stock upon any Liquidation shall be the cash or the value of the
property, rights or securities distributed to such holders by the acquiring
person, firm or other entity. The value of such property, rights or other
securities shall be determined in good faith by the Board of Directors of the
Corporation.
3. VOTING.
(a) Each holder of outstanding shares of Preferred Stock shall be
entitled to the number of votes equal to the number of whole shares of Common
Stock into which the shares of Preferred Stock held by such holder are then
convertible (as adjusted from time to time pursuant to Section 4 hereof), at
each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration. Except
as provided by law, by the provisions of Subsection 3(b), 3(c), 3(d), 3(e) or
3(f) below or by the provisions establishing any other series of preferred
stock, holders of shares of Preferred Stock and of any other outstanding series
of preferred stock shall vote together with the holders of Common Stock as a
single Series.
(b) The Corporation shall not, without first obtaining the consent
or affirmative vote of the holders of a majority in interest of the then
outstanding shares of Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) together as a single class:
(i) repurchase or redeem any shares of Common Stock (other than
buybacks at cost from terminated employees, directors and consultants, approved
by the Board of Directors); or
(ii) declare or pay any dividend on the Common Stock.
7
<PAGE>
(c) The Corporation shall not, without first obtaining the consent or
affirmative vote of the holders in interest of 66-2/3% of the aggregate then
outstanding shares of Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) together as a single class:
(i) increase the number of directors constituting the
Corporation's Board of Directors above seven (7);
(ii) effect any sale, conveyance, lease or other disposition of
all or substantially all of the assets of the Corporation;
(iii) recapitalize or reorganize or merge or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation); or
(iv) increase or decrease the number of authorized shares of
Common Stock.
(d) The Corporation shall not, without first obtaining the consent
or affirmative vote of the holders of a majority in interest of the aggregate
then outstanding shares of Series A Preferred Stock and Series B Preferred
Stock, given in writing or by vote at a meeting, consenting or voting (as the
case may be) taken together as a single class:
(i) amend, alter or repeal any provision of the Certificate of
Incorporation or the By-Laws of the Corporation that affects adversely the
voting powers, preferences or other special rights or privileges,
qualifications, limitations or restrictions of the Series A Preferred Stock or
Series B Preferred Stock;
(ii) authorize, create or issue any shares of stock having
rights, preferences or privileges superior to or on a parity with that of the
Series A Preferred Stock or the Series B Preferred Stock, including, without
limitation, issuance of additional shares of Series A Preferred Stock or Series
B Preferred Stock;
(iii) increase or decrease the number of authorized shares of
Series A Preferred Stock or Series B Preferred Stock;
(iv) effect any liquidation, dissolution or winding up of the
Corporation, including but not limited to a Liquidation; or
(v) incur any indebtedness from borrowed money in a single
transaction or series related transactions in which the amount of such
indebtedness exceeds $1,000,000.
(e) The Corporation shall not, without first obtaining the consent
or affirmative vote of the holders in interest of a majority of the aggregate
then outstanding shares of Combined C Preferred Stock, given in writing or by
vote at a meeting, consenting or voting (as the case may be) together as a
single class:
8
<PAGE>
(i) amend, alter or repeal any provision of the Certificate of
Incorporation or the By-Laws of the Corporation that affects the voting powers,
preferences or other rights or privileges, qualifications, limitations or
restrictions of the Series C Preferred Stock or Series C-1 Preferred Stock;
(ii) authorize, create or issue any shares of stock having
rights, preferences or privileges superior to or on a parity with that of the
Series C Preferred Stock or the Series C-1 Preferred Stock, including, without
limitation, issuance of additional shares of Series C Preferred Stock or Series
C-1 Preferred Stock;
(iii) complete, or enter into an agreement to complete, an
Acquisition Event (other than an Acquisition Event where the per share valuation
reflected therein is greater than $11.10 (subject to appropriate adjustment in
the event of any stock dividend, stock split, combination or other similar
recapitalizations affecting such shares of Preferred Stock));
(iv) effect any liquidation, dissolution or winding up of the
Corporation; or
(v) increase or decrease the number of authorized shares of
Series C Preferred Stock or Series C-1 Preferred Stock.
(f) The Corporation shall not, without first obtaining the consent
or affirmative vote of the holders of at least 66-2/3% of the aggregate then
outstanding shares of the Series D Preferred Stock and Series D-1 Preferred
Stock given in writing or by vote at a meeting, consenting or voting (as the
case may be) together as a single class to:
(i) amend, alter or repeal any provision of the Certificate of
Incorporation or the By-Laws of the Corporation that affects the voting powers,
preferences or other rights or privileges, qualifications, limitations or
restrictions of the Series D Preferred Stock or Series D-1 Preferred Stock;
(ii) authorize, create or issue any shares of stock or other
security having rights, preferences or privileges superior to or on a parity
with that of the Series D Preferred Stock or Series D-1 Preferred Stock,
including, without limitation, issuance of additional shares of Series D
Preferred Stock or Series D-1 Preferred Stock; or
(iii) increase or decrease the number of authorized shares of
Series D Preferred Stock or Series D-1 Preferred Stock.
(g) The Corporation shall not, without first obtaining the consent
or affirmative vote of the holders of at least 66-2/3% of the aggregate then
outstanding shares of the Series E Preferred Stock given in writing or by vote
at a meeting, consenting or voting (as the case may be) together as a single
class to:
(i) amend, alter or repeal any provision of the Certificate of
Incorporation or the By-Laws of the Corporation that affects the voting powers,
preferences or
9
<PAGE>
other rights or privileges, qualifications, limitations or restrictions of the
Series E Preferred Stock;
(ii) authorize, create or issue any shares of stock or other
security having rights, preferences or privileges superior to or on a parity
with that of the Series E Preferred Stock, including, without limitation,
issuance of additional shares of Series E Preferred Stock; or
(iii) increase or decrease the number of authorized shares of
Series E Preferred Stock.
(h) For so long as at least 50% of the aggregate number of shares
of Preferred Stock originally issued by the Corporation remain outstanding, the
Corporation shall not, without first obtaining the affirmative vote of a
majority of the directors of the Corporation who are not also employees of or
consultants to the corporation: (i) approve any contract or transaction between
the Corporation and any one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of the Corporation's directors or officers are
directors or officers, or have a financial interest; or (ii) issue or grant any
Common Stock or Options with respect thereto, to officers, directors or
consultants to the Corporation, including, without limitation, pursuant to any
plan adopted by the Board of Directors of the Corporation.
(i) For purposes of subsections 3(c), 3(d), 3(e), 3(f) and 3(g),
without limiting the generality of the foregoing, the authorization or issuance
of any series of preferred stock with preference or priority over, or on parity
with, the Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall be deemed to affect adversely the Preferred Stock.
(j) The holders of a majority in interest of the shares of Series A
Preferred Stock, voting together as a separate class, shall be entitled to elect
one director to the Corporation's Board of Directors, the holders of a majority
in interest of the shares of Combined C Preferred Stock, voting together as a
separate class, shall be entitled to elect one director to the Corporation's
Board of Directors and the holders of a majority in interest of the aggregate
shares of Series D Preferred Stock and Series D-1 Preferred Stock, shall be
entitled to elect one director of the Corporation's Board of Directors. Any and
all director positions in excess of the four directors elected by the holders of
shares of Common Stock pursuant to Section A.2 above and the three directors
elected by the holders of the Series A Preferred Stock, Combined C Preferred
Stock and Series D Preferred Stock and Series D-1 Preferred Stock pursuant to
this section shall be elected by the holders of the Common Stock and Preferred
Stock voting as a single class.
4. OPTIONAL CONVERSION. The holders of shares of the Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof without the payment of
additional consideration, at any time and from time to time, into such number of
fully paid and nonassessable shares of Common Stock as is determined by dividing
the Original Purchase Price applicable to such
10
<PAGE>
converted share(s) of Preferred Stock by the Adjusted Conversion Price (each as
defined below) in effect at the time of conversion. As of the effective date of
this Certificate of Amendment the Adjusted Conversion Price for the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series C-1 Preferred Stock, the Series D Preferred Stock, the Series D-1
Preferred Stock and the Series E Preferred Stock initially shall be $2.50,
$3.325, $3.70, $4.92, $4.876, $6.485 and $10.83 per share, respectively.
In the event of a Liquidation of the Corporation, the Conversion
Rights shall terminate at the close of business on the first full day preceding
the date fixed for the payment of any amounts distributable on liquidation to
the holders of shares of Preferred Stock.
(b) FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of the shares of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Adjusted Conversion Price. Whether fractional shares are issuable upon
such conversion shall be determined on the basis of the total number of shares
of Preferred Stock the holder is at the time converting into Common Stock and
the number of shares of Common Stock issuable upon such aggregate conversion.
(c) MECHANICS OF CONVERSION.
(i) When a holder of shares of Preferred Stock elects to
convert shares of Preferred Stock into shares of Common Stock, such holder shall
surrender the certificate or certificates for such shares of Preferred Stock, at
the office of the transfer agent for the Preferred Stock (or at the principal
office of the Corporation if the Corporation serves as its own transfer agent),
together with written notice that such holder elects to convert all or any
number of the shares of the Preferred Stock represented by such certificate or
certificates. Such notice shall state such holder's name or the names of the
nominees in which such holder wishes the certificate or certificates for shares
of Common Stock to be issued. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his or its attorney duly authorized in
writing. The date of receipt of such certificates and notice by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent) shall be the conversion date ("Conversion Date"). The Corporation shall,
as soon as practicable after the Conversion Date, issue and deliver at such
office to such holder of Preferred Stock, or to his or its nominees, a
certificate or certificates for the number of shares of Common Stock to which
such stock holder shall be entitled, together with cash in lieu of any fraction
of a share. Such conversion shall be deemed to have been made immediately prior
to the close of business on the Conversion Date, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such time, and such shares of Common Stock issuable upon
such conversion shall be issued, and deemed issued, as of such time. If the
conversion is in connection with an underwritten offer of securities registered
pursuant to the Securities Act of 1933, as amended, the conversion may, at the
option of any holder tendering shares of Preferred Stock for conversion, be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of the
11
<PAGE>
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities, and such shares of
Common Stock issuable upon such conversion shall be issued, and deemed issued,
as of such time.
(ii) The Corporation shall, at all times when any shares of
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the shares of Preferred Stock (including any Preferred Stock issuable pursuant
to any option originally issued to a holder of shares of Preferred Stock), such
number of its duly authorized shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding or issuable shares of
Preferred Stock. Before taking any action that would cause an adjustment
reducing the Adjusted Conversion Price below the then par value of the shares of
Common Stock issuable upon conversion of the shares of Preferred Stock, the
Corporation will take any corporate action that may, in the opinion of its
counsel, be necessary to ensure that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock at such Adjusted
Conversion Price. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, in addition to such other remedies as
shall be available to the holder of such shares of Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
(iii) Upon any such conversion, no adjustment to the Adjusted
Conversion Price shall be made for any accrued and unpaid dividends on the
shares of Preferred Stock surrendered for conversion or on the Common Stock
delivered upon conversion.
(iv) All shares of Preferred Stock that shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any accrued and
unpaid Cumulative Dividends thereon and payment of any Liquidation Preference
that has accrued as of the Conversion Date. Any shares of Preferred Stock so
converted shall be retired and canceled and shall not be reissued, and the
Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized Preferred Stock accordingly.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this Subsection 4(d),
the following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities (as defined hereinbelow), excluding stock and options granted to
employees, directors, or consultants of the Corporation pursuant to a plan
adopted by the Board of Directors for such purpose, to acquire up to a maximum
of 4,000,000 shares of Common Stock (subject to
12
<PAGE>
appropriate adjustment for any stock dividend, stock split, combination or other
similar recapitalization affecting such shares) (the "Reserved Shares").
(B) "Original Issue Date" shall mean the date on which a
share of Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidence of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Subsection 4(d)(iii) below,
deemed to be issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
(I) upon conversion of shares of Preferred Stock
outstanding on the Original Issue Date;
(II) as a dividend or distribution on Preferred Stock;
(III) by reason of a dividend, stock split, split-up or
other distribution on shares of Common Stock excluded from
the definition of Additional Shares of Common Stock by the
foregoing clauses of (I) and (II) or this clause (III);
(IV) upon the exercise of options awarded for the
Reserved Shares, as defined in Subsection 4(d)(i)(A);
(V) upon the initial issuance of the Series E Preferred
Stock;
(VI) upon the exercise of any option or warrant
originally issued for the purchase of shares of Preferred
Stock; or
(VII) upon the exercise of warrants granted to
NationsBanc Montgomery Securities LLC in connection with the
issuance, sale and delivery of the Series D Preferred Stock.
(ii) NO ADJUSTMENT OF ADJUSTED CONVERSION PRICE. No adjustment in
the number of shares of Common Stock into which the Preferred Stock is
convertible shall be made, by adjustment in the applicable Adjusted Conversion
Price thereof unless the consideration per share (determined pursuant to
Subsection 4(d)(v)) for an Additional Share of Common Stock issued or deemed to
be issued by the Corporation is less than the applicable Adjusted Conversion
Price in effect on the date of, and immediately prior to, the issue of such
Additional Shares.
13
<PAGE>
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK.
(A) OPTIONS AND CONVERTIBLE SECURITIES.
If the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares of Common Stock (as set forth in the instrument relating
thereto without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to Subsection 4(d)(v)
hereof) of such Additional Shares of Common Stock would be less than the
applicable Adjusted Conversion Price in effect on the date of and immediately
prior to such issue, or such record date, as the case may be, and provided
further that in any such case in which Additional Shares of Common Stock are
deemed to be issued:
(I) no further adjustment in the Adjusted Conversion
Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible
Securities;
(II) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the
Corporation, or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange
thereof, the Adjusted Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights
of conversion or exchange under such Convertible Securities;
(III) no readjustment pursuant to clause (II) above
shall have the effect of increasing the Adjusted Conversion
Price to an amount which exceeds the lower of (i) the
Conversion Price on the original adjustment date, or (ii)
the Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between
14
<PAGE>
the original adjustment date and such readjustment date; and
(IV) upon the expiration or termination of any
unexercised Option, the Adjusted Conversion Price shall not
be readjusted, but the Additional Shares of Common Stock
deemed issued as the result of the original issue of such
Option shall not be deemed issued for the purposes of any
subsequent adjustment of the Adjusted Conversion Price.
(B) STOCK DIVIDENDS. In the event the Corporation at any
time or from time to time shall declare or pay any dividend on the Common Stock
payable in Common Stock, then in any such event, Additional Shares of Common
Stock shall be deemed to have been issued immediately after the close of
business on the record date for the determination of holders of any class of
securities entitled to receive such dividend; provided, however, that if such
record date is fixed and such dividend is not fully paid, the only Additional
Shares of Common Stock deemed to have been issued will be the number of shares
of Common Stock actually issued in such dividend, and such shares will be deemed
to have been issued as of the close of business on such record date, and the
Adjusted Conversion Price shall be recomputed accordingly.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF COMMON STOCK. In the event the Corporation shall issue Additional
Shares of Common Stock after the Original Issue Date of the first share of each
series of Preferred Stock (including Additional Shares of Common Stock deemed to
be issued pursuant to Subsection 4(d)(iii)), without consideration or for a
consideration per share less than the applicable Adjusted Conversion Price in
effect on the date of and immediately prior to such issue, then and in such
event, such Adjusted Conversion Price for such series of Preferred Stock shall
be reduced, concurrently with such issue, to an amount determined by multiplying
the Adjusted Conversion Price in effect on the date of and immediately prior to
such issue, by a fraction:
(A) the numerator of which shall be (I) the number of shares
of Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock (after giving effect to the issuance of Common Stock upon
the conversion of the shares of Preferred Stock outstanding immediately prior to
the issuance of such additional shares of Common Stock), plus (II) the number of
shares of Common Stock that the net aggregate consideration received by the
Corporation for the total number of such Additional Shares of Common Stock so
issued would purchase at the Adjusted Conversion Price in effect prior to
adjustment, and
(B) the denominator of which shall be (I) the number of
shares of Common Stock outstanding immediately prior to the issuance of such
Additional Shares of Common Stock (after giving effect to the issuance of Common
Stock upon the conversion of the shares of Preferred Stock outstanding
immediately prior to the issuance of such additional shares of Common Stock),
plus (II) the number of such Additional Shares of Common Stock so issued.
15
<PAGE>
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration shall:
(I) insofar as it consists of cash, be computed as the
aggregate net cash received by the Corporation, after deducting
any underwriting discounts, commissions and fees and excluding
amounts paid or payable for accrued interest or accrued
dividends;
(II) insofar as it consists of property other than cash,
be computed at the fair market value thereof at the time of such
issue, as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets
of the Corporation for consideration which covers both, be the
proportion of such consideration so received in respect of the
Additional Shares of Common Stock, computed as provided in
clauses (I) and (II) above, as determined in good faith by the
Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 4(d)(iv)(A), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set forth in
the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the exercise
of such Options or the conversion or exchange of such Convertible Securities.
(C) STOCK DIVIDENDS. Any Additional Shares of Common Stock
relating to stock dividends shall be deemed to have been issued for no
consideration.
16
<PAGE>
(vi) ADJUSTMENT FOR SUBDIVISIONS, COMBINATIONS OR CONSOLIDATION
OF COMMON STOCK. In the event the outstanding shares of Common Stock shall be
subdivided, by stock split or otherwise (but other than by stock dividend, which
is addressed in Subsection B(4)(d)(iii)(B)), into a greater number of shares of
Common Stock, the applicable Adjusted Conversion Price in effect immediately
prior to such subdivision shall, concurrently with the effectiveness of such
subdivision, be decreased proportionately. In the event the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the applicable
Adjusted Conversion Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be increased proportionately.
(vii) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of
any recapitalization, consolidation or merger of the Corporation with or into
another corporation or the sale of all or substantially all of the assets of the
Corporation to another corporation (other than a subdivision or combination
provided for elsewhere in this Section 4 and other than a consolidation, merger
or sale which is treated as a Liquidation pursuant to Subsection 2(c)), each
share of Preferred Stock shall thereafter be convertible into the kind and
amount of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock of the Corporation deliverable upon
conversion of such Preferred Stock would have been entitled upon such
consolidation, merger or sale; and, in such case, appropriate adjustment (as
determined in good faith by he Board of Directors) shall be made in the
application of the provisions in this Section 4 set forth with respect to the
rights and interest thereafter of the holders of the Preferred Stock, to the end
that the provisions set forth in this Section 4 (including provisions with
respect to changes in and other adjustments of the Adjusted Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the conversion
of the Preferred Stock.
(viii) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event the
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive, any
distribution payable in securities of the Corporation other than shares of
Common Stock and other than as otherwise adjusted in this Section B(4) then, and
in each such event, provision shall be made such that the holders of each share
of Preferred Stock shall receive upon conversion thereof, in addition to the
number of shares of Common Stock receivable thereupon, the amount of the
securities of the Corporation that they would have received had their shares of
Preferred Stock been converted into shares of Common Stock on the date of such
event and had then thereafter, during the period from the date of such event to
and including the date of conversion, retained such securities receivable by
them as aforesaid during such period, subject to all other adjustments called
for during such period under this Section B(4) with respect to the rights of the
holders of such shares of Preferred Stock.
(e) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in carrying out all of the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of shares
of Preferred Stock against impairment.
17
<PAGE>
(f) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Adjusted Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of shares of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of shares of Preferred Stock, furnish or cause to be
furnished to such holder a similar certificate setting forth (i) such
adjustments and readjustments, (ii) the Adjusted Conversion Price then in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which then would be received upon the conversion of shares of
Preferred Stock.
(g) NOTICE OF RECORD DATE: In the event:
(i) that the Corporation takes 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 (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class of any other securities or property, or to receive
any other right;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or with another corporation, or
of the sale of all or substantially all of the assets of the Corporation;
(iv) of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation; or
(v) any recapitalization of the capital stock of the
Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the shares Preferred Stock, and shall cause to
be mailed to the holders of the shares Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least
fifteen (15) days before the record date specified below, a notice stating
(A) the recorded date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as of
which the holders of the applicable class of securities of record to be entitled
to such dividend, distribution, subdivision or combination are to be determined,
or
(B) the date of which such recapitalization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of the applicable class of securities of record shall be
entitled to exchange their shares of the applicable class of securities
18
<PAGE>
for securities or other property deliverable upon such recapitalization,
reclassification, consolidation, merger, sale, dissolution or winding up.
(h) PAYMENT OF TAXES. The Corporation shall pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Preferred Stock under Sections 4 or 5 hereof, excluding any tax or
other charge imposed in connection with any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the shares
of Preferred Stock so converted were registered.
5. MANDATORY CONVERSION.
(a) Upon the effective date of a registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation in which the per share price is at least
$14.80 (subject to adjustment for any stock dividend, stock split, combination
or other similar recapitalizations) and the aggregate net cash received by the
Corporation (after deducting any underwriting discounts, commissions and fees or
similar commissions, compensation or concessions paid or allowed by the
Corporation in connection with such issue or sale) are at least $15,000,000,
then effective upon the closing of the sale of such shares by the Corporation
pursuant to such offering, all outstanding shares of Preferred Stock shall
automatically convert to shares of Common Stock in the manner provided elsewhere
herein, including, without limitation, the adjustments contemplated by Section
B(4).
(b) All certificates evidencing shares of Preferred Stock will be
required to be surrendered in connection with the mandatory conversion described
herein and such certificates shall, from and after the date such certificates
are so required to be surrendered, be deemed to have been retired and canceled
and the shares of Preferred Stock represented thereby converted into Common
Stock for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates. The Corporation shall, as soon as
practicable after the date of conversion, issue and deliver at the office of the
transfer agent for the shares of Preferred Stock (or at the principal office of
the Corporation if the Corporation serves as its own transfer agent) to such
holder of shares of Preferred Stock, or to his or its nominee, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled, together with cash in lieu of any fraction of a share). The
Corporation may thereafter take such appropriate action as may be necessary to
reduce the authorized number of shares of Preferred Stock accordingly.
6. REDEMPTION AT OPTION OF HOLDER.
(a) At the option of the holders of a majority of the aggregate
number of shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a single class, the Corporation shall redeem, commencing on
August 7, 2002 (the "Redemption Trigger Date") and continuing on the immediately
succeeding two anniversaries thereof, in three (3) installments (each such date
a "Preferred Stock Redemption Date"), the number of shares of Series A Preferred
Stock and Series B Preferred Stock held by all holders as specified below. To
exercise their rights of redemption provided in this Section 6, the holders of a
majority of the
19
<PAGE>
aggregate number of shares of Series A Preferred Stock and Series B Preferred
Stock shall deliver to the secretary or the treasurer of the Corporation no less
than sixty (60) days prior to the applicable Preferred Stock Redemption Date a
written notice informing the Corporation of the exercise of the redemption
rights by the holders of shares of Series A Preferred Stock and Series B
Preferred Stock. No later than thirty (30) days after the applicable Preferred
Stock Redemption Date, the Corporation shall redeem the number of shares of
Series A Preferred Stock and Series B Preferred Stock specified below for each
applicable Preferred Stock Redemption Date, by paying in cash therefor, the
greater of (i) the fair market value of such shares, as initially determined at
the first Preferred Stock Redemption Date in accordance with Section 6(f) below,
or (ii) the Original Purchase Price plus all accrued but unpaid dividends on
such shares, including, without limitation, all dividends contemplated by
Section B(1) (the greater of such amounts with respect to Series A Preferred
Stock being referred to as the "Series A Redemption Price" and the greater of
such amounts with respect to Series B Preferred Stock being referred to as the
"Series B Redemption Price"). With respect to (i) the first Preferred Stock
Redemption Date the Corporation shall be required to redeem in aggregate
one-third (1/3) of the aggregate number of shares of Series A Preferred Stock
and Series B Preferred Stock originally issued; (ii) the second Preferred Stock
Redemption Date the Corporation shall be required to redeem in aggregate, taking
into effect the prior redemption, one-half (1/2) of the aggregate remaining
number of issued and outstanding shares of Series A Preferred Stock and Series B
Preferred Stock; and (iii) the third Preferred Stock Redemption Date the
Corporation shall be required to redeem in aggregate, taking into effect all
prior redemptions, the aggregate remaining number of issued and outstanding
shares of Series A Preferred Stock and Series B Preferred Stock originally
issued. In the event that the holders of a majority of the aggregate number of
shares of Series A Preferred Stock and Series B Preferred Stock, voting together
as a single class, do not elect to exercise their redemption right on the
Redemption Trigger Date in the manner provided herein, the holders of a majority
of the aggregate number of shares of Series A Preferred Stock and Series B
Preferred Stock, voting together as a single class, may elect to exercise such
redemption right at a subsequent anniversary; provided, however, except as set
forth in the immediately succeeding sentence, in no event shall the Corporation
be required to redeem more than one-third (1/3) of the aggregate number of
shares of Series A Preferred Stock and Series B Preferred Stock originally
issued by the Corporation on any Preferred Stock Redemption Date. If the
Corporation is unable to redeem in full all shares tendered for redemption on a
Preferred Stock Redemption Date, then, on the next Preferred Stock Redemption
Date, the Corporation shall be required to redeem all the previously tendered
but unredeemed shares of Series A Preferred Stock and Series B Preferred Stock
plus all new shares of such stock tendered for redemption, which may cause the
Corporation to redeem more than one-third (1/3) of the aggregate number of
shares of Series A Preferred Stock and Series B Preferred Stock originally
issued by the Corporation. Dividends on the shares of Series A Preferred Stock
and Series B Preferred Stock shall continue to accrue until redemption, and
accrued and unpaid dividends shall be paid at redemption.
(b) At the option of the holders of a majority of the aggregate
number of shares of Combined C Preferred Stock, voting together as a single
class, the Corporation shall redeem, commencing on the Redemption Trigger Date
and continuing on the immediately succeeding two anniversaries thereof, in three
(3) installments (each such date also being referred to as a "Preferred Stock
Redemption Date"), the number of shares of Combined C Preferred Stock held by
all holders as specified below. To exercise their rights of redemption provided
in
20
<PAGE>
this Section 6, the holders of a majority of the aggregate number of shares of
Combined C Preferred Stock shall deliver to the secretary or the treasurer of
the Corporation no less than sixty (60) days prior to the applicable Preferred
Stock Redemption Date a written notice informing the Corporation of the exercise
of the redemption rights by the holders of shares of Combined C Preferred Stock.
No later than thirty (30) days after the applicable Preferred Stock Redemption
Date, the Corporation shall redeem the number of shares of Combined C Preferred
Stock specified below for each applicable Preferred Stock Redemption Date, by
paying in cash therefor, the greater of (i) the fair market value of such
shares, as initially determined at the first Preferred Stock Redemption Date in
accordance with Section 6(f) below, or (ii) the Original Purchase Price plus all
accrued but unpaid dividends on such shares, including, without limitation, all
dividends contemplated by Section B(1) (the greater of such amounts with respect
to Series C Preferred Stock being referred to as the "Series C Redemption Price"
and the greater of such amounts with respect to Series C-1 Preferred Stock being
referred to as the "Series C-1 Redemption Price"). With respect to (i) the first
Preferred Stock Redemption Date the Corporation shall be required to redeem in
aggregate one-third (1/3) of the aggregate number of shares of Combined C
Preferred Stock originally issued; (ii) the second Preferred Stock Redemption
date the Corporation shall be required to redeem in aggregate, taking into
effect the prior redemption, one-half (1/2) of the aggregate remaining number of
issued and outstanding shares of Combined C Preferred Stock; and (iii) the third
Preferred Stock Redemption Date the Corporation shall be required to redeem in
aggregate, taking into effect all prior redemptions, the aggregate remaining
number of issued and outstanding shares of Combined C Preferred Stock originally
issued. In the event that the holders of a majority of the aggregate number of
shares of Combined C Preferred Stock, voting together as a single class, do not
elect to exercise their redemption right on the Redemption Trigger Date in the
manner provided herein, the holders of a majority of the aggregate number of
shares of Combined C Preferred Stock, voting together as a single class, may
elect to exercise such redemption right at a subsequent anniversary; provided,
however, except as set forth in the immediately succeeding sentence, in no event
shall the Corporation be required to redeem more than one-third (1/3) of the
aggregate number of shares of Combined C Preferred Stock originally issued by
the Corporation on any Preferred Stock Redemption Date. If the Corporation is
unable to redeem in full all shares tendered for redemption on a Preferred Stock
Redemption Date, then, on the next Preferred Stock Redemption Date, the
Corporation shall be required to redeem all the previously tendered but
unredeemed shares of Combined C Preferred Stock plus all new shares of such
stock tendered for redemption, which may cause the Corporation to redeem more
than one-third (1/3) of the aggregate number of shares of Combined Series C
Preferred Stock originally issued by the Corporation. Dividends on the shares of
Combined C Preferred Stock shall continue to accrue until redemption, and
accrued and unpaid dividends shall be paid at redemption.
(c) At the option of the holders of a majority of the aggregate
number of shares of the Series D Preferred Stock and the Series D-1 Preferred
Stock, voting together as a single class, the Corporation shall redeem,
commencing on the Redemption Trigger Date and continuing on the immediately
succeeding two anniversaries thereof, in three (3) installments (each such date
also being referred to as a "Preferred Stock Redemption Date"), the number of
shares of Series D Preferred Stock and Series D-1 Preferred Stock held by all
holders as specified below. To exercise their rights of redemption provided in
this Section 6, the holders of a majority of the aggregate number of shares of
Series D Preferred Stock and Series D-1 Preferred Stock shall deliver to the
secretary or the treasurer of the Corporation no less than sixty
21
<PAGE>
(60) days prior to the applicable Preferred Stock Redemption Date a written
notice informing the Corporation of the exercise of the redemption rights by the
holders of shares of Series D Preferred Stock and Series D-1 Preferred Stock. No
later than thirty (30) days after the applicable Preferred Stock Redemption
Date, the Corporation shall redeem the number of shares of Series D Preferred
Stock and Series D-1 Preferred Stock specified below for each applicable
Preferred Stock Redemption Date, by paying in cash therefor, the greater of (i)
the fair market value of such shares, as initially determined at the first
Preferred Stock Redemption Date in accordance with Section 6(f) below, or (ii)
the Original Purchase Price plus all accrued but unpaid dividends on such
shares, including, without limitation, all dividends contemplated by Section
B(1) (the greater of such amounts with respect to Series D Preferred Stock being
referred to as the "Series D Redemption Price" and the greater of such amounts
with respect to Series D-1 Preferred Stock being referred to as the "Series D-1
Redemption Price". With respect to (i) the first Preferred Stock Redemption Date
the Corporation shall be required to redeem in aggregate one-third (1/3) of the
aggregate number of shares of Series D Preferred Stock and Series D-1 Preferred
Stock originally issued; (ii) the second Preferred Stock Redemption date the
Corporation shall be required to redeem in aggregate, taking into effect the
prior redemption, one-half (1/2) of the aggregate remaining number of issued and
outstanding shares of Series D Preferred Stock and Series D-1 Preferred Stock;
and (iii) the third Preferred Stock Redemption Date the Corporation shall be
required to redeem in aggregate, taking into effect all prior redemptions, the
aggregate remaining number of issued and outstanding shares of Series D
Preferred Stock and Series D-1 Preferred Stock. In the event that the holders of
a majority of the aggregate number of shares of Series D Preferred Stock and
Series D-1 Preferred Stock, voting together as a single class, do not elect to
exercise their redemption right on the Redemption Trigger Date in the manner
provided herein, the holders of a majority of the aggregate number of shares of
Series D Preferred Stock and Series D-1 Preferred Stock, voting together as a
single class, may elect to exercise such redemption right at a subsequent
anniversary; provided, however, except as set forth in the immediately
succeeding sentence, in no event shall the Corporation be required to redeem
more than one-third (1/3) of the aggregate number of shares of Series D
Preferred Stock and Series D-1 Preferred Stock originally issued by the
Corporation on any Preferred Stock Redemption Date. If the Corporation is unable
to redeem in full all shares tendered for redemption on a Preferred Stock
Redemption Date, then, on the next Preferred Stock Redemption Date, the
Corporation shall be required to redeem all the previously tendered but
unredeemed shares of Series D Preferred Stock and Series D-1 Preferred Stock
plus all new shares of such stock tendered for redemption, which may cause the
Corporation to redeem more than one-third (1/3) of the aggregate number of
shares of Series D Preferred Stock and Series D-1 Preferred Stock originally
issued by the Corporation. Dividends on the shares of Series D Preferred Stock
and Series D-1 Preferred Stock shall continue to accrue until redemption, and
accrued and unpaid dividends shall be paid at redemption.
(d) At the option of the holders of a majority of the aggregate
number of shares of the Series E Preferred Stock, voting as a single class, the
Corporation shall redeem, commencing on the Redemption Trigger Date and
continuing on the immediately succeeding two anniversaries thereof, in three (3)
installments (each such date also being referred to as a "Preferred Stock
Redemption Date"), the number of shares of Series E Preferred Stock held by all
holders as specified below. To exercise their rights of redemption provided in
this Section 6, the holders of a majority of the aggregate number of shares of
Series E Preferred Stock shall deliver to the secretary or the treasurer of the
Corporation no less than sixty (60) days prior to the
22
<PAGE>
applicable Preferred Stock Redemption Date a written notice informing the
Corporation of the exercise of the redemption rights by the holders of shares of
Series E Preferred Stock. No later than thirty (30) days after the applicable
Preferred Stock Redemption Date, the Corporation shall redeem the number of
shares of Series E Preferred Stock specified below for each applicable Preferred
Stock Redemption Date, by paying in cash therefor, the greater of (i) the fair
market value of such shares, as initially determined at the first Preferred
Stock Redemption Date in accordance with Section 6(f) below, or (ii) the
Original Purchase Price plus all accrued but unpaid dividends on such shares,
including, without limitation, all dividends contemplated by Section B(1) (the
greater of such amounts with respect to the Series E Preferred Stock being
referred to as the "Series E Redemption Price"). With respect to (i) the first
Preferred Stock Redemption Date the Corporation shall be required to redeem in
aggregate one-third (1/3) of the aggregate number of shares of Series E
Preferred Stock originally issued; (ii) the second Preferred Stock Redemption
date the Corporation shall be required to redeem in aggregate, taking into
effect the prior redemption, one-half (1/2) of the aggregate remaining number of
issued and outstanding shares of Series E Preferred Stock; and (iii) the third
Preferred Stock Redemption Date the Corporation shall be required to redeem in
aggregate, taking into effect all prior redemptions, the aggregate remaining
number of issued and outstanding shares of Series E Preferred Stock. In the
event that the holders of a majority of the aggregate number of shares of Series
E Preferred Stock, voting as a single class, do not elect to exercise their
redemption right on the Redemption Trigger Date in the manner provided herein,
the holders of a majority of the aggregate number of shares of Series E
Preferred Stock, voting as a single class, may elect to exercise such redemption
right at a subsequent anniversary; provided, however, except as set forth in the
immediately succeeding sentence, in no event shall the Corporation be required
to redeem more than one-third (1/3) of the aggregate number of shares of Series
E Preferred Stock originally issued by the Corporation on any Preferred Stock
Redemption Date. If the Corporation is unable to redeem in full all shares
tendered for redemption on a Preferred Stock Redemption Date, then, on the next
Preferred Stock Redemption Date, the Corporation shall be required to redeem all
the previously tendered but unredeemed shares of Series E Preferred Stock plus
all new shares of such stock tendered for redemption, which may cause the
Corporation to redeem more than one-third (1/3) of the aggregate number of
shares of Series E Preferred Stock originally issued by the Corporation.
Dividends on the shares of Series E Preferred Stock shall continue to accrue
until redemption, and accrued and unpaid dividends shall be paid at redemption.
(e) Notwithstanding anything to the contrary contained elsewhere in
this Section 6, if shares of Preferred Stock are simultaneously tendered for
redemption pursuant to Sections 6(a), 6(b), 6(c) and 6(d), or any combination
thereof, and the Corporation is unable to redeem in full all such shares
tendered because the Corporation has insufficient legal capital available to
effect such redemptions, the Corporation shall allocate its available legal
capital to the redemption of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D
Preferred Stock, Series D-1 Preferred Stock and Series E Preferred Stock based
on the following formula: the aggregate legal capital available to effect such
redemptions shall be multiplied by a fraction, (i) the numerator of which shall
be equal to (X) the number of shares of the applicable series of Preferred Stock
tendered for redemption multiplied by (Y) the Series A Redemption Price, the
Series B Redemption Price, the Series C Redemption Price, the Series C-1
Redemption Price, the Series D Redemption Price, the Series D-1 Redemption Price
or the Series E Redemption Price, as applicable, and (ii) the
23
<PAGE>
denominator of which shall be the aggregate of (A) the number of shares of
Series A Preferred Stock tendered for redemption multiplied by the Series A
Redemption Price, (B) the number of shares of Series B Preferred Stock tendered
for redemption multiplied by the Series B Redemption Price, (C) the number of
shares of Series C Preferred Stock tendered for redemption multiplied by the
Series C Redemption Price, (D) the number of shares of Series C-1 Preferred
Stock tendered for redemption multiplied by the Series C-1 Redemption Price, (E)
the number of shares of Series D Preferred Stock tendered for redemption
multiplied by the Series D Redemption Price, (F) the number of shares of Series
D-1 Preferred Stock tendered for redemption multiplied by the Series D-1
Redemption Price and (G) the number of shares of Series E Preferred Stock
tendered for redemption multiplied by the Series E Redemption Price.
(f) Within ten (10) days of receipt by the Corporation of the
notice of the holders of shares of Preferred Stock electing to exercise their
Redemption Rights, a disinterested appraisal firm which is a member of a
recognized professional association reasonably acceptable to the Corporation and
the holders of a majority of the shares of Preferred Stock to be redeemed shall
determine the fair market value as set forth below. If the parties are unable to
agree on an appraisal firm within ten (10) days after the receipt of such
redemption notice by the Corporation, a firm shall be selected by lot from the
top-tier New York-based investment banking firms, after the Corporation and the
redeeming holders of shares of Preferred Stock have each eliminated one such
firm. The firm so selected shall then make a determination of the fair market
value, and, using such determination of fair market value, shall calculate the
Series A Redemption Price, the Series B Redemption Price, the Series C
Redemption Price, the Series C-1 Redemption Price, the Series D Redemption
Price, the Series D-1 Redemption Price or the Series E Redemption Price, as
applicable. The selection and determination of such firms shall be final and
binding upon all parties. The expenses of such firms shall be borne equally by
the holders of the shares of Preferred Stock, as a group, and the Corporation.
(g) In the event the Corporation does not pay in full to the
holders of shares of Preferred Stock the aggregate Series A Redemption Price,
Series B Redemption Price, Series C Redemption Price, Series C-1 Redemption
Price, Series D Redemption Price, Series D-1 Redemption Price or the Series E
Redemption Price, as applicable (the "Aggregate Redemption Price"), owed to such
redeeming holders by the end of the thirty (30) day payment period described in
Section 6(a) or 6(b), as applicable, or the Corporation is unable to redeem all
of the shares of Preferred Stock tendered for redemption, such unpaid portion of
the Aggregate Redemption Price shall accrue interest at the rate of fifteen
percent (15%) per annum and such accrued interest shall be payable on the last
day of each calendar quarter. If ninety (90) days after the holders of a
majority of the outstanding shares of Preferred Stock have delivered a notice to
the Corporation of its failure to pay the unpaid portion of the Aggregate
Redemption Price, the Corporation is unable to pay the unpaid portion and any
accrued interest thereon in full then the Corporation shall be deemed to be in
default of its redemption obligations hereunder. In the event of such default,
the holders of a majority of the shares of Preferred Stock shall have the right
and be entitled to elect a majority of the Board of Directors until such time as
the Corporation has cured such default. Once such default has been cured, the
right of holders of a majority of the shares of Preferred Stock shall terminate
and the voting provisions set forth elsewhere herein shall govern.
24
<PAGE>
7. AMENDMENTS. No provision of the terms of any series or class of
Preferred Stock may be amended, modified or waived without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of the respective series or class, voting separately as a
class; provided, however, that in the event that an amendment, modification or
waiver of the terms of one series or class of Preferred Stock would result in
any of the rights of the holders of another series or class of Preferred Stock
being adversely affected, then the amendment, modification or waiver of such
terms may not be effected without the written consent of a majority of the
holders of each series of Preferred Stock affected, voting separately by series
or class.
8. NO PREEMPTIVE RIGHTS. The corporation's stockholders shall have no
preemptive rights, except as granted by the Corporation pursuant to written
agreements.
FIFTH. GENERAL. Except as otherwise provided in this Restated Certificate
of Incorporation or a certificate of designation relating to the rights of the
holders of any class or series of Preferred Stock, voting separately by class or
series, to elect additional directors under specified circumstances, the number
of directors of the Corporation shall be as fixed from time to time by or
pursuant to the By-laws of the Corporation (the "By-Laws"). No director of the
Corporation (a "Director") needs to be a Stockholder.
B. ELECTION, BYLAWS. In furtherance of and not in limitation of powers
conferred by statute, it is further provided;
1. Election of Directors need not be by written ballot;
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws, subject to the rights of the holders of shares of Preferred
Stock set forth in Article FOURTH, B3(d), 3(e), 3(f) and 3(g).
SIXTH. LIMITATION ON LIABILITY. No Director of the Corporation shall be
personally liable to the Corporation or to any stockholder of the Corporation
for monetary damages for breach of fiduciary duty as a Director, provided that
this provision shall not limit the liability of a Director (i) for any breach of
the Director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involved intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the General Corporation
Law of Delaware, or (iv) for any transaction from which the Director derived an
improper personal benefit.
If the General Corporation Law of Delaware or any other statute of
the State of Delaware hereafter is amended to authorize the further elimination
or limitation of the liability of Directors of the Corporation, then the
liability of a Director of the Corporation shall be limited to the fullest
extent permitted by the statutes of the State of Delaware, as so amended, and
such elimination or imitation of liability shall be in addition to, and not in
lieu of , the limitation of the liability of a Director provided by the
foregoing provisions of this Sixth Article.
Any repeal of or amendment to this Sixth Article shall be prospective
only and shall not adversely affect any limitation on the liability of a
Director of the Corporation existing at the time of such repeal or amendment.
25
<PAGE>
SEVENTH. INDEMNIFICATION. To the maximum extent permitted by law, the
Corporation shall fully indemnify any person who was or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the fact
that such person is or was a Director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise, against expenses (including attorneys' fees), judgements,
fines and amounts paid in settlement actually and reasonable incurred by such
person in connection with such action, suit or proceeding.
To the extent permitted by law, the Corporation may fully indemnify
any person who was or is a party to is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was an employee or agent of the Corporation, or is or was serving
as the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against expenses (including attorneys' fees), judgements, fines and
amounts paid in settlement actually and reasonable incurred by such person in
connection with such action, suit or proceeding.
The Corporation shall, if so requested by a director or officer,
advance expenses (including attorneys' fees) incurred by a Director or officer
in advance of the final disposition of such action, suit or proceeding upon the
receipt of an undertaking by or on behalf of the Director or officer to repay
such amount if it shall ultimately be determined that such Director or officer
is not entitled to indemnification. The Corporation may advance expenses
(including attorneys' fees) incurred by an employee or agent in advance of the
final disposition of such action, suit or proceeding upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
EIGHTH. AMENDMENT. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and the
Restated Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
26
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VASTERA, INC.
A DELAWARE CORPORATION
(PURSUANT TO SECTIONS 228, 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
VASTERA, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "General Corporation Law"), hereby certifies that:
DOES HEREBY CERTIFY:
FIRST: That this Corporation was originally incorporated
pursuant to the General Corporation Law on July 25, 1996 under the name of
"Export Software International, Inc."
SECOND: That the Amended and Restated Certificate of
Incorporation of the Corporation in the form attached hereto as ANNEX A has been
duly adopted in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law by the directors and stockholders of the
Corporation.
THIRD: That the Amended and Restated Certificate of
Incorporation of this Corporation so adopted reads in full as set forth in ANNEX
A attached hereto and is hereby incorporated herein by this reference.
IN WITNESS WHEREOF, Vastera, Inc. has caused this Amended and
Restated Certificate to be signed by its duly authorized and elected President
and Chief Executive Officer this ____ day of _____________________, 2000.
VASTERA, INC
By: _____________________________________
Arjun Rishi
President and Chief Executive Officer
<PAGE>
ANNEX A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VASTERA, INC
ARTICLE 1
The name of this Corporation shall be Vastera, Inc.
ARTICLE II
The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, State of Delaware. The name of the registered agent at that address is
The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law.
ARTICLE IV
A. AUTHORIZED SHARES. The aggregate number of shares that the
Corporation shall have authority to issue is [110,000,000], (i) [100,000,000]
shares of which shall be Common Stock, par value $0.01 per share, and
[10,000,000] of which shall be Preferred Stock, par value $0.01 per share.
B. COMMON STOCK. Each share of Common Stock shall have one
vote on each matter submitted to a vote of the stockholders of the Corporation.
Subject to the provisions of applicable law and the rights of the holders of the
outstanding shares of Preferred Stock, the holders of shares of Common Stock
shall be entitled to receive, when and as declared by the Board of Directors of
the Corporation, out of the assets of the Corporation legally available
therefor, dividends or other distributions, whether payable in cash, property or
securities of the Corporation. The holders of shares of Common Stock shall be
entitled to receive, in proportion to the number of shares of Common Stock held,
the net assets of the Corporation upon dissolution after any preferential
amounts required to be paid or distributed to holders of outstanding shares of
Preferred Stock, if any, are so paid or distributed.
C. PREFERRED STOCK. The Preferred Stock may be issued from
time to time by the Board of Directors as shares of one or more series. The
description of shares of each additional series of Preferred Stock, including
any designations, preferences, conversion and
<PAGE>
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption shall be as set forth in
resolutions adopted by the Board of Directors.
The Board of Directors is expressly authorized, at any time,
by adopting resolutions providing for the issuance of, or providing for a change
in the number of, shares of any particular series of Preferred Stock and, if and
to the extent from time to time required by law, by filing certificates of
amendment or designation which are effective without stockholder action, to
increase or decrease the number of shares included in each series of Preferred
Stock, but not below the number of shares then issued, and to set in any one or
more respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms and
conditions of redemption relating to the shares of each such series. The
authority of the Board of Directors with respect to each series of Preferred
Stock shall include, but not be limited to, setting or changing the following:
a. the dividend rate, if any, on shares of such series, the
times of payment and the date from which dividends shall be
accumulated, if dividends are to be cumulative;
b. whether the shares of such series shall be redeemable and,
if so, the redemption price and the terms and conditions of
such redemption;
c. the obligation, if any, of the Corporation to redeem shares
of such series pursuant to a sinking fund;
d. whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class of
classes and, if so, the terms and conditions of such
conversion or exchange, including the price or prices or the
rate or rates of conversion or exchange and the terms of
adjustment, if any;
e. whether the shares of such series shall have voting rights,
in addition to the voting rights provided by law, and, if so,
the extent of such voting rights;
f. the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation; and
g. any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof relating
to such series.
ARTICLE V
The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed by,
or in the manner provided in, the Bylaws of the Corporation.
3
<PAGE>
ARTICLE VI
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as so amended.
Any repeal of or amendment to this Article VI shall be
prospective only and shall not adversely affect any limitation on the liability
of a Director of the Corporation existing at the time of such repeal or
amendment.
ARTICLE VII
To the maximum extent permitted by law, the Corporation shall
fully indemnify any person who was or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against expenses (including attorneys' fees), judgements, fines and
amounts paid in settlement actually and reasonable incurred by such person in
connection with such action, suit or proceeding.
To the extent permitted by law, the Corporation may fully
indemnify any person who was or is a party to is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
such person is or was an employee or agent of the Corporation, or is or was
serving as the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against expenses (including attorneys' fees), judgements, fines and
amounts paid in settlement actually and reasonable incurred by such person in
connection with such action, suit or proceeding.
The Corporation shall, if so requested by a director or
officer, advance expenses (including attorneys' fees) incurred by a director or
officer in advance of the final disposition of such action, suit or proceeding
upon the receipt of an undertaking by or on behalf of the director or officer to
repay such amount if it shall ultimately be determined that such director or
officer is not entitled to indemnification. The Corporation may advance expenses
(including attorneys' fees) incurred by an employee or agent in advance of the
final disposition of such action, suit or proceeding upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
4
<PAGE>
ARTICLE VIII
Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
Election of directors at an annual or special meeting of
stockholders need not be by written ballot unless the Bylaws of the Corporation
shall so provide.
ARTICLE X
A. At each annual meeting of stockholders, directors of the
Corporation shall be elected to hold office until the expiration of the term for
which they are elected, and until their successors have been duly elected and
qualified; except that if any such election shall not be so held, such election
shall take place at a stockholders' meeting called and held in accordance with
the Delaware General Corporation Law. Upon the filing of this Amended and
Restated Certificate of Incorporation, the directors of the Corporation shall be
divided into three classes as nearly equal in size as is practicable, hereby
designated as Class I, Class II and Class III. The term of office of the initial
Class I directors shall expire at the first annual meeting of stockholders
following the consummation of the Company's initial public offering, the term of
office of the initial Class II directors shall expire at the second succeeding
annual meeting of stockholders and the term of office of the initial Class III
directors shall expire at the third succeeding annual meeting of stockholders.
For the purposes hereof, the initial Class I, Class II and Class III directors
shall be designated by the Board of Directors or in the Bylaws of the
Corporation. At each annual meeting directors to replace those of a Class whose
terms expire at such annual meeting shall be elected to hold office until the
third succeeding annual meeting and until their respective successors shall have
been duly elected and qualified. If the number of directors is hereafter
changed, any newly created directorships or decrease in directorships shall be
so apportioned among the classes as to make all classes as nearly equal in
number as is practicable.
B. Vacancies occurring on the Board of Directors for any
reason may be filled by vote of a majority of the remaining members of the Board
of Directors, although less than a quorum, at a meeting of the Board of
Directors. A person so elected by the Board of Directors to fill a vacancy shall
hold office until the next succeeding annual meeting of stockholders of the
Corporation and until his or her successor shall have been duly elected and
qualified.
ARTICLE XI
In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, alter, amend
or repeal the Bylaws of the Corporation.
5
<PAGE>
ARTICLE XII
Stockholders of the Corporation may not take action by written
consent in lieu of a meeting but must take any actions at a duly called annual
or special meeting.
ARTICLE XIII
Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of the
capital stock required by law or this Certificate of Incorporation, the
affirmative vote of the holders of at least two-thirds (2/3) of the combined
voting power of all of the then-outstanding shares of the Corporation entitled
to vote shall be required to alter, amend or repeal Articles X, XII or XIII or
any provisions thereof.
ARTICLE XIV
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
* * *
-----
[SIGNATURE PAGE FOLLOWS]
6
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by the undersigned duly authorized officer of the
Corporation this _____ day of _____________, 2000.
VASTERA, INC.
By: _____________________________________
Arjun Rishi
President and Chief Executive Officer
[SIGNATURE PAGE TO CERTIFICATE OF INCORPORATION]
<PAGE>
VASTERA, INC.
AMENDMENT NO. 1 TO
BY-LAWS
THIS AMENDMENT NO. 1 TO BY-LAWS ("AMENDMENT NO. 1") is made and
effective this 12th day of May, 1999 by the Board of Directors of Vastera,
Inc. (the "COMPANY").
1. 1.10 ACTION WITHOUT MEETING. The first paragraph shall be
deleted in its entirety and the following first paragraph shall be inserted
in lieu thereof:
"Any action required to be taken at any annual or special meeting of
stockholders, or any action that may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders in interest of greater than 50% of the shares of
outstanding stock, unless the Certificate of Incorporation requires a higher
percentage for any such action."
<PAGE>
BY-LAWS
OF
VASTERA, INC.
(FORMERLY EXPORT SOFTWARE INTERNATIONAL, INC.
(A DELAWARE CORPORATION)
Dated as of July 26, 1996
<PAGE>
BY-LAWS
TABLE OF CONTENTS
ARTICLE 1 - STOCKHOLDERS
Section 1.1 Place of Meetings
Section 1.2 Annual Meeting
Section 1.3 Special Meetings
Section 1.4 Notice of Meetings
Section 1.5 Voting List
Section 1.6 Quorum
Section 1.7 Adjournments
Section 1.8 Voting and Proxies
Section 1.9 Action at Meeting
Section 1.10 Action without Meeting
ARTICLE 2 - DIRECTORS
Section 2.1 General Powers
Section 2.2 Number and Classes
Section 2.3 Term of Office, Election and Qualification
Section 2.4 Enlargement of the Board
Section 2.5 Vacancies
Section 2.6 Resignation
Section 2.7 Regular Meetings
Section 2.8 Special Meetings
Section 2.9 Notice of Special Meetings
Section 2.10 Meetings by Telephone Conference Calls
Section 2.11 Quorum
Section 2.12 Action at Meeting
Section 2.13 Action by Consent
Section 2.14 Removal
Section 2.15 Committees
Section 2.16 Compensation of Directors
ARTICLE 3 - OFFICERS
Section 3.1 Enumeration
Section 3.2 Election
Section 3.3 Qualification
Section 3.4 Tenure
Section 3.5 Resignation and Removal
Section 3.6 Vacancies
Section 3.7 Chairman of the Board and Vice-Chairman of the Board
<PAGE>
Section 3.8 President
Section 3.9 Vice Presidents
Section 3.10 Secretary and Assistant Secretaries
Section 3.11 Treasurer and Assistant Treasurers
Section 3.12 Salaries
ARTICLE 4 - CAPITAL STOCK
Section 4.1 Issuance of Stock
Section 4.2 Certificates of Stock
Section 4.3 Transfers
Section 4.4 Lost, Stolen or Destroyed Certificates
Section 4.5 Record Date
ARTICLE 5 - INDEMNIFICATION
Section 5.1 Indemnification in Actions, Suits or Proceedings Other
Than Those by or in the Right of Corporation
Section 5.2 Indemnification in Actions, Suits or Proceedings by or
in the Right of the Corporation
Section 5.3 Authorization of Indemnification
Section 5.4 Advancement of Expenses
ARTICLE 6 - GENERAL PROVISIONS
Section 6.1 Fiscal Year
Section 6.2 Corporate Seal
Section 6.3 Waiver of Notice
Section 6.4 Voting of Securities
Section 6.5 Evidence of Authority
Section 6.6 Certificate of Incorporation
Section 6.7 Transactions with Interested Parties
Section 6.8 Severability
Section 6.9 Pronouns
ARTICLE 7 - AMENDMENTS
Section 7.1 By the Board of Directors
Section 7.2 By the Stockholders
-ii-
<PAGE>
BY-LAWS
OF
EXPORT SOFTWARE INTERNATIONAL, INC.
ARTICLE 1 - STOCKHOLDERS
1.1 Place of Meeting. All meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held at such date, time and place as may be
fixed by the Board of Directors or the President. If this date shall fall upon a
legal holiday at the place of the meeting, then such meeting shall be held on
the next succeeding business day at the same hour. If no annual meeting is held
in accordance with the foregoing provisions, the Board of Directors shall cause
the meeting to be held as soon thereafter as convenient. If no annual meeting is
held in accordance with the foregoing provisions, a special meeting may be held
in lieu of the annual meeting, and any action taken at that special meeting
shall have the same effect as if it had been taken at the annual meeting, and in
such case all references in these By-Laws to the annual meeting of the
stockholders shall be deemed to refer to such special meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
any time by the President, the Board of Director or the holders of a majority of
the outstanding shares of the Common Stock. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose or
purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is 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. The notice of any meeting of stockholders may be
delivered via facsimile transmission, telegram or telex. If such notice is
delivered via facsimile transmission, telegram or telex, notice shall be deemed
given at the time such transmission is sent.
1.5 Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior
<PAGE>
to the meeting, at a place within the city where the meeting is to be held. The
list shall also be produced and kept at the time and place of the meeting during
the whole time of the meeting, and may be inspected by any stockholder who is
present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the Secretary of the corporation. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the proxy expressly
provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election.
1.10 Action without Meeting. Any action required or permitted to be taken
at any annual or special meeting of stockholders of the corporation may be taken
without a meeting, without prior notice and without a vote, if an unanimous
consent in writing, setting forth the action so taken, is signed by all of the
holders of outstanding stock.
-2-
<PAGE>
ARTICLE 2 - DIRECTORS
2.1 General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2.2 Number and Classes. The number of directors which shall constitute the
whole Board of Directors shall be five. The number of directors may be decreased
at any time and from time to time either by the stockholders or by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one of more
directors. Unless otherwise provided in the Certificate of Incorporation, the
Board of Directors shall divide the directors into three classes, which shall be
as equal in number as possible; and, when the number of directors is changed,
shall determine the class or classes to which the increased or decreased number
of directors shall be apportioned, which shall be done so as to maintain as
equal a number of directors in each class as possible; provided, however, that
no decrease in the number of directors shall affect the term of any director
then in office.
2.3 Tenure, Election and Qualification. The directors shall be elected at
the annual meeting of stockholders by such stockholders as have the right to
vote on such election. At each annual meeting of stockholders, directors elected
to succeed those whose terms are expiring shall be elected for a term of office
expiring at the annual meeting of stockholders held in the third year following
their election and until their respective successors are elected and qualified,
or until such director's earlier death, resignation or removal. Directors need
not be stockholders of the corporation.
2.4 Enlargement of the Board. The number of directors may be increased at
any time and from time to time by affirmative vote of the holders of a majority
of the shares of the Corporation's Common Stock and the holders of a majority of
the shares of the Corporation's Preferred Stock, with each of the Common Stock
and the Preferred Stock voting as a separate class. For purposes of these
By-Laws, unless required otherwise by Delaware law or unless specified otherwise
in the Corporation's Certificate of Incorporation, all shares of the
Corporation's Preferred Stock will vote together as a single class, irrespective
of the number of different classes or series of such Preferred Stock that may
from time to time exist.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy in
the Board of Directors, however occurring, including a vacancy resulting from an
enlargement of the Board, may be filled by vote of a majority of the directors
then in office, although less than a quorum, or by a sole remaining director. A
director elected
-3-
<PAGE>
to fill a vacancy shall be elected for the unexpired term of his predecessor in
office, and a director chosen to fill a position resulting from an increase in
the number of directors shall hold office until the next annual meeting of
stockholders and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.7 Regular Meetings. Provided that meetings are held at least once during
each of the Company's fiscal quarters, regular meetings of the Board of
Directors may be held without notice at such time and place, either within or
without the State of Delaware, as shall be determined from time to time by the
Board of Directors; provided that any director who is absent when such a
determination is made shall be given notice of the determination. A regular
meeting of the Board of Directors may be held without notice immediately after
and at the same place as the annual meeting of stockholders.
2.8 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by any single member of the Board of Directors or by the President of
the Company.
2.9 Notice of Special Meetings. Notice of any special meeting of directors
shall be given to each director by the Secretary or by the officer or one of the
directors calling the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone at least 48 hours in
advance of the meeting, (ii) by sending a facsimile, telegram or telex, or
delivering written notice by hand, to his last known business or home address at
least 48 hours in advance of the meeting, or (iii) by delivering written notice
to his last known business or home address at least 72 hours in advance of the
meeting by a nationally recognized overnight service (receipt requested). A
notice or waiver of notice of a meeting of the Board of Directors need not
specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of
any committee designated by the directors may participate in a meeting of the
Board of Directors or such 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 participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from
-4-
<PAGE>
time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.12 Action at Meeting. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.14 Removal. Any one or more or all of the 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, except that the directors elected by the
holders of a particular class or series of stock may be removed without cause
only by vote of the holders of a majority of the outstanding shares of such
class or series.
2.15 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, 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 of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it. Each
such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these By-Laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such compensation
for their services as the Board of Directors may from time to time determine and
Directors shall be reimbursed for expenses (including travel expenses) incurred
to attend meetings. No such payment shall preclude any director from serving the
corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
-5-
<PAGE>
ARTICLE 3 - OFFICERS
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer appointed by Board of Directors may be removed at any
time, with or without cause, by vote of a majority of the entire number of
directors then in office.
Except as the Board of Directors may otherwise determine, no
officer who resigns or is removed shall have any right to any compensation as an
officer for any period following his resignation or removal, or any right to
damages on account of such removal, whether his compensation be by the month or
by the year or otherwise, unless such compensation is expressly provided in a
duly authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board. If the Board of Directors
appoints a
-6-
<PAGE>
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of Directors. If the Board of Directors
appoints a Vice-Chairman of the Board, he shall, in the absence or disability of
the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board and shall perform such other duties and possess such other
powers as may from time to time be vested in him by the Board of Directors.
3.8 President. Unless the Board of Directors otherwise determines, the
President shall be the Chief Executive Officer of the corporation. The President
shall, subject to the direction of the Board of Directors, have general charge
and supervision of the business of the corporation. Unless otherwise provided by
the Board of Directors, he shall preside at all meetings of the stockholders, if
he is a director, at all meetings of the Board of Directors. The President shall
perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President designated as the Chief Operating Officer of the
Corporation shall perform the duties of the President and when so performing
shall have all the powers of and be subject to all the restrictions upon the
President. The Board of Directors may assign to any Vice President the title of
Executive Vice President, Senior Vice President or any other title selected by
the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess
such powers as the Board of Directors, the President or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Secretary, the Assistant Secretary, (or if there shall be more than one,
the Assistant Secretaries in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
-7-
<PAGE>
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform
such duties and shall have such powers as may from time to time be assigned to
him by the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess
such powers as the Board of Directors, the President or the Treasurer may from
time to time prescribe. In the event of the absence, inability, or refusal to
act of the Treasurer, the Assistant Treasurer, (or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 4 - CAPITAL STOCK
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him in the corporation. Each such certificate shall be signed by, or in
the name of the corporation by, the Chairman or Vice-Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
By-Laws, applicable securities laws or any agreement among any number of
shareholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.
-8-
<PAGE>
4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-Laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than ten days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, 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 before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express 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 expressed. 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 to such purpose.
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.
-9-
<PAGE>
ARTICLE 5 - INDEMNIFICATION
5.1 Indemnification in Actions, Suits or Proceedings Other Than Those by
or in the Right of the Corporation. (a) The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that such
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that such
conduct was unlawful.
(b) The Corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that such person is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, if such person acted in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that such conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such conduct was unlawful.
5.2 Indemnification in Actions, Suits or Proceedings by or in the Right
of the Corporation. (a) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is or was
a director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director of officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including
-10-
<PAGE>
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner which such person reasonably believed to be in or not
opposed to the best interest of the Corporation. No such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the extent
that the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(b) The Corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that such person is or was an employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as an employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation. No such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the extent
that the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
5.3 Authorization of Indemnification. Any indemnification under this
Article 5 shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because such person or persons
have met the applicable standard of conduct set forth in Sections 5.1 and 5.2
hereof. Such determination shall be made (i) by a majority vote of the directors
who are not parties to such action, suit or proceeding, even though less than a
quorum, or (ii) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (iii) by the stockholders.
5.4 Advancement of Expenses. The Corporation shall, if so requested by
an officer or director, advance expenses (including attorneys' fees) incurred by
a director or officer in advance of the final disposition of such action, suit
or proceeding upon the receipt of an undertaking by or on behalf of the director
of officer to repay such amount if it shall ultimately be determined that such
director or officer is not entitled to indemnification.
The Corporation may advance expenses (including attorneys' fees)
incurred by an employee or agent in advance of the final disposition of such
action, suit or proceeding upon such terms and conditions, if any, as the Board
of Directors deems appropriate.
-11-
<PAGE>
ARTICLE 6 - GENERAL PROVISIONS
6.1 Fiscal Year. The fiscal year of the Corporation shall be the twelve
months ending on December 31 of each calendar year.
6.2 Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
6.3 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
6.4 Voting of Securities. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
6.5 Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
6.6 Certificate of Incorporation. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
6.7 Transactions with Interested Parties. All contracts or transactions
between the Corporation and one or more of the directors or officers, or between
the Corporation and any other corporation, partnership, association, another
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be approved by a majority of the
outside directors of the Corporation before the Corporation shall be permitted
to perform its obligations under such contracts or transactions.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
-12-
<PAGE>
6.8 Severability. Any determination that any provision of these By-Laws
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
6.9 Pronouns. All pronouns used in these By-Laws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 7 - AMENDMENTS
7.1 By the Board of Directors. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
7.2 By the Stockholders. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted at any regular meeting of stockholders,
or at any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting by an affirmative vote of the holders of a
majority of the shares of the Corporation's Common Stock and the holders of a
majority of the shares of the Corporation's Preferred Stock, irrespective of
class or series, with the Common Stock and the Preferred Stock voting as
separate classes.
ARTICLE 8 - ADDITIONAL RIGHTS
8.1 Rights of the Holders of Shares of Preferred Stocks. These By-Laws,
including but not limited to voting by the stockholders and amendment of the
By-Laws, are subject to the rights of the holders of the shares of Preferred
Stock as set forth in the Corporation's Certificate of Incorporation, and any
agreement between the Corporation and the holders of shares of Preferred Stock.
-13-
<PAGE>
Exhibit 3.4
EXHIBIT E
AMENDED AND RESTATED BYLAWS
OF
VASTERA, INC.,
A DELAWARE CORPORATION
_______________ ____, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
ARTICLE I. Offices................................................................................................1
Section 1.1 Registered Office......................................................................1
Section 1.2 Other Offices..........................................................................1
ARTICLE II. Corporate Seal........................................................................................1
ARTICLE III. Stockholders' Meetings...............................................................................1
Section 3.1 Place of Meetings......................................................................1
Section 3.2 Annual Meeting.........................................................................2
Section 3.3 Special Meetings.......................................................................4
Section 3.4 Notice of Meetings.....................................................................4
Section 3.5 Quorum.................................................................................4
Section 3.6 Adjournment and Notice of Adjourned Meetings...........................................5
Section 3.7 Voting Rights..........................................................................5
Section 3.8 Joint Owners of Stock..................................................................5
Section 3.9 List of Stockholders...................................................................6
Section 3.10 No Action Without Meeting..............................................................6
Section 3.11 Organization...........................................................................6
ARTICLE IV. Directors.............................................................................................7
Section 4.1 Number and Term of Office; Classification..............................................7
Section 4.2 Powers.................................................................................7
Section 4.3 Vacancies..............................................................................7
Section 4.4 Resignation............................................................................8
Section 4.5 Removal................................................................................8
Section 4.6 Meetings...............................................................................8
Section 4.7 Quorum and Voting......................................................................9
Section 4.8 Action Without Meeting.................................................................9
Section 4.9 Fees and Compensation..................................................................9
Section 4.10 Committees............................................................................10
ARTICLE V. Officers..............................................................................................11
Section 5.1 Officers Designated...................................................................11
Section 5.2 Tenure and Duties of Officers.........................................................12
Section 5.3 Delegation of Authority...............................................................14
Section 5.4 Resignations..........................................................................14
Section 5.5 Removal...............................................................................14
ARTICLE VI. Execution of Corporate Instruments and Voting of Securities Owned by the Corporation.................15
Section 6.1 Execution of Corporate Instruments....................................................15
Section 6.2 Voting of Securities Owned by the Corporation.........................................15
ii
<PAGE>
ARTICLE VII. Shares of Stock.....................................................................................16
Section 7.1 Form and Execution of Certificates....................................................16
Section 7.2 Lost Certificates.....................................................................16
Section 7.3 Transfers.............................................................................16
Section 7.4 Fixing Record Dates...................................................................17
Section 7.5 Registered Stockholders...............................................................17
ARTICLE VIII. Other Securities of the Corporation................................................................17
Section 8.1 Execution of Other Securities.........................................................17
ARTICLE IX. Dividends............................................................................................18
Section 9.1 Declaration of Dividends..............................................................18
Section 9.2 Dividend Reserve......................................................................18
ARTICLE X. Fiscal Year...........................................................................................18
ARTICLE XI. Indemnification of Directors, Officers, Employees and Other Agents...................................19
Section 11.1 Directors and Executive Officers......................................................19
Section 11.2 Other Officers, Employees and Other Agents............................................19
Section 11.3 Good Faith............................................................................19
Section 11.4 Expenses..............................................................................20
Section 11.5 Enforcement...........................................................................20
Section 11.6 Non-Exclusivity of Rights.............................................................21
Section 11.7 Survival of Rights....................................................................21
Section 11.8 Insurance.............................................................................21
Section 11.9 Amendments............................................................................21
Section 11.10 Savings Clause........................................................................21
Section 11.11 Certain Definitions...................................................................21
ARTICLE XII. Notices.............................................................................................22
Section 12.1 Notice to Stockholders................................................................22
Section 12.2 Notice to Directors...................................................................23
Section 12.3 Address Unknown.......................................................................23
Section 12.4 Affidavit of Mailing..................................................................23
Section 12.5 Time Notices Deemed Given.............................................................23
Section 12.6 Failure to Receive Notice.............................................................23
Section 12.7 Notice to Person with Whom Communication Is Unlawful..................................23
Section 12.8 Notice to Person with Undeliverable Address...........................................24
ARTICLE XIII. Amendments.........................................................................................24
Section 13.1 Amendments............................................................................24
Section 13.2 Application of Bylaws.................................................................24
ARTICLE XIV. Loans to Officers...................................................................................25
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
VASTERA, INC.,
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1.1 REGISTERED OFFICE. The registered office of the corporation
shall be the registered office named in the certificate of incorporation of the
corporation, or such other office as may be designated from time to time by the
Board of Directors in the manner provided by law.
SECTION 1.2 OTHER OFFICES. The corporation may have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may require.
The books of the corporation may be kept (subject to any provision contained in
the Delaware General Corporation Law) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in these Bylaws.
ARTICLE II
CORPORATE SEAL
The corporate seal shall consist of a die bearing the name of the
corporation. Said seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed or reproduced.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 3.1 PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the principal executive offices of the
corporation.
<PAGE>
SECTION 3.2 ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of Directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors; (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors; or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received by the
Secretary of the corporation not later than the close of business on the
ninetieth (90th) day, and no earlier than the close of business on the one
hundred twentieth (120th) day, prior to the first anniversary of the date of the
proxy statement delivered to stockholders in connection with the preceding
year's annual meeting; provided, however, that if either (i) the date of the
annual meeting is advanced more than thirty (30) days or delayed (other than as
a result of adjournment) more than sixty (60) days from such an anniversary date
or (ii) no proxy statement was delivered to stockholders in connection with the
preceding year's annual meeting, notice by the stockholder to be timely must be
so delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the close of business on the tenth (10th) day following the day on which
public announcement of the date of such meeting is first made by the
corporation. To be in proper form, a stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting:
(i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business
at the annual meeting;
(ii) 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) the name and address, as they appear on the corporation's
books, of the stockholder proposing such business;
(iv) the class and number of shares of the corporation which are
beneficially owned by the stockholder;
(v) any material interest of the stockholder in such business;
and
2
<PAGE>
(vi) any other information that is required to be provided by the
stockholder pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), in such stockholder's
capacity as a proponent of a stockholder proposal.
The chairman of the meeting shall determine whether any business
proposed to be transacted by the stockholders has been properly brought before
the meeting and, if any proposed business has not been properly brought before
the meeting, the chairman shall declare that such proposed business shall not be
presented for stockholder action at the meeting. For purposes of this Section
3.2, "public announcement" shall mean disclosure in a press release reported by
the Dow Jones News Service, Associated Press or comparable national news service
or in a document publicly filed by the corporation with the Securities and
Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
Notwithstanding any provision in this Section 3.2 to the contrary, requests for
inclusion of proposals in the corporation's proxy statement made pursuant to
Rule 14a-8 under the Exchange Act shall be deemed to have been delivered in a
timely manner if delivered in accordance with such Rule. Notwithstanding
compliance with the requirements of this Section 3.2, the chairman presiding at
any meeting of the stockholders may, in his sole discretion, refuse to allow a
stockholder or stockholder representative to present any proposal which the
corporation would not be required to include in a proxy statement under any rule
promulgated by the Securities and Exchange Commission.
(c) Only persons who are nominated in accordance with the procedures
set forth in this paragraph shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of Directors at the meeting who complies with the notice procedures set
forth in this paragraph. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the corporation in accordance with the provisions of
paragraph (b) of this Section 3.2. Such stockholder's notice shall set forth (i)
as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a Director: (A) the name, age, business address and
residence address of such person; (B) the principal occupation or employment of
such person; (C) the class and number of shares of the corporation which are
beneficially owned by such person; (D) 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 nominations are to
be made by the stockholder; and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of Directors, or is otherwise required in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
Director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section
3.2. At the request of the Board of Directors, any person nominated by a
stockholder for election as a Director shall furnish to the Secretary of the
corporation that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a Director of the corporation unless nominated in accordance
with the procedures set forth in this paragraph. The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the
3
<PAGE>
procedures prescribed by these Bylaws, and if the chairman should so determine,
the chairman shall so declare at the meeting, and the defective nomination shall
be disregarded.
SECTION 3.3 SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may only
be called, for any purpose or purposes, by the President of the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized Directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board of Directors for adoption).
(b) No business may be transacted at such special meeting otherwise
than specified in the resolution calling for the meeting. The Board of Directors
shall determine the time and place of such special meeting, which shall be held
not less than ninety (90) nor more than one hundred twenty (120) days after the
date of the receipt of the request. Upon determination of the time and place of
the meeting, notice shall be given to the stockholders entitled to vote, in
accordance with the provisions of Section 3.4 of these Bylaws. Nothing contained
in this paragraph (b) shall be construed as limiting, fixing or affecting the
time when a meeting of stockholders may be held.
SECTION 3.4 NOTICE OF MEETINGS. Except as otherwise provided by law or the
certificate of incorporation of the corporation, as the same may be amended or
restated from time to time and including any certificates of designation
thereunder (hereinafter, the "Certificate of Incorporation"), written notice of
each meeting of stockholders shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting, such notice to specify the place, date, time and purpose
or purposes of the meeting. Notice of any meeting of stockholders may be waived
in writing, signed by the person entitled to notice thereof, either before or
after such meeting, and will be waived by any stockholder by his attendance
thereat in person or by proxy, except when the stockholder attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice thereof had
been given.
SECTION 3.5 QUORUM. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by duly authorized proxy, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
actions taken by the holders of a majority of the votes cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that Directors shall be elected
by a plurality of the votes of the shares present in person
4
<PAGE>
or represented by proxy at the meeting and entitled to vote on the election of
Directors. Where a separate vote by a class or classes is required, a majority
of the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter and the affirmative vote of the majority
(plurality, in the case of the election of Directors) of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class.
SECTION 3.6 ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 3.7 VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 7.5 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a written proxy executed by
such person or his duly authorized agent, which proxy shall be filed with the
Secretary at or before the meeting at which it is to be used. An agent so
appointed need not be a stockholder. No proxy shall be voted after three (3)
years from its date of creation unless the proxy provides for a longer period.
Elections of Directors need not be by written ballot, unless otherwise provided
in the Certificate of Incorporation.
SECTION 3.8 JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; or (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the Delaware General Corporation Law, Section 217(b). If
the instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of clause (c) shall
be a majority or even-split in interest.
SECTION 3.9 LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and
5
<PAGE>
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 3.10 NO ACTION WITHOUT MEETING. The stockholders of the corporation
may not take action by written consent without a meeting and must take any
actions at a duly called annual or special meeting.
SECTION 3.11 ORGANIZATION.
(a) At every meeting of stockholders, unless another officer of the
corporation has been appointed by the Board of Directors, the Chairman of the
Board of Directors, or, if a Chairman has not been appointed, is absent, or
designates the next senior officer present to so act, the President, or, if the
President is absent, the most senior Vice President present, or, in the absence
of any such officer, a chairman of the meeting chosen by a majority in interest
of the stockholders entitled to vote, present in person or by proxy, shall act
as chairman. The Secretary, or, in his absence, an Assistant Secretary directed
to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
6
<PAGE>
ARTICLE IV
DIRECTORS
SECTION 4.1 NUMBER AND TERM OF OFFICE; CLASSIFICATION.
(a) The number of directors which shall constitute the whole Board of
Directors shall be determined from time to time by the Board of Directors
(provided that no decrease in the number of directors which would have the
effect of shortening the term of an incumbent director may be made by the Board
of Directors), provided that the number of directors shall be not less than one
(1). At each annual meeting of stockholders, Directors of the corporation shall
be elected to hold office until the expiration of the term for which they are
elected, and until their successors have been duly elected and qualified or
until such Director's earlier death, resignation or due removal; except that if
any such election shall not be so held, such election shall take place at a
stockholders' meeting called and held in accordance with the Delaware General
Corporation Law. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If, for any reason, the Directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
(b) The Board of Directors shall be divided into three classes as
nearly equal in size as is practicable, hereby designated as Class I, Class II,
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the date hereof, the term
of office of the Class I directors shall expire, and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the date hereof, the term of office of the Class II
directors shall expire, and Class II directors shall be elected for a full term
of three years. At the third annual meeting of stockholders following the date
hereof, the term of office of the Class III directors shall expire, and Class
III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting. If the number of directors is hereafter changed, any newly
created directorship or decrease in directorships shall be so apportioned among
the classes as to make all classes as nearly equal in number as is practicable.
SECTION 4.2 POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 4.3 VACANCIES. Vacancies occurring on the Board of Directors may be
filled by vote of a majority of the remaining members of the Board of Directors,
although less than a quorum. Each Director so elected shall hold office for the
unexpired portion of the term of the Director or newly created directorship
whose place shall be vacant and until his or her successor shall have been duly
elected and qualified or until such Director's earlier death, resignation or due
removal. A vacancy in the Board of Directors shall be deemed to exist under this
Section 4.3 in the case of (i) the death, removal or resignation of any
Director; (ii) an increase in the authorized number of Directors pursuant to
Section 4.1(a) above; or (iii) if the
7
<PAGE>
stockholders fail at any meeting of stockholders at which Directors are to be
elected (including any meeting referred to in Section 4.6 below) to elect the
number of Directors then constituting the whole Board of Directors.
SECTION 4.4 RESIGNATION. Any Director may resign at any time by delivering
his or her written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 4.5 REMOVAL. At a special meeting of stockholders called for such
purpose and in the manner provided herein, subject to any limitations imposed by
law or the Certificate of Incorporation, the Board of Directors, or any
individual Director, may only be removed from office for cause, and a new
Director or Directors shall be elected by a vote of stockholders holding a
majority of the outstanding shares entitled to vote at an election of Directors.
SECTION 4.6 MEETINGS.
(a) ANNUAL MEETINGS. Unless the Board shall determine otherwise, the
annual meeting of the Board of Directors shall be held immediately before or
after the annual meeting of stockholders and at the place where such meeting is
held. No notice of an annual meeting of the Board of Directors shall be
necessary and such meeting shall be held for the purpose of electing officers
and transacting such other business as may lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the principal
executive offices of the corporation. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may
also be held at any place within or without the State of Delaware which has been
designated by resolution of the Board of Directors or the written consent of all
directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, and subject to the notice requirements contained herein,
special meetings of the Board of Directors may be held at any time and place
within or without the State of Delaware whenever called by the Chairman of the
Board, the President or any two of the Directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
8
<PAGE>
(e) NOTICE OF MEETINGS. Written notice of the time and place of all
special meetings of the Board of Directors shall be given at least one (1) day
before the date of the meeting. Such notice need not state the purpose or
purposes of such meeting, except as may otherwise be required by law or provided
for in the Certificate of Incorporation or these Bylaws. Notice of any meeting
may be waived in writing at any time before or after the meeting and will be
deemed waived by any Director by attendance thereat, except when the Director
attends the meeting solely for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
(f) WAIVER OF NOTICE. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
meeting, each of the Directors not present shall sign a written waiver of
notice, or a consent to holding such meeting, or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
SECTION 4.7 QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Article XI
hereof, for which a quorum shall be one-third of the exact number of Directors
fixed from time to time in accordance with Section 4.1 hereof, but not less than
one (1), a quorum of the Board of Directors shall consist of a majority of the
exact number of directors fixed from time to time in accordance with Section 4.1
of these Bylaws, but not less than one (1); provided, however, at any meeting
whether a quorum be present or otherwise, a majority of the Directors present
may adjourn from time to time until the time fixed for the next regular meeting
of the Board of Directors, without notice other than by announcement at the
meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by a vote of the
majority of the Directors present, unless a different vote is required by law,
the Certificate of Incorporation or these Bylaws.
SECTION 4.8 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 4.9 FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
9
<PAGE>
SECTION 4.10 COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by resolution
passed by a majority of the whole Board of Directors appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and specifically granted by
the Board of Directors, shall have, and may exercise when the Board of Directors
is not in session, all powers of the Board of Directors in the management of the
business and affairs of the corporation except such committee shall not have the
power or authority to amend the Certificate of Incorporation, to adopt an
agreement of merger or consolidation, to recommend to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, to recommend to the stockholders of the corporation a dissolution of the
corporation or a revocation of a dissolution, or to amend these Bylaws.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, from time to time appoint such
other committees as may be permitted by law. Such other committees appointed by
the Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of paragraphs (a)
and (b) of this Section 4.10 may at any time increase or decrease the number of
members of a committee or terminate the existence of a committee. The membership
of a committee member shall terminate on the date of his or her death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(d) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 4.10 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any Director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of
10
<PAGE>
Directors of the time and place of special meetings of the Board of Directors.
Notice of any special meeting of any committee may be waived in writing at any
time before or after the meeting and will be waived by any Director by
attendance thereat, except when the Director attends such special meeting solely
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.
(e) ORGANIZATION. The Chairman of the Board shall preside at every
meeting of the Board of Directors, if present. In the case of any meeting, if
there is no Chairman of the Board or if the Chairman is not present, the Vice
Chairman (if there be one) shall preside, or if there be no Vice Chairman or if
the Vice Chairman is not present, a chairman chosen by a majority of the
Directors present shall act as chairman of such meeting. The Secretary of the
corporation or, in the absence of the Secretary, any person appointed by the
Chairman shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 5.1 OFFICERS DESIGNATED. The officers of the corporation shall
include a President and a Secretary, and, if and when designated by the Board of
Directors, Chairman of the Board of Directors, one or more executive and
non-executive Vice Presidents (any one or more of which executive Vice
Presidents may be designated as Executive Vice President or Senior Vice
President or a similar title), and a Treasurer. The Board of Directors also may,
at its discretion, create additional officers and assign such duties to those
offices as it may deem appropriate from time to time, which offices may include
a Vice Chairman of the Board of Directors, a Chief Executive Officer, a Chief
Operating Officer, a Chief Financial Officer, one or more Assistant Secretaries
and Assistant Treasurers, and one or more other officers which may be created at
the discretion of the Board of Directors. Any one person may hold any number of
offices of the corporation at any one time unless specifically prohibited
therefrom by law. The salaries and other compensation of the officers of the
corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 5.2 TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors. Except for the Chairman of the Board and the Vice Chairman
of the Board, no officer need be a director.
11
<PAGE>
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the Board of
Directors and, unless the Chairman has designated the next senior officer to so
preside, at all meetings of the stockholders. The Chairman of the Board of
Directors shall perform other duties commonly incident to such office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(c) POWERS AND DUTIES OF THE VICE CHAIRMAN OF THE BOARD. The Board of
Directors may but is not required to assign areas of responsibility to a Vice
Chairman of the Board, and, in such event, and subject to the overall direction
of the Chairman of the Board and the Board of Directors, the Vice Chairman of
the Board shall be responsible for supervising the management of the affairs of
the corporation and its subsidiaries within the area or areas assigned and shall
monitor and review on behalf of the Board of Directors all functions within such
corresponding area or areas of the corporation and each such subsidiary of the
corporation. In the absence of the President, or in the event of the President's
inability or refusal to act, the Vice Chairman of the Board shall perform 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. Further, the Vice Chairman
of the Board shall have such other powers and duties as designated in accordance
with these Bylaws and as from time to time may be assigned to the Vice Chairman
of the Board by the Board of Directors or the Chairman of the Board.
(d) DUTIES OF PRESIDENT. Unless the Board of Directors otherwise
determines (including by election of Chief Executive Officer) and subject to the
provisions of paragraph (e) below, the President shall be the chief executive
and chief operating officer of the corporation. Unless the Board of Directors
otherwise determines, he shall, in the absence of the Chairman of the Board or
Vice Chairman of the Board or if there be no Chairman of the Board or Vice
Chairman of the Board, preside at all meetings of the stockholders and (should
he be a director) of the Board of Directors. The President shall have such other
powers and duties as designated in accordance with these Bylaws and as from time
to time may be assigned to him by the Board of Directors.
(e) DUTIES OF THE CHIEF EXECUTIVE AND CHIEF OPERATING OFFICERS.
Subject to the control of the Board of Directors, the chief executive officer
shall have general executive charge, management and control, of the properties,
business and operations of the corporation with all such powers as may be
reasonably incident to such responsibilities; and subject to the control of the
chief executive officer, the chief operating officer shall have general
operating charge, management and control, of the properties, business and
operations of the corporation with all such powers as may be reasonably incident
to such responsibilities.
(f) DUTIES OF VICE PRESIDENTS. Vice Presidents, by virtue of their
appointment as such, shall not necessarily be deemed to be executive officers of
the corporation, such status as an executive officer only being conferred if and
to the extent such Vice President is placed in charge of a principal business
unit, division or function (E.G., sales, administration or finance) or performs
a policy-making function for the corporation (within the meaning of Section 16
of the 1934 Act and the rules and regulations promulgated thereunder). Each
executive Vice President shall at all times possess, and upon the authority of
the President or the chief executive officer any non-executive Vice President
shall from time to time possess, power to sign all certificates,
12
<PAGE>
contracts and other instruments of the corporation, except as otherwise limited
pursuant to Article VI hereof or by the Chairman of the Board, the President,
chief executive officer or the Vice Chairman of the Board. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(g) DUTIES OF SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of the Board of Directors and the
stockholders, in books provided for that purpose; shall attend to the giving and
serving of all notices; may in the name of the corporation affix the seal of the
corporation to all contracts and attest the affixation of the seal of the
corporation thereto; may sign with the other appointed officers all certificates
for shares of capital stock of the corporation; and shall have charge of the
certificate books, transfer books and stock ledgers, and such other books and
papers as the Board of Directors may direct, all of which shall at all
reasonable times be open to inspection of any director upon application at the
office of the corporation during business hours. The Secretary shall perform all
other duties given in these Bylaws and other duties commonly incident to such
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time. The chief executive
officer may direct any Assistant Secretary to assume and perform the duties of
the Secretary in the absence or disability of the Secretary, and each Assistant
Secretary shall perform other duties commonly incident to such office and shall
also perform such other duties and have such other powers as the Board of
Directors or the chief executive officer, shall designate from time to time.
(h) ASSISTANT SECRETARIES. Each Assistant Secretary shall have the
usual powers and duties pertaining to such offices, together with such other
powers and duties as designated in these Bylaws and as from time to time may be
assigned to an Assistant Secretary by the Board of Directors, the Chairman of
the Board, the President, the Vice Chairman of the Board, or the Secretary. The
Assistant Secretaries shall exercise the powers of the Secretary during that
officer's absence or inability or refusal to act.
(i) DUTIES OF TREASURER.
(i) The Treasurer shall keep or cause to be kept the books of
account of the corporation in a thorough and proper manner and shall render
statements of the financial affairs of the corporation in such form and as often
as required by the Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, chief executive officer, if one be designated, the Chief
Financial Officer. The Treasurer, subject to the order of the Board of
Directors, shall have the custody of all funds and securities of the
corporation. The Treasurer shall perform other duties commonly incident to such
office and shall also perform such other duties and have such other powers as
the Board of Directors, the Chairman of the Board, the Vice Chairman of the
Board or the President shall designate from time to time.
(ii) In absence of a designated Chief Financial Officer, unless
otherwise determined by the Board of Directors or chief executive officer, the
Treasurer shall serve as the chief financial officer subject to control of the
chief executive officer.
13
<PAGE>
(iii) The Chief Financial Officer, if any be designated, may, but
need not serve as the Treasurer.
(j) ASSISTANT TREASURERS. Each Assistant Treasurer shall have the
usual powers and duties pertaining to such office, together with such other
powers and duties as designated in these Bylaws and as from time to time may be
assigned to each Assistant Treasurer by the Board of Directors, the Chairman of
the Board, the President, the Vice Chairman of the Board, or the Treasurer. The
Assistant Treasurers shall exercise the powers of the Treasurer during that
officer's absence or inability or refusal to act.
SECTION 5.3 DELEGATION OF AUTHORITY. For any reason that the Board of
Directors may deem sufficient, the Board of Directors may, except where
otherwise provided by statute, delegate the powers or duties of any officer to
any other person, and may authorize any officer to delegate specified duties of
such office to any other person. Any such delegation or authorization by the
Board shall be effected from time to time by resolution of the Board of
Directors.
SECTION 5.4 RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 5.5 REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the vote or written consent of a majority of
the Directors in office at the time, or by any committee or superior officers
upon whom such power of removal may have been conferred by the Board of
Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 6.1 EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and
14
<PAGE>
certificates of shares of stock owned by the corporation, shall be executed,
signed or endorsed by the Chairman of the Board of Directors, the President,
Chief Executive Officer or any executive Vice President and if any be
designated, Chief Financial Officer, Treasurer, Assistant Secretary or Assistant
Treasurer, and upon the authority conferred by the Board of Directors, President
or Chief Executive Officer, any non-executive Vice President, and by the
Secretary. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 6.2 VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman or Vice Chairman of the Board of Directors, Chief Executive
Officer, the President, or any executive Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 7.1 FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman or Vice Chairman of the Board of Directors, the
Chief Executive Officer, the President or any executive Vice President and by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, certifying the number of shares and the class or series owned by him
in the corporation. Where such certificate is countersigned by a transfer agent
other than the corporation or its employee, or by a registrar other than the
corporation or its employee, any other signature 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 shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
15
<PAGE>
SECTION 7.2 LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 7.3 TRANSFERS.
(a) Transfers of record of shares of stock of the corporation shall be
made only on its books by the holders thereof, in person or by attorney duly
authorized and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares. Upon surrender to the corporation or a
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment 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 upon its books. The Board of Directors shall have the power and
authority to make all such other rules and regulations as they may deem
expedient concerning the issue, transfer and registration or the replacement of
certificates for shares of capital stock of the corporation.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.
SECTION 7.4 FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a
16
<PAGE>
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty (60) days prior to such action. If no record date is fixed by
the Board of Directors, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
SECTION 7.5 REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 8.1 EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 7.1), may be signed by the Chairman or Vice Chairman of the Board of
Directors, the Chief Executive Officer, the President or any executive Vice
President, or such other person as may be authorized by the Board of Directors,
and the corporate seal impressed thereon or a facsimile of such seal imprinted
thereon and attested by the signature of the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer; provided, however, that
where any such bond, debenture or other corporate security shall be
authenticated by the manual signature of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before any bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 9.1 DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be
17
<PAGE>
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation.
SECTION 9.2 DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
The fiscal year of the corporation shall end as of December 31st, unless
otherwise fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
SECTION 11.1 DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its Directors and executive officers to the fullest extent not
prohibited by the Delaware General Corporation Law; provided, however, that the
corporation may limit the extent of such indemnification by individual contracts
with its Directors and executive officers; and, provided, further, that the
corporation shall not be required to indemnify any Director or executive officer
in connection with any proceeding (or part thereof) initiated by such person or
any proceeding by such person against the corporation or its Directors,
officers, employees or other agents unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, or (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law.
SECTION 11.2 OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law.
SECTION 11.3 GOOD FAITH.
(a) For purposes of any determination under this Article XI, a
Director or executive officer shall be deemed to have acted in good faith and in
a manner such officer
18
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe that such officer's conduct was unlawful, if such
officer's action is based on information, opinions, reports and statements,
including financial statements and other financial data, in each case prepared
or presented by:
(i) one or more officers or employees of the corporation whom the
Director or executive officer believed to be reliable and
competent in the matters presented;
(ii) counsel, independent accountants or other persons as to matters
which the Director or executive officer believed to be within
such person's professional competence; and
(iii) with respect to a Director, a committee of the Board upon which
such Director does not serve, as to matters within such
committee's designated authority, which committee the Director
believes to merit confidence; so long as, in each case, the
Director or executive officer acts without knowledge that would
cause such reliance to be unwarranted.
(b) The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, that
such person had reasonable cause to believe that his conduct was unlawful.
(c) The provisions of this Section 11.3 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the Delaware
General Corporation Law.
SECTION 11.4 EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Article XI or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 11.5 of this Article XI, no advance shall be made by the corporation if
a determination is reasonably and promptly made (i) by the Board of Directors by
a majority vote of a quorum consisting of Directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
19
<PAGE>
SECTION 11.5 ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to Directors and executive
officers under this Article XI shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the Director or executive officer. Any right to indemnification
or advances granted by this Article XI to a Director or executive officer shall
be enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, also shall be entitled to be paid the expense
of prosecuting his claim. The corporation shall be entitled to raise as a
defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for
the corporation to indemnify the claimant for the amount claimed. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because such person has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the corporation (including its Board of Directors, independent legal counsel
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.
SECTION 11.6 NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Article XI shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its Directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
SECTION 11.7 SURVIVAL OF RIGHTS. The rights conferred on any person by this
Article XI shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 11.8 INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Article XI.
SECTION 11.9 AMENDMENTS. Any repeal or modification of this Article XI
shall only be prospective and shall not affect the rights under this Article XI
in effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
20
<PAGE>
SECTION 11.10 SAVINGS CLAUSE. If this Article XI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each Director and executive officer
to the full extent not prohibited by any applicable portion of this Article XI
that shall not have been invalidated, or by any other applicable law.
SECTION 11.11 CERTAIN DEFINITIONS. For the purposes of this Article XI, the
following definitions shall apply:
(a) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(b) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines, amounts
paid in settlement or judgment and any other costs and expenses of any nature or
kind incurred in connection with any proceeding.
(c) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article XI with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(d) References to a "director," "officer," "employee," or "agent" of
the corporation shall include without limitation, situations where such person
is serving at the request of the corporation as a director, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(e) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Article XI.
21
<PAGE>
ARTICLE XII
NOTICES
SECTION 12.1 NOTICE TO STOCKHOLDERS. Unless the Certificate of
Incorporation requires otherwise, whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to such stockholder's last known post office address as shown by
the stock record of the corporation or its transfer agent.
SECTION 12.2 NOTICE TO DIRECTORS. Any notice required to be given to any
Director may be given by the method stated in Section 12.1, or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such Director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such Director. It shall not be necessary that the same
method of giving notice be employed in respect of all Directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
SECTION 12.3 ADDRESS UNKNOWN. If no address of a stockholder or Director be
known, notice may be sent to the principal executive officer of the corporation.
SECTION 12.4 AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
SECTION 12.5 TIME NOTICES DEEMED GIVEN. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at the time of transmission.
SECTION 12.6 FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
such person in the manner above provided, shall not be affected or extended in
any manner by the failure of such stockholder or such Director to receive such
notice.
SECTION 12.7 NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such
22
<PAGE>
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
SECTION 12.8 NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings to such
person during the period between such two consecutive annual meetings, or (ii)
all, and at least two, payments (if sent by first class mail) of dividends or
interest on securities during a twelve-month period, have been mailed addressed
to such person at such person's address as shown on the records of the
corporation and have been returned undeliverable, the giving of such notice to
such person shall not be required. Any action or meeting which shall be taken or
held without notice to such person shall have the same force and effect as if
such notice had been duly given. If any such person shall deliver to the
corporation a written notice setting forth such person's then current address,
the requirement that notice be given to such person shall be reinstated. In the
event that the action taken by the corporation is such as to require the filing
of a certificate under any provision of the Delaware General Corporation Law,
the certificate need not state that notice was not given to persons to whom
notice was not required to be given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 13.1 AMENDMENTS. Except as otherwise provided in the Certificate of
Incorporation, these Bylaws may be altered, amended or repealed, or new Bylaws
may be adopted, by the holders of two-thirds of the outstanding voting shares or
by the Board of Directors, when such power is conferred upon the Board of
Directors by the Certificate of Incorporation, at any regular meeting of the
stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new Bylaws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal Bylaws is conferred upon
the Board of Directors by the Certificate of Incorporation, it shall not divest
or limit the power of the stockholders to adopt, amend or repeal Bylaws.
SECTION 13.2 APPLICATION OF BYLAWS. In the event that any provisions of
these Bylaws is or may be in conflict with any law of the United States, of the
state of incorporation of the corporation or of any other governmental body or
power having jurisdiction over this corporation, or over the subject matter to
which such provision of these Bylaws applies, or may apply, such provision of
these Bylaws shall be inoperative to the extent only that the operation thereof
unavoidably conflicts with such law, and shall in all other respects be in full
force and effect.
23
<PAGE>
ARTICLE XIV
LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiaries, including any officer or employee who is a Director of the
corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the corporation. The loan, guarantee or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this Bylaw shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the corporation at common law
or under statute.
24
<PAGE>
Exhibit 4.2
================================================================================
VASTERA, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. GENERAL................................................................................................1
1.1 Definitions................................................................................................1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.................................................................3
2.1 Restrictions on Transfer...................................................................................3
2.2 Demand Registration........................................................................................4
2.3 Piggyback Registration.....................................................................................6
2.4 Form S-3 Registration......................................................................................7
2.5 IPO Allocation.............................................................................................8
2.6 Expenses of Registration...................................................................................9
2.7 Obligations of the Company................................................................................10
2.8 Termination of Registration Rights........................................................................10
2.9 Delay of Registration; Furnishing Information.............................................................11
2.10 Indemnification..........................................................................................12
2.11 Assignment of Registration Rights........................................................................13
2.12 Amendment of Registration Rights.........................................................................13
2.13 Limitation on Subsequent Registration Rights.............................................................14
2.14 "Market Stand-Off"Agreement..............................................................................15
2.15 Rule 144 Reporting.......................................................................................14
SECTION 3. COVENANTS OF THE COMPANY..............................................................................15
3.1 Basic Financial Information and Reporting.................................................................15
3.2 Inspection Rights.........................................................................................16
3.3 Confidentiality of Records................................................................................16
3.4 Reservation of Common Stock...............................................................................16
3.5 Stock Vesting.............................................................................................16
3.6 Termination of Covenants..................................................................................16
SECTION 4. RIGHTS OF FIRST REFUSAL...............................................................................17
4.1 Subsequent Offerings......................................................................................17
4.2 Exercise of Rights........................................................................................17
4.3 Issuance of Equity Securities to Other Persons............................................................17
4.4 Termination of Rights of First Refusal....................................................................18
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C>
4.5 Transfer of Rights of First Refusal.......................................................................18
4.6 Excluded Securities.......................................................................................18
SECTION 5. MISCELLANEOUS.........................................................................................19
5.1 Governing Law.............................................................................................19
5.2 Survival..................................................................................................19
5.3 Successors and Assigns; Binding Nature....................................................................19
5.4 Severability..............................................................................................19
5.5 Amendment and Waiver......................................................................................19
5.6 Delays or Omissions.......................................................................................20
5.7 Notices...................................................................................................20
5.8 Attorneys' Fees...........................................................................................20
5.9 Titles and Subtitles......................................................................................21
5.10 Pronouns.................................................................................................21
5.11 Counterparts.............................................................................................21
5.12 Entire Agreement.........................................................................................21
</TABLE>
- iii -
<PAGE>
VASTERA, INC.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is entered into as of the 24th day of November, 1998, by and among
the following parties: VASTERA, INC. a Delaware corporation formerly known as
"Export Software International, Inc." (the "COMPANY"); those entities designated
on the signature pages hereof as "INVESTORS" and any entity that may become a
party hereto as an "INVESTOR" by executing a counterpart hereof (singly, an
"INVESTOR", and collectively, the "INVESTORS").
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties, covenants and conditions set forth in
this Agreement, that certain Amended and Restated Investors' Rights Agreement
dated as of August 7, 1997 is hereby amended and restated in its entirety as
follows:
SECTION 1. GENERAL.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
"COMMON STOCK" means the Common Stock of the Company, $0.01
par value per share.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FORM S-3" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" means any person of record owning Shares or
Registrable Securities that have not been sold to the public or any assignee of
record of such Registrable Securities in accordance with Section 2.11 hereof.
"INITIAL OFFERING" means the date of the closing of a sale to
the public of Common Stock for the account of the Company in a firm commitment
underwritten offering pursuant to a registration statement filed with, and
declared effective by, the Securities and Exchange Commission under the
Securities Act in which (a) the price per share is at least $14.80 (subject to
adjustments for any stock dividends, combinations, splits, recapitalizations and
the like) and (b) the net proceeds to the Company (after Selling Expenses) are
greater than $15,000,000.
"OPTION(S)" mean the options to purchase shares of Series B
Convertible Preferred Stock held by Battery Ventures III, L.P., the options to
purchase shares of Series C-1 Convertible
<PAGE>
Preferred Stock held by certain of the Investors, the Warrants to purchase
shares of Series D-1 Convertible Preferred Stock held by certain of the
Investors; and certain bridge warrants held by Battery Ventures III, L.P. and
Lighthouse Capital Partners, II, L.P., each issued August 7, 1997.
"REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock issued or
issuable upon conversion of the Shares, including, without limitation, Common
Stock issued upon conversion of any Shares issued upon exercise of any of the
Options and (b) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such above-described securities. Notwithstanding anything to the contrary
contained in the foregoing, Registrable Securities shall not include any
securities that are (i) sold pursuant to a registration statement or Rule 144
under the Securities Act, or (ii) sold in any manner to a person or entity that,
by virtue of the provisions of this Agreement, is not entitled to the rights
provided by this Agreement.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number
of shares of Common Stock that are both Registrable Securities and either (a)
then issued and outstanding or (b) then issuable upon the conversion, exchange
or exercise of any then outstanding securities that are convertible into,
exercisable for or exchangeable for shares of Common Stock.
"REGISTRATION EXPENSES" mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements of a
single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"RELATED AGREEMENTS" mean the Preferred Stock Purchase
Agreement and the related Option Agreement, both dated as of July 31, 1996, the
Series C and Series D Preferred Stock Purchase Agreement dated as of August 7,
1997, as amended, the Series D Convertible Preferred Stock and Warrant Purchase
Agreement of even date herewith and the Second Amended and Restated Right of
First Refusal and Co-Sale Agreement of even date herewith (the "Restated Co-Sale
Agreement").
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLING EXPENSES" means all underwriting discounts and
selling commissions and fees applicable to the sale.
- 2 -
<PAGE>
"SERIES A CONVERTIBLE PREFERRED STOCK" means the Company's
Series A Convertible Preferred Stock, par value $0.01 per share.
"SERIES B CONVERTIBLE PREFERRED STOCK" means the Company's
Series B Convertible Preferred Stock, par value $0.01 per share.
"SERIES C CONVERTIBLE PREFERRED STOCK" means the Company's
Series C Convertible Preferred Stock, par value $0.01 per share.
"SERIES C-1 CONVERTIBLE PREFERRED STOCK" means the Company's
Series C-1 Convertible Preferred Stock, par value $0.01 per share.
"SERIES D CONVERTIBLE PREFERRED STOCK" means the Company's
Series D Convertible Preferred Stock, par value $0.01 per share.
"SERIES D-1 CONVERTIBLE PREFERRED STOCK" means the Company's
Series D-1 Convertible Preferred Stock, par value $0.01 per share.
"SHARES" mean shares of any of the Company's Series A
Convertible Preferred Stock, shares of the Company's Series B Convertible
Preferred Stock, shares of the Company's Series C Convertible Preferred Stock,
shares of the Company's Series C-1 Convertible Preferred Stock, shares of the
Company's Series D Convertible Preferred Stock and shares of the Company's
Series D-1 Convertible Preferred Stock.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by this Section 2.1, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
such disposition is being effected other than pursuant to Rule 144 and if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act.
Notwithstanding the provisions of paragraphs (i) and (ii) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
which does not require registration under the Securities Act by a Holder which
is (A) a partnership to its partners or former partners in accordance
- 3 -
<PAGE>
with their interests in such partnership, (B) a corporation to its shareholders
in accordance with their interests in the corporation, (C) a limited liability
company to its members or former members in accordance with their interests in
the limited liability company, or (D) to the Holder's family members or into a
trust for the benefit of such persons; provided in each case the transferee will
be subject to the terms of this Section 2.1 to the same extent as if he were an
original Holder hereunder.
(b) In addition to any legend required under applicable state
securities laws or as provided elsewhere in this Agreement, each certificate
representing Shares or Registrable Securities shall (unless otherwise permitted
by the provisions of this Agreement) be stamped or otherwise imprinted with a
legend substantially similar to the following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend; provided however, any legend required to remain by any
other agreement shall not be removed.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order from
the appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the
Company receives a written request from the Holders of 40% of the Shares (or any
Common Stock issued upon conversion thereof) (the "Initiating Holders") that the
Company file a registration statement, on Form S-1, under the Securities Act
covering the registration of at least 25% of the Registrable Securities or such
number of shares of Registrable Securities anticipated to have an aggregate
offering price of not less than $10,000,000, then the Company shall, within
thirty (30) days of the receipt thereof, give written notice of such request to
all Holders, and subject to the limitations of this Section 2.2, use its best
efforts to effect, as soon as practicable, the registration under the Securities
Act of all Registrable Securities that the Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information in the written
notice referred to in Section 2.2(a). In such event, the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in
- 4 -
<PAGE>
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority of the Initiating
Holders (which underwriter or underwriters shall be reasonably acceptable to the
Company). Notwithstanding any other provision of this Section 2.2, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten, then the Company shall advise all
Holders of Registrable Securities which would otherwise be underwritten pursuant
hereto that the number of shares that may be included in the underwriting shall
be allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities requested by each such Holder, and
the Holders to be included in the registration (including the Initiating
Holders). Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective or withdrawn by the Holders;
(ii) during the period starting with the date of
filing of, and ending on the date ninety (90) days following the effective date
of, any registration statement on Form S-1;
(iii) if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 2.2(a), the Company
gives notice to the Holders of the Company's intention to make its Initial
Offering within ninety (90) days;
(iv) if (A) at the time the Company receives a
request for registration in accordance with this Section 2.2 the Company shall
then be engaged in any material transaction (such as, by way of example only,
negotiating a merger, acquisition, joint-venture or introduction of a major new
product) the disclosure of which in a Registration Statement, in the reasonable
judgment of a majority of the Board of Directors, exercised in good faith, would
be adverse to the Company's best interests, or (B) if the Company shall furnish
to Holders requesting a registration pursuant to this Section 2.2 a certificate
signed by a majority of the Board of Directors stating that in the Board of
Directors' reasonable judgment, exercised in good faith, the Company's earnings
or the occurrence of some other material event are not at such time appropriate
for disclosure, or, that it would be seriously detrimental to the Company and
its stockholders for such registration statement to be effected at such time,
then, in either of such events, the Company shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided that such rights to delay a request
shall be exercised by the Company in the aggregate not more than once in any
twelve (12) month period; or
(v) prior to the earlier to occur of (a) September 1,
2000 or (b) six months after the Closing of the Initial Offering.
- 5 -
<PAGE>
2.3 PIGGYBACK REGISTRATION.
(a) The Company shall notify all Holders in writing at least
ninety (90) days prior to the filing of any registration statement under the
Securities Act for purposes of a public offering of securities of the Company
(including, but not limited to, registration statements relating to secondary
offerings of securities of the Company, but excluding registration statements
relating to employee benefit plans or with respect to corporate reorganizations
or other transactions under Rule 145 of the Securities Act) and will afford an
opportunity to include in such registration statement all or part of such
Registrable Securities held by such Holder. Each Holder desiring to include in
any such registration statement all or any part of the Registrable Securities
held by it shall, within fifteen (15) days after the above-described notice from
the Company, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities by such Holder. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(b) If the registration statement under which the Company
gives notice under this Section 2.3 is for an underwritten offering, the Company
shall so advise the Holders of Registrable Securities. In such event, the right
of any such Holder to be included in a registration pursuant to this Section 2.3
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities (and, if applicable, any and all other selling shareholders who may
be permitted to register shares) through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement to the contrary, if the underwriter determines in
good faith that marketing factors require a limitation of the number of shares
to be underwritten, the number of shares that may be included in the
underwriting shall be allocated, first, to the Company; second, to the Holders
on a PRO RATA basis based on the total number of Registrable Securities
requested by each Holder to be registered; third, to any stockholder of the
Company (other than a Holder) on a PRO RATA basis. No such reduction shall
reduce the securities being offered by the Company for its own account to be
included in the registration and underwriting; PROVIDED, however, that in no
event shall the amount of securities of the selling Holders included in the
registration be reduced below thirty percent (30%) of the total amount of
securities included in such registration, unless such offering is the Initial
Offering and such registration does not include shares of any other selling
stockholders, in which event any or all of the Registrable Securities of the
Holders may be excluded in accordance with the immediately preceding sentence.
In no event shall shares of any other selling stockholder be included in such
registration which would reduce the number of shares which may be included by
Holders without the written consent of Holders of not less than two-thirds of
the Registrable Securities proposed to be sold in the offering.
(c) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
- 6 -
<PAGE>
The Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2.6 hereof.
2.4 FORM S-3 REGISTRATION.
In case the Company shall receive from any Holder or Holders of (A) a
majority of the Registrable Securities relating to the Company's Series A
Convertible Preferred Stock (the "Series A Registrable Securities"), (B) a
majority of the Registrable Securities relating to the Company's Series C
Convertible Preferred Stock (the Series C Registrable Securities") or (C) any
Registrable Securities relating to the Company's Series D Convertible Preferred
Stock (in any case, the "Initiating S-3 Holders") a written request or requests
that the Company effect a registration on Form S-3 (or any successor to Form
S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holder;
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $500,000;
(iii) if (A) at the time the Company receives a
request for registration in accordance with this Section 2.4 the Company shall
then be engaged in any material transaction (such as, by way of example only,
negotiating a merger, acquisition, joint-venture or introduction of a major new
product) the disclosure of which in a Registration Statement, in the reasonable
judgment of a majority of the Board of Directors, exercised in good faith, would
be adverse to the Company's best interests, or (B) if the Company shall furnish
to the Holders requesting a registration pursuant to this Section 2.4 a
certificate signed by a majority of the Board of Directors of the Company
stating that in the Board of Directors' reasonable judgment, exercised in good
faith, the Company's earnings or the occurrence of some other material event are
not at such time appropriate for disclosure, or that it would be seriously
detrimental to the Company and its stockholders for such Form S-3 Registration
to be effected at such time, then, in either of such events, the Company shall
have the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4;
- 7 -
<PAGE>
provided, that such rights to delay a request shall be exercised by the Company
in the aggregate not more than once in any twelve (12) month period.
(iv) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company will file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
2.5 IPO ALLOCATION.
In the event of a bona fide, underwritten initial public offering of
the capital stock of the Company (the "IPO"), the Company shall use commercially
reasonable efforts to require that the managing underwriters of the IPO
establish a directed share program (the "PROGRAM") in connection with the IPO.
The Program shall consist of that number of shares of capital stock (the
"PROGRAM SHARES") determined by dividing $3,000,000 by the initial price to the
public set forth on the cover page of the final prospectus distributed in
connection with the IPO (the "IPO PRICE"), provided that, if necessary to
complete the IPO, the number of Program Shares may be reduced to the maximum
number permitted under the rules and requirements of the NASD. The Company shall
cause the managing underwriters (subject to the consent of the underwriters) to
give priority to the holders of the Company's Series C Convertible Preferred
Stock (or Common Stock issuable upon conversion thereof)(the "SERIES C
HOLDERS"), PRO RATA in accordance with their relative holdings of Series C
Convertible Preferred Stock (or Common Stock issued upon conversion thereof)
with respect to the Program Shares in allocating the shares available for
purchase in the Program. The Series C Holders, PRO RATA as aforesaid, shall have
the option, but not the obligation, to purchase all or any portion of the
Program Shares at the IPO Price. Notwithstanding the foregoing, in no event
shall the Investors designated on the signature pages hereto as the "TCV
Investors" have the rights under this Section 2.5 with respect to less than such
number of Program Shares that, when multiplied by the IPO Price, equals
$1,500,000 (such product being referred to as the "Program Value"), and if the
Program Value shall be less than $1,500,000, then the TCV Investors shall have
the rights under this Section 2.5 with respect to all of the Program Shares (the
number of Program Shares as to which the TCV Investors are to have the rights
under this Section 2.5 in accordance with this sentence are referred to as the
"TCV Minimum Shares"). If, in order to give effect to the operation of the
preceding sentence, the Investors other than the TCV Investors obtain rights
under this Section 2.5 with respect to less than their respective PRO RATA share
of the Program Shares, then (i) such other Investors shall have the rights under
this Section 2.5 with respect to all of the Program Shares other than the TCV
Minimum Shares, if there shall be any Program Shares in addition to the TCV
Minimum Shares, and (ii) such other Investors shall share such rights PRO RATA
in accordance with their relative holdings of Series C Convertible Preferred
Stock (or Common Stock issued upon the conversion thereof.
2.6 EXPENSES OF REGISTRATION.
Except as specifically provided herein, all Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 2.2 or any registration under
- 8 -
<PAGE>
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders or the Initiating S-3 Holders, as the case may be, unless (a) the
withdrawal is based upon material adverse information concerning the Company of
which the Initiating Holders or the Initiating S-3 Holders, as the case may be
were not aware at the time of such request or (b) the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2 or Section 2.4, as applicable, in which
event such right shall be forfeited by all Holders. If the Holders are required
to pay the Registration Expenses, such expenses shall be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested. If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to clause (a) above, then the Holders shall not forfeit their rights
pursuant to Section 2.2 or Section 2.4 to a demand registration.
2.7 OBLIGATIONS OF THE COMPANY.
Whenever required to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Initiating Holders or the Initiating S-3 Holders, as the case may be, keep
such registration statement effective for up to one hundred and eighty (180)
days or, if earlier, until the Holder or Holders have completed the distribution
related thereto.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of the
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration under such other securities laws and
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under a underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
- 9 -
<PAGE>
(f) Notify each Holder of Registrable Securities covered by
such registration statement that a prospectus relating thereto is required to be
delivered under the Securities Act of any event that would cause the prospectus
included in such registration statement, as then in effect, to include an untrue
statement of a material fact or to omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(g) Furnish, at the request of the Initiating Holders holding
a majority of the shares participating in the offering or the Initiating S-3
Holders holding a majority of the shares participating in the offering, as the
case may be, on the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through underwriters,
or, if such securities are not being sold through underwriters, on the date that
the registration statement with respect to such securities becomes effective,
(i) an opinion, dated as of such date, from the counsel representing the Company
for the purposes of such registration, in the form and substance as is
customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to a majority of the Holders requesting registration,
addressed to the underwriters, if any, and to the Holders requesting the
registration of their Registrable Securities and (ii) a letter dated as of such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and reasonably
satisfactory to a majority of the Holders requesting registration, addressed to
the underwriters, if any, and if permitted by applicable accounting standards,
to the Holders requesting the registration of their Registrable Securities.
2.8 TERMINATION OF REGISTRATION RIGHTS.
All registration rights granted to a Holder under this Article II
(other than under Section 2.3 with respect to underwritten offerings) shall
terminate and be of no further force and effect upon the earlier of (i) the
fifth anniversary of the consummation of the Initial Offering and (ii) such date
as all Registrable Securities held by and issuable to such Holder may be sold in
the manner described in Rule 144 during any ninety (90) day period.
2.9 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Sections 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
2.10 INDEMNIFICATION.
- 10 -
<PAGE>
In the event any Registrable Securities are included in a registration
statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company shall
indemnify and hold harmless each Holder, the partners, officers, directors and
legal counsel of each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities (joint or several) to which the may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospects or final
prospectus contained therein and any amendments or supplements thereto, (ii) the
omission or alleged omission to state a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or (iii)
any violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities laws or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities laws in
connection with the offering covered by such registration statement; and the
Company shall reimburse each such Holder, partner, officer or director,
underwriter or controlling person on a current basis for any legal or other
expense reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 2.10(a) shall not apply
to default judgments or amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company, which consent shall not be unreasonably withheld, nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder, partner,
officer, director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder shall, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officer or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs due
to the Company's reliance upon written information furnished by such Holder
under an instrument duly executed by such Holder and stated to be specifically
for use in connection with such registration; and each such Holder shall
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
- 11 -
<PAGE>
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.10(b) shall not apply to default judgments or amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.10 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.10 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 2.10,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any indemnifying party
similarly notified, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
2.10.
(d) If the indemnification provided for in this Section 2.10
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the Indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this
Section 2.10 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this Agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party a
release from all liability in respect to such claim or litigation.
- 12 -
<PAGE>
2.11 ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to cause the Company to register Registrable Securities
pursuant to this Article II may be assigned by a Holder to a transferee or
assignee of Shares or Registrable Securities, provided such transferee or
assignee (i) is a subsidiary, parent, general partner, limited partner or
retired partner of a Holder, (ii) is a Holder's family member or trust for the
benefit of an individual Holder, or (iii) acquires at least one hundred thousand
(100,000) Shares or Registrable Securities (as adjusted for stock splits and
combinations) and is not a competitor of the Company (as reasonably determined
by the Board of Directors); provided, however, (A) the transferor shall, within
ten (10) days after such transfer, furnish to the Company written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned and (B) such transferee
shall agree to be subject to all restrictions set forth in this Agreement and
the Restated Co-Sale Agreement.
2.12 AMENDMENT OF REGISTRATION RIGHTS.
Any provision of this Section 2 may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the holders of
a majority of the Series A Registrable Securities, voting or acting separately
as a class, a majority of the Series C Registrable Securities, voting or acting
separately as a class, and a majority of the Series D Registrable Securities,
voting or acting separately as a class, provided that all Holders are affected
by such amendment or waiver in a substantially similar fashion. If any amendment
treats any class of holders differently than any other class, the affected class
must approve or waive the amendment or modification by a majority vote of the
affected class. Any amendment or waiver effected in accordance with this Section
2.12 shall be binding upon each Holder and the Company. By acceptance of any
benefits under this Section 2, Holders hereby agree to be bound by the
provisions hereunder.
2.13 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS.
After the date of this Agreement, the Company shall not, without the
prior written consent of the holders of a majority of the Series A Registrable
Securities, voting or acting separately as a class, a majority of the Series C
Registrable Securities, voting or acting separately as a class, and a majority
of the Series D Registrable Securities voting or acting separately as a class,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would grant such holder any registration rights with respect
to such securities.
2.14 "MARKET STAND-OFF" AGREEMENT.
If requested by the Company or the representative of the underwriters
of the Common Stock (or other securities), each Holder and a transferee of a
Holder, regardless of whether such transferee has registration rights hereunder,
shall not sell or otherwise transfer or dispose of any Registrable Securities
held by such Holder (other than those included in the registration) for a period
specified by the representative of the underwriters not to exceed one hundred
eighty (180) days following the effective date of a registration statement of
the Company filed under the Securities Act, provided that:
- 13 -
<PAGE>
(a) such agreement shall apply only to the Initial Offering;
(b) all officers and directors of the Company and holders of
at least one percent (1%) of the Company's voting securities enter into similar
agreements; and
(c) such agreement shall provide that any discretionary waiver
or termination of the restrictions of such agreements by the Company or the
representatives of the underwriters shall apply to all persons subject to such
agreements pro rata based on the number of Registrable Securities held.
The obligations described in this Section 2.14 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.15 RULE 144 REPORTING.
With a view to making available to the Holders the benefits of certain
rules and regulations of the SEC which may permit the sale of the Registrable
Securities to the public without registration, the Company agrees to use its
best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times that the Company is subject
to the reporting requirements of the Exchange Act, as amended;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Shares or Registrable
Securities, furnish to such Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of said Rule
144 of the Securities Act, and of the Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
SECTION 3 COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be
- 14 -
<PAGE>
required under generally accepted accounting principles consistently applied. In
addition to the information described in Section 3.1(b), (c) and (d), the
Company shall provide in a timely manner any other information concerning the
Company and its business and affairs as any of the Investors may from time to
time reasonably request.
(b) As soon as practicable after the end of each fiscal year
of the Company and so long as any of the Shares are outstanding, and in any
event within one hundred twenty (120) days thereafter, the Company will furnish
to each Investor a consolidated balance sheet of the Company, as at the end of
such fiscal year, and an audited consolidated income statement and an audited
consolidated cash flow statement of the Company, for such year, all prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures from the previous
fiscal year, with an explanation of any material differences between them, all
in reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors and a report by management with a
discussion of the Company's business, including any changes in the Company's
financial condition and any significant business developments.
(c) As long as any of the Shares are outstanding, the Company
will furnish each Investor, as soon as practicable after the end of the first,
second and third quarterly accounting periods in each fiscal year of the
Company, and in any event within forty-five (45) days thereafter, a consolidated
balance sheet of the Company as of the end of each such quarterly period, and a
consolidated income statement and a consolidated cash flow statement of the
Company for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit adjustments
may not have been made, and setting forth in each case in comparative form the
figures from the previous fiscal year, with an explanation of any material
differences between them. Such financial statements shall be accompanied by a
report by management with a discussion of the Company's business, including any
changes in the Company's financial condition and any significant business
developments.
(d) As long as any of the Shares are outstanding, the Company
will furnish each Investor (i) at least thirty (30) days prior to the beginning
of each fiscal year an annual budget and operating plans for such fiscal year
(and, as soon as available, any subsequent revisions thereto); and (ii) as soon
as practicable after the end of each month, and in any event within thirty (30)
days thereafter, a consolidated balance sheet of the Company as of the end of
each such month, and a consolidated income statement and a consolidated cash
flow statement of the Company for such month and for the current fiscal year to
date, including a comparison to plan figures for such period, prepared in
accordance with generally accepted accounting principles consistently applied,
with the exception that no notes need be attached to such statements and
year-end audit adjustments may not have been made.
3.2 INSPECTION RIGHTS.
Each Investor or its authorized representatives shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, including its corporate and financial records, and to discuss the
affairs, finances and accounts of the Company or any of its subsidiaries
- 15 -
<PAGE>
with its officers, and to review such information as it may reasonably request
all at such reasonable times and as often as may be reasonably requested;
provided, however, that the Company shall not be obligated under this Section
3.2 with respect to a competitor of the Company or with respect to information
which the Board of Directors determines in good faith is confidential and should
not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS.
Each Investor agrees to use, and to use its diligent efforts to ensure
that its authorized representatives use, the same degree of care as such
Investor uses to protect its own confidential information to keep confidential
any information furnished to it which the Company identifies as being
confidential or proprietary (so long as such information is not in the public
domain), except that such Investor may disclose such proprietary or confidential
information to any partner, subsidiary or parent of such Investor for the
purpose of evaluating its investment in the Company as long as such partner,
subsidiary or parent agrees to be bound by the confidentiality provisions of
this Section 3.3. Notwithstanding the foregoing, each Investor shall be free to
distribute to its partners or shareholders summary information describing the
Company's performance.
3.4 RESERVATION OF COMMON STOCK.
The Company will at all times reserve and keep available, solely for
issuance and delivery upon the conversion of Shares, all Common Stock issuable
from time to time upon conversion of all the Shares.
3.5 STOCK VESTING.
Unless otherwise approved by the Board of Directors, all stock options
and other stock equivalents issued after the date of this Agreement to
employees, directors, consultants and other service providers shall be subject
to vesting over a minimum of four year period and with respect to any shares of
stock purchased by any such person, the Company's repurchase option shall
provide that upon such person's termination of employment or service with the
Company, with or without cause, the Company or its assignee (to the extent
permissible under applicable securities laws and other laws) shall have the
option to purchase at cost any unvested shares of stock held by such person.
3.6 TERMINATION OF COVENANTS.
The provisions of 3.1, 3.2, 3.3 and 3.4 of this Agreement shall expire,
terminate and be of no further force of effect on the date the Initial Offering
is consummated.
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS.
The Investors shall have a right of first refusal to purchase their PRO
RATA portion of the Equity Securities, as defined below, that the Company may,
from time to time, propose to sell and issue
- 16 -
<PAGE>
after the date of this Agreement, other than the Equity Securities excluded by
Section 4.6 hereof. The term "Equity Securities" shall mean (i) any Common
Stock, Preferred Stock or other security of the Company (other than debt
securities which are not convertible into and do not carry rights to acquire any
capital stock of the Company), (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS.
If the Company proposes to issue any Equity Securities, it shall give
the Investors written notice of its intention, describing the Equity Securities,
the price and the terms and conditions upon which the Company proposes to issue
the same. The Investors shall have fifteen (15) days from the giving of such
notice to agree to purchase the Equity Securities for the price and upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any such Investor if it would cause the Company
to be in violation of applicable federal securities laws by virtue of such offer
or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS.
If any Investor fails to exercise in full the rights of first refusal,
the Company shall have ninety (90) days thereafter to sell the Equity Securities
in respect of which the Investor's rights were not exercised, at a price and
upon general terms and conditions materially no more favorable to the purchasers
thereof than specified in the Company's notice to the Investor pursuant to
Section 4.2 hereof. If the Company has not sold such Equity Securities within 90
days of the notice provided pursuant to Section 4.2, the Company shall not
thereafter issue or sell such Equity Securities, without first offering such
securities to the Investor in the manner provided above.
4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL.
The rights of first refusal established by this Section 4 shall
terminate upon either (a) the date of the Initial Offering or (b) with respect
to Investors holding Series A Convertible Preferred Stock or Series B
Convertible Preferred Stock, if fewer than 30% of the number of such Shares that
are outstanding (or in the case of Series B Convertible Preferred Stock, that
are issuable upon the exercise of an option therefor that is outstanding) as of
the date of this Agreement remain outstanding or (c) with respect to Investors
holding Series C Convertible Preferred Stock or Series C-1 Convertible Preferred
Stock, if fewer than 20% of the number of such shares that are outstanding (or,
in the case of Series C-1 Convertible Preferred Stock, that are issuable upon
the exercise of options therefor that are outstanding) as of the date of this
Agreement remain outstanding or (d) with respect to Investors holding Series D
Convertible Preferred Stock or Series D-1 Convertible Preferred Stock, if fewer
than 30% of the number of such shares that are outstanding (or, in the case of
Series D-1 Convertible Preferred Stock that are issuable upon the exercise of
Warrants therefor that are outstanding) as of the date of this Agreement remain
outstanding.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL.
- 17 -
<PAGE>
The rights of first refusal of the Investors under this Section 4 may
be transferred to the same parties, subject to the same restrictions as any
transfer of registration rights pursuant to Section 2.11.
4.6 EXCLUDED SECURITIES.
The rights of first refusal established by this Section 4 shall have no
application to any of the following Equity Securities:
(a) up to an aggregate amount of 2,000,000 shares of Common
Stock (and/or options, warrants or other Common Stock purchase rights issued
pursuant to such options, warrants or other rights) issued or to be issued to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary, pursuant to stock purchase or stock option plans or other
similar arrangements that are approved by the Board of Directors;
(b) Stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement, and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement, provided that the rights
of first refusal established by this Article IV applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities issued pursuant to a public
offering; or
(g) any Equity Securities issued by the Company to an
operating company with compatible or complimentary products to effect a
strategic alliance with that company which is anticipated to provide to the
Company a well-defined economic benefit, provided that in no event shall the
number of shares of such Equity Securities so issued exceed in the aggregate
fifteen percent (15%) of the number of shares of Equity Securities outstanding
at the time of such issuance.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW.
This Agreement shall be construed and governed in accordance with, and
the rights of the parties shall be governed by, the laws of the State of
Delaware (without giving effect to any conflicts or choice of law provisions
that would cause the application of the domestic substantive laws of any other
jurisdiction).
- 18 -
<PAGE>
5.2 SURVIVAL.
The covenants and agreements made herein shall survive any
investigation made by any Holder and the closing of the transactions
contemplated hereby. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS; BINDING NATURE.
Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors, and administrators of the parties hereto and shall inure to
the benefit of and be enforceable by each person who shall be a holder of
Registrable Securities from time to time; provided, however, that prior to the
receipt by the Company of adequate written notice of the transfer of any
Registrable Securities specifying the full name and address of the transferee,
the Company may deem and treat the person listed as the holder of such
Registrable Securities in its records as the absolute owner and holder thereof
for all purposes, including the payment of dividends or any redemption price.
5.4 SEVERABILITY.
In case any provision of the Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
5.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Company, the holders
of a majority of the Series A Registrable Securities voting as a separate class,
the holders of a majority of the Series C Registrable Securities, voting as a
separate class, and the holders of two-thirds of the Series D Registrable
Securities, voting as a separate class, provided, in such case, that all such
Holders are affected by such amendment or waiver in a substantially similar
fashion.
(b) Except as otherwise expressly provided herein, the
obligations of the Company and the rights of the Holders under this Agreement
may be waived only with the written consent of the holders of at least a
majority of the Series A Registrable Securities, voting as a separate class, the
holders of a majority of the Series C Registrable Securities, voting as a
separate class, and the holders of two-thirds of the Series D Registrable
Securities, voting as a separate class, provided, in such case, that all such
Holders are affected by such waiver in a substantially similar fashion.
(c) Notwithstanding the foregoing, this Agreement may be
amended with only the written consent of the Company to include additional
purchasers of Shares as "Investors," "Holders" and parties hereto.
- 19 -
<PAGE>
5.6 DELAYS OR OMISSIONS.
It is agreed that no delay or omission to exercise any right, power, or
remedy occurring to any Holder, upon any breach, default or noncompliance of the
Company under this Agreement shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. It is further agreed that any waiver,
permit, consent or approval of any kind or character on any Holder's part of any
breach, default or noncompliance under the Agreement or any waiver on such
Holder's part of any provisions or conditions of this Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Holders, shall be cumulative and not alternative.
5.7 NOTICES.
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient; if not, then on the next business day, (iii)
five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
EXHIBIT A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.8 ATTORNEYS' FEES.
In the event that any dispute among the parties to this Agreement
should result in litigation, the prevailing party in such dispute shall be
entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees, and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.9 TITLES AND SUBTITLES.
The titles of the sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
5.10 PRONOUNS.
All pronouns contained herein and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the parties hereto may require.
- 20 -
<PAGE>
5.11 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
5.12 ENTIRE AGREEMENT.
(a) This Agreement, the Exhibits and Schedules hereto, the Related
Agreements and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof and neither party shall be liable or bound to the other
party except as specifically set forth herein and therein.
(b) This Agreement amends, restates and supersedes in its entirety
the terms and conditions set forth in the Amended and Restated Investors'
Rights, dated as of August 7, 1997, as amended agreement and such agreement
shall be of no further force or effect.
- 21 -
<PAGE>
In Witness Whereof, the parties hereto have executed this Second
Amended and Restated Investors' Rights Agreement as of the date set forth in the
first paragraph hereof.
VASTERA, INC.
By:______________________________________
Arjun Rishi, President
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: Lighthouse Management Partners II, L.P.,
its General Partner
By: Lighthouse Capital Partners, Inc.,
its General Partner
By:______________________________________
Name:
Title:
INVESTORS:
BATTERY VENTURES III, L.P.
BY: BATTERY PARTNERS III, L.P.
By:______________________________________
Robert G. Barrett,
General Partner
{SIGNATURES CONTINUED ON NEXT PAGE}
- 22 -
<PAGE>
(TCV INVESTORS):
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.
Its: Investment General Partner
By: ___________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: ___________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: ___________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: ___________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
- 23 -
<PAGE>
TECHNOLOGY CROSSOVER VENTURES II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: Investment General Partner
By: ___________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
{SIGNATURES CONTINUED ON NEXT PAGE}
- 24 -
<PAGE>
RRE INVESTORS, L.P.
By: _____________________________
Andrew L. Zalasin
Member, General Partner
RRE INVESTORS FUND, L.P.
By: _____________________________
Andrew L. Zalasin
Member, General Partner
MSD PORTFOLIO CAPITAL, L.P.
PRIVATE NEW EQUITY
By: _____________________________
Glenn Furman
Its: ____________________
RPKS INVESTMENTS, L.L.C.
By: _____________________________
Glenn Furman
Its: ____________________
TRIPLE MARLIN INVESTMENTS, L.L.C.
By: _____________________________
John Phelan
Its: ____________________
{SIGNATURES CONTINUED ON NEXT PAGE}
- 25 -
<PAGE>
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: ______________________________
Nancy Heller
Its: ______________________
__________________________________
Margaret L. Taylor
DAVID A. DUFFIELD TRUST
By: ______________________________
David A. Duffield, Trustee
VERTEX TECHNOLOGY FUND PTE. LTD.
By: ______________________________
Name: ____________________________
Title: ___________________________
DELHI & DUBLIN VENTURES, L.L.C.
By: ______________________________
Name: Sanjay Kapur
Title: Chief Executive Officer
By: ______________________________
Name: Ankesh Kumar
Title: Partner
- 26 -
<PAGE>
EXHIBIT A
TO
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
VASTERA, INC.
45025 Aviation Drive
Suite 200
Dulles, VA 20166-7554
Facsimile No.: (703) 742-4580
BATTERY VENTURES III, L.P.
901 Mariner's Island Boulevard
Suite 475
San Mateo, California 94404
Attn: Robert G. Barrett
Facsimile No.: (415) 372-3930
and
BATTERY VENTURES III, L.P.
20 William Street
Suite 200
Wellesley, Massachusetts 02181
Attn: Don Stanley
Facsimile No.: (617) 237-7788
TECHNOLOGY CROSSOVER VENTURES II, L.P. and Affiliates:
Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, New Jersey 07041
Attention: Robert C. Bensky
Facsimile No.: (973) 467-5323
with a copy to:
Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, California 94301
Attention: Richard H. Kimball
Facsimile No.: (650) 614-8222
- 27 -
<PAGE>
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, California 949f04-3121
Attention: Contract Administrator
Facsimile No.: (415) 925-3387
RRE INVESTORS, L.P.
126 East 56th Street, 22CD Floor
New York, New York 10022
MSD PORTFOLIO CAPITAL, L.P.
PRIVATE NEW EQUITY
599 Lexington Avenue, Suite 2300
New York, New York 10022
RPKS INVESTMENTS, L.L.C.
599 Lexington Avenue, Suite 2300
New York, New York 10022
TRIPLE MARLIN INVESTMENTS, L.L.C.
599 Lexington Avenue, Suite 2300
New York, New York 10022
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
730 Third Avenue
New York, New York 10017
DAVID A. DUFFIELD TRUST
Care of David Duffield, Peoplesoft, Inc.
4440 Rosewood Drive
Pleasanton, CA 94588-3031
Margaret L. Taylor
Peoplesoft, Inc.
4440 Rosewood Drive
Pleasanton, CA 94588-3031
VERTEX TECHNOLOGY FUND PTE. LTD.
Three Lagoon Drive, Suite 220
Redwood City, CA 94065
DELHI & DUBLIN VENTURES, L.L.C.
14652 Dickens Street, Suite 104
Sherman Oaks, CA 91403
- 28 -
<PAGE>
VASTERA, INC.
AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 (the "Amendment") dated as of February 26,
1999 to the Second Amended and Restated Investors' Rights Agreement dated as of
November 24, 1998 (the "Agreement"), by and among Vastera, Inc., a Delaware
corporation (the "Company"), and the holders of shares of the Company's Series A
Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred
Stock"), Series C Convertible Preferred Stock, par value $0.01 per share (the
"Series C Preferred Stock"), and Series D Convertible Preferred Stock, par value
$0.01 per share (the "Series D Preferred Stock"), listed on the signature pages
thereto (such holders, the "Series A Investors," the "Series C Investors" and
the "Series D Investors," respectively, and such holders are referred to in the
Agreement as the "Investors"), is hereby entered into by the Company, the
Investors and FDX Corporation, a Delaware corporation (the "New Investor"). The
undersigned Investors constitute the holders of at least a majority of the
Registrable Securities of each such class, as such term is defined in the
Agreement.
WHEREAS, contemporaneously with the execution of this Amendment,
the Company is issuing and selling an aggregate 512,715 shares (the "New
Shares") of its Series D Preferred Stock and has agreed to issue a warrant (the
"Warrant") to purchase an aggregate of 385,505 shares of its Series D-1
Convertible Preferred Stock, par value $0.01 per share (the "Series D-1
Preferred Stock"), to the New Investor under the terms and conditions set forth
in that certain Amendment No. 1 dated as of the date hereof to the Series D
Convertible Preferred Stock and Warrant Purchase Agreement dated as of November
24, 1998; and
WHEREAS, the Company and the Investors desire that the New
Investor be granted registration and other rights with respect to the New Shares
and the shares of Series D-1 Preferred Stock having the same terms and
conditions as the registration and other rights granted to the existing Series D
Investors with respect to the shares of Series D Preferred Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. The New Shares purchased by the New Investor and the shares
of Common Stock of the Company, $0.01 par value per share (the "Common Stock"),
into which the New Shares may be converted are and shall be "Series D
Convertible Preferred Stock" and "Registrable Securities," respectively, as such
terms are used and defined in the Agreement. The New Shares are "Shares" as such
term is used and defined in the Agreement.
Amendment No. 1 to Second Amended
and Restated Investors' Rights Agreement
<PAGE>
2. The Warrant issued to the New Investor shall be an "Option"
as such term is used and defined in the Agreement and may be exercised to
purchase Series D-1 Preferred Stock and such shares are and shall be "Series D-1
Convertible Preferred Stock" and "Shares" as such terms are used and defined in
the Agreement. The shares of Common Stock into which the Series D-1 Preferred
Stock may be converted are and shall be "Registrable Securities" as such term is
used and defined in the Agreement.
3. The New Investor shall be a "Holder" and an "Investor" as
such terms are used and defined in the Agreement.
4. The term "Related Agreements," as such term is presently
defined in the Agreement, shall, effective with the execution of this Amendment,
be redefined as follows:
"RELATED AGREEMENTS" mean the Preferred Stock Purchase
Agreement and the related Option Agreement, both dated as of July 31,
1996, the Series C and Series D Preferred Stock Purchase Agreement
dated as of August 7, 1997, as amended, the Series D Convertible
Preferred Stock and Warrant Purchase Agreement dated as of November 24,
1998, as amended, and the Second Amended and Restated Right of First
Refusal and Co-Sale Agreement dated as of November 24, 1998, as amended
(the "Restated Co-Sale Agreement").
5. Wherever the Agreement is itself referred to in the
Agreement, or wherever there are references in the Agreement to "hereunder,"
"hereof," "herein," or words of like import, they shall mean the Agreement, as
amended hereby.
6. The New Investor hereby agrees to be bound by all the terms
and conditions of, and is hereby granted all of the rights of an "Investor" and
"Holder" under, the Agreement as though such New Investor had been an original
party to the Agreement, and by executing this Amendment, the New Investor
becomes a party thereto and is bound thereby. The Investors and the Company
acknowledge that they remain bound by all the terms and conditions of the
Agreement, as amended hereby.
7. All notices, pursuant to Section 5.7 of the Agreement,
addressed to the New Investor shall be addressed as follows:
2
Amendment No. 1 to Second Amended
and Restated Investors' Rights Agreement
<PAGE>
If to FDX Corporation:
FDX Corporation
6075 Poplar Avenue
Suite 300
Memphis, Tennessee 38119
Attention: Chief Information Officer
Telephone No.: (901) 395-3600
Telecopier No.: (901) 395-7393
with a copy to:
FDX Corporation
6075 Poplar Avenue
Suite 300
Memphis, Tennessee 38119
Attention: General Counsel
Telephone No.: (901) 395-3382
Telecopier No.: (901) 395-5034
8. This Amendment shall in all respects be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Delaware, without regard to the conflict of law principles thereof.
9. Any party's failure to enforce any provision or provisions of
this Amendment shall not in any way be construed as a waiver of any such
provision or provisions, nor shall such failure to enforce prevent that party
thereafter from enforcing each and every other provision of this Amendment. The
rights granted to the parties herein are cumulative and shall not constitute a
waiver of any party's right to assert all other legal remedies available to it
under the circumstances.
10. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which when taken together
shall constitute one and the same instrument.
11. The Company, each of the Investors and the New Investor
agree upon request to execute any further documents or instruments necessary or
desirable to carry out the purposes or intent of this Amendment or the
Agreement.
12. The Agreement, as amended by this Amendment, is and shall
continue to be in full force and effect and is hereby in all respects ratified
and confirmed.
3
Amendment No. 1 to Second Amended
and Restated Investors' Rights Agreement
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to Second Amended and Restated Investors' Rights Agreement to be
duly executed on the day and year first above written.
VASTERA, INC.
By:_______________________________
_______________, President and
Chief Executive Officer
NEW INVESTOR
FDX CORPORATION
By: ______________________________________
Name: Dennis H. Jones
Title: Executive Vice President and
Chief Information Officer
Address: 6075 Poplar Avenue
Suite 300
Memphis, Tennessee 38119
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK}
4
Amendment No. 1 to Second Amended
and Restated Investors' Rights Agreement
<PAGE>
BATTERY VENTURES III, L.P.
BY: BATTERY PARTNERS III, L.P.
By: ___________________________________________
Robert G. Barrett, General Partner
TCV II, V.O.F.
A Netherlands Antilles General Partnership
BY: Technology Crossover Management II, L.L.C.
ITS: Investment General Partner
By: ___________________________________________
Robert C. Bensky, Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, L.P.
A Delaware Limited Partnership
BY: Technology Crossover Management II, L.L.C.
ITS: General Partner
By: ___________________________________________
Robert C. Bensky, Chief Financial Officer
TCV II (Q), L.P.
A Delaware Limited Partnership
BY: Technology Crossover Management II, L.L.C.
ITS: General Partner
By: ___________________________________________
Robert C. Bensky, Chief Financial Officer
TCV II STRATEGIC PARTNERS, L.P.
A Delaware Limited Partnership
BY: Technology Crossover Management II, L.L.C.
ITS: General Partner
By: ___________________________________________
Robert C. Bensky, Chief Financial Officer
5
Amendment No. 1 to Second Amended
and Restated Investors' Rights Agreement
<PAGE>
TECHNOLOGY CROSSOVER VENTURES II, C.V.
A Netherlands Antilles Limited Partnership
BY: Technology Crossover Management II, L.L.C.
ITS: Investment General Partner
By: ___________________________________________
Robert C. Bensky, Chief Financial Officer
Name: _________________________________________
Margaret L. Taylor
DAVID A. DUFFIELD TRUST
By: ___________________________________________
David A. Duffield
Trustee
VERTEX TECHNOLOGY FUND PTE. LTD.
By: ___________________________________________
Name: _________________________________________
Title: ________________________________________
DELHI & DUBLIN VENTURES, L.L.C.
By: ___________________________________________
Name: _________________________________________
Title: ________________________________________
{additional signatures follow}
6
Amendment No. 1 to Second Amended
and Restated Investors' Rights Agreement
<PAGE>
RRE INVESTORS, L.P.
By: ______________________________
Andrew L. Zalasin
Member, General Partner
RRE INVESTORS FUND, L.P.
By: ______________________________
Andrew L. Zalasin
Member, General Partner
MSD PORTFOLIO, L.P. -
PRIVATE NEW EQUITY
By: ______________________________
Glenn Fuhrman
Its: ____________________
RPKS INVESTMENTS, L.L.C.
By: ______________________________
Glenn Fuhrman
Its: _____________________
TRIPLE MARLIN INVESTMENTS, L.L.C.
By: ______________________________
John Phelan
Its: _____________________
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: ______________________________
Tom Solano
Its: ____________________________
7
Amendment No. 1 to Second Amended
and Restated Investors' Rights Agreement
<PAGE>
EXECUTION COPY
VASTERA, INC.
AMENDMENT NO. 2 TO
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED INVESTORS' RIGHTS
AGREEMENT (the "Amendment No. 2") is made and effective this 4th day of
February, 2000, by and among Vastera, Inc., a Delaware corporation (the
"Company") and each of the purchasers identified on the signature pages hereof
who are purchasing pursuant to the terms and conditions of the Series E Purchase
Agreement (as defined below) at either the Initial Closing (as defined in the
Series E Purchase Agreement) or the Second Closing (as defined in the Series E
Purchase Agreement) (each a "Purchaser," and collectively, the "Purchasers") and
the other parties identified on the signature pages hereof (the "Original
Parties").
WHEREAS, the Company desires to sell up to an aggregate of 1,846,722
shares of Series E Convertible Preferred Stock (the "Series E Preferred Stock")
to the Purchasers on the terms and conditions as contained in that Series E
Convertible Preferred Stock Purchase Agreement of even date herewith (the
"Series E Purchase Agreement"); and
WHEREAS, in connection with the sale by the Company to each Purchaser
of such shares of Series E Preferred Stock, each Purchaser desires to become a
party to that certain Second Amended and Restated Investors' Rights Agreement
dated as of November 24, 1998, as amended (the "Agreement") and the Original
Parties desire that the same occur.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend the Agreement as follows:
1. Section 1.1 of the Agreement shall be amended to add the following
definition:
"SERIES E CONVERTIBLE PREFERRED STOCK" means the Company's
Series E Convertible Preferred Stock, par value $0.01 per share.
2. The shares of Common Stock of the Company, $0.01 par value per share
(the "Common Stock"), into which the Series E Preferred Stock may be converted
are and shall be "Registrable Securities," as such term is used and defined in
the Agreement. The shares of Series E Preferred Stock are "Shares" as such term
is used and defined in the Agreement.
<PAGE>
3. Each Purchaser shall be a "Holder" and an "Investor" as such terms
are used and defined in the Agreement.
4. The term "Related Agreements," as such term is presently defined in
the Agreement, shall be deleted in its entirety and, effective with the
execution of this Amendment, the following definition shall be inserted in lieu
thereof:
"RELATED AGREEMENTS" mean the Preferred Stock Purchase
Agreement and related Option Agreement, both dated as of July 31, 1996,
the Series C and Series D Preferred Stock Purchase Agreement dated as
of August 7, 1997, as amended, the Series D Convertible Preferred Stock
and Warrant Purchase Agreement dated as of November 24, 1998, as
amended, the Series E Convertible Preferred Stock Purchase Agreement
dated as of the date hereof and the Second Amended and Restated Right
of First Refusal and Co-Sale Agreement dated as of November 24, 1998,
as amended (the "Restated Co-Sale Agreement")."
5. The first paragraph of Section 2.4 of the Agreement shall be deleted
in its entirety and, effective with the execution of this Amendment, the
following shall be inserted in lieu thereof:
"In case the Company shall receive from any Holder or Holders
of (A) a majority of the Registrable Securities relating to the
Company's Series A Convertible Preferred Stock (the "Series A
Registrable Securities"), (B) a majority of the Registrable Securities
relating to the Company's Series C Convertible Preferred Stock (the
"Series C Registrable Securities"), (C) any Registrable Securities
relating to the Company's Series D Convertible Preferred Stock (the
"Series D Registrable Securities") or (D) any Registrable Securities
relating to the Company's Series E Convertible Preferred Stock (the
"Series E Registrable Securities") (in any case, the "Initiating S-3
Holders") a written request or requests that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities
owned by such Holder or Holders, the Company will:"
6. The first sentence of Section 2.12 of the Agreement shall be deleted
in its entirety and, effective with the execution of this Amendment, the
following shall be inserted in lieu thereof:
Any provision of this Section 2 may be amended and observance
thereof may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent
of the holders of a majority of the Series A Registrable Securities,
voting or acting separately as a class, a majority
- 2 -
<PAGE>
of the Series C Registrable Securities, voting or acting separately as
a class, a majority of the Series D Registrable Securities, voting or
acting separately as a class, and a majority of the Series E
Registrable Securities, voting or acting separately as a class,
provided that all Holders are affected by such amendment or waiver in a
substantially similar fashion.
7. Section 2.13 of the Agreement shall be deleted in its entirety and,
effective with the execution of this Amendment, the following shall be inserted
in lieu thereof:
"After the date of this Agreement, the Company shall not,
without the prior written consent of the holders of a majority of the
Series A Registrable Securities, voting or acting separately as a
class, a majority of the Series C Registrable Securities, voting or
acting separately as a class, a majority of the Series D Registrable
Securities, voting or acting separately as a class, and a majority of
the Series E Registrable Securities, voting or acting separately as a
class, enter into any agreement with any holder or prospective holder
of any securities of the Company that would grant such holder any
registration rights with respect to such securities."
8. Section 4.4 of the Agreement shall be deleted in its entirety and,
effective with the execution of this Amendment, the following shall be inserted
in lieu thereof:
"The rights of first refusal established by this Section 4
shall terminate upon either (a) the date of the Initial Offering or (b)
with respect to Investors holding Series A Convertible Preferred Stock
or Series B Convertible Preferred Stock, if fewer than 30% of the
number of such Shares that are outstanding (or in the case of Series B
Convertible Preferred Stock, that are issuable upon the exercise of an
option therefor that is outstanding) as of the date of this Agreement
remain outstanding or (c) with respect to Investors holding Series C
Convertible Preferred Stock or Series C-1 Convertible Preferred Stock,
if fewer than 20% of the number of such shares that are outstanding
(or, in the case of Series C-1 Convertible Preferred Stock, that are
issuable upon the exercise of options therefor that are outstanding) as
of the date of this Agreement remain outstanding or (d) with respect to
Investors holding Series D Convertible Preferred Stock or Series D-1
Convertible Preferred Stock, if fewer than 30% of the number of such
shares that are outstanding (or, in the case of Series D-1 Convertible
Preferred Stock that are issuable upon the exercise of Warrants
therefor that are outstanding) as of the date of this Agreement remain
outstanding or (e) with respect to Investors holding Series E
Convertible Preferred Stock, if fewer than 30% of the number of such
shares that are outstanding as of the date of this Agreement remain
outstanding."
- 3 -
<PAGE>
9. Section 5.5(a) of the Agreement shall be deleted in its entirety
and, effective with the execution of this Amendment, the following shall be
inserted in lieu thereof:
"Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company, the
holders of a majority of the Series A Registrable Securities, voting as
a separate class, the holders of a majority of the Series C Registrable
Securities, voting as a separate class, the holders of two-thirds of
the Series D Registrable Securities, voting as a separate class, and
the holders of two-thirds of the Series E Registrable Securities,
voting as a separate class, provided in such case, that all such
Holders are affected by such amendment in a substantially similar
fashion."
10. Section 5.5(b) of the Agreement shall be deleted in its entirety
and, effective with the execution of this Amendment, the following shall be
inserted in lieu thereof:
"Except as otherwise expressly provided herein, the
obligations of the Company and the rights of the Holders under this
Agreement may be waived only with the written consent of the holders of
at least a majority of the Series A Registrable Securities , voting as
a separate class, the holders of a majority of the Series C Registrable
Securities, voting as a separate class, the holders of two-thirds of
the Series D Registrable Securities, voting as a separate class and the
holders of two-thirds of the Series E Registrable Securities, voting as
a separate class, provided in such case, that all such Holders are
affected by such waiver in a substantially similar fashion."
11. Wherever the Agreement is itself referred to in the Agreement, or
wherever there are references in the Agreement to "hereunder," "hereof,"
"herein," or words of like import, they shall mean the Agreement, as amended
hereby.
12. Each Purchaser hereby agrees to be bound by all the terms and
conditions of, and is hereby granted all of the rights of an "Investor" and
"Holder" under the Agreement as though such Purchaser had been an original party
to the Agreement, and by executing this Amendment, the Purchaser becomes a party
thereto and is bound thereby. The Company and the Original Parties acknowledge
that they remain bound by all the terms and conditions of the Agreement, as
amended hereby. The Agreement , as amended, is and shall continue to be in full
force and effect and is hereby in all respects ratified and confirmed.
13. All notices, pursuant to Section 5.7 of the Agreement, shall be
addressed to each Purchaser as provided in the Series E Purchase Agreement.
14. This Amendment No. 2 shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
- 4 -
<PAGE>
15. General.
(a) Any party's failure to enforce any provision or provisions
of this Amendment No. 2 shall not in any way be construed as a waiver of any
such provision or provisions, nor shall such failure to enforce prevent that
party thereafter from enforcing each and every other provision of this Amendment
No. 2. The rights granted to the parties herein are cumulative and shall not
constitute a waiver of any party's right to assert all other legal remedies
available to it under the circumstances.
(b) This Amendment No. 2 may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same instrument.
(c) Each Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Amendment No. 2 or the Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands as of the day and year first above written.
COMPANY:
VASTERA, INC.
By:____________________________
Arjun Rishi
President
{ADDITIONAL PARTIES' SIGNATURES ON FOLLOWING PAGES.}
- 5 -
<PAGE>
EXECUTION COPY
ORIGINAL PARTIES' SIGNATURES:
ORIGINAL PARTY
_____________________________________
[Purchaser Name]
By:__________________________________
Name:________________________________
[Print Name]
Title:_______________________________
<PAGE>
EXECUTION COPY
PURCHASERS' SIGNATURES:
PURCHASERS'
_____________________________________
[Purchaser Name]
By:__________________________________
Name:________________________________
[Print Name]
Title:_______________________________
<PAGE>
FORTE SOFTWARE, INC.
VALUE-ADDED RESELLER LICENSE AND SERVICES AGREEMENT
Customer Export Software International
------------------------------------------------------------------------
Address 11800 Sunrise Valley Drive, Suite 820
-------------------------------------------------------------------------
City Reston State VA Zip 22091
------------------------------- ------------ ----------------
This Value-Added Reseller License and Services Agreement (the "Agreement") is
entered into between Forte Software, Inc., a California corporation ("Forte")
and Reseller for the purpose of setting forth the terms and conditions upon
which Forte shall grant to Reseller a license to use the Products listed on
Exhibit B attached hereto.
The Effective Date of this Agreement is July 19, 1996.
FORTE: RESELLER:
FORTE SOFTWARE, INC. Export Software International
- --------------------- ------------------------------
Signature: Signature:
--------------------------------- ----------------------------
Name: Name:
--------------------------------- ----------------------------
Title: Title:
--------------------------------- --------------------------
1
<PAGE>
TERMS AND CONDITIONS
Forte Software, Inc. (Forte) and the reseller identified on
the signature page (reseller) hereby agree that the following terms and
conditions will apply to each license granted and to all services provided under
this Agreement.
1. DEFINITIONS
1.1 "Application Specific Licenses" shall mean Licenses which
shall be limited for use solely for the purpose of running the Reseller's
Application Program as specified in the Application Package Attachment. The
Application Specific License may also be used to modify or customize the
Reseller's Application Program to fit the Sublicensee's own particular
operational needs. The Application Specific License is limited for use only on
the specified Reseller Application Program and may not be used for any other
development or deployment purposes with the Reseller or Sublicensees.
1.2 "Client Environment" shall mean a hardware/operating
system/graphical user interface combination on which the Product, or any portion
thereof, is run.
1.3 "Core System" shall mean the Products bundled for Reseller
use, defined and priced as such in the Price List.
1.4 "Designated Reseller Developer" shall mean a arson within
Reseller with a valid user ID issued by Forte for developing applications with
the Product.
1.5 "Designated System" shall mean the computer hardware and
operating system(s) designated on the relevant Order Form for use in conjunction
with a Sublicensed Program or a Development License.
1.6 "Documentation" shall mean the user manual, training manuals,
consulting papers, operator instructions and other written material furnished by
Forte in conjunction with the Products.
1.7 "Effective Date" shall mean the date so specified on the
signature page or the applicable Order Form.
1.8 "Order Form" shall mean Forte's standard form for ordering
Product licenses and services attached as Exhibit B. When completed and signed
by both parties, the Order Forms (including the Signature Page of this
Agreement) shall document the Product licenses which have been granted and the
services which are to be provided under this Agreement.
1.9 "Price List" shall mean Forte's standard product list and fee
schedule that is in effect at the time a Produce license or service is ordered
by the Reseller.
2
<PAGE>
1.10 "Product" or "Products" shall mean the computer software
owned or distributed by Forte for which Reseller is granted a license pursuant
to this Agreement, and subsequent Updates thereto, whether in printed or machine
readable form.
1.11 "Reseller Sublicense Addendum" shall mean the addenda to
this Agreement specifying additional Sublicense terms and Sublicense rates and
fees far the various types of Sublicenses which may be granted by the Reseller.
1.12 "Sewer Environment" shall mean a hardware/operating system
combination (e.g., VAX/VMS or Sequent/Dynix) on which the Product, or any
portion thereof, is run.
1.13 "Standard Technical Support" shall mean the technical
support services specified in Section 3.1 of this Agreement.
1.14 "Sublicense" shall mean a nonexclusive, nontransferable
right to use an Application Specific License granted by the Reseller under a
Reseller Addendum to an end user to use a copy of the Application Specific
Licenses) with the Value-Added Package. "Sublicensee" shall mean a third party
who is granted a Sublicense of the Products) with the Value-Added Package for
such parry's own internal business purposes and not for purposes of any further
distribution.
1.15 "Supported License" shall mean a Product license for which
the Reseller has a current order for annual Standard Technical Support.
1.16 "Updates" shall mean updated versions of the Products and
Documentation which encompass logical improvements, extensions and other changes
to the Products which are generally made available to Product Licensees at no
additional license fee.
1.17 "User" unless otherwise specified in the Order Form, shall
mean a specific individual employed by Reseller who is authorized by Reseller to
use the Product(s), regardless of whether the individual is actively using the
Products) at any given time. With respect to a Sublicense; "User" shall mean
Concurrent Users which is the maximum number of "logged-in" persons of the
Sublicensee that are licensed to use the product at any one period of time.
1.18 "Value-Added Package" shall mean the hardware or software
products or services having Value-Added which are developed, sold, and/or
licensed with the Products to a sublicensee by the Reseller, as provided under
the applicable Attachment, to satisfy such Sublicensee's internal business
requirements and objectives.
2. LICENSE GRANT
2.1 Development License and Trial Licenses. Forte grants to
Reseller a nonexclusive license to use the Development Licenses Reseller obtains
under this Agreement, as follows:
(a) To develop or prototype the Value-Added Package on the
Designated System or on a backup system if the Designated System is inoperative
(b) To demonstrate the Product to potential Sublicenses.
solely in conjunction with the Value-Added Package.
(c) To provide training and technical support to employees
and customers solely in conjunction with the Value-Added Package.
(d) To use the Documentation provided with the Products) in
support of Reseller's authorized use of the Product(s).
(e) To copy the Product(s) for archival or backup purposes;
no other copies shall be made without Forte's prior written consent. All titles,
trademarks, and copyright and restricted rights notices shall be reproduced in
such copies. All archival and backup copies of the Products) are subject to the
terms of this Agreement.
(f) The Reseller may order temporary trial Demonstration
Licenses ("Trial Licenses") for its evaluation purposes only, and not for
development or prototype purposes for use during a period specified in the Order
Form. Each Order Form for Trial Licenses shall clearly state the trial period
and shall identify that the order is for a Trial License.
(g) The number of Designated Developers located at the
specified location is restricted to the number set forth in the applicable Order
Form and is restricted to the particular Client and Server Environment the
Reseller is licensed for as set forth in the Order Form.
2.2 Sublicensing.
(a) License to Sublicense Programs
As further set forth in the applicable Reseller Addendum,
Forte hereby grants the Reseller a nonexclusive, nontransferable license to
market and grant Sublicenses as set forth in such Reseller Addendum. The
Reseller shall only have the right to Sublicense Programs pursuant to an
effective Reseller Addendum between the parties hereto.
Reseller shall Sublicense the Products solely through a
written Sublicense agreement as provided under Section 2.2B. Upon Forte's
request, the Reseller shall provide Forte with a copy of the Reseller's standard
Sublicense agreement.
(b) Sublicense Agreement
Every Sublicense agreement shall include, at a minimum,
contractual provisions which:
(1) Restrict use of the Products to object code form on
designated system by a maximum number of Users for the Sublicensee's own
internal data processing only.
(2) Prohibit transfer or duplication of the Products
except for temporary transfer in the event of CPU malfunction and a single
backup or archival copy.
4
<PAGE>
(3) Prohibit assignment, timesharing, or rental of the
Products.
(4) Prohibit use of the Products for any purpose
outside the scope of the Application Specific License used in conjunction with
the Value-Added Package.
(5) Prohibit causing or permitting the reverse
engineering, disassembly, or decompilation of the Programs.
(6) Prohibit title from passing to the Sublicensee.
(7) Disclaim Forte's liability for any damages, whether
direct, indirect, incidental, or consequential arising from the use of the
Products.
(8) Require the Sublicensee, at the termination of the
Sublicense, to discontinue use and destroy or return to the Reseller the
Products, Documentation and all archival or other copies of the Product.
(9) Restrict publication of any results of benchmark
tests run on the Products.
(10) For Programs Sublicensed, for use in the United
States, prohibit transfer of the Products outside the United States; for
Programs Sublicensed for use outside the United States, require the Sublicense
to comply fully with all relevant export laws and regulations of the United
States to assure that neither the Products, not any direct product thereof, are
exported, directly or indirectly, in violation of United States law.
(11) Specify Forte as a third party beneficiary of the
Sublicense agreement.
(12) Allow the Reseller to comply with Section 5.15 of
this Agreement.
(c) Marketing/Sublicensing Practices Products.
(1) Avoid deceptive, misleading, illegal, or unethical
practices that may be detrimental to Forte or to the Products.
(2) Not make any representations, warranties, or
guarantees to Sublicensees concerning the Product that are inconsistent with or
in addition to those made in this Agreement or by Forte.
(3) Comply with all applicable Federal, State, and
Local laws and regulations in performing its duties with respect to the
Products.
2.3 Title. Forte shall retain all title, copyright, and other
proprietary rights in the Products and any modifications or translations
thereof. The Reseller and its Sublicensees do not acquire any rights in the
Products other than those specified in this Agreement.
5
<PAGE>
2.4 Transfer of Products.
(a) Except as otherwise specified in the Order Form, within
the United States, a Development License may be transferred to another computer
system of like configuration (same model and operating system), or the
Designated System may be transferred to another location within Reseller's
organization, upon written notice to Forte. All other transfers, including
transfer of a Product license outside the United States, shall be permitted only
with Forte's prior written consent and shall be subject to Forte's standard
transfer fees in effect at the time of the transfer.
(b) The rights granted herein are restricted for use solely
by the Reseller and may not be assigned or transferred to a third party without
the prior written permission of Forte.
2.5 Verification. On Forte's reasonable request, but not more
frequently than semi-annually, the Reseller shall furnish Forte with a signed
statement verifying that the Products are being used pursuant to the provisions
of this Agreement, and listing the location, type, Designated Developers,
Concurrent Runtime Users and location of the Products.
3. TECHNICAL SERVICES
3.1 Standard Technical Support Services. So long as Forte
continues to offer similar support services to its other general licensees and
subject to payment by the Reseller of the applicable fees, Forte will provide
annual Standard Technical Support for Supported Licenses as follows:
(a) Forte will provide telephone consultation at Forte's
service location, to assist the Reseller in identifying, verifying and resolving
problems in the use and operation of the Product. Telephone assistance services
shall be limited to a written list of Licensee personnel to be separately agreed
upon by Forte and the Reseller as listed in Exhibit B.
(b) Forte will respond to problem reports concerning the
Products submitted by the Reseller to Forte, using the form provided by Forte
where possible, including backup material substantiating the Product problem.
Upon proper notification of a failure of the Product to perform correctly, which
failure can be reproduced at Forte's facility or via remote access to the
Reseller's facility, Forte shall use reasonable efforts to correct the failure
and to provide the Reseller with correcting Product or a work around to the
problem.
(c) Forte will provide the Reseller with Updates. For 6
months after the introduction of a new generally available release, Forte will
use reasonable efforts to support the previous release of the Product. For
Products with annual Update support only, the support services will consist
solely of the service specified in this subsection 3.1(c).
3.2 Renewal of Annual Support Services.
(a) Forte will notify the Reseller at least 60 days before
the annual support period is scheduled to expire. Fees for annual support are
due annually in advance. Such fees will be those in effect at the beginning of
the period for which the fees are paid.
6
<PAGE>
Annual support will terminate unless the Reseller renews for the next year under
Forte's then current policies by providing Forte with a purchase order and/or
payment of the next year's fees prior to the expiration date.
(b) Forte may, where appropriate, prorate annual support
fees so that support for all Products at a specific location are renewable on
the same date, even if all the Products were not ordered at the same time.
(c) Reseller may reinstate lapsed support services only upon
payment of the back support fees specified in the Price List, plus current
year's support fees:
3.3 Rights to Developments. This Agreement will govern the Reseller's
use of any enhancements, data, and information provided by Forte in the course
of providing any technical services. Any ideas, know-how, techniques, and
software which may be developed by Forte, including any enhancements or
modifications made to the Products, shall be the property of Forte.
3.4 Incidental Expenses. With respect to any onsite services requested
by the Reseller, such services will be performed at Forte's standard consulting
rates plus reimbursement of reasonable travel and out-of-pocket expenses
incurred.
4. FEES, INVOICING, PAYMENT & TAXES
4.1 License Fees and Sublicense Fees. The Reseller may order VAR
Kit(s) with all of the associated products at the VAR Kits license fees as
specified on the applicable Order Form on Exhibit B. The Reseller may also order
standard Development and Deployment licenses for internal operations as
specified on the Price List on Exhibit A. For each copy of the Product
Sublicensed by the Reseller, the Reseller agrees to pay Forte a Sublicense fee
as set forth in the applicable Reseller Sublicense Addendum.
The Reseller is free to determine unilaterally its own license fees to
its Sublicensees. If the Reseller or a Sublicensee increases the licensed number
of Users, the Reseller will pay additional Sublicense fees to Forte at the rates
specified and in effect at the time the increase occurs.
4.2 Invoicing and Payment of License and Sublicense Fees. Invoices for
payment of license and sublicense fees shall be payable on the Effective Date of
the applicable Order Form. Reseller will provide Forte with a written purchase
order for licenses at the time of execution of an Order Form. All other
applicable fees shall be payable when invoiced at a place of Forte choosing as
specified on the invoice. All fees shall be deemed overdue if they remain unpaid
30 days after they become payable. If the Reseller's procedures require that an
invoice be submitted against a purchase order before payment can be made, the
Reseller will be responsible for issuing such purchase order 30 days before the
payment due date. All overdue amounts shall become interest at the rate of one
and one-half percent (1-1/2%) per month or the maximum legal rate, if less,
however, nothing herein shall limit Forte's right to terminate this Agreement
under Section 6.
7
<PAGE>
4.3 Technical Service Fees. Technical services ordered by Reseller for
Development Licenses will be provided under Forte's Technical Support policies
and rates in effect on the date Technical Support is ordered.
4.4 Invoicing and Payment of Technical Service Fees. Invoices for
payment of the first year of Technical Support fees shall be due and payable 6
months after the Effective Date of the applicable Order Form. Reseller will
provide Forte with a written purchase order for licenses and support at the time
of execution of an Order Form. All other applicable fees shall be payable when
invoiced at a place of Forte's choosing as specified on the invoice. All fees
shall be deemed overdue if they remain unpaid 30 days after they become payable.
If the Reseller's procedures require that an invoice be submitted against a
purchase order before payment can be made, the Reseller will be responsible for
issuing such purchase order 30 days before the payment due date. Technical
Support will terminate unless the Reseller issues payment by said due date.
4.5 Taxes. The fees listed in this Agreement do not include taxes. The
Reseller shall pay or reimburse Forte for all sales, use, excise, property,
value-added, or other federal, state or local taxes or any documentary, stamps
or duties whether withholding or otherwise, or am similar assessments based on
the licenses granted in this Agreement, the services provided under this
Agreement or on the Reseller's use of the Products; provided that, the Reseller
shall have no responsibility for income taxes imposed on Forte by any taxing
authority.
5. RECORDS
5.1 Records Inspection. The Reseller shall maintain books and records
in connection with activity under this Agreement. Such records Shall include
executed Sublicense agreements and the information required under a Reseller
Addendum. Forte may, at its expense, audit the executed Sublicensee lists, the
number of copies of Programs used or Sublicensed by the Reseller, the Computers
on which the Programs are installed, and the number of Users using the Programs
upon reasonable notice to the Reseller. Forte may audit the relevant books and
records of the Reseller to ensure compliance with the terms of this Agreement
Any such audit shall be conducted during regular business hours at the
Reseller's offices and shall not interfere unreasonably with the Reseller's
business activities. If an audit reveals that the Reseller has underpaid fees to
Forte, the. Reseller shall be invoiced for such underpaid fees based on the
Price List in effect at the time the audit is completed. If the underpaid fees
are in excess of five percent (5%), then the Reseller shall pay Forte's
reasonable costs of conducting the audit. Audits shall be made no more than once
annually.
5.2 Notice of Claim. The Reseller mill notify the Forte legal
department promptly in writing of (a) Any claim or proceeding involving the
Programs that comes to its attention; and (b) all claimed or suspected defects
in the Programs; and (c) Any material change in the management or control of the
Reseller.
5.3 Sublicensee Contact List. Every 90 days Reseller. shall provide to
Forte a listing of new Sublicensees that have been contracted during the 90 day
period. The list shall
8
<PAGE>
include company name, contact name, phone number, and address so Forte may
contact customer to address any opportunities outside of the Value-Added Package
solution.
6. TERMS AND TERMINATION
6.1 Term. This Agreement and each license granted hereunder shall
remain in effect perpetually (if not otherwise specified on the Order Form),
unless terminated as provided in Paragraph 6.2 below. The term of each Reseller
Addendum hereunder shall be as forth in such Addendum.
6.2 Termination. The Reseller may terminate this Agreement, any
license, or the Reseller Addendum at any time. Forte may terminate this
Agreement, any license, or the Reseller Addendum upon written notice if the
Reseller breaches this Agreement and fails to correct the breach within thirty
(30) days following written notice specifying the breach.
6.3 Effect of Termination. Upon expiration or termination of a
Reseller Addendum or this Agreement, all the Reseller's right to market,
Sublicense, and use the Programs as set forth in such Reseller Addendum or this
Agreement shall cease.
The termination of this Agreement, a Reseller Addendum, or any
license shall not limit either party from pursuing any other remedies available
to it including injunctive relief, nor shall such termination relieve Reseller's
obligation to pay all fees that have accrued or that Reseller has agreed to pay
under any Order Form or other similar ordering document under this Agreement.
The parties' rights and obligations under Sections 2.3, 2.4, 2.5, and Articles
5, 6, 7, 8 shall survive termination of this Agreement
If Reseller materially breaches this Agreement, including
failing to make any payments required hereunder when due under any Order Form or
other similar ordering document to this Agreement, then Forte may declare all
sums due and to become due hereunder immediately due and payable.
6.4 Return of Products upon Termination. If a license granted in this
Agreement expires or otherwise terminates, the Reseller shall (i) cease using
the applicable Products, and (ii) represent in writing to Forte in writing
within one month after termination that the Reseller has destroyed or has
returned to Forte the Products, Documentation and all copies. This requirement
applies to copies and storage in all forms, partial and complete, in all types
of media and computer memory, and whether or not modified or merged into other
materials.
7. WARRANTIES, REMEDIES, LIMITATION OF LIABILITY
7.1 Infringement Indemnity.
(a) Forte will defend and indemnify the Reseller alt costs
(including reasonable attorneys fees) arising from a claim that Products
furnished and used within the scope of this Agreement infringe a United States
copyright or United States patent provided that (i) the Reseller notifies Force
in writing within 30 days of the claim, (ii) Forte has sole control of the
defense and all related settlement negotiations, and (iii) the Reseller provides
Forte with the
9
<PAGE>
assistance, information, and authority necessary to perform the above;
reasonable out-of-pocket expenses incurred by the Reseller in providing such
assistance will be reimbursed by Forte.
(b) Forte shall have no liability for any claim of infringement
based on (i) use of a superseded or altered release of Products if such
infringement would have been avoided by the use of a current unaltered release
of the Products that Forte provides to the Reseller, or (ii) the combination,
operation, or use of any Products furnished under this Agreement with programs
or data not furnished by Forte if such infringement would have been avoided by
the use of the Products without such programs or data.
(c) In the event the Products are held or are believed by Forte
to infringe, Forte shall have the option, at its expense, to (i) modify the
Products to be noninfringing, (ii) obtain for the Reseller a license to continue
using the Products, (iii) substitute the Products with other software reasonably
suitable to Reseller, or (iv) terminate the license for the infringing Products
and refund the license fees paid for those Products, prorated over a five-year
term from the Effective Date of the applicable Order Form. This Section 7.1
states Forte's entire liability for infringement.
7.2 Product Warranty. For each Supported License, Forte warrants for a
period of 30 days from the Effective Date that the Products, unless modified by
tae Reseller, will perform the functions described in the Documentation when
operated on the specified platform. Forte does not warrant that the Products
will meet Reseller's or Sublicensee's requirements, that the Products will
operate in the combinations which Reseller or Sublicense may select for use,
that the operation of the Products will be uninterrupted or error-free, or that
all Product errors will be corrected. Forte will undertake to correct any
reported error condition in accordance with its Technical Support policies. If
Forte is unable to make the Products operate as warranted, the Reseller shall be
entitled to recover the applicable license fees paid to Forte. Such recovery
shall be the Reseller's sole and exclusive remedy for such breach of Product
warranty.
As an accommodation to the Reseller, Forte may supply the Reseller
with preproduction releases of Products, labeled "Alpha" or "Beta." These
releases are not suitable for production use. Forte does not warrant in any
manner preproduction releases; these releases are distributed "as is." If
Reseller does not obtain Technical Services support the Products are distributed
"as is."
The Reseller shall not make any warranty on Forte's behalf.
7.3 Media Warranty. Forte warrants the types, diskettes, or other
media delivered to Reseller to be free of defects in materials and workmanship
under normal use for 90 days from the Effective Date. During the 90-day period,
the Reseller may return defective media to Forte and it will be replaced without
charge. Replacement of media is the Reseller's sole and exclusive remedy in the
event of a media defect.
7.4 Services Warranty. Forte warrants that its technical services will
be of a professional quality conforming to generally accepted industry standards
and practices. This warranty shall be valid for 90 days from completion of
service. If Forte is unable to perform the services as warranted, the Reseller
shall be entitled to recover the fees paid to Forte for such
10
<PAGE>
deficient services. Such recovery shall be the Reseller's sole and exclusive
remedy for such breach of services warranty.
7.5 Limitations of Warranties. THE WARRANTIES ABOVE ARE EXCLUSIVE AND
IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.6 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY INDIRECT INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT
LIMITED TO COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES, LOSS OF
PROFITS OR REVENUE, LOSS OF DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD
PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT OR BASED ON A WARRANTY, EVEN IF
THE OTHER PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. EXCEPT WITH RESPECT TO SECTION 7.1, FORTE'S LIABILITY FOR DAMAGES
HEREUNDER SHALL IN NO EVENT EXCEED THE AMOUNT OF FEES PAID BY THE CUSTOMER UNDER
THIS AGREEMENT, AND IF SUCH DAMAGES RESULT FROM THE CUSTOMER'S USE OF THE
PRODUCT, SUCH LIABILITY SHALL BE LIMITED TO LICENSE FEES PAID, PRORATED OVER A
FIVE-YEAR TERM FROM THE EFFECTIVE DATE OF THE RELEVANT LICENSE.
The provisions of this Section 6 allocate the risks under this
Agreement between Forte and the Reseller. Forte's pricing reflects this
allocation of risk and the limitation of liability specified herein.
7.7 Indemnification of Forte. The Reseller agrees to enforce the terms
of its Sublicense agreements required by this Agreement and to inform Forte of
any known breach of such terms. The Reseller will defend and indemnify Forte
against:
(a) All claims and damages to Forte arising from any use by the
Reseller or its Sublicensees of any product not provided by Forte but used in
combination with the Programs if such claim would have been avoided by the
exclusive use of the Programs;
(b) All damages to Forte caused by the Reseller's failure to
include the required contractual terms set forth in Section 2.2B hereof in each
Sublicense agreement; and
(c) All damages to Forte caused by Sublicensees' breach of any of
the applicable provisions required by Section 2.2 hereof.
8. GENERAL TERMS
8.1 Nondisclosure. By virtue of this Agreement, the parties may
have access to information that is confidential to one another ("Confidential
Information"). Confidential Information shall be limited to the Products,
information related thereto and all information clearly marked as confidential.
11
<PAGE>
A party's Confidential Information shall not include information
which (i) is or becomes a part of the public domain through no act or omission
of the other party; or (ii) was in the other party's lawful possession prior to
the disclosure and had not been obtained by the other party either directly or
indirectly from the disclosing party; or (iii) is lawfully disclosed to the
other party by a third party without restriction on disclosure, or (iv) is
independently developed by the other party. Results of benchmark tests run by
the Reseller may not be disclosed unless Forte consents to such disclosure in
writing.
The parties agree, both during the term of this Agreement and for
a period of five (5) years after termination of this Agreement and of all
licenses granted hereunder, to hold each other's Confidential Information in
confidence. The parties agree not to make each other's Confidential Information
available in any form to any third party or to use each other's Confidential
Information for any purpose other than the implementation of this Agreement.
Each party agrees to take all reasonable steps to ensure that Confidential
Information is not disclosed or distributed by its employees or __________ in
violation of the provisions of this Agreement.
8.2 Governing Law and Jurisdiction. This Agreement shall be governed
and construed under the laws of the State of California, as applied to
agreements executed and performed entirely in California by California residents
and in no event shall this Agreement be governed by the United Nations
Convention on Contracts for the International Sale of Goods. In any legal action
relating to this Agreement the Reseller agrees (i) to the exercise of
jurisdiction over it by a state or federal court in San Francisco or Alameda
County, California; and (ii) that if the Reseller brings the action, it shall be
instituted in one of the courts specified in subparagraph (i) above. Forte may
institute legal action in any appropriate jurisdiction.
8.3 Copyrights. The Products are copyrighted by Forte. The Reseller
shall retain all Forte copyright notices on the Products used by the Reseller
under its Development Licenses. The Reseller shall include the following on all
copies of the Products distributed by the Reseller:
(a) A reproduction of Forte's copyright notices; or
(b) A copyright notice indicating that the copyright is vested in
the Reseller containing the following:
(1) A "c" in a circle and the word "copyright";
(2) The Reseller's name;
(3) The date of copyright; and
(4) The words "All Rights Reserved."
Such notices shall be placed on the Documentation, the sign-on screen
for any application package incorporating the Products, and the diskette or tape
labels. Notwithstanding any copyright notice by the Reseller to the contrary,
the copyright to the Product included in any such application package shall
remain in Forte. Other than as specified above, on any
12
<PAGE>
reproduction or translation of any Products, Documentation, or promotional
material, the Reseller agrees to reproduce Forte copyright notices intact.
8.4 Trademarks. "Forte" and any other trademarks and service marks
adopted by Forte to identify the Products and other Forte products and services
belong to Forte; the Reseller will have no rights in such marks except as
expressly set forth herein and a specified in writing from time to time.
Reseller's use of Forte's trademarks shall be under Forte's trademark policies
and procedures in effect from time to time. The Reseller agrees not to use the
trademarks "Forte," or any other mark likely to cause confusion with the
trademark "Forte" as any portion of the Reseller's tradename, trademark for the
Reseller's Application Packages, or trademark for any other products of the
Reseller. The Reseller shall have the right to use the trademark "Forte" and
other Forte trademarks solely to refer to Forte Programs, products and services.
The Reseller agrees with respect to each registered trademarks of
Forte, to include in each advertisement, brochure, or other such use of the
trademark. the trademark symbol "circle R" and the following statements:
_______ is a registered trademark of Forte Software Inc., Oakland,
California.
Unless otherwise notified in writing by Forte, the Reseller agrees,
with respect to every other trademark of Forte, to include in each
advertisement, brochure, or other such use of the trademark, the symbol "TM" and
the following statements:
_______ is a trademark of Forte Software Inc., Oakland, California.
The Reseller shall not market the Forte Programs in any way which
implies that the Forte Programs are the proprietary product of the reseller or
any party other than Forte. Forte shall not have any liability to the Reseller
for any claims made by third parties relating to the Reseller's use of Force's
trademarks.
8.5 Relationship between Parties. In all matters relating to this
Agreement, the Reseller will act as an independent contractor. The relationship
between Forte and the Reseller is that of licenser/licensee. Neither party will
represent that it has any authority to assume or create any obligation, express
or implied, on behalf of the party, nor to represent the other party capacity.
Nothing in this Agreement shall be construed to limit either party's right to
independently develop or distribute software which is functionally similar to
the other party's product, so long as proprietary information of the other party
is not used in such development.
8.6 Notice. All notices, including notices of address change, required
to be sent hereunder shall be in English and in writing and shall be deemed to
have been received ten (10) days after having been properly mailed, postage
prepaid, to the first address listed in the relevant Price List (if the
Reseller) or to the Forte address on the Price List (if to Forte).
To expedite order processing, the Reseller agrees that Forte may treat
documents faxed by the Reseller to Forte as original documents: nevertheless,
either party may require the other to exchange original signed documents.
13
<PAGE>
8.7 Severability. In the event any provision of this Agreement is held
to be invalid or unenforceable, the remaining provisions of this Agreement will
remain in full force and effect.
8.8 Waiver. The waiver by either party of any default or breach of
this Agreement shat not constitute a waiver of any other or subsequent default
or breach.
8.9 Export Administration and U.S. Government Rights. If the Products
are far use outside the United States, the Reseller agrees to comply fully with
all relevant regulations of the United States Department of Commerce and with
the United States Export Administration Act to assure that the Products and
media are not exported in violation of United States law. Products and
Documentation are provided with Restricted Rights. Use, duplication or
disclosure by the U.S. government is subject to restrictions as set forth in
Subparagraph (c)(1)(i) of the Rights in Technical Data and Computer Software
Clause at 252.227-7013.
8.10 Federal Government Sublicenses. If the Reseller grants a
Sublicense to the Unites States Government, the Programs shall be provided with
"Restricted Rights" and the Reseller will place a lend, in addition to
applicable copyright notices, on the documentation, and on the tape or diskette
label, substantially similar to the following:
8.11 Restricted Rights Legend. "Use, duplication or disclosure by the
Government is subject to restrictions as set forth in subparagraph (c)(1)(ii) of
the Department of Defense Regulations Supplement ("DFARS") 252.227-701, Rights
in Technical Data and Computer Software (October 1988) and Federal Acquisition
Regulations ("FAR") 52.227-14, Rights in Data General, including Alternate III
(June 1937), as applicable. Force Software Inc., 1800 Harrison Street, 15th
Floor, Oakland, California 94612."
8.12 Nonassignability and Binding Effect. Any attempted assignment of
the rights or delegation of the obligations under this Agreement shall be void
without the prior written consent of the nonassigning or nondelegating parry. In
the case of any permitted assignment or transfer of or under this Agreement,
this Agreement or the relevant provisions shall be binding upon, and inure to
the benefit of, the successors, executors, heirs, representatives,
administrators and assigns of the parties hereto.
8.13 Force Majeure. Neither party shall be liable to the other for its
failure to perform any of its obligations under this Agreement or any Exhibit,
except far payment obligations, during any period in which such performance is
delayed because rendered impracticable or impossible due to circumstances beyond
its reasonable control, provided that the party experiencing the delay promptly
notifies the other of the delay.
8.14 Remedies. The parties stipulate that the legal remedies of Forte
in the event of any default or threatened default by Reseller in the performance
of or compliance with any of the terms of this Agreement are not and shall not
be adequate, and that such terms may be specifically enforced by a decree for
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms of this Agreement or otherwise. No
remedies in this Agreement are exclusive of any other remedies but shall be
cumulative and shall
14
<PAGE>
include all remedies available hereunder or under any other written agreement or
in law or equity, including rights of offset.
8.15 Attorney's Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the provisions
of this Agreement, the prevailing party in such action shall recover all
reasonable costs and expenses, including attorney's fees, incurred in connection
therewith.
8.16 Inherently Dangerous Applications. The Products are not
specifically developed, or licensed for use in any nuclear, aviation, mass
transit, or medical application or in any other inherently dangerous
applications. The Reseller agrees to notify each Sublicensee of the Reseller of
this limitation. The Reseller hereby agrees, and each Sublicensee shall agree,
that Forte shall not be liable for any claims or damages arising from such use
if the Reseller or its Sublicensees use the Products for such applications. The
Reseller agrees to indemnify and hold Forte harmless from any claims for losses,
costs, damages, or liability arising out of or in connection with the use of the
Products in such applications.
8.17 Entire Agreement. This Agreement constitutes the complete
agreement between the parties and supersedes all previous agreements or
representations, written or oral, with respect to the Products and services
specified herein. This Agreement may not be modified or amended except in a
writing signed by a duly authorized representative of each party.
It is expressly agreed that any term and conditions of the Reseller's
purchase order shall be superseded by the terms and conditions of this Agreement
This Agreement shall also supersede the terms of any unsigned license agreement
included in a package for Forte-furnished microcomputer software.
15
<PAGE>
RESELLER APPLICATION SPECIFIC SUBLICENSE ADDENDUM A
This document (the "Addendum") is between Forte Software Inc. (Forte)
and Export Software International (the "Reseller") shall be governed by the
terms of the Reseller Agreement between the Reseller and Forte effective
____________, 19___ (the "Agreement") and the terms set forth below.
1. SUBLICENSES
1.1 Sublicense Programs and Terms. The Reseller may only Sublicense
Application Specific Programs for which the Reseller has previously acquired a
Supported Development License for the applicable Designated System. The Reseller
shall have the right to market and grant Sublicenses of Application Specific
Programs under the conditions set forth in the Agreement and under the following
restrictions:
(a) Sublicense Application Specific Programs with the Application
Program in the Application Package for use on Designated Systems to
Sublicensees. Each copy of the Application Specific Program distributed shall be
for the Sublicensee's own internal use in the Territory only on the Designated
System(s) limited to a maximum number of Users;
(b) Make and deliver to the Sublicensee a single copy of the
Application Specific Programs in the Application Package for each Sublicense
granted; and
The Reseller shall use all practical means available, both contractual
and technical, to control the restricted use of each Application Specific
Program Sublicense. If a Sublicensee uses the Application Specific Program
beyond the limited functionality described in Section 1.2 hereof, the Reseller
or Distributor shall immediately notify the Sublicensee of such unauthorized use
and if the Sublicensee fails to discontinue such unauthorized use following
notification either terminate the Sublicense or forward to Forte one hundred
percent (100%) of the applicable Full Use standard Product license fees in
effect at the time the payment is made to Forte together with a written request
by the Sublicensee for a Full Use Product license from Forte. Forte must
approve, in writing, the Sublicensee's request before continued use of the
Programs by the Sublicensee shall be deemed authorized.
1.2 Application Specific Licenses. For the purposes of this Addendum,
"Application Specific Licenses" shall mean Licenses which shall be limited for
use solely for the purpose of running the Resellers Application Program as
specified in the Application Package Attachment. The Application Specific
License may also be used to modify or customize the Resellers Application
Program to fit the Sublicensee's own particular operational needs. The
Application Specific License is limited for use only on the specified Reseller
Application Program and may not be used for any other development or deployment
purposes with the Reseller or Sublicensees.
1.3 Value-Added Package. For the purposes of this Addendum,
"Application Program(s)" shall mean the Reseller's value-added application
software, described in the attached Application Package Attachment with which
the Application Specific Programs are coupled. "Application Package(s)" shall
mean the Application Specific Programs coupled with the
<PAGE>
Application Programs. For purposes of the Agreement, the Application Program
shall be regarded as the Reseller's Value-Added Package.
1.4 Trial Sublicenses. The Reseller and its Distributors shall be
entitled to grant, at no charge, up to a maximum combined total of ten (10)
temporary Trial Sublicenses of the Application Package at any one time. Such
Sublicenses shall be far evaluation purposes only and shall be for a period not
to exceed thirty (30) days. The Reseller shall pay Forte Sublicense fees for any
Trial Sublicenses in excess of thirty (30) days. Each such Trial Sublicense
shall be Sublicensed under a Sublicense agreement.
1.5 Distributors. Forte grants the Reseller the right to appoint third
parties (. Distributors") to market and' Sublicense the Application Specific
Programs in the Territory, under the terms of the Agreement and this Addendum.
However, Distributors shall have no right to make copies of the Programs for
Sublicensing and shall obtain all such Programs from the Reseller. Each
Distributor shall execute a written agreement with the Reseller binding the
Distributor to provisions substantially similar to those contained in Sections
2.2, 2.3, 2.4, 5.1, 5.2, 6.1, 6.2, 6.3, 7.2, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7,
8.8, 8.9, 8.10, 8.11, 8.12, 8.13, and 8.15 of the Agreement and to those
contained in Sections 1 (except 1.5), 3, 4, 5, and 6 of this Addendum Each
obligation of the Reseller under such provisions shall also be applicable to
each Distributor. Each Distributor agreement shall also contain any other
provisions necessary for the Reseller to satisfy its commitments under the
Agreement. .
In addition, the Reseller shall keep executed Distributor agreements
and records of the Distributor information required under the Reseller's
Sublicense reports, and shall allow Forte to inspect such information as
specified under the Agreement. The Reseller will defend and indemnify Forte
against all damages to Forte caused by (i) the Distributors' failure to include
the required contractual terms set forth in Sections 2.2B of the Agreement in
each Sublicense agreement, and (ii) the Distributors' breach of any of the
applicable provisions required by in its Distributor agreement.
1.6 Documentation. The Reseller shall be responsible for providing
documentation for Sublicensees. The Reseller shall have the right to incorporate
portions of the Documentation into the Reseller's documentation subject to the
provisions of Section 8.3 of the Agreement
2. SUBLICENSE FEES
2.1 Sublicense Fees and Rate. For each copy of the Programs
Sublicensed by the Reseller, the Reseller agrees to pay Forte a Sublicense fee
equal to fifteen percent (15%) of the Reseller Application Package List Price.
The Sublicense fee shall be calculated effective the date the Application
Package is shipped.
As further specified in Section 6 of this Addendum, Sublicense fees
shall be due and payable with each applicable Sublicense report.
Within thirty (30) days after each anniversary during the Term of this
Addendum, Forte and the Reseller shall renegotiate the Sublicense fee percentage
rate set forth above based on the actual amount of cumulative Sublicense fees
received by Forte hereunder. If the parties
<PAGE>
have not agreed in writing on the Sublicense fee percentage rate for the next
annual period, the Reseller's right to Sublicense Application Specific Programs
shall cease until the parties hereto mutually agree in writing on a new
Sublicense fee rate percentage for Sublicenses of Application Specific Programs.
2.2 Price List for Sublicenses. Notwithstanding any other provision of
the Agreement, the applicable Reseller Price List for determining Sublicense
fees shall be the standard Forte Sublicense Fee rate as a percentage of the
Reseller Application Package List Price in effect at the time the Application
Package is Sublicensed.
Notwithstanding any other provision of this Agreement, if the Reseller
issues a written Sublicense quote and such quote accepted by the applicable
Sublicensee, for a period of ninety (90) days after the date of submission of
the quote to the Sublicensee, the Sublicense fee applicable to the Programs
identified in the quote shall be based on the Reseller Price List in effect on
such date.
2.3 Users. The Sublicense fee for a Program shall be based and priced
on the applicable User Level for the maximum number of Users for such Program,
as specified in the Reseller Price List. The Reseller shall have the right to
Sublicense Programs on any User basis specified in the Reseller Price List in
effect at the time the applicable Program is Sublicensed.
3. TERM
This Addendum shall become effective on the Effective Date of
this Addendum and shall be valid for three (3) years (the "Term") from the
Product Shipment Date, unless terminated as provided in the Agreement. For the
purposes of this Section, the term "Product Shipment Date" shall mean the
earlier of the date on which an Application Package is first shipped by the
Reseller or the first anniversary of the Effective Date of this Addendum. Any
renewal of this Addendum shall be subject to re-negotiation of terms and fees.
Unless the expiration or termination is for default by the Reseller, the
Reseller may continue using the release of the Programs then in the Reseller's
possession on the Designated Systems for which Development Licenses were
granted, solely for the purpose of continuing technical support for Sublicenses
granted prior to termination. Such continued use of the Programs shall be
subject to all the provisions of this Agreement, including, without limitation,
payment of the Technical Support Fees specified herein.
4. TERRITORY
The Reseller shall have the right to market and grant
Sublicenses of Programs in the United States only (the "Territory").
5. TECHNICAL SUPPORT
5.1 Technical Support for Sublicensees
(a) Installation. The Reseller or its Distributors will be
responsible for any assistance needed to install the Application Package at
Sublicensee sites.
<PAGE>
(b) Sublicensing Support. The Reseller is responsible for
providing all technical support, training and consultations to its Sublicensees
and Distributors. In consideration of the payments specified in Section 5.2, the
Reseller shall have the right to use the Forte Technical Support services
acquired for its Supported Development Licenses to provide technical support
services to its Sublicensees as further set forth in the Agreement. The Reseller
shall continuously maintain Forte Technical Support services for the Development
Licenses during the period during which Reseller provides technical support
services to any Sublicensees. Any questions from the Reseller's Sublicensees or
Distributors will be referred by Forte to the Reseller.
5.2 Technical Support Fees. For Technical Support services far
Sublicensees, each September 1 on an accrued basis, the Reseller agrees to pay
Forte annual Technical Support Fees for the cumulative Sublicenses ordered up
and through that years September 1 effective date. The Reseller agrees to pay
Forte annual Technical Support Fees for each Application Specific Program
Sublicensed under this Addendum, a previous Reseller Addendum, or a previous
distribution agreement between the parties hereto where the Sublicensee received
technical support services for such Application Specific Program during the
applicable support period (up and to September 1 on an annual basis).
Annual Technical Support Fees for a Program shall be equal to the
applicable Sublicense Technical Support percentage rate of Reseller cumulative
Sublicense Fees accrued to Forte up and to September 1 annually. Technical
Support Fees payable hereunder for a Application Specific Program are payable to
Forte annually, on September 1 of each year.
6. SUBLICENSE REPORTS
Within thirty (30) days of the last day of each month, the Reseller
shall send Forte a report detailing for the month:
(a) For each Sublicensed Application Package shipped during the prior
month, Sublicensee name, address, make/model and operating system of the
Designated System, date of shipment, Application Specific Programs shipped,
maximum number of licensed Users, whether the Sublicense is a Trial Sublicense,
and total Sublicense fees and Technical Support Fees due to Forte;
(b) For each Application Program licensed to end-users to be used with
previously installed software licensed by Forte in conjunction with the
Application Program, Sublicensee name, address, make/model and operating system
of the cpu, and date of installation; and
(c) The Distributor agreements executed during the prior month,
including names and addresses of the Distributors. The Reseller shall require
its Distributors to report this information to the Reseller on a monthly basis
and will include it in the report for the month in which the Reseller received
the information. The Reseller shall provide Forte with payment of all fees
required under the monthly report with such report in the form of a check made
out in the amount of such fees.
<PAGE>
7. ADDITIONAL LICENSES
During the Term, the Reseller may order production release versions of
Forte off-the-shelf Products available as production release as of the Effective
Date of this Addendum and listed on the Price List in effect as of such date.
The license fee for Development Licenses shall be equal to Forte's standard
Reseller list license fees in effect when an order is placed. The Reseller may
obtain Technical Support services form Forte for such Products under Forte's
applicable Technical Support fees and policies in effect when such services are
ordered.
The Effective Date of this Addendum shall be July 19, 1996.
Executed by Forte Software, Inc. Executed by Reseller:
Signature: Signature:
---------------------------- --------------------------
Name: Name:
------------------------------- --------------------------
Title: Title:
------------------------------- ---------------------------
Forte Software, Inc.
1800 Harrison Street, 15th Floor
Oakland, CA 94065
(510) 869-3400
Forte is a registered trademark of Forte Software, Inc.
<PAGE>
ADDENDUM C to
VALUE-ADDED RESELLER LICENSE AND SERVICES AGREEMENT
BETWEEN Vastera, Inc. (formerly Export Software International)
AND
Forte Software, Inc.
This Addendum C shall amend the value-added Reseller License
and Services Agreement dated July 19, 1996 and Reseller Application Specific
Sublicense. Addendum A thereto (collectively, the "Agreement") between Vastera
Inc. (formerly Export Software International) ("Reseller") and Forte Software,
Inc. ("Forte") as of the Effective Date indicated below. Other than the
amendments listed below, the terms and conditions of the Agreement remain
unchanged and in full force and. effect. In the event of any conflict between
the Agreement and this Addendum C, Addendum C shall govern. Capitalised terms
herein shall have the same meaning as in the Agreement, unless otherwise
indicated.
1. Reseller shall pay Forte a nonrefundable license fee of $750,000 payable
as follows: $250,000 due upon execution of the agreement, $250,000 due on or
before March 1, 1999 and $250,000 tine on or before June 1, 1999. Upon execution
of this Addendum, such payment obligation is noncancellable. In consideration
for such license fee:
A. Forte agrees to extend the term of the Agreement for 3 years from
the Effective Darn below ("Extended Term").
B. Reseller shall have a license for 50 additional Designated
Developers to be used in accordance with the Agreement.
C. The Sublicense fee rate of Section 2.1 will lx reduced as provided
below.
2. Replace the fast paragraph of Section 2.1 with the following:
"For each copy of the Application Package Sublicensed by the Reseller
to a New Customer for use worldwide, the Reseller agrees to pay Forte a
Sublicense fee equal to two percent (2%) of the Reseller's Base System List
Price. The Sublicense fee will be based on the number of licensed users of the
Base System up to a maximum of 8 users. The Sublicense fee shall be calculated
effective the dace the Application Package is delivered to the Sublicensee.
For each copy of the Base System Sublicensed by the Reseller to an
Existing Customer, the Reseller agues to pay Forte a Sublicense fee equal to two
percent (2%) of the net license fees received from such Existing Customer for
such Sublicense."
Definition of Base Product -- Base product will be defined as the
Vastera base product of module for Import Management and for Export Management,
or if the two should ever be combined it will be deed as the Base module price
for the combination. Base shall exclude current add-on's such as, but not
limited to; any (current or future) country modules, technical extensions such
as email, fax or Internet capabilities, languages, 3rd party interfaces,
additional users beyond, the initial 8, or any other capabilities not packaged
and priced as part of the Base module(s). Royalty will be payable should Vastera
develop any new products based on the Forte product.
<PAGE>
Where no legal license has transferred including but not limited to
demonstration copies, outsourcing, or service bureau operation no payment to
Forte shall be due. In the event of a service bureau the company offering the
service must have executed a valid royalty bearing agreement. If they have not,
a royalty which is equal to the than current import, export or combined price
will be assessed and payable to Forte. If Vastera should license software on a
per transaction Basis to an end user Vastera shall pay 2 % of the then current
list price for export, import or the combination of the two.
3. Distributors/Resellers
Vastera resellers and their Distributors shall have the right to
distribute Forte products along with our product under a legally binding license
agreement protecting both Vastera and Forte's proprietary interest and the
reporting by the reseller/distributor to Vastera shall be sufficient reporting
for Vastera to Forte. Royalty will be paid on the net revenue (up to 50%
discount) to Vastera relating to the Base product module(s) as defined above and
up to 8 users.
4. Forte agrees to list Vastera, Inc. an additional assured on their escrow
agreement and provide Vastera documented evidence.
Forte represents that it has deposited with an escrow agent
copies of the source code and reasonable technical documentation for all
Products licensed under the Agreement, pursuant to a Technology Escrow Agreement
with such escrow agent. Upon Reseller's execution of an instrument enrolling
Reseller as a party to the Technology Escrow Agreement, Reseller shall be
entitled to receive a copy of the escrowed source code and, documentation from
the escrow agent in the event Forte files for bankruptcy, ceases business
operations generally or ceases to make available maintenance or support services
for the then-current version of the licensed Product. Forte shall pay all
relevant escrow fees to the escrow agent arid reserves the right to invoice
Reseller for reimbursement of such fees. In the event Reseller receives the
escrowed source code and documentation, Reseller shall have the royalty-free,
nonexclusive, perpetual right to use such source code solely for internal use in
maintaining and supporting the licensed Products, All such source code, as
delivered or modified, shall constitute Confidential Information of Forte for
purposes of the Agreement, and Reseller shall not disclose the source code or
its modifications to others or permit others to copy the source code or
modifications thereof. Forte shall update the deposited material promptly after
each major update to the licensed Product."
The parties have executed this Addendum C as of __________, 1998 (the
"Effective Date").
Executed by Vastera Software Executed by Forte Software, Inc.
Signature: Signature:
-------------------------- -----------------------
Name: Name:
------------------------------ ---------------------------
Title: Title:
------------------------------ ----------------------------
<PAGE>
Exhibit 10.2
LEASE
between
RHI HOLDINGS, INC.,
A Delaware Corporation
as Landlord
- and -
Export Software International, Inc.
as Tenant
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1: DEMISED PREMISES......................................................................................1
1.1 Agreement to Lease..............................................................................1
1.2 Use of Demised Premises.........................................................................2
1.3 Use of Common Areas.............................................................................2
1.4 Uses Reserved Exclusively to Landlord...........................................................3
ARTICLE 2: TERM OF LEASE.........................................................................................3
2.1 Term............................................................................................3
2.2 Early Termination Option........................................................................4
ARTICLE 3: RENT..................................................................................................4
3.1 Minimum Rent....................................................................................4
3.2 Additional Rent.................................................................................5
3.3 Pro-Ration of Minimum Rent for Less Than Full Month.............................................5
3.4 Payment of Rent.................................................................................5
ARTICLE 4: ANNUAL ADJUSTMENT TO MINIMUM RENT.....................................................................6
4.1 Annual Adjustment...............................................................................6
ARTICLE 5: ADJUSTMENTS TO RENT FOR INCREASED OPERATING EXPENSES..................................................6
5.1 Tenant's Pro-Rata Share of Increased Operating Expenses and Real Estate Taxes...................6
5.2 Definition of Operating Expenses................................................................6
5.3 Definition of Real Estate Taxes.................................................................9
5.4 Estimated Payments..............................................................................9
5.5 Annual Settlement..............................................................................10
5.6 Final Proration................................................................................11
ARTICLE 6: SECURITY DEPOSIT.....................................................................................11
6.1 Amount of Deposit..............................................................................11
6.2 Use and Return of Deposit......................................................................11
6.3 Transfer of Deposit............................................................................12
6.4 No Liability of Mortgage.......................................................................12
ARTICLE 7: ASSIGNMENT AND SUBLETTING............................................................................12
7.1 General........................................................................................12
7.2 Submission of Information......................................................................13
7.3 Payments to Landlord...........................................................................13
7.4 Change in Control as a Prohibited Transfer.....................................................13
7.5 Terms of Assignments or Subleases..............................................................13
ARTICLE 8: INITIAL IMPROVEMENTS.................................................................................14
8.1 Initial Improvements...........................................................................14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
8.2 Additional Terms...............................................................................15
8.3 Removal of Alterations on Lease Expiration.....................................................15
8.4 Landlord Contribution to Initial Improvements..................................................15
ARTICLE 9: ALTERATIONS..........................................................................................16
9.1 No Alterations, Improvements or Fixtures without Consent.......................................16
9.2 Removal........................................................................................17
ARTICLE 10: TENANT'S CARE OF THE DEMISED PREMISES, BUILDING RULES AND REGULATIONS, AND LANDLORD ACCESS...........17
10.1 Maintenance and Surrender of Demised Premises..................................................17
10.2 Tenant Equipment...............................................................................18
10.3 Removal of Fixtures and Alterations upon End of Lease..........................................18
10.4 Use of Demised Premises Affecting Insurance Rating.............................................18
10.5 Compliance with Building Rules and Regulations.................................................18
10.6 Miscellaneous Covenants and Agreements.........................................................19
10.7 Landlord Entry for Repairs and Inspection......................................................19
ARTICLE 11: TENANT'S INSURANCE...................................................................................20
11.1 Coverage.......................................................................................20
11.2 Policy Requirements............................................................................20
11.3 Landlord's Right to Maintain Coverage..........................................................20
11.4 Insurance Coverage Does Not Limit Tenant's Liability...........................................21
11.5 Compliance with Insurance Requirements.........................................................21
11.6 Landlord's Insurance...........................................................................21
11.7 Waiver of Subrogation..........................................................................21
ARTICLE 12: UTILITIES, SERVICES AND SERVICE DISCLAIMER...........................................................22
12.1 General Provisions Applicable to Landlord Services; Definition of Business Hours...............22
12.2 Electrical Current Heating and Air Conditioning................................................22
12.3 Other Landlord Services........................................................................23
12.4 Utility Charges in Excess of Basic Service; Meters.............................................23
12.5 Services Disclaimer............................................................................23
ARTICLE 13: CASUALTY AND CONDEMNATION............................................................................24
13.1 Fire and Other Casualty Damage to Demised Premises.............................................24
13.2 Condemnation...................................................................................24
ARTICLE 14: TENANT EVENTS OF DEFAULT AND LANDLORD REMEDIES.......................................................25
14.2 Events of Default Not Affected by Security Deposit or Acceptance of Rent.......................25
14.3 Remedies upon Event of Default.................................................................26
14.4 Liability of Tenant............................................................................26
14.5 Liquidated Damages.............................................................................27
14.6 Attorney's Fees................................................................................27
14.7 No Jury Trial..................................................................................27
14.8 Right to Enjoin, Etc...........................................................................28
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
14.9 INTENTIONALLY DELETED..........................................................................28
14.10 Remedies Cumulative............................................................................28
14.11 Waiver of Tenant Defaults......................................................................28
14.12 Right of Landlord to Cure Tenant Events of Default.............................................28
14.13 Late Payments and Interest.....................................................................28
14.14 Definition of Default Rate.....................................................................29
14.15 Breach by Landlord.............................................................................29
ARTICLE 15: SUBORDINATION, ATTORNMENT AND RELATED PROVISIONS.....................................................29
15.1 Subordination..................................................................................29
15.2 Estoppel Certificates..........................................................................30
15.3 Modification of Lease for Financing Requirements...............................................31
ARTICLE 16: LIMITATION OF LANDLORD'S LIABILITY; TENANT INDEMNITY OBLIGATIONS.....................................31
16.1 No Personal Obligations; Liability Limited to Building.........................................31
16.2 Force Majeure..................................................................................31
16.3 No Liability for Damage to Personal Properly and Person........................................32
16.4 Tenant's Indemnity Obligations.................................................................32
ARTICLE 17: PARKING..............................................................................................33
17.1 Allotted Parking and Designated Parking Areas..................................................33
17.2 Revocation or Reductions of Parking License....................................................33
17.3 No Liability for Damage to Vehicles............................................................33
17.4 Parking License Not Assignable.................................................................33
ARTICLE 18: RENEWAL AND EXTENSION OPTIONS........................................................................34
18.1 Renewal Term...................................................................................34
18.2 Rent During Renewal Term.......................................................................34
18.3 Definition of Market Rent......................................................................34
18.4 Conditions To Renewal..........................................................................34
18.5 Right of First Offer...........................................................................35
18.6 Right of First Refusal.........................................................................35
ARTICLE 19: HOLDING OVER.........................................................................................36
ARTICLE 20: MISCELLANEOUS........................................................................................36
20.1 Brokers........................................................................................36
20.2 Notices........................................................................................37
20.3 Covenants of Landlord..........................................................................38
20.4 Successors and Assigns.........................................................................38
20.5 Time of the Essence............................................................................38
20.6 No Recordation.................................................................................38
20.7 Captions.......................................................................................38
20.8 Landlord Approvals.............................................................................39
20.9 Landlord's Fees................................................................................39
20.10 Entire Agreement...............................................................................39
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
20.11 Applicable Laws................................................................................39
20.12 No Option......................................................................................39
20.13 Partial Invalidity.............................................................................39
20.14 Pronouns.......................................................................................40
ARTICLE 21: ENVIRONMENTAL COMPLIANCE.............................................................................40
ARTICLE 22: INDEX OF DEFINED TERMS...............................................................................40
</TABLE>
* * *
EXHIBITS
Exhibit A.........Demised Premises
Exhibit B.........Rules and Regulations
TENANT DELIVERIES UPON EXECUTION:
1. One month's advance rent (See Article 3)
2. Security Deposit (See Article 6)
3. Insurance Certificates (See Article 11)
TENANT DELIVERIES IN CONNECTION WITH TENANT IMPROVEMENTS:
1. Plans, specifications and cost estimates (See Article 8)
2. Insurance Certificates (See Article 8)
3. Status reports on MWAA approvals (See Section 2.1)
iv
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") dated as of August 20, 1996, by and
between RHI HOLDINGS, INC., a Delaware corporation ("LANDLORD"), and Export
Software International, Inc. a Delaware corporation ("TENANT").
In consideration of the mutual agreement hereinafter set forth, the
parties do hereby agree as follows:
AN INDEX OF DEFINED TERMS IS SET FORTH IN ARTICLE 22 BELOW.
ARTICLE
DEMISED PREMISES
1.1 AGREEMENT TO LEASE.
Landlord does hereby lease to Tenant and Tenant does hereby lease from
Landlord, for the term and upon the conditions hereinafter provided, the
following space (the "DEMISED PREMISES")in the building located at 300 West
Service Road, Washington Dunes International Airport, Chantilly, VA 22021 (the
"Building"):
A) Approximately 12,072 square feet of rentable area on the
second floor of the Building, as shown as shown on the plan attached hereto as
Exhibit A (the "INITIAL SPACE");
B) Approximately 2,802 square feet of rentable area adjacent to
the Initial Space, as shown on the plan attached hereto as Exhibit A (the "FIRST
ADDITIONAL SPACE" ); and
C) Approximately 2,'131 square feet of rentable area adjacent to
the Initial Space, as shown in the plan attached hereto as Exhibit A (the
"SECOND ADDITIONAL SPACE").
D) Total Demised Premises = Approximately 17,005 rentable square
feet. Measurement of the Demised Premises has been made by Landlord's architect,
DBI.
E) Rent payment for the Initial Space shall begin on the Lease
Commencement Date.
F) Rent payment on the First Additional Space shall begin on
January 1, 1997.
G) Rent payment for the Second Additional Space shall begin on
March 1, 1997.
The real property on which the Building is located, together with the
surrounding real property and parking area, Plot C-7-4, are collectively
referred to herein as the "REAL PROPERTY."
The Building and the Real Property are sometimes collectively referred
to herein as the "PROTECT."
<PAGE>
1.2 USE OF DEMISED PREMISES.
Tenant will use and occupy the Demised Premises solely for genera
office purposes and uses incident thereto in accordance with the certificate of
occupancy and applicable zoning regulations, and for no other purpose. Tenant
will not use or occupy the Demised Premises for any unlawful, disorderly, -or
extra hazardous purpose, and will not manufacture any commodity or prepare or
dispense any food or beverage therein, except for Tenant's personal use in the
Demised Premises Tenant will comply with all present and future laws,
regulations and governmental requirements of any governmental or public
authority having jurisdiction aver the Demised Premises applicable to Tenant's
business.
Landlord represents and warrants to Tenant that the Building presently
complies with all applicable federal, state and local laws, ordinances,
regulations, rules and requirements of any governmental authority having
jurisdiction, including the Americans With Disabilities Act of 1990, as amended
(collectedly, "APPLICABLE LAWS").
Tenant, at Tenant's sole expense, shall make, or cause to be made, all
necessary installations, repairs, replacements and alterations to the Demised
Premises that are required to comply with any and all Applicable Laws if: (i)
the failure to so comply relates to the initial leasehold improvements to the
Demised Premises being made by Tenant (and not the condition of the Building or
Demised Premises prior to any construction by Tenant) or any Alterations to the
Demised Premises made by Tenant or on Tenant's behalf; or (ii) such compliance
is required as a result of Tenant's specific use of the Demised Premises.
1.3 USE OF COMMON AREAS.
As used in this Lease, the term "COMMON AREAS" means, without
limitation, the hallways, entryways, stairs, elevators, driveways, walkways,
terraces, docks, loading areas, restrooms, trash facilities, and all other areas
and facilities in the Project that are provided and designated from time to time
by Landlord for the general nonexclusive use and convenience of Tenant with
Landlord and other tenants of the Building and their respective employees,
invitees, licensees, or other visitors. Landlord grants Tenant, its employees,
invitees, licensees, and other visitors a nonexclusive license far the term to
use the Common Areas in common with others entitled to use the Common Areas,
subject to the terms and conditions of this Lease. Without advance written
notice to Tenant, and without any liability to Tenant in any respect, provided
Landlord will take no action permitted under this SECTION 1.3 in such a manner
as to materially impair or adversely affect Tenant's substantial benefit and
enjoyment of the Demised Premises, Landlord will have the right to:
(a) Close off any of the Common Areas to whatever extent
required in the opinion of Landlord and its counsel to prevent a dedication of
any of the Common Areas or the accrual of any rights by any person or the public
to the Common Areas;
(b) Temporarily close any of the Common Areas for
maintenance, alteration, or improvement purposes; and
(c) Change the size, use, shape, or nature of any Common
Areas, including erecting additional buildings on the Common Areas, expanding
the existing Building or other
2.
<PAGE>
buildings to cover a portion of the Common Areas, converting Common Areas to a
portion of the Building or other buildings, or converting any portion of the
building (excluding the Demised Premises) or other buildings to Common Areas.
Upon erection of any additional buildings or change in Common Areas, the portion
of the Project upon which buildings or structures have been erected will no
longer be deemed to be a part of the Common Areas.
1.4 USES RESERVED EXCLUSIVELY TO LANDLORD.
As between Landlord and Tenant, Landlord retains unto itself the sole
and exclusive use of-the roof, the exterior wails and the Common Areas of the
Building.
ARTICLE 2
TERM OF LEASE
2.1 TERM.
The term of the Lease shall be eight (8) years, commencing on the Lease
Commencement Date (as defined below) and ending on the eighth (8th) annual
anniversary thereof ("EXPIRATION DATE"). As used herein, the "LEASE COMMENCEMENT
DATE" shall be the earlier of: (a) November 1, 1996 (subject to extension for
MWAA delays, as provided below); or (b) such date as the Initial Improvements
are completed and Tenant occupies the Demised Premises. The anticipated
completion date for the Initial Improvements is November 1, 1996. Tenant shall
use its reasonable best efforts to complete the Initial Improvements by November
1, 1996 (subject to force majeure and other events not within Tenant's control).
However, in the event Tenant does not complete the Initial Improvements by
November 1, 1996, Landlord shall not be liable or responsible for any claims,
damages or liability by reason of such delay, nor shall the obligations of
Tenant to commence rent payments as of such date be affected in any way.
The November 1, 1996 date under clause (a) above shall be extended on a
day for day basis for delays in obtaining approvals from MWAA, as follows: As
soon as possible, and in any event no later than September 15, 1996, Tenant
shall submit to MWAA all requisite plans, documents, and other materials
required to obtain certificate of occupancy and other requisite permits from
MWAA. The parties expect that MWAA shall issue its approval within four weeks
from the date of submission for approval. Tenant and Tenant's contractors shall
keep Landlord informed of the submission of materials for MWAA approval, and the
status of MWAA response. Tenant and Tenant's contractors shat! update Landlord
on the MWAA approval process not less than once per week. In the event that
Tenant has complied with the provisions herein, and MWAA does not issue its
approval within the anticipated four weeks period, the November 1, 1998 date
shall be extended on a day far day basis for each day that MWAA's approval is
issued beyond four weeks.
Promptly after the Lease Commencement Date is ascertained, Landlord and
Tenant shall execute a certificate confirming the Lease Commencement Date and
the Expiration Date.
If Landlord fails to deliver possession of the Demised Premises to the
Tenant far purposes of commencing the Initial Improvements on or before
September 1, 1996, for any reason other than delays solely caused by Tenant,
Tenant shall be entitled to either: (i) terminate
3.
<PAGE>
this Lease by giving written notice to Landlord and upon delivery of such
notice, this Lease shall terminate, and monies deposited by Tenant with Landlord
shall be promptly returned or refunded to Tenant and neither party shall have
any further rights, duties or obligations hereunder; or (ii) an abatement of
Minimum Rent in an amount equal to $520 times the number of days elapsing
between September 1, 1996 and the date that Landlord actually delivers
possession of the Demised Premises. Unless abated as a result of delays in
delivery of possession as described in the immediately preceding sentence,
Tenant's obligation to pay Minimum Rent shall commence upon the Lease
Commencement Date, except with respect to the First Additional Space and the
Second Additional Space.
2.2 EARLY TERMINATION OPTION.
Provided Tenant is not then in default under the terms f this Lease,
Tenant shall have a one-time option to terminate this Lease effective as of five
years from the Lease Commencement Date (i.e., approximately October 31, 2001,
assuming a Lease Commencement Date of November 1, 1996) (the "EARLY TERMINATION
DATE"), by:
A: Giving written notice t;-Landlord not more than 360 days and
not less than 180 days prior to the Early Termination Date; and
B: Paying to Landlord a cancellation fee of $290,000 cash, as
follows: $100,000 at the time of issuing the early-termination-notice, and the
balance ($190,000) at any time thereafter, but not later than the Early
Termination Date.
ARTICLE 3
RENT
3.1 MINIMUM RENT.
Tenant covenants and agrees to pay to Landlord, "MINIMUM RENT" of:
(a) $16 per sq. ft. for the Initial Space [$16 x 12,072 =
$193,152] commencing on the Lease Commencement Date;
(b) $16 per sq. ft. for the First Additional Space [$16 x
2,802 = $44,832], commencing on January 1, 1997;
(c) $16 per sq. ft. far the Second Additional Space [$18
x 2,131 = $34,098], commencing on March 1, 1997;
(d) Aggregate Minimum Rent from Lease Commencement Date
Though and Including December 31, 1996: $193,152 per year, to be paid in monthly
installments of $16,096, payable in advance on the first day of each calendar
month;
(e) Aggregate Minimum Rent from January 1, 1997 through
and including February 28, 1997: $237,984 per year, to be paid in monthly
installments of $19,832, payable in advance on the first day of each calendar
month;
4.
<PAGE>
(f) Aggregate Minimum Rent from March 1, 1997 through the
term of February 28, 1997: $237,984 per year, to be paid in monthly installments
of $19,832, payable in advance on the first day of each calendar month;
(g) The Minimum Rent is subject to adjustment as provided
in ARTICLE 4.
(h) The first month's rent (($16,096) is due and payable
upon execution of this Lease.
3.2 ADDITIONAL RENT.
Tenant shall also pay, as "ADDITIONAL RENT," all such other sums of
money as shall become due from and payable by Tenant to Landlord under this
Lease. Unless otherwise specified herein, Additional Rent shall be paid by
Tenant with the next installment of Minimum Rent falling due. Tenant's
obligation to pay any Additional Rent due under the terms hereof shall survive
the termination of this Lease.
3.3 PRO-RATION OF MINIMUM RENT FOR LESS THAN FULL MONTH.
If the Lease Commencement Date occurs on a day other than on the first
day of a month, Minimum Rent from the Lease Commencement Date until the first
day of the following month shall be prorated at the rate of one-thirtieth (1130)
of the Minimum Rent for each such day, payable in advance on the Lease
Commencement Date.
3.4 PAYMENT OF RENT.
Tenant will pay all Minimum Rent and Additional Rent (collectively,
"RENT") without demand, deduction, set-off or counterclaim, by check to Landlord
at:
RHI Holdings, Inc.
c/o Charles E. Smith Management, Inc.
235 Crystal Drive
Arlington, VA 22202
- -- or to such other party or to such other address as Landlord may designate
from time to time by written notice to Tenant. If Landlord shall at any time or
times accept any Rent after it has become due and payable, such acceptance shall
not excuse delay upon subsequent occasions, or constitute a waiver of any or all
of Landlord's rights hereunder.
ARTICLE 4
ANNUAL ADJUSTMENT TO MINIMUM RENT
4.1 ANNUAL ADJUSTMENT.
On the twelve month anniversary of the Lease Commencement Date and
every twelve months thereafter ("ADJUSTMENT DATES"), Minimum Rent (then in
effect) shall be increased by 3%.
5.
<PAGE>
ARTICLE 5
ADJUSTMENTS TO RENT FOR INCREASED OPERATING EXPENSES
5.1 TENANT'S PRO-RATA SHARE OF INCREASED OPERATING EXPENSES AND
REAL ESTATE TAXES.
Commencing with the fiscal year beginning July 1, 1997 and continuing
for each fiscal year thereafter throughout the term, including the fiscal year
in which this Lease terminates, Tenant shall pay to Landlord as Additional Rent,
Tenant's pro rata share of the excess, if any, of the Operating Expense
(hereinafter defined) for the Building for such fiscal year over the Expense
Base (hereinafter defined) and (ii) Tenant's pro rata share of the excess, if
any, of the Real Estate Taxes (hereinafter defined) for such fiscal year aver
the Tax Base (hereinafter defined). The "EXPENSE BASE" and the "TAX BASE" shall
be Landlord's Operating Expenses and Real Estate Taxes (respectively) far the
fiscal year ending June 30, 1997.
Landlord and Tenant hereby agree that Tenant's pro rata share
(`Tenant's Share") shall be as follows:
<TABLE>
<S> <C>
Total Footage in Building: 118,349
Demised Premises: 17,005
Tenant's Share 14.37%
</TABLE>
5.2 DEFINITION OF OPERATING EXPENSES.
The term "OPERATING EXPENSES" shall mean all of the costs and expenses
incurred in operating and maintaining the Project, as determined by Landlord,
including by way of illustration, but not limitation: (i) water and sewer
charges, (ii) insurance premiums, (iii) utilities, (iv) fees and commissions
paid to property management company, not to exceed however the greater of 3% of
rents or $50,000, (v) maintenance and repair expenses, including salaries, wages
and other personnel costs of janitors, engineers, superintendents, watchmen and
other Building employees (including the salary of on-site building manager),
(vi) supplies, (vii) costs and upkeep of all parking and Common Areas, (viii)
the costs of any additional services not provided to the Project at the Lease
Commencement Date but thereafter provided by Landlord in the prudent management
of the Project; and (ix) such other expenses with respect to the operation,
maintenance and management of the Project which shall be incurred or paid by or
on behalf of Landlord and which shall be properly chargeable as an ordinary
expense to the operation, maintenance and management of the Project in
accordance with generally accepted accounting principles as applied to the
operation, maintenance or management of a first class office project.
Operating Expenses shall NOT include:
(a) any leasing and brokerage commissions, finder's fees or
similar compensation whether paid to Landlord's managing agent or otherwise;
6.
<PAGE>
(b) any capital expenditures {which is defined to mean (i) repairs
to the following structural elements of the Building: the roof, load bearing
walls, foundation and load bearing floats; (ii) replacement (but not repairs) of
entire (or substantially all) f mechanical or electrical systems benefiting the
Building; and (iii) replacement (h not repairs) of parking lot and paved areas;
(c) any amounts received by Landlord through proceeds of
insurance, to the extent the proceeds are compensation for expenses which were
previously included in t definition of operating costs hereunder.
(d) the cost of any repairs, restorations, replacements or other
work incurred by reason of fire or other insurable casualty {in excess of the
amount of any commercially reasonable deductible under any applicable insurance
policies}, or caused by the exercise of the right of eminent domain;
(e) any advertising and promotional expenditures;
(f) any legal, appraisal or accounting fees incurred in connection
with any disputes involving any tenants of the Building, and all other legal,
appraisal, accounting and other professional fees, other than legal and auditing
fees reasonably incurred in connection with the maintenance and operation of the
Building (exclusive of the leasing, financing or sale of the Building) or
incurred in connection with the preparation of statements required pursuant to
additional rent or lease escalation provisions;
(g) the incremental cost of furnishing services such as overtime
HVAC to any tenant at such tenant's expense; costs incurred in performing work
or furnishing services for individual tenants (including the Tenant) at such
tenant's expense; and casts of performing work or furnishing services for
tenants other than this Tenant at Landlord's expense to the extent that such
work or service is in excess of any work or service Landlord is obligated to
furnish to the Tenant at Landlord's expense;
(h) any item treated as "Real Property Taxes" hereunder;
(i) any principal, interest or other payments on any mortgage,
deed of trust, master lease, ground lease or ether underlying lease; provided,
however, that the maintenance fee (presently, approximately $4,800 a month) that
is charged by the ground lessor for patrolling services, police and fire
services, road maintenance service, etc. provided by MWAA and/or the FAA to the
airport complex is included in the definition of Operating Expenses;
(j) any depreciation or amortization of the Building or any
systems, fixtures, quipment or other personalty contained therein;
(k) any costs allocable to the repair, restoration, replacement or
correction of any . inherent structural defects in the Building;
(l) any expenses of redecorating or renovating space for new
tenants or for existing tenants renewing their leases;
7.
<PAGE>
(m) any amount incurred by Landlord by reason of Landlord's gross
negligence or intentional misconduct;
(n) repairs or replacements required to cure violations of, or
cause compliance with, all Applicable Laws in effect as of the Lease
Commencement Date;
(o) any amount payable by Landlord which constitutes a fine,
interest or penalty;
(p) any cost representing an amount paid for services or materials
to a related person, firm or entity to the extent such amount exceeds the amount
that would be paid for such services or materials at the then-existing market
rates of the same quality and/or timeliness to an unrelated person, firm or
corporation;
(q) the costs of installing, operating and maintaining any
specialty improvement within the Building, including, but not limited to, any
cafeteria, hotel or dining facility; or any athletic, lunch or recreational
facility or club;
(r) the cost of furnishing electricity to demised areas of the
Building at a tenant's expense;
(s) any interest, fines, penalties or other charges incurred as a
result of any late payments by Landlord of any Operating Expenses or Real Estate
Taxes;
(t) any genera( home office overhead expense of Landlord or
Landlord's affiliates;
(u) the costs of acquiring any works of fine art (as distinguished
from decorative items) displayed in the public areas of the Building;
(v) any damages awarded to any tenant of the Building against
Landlord;
(w) salaries and benefits for off-site personnel;
(x) If future laws require any changes to be made -to the Building
(additions, improvements, alterations, etc.), to comply with then applicable
laws, these will not be passed through as Operating Expenses if they are in the
nature of a capital expenditure (far example, adding a new system); but will be
passed through as Operating Expenses if they are in the nature of an operating
expense (for example, adding security guards).
Operating Expenses SHALL include the yearly amortization of capital
costs incurred by Landlord (i) for improvements or structural repairs to the
Project required to comply with any changes in the laws, rules or regulations of
any governmental authority having jurisdiction, or (ii) for purposes of
improving the operating efficiency of the Building or reducing Landlord's
Operating Expenses, which costs shall be amortized over the useful life of such
improvements or repairs as reasonably estimated by Landlord.
8.
<PAGE>
5.3 DEFINITION OF REAL ESTATE TAXES.
The term "REAL ESTATE TAXES" shall include al! taxes and assessments,
general and special, or ordinary or extraordinary, assessed, levied or imposed
upon the Project.
"Real Estate Taxes" shall not include: (a) any gross receipts, capital,
franchise, sales or income tax levied upon Landlord or any of Landlord's
earnings or measured by the income of Landlord from the ownership, management,
leasing or operation of the Building; (b) any item treated as an "Operating
Expense" hereunder; (c) any fines or penalties incurred due to violation by
Landlord or any tenant or other occupant of the Building of any applicable
governmental rule or authority; (d) any interest, fines, penalties or other
charges incurred as a result of any late payments by Landlord of any operating
cost or property taxes; and (e) any assessments or other amounts payable in
installments, to the extent that any such installments would cover any period of
time subsequent to the term of this Lease.
If any taxes are separately assessed against Landlord or the Project
due to improvements, alterations, additions and substitutions undertaken by or
at the specific request of Tenant, Tenant shall be solely responsible for the
payment of such tax.
The net amount of any refund or credit in Real Estate Taxes obtained by
Landlord or any party on Landlord's behalf as a result of any appeal or contest
brought by Landlord or on Landlord's behalf (less any expenses incurred by
Landlord in connection with obtaining such refund or credit and not previously
recovered by Landlord as an Operating Expense) shall be passed through one
hundred percent (100%) to Tenant and ail other tenants, pro-rata in accordance
with their respective proportionate shares of property taxes.
5.4 ESTIMATED PAYMENTS.
During each calendar year or partial calendar year in the term, in
addition to monthly Rent, Tenant will pay to Landlord on the first day of each
month an amount equal to 1/12 of the product of Tenant's Share multiplied by the
"ESTIMATED TAXES AND EXPENSES" (defined below) for such calendar year.
"ESTIMATED TAXES AND EXPENSES" for any calendar year means Landlord's
reasonable estimate of Operating Expenses and Real Estate Taxes for such
calendar year, less the product of the Expense Base and the Tax Base multiplied
by the rentable area of the Building.
During any partial calendar year during the term, Estimated Taxes and
Expenses will be estimated on a full-year basis. After the close of each
calendar year, Landlord will give Tenant written notice of Estimated Taxes and
Expenses for the ensuing calendar year. On or before the first day of each month
during the ensuing calendar year (or each month of the term, if a partial
calendar year), Tenant wilt pay to Landlord 1/12 of the product of Tenant's
Share multiplied by the Estimated Taxes and Expenses for such calendar year;
however, if such written notice is not given on or before January 1, Tenant will
continue to make monthly payments on the basis of the prior year's Estimated
Taxes and Expenses until the month after such written notice is given, at which
time Tenant will commence making monthly payments based upon the revised
Estimated Taxes and Expenses. In the month Tenant first makes a payment based
upon the revised Estimated Taxes and Expenses, Tenant will pay to Landlord for
each month which has elapsed
9.
<PAGE>
since January 1 the difference between the amount payable based upon the revised
Estimated Taxes and Expenses and the amount payable based upon the prior year's
Estimated Taxes and Expenses. If at any time or times it reasonably appears to
Landlord that the actual Operating Expenses and Real Estate Taxes for any
calendar year will vary from the Estimated Taxes and Expenses for such calendar
year, Landlord may, by written notice to Tenant, revise the Estimated Taxes and
Expenses for such calendar year, and subsequent payments by Tenant in such
calendar year will be based upon such revised Estimated Taxes and Expenses.
5.5 ANNUAL SETTLEMENT.
Within 120 days after the end of each calendar year or as soon after
such 120-day period as practicable, Landlord will deliver to Tenant a statement
of amounts payable by Tenant under SECTION 5.1, for such calendar year prepared
and certified by Landlord (the "ANNUAL EXPENSE STATEMENT"). If the Annual
Expense Statement shows an amount owing by Tenant that is less than the
Estimated Taxes and Expense payments previously made by Tenant for such calendar
year, the excess will be held by Landlord and credited against the next payment
of Rent; however, if the term has ended and Tenant was not in default at its
end, Landlord will refund the excess to Tenant within 60 days of the date of the
Annual Expense Statement. If the Annual Expense Statement shows an amount owing
by Tenant that is more than the Estimated Takes and Expense payments previously
made by Tenant for such calendar year, Tenant will pay the deficiency to
Landlord within ten (10) days after the delivery of such statement.
Each Annual Expense Statement provided by Landlord under this SECTION
5.5 shall be conclusive and binding upon Tenant unless within sixty (60) days
after receipt thereof, Tenant shall notify Landlord that it disputes the
correctness of the Annual Expense Statement, specifying the respects in which
the Annual Expense Statement is claimed to be incorrect. Tenant, at its expense,
shall then have the right to audit Landlord's books and records relating to the
Annual Expense Statement. Pending determination of the dispute, Tenant shall pay
within ten (10) days from notice any amounts due from Tenant in accordance with
the Annual Expense Statement, but such payment shall be without prejudice to
Tenant's position.
5.6 FINAL PRORATION.
If this Lease ends on a day other than the last day of a calendar year,
the amount of increase (if any) in the Operating Expenses and Real Estate Taxes
payable by Tenant applicable to the calendar year in which this Lease ends will
be calculated on the basis of the number of days of the term falling within such
calendar year, and Tenant's obligation to pay any increase or Landlord's
obligation to refund any overage will survive the expiration or other
termination of this Lease.
ARTICLE 6
SECURITY DEPOSIT
6.1 AMOUNT OF DEPOSIT.
Tenant, contemporaneously with the execution of this Lease, has
deposited with Landlord the sum of $45,346.66 (the "SECURITY DEPOSIT") (the
equivalent of two month's rent for the entire
10.
<PAGE>
Demised Premises), the receipt of which is hereby acknowledged by Landlord. The
Security Deposit shall be held by Landlord, without liability for interest, as
security for all of the terms, covenants, and conditions of the Lease to be kept
and performed by Tenant during the term hereof. On the first anniversary of the
Lease Commencement Date, provided Tenant delivers to Landlord certified
financial statements and income statements indicating that Tenant has the same
net worth .it had as of the Lease Commencement Date, and that in its most
recently completed fiscal year and most recently completed fiscal quarter it had
a positive net income, Landlord shall return one-half of the Security Deposit,
together with interest thereon at the rate of 3.4(degree)l(degree) per annum.
6.2 USE AND RETURN OF DEPOSIT.
If at any time during the term of this Lease any Rent shall be overdue
and unpaid, or any other sum payable to Landlord by Tenant hereunder shall be
overdue and unpaid, Landlord may (but shall not be required to) appropriate any
portion of the Security Deposit to the payment of any such overdue Rent or other
sum. In the event of the failure of Tenant to keep and perform any of the terms,
covenants and conditions of this Lease, then Landlord at its option may
appropriate and apply the entire Security Deposit, or so much thereof as may be
necessary, to compensate Landlord for all loss or damage sustained or suffered
by Landlord due to such breach on the part of Tenant. Should the entire Security
Deposit, or any portion thereof, be appropriated and applied by Landlord for
payment of overdue Rent or other sums due and payable to Landlord by Tenant
hereunder, then Tenant shall, upon, the written demand of Landlord, forthwith
remit to Landlord a sufficient amount in cash to restore said security to the
original sum deposited, and Tenant's failure to do so within five (5) days after
receipt of such demand shall constitute a breach of this Lease. Should Tenant
comply with ail of said terms, covenants and conditions and promptly pay ail of
the Rent as it becomes due, and all other sums payable to Landlord by Tenant
hereunder, the Security Deposit shall be returned in full to Tenant at the end
of the term of this Lease, or upon the earlier termination of this Lease,
together with interest thereon at the rate of 3.4% per annum.
6.3 TRANSFER OF DEPOSIT.
Landlord may deliver the Security Deposit to the transferee of
Landlord's interest in the Demised Premises, in the event that such interest be
transferred, and upon delivery of notice from such transferee to Tenant
acknowledging receipt thereof Landlord shall be discharged from any further
liability with respect to the Security Deposit.
6.4 NO LIABILITY OF MORTGAGE.
Tenant shall not be entitled to look to the mortgagee, as mortgagee,
mortgagee in possession, or successor in title to the Demised Premises, for
accountability for any Security Deposit required by Landlord hereunder, unless
said sums have actually been received by said mortgagee as security for Tenant's
performance of this Lease.
11.
<PAGE>
ARTICLE 7
ASSIGNMENT AND SUBLETTING
7.1 GENERAL.
(a) Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors, and assigns, covenants that
it will not assign, transfer by operation of law or otherwise, mortgage, or
encumber this Lease, nor sublease, nor permit the Demised Premises or any part
of the Demised Premises to be used or occupied by others, without the prior
written consent of Landlord in each instance, which consent shall not be
unreasonably withheld or unreasonably delayed beyond thirty (30) days from
Tenant's request. Any assignment or sublease in violation of this ARTICLE 7 will
be void. If this Lease is assigned, or if the Demised Premises or any part of
the Demised Premises are subleased or occupied by anyone other than Tenant,
Landlord may, after default by Tenant, collect Rent from the assignee,
subtenant, or occupant, and apply the net amount collected to Rent.
(b) Notwithstanding the provisions of Section 7.1 (a),
Tenant may assign or sublet the Demised Premises, or any portion thereof,
without Landlord's consent to any corporation which controls is controlled by or
is under common control with Tenant or to any corporation (or other recognized
legal entities such as limited liability companies, partnerships, etc.)
resulting from the merger or consolidation with or into Tenant, or to any person
or entity which acquires all the assets of Tenant as a going concern of the
business that is being conducted on the Premises; provided, that Tenant notifies
Landlord of any such assignment or sublease and promptly supplies Landlord with
any documents or information reasonably requested by Landlord regarding such
assignment or sublease. "Control" as used in this Section 7.1(b) shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person or entity.
(c) No assignment, sublease, occupancy, or collection
will be deemed (1) a waiver of the provisions of this SECTION 7.1; (2) the
acceptance of the assignee, subtenant, or occupant as Tenant; or (3) a release
from the further performance by Tenant of its covenants and obligations
contained in this Lease. The consent by Landlord to an assignment or sublease
will not be construed to relieve Tenant from obtaining Landlord's prior written
consent in writing to any further assignment or sublease. No permitted subtenant
may assign or encumber its sublease or further sublease al! or any portion of
its subleased space, or otherwise permit the subleased space or any part of its
subleased space to be used or occupied by others, without Landlord's prior
written consent in each instance.
7.2 SUBMISSION OF INFORMATION.
If Tenant requests Landlord's consent to a specific assignment or
subletting, Tenant will submit in writing to Landlord (a) the name and address
of the proposed assignee or subtenant; (b) the business terms of the proposed
assignment or sublease; (c) reasonably satisfactory information as to the nature
and character of the business of the proposed assignee or subtenant, and as to
the nature of its proposed use of the space; (d) banking, financial, or other
credit information reasonably sufficient to enable Landlord to determine the
financial responsibility and character of the proposed assignee or subtenant;
and (e) the proposed form of assignment or
12.
<PAGE>
sublease for Landlord's approval. Tenant shall provide similar information with
respect to any notification of an assignment or sublease under Section 7.1(b).
7.3 PAYMENTS TO LANDLORD.
If Landlord consents to a proposed assignment or sublease, then
Landlord will have the right to require Tenant to pay to Landlord a sum equal to
the amount by which the rent to be paid by any assignee or sublessee exceeds the
rent then payable under this Lease, after deducting from the amount payable by
any assignee or sublessee all reasonable costs and expenses incurred by Tenant
in obtaining the assignee or sublessee, including advertising and marketing,
legal fees, and casts associated with the preparation of the space for the
assignee or sublessee.
7.4 CHANGE IN CONTROL AS A PROHIBITED TRANSFER.
The transfer of a majority of the issued and outstanding capital stock
of any corporate Tenant or subtenant of this Lease (other than as part of an
initial public offering), or a majority of the total interest in any partnership
Tenant or subtenant, however accomplished, and whether in a single transaction
or in a series of related or unrelated transactions, will be deemed an
assignment of this Lease or of such sublease requiring Landlord's consent in
each instance.
7.5 TERMS OF ASSIGNMENTS OR SUBLEASES.
In the event Landlord consents to any assignment or sublease under
Section 7.1(a), or in the event of a permitted assignment or sublease under
Section 7.1(b), a dully executed copy of the sublease or assignment shat( be
delivered to Landlord within ten (10) days after execution thereof. Any such
sublease shall provide that the subtenant shall comply with all applicable terms
and conditions of this Lease to be performed by the Tenant hereunder. Any such
assignment of this Lease shall contain an assumption by the assignee of all of
the terms and obligations of this Lease to be performed by the Tenant. Tenant
covenants that, notwithstanding any such assignment or transfer, and
notwithstanding the acceptance of Rent by Landlord from an assignee or
transferee or any other party, the Tenant shall remain fully liable for the
payment of Rent due and to become due under this Lease and for the performance
of all of the covenants, agreements, terms, provisions and conditions of this
Lease on the part of Tenant to be performed or observed.
ARTICLE 8
INITIAL IMPROVEMENTS
8.1 INITIAL IMPROVEMENTS.
Tenant accepts the Demised Premises "As Is." Landlord grants to Tenant
the right to alter and remodel the Demised Premises, at Tenant's expense, for
Tenant's intended use in conjunction with the commencement of the Lease
("INITIAL IMPROVEMENTS"); provided, however, that:
LANDLORD APPROVAL: No Initial Improvements shall be made without first
submitting the plans thereof and receiving the sanction of the Landlord.
13.
<PAGE>
PERMITS: No alterations shall be undertaken until Tenant shall have
procured and paid for all necessary permits or authorizations from any federal,
state or local governmental entity, board or agency having jurisdiction. Without
limitation, Tenant shall obtain all necessary approvals from the Ground Lessor
(Metropolitan Washington Airports Authority).
PROFESSIONAL SUPERVISION: All alterations shall be conducted under the
supervision of an architect or engineer selected by Tenant and approved in
writing by Landlord (which approval shall not be unreasonably withheld).
WORK IN ACCORDANCE WITH APPROVED PLANS: All alterations shall be made
in accordance with detailed plans and specifications and cost estimates prepared
by such architects or engineers and approved in writing by Landlord (which
approval shall not be unreasonably withheld).
PROMPT COMPLETION, IN COMPLIANCE WITH ALL LAWS: All alterations shall
be made by Tenant promptly (unavoidable delays excepted and in a good and
workmanlike manner, in compliance with all applicable permits and authorizations
and building codes, zoning laws and all other applicable laws, rules,
ordinances, regulations and similar requirements of any federal, state or local
governmental entity, board or agency having jurisdiction.
CASH PAYMENT/NO LIENS: The cost of all alterations shall be paid in
cash or its equivalent, so that the Demised Premises shall at all times be free
of liens for labor and material supplied or claim to have been supplied to the
Demised Premises.
INDEMNIFICATION AND HOLD HARMLESS: Tenant shall indemnify Landlord and
its agents and employees and save it harmless from and against any and all loss,
claims, actions, damages, liabilities and expense (including reasonable
attorneys fees) in connection with or arising from the alterations, or in
connection with or arising from a breach of the covenants set forth in this
Article 8 regarding alterations.
DELIVERY OF INSURANCE CERTIFICATES: Alterations shall not commence
until Tenant shall have obtained comprehensive general liability and worker's
compensation insurance in an amount of not less than $1,000,000 per person,
$5,000,000 per occurrence, and $5,000,000 for damages or injury to property,
with not more than $2,500 deductible. Prior to commencement of alterations,
Tenant shall have delivered certificates of insurance to Landlord, issued by
insurance companies reasonably acceptable to Landlord, naming Landlord and
Landlord's Lenders as additional insured parties.
8.2 ADDITIONAL TERMS.
The Initial Improvements shall be subject to the additional terms and
conditions of Section 0.1 hereof.
8.3 REMOVAL OF ALTERATIONS ON LEASE EXPIRATION.
At the time of approving the Initial Improvements, Landlord will
indicate whether such Initial Improvements shat( be subject to the removal
conditions. set forth in Section 9.2 hereof. Landlord represents that no Initial
Improvements other than what it reasonably considers to be "above standard"
Initial Improvements shall be subject to removal.
14.
<PAGE>
8.4 LANDLORD CONTRIBUTION TO INITIAL IMPROVEMENTS.
Landlord hereby agrees to pay to Tenant the sum of $144,864 ($12 per
square foot) for the Initial Space, $33,624 ($12 per square foot) for the First
Additional Space, and $25,572 ($12 per square foot) for the Second Additional
Space as Landlord's contribution to the cost of the Initial Improvements (the
"ALLOWANCE"), as follows: (a) not more often than every two weeks, Tenant shall
periodically submit to Landlord a Request for Payment containing an invoice for
the portions of the work completed or installed in the Demised Premises together
with invoices received from contractors and vendors for the work. Within 15 days
of receipt of such Request fogy Payment, Landlord shall pay the amount set forth
in the Request for Payment, provided in the event Landlord disputes any portion
of the Request for Payment, Landlord shall pay, within said time, the undisputed
portion of the Request for Payment and state in writing detailed reasons for
withholding payment on the balance of the Request for Payment.
After completion of the work in each of the three spaces (the Initial
Space, the First Additional Space, and the Second Additional Space) and final
Request For Payment for each of the three spaces submitted by Tenant, any unused
portion of the Allowance for each of the three spaces (but not to exceed $1.50
per square foot) shall be applied as credit on payment against Minimum Rent or
Additional Rent.
In addition to the Allowance, Landlord (at its expense) shall retain
DBI to provide reasonable space planning, architectural and engineering plans
for the work. Such expense shat! not exceed $2,000.
Prior to the Lease Commencement date, neither Tenant nor Tenant's
contractors shaft be charged for, or obligated to pay or reimburse Landlord for
the costs of any utilities or services provided to the Building or Demised
Premises, or for parking.
If any asbestos, lead paint or "hazardous material," "hazardous waste,"
or "hazardous substances" (as those terms are defined under applicable law) are
discovered within the Demised Premises by Tenant or Tenant's contractors, Tenant
shall notify Landlord in writing, and Landlord shall, at Landlord's sole
expense, cause the asbestos, lead paint hazardous material, hazardous waste, or
hazardous substance to be removed in accordance with all Applicable Laws within
thirty (30) days of receipt of Tenant's notice (or such longer period as it may
reasonably take, provided Landlord is diligently pursuing to remedy such
situation). The Lease Commencement Date shall be delayed accordingly for any
period of time attributable to such repairs to be made by Landlord. Landlord
will increase the Allowance to cover any reasonable and documented increased
design or construction costs incurred by Tenant as a result of the presence of
asbestos, lead paint or any hazardous material, hazardous waste or hazardous
substance in the Demised Premises or the Building.
15.
<PAGE>
ARTICLE 9
ALTERATIONS
9.1 NO ALTERATIONS, IMPROVEMENTS OR FIXTURES WITHOUT CONSENT.
Tenant wilt not make or allow to be made any alterations, additions, or
improvements to the Demised Premises, or attach any fixtures or equipment to the
Demised Premises, without first obtaining Landlord's written consent. All
alterations, additions, and improvements consented to by Landlord must be
performed by contractors approved by Landlord and must conform to all
governmental and insurance rules and regulations established from time to time.
If any mechanics' or materialmen's lien is filed against the Demised Premises,
the Building or the Project, for-work claimed to have been done for, or
materials claimed to have been furnished to Tenant, such lien shall be
discharged by Tenant within ten (10) days thereafter, at Tenant's sole cost and
expense, by the payment thereof or by filing any bond required by law. If Tenant
shall fail to discharge any such mechanic's or materialmen's lien, Landlord may,
at its option, discharge the same and collect same as Additional Rent together
with interest on the amount thereof from the date of payment by Landlord anti!
the date of repayment by Tenant at the Default Rate (as defined in SECTION
14.14); it being hereby expressly covenanted and agreed that such discharge by
Landlord shall not be deemed to waive, or release the default of Tenant in not
discharging the same.
Notwithstanding the immediately preceding sentence, Landlord's consent
to any alterations, improvements or additions to the Demises Premises shall not
be required to the extent that: (a) such alterations, improvements or additions
will not involve structural changes to the Building,. and do not involve any
changes to the electrical, HVAC, plumbing, or other Building systems; (b) the
cost of any such alterations, improvements or additions does not exceed $50,000
per year; (c) Landlord is notified in writing in advance of such work (not less
than thirty days prior notice); (d) such work is performed by contractors
approved by Landlord (which approval shall not be unreasonably withheld) and
conforms with governmental and insurance rules and regulations; (e) no mechanics
liens are permitted in connection with such work; (f) upon expiration of the
Lease Term, Landlord may require Tenant to remove such alterations, improvements
or additions at Tenant's sole cost and to restore the Demised Premises to the
condition in which they were before such alterations, improvements or additions
were made, reasonable wear and tear excepted.
9.2 REMOVAL.
Unless Landlord, at its sole discretion, elects otherwise (at the time
of granting consent), all alterations, additions, fixtures, and improvements
that are made in or upon the Demised Premises pursuant to this ARTICLE 9 shall
be removed by Tenant at its sole cost prior to the end of the term of this
Lease, and Tenant will restore. the Demised Premises to the condition in which
they were before such alterations, additions, fixtures, improvements, and
additions were made, reasonable wear and tear excepted. Removal of the Initial
Improvements shall be governed by Section 8.3.
16.
<PAGE>
ARTICLE 10
TENANT'S CARE OF THE DEMISED PREMISES, BUILDING RULES AND
REGULATIONS, AND LANDLORD ACCESS
10.1 MAINTENANCE AND SURRENDER OF DEMISED PREMISES.
Tenant, at its sole cost and expense, shall keep the Demised Premises
(including all improvements, fixtures and al! other property contained in the
Demised Premises) in a neat, safe, and clean condition, and in good order and
repair, and will surrender the Demised Premises at the end of the term in as
good order and condition as they were at the commencement of the term, except
for reasonable wear and tear. Tenant shall not commit or suffer to be committed
any waste upon the Demised Premises or any nuisance or other act or thing which
may disturb the quiet enjoyment or interfere with, inhibit or preclude any
permitted use of any other tenant in the Building or any person outside the
Building.
10.2 TENANT EQUIPMENT.
Maintenance and repair of equipment serving only the Demised Premises,
such as kitchen fixtures, separate air conditioning equipment, or any other type
of special equipment, whether installed by Tenant or by Landlord on behalf of
Tenant, shad be the sole responsibility of Tenant, and Landlord shall have no
obligation in connection therewith.
10.3 REMOVAL OF FIXTURES AND ALTERATIONS UPON END OF LEASE.
On or prior to the end of the term, Tenant shall remove from the
Demised Premises all (i) trade fixtures, (ii) furniture, (iii) equipment and
machinery, and (iv) alterations, additions or improvements (if any) required to
be removed by Tenant in- accordance with Article 9 (collectively, "TENANT REMOVE
ITEMS"). Tenant will fully repair any damage occasioned by the removal of any
Tenant Remove Items. All Tenant Remove Items on the Demised Premises after two
(2) day from the end of the term will be deemed conclusively to have been
abandoned and may be appropriated, sold, stored, destroyed, or otherwise
disposed of by Landlord without written notice to Tenant or any other person and
without obligation to account for them. Tenant will pay Landlord for all
expenses incurred in connection with the removal of such property, including but
net limited to the cost of repairing any damage to the Building or the Demised
Premises caused by the removal of such property. Tenant's obligation to observe
and perform this covenant will survive the expiration or other termination of
this Lease.
10.4 USE OF DEMISED PREMISES AFFECTING INSURANCE RATING.
Tenant will not conduct or permit to be conducted any activity or place
any equipment in or about the Demised Premises, which will, in any way, increase
the rate of insurance premiums on the Building or the Real Property. If any
increase in the rate of insurance is stated by any insurance company or by the
applicable insurance Rating Bureau to be due to any activity or equipment in or
about the Demised Premises, such statement shall be conclusive evidence that the
increase in such rate is due to Tenant's activity or equipment and, as a result
thereof, Tenant shall be liable for such increase and shall reimburse Landlord
therefor, within ten (10) days of receipt of written notice, and said sum shall
be deemed to be Additional Rent.
17.
<PAGE>
10.5 COMPLIANCE WITH BUILDING RULES AND REGULATIONS.
Tenant, its agents and employees shall abide by and observe the rules
and regulations attached hereto and made a part hereof as Exhibit B and such
other rules and regulations as may be promulgated from time to time by Landlord
for the operation and maintenance of the Building, the Real Property and the
Project, provided that the same are not inconsistent with the provisions of this
Lease and Tenant is given not less than thirty (30) days notice thereof. Nothing
contained in this Lease shall be construed to impose upon Landlord any duty or
obligation to enforce such rules and regulations, or the terms, conditions or
covenants contained in any other lease, as against any other tenant, and
Landlord shall not be liable to Tenant far violation of the same by any other
tenant, its employees, agents, or invitees. Notwithstanding the foregoing,
Landlord covenants and agrees to enforce all rules and regulations in a uniform
and nondiscriminatory manner. In the event of any conflicts between the rules
and regulations and the provisions of this Lease, the provisions of this Lease
shall control.
10.6 MISCELLANEOUS COVENANTS AND AGREEMENTS.
Tenant further agrees that:
No sign, advertisement or notice shall be inscribed, painted or affixed
on any part of the outside or inside of the Demised Premises or Building, except
on the directories and doors of offices, and then only in such size, color and
style as the Landlord shall reasonably approve.
Landlord shall have the right to prescribe the weight, and method of
installation and position of safes or other heavy items forming part of the
Tenant Remove Items. Tenant shall not install any Tenant Remove Items that will
place a load upon any floor exceeding the load per square foot area which such
floor was designed to carry.
All damage done to the Building by taking in or removing any Tenant
Remove Items, or due to its being in the Demised Premises, shall be repaired at
the expense of Tenant.
No freight, furniture or other bulky matter of any description shat! be
received into the Building or carried in the elevators, except as approved by
Landlord. All moving of Tenant Remove Items shall be under the direct control
and supervision of the Landlord, who shall, however, not be responsible for any
damage to or charges for moving same, but shall fully cooperate with Tenant in
scheduling same. Provided Tenant furnishes Landlord with at least two week's
prior written notice of Tenant's move to the Demised Premises, Tenant shall have
the exclusive right to use the freight elevator during the weekend that it moves
into the Demised Premises.
10.7 LANDLORD ENTRY FOR REPAIRS AND INSPECTION.
Tenant shall permit Landlord, or its representative(s), to enter the
Demised Premises during Tenant's normal business hours and upon not less than 24
hour notice to Tenant, or at such other times and with such shorter or no notice
as may be required in the event of an emergency, to examine and inspect same,
and to make such alterations and/or repairs as in the judgement of Landlord may
be deemed necessary, or to exhibit the same to prospective tenants, purchasers
or mortgagees. If, in an emergency, it shall become necessary to make promptly
any
18.
<PAGE>
repairs or replacements required to be made by Tenant, then Landlord may, at its
option, proceed forthwith to have such repairs or replacements made and to pay
the cost thereof for Tenant's account. Tenant shall reimburse Landlord for the
cost of such repairs or replacements on demand. There shall be no abatement of
Rent and no liability by reason of any injury to or interference with Tenant's
business arising from the making of any examinations, exhibitions, inspections,
repairs, alterations or improvements in or to any portion of the Demised
Premises or the Project.
ARTICLE 11
TENANT'S INSURANCE
11.1 COVERAGE.
During the term of this Lease, Tenant steal! obtain, pay the premiums
for, and maintain in full force and effect the following types of insurance:
(a) COMPREHENSIVE LIABILITY. A general comprehensive
liability insurance policy including a contractual liability endorsement, naming
Landlord arid any mortgagee or ground lessor of the Building as additional
insured parties, in an amount of not less than $1,000,000 per person, $5,000,000
per occurrence, and $5,000,000 for damages or injury to property, with not more
than $2,500 deductible.
(b) ALL-RISK PROPERTY. All-risk property insurance
written at replacement cost value, covering all of Tenant's personal property in
the Demised Premises (including, without limitation, inventory, trade fixtures,
floor coverings, furniture and other property removable by Tenant under the
provisions of this Lease) and all leasehold improvements installed in the
Demised Premises.
(c) WORKER'S COMPENSATION. If and to the extent required
by law, workers compensation or similar', insurance in form and amounts required
by law including Employer's Liability insurance in the amount of $100,000 for
any one occurrence.
11.2 POLICY REQUIREMENTS.
All insurance policies required to be procured by Tenant under this
Lease: (i) shall be issued by responsible insurance companies licensed to do
business in the jurisdiction in which the Building is located and shall be in
such form and content as approved by Landlord; (ii) shall be written as primary
policy coverage and not contributing with or in excess of any coverage which
Landlord may carry; (iii) shall provide that the policy steal( not be canceled
unless Landlord shall have received thirty (30) day's prior written notice of
cancellation or in the case of non-payment of premium only, ten (10) day's prior
written notice; and (iv) shall waive insurer's rights of subrogation against
Landlord, its agents and employees, including any mortgages or any other
interested party designated by Landlord.
With respect to each and every one of the insurance policies required
to be procured by Tenant under this Lease, on or before the Lease Commencement
Date, and at least thirty (30) days before the expiration of the expiring
policies previously furnished, Tenant shall deliver to
19.
<PAGE>
Landlord certificates for each such policy or renewal thereof, or such other
evidence that may be satisfactory to Landlord and the holder of any first deed
of trust on the Building.
11.3 LANDLORD'S RIGHT TO MAINTAIN COVERAGE.
In the event Tenant shall fait to provide such insurance, or shall fail
to pay the premiums when due, Landlord shat! have the right to cause such
insurance to be issued and to pay the premiums therefor, or any premiums in
default, and to collect same as Additional Rent together with interest on the
amount of such premiums from the date of payment by Landlord until the date of
repayment by Tenant at the Default Rate (as defined in SECTION 14.14).
11.4 INSURANCE COVERAGE DOES NOT LIMIT TENANT'S LIABILITY.
Neither the issuance of any insurance policy required under this Lease
nor the minimum limits specified herein shall be deemed to limit or restrict in
any way Tenant's liability arising under or out of this Lease.
11.5 COMPLIANCE WITH INSURANCE REQUIREMENTS.
Tenant shall comply with al( requirements of Landlord's and Tenant's
insurance carriers and shall not do or permit to be done any act or thing upon
the Demised Premises that wilt invalidate or be in conflict with fire insurance
policies covering the Building or any part thereof, fixtures and property in the
Building or the Demised Premises or any other insurance policies or coverage
referred to in this ARTICLE 11, and shatl comply with all rules, orders,
regulations or requirements of the Board of Fire Underwriters having
jurisdiction, or any other similar body in the case of such fire insurance
policies, and the applicable insurance rating bureau or similar body in the case
of ail other such insurance policies.
11.6 LANDLORD'S INSURANCE.
Landlord shall insure the Building under an "all-risk" insurance
policy, with replacement cost endorsement, in an amount not less than the full
insurable value of the Building and shall carry comprehensive general liability,
rent loss, and worker's compensation insurance in amounts and with deductibles
comparable to the insurance carried by landlords of comparable quality office
buildings located in the vicinity of the Building.
11.7 WAIVER OF SUBROGATION.
Neither Landlord nor Tenant shall be liable to the other for any loss
or damage to property or injury to or death of persons occurring on the Demised
Premises or the Building, or in any manner growing out of or connected with the
Tenant's use and occupation of the Demised Premises or the condition thereof,
whether or not caused by the negligence or other fault of Landlord or Tenant or
of their respective agents, employees, subtenants, licensees, or assignees
(collectively, "NON-SUBROGATED LOSS").
This release shall apply only to the extent that such Non-Subrogated
Loss is covered by insurance required to be carried by the parties under this
Article 11, regardless of whether such insurance is payable to or protects
Landlord or Tenant or both. Nothing in this Section 11.7 shall
20.
<PAGE>
be construed to import any greater liability or indemnification obligation upon
either Landlord or Tenant than would have existed in the absence of this Section
11.7
Landlord further agrees that it will cause its policies of insurance
required to be maintained hereunder to be so written as to include a wavier of
subrogation if such a wavier is obtainable without additional cost. Tenant's
policies steal! contain a waiver of subrogation as provided in Section 11.2.
ARTICLE 12
UTILITIES, SERVICES AND SERVICE DISCLAIMER
12.1 GENERAL PROVISIONS APPLICABLE TO LANDLORD SERVICES; DEFINITION
OF BUSINESS HOURS.
Landlord agrees to furnish such services as may specifically be
required of Landlord by this ARTICLE 12 of the Lease. Landlord shall provide
such services in a manner consistent with services provided by other Class B
office buildings in the Washington Duties International Airport area.
Services specified in this ARTICLE 12 shall be provided during Business
Hours only. As used herein "BUSINESS HOURS" means Monday through Friday, from
7:00 a.m. through 6:00 p.m., and Saturday, 8:00 a.m. through 1.00 p.m.,
exclusive of Federal holidays.
12.2 ELECTRICAL CURRENT HEATING AND AIR CONDITIONING.
(a) LANDLORD'S OBLIGATION. Landlord shat! furnish
reasonably adequate electric current sufficient for (1) standard lighting and
the operation of low-wattage office machines (such as desktop micro-computers,
desktop calculators, typewriters, microwaves, printers, fax machines, copiers
and telephone equipment) during Business Hours; (2) standard heat and air
conditioning reasonably required for the comfortable occupation of the Demised
Premises during Business Hours; and (3) twenty-four (24) hour per day, seven
days per week access and elevator service. Landlord shall not be obligated to
furnish more power to the Demised Premises than allocated thereto under the
Building design.
(b) TENANT'S OBLIGATION. Tenant shall arrange to purchase
and pay for all of Tenant's electric current requirements that exceed the
standard basic requirements set forth in Section 12.2f al above.
(c) AFTER HOURS HEATING AND AIR CONDITIONING. Provided
that Tenant gives Landlord appropriate advance notice, Landlord shat! provide
overtime heating or air conditioning beyond Business Hours. Tenant shall pay
Landlord for such overtime use on the basis of Landlord's actual cost per hour,
which is currently $40 per hour.
(d) ELECTRICAL CAPACITY. Attached hereto as Exhibit C is
an equipment inventory for Tenant, and an estimate prepared by Mona Electric of
the electric consumption assuming ail such inventory is used simultaneously. The
parties hereby agree that consumption
21.
<PAGE>
of electricity by Tenant in an amount set forth in such Exhibit C shall not be
considered consumption that exceeds the standard basic requirements set forth in
Subsection 12.2(a) above.
12.3 OTHER LANDLORD SERVICES.
Landlord shall furnish reasonably adequate water, lavatory supplies for
restrooms in Common Areas, and normal and usual cleaning and trash removal
service. Attached hereto as Exhibit D are the cleaning specifications for the
Building. Landlord covenants and agrees with Tenant to cause the Demised
Premises and Common Areas to be cleaned and maintained in accordance with these
standards at all times during the term of the Lease.
12.4 UTILITY CHARGES IN EXCESS OF BASIC SERVICE; METERS.
Tenant shall pay all charges for electricity, water, and other
utilities used by Tenant on the Demised Premises in excess of the basic service
utilities to be provided by Landlord under this ARTICLE 12. Landlord may install
a separate water or electric meters to measure the amount of water or
electricity consumed upon the Demised Premises. The cost of any such meters and
of installation, maintenance and repair thereof shall be paid for by Tenant.
Tenant shall pay Landlord promptly upon demand therefor by Landlord for all
water and electricity consumed as shown by said meters, and the amounts to be
paid by Tenant for Additional Rent shall be adjusted accordingly (i.e.,
operating expenses would not include utilities, other than utilities for Common
Areas).
12.5 SERVICES DISCLAIMER.
Landlord shall not be liable for damages for failure, interruption or
slow-down of: (i) heat, (ii) hot or cold water, (iii) air conditioning, (iii)
sewer service, (iv) electric current, (v) gas, or (vi) any other service --
caused by reason of: (1) breakdown or interruption of plant, equipment, or
apparatus, (2) shut-down of any services for necessary repairs or alterations,
(3) unavailability of fuel, water or any other substance or utility, (4) war or
civil disturbance, (5) strike or lockout, (6) fire, flood or casualty, (7)
governmental regulations, or (8) any other conditions beyond Landlord's control.
Notwithstanding the foregoing, if any failure to supply services or utilities to
the Demised Premises due to Landlord's fault or for reasons within Landlord's
control shall render the Demised Premises effectively unusable by Tenant for a
period of seventy-two (72) hours, then Minimum Rent shall be abated during such
time in excess of seventy-two (72) hours as Landlord is unable to supply
services or utilities to the Demised Premises due to Landlord's fault of for
reasons within Landlord's control.
Any security measures that Landlord may elect to undertake in and about
the Project are understood to be for the protection and preservation of the
Building and Real Property only and shall not be relied upon by the Tenant far
the protection in either its person or property or that of its guests, invitees
or employees, and no liability shall be imposed on the Landlord, its agents or
employees in connection therewith.
22.
<PAGE>
ARTICLE 13
CASUALTY AND CONDEMNATION
13.1 FIRE AND OTHER CASUALTY DAMAGE TO DEMISED PREMISES.
If the Demised Premises (other than leasehold improvements) shall be
partially damaged by fire or other cause covered by extended coverage insurance,
other than by the fault or neglect of Tenant, Landlord shall as soon as
practicable after such damage occurs (taking into account the time necessary to
effectuate a satisfactory settlement with any insurance company) repair such
damage at Landlord's sole expense, and the Rent shall be reduced in proportion
to the floor area of the Demised Premises which is usable by Tenant until such
repairs are completed; provided, however, that (i) in no event shall Landlord
have any repair obligations in excess of insurance proceeds actually received by
Landlord, and (ii) Tenant's rental obligation shall abate only to the extent of
the proceeds actually received by Landlord under its rental reimbursement
insurance policy. If the Demised Premises are substantially damaged by fire or
other cause to such extent that (in Landlord's reasonable estimation) the damage
cannot be fully repaired within one hundred twenty (120) days from the date of
such damage, Landlord shall notify Tenant in writing ("CASUALTY NOTICE") and:
(a) Landlord shall have the option of electing not to repair the damage and
terminating this Lease effective ten days after such Casualty Notice, and (b)
Tenant shall have the right of terminating the Lease by notifying Landlord in
writing within ten days after receipt of such Casualty Notice. No compensation
or reduction of rent will be allowed or paid by Landlord by reason of
inconvenience, annoyance, or injury to business arising from the necessity of
repairing the Demised Premises or any portion of the Building.
To the extent that Landlord receives insurance proceeds covering
leasehold improvements, Landlord will repair leasehold improvements. Tenant
shall have no right to terminate the Lease in the event of damage to leasehold
improvements not covered by insurance proceeds received by Landlord.
13.2 CONDEMNATION.
If the whole or a substantial part of the Demised Premises shall be
taken or condemned by any governmental authority for any public or quasi-public
use or purpose, then the term of this Lease shall cease and terminate as of the
date when title vests in such governmental authority, and Tenant shall have no
claim against Landlord (or otherwise) for any portion of the amount that may be
awarded as damages as a result of such taking or condemnation or for the value
of any unexpired term of the Lease; provided, however, that Tenant may assert
any claim that it may have against the condemning authority for compensation for
any fixtures owned by Tenant and for any relocation expenses compensable by
statute. The Rent, however, shat! be abated on the date when such title vests in
such governmental authority. !f less than a substantial part of the Demised
Premises is taken or condemned by any governmental authority for any public or
quasi-public use or purpose, the Rent shall be adjusted on a square footage
basis on the date when title vests in such governmental authority and the Lease
shat! otherwise continue in full force and effect. For purposes hereof, a
substantial part of the Demised Premises shall be considered to have been taken
if more than fifty percent (50%) of the Demised Premises are unusable by Tenant.
23.
<PAGE>
ARTICLE 14
TENANT EVENTS OF DEFAULT AND LANDLORD REMEDIES
Each of the following events shat! be a default ("EVENT OF DEFAULT") of
Tenant under this Lease:
(a) MINIMUM RENT EVENT OF DEFAULT: Failure of Tenant to
make any payment of Minimum Rent within ten (10) days written notice that the
same is due.
(b) ADDITIONAL RENT EVENT OF DEFAULT: Failure of Tenant
to make any payment of Additional Rent within ten (10) days written notice that
the same is due.
(c) COVENANT EVENTS OF DEFAULT: Failure of Tenant to
perform or comply with any provisions of this Lease to be performed or complied
with by Tenant, other than provisions for the payment of Minimum Rent or
Additional Rent, where such failure shall continue for a period of thirty (30)
days after written notice thereof by Landlord to Tenant (provided that if such
default is of the type that is not reasonably capable of being cured within
thirty (30) days, then Tenant shall have such longer cure period in which to
cure such default, provided Tenant commences such cure within thirty (30) days
after written notice thereof by Landlord, and thereafter diligently prosecutes
such cure to completion).
(d) LEASE ATTACHMENT: The taking of this Lease or the
Demised Premises, or any part thereof, upon execution or by other process of law
directed against Tenant, or upon or subject to any attachment at the insistence
of any creditor of or claimant against Tenant, which execution or attachment
shall not be discharged or disposed of within thirty (30) days after the levy
thereof.
(e) BANKRUPTCY EVENTS: Tenant or any guarantor of
Tenant's obligations hereunder: (i) admits in writing its inability to pay debts
generally as they become due; (ii) files a petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the Bankruptcy Act
(as now existing or in the future amended), or an answer or other pleading
admitting the material allegations of such a petition or seeking, consenting to
or acquiescing in the relief provided for under such Act; (iii) makes an
assignment of all or a substantial part of its property for the benefit of its
creditors; (iv) seeks or consents to or acquiesces in the appointment of a
receiver or trustee for all or a substantial part of its property or of the
Demised Premises; (v) is adjudicated a bankrupt or insolvent; or (vi) is the
subject of the entry of a court order without its consent, which order shall not
be vacated, set aside or stayed within sixty (60) days from the date of entry,
appointing a receiver or trustee for all or a substantial part of its property
or approving a petition filled against it for the effecting of an arrangement in
bankruptcy or for a reorganization pursuant to the Bankruptcy Act or for any
other judicial modification or alteration of the rights of creditors.
14.2 EVENTS OF DEFAULT NOT AFFECTED BY SECURITY DEPOSIT OR
ACCEPTANCE OF RENT.
The provisions of this ARTICLE 14 shall apply notwithstanding the
payment by Tenant of a Security Deposit. The receipt by Landlord of payments of
Rent, as such, accruing subsequent to the time of an Event of Default shall not
be deemed a waiver by Landlord of its rights and remedies under this ARTICLE 14.
24.
<PAGE>
14.3 REMEDIES UPON EVENT OF DEFAULT.
Upon the occurrence of an Event of Default, Landlord shall have the
right, at its election, then or at any time thereafter either:
(a) TERMINATION OF LEASE: To give Tenant written notice
of Landlord's intent to terminate this Lease on the date of the notice or on any
later date specified in the notice, and on such date Tenant's right to
possession of the Demised Premises shall cease and this Lease shall thereupon be
terminated; or
(b) REENTRY AND POSSESSION: Without demand or notice, to
reenter and take possession of all or -any part of the Demised Premises, and
expel Tenant and those claiming through Tenant, and remove the property of
Tenant and any other person, either by summary proceedings or by action at law
or in equity, without being deemed guilty of trespass and without prejudice to
any remedies for nonpayment or late payment of Rent or breach of covenant. If
Landlord elects to reenter under this subsection, Landlord may terminate this
Lease, or, from time to time, without terminating this Lease, may relet all or
any part of the Demised Premises as agent for Tenant for such term or terms and
at such rental and upon such other terms and conditions as Landlord may deem
advisable, with the right to make alterations and repairs to the Demised
Premises. No such reentry or taking of possession of the Demised Premises by
Landlord shall be construed as an election on Landlord's part to terminate this
Lease unless a written notice of such intention is given to Tenant under SECTION
14.3(A), or unless the termination be decreed by a court of competent
jurisdiction at the request of Landlord.
(c) WAIVER OF NOTICE. Redemption. Repossession and
Restoration of Lease: Tenant, on its own behalf and on behalf of all persons
claiming through Tenant, including all creditors, does hereby waive any and all
rights and privileges, so far as its permitted by law, which Tenant and all such
persons might otherwise have under any present or future law (i) to the service
of any notice of intention to reenter which may otherwise be required to be
given, (ii) to redeem the Demised Premises, (iii) to reenter or repossess the
Demised Premises, or (iv) to restore the operation of this Lease, with respect
to any dispossession of Tenant by judgment or warrant of any court, whether such
dispossession, reentry, expiration or termination be by operation of law or
pursuant to the provisions of this Lease.
14.4 LIABILITY OF TENANT.
If Landlord terminates this Lease pursuant to SECTION 14.3, Tenant
shall remain liable (in addition to accrued liabilities) for:
(A) (i) Minimum Rent, Additional Rent and any other sums provided for in
this Lease until the date this Lease would have expired had such
termination not occurred; (ii) any and all expenses (including
attorneys' fees, disbursements and brokerage fees incurred by Landlord
in reentering and repossessing the Demised Premises, in curing any
Event of Default, in painting, altering, repairing or dividing the
Demised Premises, in protecting and preserving the Demised Premises by
use of watchmen and caretakers, and in reletting the Demised Premises;
and (iii) any and ail expenses which Landlord may incur during the
occupancy of any new tenant;
25.
<PAGE>
LESS:
(B) The net proceeds of any reletting prior to the date this Lease would
have expired if it had not been terminated.
Tenant agrees to pay to Landlord the difference between ITEMS (A) AND
(B) above for each month during the term, at the end of each such month. Any
suit brought by Landlord to enforce collection of such difference for any one
month shall not prejudice Landlord's right to enforce the collection of any
difference for any subsequent month. Tenant's liability shall survive the
institution of summary proceedings and the issuance of any writ of restitution
thereunder.
14.5 LIQUIDATED DAMAGES.
If Landlord terminates this Lease pursuant to this ARTICLE 14, Landlord
shall have the right, at any time, at its option, to require Tenant to pay to
Landlord, on demand, as liquidated and agreed final damages in lieu of Tenant's
liability under SECTION 14.4 the rent and all other charges which would have
been payable from the date of such demand to the date when this Lease would have
expired if it had not been terminated, minus the fair rental value of .the
Demised Premises for the same period, discounted to present value at a discount
rate equal to five percent (5%) per annum. If the Demised Premises shall have
been relet for all or part of the remaining balance of the term by Landlord
after an Event of Default but before determination of such liquidated damages,
the amount of rent reserved upon such reletting shall be deemed the fair rental
value of the Demised Premises for purposes of the foregoing determination of
liquidated damages. Upon payment of such liquidated and agreed final damages,
Tenant shall be released from all further liability under this Lease with
respect to the period after the date of demand.
14.6 ATTORNEY'S FEES.
In the event Tenant defaults in the performance of any of the terms,
covenants, agreements or conditions contained in this Lease and Landlord places
the enforcement of this Lease, or any part thereof, or the collection of any
Rent due, or to became due hereunder, or recovery of the possession of the
Demised Premises in the hands of an attorney, or files suit upon the same,
Tenant agrees to pay Landlord reasonable attorneys' fees.
14.7 NO JURY TRIAL.
Each of Landlord and Tenant waives all right to trial by jury in any
proceeding which may be instituted by Landlord against Tenant (or vice versa)
arising under or by virtue of this Lease.
14.8 RIGHT TO ENJOIN, ETC.
In the event of any breach or threatened breach by Tenant or any
persons) claiming through Tenant of any of the provisions contained in this
Lease, Landlord shall be entitled to enjoin such breach or threatened breach and
shall have the right to invoke any right or remedy
26.
<PAGE>
allowed at law or otherwise as if reentry, summary proceedings or other
prescribed remedies were not provided for in this Lease.
14.9 INTENTIONALLY DELETED
14.10 REMEDIES CUMULATIVE.
All rights and remedies of Landlord under this Lease shall be
cumulative and shall not be exclusive of any other rights and remedies Landlord
may have in law or equity.
14.11 WAIVER OF TENANT DEFAULTS.
In the event Landlord institutes proceedings under the terms of this
Lease, and a compromise or settlement thereof shall be made, the same shall not
constitute a waiver of any covenant contained in the Lease nor of any of
Landlord's rights hereunder. No Waiver by Landlord of any breach of any
covenant, condition or agreement in the Lease shall operate as a waiver of such
covenant, condition or agreement, or of any subsequent breach thereof. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
installments of Rent stipulated in this Lease shall be deemed to be other than
on account of the earliest stipulated Rent, nor shall any endorsement or
statement on any check or letter accompanying a check for payment of Rent be
deemed an accord and satisfaction and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such Rent or to
pursue any other remedy provided in this Lease. No reentry by Landlord, an no
acceptance by Landlord of keys from Tenant, shall be considered an acceptance of
a surrender of the Lease.
14.12 RIGHT OF LANDLORD TO CURE TENANT EVENTS OF DEFAULT.
If Tenant defaults in the making of any payment or in the doing of any
act herein required to be made or done by Tenant, taking into account applicable
cure periods, then after ten (10) days notice from Landlord, Landlord may, but
shall not be required to, make such payments or do such act, and collect the
amount thereof as Additional Rent together with interest on such amount from the
date of payment by Landlord until the date of repayment by Tenant at the Default
Rate (as defined in SECTION 14.14); but the making of such payment or the doing
of such act by Landlord shall not operate to cure such Event of Default or to
estop Landlord from the pursuit of any remedy to which Landlord would otherwise
be entitled.
14.13 LATE PAYMENTS AND INTEREST.
If Tenant fails to pay any installment of Rent on or before the fifth
day of the calendar month when such installment is due and payable, such unpaid
installment shall bear interest at the Default Rate (as defined in SECTION
14.14), thirty (30) days from the date such installment became due end payable
to the date of payment thereof by Tenant. Such interest shall constitute
Additional Rent hereunder due and payable with the next monthly installment of
Rent. In addition, Tenant shall pay to Landlord, as a "late charge" five percent
(5%) of any payment herein required to be made by Tenant which is more than ten
(10) days late to cover the costs of collecting accounts past due.
27.
<PAGE>
14.14 DEFINITION OF DEFAULT RATE.
As used herein, "DEFAULT RATE" means the lower of: (i) the average
prime fending rate as reported by the Waif Street Journal, plus 2%, or (ii) the
maximum rate permitted by law.
14.15 BREACH BY LANDLORD.
Landlord shall not be deemed in breach of this Lease unless Landlord
fails within a reasonable time to perform an obligation required to be performed
by Landlord. For purposes of this Section 14.15, a reasonable time shall in no
event be less than thirty (30) days after receipt by Landlord, and by any
lenders) whose name and address shall have been famished to Tenant in writing
for such purpose, of written notice specifying wherein such obligation of
Landlord has not been performed; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days after such notice
are reasonably required far its performance, then Landlord shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
ARTICLE 15
SUBORDINATION, ATTORNMENT AND RELATED PROVISIONS
15.1 SUBORDINATION.
(a) SUBORDINATION GENERALLY, TENANT'S CERTIFICATE: This
Lease is subject and subordinate to al! ground or underlying leases and to all
mortgages and/or deeds of trust which may now or (subject to Section 15.1(d))
hereafter affect the Project or any part thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. This clause
shall be self-operative and no further instrument of subordination shall be
required by any mortgagee or trustee. In confirmation of such subordination,
Tenant, shall execute promptly any certificate that the Landlord or the party
secured by any deed of trust, or any successor in interest may request.
(b) PROVISIONS APPLICABLE TO MORTGAGE OR DEED OF TRUST
SUBORDINATION: Notwithstanding the foregoing, the party secured by any such deed
of trust shall have the rights to recognize this Lease and, in the event of any
foreclosure sale under such deed of trust, this Lease shall continue in full
force and effect at the option of the party secured by such deed of trust or the
purchaser under any such foreclosure safe. Tenant covenants and agrees that it
will, at the written request of the party secured by any such deed of trust,
execute, acknowledge and deliver any instrument that has for its purpose and
effect the subordination of said deed of trust to the lien of this Lease. The
party secured by such deed of trust and any successor in interest shall not be
bound by any payment in Rent in advance for more than thirty (30) days or by any
amendment or modification of this Lease made subsequent to the date of
recordation of such deed of trust without the consent of the party secured by
such deed of trust or such successor in interest.
(c) PROVISIONS APPLICABLE TO GROUND OR UNDERLYING LEASE
SUBORDINATION: At the option of any landlord under any ground or underlying
lease to which the Lease is now or may hereafter become subject or subordinate,
Tenant agrees that neither the cancellation nor
28.
<PAGE>
termination of such ground or underlying lease shall by operation of law or
otherwise, result in cancellation or termination of this Lease or the
obligations of the Tenant hereunder, and Tenant covenants and agrees to attorn
to such landlord or to any successor to Landlord's interest in such ground or
underlying lease, and in that event, this Lease shall continue as a direct lease
between the Tenant herein and such landlord or its successor. Such landlord or
successor under such ground or underlying lease shall not be bound by any
prepayment on the part of Tenant of any Rent for more than one month in advance,
so that Rent shall be payable under this Lease in accordance with its terms,
from the date of the termination of the ground or underlying lease, as if such
prepayment had not been made. Such landlord or successor under such ground or
underlying lease shall not be bound by this Lease or any amendment or
modification of .this Lease unless, prior to the termination of such ground or
underlying lease, a copy of this Lease or amendment or modification thereof, as
the case may be, shall have been delivered to such landlord or successor.
(d) NON-DISTURBANCE: With respect to all ground or
underlying leases ("ground lessors") and to all mortgages and/or deeds of trust
("lenders") which may hereafter affect the Project, Tenant's subordination of
this Lease shall be subject to written assurance (a "non-disturbance agreement")
in commercially reasonable form, from the lender or ground lessor (as
applicable) that Tenant's possession and this Lease, including any options to
extend the term hereof, will not be disturbed so long as Tenant is not in
default under the Lease and attorns to the record owner of the Demised Premises.
With respect to the ground lessor as of the date hereof (MWAA),
Landlord shall obtain a non-disturbance agreement from such ground lessor on or
prior to the Lease Commencement Date.
15.2 ESTOPPEL CERTIFICATES.
Tenant agrees, at any time and from time to time, upon not less than
five (5) days prior written notice by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing (i) certifying that this Lease has
been unmodified since its execution and is in full force and effect (or if there
have been modifications, that the Lease is in full force and effect, as
modified, and stating the modifications), (ii) stating the dates, if any, to
which the Rent and sums hereunder have been paid by Tenant, (iii) stating
whether or not to the knowledge of Tenant, there are then existing any Landlord
or Tenant defaults under the Lease (and, if so, specifying the same), and (iv)
stating the address to which notices to Tenant should be sent. Any such
statement delivered pursuant hereto shat! provide that such statement may be
relied upon by Landlord or any prospective purchaser or mortgagee of the Project
or any part therein. Tenant's failure to execute and deliver such statement
within the time specified shall be deemed the equivalent of the delivery of a
statement to the effect that Landlord is in full compliance with the terms of
this Lease.
15.3 MODIFICATION OF LEASE FOR FINANCING REQUIREMENTS.
In the event that any person or entity now or hereafter providing
financing to Landlord for the Project requires, as a condition of such
financing, that this Lease be modified, Landlord shall submit such required
modifications to Tenant, and Tenant shall enter into and execute a
29.
<PAGE>
written amendment hereto incorporating such required modifications within
fifteen (15) days after the same has been submitted to Tenant by Landlord,
provided, that, such modifications (a) are reasonable, (b) do not adversely
affect Tenant's use of the Demised Premises as herein permitted, (c) do not
materially affect any. of the provisions of this Lease as determined in Tenant's
reasonable discretion, and (d) do not increase the rentals and other sums
required to be paid by Tenant hereunder. Any changes requested by any person or
entity providing financing for the Project shall be deemed to materially affect
the provisions of this Lease within the meaning of clause (c) of the immediately
preceding sentence and, accordingly, Tenant shall not be obligated to consent to
any changes requested or sought to be imposed pursuant to this Section 15.3 if
any of such changes would: (i) result in a change of the term of this Lease or
any of Tenant's options to extend or renew the term. of this Lease; (ii) result
in a change of the size or location of the Demised Premises; (iii) affect
Tenant's entitlement to non-disturbance under this Lease as a condition of
subordinating its interest hereunder to the interest of the mortgagee or other
=interested party; (iv) affect Tenant's option to terminate this Lease as a
result of any fire or other casualty to the extent Tenant is permitted to do so
under Article 13; (v) materially and adversely affect the operation or conduct
of Tenant's business; or (vi) impose any additional financial responsibility or
obligation on Tenant.
ARTICLE 16
LIMITATION OF LANDLORD'S LIABILITY; TENANT INDEMNITY OBLIGATIONS
16.1 NO PERSONAL OBLIGATIONS; LIABILITY LIMITED TO BUILDING.
The obligations of Landlord under this Lease do not constitute personal
obligations of the directors, officers, or shareholders of Landlord, and Tenant
shall look solely to the real estate that is the subject of this Lease and to no
other assets of the Landlord for satisfaction of any liability in-respect of
this Lease and will not seek recourse against the directors, officers or.
shareholders of Landlord or any of their personal assets for such satisfaction.
16.2 FORCE MAJEURE.
Neither Tenant nor Landlord shall be required to perform any of its
obligations under this Lease (other than the payment of Rent), nor be liable for
loss or damage for failure to do so, nor shall either party be released from any
of its obligations under this Lease, where such failure arises from or through
acts of God, strikes, lockouts, labor difficulties, explosions, sabotage,
accidents, riots, civil commotions, acts of any foreign country, fire and
casualty, energy shortage, or other force majeure causes beyond the reasonable
control of such party, unless such loss or damage results from willful
misconduct or gross negligence by such party.
16.3 NO LIABILITY FOR DAMAGE TO PERSONAL PROPERLY AND PERSON.
All property of Tenant, its agents or invitees, or of any other person,
in or on the Demised Premises or the Project, shall be and remain at the sole
risk of Tenant or such agent, invitee or person. Landlord shall not be liable
for any damage to or theft or loss of such property, whether or not caused by
the act or omission of any person, or by the bursting, leaking or overflowing of
water, sewer, steam or sprinkler pipes, heating or plumbing fixtures, air
conditioning or heating failure, gas, noxious odors or noise, or any other actor
thing. Landlord shall not under any
30.
<PAGE>
circumstances be liable for the interruption or loss of Tenant's business that
may result from any of the acts or causes described above. Landlord shall not be
liable for any personal injury to Tenant, its agents or invitees, or to any
other persons, arising from the use, occupancy or condition of the Demised
Premises, the Building or the Real Property other than liability for personal
injuries resulting directly from the gross negligence or willful misconduct of
Landlord, and then only to the extent that Tenant is not compensated therefor by
insurance.
16.4 TENANT'S INDEMNITY OBLIGATIONS.
Tenant shall indemnify Landlord and its agents and employees and save
it harmless from and against any and all claims, actions, damages, liabilities
and expense (including reasonable attorneys fees) in connection with loss of
life, personal injury or damage to property arising from, resulting from, or
related to (in whole or in part): (i) any occurrence in, upon or at the Demised
Premises, or (ii) the occupancy or use by Tenant (including Tenant's agents,
contractors, employees, servants, permitted subtenants, invitees or licensees)
of the Demised Premises, or (iii) any negligent act or omission of Tenant, its
agents, contractors, employees, servants, permitted subtenants, invitees or
licensees, or (iv) any Event of Default, breach, violation or nonperformance of
this Lease by Tenant (collectively, (i) through (iv), hereinafter referred to as
"TENANT INDEMNITY OBLIGATIONS").
In the event that Landlord or its agents and employees shall, without
fault on its part, be made a party to any litigation commenced by or against
Tenant or relating to any Tenant Indemnity Obligations, then Tenant shall
protect and hold Landlord harmless and shall pay all costs, expenses and
reasonable attorneys' fees incurred or paid in connection with such litigation.
Tenant shall pay, satisfy and discharge any and all judgments, orders and
decrees which may be entered or recovered against Landlord in connection with
the foregoing.
Notwithstanding any provision to the contrary contained in this Article
16, none of the indemnification provisions of Section 16.4 shall apply in any
respect to injuries, damages, liabilities, losses, costs, or expense arising in
whole or in part from Landlord's gross negligence or willful misconduct.
ARTICLE 17
PARKING
17.1 ALLOTTED PARKING AND DESIGNATED PARKING AREAS.
So long as Tenant is not in default under this Lease, Landlord hereby
grants to Tenant a non-exclusive license (the "PARKING LICENSE") to park 51 cars
("ALLOTTED PARKING") (3 parking spaces for every 1,000 sq. ft. of leased space)
(subject to increase in the event the floor area leased by Tenant increases),
for use solely by Tenant and Tenant's employees, guests and invitees in the
spaces which will hereafter be designated by Landlord (the "DESIGNATED PARKING
AREAS"). The use by Tenant, its employees, guests or invitees of more than the
Allotted Parking after thirty (30) days notice by Landlord ("OVER-USE") shall be
deemed an Event of Default under this Lease and Landlord may exercise such
remedies as are provided pursuant to ARTICLE 14 of the Lease. Landlord shall not
be responsible to Tenant for enforcing the Parking
31.
<PAGE>
License or violation of the provisions of this ARTICLE 17 by co-tenants of
the Building, by third parties, or guests or visitors to the Building.
17.2 REVOCATION OR REDUCTIONS OF PARKING LICENSE.
Landlord shall have the right to: (i) revoke the Parking License in the
event of an Over-Use; or (ii) in the event of any occurrence not caused by
Landlord which reduces the number of parking spaces in the Designated Parking
Area, reduce the Allocated Parking (with no adjustment to Rent) to the extent of
Tenant's proportionate share of the number of parking spaces by which the
Designated Parking Area is so reduced.
17.3 NO LIABILITY FOR DAMAGE TO VEHICLES.
Landlord shall not be liable for damage to any vehicle using the
parking facilities pursuant to this Lease, including theft, collision, fire, or
any other damage to such vehicle; Landlord shall not be responsible for articles
left in such vehicles; Landlord shall not be liable for loss of use of any such
vehicles which may be damaged while using the parking facilities. In addition,
Landlord shall not be liable for any injury to any person using the parking
facilities regardless of the cause of such injury; all persons using the parking
facilities shall do so at their own risk. Tenant shall indemnify and hold
Landlord and its agents harmless from all loss, damage, liability, cost or
expense incurred, suffered, or claimed by any person or entity by reason of
injury, loss or damage to any person, property, or business resulting from the
Tenant's negligence or negligent or unlawful use of the parking facilities.
17.4 PARKING LICENSE NOT ASSIGNABLE.
The Parking License may not be assigned by the Tenant without the prior
written consent of Landlord.
32.
<PAGE>
ARTICLE 18
RENEWAL AND EXTENSION OPTIONS
18.1 RENEWAL TERM.
Provided that (i) this Lease is in full force and effect, (ii) Tenant
is in possession of the Demised Premises, and (iii) no Event of Default then
exists under this Lease, Tenant shall have the option to extend the term of this
Lease for an additional period of sixty (60) months (the "RENEWAL TERM"). The
Renewal Term shall commence on the date following the fixed expiration date of
the then current lease term and shall be upon the same terms and conditions as
set forth in this Lease, except as set forth hereinafter.
18.2 RENT DURING RENEWAL TERM.
The Minimum Rent during the Renewal Term shall be the greater of (i)
Market Rent (as defined below), less $1 per sq. ft. per annum, or (ii) Minimum
Rent as set forth in ARTICLE 3 as adjusted periodically pursuant to ARTICLE 4,
less $1 per sq. ft. per annum; provided, in either instance, that Landlord shall
not provide any tenant improvements.
18.3 DEFINITION OF MARKET RENT.
"MARKET RENT" shall mean the fair market rent for the Demised Premises
as of a date 170 days prior to the expiration of then current lease term (the
"DETERMINATION DATE"), for the Demised Premises based upon the rents generally
in effect for comparable office space in the area in which the Building is
located; PROVIDED, HOWEVER, that Market Rent shall not exceed 115% of the
Minimum Rent as set forth in Article 3 as adjusted periodically pursuant to
Article 4. Market Rent shall be determined by Landlord in its sole discretion;
in the event Tenant disagrees with Landlord's determination, this renewal option
shall e null and void.
18.4 CONDITIONS TO RENEWAL.
Tenant's option to renew, as herein provided, shall be conditioned upon
and subject to each of the following:
(a) NOTICE: Tenant shall notify Landlord in writing of
its exercise of its option to renew at least nine (9) months prior to the
expiration of the then current lease term;
(b) NON-ASSIGNMENT: Tenant's option to renew is not
assignable and may be exercised only by the Tenant;
(c) AS IS CONDITION OF PREMISES: Landlord shall have no
obligation to do any work or perform any services with respect to the Demised
Premises which the Tenant shall continue to occupy in its then "AS !S" condition
during the Renewal Term; and
(d) NO FURTHER RENEWAL RIGHTS: Upon expiration of the
Renewal Term, Tenant shat' have no further right to
extend the term of this Lease.
33.
<PAGE>
18.5 RIGHT OF FIRST OFFER.
If after the Lease Commencement Date any portion on the east side of
the first floor of the Building, other than any portion thereof to be occupied
by Lessor or its affiliates, shall be or become vacant and available for
occupancy (such vacant portion hereinafter referred to as the "RIGHT OF FIRST
OFFER SPACE"), and if this Lease is then in full force and effect, Tenant shall
have a single option to lease the Right of First Offer Space from Landlord for
Tenant's use as offices in connection with Tenant's business, subject to the
following terms and conditions:
(i) Within five (5) business days after Landlord notifies Tenant
that the Right of First Offer Space is vacant or is to become vacant, Tenant
shall notify Landlord whether or not Tenant desires to lease the Right of First
Offer Space;
(ii) After such notice from Tenant, Landlord and Tenant shall
endeavor in goad faith to enter into an agreement for the leasing of the Right
of First Offer Space to Tenant, specifying the rent to be paid by Tenant for
such Right of First Offer Space;
(iii) if Landlord and Tenant fail to enter into an agreement for the
leasing of the Right of First Offer Space to Tenant within ten (10) days after
Landlord submits to Tenant a proposed agreement for such purpose, Landlord shall
thereafter be free from all restrictions or conditions imposed by this Section
18.5 with respect to the Right of First Offer Space and Landlord shall be free
to tease the Right of First Offer Space to any other person, firm or
corporation;
(iv) Landlord shall not be required to lease the Right of First
Offer Space to Tenant other than for a term to expire on the expiration or
sooner termination of this Lease;
(v) Tenant shall accept such Right of First Offer Space in its
then condition and state of repair unless Landlord, at Landlord's option, shall
otherwise agree.
18.6 RIGHT OF FIRST REFUSAL.
If after the Lease Commencement Date Lessor receives an offer to lease
all or any portion of the second floor of the Building (such space hereinafter
referred to as the "RIGHT OF FIRST REFUSAL SPACE"), and if this Lease is then in
full force and effect, Lessor shall notify Tenant (the "RIGHT OF FIRST REFUSAL
NOTICE") of the prospective lease and the terms and conditions thereof,
including the space in question (the "SUBJECT SPACE"), the offered terms of
minimum rent, tenant improvements allowance, lease commencement date and lease
termination date, annual escalation, and other material terms. Within five (5)
business days after Landlord gives the Right of First Refusal Notice to Tenant,
Tenant shall notify Landlord whether or not Tenant desires to accept the Subject
Space on the terms and conditions set forth in the Right of First Refusal
Notice. If Tenant accepts the. Subject Space within such five business day
period, on the terms and conditions set forth in the Right of First Refusal
Notice, the parties shall execute an agreement within ten days. If Tenant does
not accept such space within five (5) business days. after Landlord issues a
Right of First Refusal Notice, Landlord shall thereafter be free from ail
restrictions or conditions imposed by this Section 18.6 with respect to the
Subject Space
34.
<PAGE>
identified in the Right of First Refusal Notice, and Landlord shall be free to
lease such space to any other person, firm or corporation.
Notwithstanding the foregoing, the rights of first refusal set forth in
this Section 18.6: (i) shall be subject and subordinate to the right of first
offer and right of first refusal set forth in MWAA's present lease for a portion
of the second floor; and (ii) shall not be applicable to any offer to lease or
occupy the Right of First Refusal Space by Landlord or Landlord's affiliates, or
by MWAA.
ARTICLE 19
HOLDING OVER
Tenant will have no right to remain in possession of all or any part of
the Demised Premises after the expiration of the term of this Lease. 1f Tenant
remains in possession of all or any part of the Demised Premises after the
expiration of the term, with the express or implied consent of Landlord: (a)
such tenancy will be deemed to be a periodic tenancy from month-to-month only;
(b) such tenancy will not constitute a renewal or extension of this Lease for
any further term; and (c) such tenancy may be terminated by Landlord upon the
earlier of 30 days' prior written notice or the earliest date permitted by law.
In such event, Minimum Rent will be increased to an amount equal to 150% of the
Minimum Rent payable during the last month of the term, and any other sums due
under this Lease will be payable in the amount and at the times specified in
this Lease. Such month-to-month tenancy will be subject to every other term,
condition, and covenant contained in this Lease.
ARTICLE 20
MISCELLANEOUS
20.1 BROKERS.
A. Tenant represents and warrants that Tenant has dealt only with
CB Commercial and Trammel Crow as broker in connection with this Lease on behalf
of Tenant, and Charles E. Smith Cos. on behalf of Landlord, and that insofar as
Tenant knows, no other broker participated in or negotiated this Lease or is
entitled to any commission in connection therewith and Tenant agrees to defend,
indemnify and hold Landlord harmless from any claims by any broker alleging to
have acted on behalf of Tenant and for any claims, liability, damages and
expenses (including reasonable attorneys' fees) suffered or incurred by Landlord
as a result of a breach of Tenant's representations, warranties and covenants
contained in this Section 20.1. The execution and delivery of this Lease by
Landlord shall be conclusive evidence that Landlord has relied upon the
foregoing representation and warranty in making this Lease.
B. Landlord represents and warrants to Tenant that Landlord has
dealt only with The Charles E. Smith Companies on behalf of Landlord and CB
Commercial on behalf of Tenant in connection with the Lease. Landlord shall be
responsible for, and covenants and agrees with Tenant, to pay any commissions to
such brokers as are due pursuant to the listing agreement with The Charles E.
Smith Companies,
35.
<PAGE>
and agrees to defend, indemnify and hold Tenant harmless from any claims,
liability, damages and expenses (including reasonable attorneys' fees) suffered
or incurred by Tenant as a result of a breach of Landlord's representations,
warranties and covenants contained in this Section 20.1.
C, Tenant has informed Landlord that it has used both CB Commercial and
Trammel Crow in connection with this Lease. Trammel Crow joins in the execution
of this Lease for the purpose of acknowledging that Landlord will not be
required to make any payment to either Trammel Crow nor CB Commercial until CB
Commercial and Trammel Crow deliver a joint letter of understating to Landlord
regarding the sharing of placement agent fees between such brokers, and that in
no event will Landlord pay more than one fee (or split fee aggregating to nor
more than if Landlord had paid one fee) for placement agent. Trammel Crow
further agrees that in the event CB Commercial does not deliver such a letter to
Landlord within sixty (60) days from the date hereof, Landlord shall pay any
applicable placement agent fee to CB Commercial and Trammel Crow shall
thereafter look solely to CB Commercial for any fee in connection with this
Lease.
20.2 NOTICES.
All notices or other communications hereunder shall be in writing and
shall be deemed duly given if delivered in person or sent by certified or
registered mail, return receipt requested, first class, postage prepaid, as
follows:
(a) If to Landlord:
RHI Holdings, Inc.
Washington Dulles International Airport
300 West Service Road,
P.O. Box 10803,
Chantilly, VA 22021
or to such other address as Landlord may designate from time to time by notice
to Tenant given pursuant to the provisions of this Section.
(b) If to Tenant:
PRIOR TO THE LEASE COMMENCEMENT DATE: Export Software International,
Reston International Center, 1 1800 Sunrise Valley Drive, Suite 820, Reston,
Virginia 22091, Attention: Mr. P.R. Rishi. With a copy to: Edwin M. Martin, Jr.,
Esquire, Piper & Marbury, L.L.P., 1200 Nineteenth Street, N.W., Washington, D.C.
20036.
AFTER THE LEASE COMMENCEMENT DATE: At the Demised Premises, or to such
other address as Tenant may designate from time to time by notice to Landlord
given pursuant to the provisions of this Section. (With a courtesy copy to:
Edwin M. Martin, Jr., Esquire, Piper & Marbury, L.L.P., 1200 Nineteenth Street,
N.W., Washington, D.C. 20036; provided that failure to deliver such courtesy
copy shall not invalidate the notice issued to Tenant.)
36.
<PAGE>
20.3 COVENANTS OF LANDLORD.
Landlord covenants that it has the right to make this Lease, and that
if Tenant shall pay the rental and perform all of Tenant's obligations under
this Lease, Tenant shall, during the term hereof, freely, peaceably and quietly
occupy and enjoy the full possession of the Demised Premises without molestation
or hindrance by Landlord or any party claiming through or under Landlord.
Landlord represents and warrants to Tenant as follows: (a) Landlord
owns the Project, subject to the operation and effect of a ground lease (the
"Ground Lease") with the Metropolitan Washington Airports Authority (the "Ground
Lessor"); (b) Landlord has the full power and authority to enter into this Lease
and to perform all of its obligations hereunder without the need to obtain any
consent or approvals of any other party or parties other than the Ground Lessor;
(c) upon due execution and delivery of this Lease by Landlord, this Lease shall
constitute the legal, valid and binding obligation of Landlord, fully
enforceable against Landlord in accordance with its terms; (d) the execution and
delivery of this Lease by Landlord and the performance by Landlord in accordance
with its terms will not conflict with, cause a default under, or otherwise
violate, the terms of the Ground Lease or any bond, note, security instrument,
indenture, contract or agreement.
20.4 SUCCESSORS AND ASSIGNS.
The terms, covenants and conditions hereof shall be binding upon and
inure to the successors in interest and assigns of the parties hereto. Landlord
may freely and fully assign its interest hereunder. The term "LANDLORD" as used
throughout this Lease shall mean solely the owner of Landlord's interest in the
Building, whomever that may be at the relevant time, so that in the event of any
sale or transfer of Landlord's interest in the Building any prior Landlord shall
be freed and relieved of all covenants and obligations of Landlord hereunder,
except those that relate to any duties or obligations accruing prior to the
effective date of such transfer.
20.5 TIME OF THE ESSENCE.
Time is of the essence with respect to Tenant's monetary obligations in
this Lease.
20.6 NO RECORDATION.
Tenant's recordation of this Lease or any memorandum or short form
Lease will be void and a default hereunder.
20.7 CAPTIONS.
The captions of the various articles and sections of this Lease are for
convenience only and do not define, limit, describe, or construe the contents of
such articles or sections.
20.8 LANDLORD APPROVALS.
Whenever in this Lease action or approval on the part of the Landlord
is required or optional, it is understood that such action or approval may
require that such action be taken or approval given on terms acceptable to
Landlord's mortgagee and ground lessor.
37.
<PAGE>
20.9 LANDLORD'S FEES.
Whenever Tenant requests Landlord to take any action or give any
consent required or permitted under this Lease, Tenant will reimburse Landlord
for all of Landlord's reasonable costs incurred in reviewing the proposed action
or consent, including without limitation reasonable attorneys', engineers' or
architects' fees (such costs not to exceed $1,000 in the aggregate, such amount
to be increased annually during the term hereof by 5%), within 10 days after
Landlord's delivery to Tenant of a statement of such costs. Tenant will be
obligated to make such reimbursement without regard to whether Landlord consents
to any such proposed action.
20.10 ENTIRE AGREEMENT.
This Lease, together with the Exhibits and any Addenda attached hereto,
contain and embody the entire agreement of the parties hereto, and no
representations, inducements, or agreements, oral or otherwise, between the
parties not contained in this Lease and Exhibits and Addenda, shall be of any
force or effect. This Lease may not be modified, changed or terminated in whole
or in part in any manner other than by an agreement in writing duly signed by
both parties hereto.
20.11 APPLICABLE LAWS.
It is the agreement of the parties that this Lease is to be construed
in accordance with the laws of the Commonwealth of Virginia.
20.12 NO OPTION.
The submission of this Lease for examination by Tenant does not
constitute a reservation of or option for the Demised Premises, and this Lease
shall become effective as a Lease only upon execution and delivery thereof by
Landlord and Tenant.
20.13 PARTIAL INVALIDITY.
If any provision of this Lease or the application thereof to any person
or circumstance shall to any extent be held void, unenforceable or invalid, then
the remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is held void, unenforceable or
invalid shall not be effected thereby, and each provision of this Lease shall be
valid and enforced to the fullest extent permitted by law.
38.
<PAGE>
20.14 PRONOUNS.
Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places in which the context may require such substitution or
substitutions.
ARTICLE 21
ENVIRONMENTAL COMPLIANCE
Tenant shall not store, treat, dispose, handle or otherwise use any
hazardous or toxic substances, wastes, or materials, or other pollutants or
contaminants upon the Demised Premises without the prior written consent of
Landlord; provided, however that Tenant shall be allowed to store and use such
amounts of cleaning fluids and lubricants as are reasonably necessary to conduct
its business activities upon the Demised Premises subject to the condition that
all such cleaning fluids and lubricants, shall be stored, used, disposed of
and/or removed from the Demised Premises in compliance with manufacturer's
directions and all applicable governmental laws and regulations. Tenant shall at
all times remain fully responsible and liable for compliance with all federal,
state and local statues, ordinances, regulations and other requirements relating
to human health or the environment which are applicable to Tenant's use of the
Demised Premises, including, but not limited to, those respecting the storage,
treatment, disposal, handling, and release of hazardous or toxic substances,
wastes, or materials, or other pollutants or contaminants. Tenant agrees to
indemnify and to hold Landlord harmless from any and all claims, causes of
action, damages, penalties, and costs (including attorneys' fees, consultant
fees, and related expenses) which may be asserted against or incurred by
Landlord resulting from or related to: (i) Tenant's breach, violation or default
of the terms, conditions and covenants of this ARTICLE 21; (ii) the spill,
disposal or other release or threatened release of any hazardous or toxic
substance, waste or material, or any other pollutant or contaminant, on the
Demised Premises or the Project caused by Tenant, its employees; agents or
contractors; or (iii) any violation or alleged violation of any environmental
statute, ordinance, regulation or other requirement caused by Tenant, its
employees, agents or contractors. Tenant's obligation to indemnify and hold
Landlord harmless pursuant to this Article 21 shall survive the expiration or
termination of this Lease.
ARTICLE 22
INDEX OF DEFINED TERMS
The following terms have the meaning ascribed to them in the Sections
noted below:
The following terms have the meaning ascribed to them in the Sections
noted below:
<TABLE>
<CAPTION>
TERM SECTION WHERE DEFINED
<S> <C>
Additional Rent..................................................Section 3.2
Adjustment Dates.................................................Section 4.1
Allotted Parking................................................Section 17.1
39.
<PAGE>
Allowance........................................................Section 8.4
Annual Expense Statement.........................................Section 5.5
Applicable Laws..................................................Section 1.2
Building.........................................................Section 1.1
Casualty Notice.................................................Section 13.1
Common Areas.....................................................Section 1.3
Default Rate...................................................Section 14.14
Demised Premises................................................Section 1 .1
Designated Parking Areas........................................Section 17.1
Determination Date..............................................Section 18.3
Estimated Taxes and Expenses.....................................Section 5.4
Event of Default................................................Section 14.1
Expense Base.....................................................Section 5.1
First Additional Space...........................................Section 1.1
Initial Improvements.............................................Section 8.1
Initial Space....................................................Section 1.1
Landlord..............................................Preamble; Section 20.4
Lease...............................................................Preamble
Lease Commencement Date............................................Article 2
Minimum Rent.....................................................Section 3.1
Non-Subrogated Loss.............................................Section 11.7
Operating Expenses...............................................Section 5.2
Over-Use........................................................Section 17.1
Parking License.................................................Section 17.1
Project..........................................................Section 1.1
Real Estate Taxes................................................Section 5.3
Real Property....................................................Section 1.1
Rent.............................................................Section 3.4
Right of First Offer Space......................................Section 18.5
Right of First Refusal Notice...................................Section 18.6
Right of First Refusal Space....................................Section 18.6
Second Additional Space..........................................Section 1.1
Security Deposit.................................................Section 6.1
Subject Space...................................................Section 18.6
Tax Base.........................................................Section 5.1
Tenant..............................................................Preamble
Tenant Indemnity Obligations....................................Section 16.4
Tenant Remove Items.............................................Section 10.3
Tenant's Share...................................................Section 5.1
Termination Date...................................................Article 2
</TABLE>
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
[NEXT PAGE IS THE SIGNATURE PAGE]
40.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under
seal as of the day and year first hereinbefore written.
LANDLORD:
RHI HOLDINGS, INC.
Attest: By:________________________________
________________________________
Title:_____________________________
TENANT:____________________________
EXPORT SOFTWARE INTERNATIONAL, INC.
Attest: By:________________________________
________________________________
Title:_____________________________
Trammel Crow joins in the execution of this Lease solely for the
purposes set forth in Section 20.1(C):
Trammel Crow Real Estate Services. Inc.
By:_____________________________
41.
<PAGE>
Exhibit 10.2
LEASE
between
RHI HOLDINGS, INC.,
A Delaware Corporation
as Landlord
- and -
Vastera Corporation
as Tenant
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1: DEMISED PREMISES ................................................... 1
1.1 Agreement to Lease ................................................. 1
1.2 Use of Demised Premises ............................................ 1
1.3 Use of Common Areas ................................................ 2
1.4 Uses Reserved Exclusively to Landlord .............................. 2
ARTICLE 2: TERM OF LEASE ...................................................... 3
2.1 Term ............................................................... 3
2.2 Earl Termination Option ............................................ 3
ARTICLE 3: RENT ................................................................ 3
3.1 Minimum Rent ........................................................ 3
3.2 Additional Rent ..................................................... 3
3.3 Pro-Ration of Minimum Rent for Less than Full Month ................. 3
3.4 Payment of Rent ..................................................... 4
ARTICLE 4: ANNUAL ADJUSTMENT TO MINIMUM RENT .................................. 4
4.1 Annual Adjustment .................................................. 4
ARTICLE 5: ADJUSTMENTS TO RENT FOR INCREASED OPERATING
EXPENSES ........................................................... 4
5.1 Tenant's Pro-Rata Share of Increased Operating Expenses and
Real Estate Taxes .................................................. 4
5.2 Definition of Operating Expenses ................................... 5
5.3 Definition of Real Estate Taxes .................................... 7
5.4 Estimated Payments ................................................. 8
5.5 Annual Settlement .................................................. 9
5.6 Final Proration .................................................... 9
ARTICLE 6: SECURITY DEPOSIT ................................................... 9
6.1 Amount of Deposit .................................................. 9
6.2 Use and Return of Deposit ..........................................10
6.3 Transfer of Deposit ................................................10
6.4 No Liability of Mortgagee ..........................................10
ARTICLE 7: ASSIGNMENT AND SUBLETTING ..........................................11
7.1 General ............................................................11
7.2 Submission of Information ..........................................11
7.3 Payments to Landlord ...............................................12
7.4 Change in Control as a Prohibited Transfer .........................12
7.5 Terms of Assignments or Subleases ..................................12
ARTICLE 8: Initial Improvements ...............................................13
8.1 Initial Improvements ...............................................13
</TABLE>
i.
<PAGE>
<TABLE>
<S> <C>
8.2 Additional Terms ...................................................14
8.3 Removal of Alterations on Lease Expiration .........................14
8.4 Landlord Contribution to Initial Improvements ......................14
ARTICLE 9: ALTERATIONS ........................................................14
9.1 No Alterations Improvements or Fixtures without Consent ............14
9.2 Removal ............................................................15
ARTICLE 10: TENANT'S CARE OF THE DEMISED PREMISES, BUILDING RULES
AND REGULATIONS, AND LANDLORD ACCESS ...............................15
10.1 Maintenance and Surrender of Demised Premises ......................15
10.2 Tenant Equipment ...................................................15
10.3 Removal of Fixtures and Alterations upon End of Lease ..............16
10.4 Use of Demised Premises Affecting Insurance Rating .................16
10.5 Compliance with Buildings Rules and Regulations ....................16
10.6 Miscellaneous Covenants and Agreements .............................17
10.7 Landlord Entry for Repairs and Inspection ..........................17
ARTICLE 11: TENANT'S INSURANCE .................................................18
11.1 Coverage ...........................................................18
11.2 Policy Requirements ................................................18
11.3 Landlord's Right to Maintain Coverage ..............................19
11.4 Insurance Coverage Does Not Limit Tenant's Liability ...............19
11.5 Compliance with Insurance Requirements .............................19
11.6 Landlord's Insurance ...............................................19
11.7 Waiver of Subrogation ..............................................19
ARTICLE 12: UTILITIES, SERVICES AND SERVICE DISCLAIMER .........................20
12.1 General Provisions Applicable to Landlord Services; Definition of
Business Hours .....................................................20
12.2 Electrical Current, Heating and Air Conditioning ...................20
12.3 Other Landlord Services ............................................21
12.4 Utility Charges in Excess of Basic Service; Meters .................21
12.5 Services Disclaimer ................................................21
ARTICLE 13: CASUALTY AND CONDEMNATION ..........................................22
13.1 Fire and Other Casualty Damage to Demised Premises .................22
13.2 Condemnation .......................................................23
ARTICLE 14: TENANT EVENTS OF DEFAULT AND LANDLORD REMEDIES .....................23
14.1 Events of Default Defined ..........................................23
14.2 Events of Default Jot Affected by Security Deposit or Acceptance
of Rent ............................................................24
14.3 Remedies upon Event of Default .....................................24
14.4 Liability of Tenant ................................................25
14.5 Liquidated Damages .................................................25
14.6 Attorneys' Fees ....................................................26
14.7 No Jury Trial ......................................................26
</TABLE>
ii.
<PAGE>
<TABLE>
<S> <C>
14.8 Right to Enjoin, Etc. ..............................................26
14.9 INTENTIONALLY DELETED ..............................................26
14.10 Remedies Cumulative ................................................26
14.11 No Waiver of Tenant Defaults .......................................27
14.12 Right of Landlord to Cure Tenant Events of Default .................27
14.13 Late Payments and Interest .........................................27
14.14 Definition of Default Rate .........................................27
14.15 Breach Bar Landlord ................................................28
ARTICLE 15: SUBORDINATION, ATTORNMENT AND RELATED PROVISIONS ...................28
15.1 Subordination ......................................................28
15.2 Estoppel Certificates ..............................................29
15.3 Modification of Lease for Financing Requirements ...................30
ARTICLE 16: LIMITATION OF LANDLORD'S LIABILITY; TENANT INDEMNITY
OBLIGATIONS ........................................................30
16.1 No Personal Obligations; Liability Limited to Building .............30
16.2 Force Majeure ......................................................30
16.3 No Liability for Damage to Personal Property and Person ............31
16.4 Tenant's Indemnity Obligations .....................................31
ARTICLE 17: PARKING ............................................................32
17.1 Allotted Parking and Designated Parking Areas ......................32
17.2 Revocation or Reductions of Parking License ........................32
17.3 No Liability for Damage to Vehicles ................................32
17.4 Parking License Not Assignable .....................................32
ARTICLE 18: RENEWAL AND EXTENSION OPTIONS ......................................33
ARTICLE 19: HOLDING OVER .......................................................33
ARTICLE 20: MISCELLANEOUS ......................................................33
20.1 Brokers ............................................................33
20.2 Notices ............................................................33
20.3 Covenants of Landlord ..............................................34
20.4 Successors and Assigns .............................................34
20.5 Time of the Essence ................................................35
20.6 No Recordation .....................................................35
20.7 Captions ...........................................................35
20.8 Landlord Approvals .................................................35
20.9 Landlord's Fees ....................................................35
20.10 Entire Agreement ...................................................35
20.11 Applicable Laws ....................................................36
20.12 No Option ..........................................................36
20.13 Partial Invalidity .................................................36
20.14 Pronouns ...........................................................36
</TABLE>
iii.
<PAGE>
<TABLE>
<S> <C>
ARTICLE 21: ENVIRONMENTAL COMPLIANCE ...........................................36
ARTICLE 22: INDEX OF DEFINED TERMS .............................................37
</TABLE>
* * *
EXHIBITS
Exhibit A Demised Premises
Exhibit B Rules and Regulations
TENANT DELIVERIES UPON EXECUTION:
1. One month's advance rent (See Article 3)
2. Security Deposit (See Article 6)
3. Insurance Certificates (See Article 11)
TENANT DELIVERIES IN CONNECTION WITH TENANT IMPROVEMENTS:
1. Plans, specifications and cost estimates (See Article 8)
2. Insurance Certificates (See Article 8)
iv.
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("LEASE") dated as of October 26.1998, by and
between RHI HOLDINGS, INC., a Delaware corporation ("LANDLORD"), and Vastera
Corporation. a Delaware corporation ("TENANT").
In consideration of the mutual agreement hereinafter set forth, the
parties do hereby agree as follows:
AN INDEX OF DEFINED TERMS IS SET FORTH IN ARTICLE 22 BELOW.
ARTICLE 1
DEMISED PREMISES
1.1 AGREEMENT TO LEASE.
Landlord does hereby lease to Tenant and Tenant does hereby lease from
Landlord, for the term and upon the conditions hereinafter provided, the
following space (the "DEMISED PREMISES")in the building located at 45025
Aviation Drive, Dulles, VA 20166 (the "BUILDING"):
Approximately 10,558 square feet of rentable area (the
"Demised Premises"), on the First Floor of the building (Suit
120) located at 45025 Aviation Drive, Dunes VA 20166 (the
"BUILDING"), as shown on the plan attached hereto as Exhibit A.
The real property on which the Building is located, together with the
surrounding real property and parking area, Plot C-7-4, are collectively
referred to herein as the "REAL PROPERTY."
The Building and the Real Property are sometimes collectively referred
to herein as the "PROJECT."
1.2 USE OF DEMISED PREMISES.
Tenant will use and occupy the Demised Premises solely for general
office purposes and uses incident thereto in accordance with the certificate of
occupancy and applicable zoning regulations, and for no other purpose. Tenant
will not use or occupy the Demised Premises for any unlawful, disorderly, or
extra hazardous purpose, and will not manufacture any commodity or prepare or
dispense any food or beverage therein, except for Tenant's personal use in the
Demised Premises. Tenant will comply with all present and future laws,
regulations and governmental requirements of any governmental or public
authority having jurisdiction over the Demised Premises applicable to Tenant's
business. .
Landlord represents and warrants to Tenant that the Building presently
complies with all applicable federal, state and local laws, ordinances,
regulations, rules and requirements of any governmental authority having
jurisdiction, including the Americans With Disabilities Act of 1990, as amended
(collectedly, "APPLICABLE LAWS").
<PAGE>
Tenant, at Tenant's sole expense, shall make, or cause to be made,
all necessary installations, repairs, replacements and alterations to the
Demised Premises that are required to comply with any and all Applicable Laws
if: (i) the failure to so comply relates to the initial leasehold
improvements to the Demised Premises being made by Tenant (and not the
condition of the Building or Demised Premises prior to any construction by
Tenant) or any Alterations to the Demised Premises made by Tenant or on
Tenant's behalf; or (ii) such compliance is required as a result of Tenant's
specific use of the Demised Premises.
1.3 USE OF COMMON AREAS.
As used in this Lease, the term "COMMON AREAS" means, without
limitation, the hallways, entryways, stairs, elevators, driveways, walkways,
terraces, docks, loading areas, restrooms, trash facilities, and all other areas
and facilities in the Project that are provided and designated from time to time
by Landlord for the general nonexclusive use and convenience of Tenant with
Landlord and other tenants of the Building and their respective employees,
invitees, licensees, or other visitors. Landlord grants Tenant, its employees,
invitees, licensees, and other visitors a nonexclusive license for the term to
use the Common Areas in common with others entitled to use the Common Areas,
subject to the terms and conditions of this Lease. Without advance written
notice to Tenant, and without any liability to Tenant in any respect, provided
Landlord will take no action permitted under this SECTION 1.3 in such a manner
as to materially impair or adversely affect Tenant's substantial benefit and
enjoyment of the Demised Premises, Landlord will have the right to:
(a) Close off any of the Common Areas to whatever extent required
in the opinion of Landlord and its counsel to prevent a dedication of any of the
Common Areas or the accrual of any rights by any person or the public to the
Common Areas;
(b) Temporarily close any of the Common Areas for maintenance,
alteration, or improvement purposes; and
(c) Change the size, use, shape, or nature of any Common Areas,
including erecting additional buildings on the Common Areas, expanding the
existing Building or other buildings to cover a portion of the Common Areas,
converting Common Areas to a portion of the Building or other buildings, or
converting any portion of the building (excluding the Demised Premises) or other
buildings to Common Areas. Upon erection of any additional buildings or change
in Common Areas, the portion of the Project upon which buildings or structures
have been erected will no longer be deemed to be a part of the Common Areas.
1.4 USES RESERVED EXCLUSIVELY TO LANDLORD.
As between Landlord and Tenant, Landlord retains unto itself the sole
and exclusive use of the roof, the exterior walls and the Common Areas of the
Building.
<PAGE>
ARTICLE 2
TERM OF LEASE
2.1 TERM.
The term of the Lease shall be 41 months, commencing on January 1, 1999
(the "LEASE COMMENCEMENT DATE") and ending on May 31, 2002 the "EXPIRATION
DATE").
2.2 EARL TERMINATION OPTION. NONE.
ARTICLE 3
RENT
3.1 MINIMUM RENT.
Tenant covenants and agrees to pay to Landlord, "MINIMUM RENT" of $19
per sq. ft. per year ($16,716.83 per month). The Minimum Rent is subject to
adjustment as provided in ARTICLE 4.
The first month's rent ($16.716.83) is due and payable upon execution
of this Lease.
3.2 ADDITIONAL RENT.
Tenant shall also pay, as "ADDITIONAL RENT" all such other sums of
money as shall become due from and payable by Tenant to Landlord under this
Lease. Unless otherwise specified herein, Additional Rent shall be paid by
Tenant with the next installment of Minimum Rent falling due. Tenant's
obligation to pay any Additional Rent due under the terms hereof shall survive
the termination of this Lease.
3.3 PRO-RATION OF MINIMUM RENT FOR LESS THAN FULL MONTH.
If the Lease Commencement Date occurs on a day other than on the first
day of a month, Minimum Rent from the Lease Commencement Date until the first
day of the following month shall be prorated at the rate of one-thirtieth (1/30)
of the Minimum Rent for each such day, payable in advance on the Lease
Commencement Date.
3.4 PAYMENT OF RENT.
Tenant will pay all Minimum Rent and Additional Rent (collectively,
"RENT") without demand, deduction, set-off or counterclaim, by check to Landlord
at:
RHI Holdings, Inc.
c/o CB Commercial Real Estate Group, Inc.
1650 Tysons Blvd McLean, VA 22102
Reference: Fairchild Building
- -- or to such other party or to such other address as Landlord may designate
from time to time by written notice to Tenant. If Landlord shall at any time or
times accept any Rent after it has
<PAGE>
become due and payable, such acceptance shall not excuse delay upon subsequent
occasions, or constitute a waiver of any or all of Landlord's rights hereunder.
ARTICLE 4
ANNUAL ADJUSTMENT TO MINIMUM RENT
4.1 ANNUAL ADJUSTMENT.
On the twelve month anniversary of the Lease Commencement Date and
every twelve months thereafter ("ADJUSTMENT DATES"), Minimum Rent (then in
effect) shall be increased by 3%.
ARTICLE 5
ADJUSTMENTS TO RENT FOR INCREASED OPERATING EXPENSES
5.1 TENANT'S PRO-RATA SHARE OF INCREASED OPERATING EXPENSES AND REAL
ESTATE TAXES.
Commencing with the fiscal year beginning July 1, 1999 and continuing
for each fiscal year thereafter throughout the term, including the fiscal year
in which this Lease terminates, Tenant shall pay to Landlord as Additional Rent,
Tenant's pro rata share of the excess, if any, of the Operating Expense
(hereinafter defined) for the Building for such fiscal year over the Expense
Base (hereinafter defined) and (ii) Tenant's pro rata share of the excess, if
any, of the Real Estate Taxes (hereinafter defined) for such fiscal year over
the Tax Base (hereinafter defined). The "EXPENSE BASE" and the "TAX BASE" shall
be Landlord's Operating Expenses and Real Estate Taxes (respectively) for the
fiscal year ending June 30, 1998.
Landlord and Tenant hereby agree that Tenant's pro rata share
("Tenant's Share") shall be as follows:
<TABLE>
<S> <C>
Total Footage in Building: 118,349
Demised Premises: 10.558
Tenant's Share 8.92%
</TABLE>
5.2 DEFINITION OF OPERATING EXPENSES.
The term "OPERATING EXPENSES" shall mean all of the costs and expenses
incurred in operating and maintaining the Project, as determined by Landlord,
including by way of illustration, but not limitation: (i) water and sewer
charges, (ii) insurance premiums, (iii) utilities, (iv) fees and commissions
paid to property management company, not to exceed however the greater of 3% of
rents or $50,000, (v) maintenance and repair expenses, including salaries, wages
and other personnel costs of janitors, engineers, superintendents, watchmen and
other Building employees (including the salary of on-site building manager),
(vi) supplies, (vii) costs and upkeep of all parking and Common Areas, (viii)
the costs of any additional
<PAGE>
services not provided to the Project at the Lease Commencement Date but
thereafter provided by Landlord in the prudent management of the Project; and
(ix) such other expenses with respect to the operation, maintenance and
management of the Project which shall be incurred or paid by or on behalf of
Landlord and which shall be properly chargeable as an ordinary expense to the
operation, maintenance and management of the Project in accordance with
generally accepted accounting principles as applied to the operation,
maintenance or management of a first class office project.
Operating Expenses shall not include:
(a) any leasing and brokerage commissions, finder's fees or
similar compensation, whether paid to Landlord's managing agent or otherwise;
(b) any capital expenditures (which is defined to mean (i)
repairs to the following structural elements of the Building: the roof, load
bearing walls, foundation and load bearing floors; (ii) replacement (but not
repairs) of entire (or substantially all) the mechanical or electrical systems
benefiting the Building; and (iii) replacement (but not repairs) of parking lot
and paved areas;
(c) any amounts received by Landlord through proceeds of
insurance, to the extent the proceeds are compensation for expenses which were
previously included in the definition of operating costs hereunder.
(d) the cost of any repairs, restorations, replacements or
other work incurred by reason of fire or other insurable casualty (in excess of
the amount of any commercially reasonable deductible under any applicable
insurance policies), or caused by the exercise of the right of eminent domain;
(e) any advertising and promotional expenditures;
(f) any legal, appraisal or accounting fees incurred in
connection with any disputes involving any tenants of the Building, arid all
other legal, appraisal, accounting and other professional fees, other than legal
and auditing fees reasonably incurred in connection with the maintenance and
operation of the Building (exclusive of the leasing, financing or sale of the
Building) or incurred in connection with the preparation of statements required
pursuant to additional rent or lease escalation provisions;
(g) the incremental cost of furnishing services such as
overtime HVAC to any tenant at such tenant's expense; costs incurred in
performing work or furnishing services for individual tenants (including the
Tenant) at such tenant's expense; and costs of performing work or furnishing
services for tenants other than this Tenant at Landlord's expense to the extent
that such work or service is in excess of any work or service Landlord is
obligated to furnish to the Tenant at Landlord's expense;
(h) any item treated as "Real Property Taxes" hereunder;
(i) any principal, interest or other payments on any mortgage,
deed of trust, master lease, ground lease or other underlying lease; provided,
however, that the maintenance fee
<PAGE>
(presently, approximately $4,800 a month) that is charged by the ground lessor
for patrolling services, police and fire services, road maintenance service,
etc. provided by MWAA and/or the FAA to the airport complex is included in the
definition of Operating Expenses;
(j) any depreciation or amortization of the Building or any
systems, fixtures, equipment or other personalty contained therein;
(k) any costs allocable to the repair, restoration,
replacement or correction of any inherent structural defects in the Building;
(l) of redecorating or renovating space for new tenants or for
existing tenants renewing their leases;
(m) any amount incurred by Landlord by reason of Landlord's
gross negligence or intentional misconduct;
(n) repairs or replacements required to cure violations of, or
cause compliance with, all Applicable Laws in effect as of the Lease
Commencement Date;
(o) any amount payable by Landlord which constitutes a fine,
interest or penalty;
(p) any cost representing an amount paid for services or
materials to a related person, firm or entity to the extent such amount exceeds
the amount that would be paid for such services or materials at the
then-existing market rates of the same quality and/or timeliness to an unrelated
person, firm or corporation;
(q) the costs of installing, operating and maintaining any
specialty improvement within the Building, including, but not limited to, any
cafeteria, hotel or dining facility; or any athletic, lunch or recreational
facility or club;
(r) the cost of furnishing electricity to demised areas of the
Building at a tenant's expense;
(s) any interest, fines, penalties or other charges incurred
as a result of any late payments by Landlord of any Operating Expenses or Real
Estate Taxes;
(t) any general home office overhead expense of Landlord or
Landlord's affiliates;
(u) the costs of acquiring any works of fine art (as
distinguished from decorative items) displayed in the public areas of the
Building;
(v) any damages awarded to any tenant of the Building against
Landlord;
(w) salaries and benefits for off-site personnel;
<PAGE>
(x) If future laws require any changes to be made to the
Building (additions, improvements, alterations, etc.), to comply with then
applicable laws, these will not be passed through as Operating Expenses if they
are in the nature of a capita! expenditure (for example, adding a new system);
but will be passed through as Operating Expenses if they are in the nature of an
operating expense (for example, adding security guards).
Operating Expenses shall include the yearly amortization of capital
costs incurred by Landlord (i) for improvements or structural repairs to the
Project required to comply with any changes in the laws, rules or regulations of
any governmental authority having jurisdiction, or (ii) for purposes of
improving the operating efficiency of the Building or reducing Landlord's
Operating Expenses, which costs shall be amortized over the useful life of such
improvements or repairs as reasonably estimated by Landlord.
5.3 DEFINITION OF REAL ESTATE TAXES.
The term "REAL ESTATE TAXES" shall include all taxes and assessments,
general and special, or ordinary or extraordinary, assessed, levied or imposed
upon the Project.
"Real Estate Taxes" shall not include: (a) any gross receipts, capital,
franchise, sales or income tax levied upon Landlord or any of Landlord's
earnings or measured by the income of Landlord from the ownership, management,
leasing or operation of the Building; (b) any item treated as an "Operating
Expense" hereunder; (c) any fines or penalties incurred due to violation by
Landlord or any tenant or other occupant of the Building of any applicable
governmental rule or authority; (d) any interest, fines, penalties or other
charges incurred as a result of any late payments by Landlord of any operating
cost or property taxes; and (e) any assessments or other amounts payable in
installments, to the extent that any such installments would cover any period of
time subsequent to the term of this Lease.
If any taxes are separately assessed against Landlord or the Project
due to improvements, alterations, additions and substitutions undertaken by or
at the specific request of Tenant, Tenant shall be solely responsible for the
payment of such tax.
The net amount of any refund or credit in Real Estate Taxes obtained by
Landlord or any party on Landlord's behalf as a result of any appeal or contest
brought by Landlord or on Landlord's behalf (less any expenses incurred by
Landlord in connection with obtaining such refund or credit and not previously
recovered by Landlord as an Operating Expense) shall be passed through one
hundred percent (100%) to Tenant and all other tenants, pro-rata in accordance
with their respective proportionate shares of property taxes.
5.4 ESTIMATED PAYMENTS.
During each calendar year or partial calendar year in the term, in
addition to monthly Rent, Tenant will pay to Landlord on the first day of each
month an amount equal to 1/12 of the product of Tenant's Share multiplied by the
"ESTIMATED TAXES AND EXPENSES" (defined below) for such calendar year.
<PAGE>
"Estimated Taxes and Expenses" for any calendar year means Landlord's
reasonable estimate of Operating Expenses and Real Estate Taxes for such
calendar year, less the product of the Expense Base and the Tax Base multiplied
by the rentable area of the Building.
During any partial calendar year during the term, Estimated Taxes and
Expenses will be estimated on a full-year basis. After the close of each
calendar year, Landlord will give Tenant written notice of Estimated Taxes and
Expenses for the ensuing calendar year. On or before the first day of each month
during the ensuing calendar year (or each month of the term, if a partial
calendar year), Tenant will pay to Landlord 1/12 of the product of Tenant's
Share multiplied by the Estimated Taxes and Expenses for such calendar year;
however, if such written notice is not given on or before January 1, Tenant will
continue to make monthly payments on the basis of the prior year's Estimated
Taxes and Expenses until the month after such written notice is given, at which
time Tenant will commence making monthly payments based upon the revised
Estimated Taxes and Expenses. In the month Tenant first makes a payment based
upon the revised Estimated Taxes and Expenses, Tenant will pay to Landlord for
each month which has elapsed since January 1 the difference between the amount
payable based upon the revised Estimated Taxes and Expenses and the amount
payable based upon the prior year's Estimated Taxes and Expenses. If at any time
or times it reasonably appears to Landlord that the actual Operating Expenses
and Real Estate Taxes for any calendar year will vary from the Estimated Taxes
and Expenses for such calendar year, Landlord may, by written notice to Tenant,
revise the Estimated Taxes and Expenses for such calendar year, and subsequent
payments by Tenant in such calendar year will be based upon such revised
Estimated Taxes and Expenses.
5.5 ANNUAL SETTLEMENT.
Within 120 days after the end of each calendar year or as soon after
such 120-day period as practicable, Landlord will deliver to Tenant a statement
of amounts payable by Tenant under SECTION 5.1 for such calendar year prepared
and certified by Landlord (the "ANNUAL EXPENSE STATEMENT"). If the Annual
Expense Statement shows an amount owing by Tenant that is less than the
Estimated Taxes and Expense payments previously made by Tenant for such calendar
year, the excess will be held by Landlord and credited against the next payment
of Rent; however, if the term has ended and Tenant was not in default at its
end, Landlord will refund the excess to Tenant within 60 days of the date of the
Annual Expense Statement. If the Annual Expense Statement shows an amount owing
by Tenant that is more than the Estimated Taxes and Expense payments previously
made by Tenant for such calendar year, Tenant will pay the deficiency to
Landlord within ten (10) days after the delivery of such statement.
Each Annual Expense Statement provided by Landlord under this
SECTION 5.5 shall be conclusive and binding upon Tenant unless within sixty
(60) days after receipt thereof, Tenant shall notify Landlord that it
disputes the correctness of the Annual Expense Statement, specifying the
respects in which the Annual Expense Statement is claimed to be incorrect.
Tenant, at its expense, shall then have the right to audit Landlord's books
and records relating to the Annual Expense Statement. Pending determination
of the dispute, Tenant shall pay within ten (10) days from notice any amounts
due from Tenant in accordance with the Annual Expense Statement, but such
payment shall be without prejudice to Tenant's position.
<PAGE>
5.6 FINAL PRORATION.
If this Lease ends on a day other than the last day of a calendar year,
the amount of increase (if any) in the Operating Expenses and Real Estate Taxes
payable by Tenant applicable to the calendar year in which this Lease ends will
be calculated on the basis of the number of days of the term falling within such
calendar year, and Tenant's obligation to pay any increase or Landlord's
obligation to refund any overage will survive the expiration or other
termination of this Lease.
ARTICLE 6
SECURITY DEPOSIT
6.1 AMOUNT OF DEPOSIT.
Tenant, contemporaneously with the execution of this Lease, has
deposited with Landlord the sum of $16.716.83 (the "SECURITY DEPOSIT") (the
equivalent of one month's rent for the Demised Premises), the receipt of which
is hereby acknowledged by Landlord. The Security Deposit shall be held by
Landlord, without liability for interest, as security for all of the terms,
covenants, and conditions of the Lease to be kept and performed by Tenant during
the term hereof.
6.2 USE AND RETURN OF DEPOSIT.
If at any time during the term of this Lease any Rent shall be overdue
and unpaid, or any other sum payable to Landlord by Tenant hereunder shall be
overdue and unpaid, Landlord may (but shall not be required to) appropriate any
portion of the Security Deposit to the payment of any such overdue Rent or other
sum. In the event of the failure of Tenant to keep and perform any of the terms,
covenants and conditions of this Lease, then Landlord at its option may
appropriate and apply the entire Security Deposit, or so much thereof as may be
necessary, to compensate Landlord for all loss or damage sustained or suffered
by Landlord due to such breach on the part of Tenant. Should the entire Security
Deposit, or any portion thereof, be appropriated and applied by Landlord for
payment of overdue Rent or other sums due and payable to Landlord by Tenant
hereunder, then Tenant shall, upon the written demand of Landlord, forthwith
remit to Landlord a sufficient amount in cash to restore said security to the
original sum deposited, and Tenant's failure to do so within five (5) days after
receipt of such demand shall constitute a breach of this Lease. Should Tenant
comply with all of said terms, covenants and conditions and promptly pay all of
the Rent as it becomes due, and all other sums payable to Landlord by Tenant
hereunder, the Security Deposit shall be returned in full to Tenant at the end
of the term of this Lease, or upon the earlier termination of this Lease,
together with interest thereon at the rate of 3.4% per annum.
6.3 TRANSFER OF DEPOSIT.
Landlord may deliver the Security Deposit to the transferee of
Landlord's interest in the Demised Premises, in the event that such interest be
transferred, and upon delivery of notice from such transferee to Tenant
acknowledging receipt thereof Landlord shall be discharged from any further
liability with respect to the Security Deposit.
<PAGE>
6.4 NO LIABILITY OF MORTGAGEE.
Tenant shall not be entitled to look to the mortgagee, as mortgagee,
mortgagee in possession, or successor in title to the Demised Premises, for
accountability for any Security Deposit required by Landlord hereunder, unless
said sums have actually been received by said mortgagee as security for Tenant's
performance of this Lease.
ARTICLE 7
ASSIGNMENT AND SUBLETTING
7.1 GENERAL.
(a) Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors, and assigns, covenants that
it will not assign, transfer by operation of law or otherwise, mortgage, or
encumber this Lease, nor sublease, nor permit the Demised Premises or any part
of the Demised Premises to be used or occupied by others, without the prior
written consent of Landlord in each instance, which consent shall not be
unreasonably withheld or unreasonably delayed beyond thirty (30) days from
Tenant's request. Any assignment or sublease in violation of this ARTICLE 7 will
be void. If this Lease is assigned, or if the Demised Premises or any part of
the Demised Premises are subleased or occupied by anyone other than Tenant,
Landlord may, after default by Tenant, collect Rent from the assignee,
subtenant, or occupant, and apply the net amount collected to Rent.
(b) Notwithstanding the provisions of Section 7.1(a), Tenant may
assign or sublet the Demised Premises, or any portion thereof, without
Landlord's consent to any corporation which controls is controlled by or is
under common control with Tenant or to any corporation (or other recognized
legal entities such as limited liability companies, partnerships, etc.)
resulting from the merger or consolidation with or into Tenant, or to any person
or entity which acquires all the assets of Tenant as a going concern of the
business that is being conducted on the Premises; provided, that Tenant notifies
Landlord of any such assignment or sublease and promptly supplies Landlord with
any documents or information reasonably requested by Landlord regarding such
assignment or sublease. "Control" as used in this Section 7.1(b) shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person or entity.
(c) No assignment, sublease, occupancy, or collection will be
deemed (1) a waiver of the provisions of this SECTION 7.1; (2) the acceptance of
the assignee, subtenant, or occupant as Tenant; or (3) a release from the
further performance by Tenant of its covenants and obligations contained in this
Lease. The consent by Landlord to an assignment or sublease will not be
construed to relieve Tenant from obtaining Landlord's prior written consent in
writing to any further assignment or sublease. No permitted subtenant may assign
or encumber its sublease or further sublease all or any portion of its subleased
space, or otherwise permit the subleased space or any part of its subleased
space to be used or occupied by others, without Landlord's prior written consent
in each instance.
<PAGE>
7.2 SUBMISSION OF INFORMATION.
If Tenant requests Landlord's consent to a specific assignment or
subletting, Tenant will submit in writing to Landlord (a) the name and address
of the proposed assignee or subtenant; (b) the business terms of the proposed
assignment or sublease; (c) reasonably satisfactory information as to the nature
and character of the business of the proposed assignee or subtenant, and as to
the nature of its proposed use of the space; (d) banking, financial, or other
credit information reasonably sufficient to enable Landlord to determine the
financial responsibility and character of the proposed assignee or subtenant;
and (e) the proposed form of assignment or sublease for Landlord's approval.
Tenant shall provide similar information with respect to any notification of an
assignment or sublease under Section 7.1(b).
7.3 PAYMENTS TO LANDLORD.
If Landlord consents to a proposed assignment or sublease, then
Landlord will have the right to require Tenant to pay to Landlord a sum equal to
the amount by which the rent to be paid by any assignee or sublessee exceeds the
rent then payable under this Lease, after deducting from the amount payable by
any assignee or sublessee all reasonable costs and expenses incurred by Tenant
in obtaining the assignee or sublessee, including advertising and marketing,
legal fees, and costs associated with the preparation of the space for the
assignee or sublessee.
7.4 CHANGE IN CONTROL AS A PROHIBITED TRANSFER.
The transfer of a majority of the issued and outstanding capital stock
of any corporate Tenant or subtenant of this Lease (other than as part of an
initial public offering), or a majority of the total interest in any partnership
Tenant or subtenant, however accomplished, and whether in a single transaction
or in a series of related or unrelated transactions, will be deemed an
assignment of this Lease or of such sublease requiring Landlord's consent in
each instance.
7.5 TERMS OF ASSIGNMENTS OR SUBLEASES.
In the event Landlord consents to any assignment or sublease under
Section 7.1(a), or in the event of a permitted assignment or sublease under
Section 7.1(b), a dully executed copy of the sublease or assignment shall be
delivered to Landlord within ten (10) days after execution thereof. Any such
sublease shall provide that the subtenant shall comply with all applicable terms
and conditions of this Lease to be performed by the Tenant hereunder. Any such
assignment of this Lease shall contain an assumption by the assignee of all of
the terms and obligations of this Lease to be performed by the Tenant. Tenant
covenants that, notwithstanding any such assignment or transfer, and
notwithstanding the acceptance of Rent by Landlord from an assignee or
transferee or any other party, the Tenant shall remain fully liable for the
payment of Rent due and to become due under this Lease and for the performance
of ail of the covenants, agreements, terms, provisions and conditions of this
Lease on the part of Tenant to be performed or observed.
<PAGE>
ARTICLE 8
INITIAL IMPROVEMENTS
8.1 INITIAL IMPROVEMENTS.
Tenant accepts the Demised Premises "As Is." Landlord grants to Tenant
the right to alter and remodel the Demised Premises, at Tenant's expense, for
Tenant's intended use in conjunction with the commencement of the Lease
("INITIAL IMPROVEMENTS"); provided, however, that:
LANDLORD APPROVAL: No Initial Improvements shall be made without first
submitting the plans thereof and receiving the sanction of the Landlord.
PERMITS: No alterations shall be undertaken until Tenant shall have
procured and paid for all necessary permits or authorizations from any federal,
state or local governmental entity, board or agency having jurisdiction. Without
limitation, Tenant shall obtain all necessary approvals from the Ground Lessor
(Metropolitan Washington Airports Authority).
PROFESSIONAL SUPERVISION: All alterations shall be conducted under the
supervision of an architect or engineer selected by Tenant and approved in
writing by Landlord (which approval shall not be unreasonably withheld).
WORK IN ACCORDANCE WITH APPROVED PLANS: All alterations shall be made
in accordance with detailed plans and specifications and cost estimates prepared
by such architects or engineers and approved in writing by Landlord (which
approval shall not be unreasonably withheld).
PROMPT COMPLETION, IN COMPLIANCE WITH ALL LAWS: All alterations shall
be made by Tenant promptly (unavoidable delays excepted) and in a good and
workmanlike manner, in compliance with all applicable permits and authorizations
and building codes, zoning laws and all other applicable laws, rules,
ordinances, regulations and similar requirements of any federal, state or local
governmental entity, board or agency having jurisdiction.
CASH PAYMENT/NO LIENS: The cost of all alterations shall be paid in
cash or its equivalent, so that the Demised Premises shall at all times be free
of liens for labor and material supplied or claim to have been supplied to the
Demised Premises.
INDEMNIFICATION AND HOLD HARMLESS: Tenant shall indemnify Landlord and
its agents and employees and save it harmless from and against any and all loss,
claims, actions, damages, liabilities and expense (including reasonable
attorneys fees) in connection with or arising from the alterations, or in
connection with or arising from a breach of the covenants set forth in this
Article 8 regarding alterations.
DELIVERY OF INSURANCE CERTIFICATES: Alterations shall not commence
until Tenant shall have obtained comprehensive general liability and worker's
compensation insurance in an amount of not less than $1,000,000 per person,
$5,000,000 per occurrence, and $5,000,000 for damages or injury to property,
with not more than $2,500 deductible. Prior to commencement of alterations,
Tenant shall have delivered certificates of insurance to Landlord, issued by
insurance
<PAGE>
companies reasonably acceptable to Landlord, naming Landlord and Landlord's
Lenders as additional insured parties.
8.2 ADDITIONAL TERMS.
The Initial Improvements shall be subject to the additional terms and
conditions of Section 9.1 hereof.
8.3 REMOVAL OF ALTERATIONS ON LEASE EXPIRATION.
At the time of approving the Initial Improvements, Landlord will
indicate whether such Initial Improvements shall be subject to the removal
conditions set forth in Section 9.2 hereof. Landlord represents that no Initial
Improvements other than what it reasonably considers to be "above standard"
Initial Improvements shall be subject to removal.
8.4 LANDLORD CONTRIBUTION TO INITIAL IMPROVEMENTS
NONE.
ARTICLE 9
ALTERATIONS
9.1 NO ALTERATIONS IMPROVEMENTS OR FIXTURES WITHOUT CONSENT.
Tenant will not make or allow to be made any alterations, additions, or
improvements to the Demised Premises, or attach any fixtures or equipment to the
Demised Premises, without first obtaining Landlord's written consent. All
alterations, additions, and improvements consented t6 by Landlord must be
performed by contractors approved by Landlord and must conform to all
governmental and insurance rules and regulations established from time to time.
If any mechanics' or lien is filed against the Demised Premises, the Building or
the Project, for work claimed to have been done for, or materials claimed to
have been furnished to Tenant, such lien shall be discharged by Tenant within
ten (10) days thereafter, at Tenant's sole cost and expense, by the payment
thereof or by filing any bond required by law. If Tenant shall fail to discharge
any such mechanic's or materialmen's lien, Landlord may, at its option,
discharge the same and collect same as Additional Rent together with interest on
the amount thereof from the date of payment by Landlord until the date of
repayment by Tenant at the Default Rate (as defined in SECTION 14.14); it being
hereby expressly covenanted and agreed that such discharge by Landlord shall not
be deemed to waive, or release the default of Tenant in not discharging the
same.
Notwithstanding the immediately preceding sentence, Landlord's consent
to any alterations, improvements or additions to the Demises Premises shall not
be required to the extent that: (a) such alterations, improvements or additions
will not involve structural changes to the Building, and do not involve any
changes to the electrical, HVAC, plumbing, or other Building systems; (b) the
cost of any such alterations, improvements or additions does not exceed $50,000
per year; (c) Landlord is notified in writing in advance of such work (not less
than thirty days prior notice); (d) such work is performed by contractors
approved by Landlord (which approval shall not be unreasonably withheld) and
conforms with governmental and insurance rules and regulations; (e) no mechanics
liens are permitted in connection with such work; (f) upon expiration of the
Lease Term, Landlord may require Tenant to remove such
<PAGE>
alterations, improvements or additions at Tenant's sole cost and to restore the
Demised Premises to the condition in which they were before such alterations,
improvements or additions were made, reasonable wear and tear excepted.
9.2 REMOVAL.
Unless Landlord, at its sole discretion, elects otherwise (at the time
of granting consent), al! alterations, additions, fixtures, and improvements
that are made in or upon the Demised Premises pursuant to this Article 9 shall
be removed by Tenant at its sole cost prior to the end of the term of this
Lease, and Tenant will restore the Demised Premises to the condition in which
they were before such alterations, additions, fixtures, improvements, and
additions were made, reasonable wear and tear excepted. Removal of the Initial
Improvements shall be governed by Section 8.3.
ARTICLE 10
TENANT'S CARE OF THE DEMISED PREMISES, BUILDING RULES AND
REGULATIONS, AND LANDLORD ACCESS
10.1 MAINTENANCE AND SURRENDER OF DEMISED PREMISES.
Tenant, at its sole cost and expense, shall keep the Demised Premises
(including all improvements, fixtures and all other property contained in the
Demised Premises) in a neat, safe, and clean condition, and in good order and
repair, and will surrender the Demised Premises at the end of the term in as
good order and condition as they were at the commencement of the term, except
for reasonable wear and tear. Tenant shall not commit or suffer to be committed
any waste upon the Demised Premises or any nuisance or other act or thing which
may disturb the quiet enjoyment or interfere with, inhibit or preclude any
permitted use of any other tenant in the Building or any person outside the
Building.
10.2 TENANT EQUIPMENT.
Maintenance and repair of equipment serving only the Demised Premises,
such as kitchen fixtures, separate air conditioning equipment, or any other type
of special equipment, whether installed by Tenant or by Landlord on behalf of
Tenant, shall be the sole responsibility of Tenant, and Landlord shall have no
obligation in connection therewith.
10.3 REMOVAL OF FIXTURES AND ALTERATIONS UPON END OF LEASE.
On or prior to the end of the term, Tenant shall remove from the
Demised Premises all (i) trade fixtures, (ii) furniture, (iii) equipment and
machinery, and (iv) alterations, additions or improvements (if any) required to
be removed by Tenant in accordance with ARTICLE 9 (collectively, "TENANT REMOVE
ITEMS"). Tenant will fully repair any damage occasioned by the removal of any
Tenant Remove Items. All Tenant Remove Items on the Demised Premises after two
(2) day from the end of the term will be deemed conclusively to have been
abandoned and may be appropriated, sold, stored, destroyed, or otherwise
disposed of by Landlord without written notice to Tenant or any other person and
without obligation to account for them. Tenant will pay Landlord for all
expenses incurred in connection with the removal of such property,
<PAGE>
including but not limited to the cost of repairing any damage to the Building or
the Demised Premises caused by the removal of such property. Tenant's obligation
to observe and perform this covenant will survive the expiration or other
termination of this Lease.
10.4 USE OF DEMISED PREMISES AFFECTING INSURANCE RATING.
Tenant will not conduct or permit to be conducted any activity or place
any equipment in or about the Demised Premises, which will, in any way, increase
the rate of insurance premiums on the Building or the Real Property. If any
increase in the rate of insurance is stated by any insurance company or by the
applicable Insurance Rating Bureau to be due to any activity or equipment in or
about the Demised Premises, such statement shall be conclusive evidence that the
increase in such rate is due to Tenant's activity or equipment and, as a result
thereof, Tenant shall be liable for such increase and shall reimburse Landlord
therefor, within ten (10) days of receipt of written notice, and said sum shall
be deemed to be Additional Rent.
10.5 COMPLIANCE WITH BUILDINGS RULES AND REGULATIONS.
Tenant, its agents and employees shall abide by and observe the rules
and regulations attached hereto and made a part hereof as EXHIBIT B and such
other rules and regulations as may be promulgated from time to time by Landlord
for the operation and maintenance of the Building, the Real Property and the
Project, provided that the same are not inconsistent with the provisions of this
Lease and Tenant is given not less than thirty (30) days notice thereof. Nothing
contained in this Lease shall be construed to impose upon Landlord any duty or
obligation to enforce such rules and regulations, or the terms, conditions or
covenants contained in any other lease, as against any other tenant, and
Landlord shall not be liable to Tenant for violation of the same by any other
tenant, its employees, agents, or invitees. Notwithstanding the foregoing,
Landlord covenants and agrees to enforce all rules and regulations in a uniform
and nondiscriminatory manner. In the event of any conflicts between the rules
and regulations and the provisions of this Lease, the provisions of this Lease
shall control.
10.6 MISCELLANEOUS COVENANTS AND AGREEMENTS.
Tenant further agrees that:
No sign, advertisement or notice shall be inscribed, painted or affixed
on any part of the outside or inside of the Demised Premises or Building, except
on the directories and doors of offices, and then only in such size, color and
style as the Landlord shall reasonably approve.
Landlord shall have the right to prescribe the weight, and method of
installation and position of safes or other heavy items forming part of the
Tenant Remove Items. Tenant shall not install any Tenant Remove Items that will
place a load upon any floor exceeding the load per square foot area which such
floor was designed to carry.
All damage done to the Building by taking in or removing any Tenant
Remove Items, or due to its being in the Demised Premises, shall be repaired at
the expense of Tenant.
No freight, furniture or other bulky matter of any description shall be
received into the Building or carried in the elevators, except as approved by
Landlord. All moving of Tenant
<PAGE>
Remove Items shall be under the direct control and supervision of the Landlord,
who shall, however, not be responsible for any damage to or charges for moving
same, but shall fully cooperate with Tenant in scheduling same. Provided Tenant
furnishes Landlord with at least two week's prior written notice of Tenant's
move to the Demised Premises, Tenant shall have the exclusive right to use the
freight elevator during the weekend that it moves into the Demised Premises.
10.7 LANDLORD ENTRY FOR REPAIRS AND INSPECTION.
Tenant shall permit Landlord, or its representative(s), to enter the
Demised Premises during Tenant's normal business hours and upon not less than 24
hour notice to Tenant; or at such other times and with such shorter or no notice
as may be required in the event of an emergency, to examine and inspect same,
and to make such alterations and/or repairs as in the judgement of Landlord may
be deemed necessary, or to exhibit the same to prospective tenants, purchasers
or mortgagees. If, in an emergency, it shall become necessary to make promptly
any repairs or replacements required to be made by Tenant, then Landlord may, at
its option, proceed forthwith to have such repairs or replacements made and to
pay the cost thereof for Tenant's account. Tenant shall reimburse Landlord for
the cost of such repairs or replacements on demand.
There shall be no abatement of Rent and no liability by reason of any
injury to or interference with Tenant's business arising from the making of any
examinations, exhibitions, inspections, repairs, alterations or improvements in
or to any portion of the Demised Premises or the Project.
ARTICLE 11
TENANT'S INSURANCE
11.1 COVERAGE.
During the term of this Lease, Tenant shall obtain, pay the premiums
for, and maintain in foil force and effect the following types of insurance:
(a) COMPREHENSIVE LIABILITY. A general comprehensive liability
insurance policy including a contractual liability endorsement, naming Landlord
and any mortgagee or ground lessor of the-Building as additional insured
parties, in an amount of not less than $1,000,000 per person, $5,000,000 per
occurrence, and $5,000,000 for damages or injury to property, with not more than
$2,500 deductible.
(b) ALL-RISK PROPERTY. All-risk property insurance written at
replacement cost value, covering all of Tenant's personal property in the
Demised Premises (including, without limitation, inventory, trade fixtures,
floor coverings, furniture and other property removable- by Tenant under the
provisions of this Lease) and all leasehold improvements installed in the
Demised Premises.
<PAGE>
(c) WORKER'S COMPENSATION. If and to the extent required by law,
worker's compensation or similar insurance in form and amounts required by law
including Employer's Liability insurance in the amount of $100,000 for any one
occurrence.
11.2 POLICY REQUIREMENTS.
All insurance policies required to be procured by Tenant under this
Lease: (i) shall be issued by responsible insurance companies licensed to do
business in the jurisdiction in which the Building is located and shall be in
such form and content as approved by Landlord; (ii) shall be written as primary
policy coverage and not contributing with or in excess of any coverage which
Landlord may carry; (iii) shall provide that the policy shall not be canceled
unless Landlord shall have received thirty (30) day's prior written notice of
cancellation or in the case of non-payment of premium only, ten (10) day's prior
written notice; and (iv) shall waive insurer's rights of subrogation against
Landlord, its agents and employees, including any mortgagee or any other
interested party designated by Landlord.
With respect to each and every one of the insurance policies required
to be procured by Tenant under this Lease, on or before the Lease Commencement
Date, and at least thirty (30) days before the expiration of the expiring
policies previously furnished, Tenant shall deliver to Landlord certificates for
each such policy or renewal thereof, or such other evidence that may be
satisfactory to Landlord and the holder of any first deed of trust on the
Building.
11.3 LANDLORD'S RIGHT TO MAINTAIN COVERAGE.
In the event Tenant shall fail to provide such insurance, or shall fail
to pay the premiums when due, Landlord shall have the right to cause such
insurance to be issued and to pay the premiums therefor, or any premiums in
default, and to collect same as Additional Rent together with interest on the
amount of such premiums from the date of payment by Landlord until the date of
repayment by Tenant at the Default Rate (as defined in SECTION 14.14).
11.4 INSURANCE COVERAGE DOES NOT LIMIT TENANT'S LIABILITY.
Neither the issuance of any insurance policy required under this Lease
nor the minimum limits specified herein shall be deemed to limit or restrict in
any way Tenant's liability arising under or out of this Lease.
11.5 COMPLIANCE WITH INSURANCE REQUIREMENTS.
Tenant shall comply with all requirements of Landlord's and Tenant's
insurance carriers and shall not do or permit to be done any act or thing upon
the Demised Premises that will invalidate or be in conflict with fire insurance
policies covering the Building or any part thereof, fixtures and property in the
Building or the Demised Premises or any other insurance policies or coverage
referred to in this ARTICLE 11, and shall comply with all rules, orders,
regulations or requirements of the Board of Fire Underwriters having
jurisdiction, or any other similar body in the case of such fire insurance
policies, and the applicable insurance rating bureau or similar body in the case
of all other such insurance policies.
<PAGE>
11.6 LANDLORD'S INSURANCE.
Landlord shall insure the Building under an "all-risk" insurance
policy, with replacement cost endorsement, in an amount not less than the full
insurable value of the Building and shall carry comprehensive general liability,
rent loss, and worker's compensation insurance in amounts and with deductibles
comparable to the insurance carried by landlords of comparable quality office
buildings located in the vicinity of the Building.
11.7 WAIVER OF SUBROGATION.
Neither Landlord nor Tenant shall be liable to the other for any loss
or damage to property or injury to or death of persons occurring on the Demised
Premises or the Building, or in any manner growing out of or connected with the
Tenant's use and occupation of the Demised Premises or the condition thereof,
whether or not caused by the negligence or other fault of Landlord or Tenant or
of their respective agents, employees, subtenants, licensees, or assignees
(collectively, "NON-SUBROGATED LOSS").
This release shall apply only to the extent that such Non-Subrogated
Loss is covered by insurance required to be carried by the parties under this
Article 11, regardless of whether such insurance is payable to or protects
Landlord or Tenant or both. Nothing in this Section 11.7 shall be construed to
import any greater liability or indemnification obligation upon either Landlord
or Tenant than would have existed in the absence of this Section 1
Landlord further agrees that it will cause its policies of insurance
required to be maintained hereunder to be so written as to include a wavier of
subrogation if such a wavier is obtainable without additional cost. Tenant's
policies shall contain a waiver of subrogation as provided in Section 11.2.
ARTICLE 12
UTILITIES, SERVICES AND SERVICE DISCLAIMER
12.1 GENERAL PROVISIONS APPLICABLE TO LANDLORD SERVICES; DEFINITION OF
BUSINESS HOURS.
Landlord agrees to furnish such services as may specifically be
required of landlord by this ARTICLE 12 of the Lease. Landlord shall provide
such services in a manner consistent with services provided by other Class B
office buildings in the Washington Dulles International Airport area.
Services specified in this ARTICLE 12 shall be provided during Business
Hours only. As used herein "Business Hours" means Monday through Friday, from
7:00 a.m. through 6:00 p.m., and Saturday, 8:00 a.m. through 1.00 p.m.,
exclusive of Federal holidays.
12.2 ELECTRICAL CURRENT, HEATING AND AIR CONDITIONING.
(a) LANDLORD'S OBLIGATION. Landlord shall furnish reasonably
adequate electric current sufficient for (1) standard lighting and the operation
of low-wattage office
<PAGE>
machines (such as desktop micro-computers, desktop calculators, typewriters,
microwaves, printers, fax machines, copiers and telephone equipment) during
Business Hours;.(2) standard heat and air conditioning reasonably required for
the comfortable occupation of the Demised Premises during Business Hours; and
(3) twenty-four (24) hour per day, seven days per week access and elevator
service. Landlord shall not be obligated to furnish more power to the Demised
Premises than allocated thereto under the Building design.
(b) TENANT'S OBLIGATION. Tenant shall arrange to purchase and pay
for all of Tenant's electric current requirements that exceed the standard basic
requirements set forth in SECTION 12.2(a) above.
(c) AFTER HOURS HEATING AND AIR CONDITIONING. Provided that Tenant
gives Landlord appropriate advance notice, Landlord shall provide overtime
heating or air conditioning beyond Business Hours. Tenant shall pay Landlord for
such overtime use on the basis of Landlord's actual cost per hour, which is
currently $40 per hour.
(d) ELECTRICAL CAPACITY. Attached hereto as Exhibit C is an
equipment inventory for Tenant, and an estimate prepared by Mona Electric of the
electric consumption assuming all such inventory is used simultaneously. The
parties hereby agree that consumption of electricity by Tenant in an amount set
forth in such Exhibit C shall not be considered consumption that exceeds the
standard basic requirements set forth in Subsection 12.2(a) above.
12.3 OTHER LANDLORD SERVICES.
Landlord shall furnish reasonably adequate water, lavatory supplies for
restrooms in Common Areas, and normal and usual cleaning and trash removal
service. Attached hereto as Exhibit D are the cleaning specifications for the
Building. Landlord covenants and agrees with Tenant to cause the Demised
Premises and Common Areas to be cleaned and maintained in accordance with these
standards at all times during the term of the Lease.
12.4 UTILITY CHARGES IN EXCESS OF BASIC SERVICE; METERS.
Tenant shall pay all charges for electricity, water, and other
utilities used by Tenant on the Demised Premises in excess of the basic service
utilities to be provided by Landlord under this ARTICLE 12. Landlord may install
a separate water or electric meters to measure the amount of water or
electricity consumed upon the Demised Premises. The cost of any such meters and
of installation, maintenance and repair thereof shall be paid for by Tenant.
Tenant shall pay Landlord promptly upon demand therefor by Landlord for all
water and electricity consumed as shown by said meters, and the amounts to be
paid by Tenant for Additional Rent shall be adjusted accordingly. (i.e.,
operating expenses would not include utilities, other than utilities for Common
Areas).
12.5 SERVICES DISCLAIMER.
Landlord shall not be liable for damages for failure, interruption or
slow-down of: (i) heat, (ii) hot or cold water, (iii) air conditioning, (iii)
sewer service, (iv) electric current, (v) gas, or (vi) any other service --
caused by reason of: (1) breakdown or interruption of plant, equipment, or
apparatus, (2) shut-down of any services for necessary repairs or alterations,
<PAGE>
(3) unavailability of fuel, water or any other substance or utility, (4) war or
civil disturbance, (5) strike or lockout, (6) fire, flood or casualty, (7)
governmental regulations, or (8) any other conditions beyond Landlord's control.
Notwithstanding the foregoing, if any failure to supply services or utilities to
the Demised Premises due to Landlord's fault or for reasons within Landlord's
control shall render the Demised Premises effectively unusable by Tenant for a
period of seventy-two (72) hours, then Minimum Rent shall be abated during such
time in excess of seventy-two (72) hours as Landlord is unable to supply
services or utilities to the Demised Premises due to Landlord's fault of for
reasons within Landlord's control.
Any security measures that Landlord may elect to undertake in and about
the Project are understood to be for the protection and preservation of the
Building and Real Property only and shall not be relied upon by the Tenant for
the protection in either its person or property or that of its guests, invitees
or employees, and no liability shall be imposed on the Landlord, its agents or
employees in connection therewith.
ARTICLE 13
CASUALTY AND CONDEMNATION
13.1 FIRE AND OTHER CASUALTY DAMAGE TO DEMISED PREMISES.
If the Demised Premises (other than leasehold improvements) shall be
partially damaged by fire or other cause covered by extended coverage insurance,
other than by the fault or neglect of Tenant, Landlord shall as soon as
practicable after such damage occurs (taking into account the time necessary to
effectuate a satisfactory settlement with any insurance company) repair such
damage at Landlord's sole expense, and the Rent shall be reduced in proportion
to the floor area of the Demised Premises which is usable by Tenant until such
repairs are completed; provided, however, that (i) in no event shall Landlord
have any repair obligations in excess of insurance proceeds actually received by
Landlord, and (ii) Tenant's rental obligation shall abate only to the extent of
the proceeds actually received by Landlord under its rental reimbursement
insurance policy. If the Demised Premises are substantially damaged by fire or
other cause to such extent that (in Landlord's reasonable estimation) the damage
cannot be fully repaired within one hundred twenty (120) days from the date of
such damage, Landlord shall notify Tenant in writing ("CASUALTY NOTICE") and:
(a) Landlord shall have the option of electing not to repair the damage and
terminating this Lease effective ten days after such Casualty Notice, and (b)
Tenant shall have the right of terminating the Lease by notifying Landlord in
writing within ten days after receipt of such Casualty Notice. No compensation
or reduction of rent will be allowed or paid by Landlord by reason of
inconvenience, annoyance, or injury to business arising from the necessity of
repairing the Demised Premises or any portion of the Building.
To the extent that Landlord receives insurance proceeds covering
leasehold improvements, Landlord will repair leasehold improvements. Tenant
shall have no right to terminate the Lease in the event of damage to leasehold
improvements not covered by insurance proceeds received by Landlord.
<PAGE>
13.2 CONDEMNATION.
If the whole or a substantial part of the Demised Premises shall be
taken or condemned by any governmental authority for any public or quasi-public
use or purpose, then the term of this Lease shall cease and terminate as of the
date when title vests in such governmental authority, and Tenant shall have no
claim against Landlord (or otherwise) for any portion of the amount that may be
awarded as damages as a result of such taking or condemnation or for the value
of any unexpired term of the Lease; provided, however, that Tenant may assert
any claim that it may have against the condemning authority for compensation for
any fixtures owned by Tenant and for any relocation expenses compensable by
statute. The Rent, however, shall be abated on the date when such title vests in
such governmental authority. If less than a substantial part of the Demised
Premises is taken or condemned by any governmental authority for any public or
quasi-public use or purpose, the Rent shall be adjusted on a square footage
basis on the date when title vests in such governmental authority and the Lease
shall otherwise continue in full force and effect. For purposes hereof, a
substantial part of the Demised Premises shall be considered to have been taken
if more than fifty percent (50%) of the Demised Premises are unusable by Tenant.
ARTICLE 14
TENANT EVENTS OF DEFAULT AND LANDLORD REMEDIES
14.1 EVENTS OF DEFAULT DEFINED.
Each of the following events shall be a default ("EVENT OF DEFAULT") of
Tenant under this Lease:
(a) MINIMUM RENT EVENT OF DEFAULT: Failure of Tenant to make any
payment of Minimum Rent within ten (10) days written notice that the same is
due.
(b) ADDITIONAL RENT EVENT OF DEFAULT: Failure of Tenant to make
any payment of Additional Rent within ten (10) days written notice that the same
is due.
(c) COVENANT EVENTS OF DEFAULT: Failure of Tenant to perform or
comply with any provisions of this Lease to be performed or complied with by
Tenant, other than provisions for the payment of Minimum Rent or Additional
Rent, where such failure shall continue for a period of thirty (30) days after
written notice thereof by Landlord to Tenant, (provided that if such default is
of the type that is not reasonably capable of being cured within thirty (30)
days, then Tenant shall have such longer cure period in which to cure such
default, provided Tenant commences such cure within thirty (30) days after
written notice thereof by Landlord, and thereafter diligently prosecutes such
cure to completion).
(d) LEASE ATTACHMENT: The taking of this Lease or the Demised
Premises, or any part thereof, upon execution or by other process of law
directed against Tenant, or upon or subject to any attachment at the insistence
of any creditor of or claimant against Tenant, which execution or attachment
shall not be discharged or disposed of within thirty (30) days after the levy
thereof.
<PAGE>
(e) BANKRUPTCY EVENTS: Tenant or any guarantor of Tenant's
obligations hereunder: (i) admits in writing its inability to pay debts
generally as they become due; (ii) files a petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the Bankruptcy Act
(as now existing or in the future amended), or an answer or other pleading
admitting the material allegations of such a petition or seeking, consenting to
or acquiescing in the relief provided for under such Act; (iii) makes an
assignment of all or a substantial part of its property for the benefit of its
creditors; (iv) seeks or consents to or acquiesces in the appointment of a
receiver or trustee for all or a substantial part of its property or of the
Demised Premises; (v) is adjudicated a bankrupt or insolvent; or (vi) is the
subject of the entry of a court order without its consent, which order shall not
be vacated, set aside or stayed within sixty (60) days from the date of entry,
appointing a receiver or trustee for all or a substantial part of its property
or approving a petition filed against it for the effecting of an arrangement in
bankruptcy or for a reorganization pursuant to the Bankruptcy Act or for any
other judicial modification or alteration of the rights of creditors.
14.2 EVENTS OF DEFAULT JOT AFFECTED BY SECURITY DEPOSIT OR ACCEPTANCE
OF RENT.
The provisions of this ARTICLE 14 shall apply notwithstanding the
payment by Tenant of a Security Deposit. The receipt by Landlord of payments of
Rent, as such, accruing subsequent to the time of an Event of Default shall not
be deemed a waiver by Landlord of its rights and remedies under this Article 14.
14.3 REMEDIES UPON EVENT OF DEFAULT.
Upon the occurrence of an Event of Default, Landlord shall have the
right, at its election, then or at any time thereafter either:
(a) TERMINATION OF LEASE: To give Tenant written notice of
Landlord's intent to terminate this Lease on the date of the notice or on any
later date specified in the notice, and on such date Tenant's right to
possession of the Demised Premises shall cease and this Lease shall thereupon be
terminated; or
(b) REENTRY AND POSSESSION: Without demand or notice, to reenter
and take possession of all or any part of the Demised Premises, and expel Tenant
and those claiming through Tenant, and remove the property of Tenant and any
other person, either by summary proceedings or by action at law or in equity,
without being deemed guilty of trespass and without prejudice to any remedies
for nonpayment or late payment of Rent or breach of covenant. If Landlord elects
to reenter under this subsection, Landlord may terminate this Lease, or, from
time to time, without terminating this Lease, may relet all or any part of the
Demised Premises as agent for Tenant for such term or terms and at such rental
and upon such other terms and conditions as Landlord may deem advisable, with
the right to make alterations and repairs to the Demised Premises. No such
reentry or taking of possession of the Demised Premises by Landlord shall be
construed as an election on Landlord's part to terminate this Lease unless a
written notice of such intention is given to Tenant under SECTION 14.3(a.), or
unless the termination be decreed by a court of competent jurisdiction at the
request of Landlord.
<PAGE>
(c) WAIVER OF NOTICE, REDEMPTION. REPOSSESSION AND RESTORATION OF
LEASE: Tenant, on its own behalf and on behalf of all persons claiming through
Tenant, including all creditors, does hereby waive any and all rights and
privileges, so far as its permitted by law, which Tenant and all such persons
might otherwise have under any present or future law (i) to the service of any
notice of intention to reenter which may otherwise be required to be given, (ii)
to redeem the Demised Premises, (iii) to reenter or repossess the Demised
Premises, or (iv) to restore the operation of this Lease, with respect to any
dispossession of Tenant by judgment or warrant of any court, whether such
dispossession, reentry, expiration or termination be by operation of law or
pursuant to the provisions of this Lease.
14.4 LIABILITY OF TENANT.
If Landlord terminates this Lease pursuant to SECTION 14.3, Tenant
shall remain liable (in addition to accrued liabilities) for:
(A) (i) Minimum Rent, Additional Rent and any other sums provided for in this
Lease until the date this Lease would have expired had such termination not
occurred; (ii) any and all expenses (including attorneys' fees,
disbursements and brokerage fees) incurred by Landlord in reentering and
repossessing the Demised Premises, in curing any Event of Default, in
painting, altering, repairing or dividing the Demised Premises, in
protecting and preserving the Demised Premises by use of watchmen and
caretakers, and in reletting the Demised Premises; and (iii) any and all
expenses which Landlord may incur during the occupancy of any new tenant;
LESS:
(B) The net proceeds of any reletting prior to the date this Lease would have
expired if it had not been terminated.
Tenant agrees to pay to Landlord the difference between ITEMS (A) AND (B)
above for each month during the term, at the end of each such month. Any suit
brought by Landlord to enforce collection of such difference for any one month
shall not prejudice Landlord's right to enforce the collection of any difference
for any subsequent month. Tenant's liability shall survive the institution of
summary proceedings and the issuance of any writ of restitution thereunder.
14.5 LIQUIDATED DAMAGES.
If Landlord terminates this Lease pursuant to this ARTICLE 14, Landlord
shall have the right, at any time, at its option, to, require Tenant to pay to
Landlord, on demand, as liquidated and agreed final damages in lieu of Tenant's
liability under SECTION 14.4 the rent and all other charges which would have
been payable from the date of such demand to the date when this Lease would have
expired if it had not been terminated, minus the fair rental value of the
Demised Premises for the same period, discounted to present value at a discount
rate equal to five percent (5%) per annum. If the Demised Premises shall have
been relet for all or part of the remaining balance of the term by Landlord
after an Event of Default but before determination of such liquidated damages,
the amount of rent reserved upon such reletting shall be deemed the fair rental
value of the Demised Premises for purposes of the foregoing determination of
<PAGE>
liquidated damages. Upon payment of such liquidated and agreed final damages,
Tenant shall be released from all further liability under this Lease with
respect to the period after the date of demand.
14.6 ATTORNEYS' FEES.
In the event Tenant defaults in the performance of any of the terms,
covenants, agreements or conditions contained in this Lease and Landlord places
the enforcement of this Lease, or any part thereof, or the collection of any
Rent due, or to become due hereunder, or recovery of the possession of the
Demised Premises in the hands of an attorney, or files suit upon the same,
Tenant agrees to pay Landlord reasonable attorneys' fees.
14.7 NO JURY TRIAL.
Each of Landlord and Tenant waives all right to trial by jury in any
proceeding which may be instituted by Landlord against Tenant (or vice versa)
arising under or by virtue of this Lease.
14.8 RIGHT TO ENJOIN, ETC.
In the event of any breach or threatened breach by Tenant or any
persons) claiming through Tenant of any of the provisions contained in this
Lease, Landlord shall be entitled to enjoin such breach or threatened breach and
shall have the right to invoke any right or remedy allowed at law or otherwise
as if reentry, summary proceedings or other prescribed remedies were not
provided for in this Lease.
14.9 INTENTIONALLY DELETED.
14.10 REMEDIES CUMULATIVE.
All rights and remedies of Landlord under this Lease shall be
cumulative and shall not be exclusive of any other rights and remedies Landlord
may have in law or equity.
14.11 NO WAIVER OF TENANT DEFAULTS.
In the event Landlord institutes proceedings under the terms of this
Lease, and a compromise or settlement thereof shall be made, the same shall not
constitute a waiver of any covenant contained in the Lease nor of any of
Landlord's rights hereunder. No waiver by Landlord of any breach of any
covenant, condition or agreement in the Lease shall operate as a waiver of such
covenant, condition or agreement, or of any subsequent breach thereof. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
installments of Rent stipulated in this Lease shall be deemed to be other than
on account of the earliest stipulated Rent, nor shat! any endorsement or
statement on any check or letter accompanying a check for payment of Rent be
deemed an accord and satisfaction and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such Rent or to
pursue any other remedy provided in this Lease. No reentry by Landlord, an no
acceptance by Landlord of keys from Tenant, shall be considered an acceptance of
a surrender of the Lease.
<PAGE>
14.12 RIGHT OF LANDLORD TO CURE TENANT EVENTS OF DEFAULT.
If Tenant defaults in the making of any payment or in the doing of any
act herein required to be made or done by Tenant, taking into account applicable
cure periods, then after ten (10) days notice from Landlord, Landlord may, but
shall not be required to, make such payments or do such act, and collect the
amount thereof as Additional Rent together with interest on such amount from the
date of payment by Landlord until the date of repayment by Tenant at the Default
Rate (as defined in SECTION 14.14); but the making of such payment or the doing
of such act by Landlord shall not operate to cure such Event of Default or to
estop Landlord from the pursuit of any remedy to which Landlord would otherwise
be entitled.
14.13 LATE PAYMENTS AND INTEREST.
If Tenant fails to pay any installment of Rent on or before the fifth
day of the calendar month when such installment is due and payable, such unpaid
installment shall bear interest at the Default Rate (as defined in .SECTION
14.14), thirty (30) days from the date such installment became due and payable
to the date of payment thereof by Tenant. Such interest shall constitute
Additional Rent hereunder due and payable with the next monthly installment of
Rent. In addition, Tenant shall pay to Landlord, as a "late charge" five percent
(5%) of any payment herein required to be made by Tenant which is more than ten
(10) days late to cover the costs of collecting accounts past due.
14.14 DEFINITION OF DEFAULT RATE.
As used herein, "DEFAULT RATE" means the lower of: (i) the average
prime lending rate as reported by the Wall Street Journal, plus 2%, or (ii) the
maximum rate permitted by law.
14.15 BREACH BAR LANDLORD.
Landlord shall not be deemed in breach of this Lease unless Landlord
fails within a reasonable time to perform an obligation required to be performed
by Landlord. For purposes of this Section 14.15, a reasonable time shall in no
event be less than thirty (30) days after receipt by Landlord, and by any
lenders) whose name and address shall have been furnished to Tenant in writing
for such purpose, of written notice specifying wherein such obligation of
Landlord has not been performed; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Landlord shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
ARTICLE 15
SUBORDINATION, ATTORNMENT AND RELATED PROVISIONS
15.1 SUBORDINATION.
(a) SUBORDINATION GENERALLY TENANT'S CERTIFICATE: This Lease is
subject and subordinate to all ground or underlying leases and to all mortgages
and/or deeds of trust which may now or (subject to Section 15.1(d)) hereafter
affect the Project or any part thereof, and to all
<PAGE>
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be self-operative and no further instrument of subordination
shall be required by any mortgagee or trustee. In confirmation of such
subordination, Tenant shall execute promptly any certificate that the Landlord
or the party secured by any deed of trust, or any successor in interest may
request.
(b) PROVISIONS APPLICABLE TO MORTGAGE OR DEED OF TRUST
SUBORDINATION: Notwithstanding the foregoing, the party secured by any such deed
of trust shall have the rights to recognize this Lease and, in the event of any
foreclosure sale under such deed of trust, this Lease shall continue in full
force and effect at the option of the party secured by such deed of trust or the
purchaser under any such foreclosure sale. Tenant covenants and agrees that it
will, at the written request of the party secured by any such deed of trust,
execute, acknowledge and deliver any instrument that has for its purpose and
effect the subordination of said deed of trust to the lien of this Lease.
The party secured by such deed of trust and any successor in interest
shall not be bound by any payment in Rent in advance for more than thirty (30)
days or by any amendment or modification of this Lease made subsequent to the
date of recordation of such deed of trust without the consent of the party
secured by such deed of trust or such successor in interest.
(c) PROVISIONS APPLICABLE TO GROUND OR UNDERLYING LEASE
SUBORDINATION: At the option of any landlord under any ground or underlying
(ease to which the Lease is now or may hereafter become subject or subordinate,
Tenant agrees that neither the cancellation nor termination of such ground or
underlying lease shall by operation of law or otherwise, result in cancellation
or termination of this Lease or the obligations of the Tenant hereunder, and
Tenant covenants and agrees to attorn to such landlord or to any successor to
Landlord's interest in such ground or underlying lease, and in that event, this
Lease shall continue as a direct lease between the Tenant herein and such
landlord or its successor. Such landlord or successor under such ground or
underlying lease shall not be bound by any prepayment on the part of Tenant of
any Rent for more than one month in advance, so that Rent shall be payable under
this Lease in accordance with its terms, from the date of the termination of the
ground or underlying lease, as if such prepayment had not been made. Such
landlord or successor under such ground or underlying lease shall not be bound
by this Lease or any amendment or modification of this Lease unless, prior to
the termination of such ground or underlying lease, a copy of this Lease or
amendment or modification thereof, as the case may be, shall have been delivered
to such landlord or successor.
(d) NON-DISTURBANCE: With respect to all ground or underlying
leases ("ground lessors") and to all mortgages and/or deeds of trust ("lenders")
which may hereafter affect the Project, Tenant's subordination of this Lease
shall be subject to written assurance (a "non-disturbance agreement") in
commercially reasonable form, from the lender or ground lessor (as applicable)
that Tenant's possession and this Lease, including any options to extend the
term hereof, will not be disturbed so long as Tenant is not in default under the
Lease and attorns to the record owner of the Demised Premises.
<PAGE>
With respect to the ground lessor as of the date hereof (MWAA),
Landlord shall obtain a non-disturbance agreement from such ground lessor on or
prior to the Lease Commencement Date.
15.2 ESTOPPEL CERTIFICATES.
Tenant agrees, at any time and from time to time, upon not less than
five (5) days prior written notice by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing (i) certifying that this Lease has
been unmodified since its execution and is in full force and effect (or if there
have been modifications, that the Lease is in full force and effect, as
modified, and stating the modifications), (ii) stating the dates, if any, to
which the Rent and sums hereunder have been paid by Tenant, (iii) stating
whether or not to the knowledge of Tenant, there are then existing any Landlord
or Tenant defaults under the Lease (and, if so, specifying the same), and (iv)
stating the address to which notices to Tenant should be sent. Any such
statement delivered pursuant hereto shall provide that such statement may be
relied upon by Landlord or any prospective purchaser or mortgagee of the Project
or any part therein. Tenant's failure to execute and deliver such statement
within the time specified shall be deemed the equivalent of the delivery of a
statement to the effect that Landlord is in full compliance with the terms of
this Lease.
15.3 MODIFICATION OF LEASE FOR FINANCING REQUIREMENTS.
In the event that any person or entity now or hereafter providing
financing to Landlord for the Project requires, as a condition of such
financing, that this Lease be modified, Landlord shall submit such required
modifications to Tenant, and Tenant shall enter into and execute a written
amendment hereto incorporating such required modifications within fifteen (15)
days after the same has been submitted to Tenant by Landlord, PROVIDED, THAT,
such modifications (a) are reasonable, (b) do not adversely affect Tenant's use
of the Demised Premises as herein permitted, (c) do not materially affect any of
the provisions of this Lease as determined in Tenant's reasonable discretion,
and (d) do not increase the rentals and other sums required to be paid by Tenant
hereunder. Any changes requested by any person or entity providing financing for
the Project shall be deemed to materially affect the provisions of this Lease
within the meaning of clause (c) of the immediately preceding sentence and,
accordingly, Tenant shall not be obligated to consent to any changes requested
or sought to be imposed pursuant to this Section 15.3 if any of such changes
would: (i) result in a change of the term of this Lease or any of Tenant's
options to extend or renew the term of this Lease; (ii) result in a change of
the size or location of the Demised Premises; (iii) affect Tenant's entitlement
to non-disturbance under this Lease as a condition of subordinating its interest
hereunder to the interest of the mortgagee or other interested party; (iv)
affect Tenant's option to terminate this Lease as a result of any fire or other
casualty to the extent Tenant is permitted to do so under Article 13; (v)
materially and adversely affect the operation or conduct of Tenant's business;
or (vi) impose any additional financial responsibility or obligation on Tenant.
<PAGE>
ARTICLE 16
LIMITATION OF LANDLORD'S LIABILITY; TENANT INDEMNITY OBLIGATIONS
16.1 NO PERSONAL OBLIGATIONS; LIABILITY LIMITED TO BUILDING.
The obligations of Landlord under this Lease do not constitute personal
obligations of the directors, officers, or shareholders of Landlord, and Tenant
shall look solely to the real estate that is the subject of this Lease and to no
other assets of the Landlord for satisfaction of any liability in respect of
this Lease and will not seek recourse against the directors, officers or
shareholders of Landlord or any of their personal assets for such satisfaction.
16.2 FORCE MAJEURE.
Neither Tenant nor Landlord shall be required to perform any of its
obligations under this Lease (other than the payment of Rent), nor be liable for
lass or damage for failure to do so, nor shall either party be released from any
of its obligations under this Lease, where such failure arises from or through
acts of God, strikes, lockouts, labor difficulties, explosions, sabotage,
accidents, riots, civil commotions, acts of any foreign country, fire and
casualty, energy shortage, or other force majeure causes beyond the reasonable
control of such party, unless such loss or damage results from willful
misconduct or gross negligence by such party.
16.3 NO LIABILITY FOR DAMAGE TO PERSONAL PROPERTY AND PERSON.
All property of Tenant, its agents or invitees, or of any other person,
in or on the Demised Premises or the Project, shall be and remain at the sole
risk of Tenant or such agent, invitee or person. Landlord shall not be liable
for any damage to or theft or loss of such property, whether or not caused by
the act or omission of any person, or by the bursting, leaking or overflowing of
water, sewer, steam or sprinkler pipes, heating or plumbing fixtures, air
conditioning or heating failure, gas, noxious odors or noise, or any other act
or thing. Landlord shall not under any circumstances be liable for the
interruption or loss of Tenant's business that may result from any of the acts
or causes described above. Landlord shall not be liable for any personal injury
to Tenant, its agents or invitees, or to any other persons, arising from the
use, occupancy or condition of the Demised Premises, the Building or the Real
Property other than liability for personal injuries resulting directly from the
gross negligence or willful misconduct of Landlord, and then only to the extent
that Tenant is not compensated therefor by insurance.
16.4 TENANT'S INDEMNITY OBLIGATIONS.
Tenant shall indemnify Landlord and its agents and employees and save
it harmless from and against any and all claims, actions, damages, liabilities
and expense (including reasonable attorneys fees) in connection with loss of
life, personal injury or damage to property arising from, resulting from, or
related to (in whole or in part): (i) any occurrence in, upon or at the Demised
Premises, or (ii) the occupancy or use by Tenant (including Tenant's agents,
contractors, employees, servants, permitted subtenants, invitees or licensees)
of the Demised Premises, or (iii) any negligent act or omission of Tenant, its
agents, contractors, employees, servants, permitted subtenants, invitees or
licensees, or (iv) any Event of Default, breach, violation or nonperformance of
this Lease by Tenant (collectively, (i) through (iv), hereinafter referred to as
"TENANT INDEMNITY OBLIGATIONS").
<PAGE>
In the event that Landlord or its agents and employees shall, without
fault on its part, be made a party to any litigation commenced by or against
Tenant or relating to any Tenant Indemnity Obligations, then Tenant shall
protect and hold Landlord harmless and shall pay all costs, expenses and
reasonable attorneys' fees incurred or paid in connection with such litigation.
Tenant shall pay, satisfy and discharge any and all judgments, orders and
decrees which may be entered or recovered against Landlord in connection with
the foregoing.
Notwithstanding any provision to the contrary contained in this Article
16, none of the indemnification provisions of Section 16.4 shall apply in any
respect to injuries, damages, liabilities, losses, costs, or expense arising in
whole or in part from Landlord's gross negligence or willful misconduct.
ARTICLE 17
PARKING
17.1 ALLOTTED PARKING AND DESIGNATED PARKING AREAS.
So long as Tenant is not in default under this Lease, Landlord hereby
grants to Tenant a non-exclusive license (the "PARKING LICENSE") to park 32 cars
in the rear parking lot ("ALLOTTED PARKING") (3 parking spaces for every 1,000
sq. ft. of leased space) (subject to increase in the event the floor area leased
by Tenant increases), for use solely by Tenant and Tenant's employees, guests
and invitees in the spaces which will hereafter be designated by Landlord (the
"DESIGNATED PARKING AREAS"). The use by Tenant, its employees, guests or
invitees of more than the Allotted Parking after thirty (30) days notice by
Landlord ("OVER-USE") shall be deemed an Event of Default under this Lease and
Landlord may exercise such remedies as are provided pursuant to ARTICLE 14 of
the Lease. Landlord shall not be responsible to Tenant for enforcing the Parking
License or violation of the provisions of this ARTICLE 17 by co-tenants of the
Building, by third parties, or guests or visitors to the Building.
17.2 REVOCATION OR REDUCTIONS OF PARKING LICENSE.
Landlord shall have the right to: (i) revoke the Parking License in the
event of an Overuse; or (ii) in the event of any occurrence not caused by
Landlord which reduces the number of parking spaces in the Designated Parking
Area, reduce the Allocated Parking (with no adjustment to Rent) to the extent of
Tenant's proportionate share of the number of parking spaces by which the
Designated Parking Area is so reduced.
17.3 NO LIABILITY FOR DAMAGE TO VEHICLES.
Landlord shall not be liable for damage to any vehicle using the
parking facilities pursuant to this Lease, including theft, collision, fire, or
any other damage to such vehicle; Landlord shall not be responsible for articles
left in such vehicles; Landlord shall not be liable for loss of use of any such
vehicles which may be damaged while using the parking facilities. In addition,
Landlord shall not be liable for any injury to any person using the parking
facilities regardless of the cause of such injury; all persons using the parking
facilities shall do so at their own risk. Tenant shall indemnify and hold
Landlord and its agents harmless from all loss, damage, liability, cost or
expense incurred, suffered, or claimed by any person or entity by
<PAGE>
reason of injury, loss or damage to any person, property, or business resulting
from the Tenant's negligence or negligent or unlawful use of the parking
facilities.
17.4 PARKING LICENSE NOT ASSIGNABLE.
The Parking License may not be assigned by the Tenant without the prior
written consent of Landlord.
ARTICLE 18
RENEWAL AND EXTENSION OPTIONS
NONE
ARTICLE 19
HOLDING OVER
Tenant will have no right to remain in possession of all or any part of
the Demised Premises after the expiration of the term of this Lease. If Tenant
remains in possession of all or any part of the Demised Premises after the
expiration of the term, with the express or implied consent of Landlord: (a)
such tenancy will be deemed to be a periodic tenancy from month-to-month only;
(b) such tenancy will not constitute a renewal or extension of this Lease for
any further term; and (c) such tenancy may be terminated by Landlord upon the
earlier of 30 days' prior written notice or the earliest date permitted by law.
In such event, Minimum Rent will be increased to an amount equal to 150% of the
Minimum Rent payable during the last month of the term, and any other sums due
under this Lease will be payable in the amount and at the times specified in
this Lease. Such month-to-month tenancy will be subject to every other term,
condition, and covenant contained in this Lease.
ARTICLE 20
MISCELLANEOUS
20.1 BROKERS.
Tenant represent and warrants that Tenant has not dealt with any broker
in connection with this Lease and that insofar as Tenant knows, no other broker
participated in or negotiated this Lease or is- entitled to any commission in
connection therewith and Tenant agrees to defend, indemnify and hold Landlord
harmless from any claims by any broker alleging to have acted on behalf of
Tenant. The execution and delivery of this Lease by Landlord shall be conclusive
evidence that Landlord has relied upon the foregoing representation and warranty
in making this Lease.
Tenant has previously negotiated with AdTechs regarding Tenant's lease
of the subject premises Attached hereto as Exhibit E is AdTechs' representation
that no broker fees are due and payable by Landlord.
<PAGE>
20.2 NOTICES
All notices or other communications hereunder shall be in writing and
shall be deemed duly given if delivered in person or sent by certified or
registered mail, return receipt requested, first class, postage prepaid, as
follows:
(a) If to Landlord:
RHI Holdings, Inc.
45025 Aviation Drive. Suite 400
Dulles, VA 20166-7516
or to such other address as Landlord may designate from
time to time by notice to Tenant given pursuant to the
provisions of this Section.
(b) If to Tenant:
At the Demised Premises, or to such other address as
Tenant may designate from time to time by notice to
Landlord given pursuant to the provisions of this Section.
20.3 COVENANTS OF LANDLORD.
Landlord covenants that it has the right to make this Lease, and that
if Tenant shall pay the rental and perform all of Tenant's obligations under
this Lease, Tenant shall, during the term hereof, freely, peaceably and quietly
occupy and enjoy the full possession of the Demised Premises without molestation
or hindrance by Landlord or any party claiming through or under Landlord.
Landlord represents and warrants to Tenant as follows: (a) Landlord
owns the Project, subject to the operation and effect of a ground lease (the
"Ground Lease") with the Metropolitan Washington Airports Authority (the "Ground
Lessor"); (b) Landlord has the full power and authority to. enter into this
Lease and to perform all of its obligations hereunder without the need to obtain
any consent or approvals of any other party or parties other than the Ground
Lessor; (c) upon due execution and delivery of this Lease by Landlord, this
Lease shall constitute the legal, valid and binding obligation of Landlord,
fully enforceable against Landlord in accordance with its terms; (d) the
execution and delivery of this Lease by Landlord and the performance by Landlord
in accordance with its terms will not conflict with, cause a default under, or
otherwise violate, the terms of the Ground Lease or any bond, note, security
instrument, indenture, contract or agreement.
20.4 SUCCESSORS AND ASSIGNS.
The terms, covenants and conditions hereof shall be binding upon and
inure to the successors in interest and assigns of the parties hereto. Landlord
may freely and fully assign its interest hereunder. The term "Landlord" as used
throughout this Lease shall mean solely the owner of Landlord's interest in the
Building, whomever that may be at the relevant time, so that in the event of any
sale or transfer of Landlord's interest in the Building any prior Landlord shall
<PAGE>
be freed and relieved of all covenants and obligations of Landlord hereunder,
except those that relate to any duties or obligations accruing prior to the
effective date of such transfer.
20.5 TIME OF THE ESSENCE.
Time is of the essence with respect to Tenant's monetary obligations in
this Lease.
20.6 NO RECORDATION.
Tenant's recordation of this Lease or any memorandum or short form
Lease will be void and a default hereunder.
20.7 CAPTIONS.
The captions of the various articles and sections of this Lease are for
convenience only and do not define, limit, describe, or construe the contents of
such articles or sections.
20.8 LANDLORD APPROVALS.
Whenever in this Lease action or approval on the part of the Landlord
is required or optional, it is understood that such action or approval may
require that such action be taken or approval given on terms acceptable to
Landlord's mortgagee and ground lessor.
20.9 LANDLORD'S FEES.
Whenever Tenant requests Landlord to take any action or give any
consent required or permitted under this Lease, Tenant will reimburse Landlord
for all of Landlord's reasonable costs incurred in reviewing the proposed action
or consent, including without limitation reasonable attorneys', engineers' or
architects' fees (such costs not to exceed. $1,000 in the aggregate, such amount
to be increased annually during the term hereof by 5%), within 10 days after
Landlord's delivery to Tenant of a statement of such costs. Tenant will be
obligated to make such reimbursement without regard to whether Landlord consents
to any such proposed action.
20.10 ENTIRE AGREEMENT.
This Lease, together with the Exhibits and any Addenda attached hereto,
contain and embody the entire agreement of the parties hereto, and no
representations, inducements, or agreements, oral or otherwise, between the
parties not contained in this Lease and Exhibits and Addenda, shall be of any
force or effect. This Lease may not be modified, changed or terminated in whole
or in part in any manner other than by an agreement in writing duly signed by
both parties hereto.
20.11 APPLICABLE LAWS.
It is the agreement of the parties that this Lease is to be construed
in accordance with the laws of the Commonwealth of Virginia.
<PAGE>
20.12 NO OPTION.
The submission of this Lease for examination by Tenant does not
constitute a reservation of or option for the Demised Premises, and this Lease
shall become effective as a Lease only upon execution and delivery thereof by
Landlord and Tenant.
20.13 PARTIAL INVALIDITY.
If any provision of this Lease or the application thereof to any person
or circumstance shall to any extent be held void, unenforceable or invalid, then
the remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is held void, unenforceable or
invalid shall not be effected thereby, and each provision of this Lease shall be
valid and enforced to the fullest extent permitted by law.
20.14 PRONOUNS.
Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places in which the context may require such substitution or
substitutions:
ARTICLE 21
ENVIRONMENTAL COMPLIANCE
Tenant shall not store, treat, dispose, handle or otherwise use any
hazardous or toxic substances, wastes, or materials, or other pollutants or
contaminants upon the Demised Premises without the prior written consent of
Landlord; provided, however that Tenant shall be allowed to store and use such
amounts of cleaning fluids and lubricants as are reasonably necessary to conduct
its business activities upon the Demised Premises subject to the condition that
all such cleaning fluids and lubricants shall be stored, used, disposed of
and/or removed from the Demised Premises in compliance with manufacturer's
directions and all applicable governmental laws and regulations. Tenant shall at
all times remain fully responsible and liable for compliance with all federal,
state and local statues, ordinances, regulations and other requirements relating
to human health or the environment which are applicable to Tenant's use of the
Demised Premises, including, but not limited to, those respecting the storage,
treatment, disposal, handling, and release of hazardous or toxic substances,
wastes, or materials, or other pollutants or contaminants. Tenant agrees to
indemnify and to hold Landlord harmless from any and all claims, causes of
action, damages, penalties, and costs (including attorneys' fees, consultant
fees, and related expenses) which may be asserted against or incurred by
Landlord resulting from or related to: (i) Tenant's breach, violation or default
of the terms, conditions and covenants of this ARTICLE 21; (ii) the spill,
disposal or other release or threatened release of any hazardous or toxic
substance, waste or material, or any other pollutant or contaminant, on the
Demised Premises or the Project caused by Tenant, its employees, agents or
contractors; or (iii) any violation or alleged violation of any environmental
statute, ordinance, regulation or other requirement caused by Tenant, its
employees, agents or contractors. Tenant's obligation to indemnify and hold
Landlord harmless pursuant to this ARTICLE 21 shall survive the expiration or
termination of this Lease.
<PAGE>
ARTICLE 22:
INDEX OF DEFINED TERMS
The following terms have the meaning ascribed to them in the Sections
noted below:
<TABLE>
<CAPTION>
TERM SECTION WHERE DEFINED
<S> <C>
Additional Rent................................................Section 3.2
Adjustment Dates...............................................Section 4.1
Allotted Parking..............................................Section 17.1
Annual Expense Statement.......................................Section 5.5
Applicable Laws................................................Section 1.2
Building.......................................................Section 1.1
Casualty Notice...............................................Section 13.1
Common Areas...................................................Section 1.3
Default Rate.................................................Section 14.14
Demised-Premises..............................................Section 1 .1
Designated Parking Areas......................................Section 17.1
Estimated Taxes and Expenses...................................Section 5.4
Event of Default..............................................Section 14.1
Expense Base...................................................Section 5.1
Initial Improvements...........................................Section 8.1
Landlord............................................Preamble; Section 20.4
Lease.............................................................Preamble
Lease Commencement Date..........................................Article 2
Minimum Rent...................................................Section 3.1
Non-Subrogated Loss...........................................Section 11.7
Operating Expenses.............................................Section 5.2
Over-Use......................................................Section 17.1
Parking License...............................................Section 17.1
Project........................................................Section 1.1
Real Estate Taxes..............................................Section 5.3
Real Property..................................................Section 1.1
Rent...........................................................Section 3.4
Security Deposit...............................................Section 6.1
Tax Base.......................................................Section 5.1
Tenant............................................................Preamble
Tenant Indemnity Obligations..................................Section 16.4
Tenant Remove Items...........................................Section 10.3
</TABLE>
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
[NEXT PAGE IS THE SIGNATURE PAGE]
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under
seal as of the day and year first hereinbefore written.
LANDLORD:
RHI HOLDINGS, INC.
<TABLE>
<S> <C>
Attest: By:
----------------------------------------
Title:
- ---------------------------------- -------------------------------------
TENANT:
VASTERA CORPORATION
Attest: By:
----------------------------------------
Title:
- ---------------------------------- -------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
Demised Premises
See Attached
Exhibit B
Rules and Regulations
Page 1.
<PAGE>
EXHIBIT B
Rules and Regulations
1. Tenant and its agents and employees shall not loiter in or upon
or in any way obstruct the grounds, sidewalks, driveways or parking areas, or
the common halls, passages, exits, entrances, corridors, stairways of
elevators, in or about the Building in which the Demised Premises are
located, or use for any purpose other than for ingress to and egress from the
Demised Premises. These areas are not for the use of the general public, and
Landlord reserves the right to control and prevent access to them by all
persons whose presence in the judgement of the Landlord will be prejudicial
to the safety, character, reputation and interests of the Building and its
Tenants. However, nothing in these Rules and Regulations shall be construed
to prevent access by persons with whom Tenant usually deals in the ordinary
course of its business, unless those persons violate the Rules and
Regulations of the Building or are engaged in illegal activities.
2. Landlord reserves the right to control ingress and egress to and
from the Building and/or to close and keep locked all entrances and exits
doors of the Building on Saturdays, Sundays and federal holidays, on other
days between the hours of 6:00 p.m. and 7:00 a.m., and during such other
times as Landlord deems advisable for the adequate security of the Building.
Internal access in and use of the Building and the Demised Premises at such
times shall be subject to such rules and regulations for use of cardkeys
issued to Tenant. Tenant and its agents and employees, and any other persons
entering or leaving the Building at such times may be required to sign the
Building register, and the security. officer of agent of Landlord in charge
shall have the right to refuse admittance to any person not possessing
satisfactory identification and authorization. Landlord assumes no
responsibility with respect to and shall not be liable for any damages
resulting from any security measures, cardkey use or the admission or
non-admission of any person, authorized or unauthorized, into the Building.
Landlord shall provide Tenant with three (3) building access card
key passes per 1,000 square feet leased. Any additional or replacement cards
shall be subject to Landlord's consent requirement, and subject to a maximum
charge of $10.00 per card (such amount increased by 5% each calendar year
during the term hereof).
3. Tenant and its agents and employees shall not make, or permit to
be made, any noise that is annoying, unpleasant or distasteful, whether by
the use of any musical instrument, radio, television set, other audio device
or otherwise, or cause or permit any unusual or objectionable odors to be
product upon or emanate form the Demised Premises, or in any other way
disturb or interfere with other tenants or their agents, employees or
invitees.
4. No animals, birds, bicycles or other vehicles shall be brought
into or kept within the Demised Premises or any other part of the Building.
5. No flammable, combustible, weapons, or explosive fluid chemical
or substance shall be brought into or kept within the Demised Premises or any
other part of the Building, and Tenant and
Exhibit B
Rules and Regulations
Page 1.
<PAGE>
its agents and employees shall obey and comply with all fire regulations and
procedures applicable to the Demised Premises and the Building.
6. Tenant and its agents and employees shall not permit to be done
any cooking upon the Demised Premises, or any other part of the Building,
without prior written consent of the Landlord, other than microwave cooking
in the galley space of the Demised Premises. Tenant is entitled to maintain a
"galley kitchen" in the Demised Premises, which shall include a sink,
dishwasher, and one or more microwaves but which shall not include a stove.
The galley kitchen may include vending machines, but only if such machines
are serviced by the cafeteria operated in the basement of the building.
Tenant is entitled to maintain soda vending machines (but not food vending
machines) in the Demised Premises.
7. Smoking is permitted only outside the Building. Tenant and its
agents and employees shall not throw cigar or cigarette butts or other
substances or litter of any kind in or about the Building except in
receptacles placed for that purpose in the back entrance to the Building.
8. Tenant shall not use the Demised Premises for manufacturing or
storing goods (other than courtesy or demonstration copies of software
developed and sold by Tenant), wares or merchandise within the Demised
Premises, or permit any auction to be conducted within or upon the Demised
Premises or the Project (consisting of the Building and all Real Property and
Common Areas adjacent to the Building).
9. Furniture, equipment, safes, freight and bulky items shall be
moved into and out of the Building only with prior coordination with the
Landlord.
10. Tenants, their agents, employees and invitees shall abide by all
of the vehicle registration and parking regulations described herein.
Landlord may exercise its right to have vehicles towed at the owner's or
operator's expense for violations of this regulation.
Vehicle owners or users shall register any vehicle parked in the
Building parking areas. Information provided must be updated in the event of
any change. Unregistered vehicles are subject to being towed. Daily parking
permits are available for temporary use vehicles.
All parking in the north (front) lot is reserved for either visitors
or designated employees. All other Tenant employees, agents and ,invitees are
prohibited form parking in this lot, event for a short period of time.
The majority of spaces in the north (front) lot closest to the
Building are reserved for either designated employees or handicapped persons.
Reserved spaces are marked and restrictions apply 24 hours a day, 7 days per
week.
Standing, stopping or parking is prohibited at the south (rear)
entrance to the Building. This area is designated as a fire lane, handicapped
entrance and pedestrian crosswalk; this entrance also provides the only
access to the basement parking.
Exhibit B
Rules and Regulations
Page 2.
<PAGE>
Loading and unloading shall be done in the designated areas along
the metal fence.
Parking in the roadway or outside of marked lanes is prohibited.
Except in the case of a safety hazard, violations of these
regulations will result in a violation notice being affixed to the windshield
and the incident will be recorded. A second violation will result in the
vehicle being towed at the owner's or operator's expense. Vehicles creating a
safety hazard will be towed immediately.
11. Tenants, their agents, employees, and invitees shall not smoke
in the common hallways, elevators, elevator lobbies, main lobby, and dining
room. Smoking in tenant spaces is at the discretion of the tenants, subject
to applicable law.
12. EXERCISE FACILITIES. Tenant may use the shower rooms (male and
female) in the basement of the Building. If Landlord in the future builds an
exercise facility, Tenant will be authorized to use such facility on the same
terms as other tenants use the same (non-discriminatory basis). Landlord has
no plans to provide an exercise facility.
Exhibit B
Rules and Regulations
Page 3.
<PAGE>
AMENDMENT TO LEASE AGREEMENT
THIS AMENDMENT TO LEASE AGREEMENT (the "LEASE AMENDMENT") is made as a September
1, 1997 (the "EFFECTIVE DATE"), by and between RHI Holdings, Inc., a Delaware
corporation ("Landlord") and Vastera, Inc. (p/k/a Export Software International,
Inc.) ("Tenant").
RECITALS
A. Pursuant to a Lease Agreement dated as of August 20, 1996, by and
between Landlord and Tenant (the "Lease"), Landlord leased to Tenant
certain premises (approximately 17,005 sq. ft.) on the second floor of
the building known as The Fairchild Building (the "BUILDING"), located
at Washington Dulles International Airport, Chantilly, Loudoun County,
Virginia, all as more particularly described in the Lease.
B. Landlord and Tenant desire to amend the Lease, to provide for the lease
of additional space (approximately 819 sq. ft.) on the first floor of
the Building.
C. Capitalized terms used but not otherwise defined herein have the
meaning ascribed to them in the Lease.
NOW, THEREFORE, in consideration of the premises and the provisions contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby amend
and modify the Lease as follows:
1. DEMISED PREMISES: Prior to this Lease Amendment, the Demised Premises
consisted of an aggregate of 17,005 sq. ft. of rentable are on the
second floor of the Building, as shown on Exhibit A of the Lease (the
"OLD SPACE"). From and after the Effective Date, the Demised Premises
shall include an additional 819 sq. ft. of rentable area on the first
floor of the Building (Suite 100), as shown on Exhibit A to this Lease
Amendment (the "NEW SPACE"). Accordingly, from and after the Effective
Date, the aggregate Demised Premises under the Lease shall consist of
17,824 square feet of rentable area.
2. TERM: The term for the New Space shall be coterminous with the
remaining term of the Lease (including any Renewal Terms). The New
Space is accepted subject to all the terms, conditions and obligations
under the Lease and shall (for all purposes) be deemed Demised Premises
under the Lease.
3. ACCEPTANCE OF NEW SPACE IN "AS IS" CONDITIONS: Landlord shall have no
obligation to do any work or perform any service with respect to the
New Space, which the Tenant hereby accepts its existing "as is"
condition. Landlord grants to Tenant the right to alter and remodel the
New Space, at Tenant's expense, for Tenant's intended use in
conjunction with the commencement of the term for the New Space ("NEW
SPACE INITIAL IMPROVEMENTS"); provided, however, that:
LANDLORD APPROVAL: No New Space Initial Improvements shall be made
without first submitting the plans thereof and receiving the sanction
of the Landlord.
<PAGE>
PERMITS: No alterations shall be undertaken until Tenant shall have
procured and paid for all necessary permits or authorizations from any
federal, state or local governmental entity, board or agency having
jurisdiction. Without limitation, Tenant shall obtain all necessary
approvals from the Ground Lessor (Metropolitan Washington Airports
Authority).
PROFESSIONAL SUPERVISION: All alternations shall be conducted under the
supervision of an architect or engineer selected by Tenant and approved
in writing by Landlord (which approval shall not be unreasonably
withheld).
WORK IN ACCORDANCE WITH APPROVED PLANS: All alterations shall be made
in accordance with detailed plans and specifications and cost estimates
prepared by such architects or engineers and approved in writing by
Landlord (which approval shall not be unreasonably withheld).
PROMPT COMPLETION, IN COMPLIANCE WITH ALL LAWS: All alterations shall
be made by Tenant promptly (unavoidable delays excepted) and in a good
and workmanlike manner, in compliance with all applicable permits and
authorizations and building codes, zoning laws and all other applicable
laws, rules, ordinances, regulations and similar requirements of any
federal, state or local governmental entity, board or agency having
jurisdiction.
CASH PAYMENT/NO LIENS: The cost of all alterations shall be paid in
case or its equivalent, so that the Demised Premises shall at all times
be free of liens for labor and material supplied or claim to have been
supplied to the Demised Premises.
INDEMNIFICATION AND HOLD HARMLESS: Tenant shall indemnify Landlord and
its agents and employees and same it harmless from and against any and
all loss, claims, actions, damages, liabilities and expense (including
reasonable attorneys fees) in connection with or arising from the
alterations, or in connection with or arising from a breach of the
covenants set forth in this Section regarding alterations.
DELIVERY OF INSURANCE CERTIFICATES: Alterations shall not commence
until Tenant shall have obtained comprehensive general liability and
worker's compensation insurance in an amount of not less than
$1,000,000 per person, $5,000,000 per occurrence, and $5,000,000 for
damages or injury to property, with not more than $2,500 deductible.
Prior to commencement of alterations, Tenant shall have delivered
certificates of insurance to Landlord, issued by insurance companies
reasonably acceptable to Landlord, naming Landlord and Landlord's
Lenders as additional insured parities.
OTHER IMPROVEMENTS: Improvements or alterations made after the New
Space Initial Improvements are completed shall be subject to all the
terms and conditions of Article 9 of the Lease.
4. MINIMUM RENT: From and after the Effective Date, Minimum Rent shall be
$16 per rentable square foot per year for the Old Space, and $16.50 per
rentable square foot for the New Space; aggregate of $285,593.50 per
year; payable in equal monthly installments of $23,799.46; payable in
advance on the first day of each calendar month.
2.
<PAGE>
Minimum Rent shall be subject to annual escalation as provided below.
5. ANNUAL ESCALATIONS TO MINIMUM RENT. On November 1 of each year during
the remaining term of the Lease (including any Renewal Terms) Minimum
Rent shall increase by 3%, as provided in Article 4 of the Lease.
The first such increase shall be made on November 1, 1997.
6. ADDITIONAL RENT. Tenant shall continue to pay as additional rent its
proportionate share of Operating Expenses and Real Estate Taxes, as
provided in Article 5 of the Lease.
Landlord and Tenant agree that from and after the Effective Date,
Tenant's proportionate share shall be 15.06%, determined as follows:
<TABLE>
<S> <C>
Total Footage in Building: 118, 349
Demised Premises: 17,824
Tenant's Share 15.06%
</TABLE>
7. ALLOTTED PARKING AND DESIGNATED PARKING AREAS. Section 17.1 of the
Lease is hereby amended to increase the Allotted Parking (presently 51
cars) by an additional 2 spaces (3 parking spaces for every 1,000 sq.
ft. of New Space), for use solely by Tenant and Tenant's employees,
guests and invitees in the spaces which will hereafter be designed by
Landlord.
8. TENANT'S INSURANCE. On or prior to the Effective Date, Tenant shall
deliver to Landlord evidence of the insurance required under Article 11
of the Lease, showing coverage for the Demised Premises (including the
New Space).
9. EFFECT OF AMENDMENT. Except as amended hereby, the Lease shall remain
unmodified, and in full force and effect. In the event of any
inconsistencies between this Lease Amendment and the Lease, this Lease
Amendment shall govern.
10. GOVERNING LAW. The Lease Amendment shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
3.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease Amendment to be executed
by their duly authorized officers effective as of the date first above written.
LANDLORD:
ATTEST RHI HOLDINGS, INC.
/s/ By:
- --------------------------------- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
TENANT:
ATTEST VASTERA, INC.
/s/ By: /s/ Kimberly A. Walsh
- --------------------------------- ------------------------------------
Name: Name: Kimberly A. Walsh
Title: Title: Director of Human Resources
Attachments:
Exhibit A: Floor Plan of First Floor, Showing New Space
4.
<PAGE>
AMENDMENT NO. 3 TO LEASE AGREEMENT
THIS AMENDMENT NO. 3 TO LEASE AGREEMENT (the "LEASE AMENDMENT") is made as of
August 1, 1999 (the "EFFECTIVE Date"), by and between RHI Holdings, Inc., a
Delaware corporation ("LANDLORD") and Vastera, Inc. (p/k/a Export Software
International, Inc.) ("TENANT").
RECITALS
A. Pursuant to Lease Agreement dated as of August 20, 1996 and Amended as
of September 1, 1997, by and between Landlord and Tenant (the "LEASE"),
Landlord leased to Tenant certain premises (approximately 17,824 sq.
ft.) on the first and second floors of the building known as The
Fairchild Building (the "BUILDING"), located at Washington Dulles
International Airport, Dulles, VA, all as more particularly described
in the Lease.
NOTE: IN ADDITION, PURSUANT TO A LEASE AGREEMENT DATED AS OF OCTOBER
26, 1998 (THE "SECOND LEASE"), TENANT LEASES APPROXIMATELY 10,558 SQ.
FT. IN SUITE 120 OF THE BUILDING.
B. Landlord and Tenant desire to further amend the Lease, to provide for
the lease of additional space (approximately 4,513 sq. ft.) on the
first floor of the Building.
C. Capitalized terms used by not otherwise defined herein shall have the
meaning ascribed to them in the Lease.
NOW, THEREFORE, in consideration of the promises and the provisions contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby amend
and modify the Lease as follows:
1. DEMISED PREMISES: Prior to this Lease Amendment, the Demised Premises
consisted of 17,005 sq. ft. on the second floor of the Building (the
"FIRST SPACE") and 819 sq. ft. on the first floor of the Building (the
"SECOND SPACE"). From and after the Effective Date, the Demised
Premises shall include an additional 6,515 sq. ft. of rentable area on
the first floor of the Building, as shown on Exhibit A of this Lease
Amendment (the "THIRD SPACE"). Accordingly, from and after the
Effective Date, the aggregate Demised Premises under the Lease shall
consist of 24,339 square feet of rentable area.
NOTE: TOGETHER WITH THE SPACE UNDER THE SECOND LEASE, TENANT'S TOTAL
LEASED SPACE IN THE BUILDING IS APPROXIMATELY 34,897 SQ. FT.
2. TERM: The term of the Third Space shall be coterminous with the
remaining term of the Lease (including Renewal Terms). The Third Space
is accepted subject to all the terms, conditions and obligations under
the Lease and shall (for all purposes) be deemed Demised Premises under
the Lease.
3. ACCEPTANCE OF THIRD SPACE IN "AS IS" CONDITION: Landlord shall have no
obligation to do any work or perform any service with respect to the
Third Space, which the Tenant hereby accepts in its existing "as is"
condition. Landlord grants to Tenant the right to alter and remodel the
Third Space, at Tenant's expense, for Tenant's intend use in
<PAGE>
conjunction with the commencement of the term for the Third Space
("THIRD SPACE INITIAL IMPROVEMENTS"); provided, however, that:
LANDLORD APPROVAL: No Third Space Initial Improvements shall be made
without first submitting the plans thereof and receiving the sanction
of the Landlord.
PERMITS: No alterations shall be undertaken until Tenant shall have
procured and paid for all necessary permits or authorizations from any
federal, state or local governmental entity, board of agency having
jurisdiction. Without limitation, Tenant shall obtain all necessary
approvals from the Ground Lessor (Metropolitan Washington Airports
Authority).
PROFESSIONAL SUPERVISION: All alterations shall be conducted under the
supervision of an architect or engineer selected by Tenant and approved
in writing by Landlord (which approval shall not be unreasonably
withheld).
WORK IN ACCORDANCE WITH APPROVED PLANS: All alterations shall be made
in accordance with the detailed plans and specifications and cost
estimates prepared by such architects or engineers and approved in
writing by Landlord (which approval shall not be unreasonably
withheld).
PROMPT COMPLETION, IN COMPLIANCE WITH ALL LAWS: All alterations shall
be made by Tenant promptly (unavoidable delays excepted) and in a good
and workmanlike manner, in accordance with all applicable permits and
authorizations and building codes, zoning laws and all other applicable
laws, rules, ordinances, regulations and similar requirements of any
federal, state or local government entity, board or agency having
jurisdiction.
CASH PAYMENTS/ NO LIENS: The cost of all alterations shall be paid in
cash or its equivalent, so that the Demised Premises shall at all times
be free of liens for labor and material supplied to the Demised
Premises.
INDEMNIFICATION AND HOLD HARMLESS: Tenant shall indemnify Landlord and
its agents and employees and save it harmless from and against any and
all loss, claims, actions, damages, liabilities and expense (including
reasonable attorneys' fees) in connection with or arising from the
alterations, or in connection with or arising from a breach of the
covenants set forth in this Section regarding alterations.
DELIVER OF INSURANCE CERTIFICATES: Alterations shall not commence until
Tenant shall have obtained comprehensive general liability and worker's
compensation insurance in an amount of not less than $1,000,000 per
person, $5,000,000 per occurrence, and $5,000,000 for damages or injury
to property, with not more than $2,500 deductible. Prior to
commencement of alterations, Tenant shall have delivered certificates
of insurance to Landlord, issued by insurance companies reasonably
acceptable to Landlord, naming Landlord and Landlord's Lenders as
additional insured parties.
2.
<PAGE>
OTHER IMPROVEMENTS: Improvements or alterations made after the Third
Space Initial Improvements are completed shall be subject to all the
terms and conditions of Article 9 of the Lease.
4. MINIMUM RENT: From and after the Effective Date, Minimum Rent shall be
$16.97 per rentable square foot for the First Space, $17.51 per
rentable square foot for the Second Space and $22 per rentable square
foot for the Third Space; aggregate of $446,316.13; payable in equal
monthly installments of $37,193.01; payable in advance on the first day
of each calendar month.
NOTE: CURRENT MINIMUM RENT FOR THE SPACE UNDER THE SECOND LEASE IS $19
PER RENTABLE SQUARE FOOT. TOGETHER WITH MINIMUM RENT FOR THE SPACE
UNDER THE SECOND LEASE, TENANT'S AGGREGATE RENT FOR ALL SPACE IN THE
BUILDING IS $646,918.13; PAYABLE IN EQUAL MONTHLY INSTALLMENTS OF
$53,909.84; PAYABLE IN ADVANCE ON THE FIRST DAY OF EACH CALENDAR
MONTH..
Minimum Rent shall be subject to annual escalation as provided below.
5. ANNUAL ESCALATION TO MINIMUM RENT: On November 1 of each year during
the remaining term of the Lease (including any Renewal Terms) Minimum
Rent shall increase by 3% as provided in Article 4 of the Lease.
The first such increase shall be made on November 1, 1999.
NOTE: MINIMUM RENT UNDER THE SECOND LEASE IS ESCALATED 3% ON JANUARY 1
OF EACH YEAR. THE FIRST SUCH INCREASE SHALL BE MADE ON JANUARY 1, 2000.
6. ADDITIONAL RENT: Tenant shall continue to pay as additional rent is
proportionate share of Operating Expenses and Real Estate Taxes, as
provided in Article 5 of the Lease.
Landlord and Tenant agree that from and after the Effective Date,
Tenant's proportionate share shall be 20.57%, determined as follows:
<TABLE>
<S> <C>
Total Footage in Building 118,349
Demised Premises 24,339
Tenant's Share 20.57%
</TABLE>
NOTE: TOGETHER WITH THE SPACE UNDER THE SECOND LEASE, TENANT'S
AGGREGATE SHARE IN 29.49%.
7. ALLOTTED PARKING AND DESIGNATED PARKING AREAS: Section 17.1 of the
Lease is hereby amended to increase the Allotted Parking (presently 53
cars) by an additional 19 spaces (3 parking spaces for every 1,000 sq.
ft. of Third Space), for use solely by Tenant and Tenant's employees,
guests and invitees in the spaces which will hereafter be designated by
Landlord.
3.
<PAGE>
NOTE: IN ADDITION, TENANT HAS ONE SPACE IN THE FRONT OF THE BUILDING,
SUBJECT TO THE ADDITIONAL RENT SET FORTH IN AMENDMENT NO. 2 TO THE
LEASE; AND HAS 32 SPACES AS SET FORTH IN THE SECOND LEASE.
8. TENANT'S INSURANCE: On or prior to the Effective Date, Tenant shall
deliver to Landlord evidence of the insurance required under Article 11
of the Lease, showing coverage for the Demised Premises (including the
Third Space).
9. EFFECT OF AMENDMENT: Except as amended hereby, the Lease shall remain
unmodified, and in full force and effect. In the event of any
inconsistencies between this Lease Amendment and the Lease, this Lease
Amendment shall govern.
10. GOVERNING LAW: This Lease Amendment shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties have caused this Lease Amendment to be executed
by their duly authorized offices effective as of the date first above written.
LANDLORD: TENANT:
RHI HOLDINGS, INC. VASTERA, INC.
By: By:
------------------------------- -------------------------------------
Name: Donald E. Miller Name: Philip J. Balsamo
Title: Vice President Title: CFO
Attachment: Floor Plans of First Floor, Showing Third Space
4.
<PAGE>
AMENDMENT NO. 4 TO LEASE AGREEMENT
THIS AMENDMENT NO. 4 TO LEASE AGREEMENT (the "LEASE AMENDMENT") is made as of
August 1, 1999 (the "EFFECTIVE DATE"), by and between RHI Holdings, Inc., a
Delaware corporation ("LANDLORD") and Vastera, Inc. (p/k/a Export Software
International, Inc.) ("TENANT").
RECITALS
A. Pursuant to Lease Agreement (the "LEASE") dated as of August 20, 1996
(Amended as of September 1, 1997, May 13, 1999, and August 1, 1999), by
and between Landlord and Tenant, Landlord leased to Tenant certain
premises (approximately 17,824 sq. ft.) on the first and second floors
of the building known as The Fairchild Building (the "BUILDING"),
located at Washington Dulles International Airport, Dulles VA, all as
more particularly described in the Lease.
NOTE: IN ADDITION, PURSUANT TO A LEASE AGREEMENT DATED AS OF OCTOBER
26, 1998 (THE "SECOND LEASE"), TENANT LEASES APPROXIMATELY 10,558 SQ.
FT. IN SUITE 120 OF THE BUILDING.
B. Landlord and Tenant desire to further amend the Lease, to provide for
the lease of additional space, consisting of approximately 4,513 sq.
ft. on the first floor of the Building.
C. Capitalized terms used by not otherwise defined herein shall have the
meaning ascribed to them in the Lease.
NOW, THEREFORE, in consideration of the promises and the provisions contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby amend
and modify the Lease as follows:
1. DEMISED PREMISES: Prior to this Lease Amendment, the Demised Premises
consisted of 17,005 sq. ft. on the second floor of the Building (the
"FIRST SPACE"), 819 sq. ft. on the first floor of the Building (the
"SECOND SPACE"), and 6,515 sq. ft. of rentable area on the first floor
of the Building (the "THIRD SPACE"). From and after the Effective Date,
the Demised Premises shall include, approximately, an additional 4,513
sq. ft. of rentable area on the first floor of the Building, as shown
on Exhibit A of this Lease Amendment (the "FOURTH SPACE"). Accordingly,
from and after the Effective Date, the aggregate Demised Premises under
the Lease shall consist of 28,852 square feet of rentable area.
NOTE: TOGETHER WITH THE SPACE UNDER THE SECOND LEASE, TENANT'S TOTAL
LEASED SPACE IN THE BUILDING IS APPROXIMATELY 39,410 SQ. FT.
2. TERM: The term of the Fourth Space shall be coterminous with the
remaining term of the Lease (including Renewal Terms). The Fourth Space
is accepted subject to all the terms, conditions and obligations under
the Lease and shall (for all purposes) be deemed Demised Premises under
the Lease.
<PAGE>
3. ACCEPTANCE OF FOURTH SPACE IN "AS IS" CONDITION: Landlord shall have no
obligation to do any work or perform any service with respect to the
Fourth Space, which the Tenant hereby accepts in its existing "as is"
condition. Landlord grants to Tenant the right to alter and remodel the
Fourth Space, at Tenant's expense, for Tenant's intend use in
conjunction with the commencement of the term for the Fourth Space
("FOURTH SPACE INITIAL IMPROVEMENTS"); provided, however, that:
LANDLORD APPROVAL: No Fourth Space Initial Improvements shall be made
without first submitting the plans thereof and receiving the sanction
of the Landlord.
PERMITS: No alterations shall be undertaken until Tenant shall have
procured and paid for all necessary permits or authorizations from any
federal, state or local governmental entity, board of agency having
jurisdiction. Without limitation, Tenant shall obtain all necessary
approvals from the Ground Lessor (Metropolitan Washington Airports
Authority).
PROFESSIONAL SUPERVISION: All alterations shall be conducted under the
supervision of an architect or engineer selected by Tenant and approved
in writing by Landlord (which approval shall not be unreasonably
withheld).
WORK IN ACCORDANCE WITH APPROVED PLANS: All alterations shall be made
in accordance with the detailed plans and specifications and cost
estimates prepared by such architects or engineers and approved in
writing by Landlord (which approval shall not be unreasonably
withheld).
PROMPT COMPLETION, IN COMPLIANCE WITH ALL LAWS: All alterations shall
be made by Tenant promptly (unavoidable delays excepted) and in a good
and workmanlike manner, in accordance with all applicable permits and
authorizations and building codes, zoning laws and all other applicable
laws, rules, ordinances, regulations and similar requirements of any
federal, state or local government entity, board or agency having
jurisdiction.
CASH PAYMENTS/ NO LIENS: The cost of all alterations shall be paid in
cash or its equivalent, so that the Demised Premises shall at all times
be free of liens for labor and material supplied to the Demised
Premises.
INDEMNIFICATION AND HOLD HARMLESS: Tenant shall indemnify Landlord and
its agents and employees and save it harmless from and against any and
all loss, claims, actions, damages, liabilities and expense (including
reasonable attorneys' fees) in connection with or arising from the
alterations, or in connection with or arising from a breach of the
covenants set forth in this Section regarding alterations.
DELIVER OF INSURANCE CERTIFICATES: Alterations shall not commence until
Tenant shall have obtained comprehensive general liability and worker's
compensation insurance in an amount of not less than $1,000,000 per
person, $5,000,000 per occurrence, and $5,000,000 for damages or injury
to property, with not more than $2,500 deductible. Prior to
commencement of alterations, Tenant shall have delivered certificates
of
2.
<PAGE>
insurance to Landlord, issued by insurance companies reasonably
acceptable to Landlord, naming Landlord and Landlord's Lenders as
additional insured parties.
OTHER IMPROVEMENTS: Improvements or alterations made after the Fourth
Space Initial Improvements are completed shall be subject to all the
terms and conditions of Article 9 of the Lease.
4. MINIMUM RENT: From and after the Effective Date, Minimum Rent shall be:
<TABLE>
<S> <C> <C>
(i) $17.48 per rentable square foot for the First Space; (17.48 x 17,005)
(ii) $18.04 per rentable square foot for the Second Space; (18.04 x 819)
(iii) $22.66 per rentable square foot for the Third Space; and (22.66 x 6,515)
(iv) $26.00 per rentable square foot for the Fourth Space. (26.00 x 4,513)
</TABLE>
= Aggregate of $576,990.06; payable in equal monthly installments of
$48,082.51; payable in advance on the first day of each calendar month.
NOTE: CURRENT MINIMUM RENT FOR THE SPACE UNDER THE SECOND LEASE
(EFFECTIVE AS OF JANUARY 1, 2000) IS $19.57 PER RENTABLE SQUARE FOOT.
TOGETHER WITH MINIMUM RENT FOR THE SPACE UNDER THE SECOND LEASE,
TENANT'S AGGREGATE RENT FOR ALL SPACE IN THE BUILDING IS $783,610.12;
PAYABLE IN EQUAL MONTHLY INSTALLMENTS OF $65,300.84; PAYABLE IN ADVANCE
ON THE FIRST DAY OF EACH CALENDAR MONTH.
Minimum Rent shall be subject to annual escalation as provided below.
5. ANNUAL ESCALATION TO MINIMUM RENT: On November 1 of each year during
the remaining term of the Lease (including any Renewal Terms) Minimum
Rent shall increase by 3% as provided in Article 4 of the Lease. The
first such increase shall be made on November 1, 2000.
NOTE: MINIMUM RENT UNDER THE SECOND LEASE IS ESCALATED 3% ON JANUARY 1
OF EACH YEAR. THE FIRST SUCH INCREASE SHALL BE MADE ON JANUARY 1, 2001.
6. ADDITIONAL RENT: Tenant shall continue to pay as additional rent is
proportionate share of Operating Expenses and Real Estate Taxes, as
provided in Article 5 of the Lease.
Landlord and Tenant agree that from and after the Effective Date,
Tenant's proportionate share shall be 32.64243%, determined as follows:
<TABLE>
<S> <C>
Total Footage in Building 118,349
Demised Premises 28,852
Tenant's Share 24.37874%
</TABLE>
NOTE: TOGETHER WITH THE SPACE UNDER THE SECOND LEASE, TENANT'S
AGGREGATE SHARE IN 33.29981%.
3.
<PAGE>
7. ALLOTTED PARKING AND DESIGNATED PARKING AREAS: Section 17.1 of the
Lease is hereby amended to increase the Allotted Parking (presently 72
cars) by an additional 13 spaces (3 parking spaces for every 1,000 sq.
ft. of Fourth Space), for use solely by Tenant and Tenant's employees,
guests and invitees in the spaces which will hereafter be designated by
Landlord.
NOTE: IN ADDITION, TENANT HAS ONE SPACE IN THE FRONT OF THE BUILDING,
SUBJECT TO THE ADDITIONAL RENT SET FORTH IN AMENDMENT NO. 2 TO THE
LEASE; AND HAS 32 SPACES AS SET FORTH IN THE SECOND LEASE.
8. TENANT'S INSURANCE: On or prior to the Effective Date, Tenant shall
deliver to Landlord evidence of the insurance required under Article 11
of the Lease, showing coverage for the Demised Premises (including the
Fourth Space).
9. EFFECT OF AMENDMENT: Except as amended hereby, the Lease shall remain
unmodified, and in full force and effect. In the event of any
inconsistencies between this Lease Amendment and the Lease, this Lease
Amendment shall govern.
10. GOVERNING LAW: This Lease Amendment shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
[NEXT PAGE IS THE SIGNATURE PAGE]
4.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease Amendment to be executed
by their duly authorized offices effective as of the date first above written.
LANDLORD: TENANT:
RHI HOLDINGS, INC. VASTERA, INC.
By: By:
---------------------------------- ------------------------------------
Name: Name: Philip J. Balsamo
-------------------------------
Title: Title: CFO
------------------------------
Attachment: Floor Plans of First Floor, Showing Fourth Space
5.
<PAGE>
AMENDMENT NO. 5 TO LEASE AGREEMENT
THIS AGREEMENT NO. 5 TO LEASE AGREEMENT (the "LEASE AMENDMENT") is dated as of
March 6, 2000, by and between RHI Holdings, Inc., a Delaware corporation
("LANDLORD") and Vastera, Inc. (p/k/a Export Software International, Inc.)
("TENANT").
RECITALS
A. Pursuant to Lease Agreement (the "LEASE") dated as of August 20, 1996
(Amended as of September 1, 1997, May 13, 1999, August 1, 1999, and
January 1, 2000), by and between Landlord and Tenant, Landlord leased
to Tenant certain premises (approximately 28,852 sq. ft. ) on the first
and second floors of the building know as the Fairchild Building (the
"BUILDING"), located at Washington Dulles International Airport,
Dulles, VA, all as more particularly described in the Lease.
NOTE: IN ADDITION, PURSUANT TO A LEASE AGREEMENT DATED AS OF OCTOBER
26, 1998 (THE "SECOND LEASE"), TENANT LEASES APPROXIMATELY 10,558 SQ.
FT. IN SUITE 120 OF THE BUILDING.
B. Landlord and Tenant desire to further amend the Lease, to provide for
the lease of additional space, consisting of approximately 9,780 sq.
ft. on the third floor of the Building.
C. Capitalized terms used but not otherwise defined herein shall have the
meaning ascribed to them in the Lease.
NOW, THEREFORE, in consideration of the promises and the provisions contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby amend
and modify the Lease as follows:
1. DEMISED PREMISES: Prior to this Lease Amendment, the Demised Premises
consisted of 17,005 sq. ft. on the second floor of the Building (the
"FIRST SPACE"), 819 sq. ft. on the first floor of the Building (the
"SECOND SPACE"), 6,515, sq. ft. of on the first floor of the Building
(the "THIRD SPACE"), and 4,513 sq. ft. on the first floor of the
Building (the "FOURTH SPACE").
Landlord hereby leases to Tenant, and Tenant hereby accepts, an
additional 9,780 sq. ft. of rentable area on the third floor of the
Building, as shown on Exhibit A of this Lease Amendment (the "FIFTH
Space"). The Fifth Space is accepted subject to all terms, conditions,
and obligations under the Lease and shall (for all purposes) be deemed
Demised Premises under the Lease. Accordingly, from and after the date
hereof, the aggregate Demised Premises under the Lease shall consist of
38,632 square feet of rentable area.
NOTE: TOGETHER WITH THE SPACE UNDER THE SECOND LEASE, TENANT'S TOTAL
LEASED SPACE IN THE BUILDING IS APPROXIMATELY 49,109 SQ. FT.
<PAGE>
2. TERM: The term of the Fifth Space shall commence on May 1, 2000, and
shall be coterminous with the remaining term of the Lease (including
Renewal Terms).
3. ACCEPTANCE OF FIFTH SPACE IN "AS IS" CONDITION: Landlord shall have no
obligation to do any work or perform any service with respect to the
Fifth Space, which the Tenant hereby accepts in its existing "as is"
condition. Landlord grants to Tenant the right to alter and remodel the
Fifth Space, at Tenant's expense, for Tenant's intend use in
conjunction with the commencement of the term for the Fifth Space
("FIFTH SPACE INITIAL IMPROVEMENTS"); provided, however, that:
LANDLORD APPROVAL: No Fifth Space Initial Improvements shall be made
without first submitting the plans thereof and receiving the sanction
of the Landlord.
PERMITS: No alterations shall be undertaken until Tenant shall have
procured and paid for all necessary permits or authorizations from any
federal, state or local governmental entity, board or agency having
jurisdiction. Without limitation, Tenant shall obtain all necessary
approvals from the Ground Lesser (Metropolitan Washington Airports
Authority).
PROFESSIONAL SUPERVISION: All alterations shall be conducted under the
supervision of an architect or engineer selected by Tenant and approved
in writing by Landlord (which approval shall not be unreasonably
withheld).
WORK IN ACCORDANCE WITH APPROVAL PLANS: All alterations shall be made
in accordance with detailed plans and specifications and cost estimates
prepared by such architects or engineers and approved in writing by
Landlord (which approval shall not be unreasonably withheld).
PROMPT COMPLETION, IN COMPLIANCE WITH ALL LAWS: All alterations shall
be made by Tenant promptly (unavoidable delays excepted) and in a good
and workmanlike manner, in accordance with all applicable permits and
authorizations and building codes. zoning laws and all other applicable
laws, rules, ordinances, regulations and similar requirements of and
federal, state or local governmental entity, board of agency having
jurisdiction.
CASH PAYMENTS/NO LIENS: The cost of all alterations shall be paid in
cash or its equivalent, so that the Demised Premises shall at all times
be free of liens for labor and material supplied to the Demised
Premises.
INDEMNIFICATION AND HOLD HARMLESS: Tenant shall indemnify Landlord and
its agents and employees and save it harmless from and against any and
all loss, claims, actions, damages, liabilities and expense (including
reasonable attorneys' fees) in connection with or arising from
alternations, or in connection with or arising from a breach of the
covenants set forth in this Section regarding alterations.
DELIVERY OF INSURANCE CERTIFICATES: Alternations shall not commence
until Tenant shall have obtained comprehensive general liability and
worker's compensation insurance in an amount of not less than
$1,000,000 per person, $5,000,000 per occurrence, and $5,000,000 for
damages for injury to property, with not more than $2,500 deductible.
2.
<PAGE>
Prior to commencement of alternations, Tenant shall have delivered
certificates of insurance to Landlord, issued by insurance companies
reasonably acceptable to Landlord, naming Landlord and Landlord's
Lenders as additional insured parties.
OTHER IMPROVEMENTS: Improvements or alterations made after the Fifth
Space Initial Improvements are completed shall be subject to all the
terms and conditions of Article 9 of the Lease.
PRIVATE ELEVATOR: Tenant shall not have access to the third floor
Fairchild "private" elevator. Landlord and Tenant shall come to terms
on blocking off the private elevator:
SUPPLEMENTAL AIR CONDITIONING UNIT: Subject to Landlord's consent (not
to be unreasonably withheld), simultaneously with Tenant's work for the
Fifth Space Tenant may include the installation of a supplemental air
conditioning unit (for use in Tenant's space in the first floor of the
Building), subject to the following conditions: (i) Landlord's consent
is subject to obtaining an engineering report indicating that such
supplemental air conditioning unit does not increase the cost of
operating or maintaining the Building (ii) the installation and
maintenance of the air conditioning unit shall be Tenant's
responsibility; (iii) the supplemental air conditioning unit shall be
separately metered, and Tenant shall be responsible for all costs
associated with such unit; and (iv) Tenant shall be required to remove
the supplemental air conditioning unit on or prior to the end of the
Term of the Lease.
4. MINIMUM RENT: Minimum Rent for the Fifth Space shall commence on May 1,
2000, at $23 per sq. ft. Accordingly, from and after May 1, 2000,
aggregate Minimum Rent for the Demised Premises shall be as follows:
<TABLE>
<S> <C> <C>
(i) $17.48 per rentable square foot for the First Space; (17.48 x 17,005)
(ii) $18.04 per rentable square foot for the Second Space; (18.04 x 819)
(iii) $22.66 per rentable square foot for the Third Space; and (22.66 x 6,515)
(iv) $26.00 per rentable square foot for the Fourth Space. (26.00 x 4,513)
(v) $23.00 per rentable square foot for the Fifth Space. (23.00 x 9,780)
</TABLE>
= Aggregate of $801,930.06; payable in equal monthly installments of
$66,827.51; payable in advance on the first day of each calendar month.
NOTE: CURRENT MINIMUM RENT FOR THE SPACE UNDER THE SECOND LEASE
(EFFECTIVE AS OF JANUARY 1, 2000) IS $19.57 PER RENTABLE SQUARE FOOT.
TOGETHER WITH MINIMUM RENT FOR THE SPACE UNDER THE SECOND LEASE,
TENANT'S AGGREGATE RENT FOR ALL SPACE IN THE BUILDING IS $1,008,550.12;
PAYABLE IN EQUAL MONTHLY INSTALLMENTS OF $84,045.84; PAYABLE IN ADVANCE
ON THE FIRST DAY OF EACH CALENDAR MONTH.
Minimum Rent shall be subject to annual escalation as provided below.
3.
<PAGE>
5. ANNUAL ESCALATION TO MINIMUM RENT: On November 1 of each year during
the remaining term of the Lease (including any Renewal Terms) Minimum
Rent for the Demised Premises (including the Fifth Space) shall
increase by 3% as provided in Article 4 of the Lease. The first such
increase shall be made on November 1, 2000.
NOTE: MINIMUM RENT UNDER THE SECOND LEASE IS ESCALATED 3% ON JANUARY 1
OF EACH YEAR. THE FIRST SUCH INCREASE SHALL BE MADE ON JANUARY 1,
2001.
6. ADDITIONAL RENT: Tenant shall continue to pay as additional rent its
proportionate share of Operating Expenses and Real Estate Taxes, as
provided in Article 5 of the Lease.
Landlord and Tenant agree that from and after May 1, 2000, Tenant's
proportionate share shall be 32.64243%, determined as follows:
<TABLE>
<S> <C>
Total Footage in Building 118,349
Demised Premises 38,632
Tenant's Share 32.64243%
</TABLE>
NOTE: TOGETHER WITH THE SPACE UNDER THE SECOND LEASE, TENANT'S
AGGREGATE SHARE IS 41.56361%.
7. SECURITY DEPOSIT: Simultaneously herewith Tenant shall deposit with
Landlord the sum of $38,000 (approximately two months rent for the
Fifth Space, rounded to the nearest thousand). Such sum, together with
the sums already deposited by Tenant pursuant to Section 6.1 of the
Lease, are collectively referred to as the Security Deposit, to be held
as security for Tenant's obligations under the Lease as provided in
Section 6.1 of the Lease. Without limitation, the Security Deposit
shall secure Tenant's obligation to remove the supplemental air
conditioning Unit referenced in Section 3 above.
8. ALLOTTED PARKING AND DESIGNATED PARKING AREAS: Section 17.1 of the
Lease is hereby amended to increase the Allotted Parking (presently 85
cars) by an additional 29 spaces (3 parking spaces for every 1,000 sq.
ft. of Fifth Space), for use solely by Tenant and Tenant's employees,
guests and invitees in the space which will hereafter be designated by
Landlord.
NOTE: IN ADDITION, TENANT HAS ONE SPACE IN THE FRONT OF THE BUILDING,
SUBJECT TO THE ADDITIONAL RENT SET FORTH IN AMENDMENT NO. 2 TO THE
LEASE; AND HAS 32 SPACES AS SET FORTH IN THE SECOND LEASE.
9. TENANT'S INSURANCE: On or prior to May 1, 2000, Tenant shall deliver to
Landlord evidence of the insurance required under Article 11 of the
Lease, showing coverage for the Demised Premises (including the Fifth
Space).
4.
<PAGE>
10. EFFECT OF AMENDMENT: Except as amended hereby, the Lease shall remain
unmodified, and in full force and effect. In the event of any
inconsistencies between this Lease Amendment and the Lease, this Lease
Amendment shall govern.
11. GOVERNING LAW: This Lease Amendment shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
[NEXT PAGE IS THE SIGNATURE PAGE]
5.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease Agreement to be executed
by their duly authorized offices effective as of the date first above written.
LANDLORD: TENANT:
RHI HOLDINGS, INC. VASTERA, INC.
By:/s/ By: /s/ Phi Balsamo
------------------------------- -------------------------------------
Name: Name: Phi Balsamo
-----------------------------
Title: Title: CFO
----------------------------
Attachment: Floor Plans for Third Floor, Showing Fifth Space
6.
<PAGE>
LEASE AGREEMENT
FOR PREMISES LOCATED AT
DIAGONAL OFFICES -1375 Florida Avenue
Longmont, Colorado
BETWEEN
QUANTUM CONSULTING ASSOCIATES
AS TENANT
AND
PRATT PARTNERSHIP
AS LANDLORD
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. PREMISES LEASED; DESCRIPTION..........................................1
2. PRESENT CONDITION OF PROPERTY.........................................1
3. TERM..................................................................1
3.1 Initial Term...................................................1
3.2 Option to Extend...............................................1
3.3 Tenant Improvement Construction................................2
3.4 Delivery of Possession.........................................2
4. Rent..................................................................2
4.1 Base Rental....................................................2
4.2 Operating Expenses.............................................3
4.3 Escalation of Base Rental......................................5
4.4 Private Security Service.......................................5
4.5 Late Charges...................................................5
4.6 Security Deposit...............................................5
4.7 Proration of Rent for Partial Months...........................6
5. TAXES.................................................................6
6. SERVICES PROVIDED BY LANDLORD.........................................6
7. INTERRUPTION OR DISCONTINUANCE OF LANDLORD'S SERVICES.................7
8. HOLDING OVER..........................................................7
9. MODIFICATIONS OR EXTENSIONS...........................................8
10. ALTERATIONS BY LANDLORD...............................................8
11. ALTERATIONS BY TENANT.................................................8
12. MECHANIC'S LIENS......................................................8
13. SIGNS.................................................................8
14. MAINTENANCE AND REPAIRS OF THE BUILDING; LANDLORD NOT LIABLE FOR DAMAGE
TO CONTENTS...........................................................8
15. CONDITION UPON SURRENDER-- RETURN OF KEYS.............................9
16. NO WASTE; NO NUISANCE; COMPLIANCE WITH LAWS; RULES AND REGULATIONS..9
i
<PAGE>
17. LIABILITY FOR OVERLOAD...............................................12
18. NO USE OF PREMISES IN VIOLATION OF INSURANCE POLICIES................12
19. INSURANCE............................................................12
19.1 Waiver of Subrogation.........................................12
19.2 Other Provisions Regarding Tenant's Insurance.................13
19.3 Changes in Standard Policies..................................13
20. FIRE REGULATIONS-- TENANT RESPONSIBILITY.............................13
21. REPLACEMENT OF BUILDING-- CASUALTY DAMAGES...........................13
22. ENVIRONMENTAL MATTERS................................................14
22.1 Definitions...................................................14
22.2 Tenant's Obligation to Indemnity, Defend and Hold Harmless....15
22.3 Tenant's Obligation to Remediate..............................16
22.4 Notification..................................................17
22.5 Negative Covenants............................................17
22.6 Landlord's Right to Inspect and to Audit Tenant's Records.....18
22.7 Landlord's Right to Remediate.................................18
22.8 Landlord's Obligation to Remediate............................18
22.9 Landlord's Obligation to Indemnity, Defend and Hold Harmless
Concerning Environmental Matters..............................18
22.10 Survival of Environmental Obligations.........................19
23. ENTRY BY LANDLORD....................................................19
24. DEFAULT - REMEDIES OF LANDLORD.......................................19
24.1 Default Defined...............................................19
24.2 Landlord's Remedies in the Event of Default...................20
24.3 Tenant to Surrender Peaceably.................................21
24.4 No Termination by Re-Entry....................................21
24.5 Injunction....................................................21
24.6 Remedies Listed are Cumulative and Non-Exclusive..............21
24.7 Interest on Sums Past Due.....................................21
24.8 Attorneys' Fees...............................................21
24.9 Time to Cure Certain Non-Monetary Defaults....................21
24.10 Landlord Default..............................................22
25. LANDLORD'S SECURITY INTEREST IN TENANT'S PERSONAL PROPERTY;
LANDLORD'S RIGHT TO REMOVE SAME......................................22
26. LEGAL PROCEEDINGS AGAINST TENANT BY THIRD PARTIES; TENANT TO
PAY LANDLORD'S FEES..................................................22
27. INDEMNIFICATION BY TENANT AND BY LANDLORD............................23
ii
<PAGE>
28. ASSIGNMENT OR SUBLETTING.............................................23
29. LANDLORD'S WARRANTY OF TITLE; QUIET ENJOYMENT........................24
30. ADDITIONAL DEVELOPMENT OF PROPERTY RIGHTS OF LANDLORD................24
31. MENTAL ACQUISITION OF THE PREMISES...................................24
32. SUBORDINATION OF TAK LEASEHOLD TO MORTGAGES..........................25
33. TENANT'S GUARANTEE AND FINANCIAL STATEMENTS..........................25
34. MEMORANDUM OF LEASE-- RECORDING......................................26
35. NO WAIVER OF BREACH; ACCEPTANCE OF PARTIAL PAYMENTS OF RENT..........26
36. CONTROLLING LAW......................................................26
37. INUREMENTS...........................................................26
38. TIME.................................................................26
39. ADDRESSES EMPLOYER IDENTIFICATION NUMBERS; METHOD OF GIVING NOTICE...26
40. PARAGRAPH HEADINGS; GRAMMAR..........................................27
iii
<PAGE>
LEASE
THIS LEASE, made and entered into this 17th day of August, 1993, by and
between PRATT PARTNERSHIP, a Colorado general partnership, hereinafter referred
to as "Landlord," and QUANTUM CONSULTING ASSOCIATES, hereinafter referred to as
"Tenant,"
WITNESSETH:
In consideration of the covenants, terms, conditions, agreements, and
payments as hereinafter set forth, the parties hereto covenant and agree as
follows:
1. PREMISES LEASED; DESCRIPTION. Landlord hereby leases unto Tenant the
following described premises containing approximately 2,488 square feet of
office space and Tenant's prorated share of common areas, measured to the
outside of the walls, including overhangs, canopies and loading docks, and to
approximately 1/2 the thickness of common walls; commonly known as 1375 Florida,
Suite 8, in the City of Longmont, County of Boulder, State of Colorado, a more
detailed description of which is Lot 1, Longmont Industrial Park, Unit 2, Replat
B, City of Longmont, County of Boulder, State of Colorado, a diagram of which is
attached as Exhibit B (hereinafter referred to as the "premises"); the leasing
of which is made according to the terms of this Agreement; together with all
appurtenances thereto, and all fixtures attached thereto, in present condition,
and together with non-exclusive reasonable access across any other land owned by
Landlord as may be required for use of the premises by Tenant, with such access
to be on such roadways, sidewalks, and other common areas of which the premises
are a part, or of any such adjacent lands owned by Landlord, as Landlord may
from time to time designate.
2. PRESENT CONDITION OF PROPERTY. Tenant has examined, and accepts the
building, improvements, and any fixtures on the premises, in present condition,
subject to the construction of Tenant Improvements as detailed on the plans and
specifications labeled Exhibit "A," attached hereto and made a part hereof by
reference. No representation, statement, or warranty, expressed or implied, has
been made by or on behalf of Landlord as to the condition of the premises, or as
to the use that may be made of same. In no event shall Landlord be liable for
any defect in the premises or for any limitation on the use of the premises.
3. TERM.
3.1 INITIAL TERM. The term of this lease shall commence at 12:00
noon on September 15, 1993 (the "Commencement Date"), and unless terminated as
herein provided for, shall end at 12:00 noon on the 15th day of September, 1996.
The Commencement Date as set forth in this Paragraph 3.1 shall be subject to
those adjustments of the Commencement Date, if any, set forth in Paragraph 3.3
which relate to the performance of construction on the premises.
3.2 OPTION TO EXTEND. Upon full and complete performance of all
the terms, covenants, and conditions herein contained by Tenant and payment of
all rental due under the terms hereof, Tenant shall be given the option to renew
this lease for N/A additional terms of N/A -months each. Each such option shall
be exercisable only by delivery of Tenant's signed written notice of extension
to Landlord not less than 180 days prior to the expiration of the then-
<PAGE>
existing lease term. In the event of such exercise, this lease shall be deemed
to be extended for the additional period pursuant to all the terms and
conditions set forth herein, including (but not as a limitation) those
provisions for increase of the base rental set forth in Paragraph 4.1.3. In the
event of exercise of said Option, any funds held by Landlord pursuant hereto
shall continue to be so held subject to the terms and conditions relating to
same.
3.3 TENANT IMPROVEMENT CONSTRUCTION. The Commencement Date of
this lease shall be delayed until the substantial completion of the tenant
improvements described on Exhibit "A" attached hereto and delivery of possession
to Tenant, if such occurs after the Commencement Date, as follows: if for any
reason Landlord does not substantially complete such construction prior to the
Commencement Date, such failure will not affect the validity of this lease, but
in such case Tenant shall not be obligated to pay rent until such construction
is substantially completed and possession of the premises is delivered to
Tenant. Provided, however, if Landlord shall not have substantially completed
and delivered possession of the premises within sixty (60) days after the
Commencement Date, Tenant may, at Tenant's option, upon notice in writing to
Landlord delivered within ten (10) days after the end of the 60-day period,
cancel this lease. Landlord shall have no liability to Tenant for failure to
substantially complete construction prior to any date or dates. Tenants only
remedy shall be cancellation of the lease.
Should construction of the tenant improvements be completed to
such an extent as to permit the issuance of a partial certificate of occupancy
by the governing authority, Tenant may occupy the portion of the premises so
permitted prior to (or after) the Commencement Date and shall pay rent for the
occupied portion, prorated in proportion to the number of square feet of
building space occupied, beginning on data of delivery of possession. Rent
adjustments shall be similarly prorated. In no event shall Tenant take
possession prior to satisfaction of the requirements for Tenant's insurance set
forth below.
3.4 DELIVERY OF POSSESSION. Except as above provided with
respect to construction of Tenant improvements, Tenant shall be entitled to
possession of the premises at noon on the Commencement Date, as defined in
Paragraph 3.1. Tenant may, with approval by Landlord in its sole discretion,
have access to the premises during tenant improvement construction for the
purpose of moving in Tenant-owned furniture, fixtures, equipment and inventory.
This access and the items so moved in shall not in any way impede the
construction of the tenant improvements, nor shall Landlord, its agent,
employees, sub-contractors, or any other person on the premises whether invited
or not invited, be liable for the protection, care or security of Tenant owned
items. This paragraph shall not be construed so as to permit Tenant to occupy
the premises prior to the satisfaction of all requirements for Tenant's
insurance set forth below.
4. RENT. Tenant shall pay to Landlord, at the address of Landlord as
herein set forth, the following as rental for the premises:
4.1 BASE RENTAL. The base rental for the full term hereof shall
be SEVENTY THOUSAND NINE HUNDRED EIGHT AND NO/100THS Dollars ($70,908.00),
payable in monthly installments (basic monthly rental of ONE THOUSAND NINE
HUNDRED SIXTY
2
<PAGE>
NINE AND 67/100THS Dollars ($1,969.67)) in advance on the first day of each
month during the term hereof.
4.2 OPERATING EXPENSES. Tenant shall pay to Landlord during the
term hereof, in addition to the Bass Rental, Tenant's Share, as hereinafter
defined, of the Operating Expenses, as hereinafter defined, for each year of the
term, in accordance with the following provisions:
4.2.1 Tenant's Share, as defined, for purposes of this
Lease Agreement, to be the percentage which is determined by dividing the
approximate square footage of the Leased Premises by the total approximate
square footage of the space contained in the Diagonal Offices Project. It is
understood and agreed that the square footage figures set forth in the Lease
Agreement which Landlord and Tenant agree are reasonable and shall not be
subject to revision except in connection with an actual change in the size of
the Premises or a change in the space available for lease in the Diagonal
Offices Project. Total square footage in the Diagonal Offices Project is 16,844
square feet, and Tenant's share is fourteen and eight tenths percent (14.80).
4.2.2 Operating Expenses for the first year of the
initial term are estimated to be $3.00 per rentable square foot. During said
year, Tenant shall make estimated monthly payments of $622.00 as Tenant's share
of Operating Expanses.
4.2.3 Tenant's share of the Operating Expenses for the
first and last years of the lease term shall be prorated according to that
portion of such year as to which Tenant is responsible for a share of such
expenses.
4.2.4 "Operating Expenses" is defined, for purposes of
this Lease Agreement, to include all costs, if any, incurred by Lessor in the
exercise of its reasonable discretion, for:
(a) The operation, repair, maintenance, and replacement,
in neat, clean, safe, good order and condition, of the Diagonal Offices Project,
which may include but is not limited to, the following:
(i) The Common Areas, including their surfaces,
coverings, decorative items, carpets, drapes and window coverings, and including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, stairways, parkways, driveways, landscaped areas, striping, bumpers,
irrigation systems, Common Area lighting facilities, building exteriors and
roofs, fences and gates;
(ii) All heating, air conditioning, plumbing,
electrical systems, ADA issues, life safety equipment, telecommunication and
other equipment used in common by, or for the benefit of, tenants or occupants
of the Diagonal Offices Project, including tenant directories, fire detection
systems including sprinkler system maintenance and repair.
(b) Trash disposal, janitorial for the common areas and
security services;
3
<PAGE>
(c) Any other service which may be provided by Landlord
that is elsewhere in this Lease Agreement stated to be an "Operating Expense";
(d) The cost of the premiums for the liability and
property insurance policies to be maintained by Landlord under Paragraph 19
hereof;
(e) The amount of the real property taxes to be paid by
Landlord under Paragraph 5 hereof;
(f) The cost of water, sewer, gas, electricity, and
other publicly mandated services to the Diagonal Offices Project;
(g) Labor, salaries and applicable fringe benefits and
costs, materials, supplies and tools, used in maintaining and/or cleaning the
Diagonal Offices Project and accounting and a management fee attributable to the
operation of the Diagonal Offices Project;
(h) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby amortized
over its useful life according to the Federal income tax regulations or
guidelines for depreciation thereof (including interest on the unamortized
balance as is then reasonable in the judgment of Landlord's accountants);
(i) Replacements of equipment or improvements that have
a useful life for depreciation purposes according to Federal income tax
guidelines of five (5) years or less, as amortized over such life.
4.2.5 Operating Expenses shall not include the costs of
replacements of equipment or improvements that have a useful life for Federal
income tax purposes in excess of five (5) years unless it is of the type
described in Paragraph 4.2.4(h) , in which case their cost shall be included as
above provided.
4.2.6 Operating Expenses shall not include any expenses
paid by any tenant directly to third parties, or as to which Landlord is
otherwise reimbursed by any third party, other tenant, or by insurance proceeds.
4.2.7 Each January 1st, and annually thereafter,
Tenant's Share of any increase in Operating Expenses shall be payable by Tenant
within ten (10) days after a reasonably detailed statement of actual expenses is
presented to Tenant by Landlord. At Landlord's option, however, an amount may be
estimated by Landlord from time to time in advance of Tenant's Share of the
increase in Operating Expenses; and the same shall be payable monthly or
quarterly, as Landlord shall designate, during each calendar year subsequent to
the year in which the lease is executed, on the same day as the Base Rental is
due hereunder. In the event that Tenant pays Landlord's estimate of Tenant's
Share of the increase in Operating Expenses as aforesaid, Landlord shall deliver
to Tenant within sixty (60) days after the expiration of each subsequent year a
reasonably detailed statement showing Tenant's Share of the actual Operating
Expense increase incurred during such year. If Tenant's payments under this
paragraph 4.2.7 during said subsequent year exceed Tenants Share as indicated on
said statement, Tenant shall be entitled to credit the amount of such
overpayment against Tenant's
4
<PAGE>
Share of Operating Expenses next falling due. If Tenant's payments under this
paragraph during said subsequent year were less than Tenant's Share as indicated
on said statement, Tenant shall pay to Landlord the amount of the deficiency
within ten (10) days after delivery by Landlord to Tenant of said statement.
Landlord and Tenant shall forthwith adjust between them the cash payment any
balance determined to exist with respect to that portion of the last year for
which Tenant is responsible as to Operating Expenses, notwithstanding that the
Lease term may have terminated before the end of such year.
4.3 ESCALATION OF BASE RENTAL.
4.3.1 On March 15,1995, the base rental payable by
Tenant shall be increased by five percent (5%).
4.3.2 Landlord and Tenant agree that the Base Rental
increase shall be calculated on the Base Rental of $9.50 per square foot.
4.4 PRIVATE SECURITY SERVICE. Landlord may, in its sole
discretion, engage a private security service, as an independent contractor, to
patrol an area which includes the premises. If Landlord does so employ a private
security service, the cost thereof shall be treated in the same manner as
Operating Expense and paid by Tenant as Additional Rent under the same
provisions as are applicable to Operating Expense.
Landlord shall have absolutely no obligation to engage a private
security service and shall not be liable for any damages or loss which might
have been averted had a private security service been engaged. If Landlord does
engage a private security service, Landlord shall not be liable for any damages
or loss which may result from actions, inactions, non-performance or quality of
performance by the security service. If the Tenant desires a higher level of
security services than Landlord provides, or wishes to obtain an agreement that
there will be liability for actions, inactions, non-performance or quality of
performance by a security service, Tenant may itself engage such security
service as Tenant chooses, at Tenant's sole expense.
Nothing herein shall limit any action by Tenant against any
person or entity providing private security service, provided that Landlord
shall not be party to, or liable for any judgment entered in such an action, as
a defendant, cross defendant, third-party defendant, or otherwise. Tenant shall
indemnify Landlord against any loss, liability or claim arising out of any
action brought by tenant against any person or entity providing private security
service. The obligation to indemnify shall include payment of Landlord's
attorneys' fees incurred in connection with the claim covered by the indemnity
and in enforcing the obligation to indemnify.
4.5 LATE CHARGES. Tenant will pay a late charge equal to five
percent of any monthly rental payment or other payment not paid when due, which
payment shall be in addition to any interest elsewhere provided for.
4.6 SECURITY DEPOSIT. Landlord acknowledges receipt of the sum
of THREE THOUSAND NINE HUNDRED THIRTY NINE AND 34/100THS Dollars ($3,939.34)
paid by Tenant upon the execution hereof, to be retained by Landlord as security
for the performance of all of the terms and conditions of this lease Agreement
to be performed by Tenant including
5
<PAGE>
payment of all rental due under the terms hereof. Landlord shall not owe Tenant
any interest on the deposit. At Landlord's election, deductions may be made by
Landlord from the amount so retained for the reasonable cost of repairs to the
premises which should have been performed by Tenant, for any rental payment or
other sum delinquent under the terms hereof, and for any sum used by Landlord in
any manner to cure any default in the performance of Tenant under the terms of
this lease. In the event deductions are so made during the rental term, upon
notice by Landlord, Tenant shall redeposit such amounts so expended so as to
maintain the security deposit in the amount as herein provided for, within 10
days after receipt of such written demand from Landlord. Nothing herein
contained shall limit the liability of Tenant as to any repairs or maintenance
of the premises; and nothing herein shall limit the obligation of Tenant
promptly to pay all sums otherwise due under this lease and to comply with all
the terms and conditions hereof. The security deposit, less any sums withheld by
Landlord pursuant to the terms hereof, shall be repaid to Tenant within sixty
days after the data of termination of the lease.
4.7 PRORATION OF RENT FOR PARTIAL MONTHS. If the lease term
begins on other than the first day of a month, base rent and additional rent
from such date until the first day of the next succeeding calendar month shall
be prorated on the basis of the actual number of days in such calendar month and
shall be payable in advance. If the lease term terminates on other than the last
day of the calendar month, rent from the first day of such calendar month until
such termination date shall be prorated on the basis of the actual number of
days in such month, and shall be payable in advance.
5. TAXES. The Landlord will pay all real property taxes which may be
levied or assessed against the property of which the leased premises are a part.
Tenant shall be responsible for and shall pay any and all taxes or assessments
levied or assessed against any furniture, fixtures, equipment, and items of a
similar nature installed or located in or about the leased premises by Tenant.
6. SERVICES PROVIDED BY LANDLORD. Landlord agrees, without extra charge
except as provided below, during the period Tenant shall occupy the premises
under the terms hereof, and in accordance with standards from time to time
prevailing for a office building in the City of Longmont:
(a) to furnish such heated or cooled air to the premises each
business day other than Saturdays, Sundays and legal holidays from 8:00 a.m. to
8:00 p.m., as may in the judgment of Landlord be reasonable required for the
comfortable use and occupation of the premises;
(b) to provide window washing as may in the judgment of Landlord
be reasonably required; and
(c) to cause electric current to be supplied for lighting the
premises and public halls and ordinary business office use.
It is understood that Tenant shall use such electric current as shall be
supplied by Landlord only for ordinary lighting and ordinary office equipment,
necessary for normal business use, as reasonably determined by Landlord, unless
the prior written approval of
6
<PAGE>
Landlord is obtained. Tenant shall pay on demand to Landlord for electric
current for any other purpose, including without limitation, the operation of
heavy duty accounting equipment and copy equipment and the operation of ordinary
office equipment in such numbers that more electric current is required than is
necessary for normal business office use as determined by Landlord. Tenant shall
also pay Landlord for Landlord's cost of acquiring and installing meters or
other measuring devices, if deemed necessary by Landlord for determining the
amount of electric current used by Tenant. The amount to be paid by Tenant for
use of electric current shall be determined by data from meters or other
measuring devices satisfactory to Landlord based upon charges determined by
Landlord, unless the amount to be paid is otherwise agreed upon by Landlord and
Tenant. Before using more electric current than is necessary for normal business
office use, Tenant shall ascertain from Landlord the maximum amount of electric
current which can be safely used in the premises, taking into account the
capacity of the electric wiring and other electric facilities in the building
and the premises, as well as the needs of other tenants in the Building, and
Tenant shall not use more electric current than the maximum amount which can be
safely used in the premises. Landlord's consent to Tenant's use of anything
using more electric current than is necessary for normal business office use
shall not relieve Tenant from its obligation not to use more electric current
than that which Landlord states is the maximum amount which can be safely used
in the premises.
7. INTERRUPTION OR DISCONTINUANCE OF LANDLORD'S SERVICES. Tenant agrees
that Landlord shall not be liable for failure to supply any such heating, air
conditioning, or electric current during any period Landlord is unable to
furnish such services or current and Landlord uses reasonable diligence to
supply such services or current, it being understood that Landlord reserves the
right to discontinue temporarily such services, or any of them, or such current
at such times as may be necessary by reason of accident, unavailability of
employees, repairs, alterations or improvements, or whenever by reason of
strikes, lockouts, riots, acts of God or any other happening, beyond control of
Landlord. Landlord's obligations to furnish services or current shall be
conditioned upon the availability of adequate energy sources. Landlord shall
have the right to reduce heating, cooling or lighting within the premises and in
the public areas in the Building and the right to enter upon the premises at all
reasonable times in order to make such repairs, alterations and adjustments as
shall be necessary in order to comply with the provisions of any mandatory or
voluntary fuel or energy saving allocation or similar statute, regulation or
program. Tenant further agrees that, if any payment of rent as herein provided
shall remain unpaid for more than Ten (10) days after it shall become due,
Landlord may, without notice to Tenant, discontinue furnishing heating, air
conditioning, and electric current, or any of them, until all arrears of rent
shall have been paid in full, and Landlord shall not be liable for damages to
person or property for any such discontinuance, nor shall such discontinuance in
any way be construed as an eviction of tenant or cause an abatement of rent or
operate to release Tenant from any of the Tenants obligations hereunder.
8. HOLDING OVER. If, after expiration of the term of this lease, Tenant
shall remain in possession of the premises and continue to pay rent without a
written agreement as to such possession, then Tenant shall be deemed a
month-to-month Tenant and the rental rate during such holdover tenancy shall be
equivalent to one and one-half times the monthly rental paid for the last month
of tenancy under this lease. Such month-to-month tenancy may be
7
<PAGE>
terminated by the Landlord at noon on any day which is more than twenty-nine
(29) days after date of delivery of Landlord's written notice of termination to
Tenant.
9. MODIFICATIONS OR EXTENSIONS. No holding over by Tenant shall operate
to renew or extend this lease without the written consent of Landlord. No
modification of this lease shall be binding unless endorsed hereon or otherwise
written and signed by the respective parties.
10. ALTERATIONS BY LANDLORD. Tenant shall permit Landlord to enter the
premises to examine and inspect the same and make such repairs,, additions or
alterations as Landlord may deem necessary or proper for the safety, improvement
or preservation thereof and of the Building, and it is expressly understood that
Landlord shall at all times have the right at its election to make any such
alterations or changes either to the premises or to other portions of the
Building as it may from time to time deem necessary or desirable, as long as
such alterations and changes do not unreasonably interfere with Tenant's use and
occupancy of the premises.
11. ALTERATIONS BY TENANT. Tenant shall make no alterations,
decorations, improvements or additions to the premises without first obtaining
the written consent of Landlord; and all said alterations, additions or
improvements made by either party whether or not at the expense of Tenant,
including carpeting, shall be deemed a part of the real estate and the property
of Landlord and shall remain upon and be surrendered with said premises as a
part thereof without molestation, disturbance or injury at the end of said term
whether by lapse of time or otherwise.
12. MECHANIC'S LIENS. Tenant shall pay all costs for construction done
by it or caused to be done by it on the premises as permitted by this lease.
Tenant shall keep the building, other improvements and land of which the
premises are a part free and clear of all mechanic's liens resulting from
construction by or for Tenant. Tenant shall have the right to contest the
correctness or validity of any such lien if, immediately on demand by Landlord,
Tenant deposits with Landlord and/or any appropriate court or title insurance
company a bond or sum of money sufficient to allow issuance of title insurance
against the lien and/or to comply with the statutory requirements for discharge
of the lien found in ss.ss. 38-22-130 and 131, Colorado Revised Statutes, or any
successor statutory provision. Landlord shall have the right to require Tenant's
contractor(s), subcontractors and materialmen to furnish to both Tenant and
Landlord adequate lien waivers on work or materials paid for, in connection with
all periodic or final payments, by endorsement on checks, making of joint
checks, or otherwise, and Landlord shall have the right to review invoices prior
to payment. Landlord reserves the right to post notices on the premises that
Landlord is not responsible for payment of work performed and that Landlord's
interest is not subject to any lien.
13. SIGNS. It is the Landlord's intent to maintain uniformity of signs.
Tenant shall place no signs on the leased premises without prior written consent
of Landlord. No signs shall be placed on any windows or doors. Landlord will
provide a common directory sign for the Building and Tenant shall be entitled to
a listing on such sign.
14. MAINTENANCE AND REPAIRS OF THE BUILDING; LANDLORD NOT LIABLE FOR
DAMAGE TO CONTENTS. Landlord shall be responsible for maintenance
8
<PAGE>
and repairs of the structural portions, the roof, the common areas and the
exterior finish of the building (other than glass) on the premises at the sole
cost and expense of Landlord; provided, however, that if any such maintenance or
repairs are necessitated by the acts of Tenant or its employees, agents,
contractors, sub-contractors, licensees, invitees or guests, Tenant shall
reimburse Landlord for the cost of same, as additional rent, to be paid within
10 days after delivery of invoice. All other maintenance, repairs and
replacements within the premises shall be performed by Tenant, at its own
expense, including all necessary maintenance, repairs and replacements to
electrical systems, window or other glass, doors, fixtures, interior
decorations, and all other appliances and appurtenances. Such repairs and
replacements, interior and exterior, ordinary as well as extraordinary, shall be
made promptly, as and when necessary, so that the premises are maintained in
first class condition. All such maintenance, repairs and replacements shall be
in quality and class at least equal to the original work. On default of Tenant
in making such maintenance, repairs or replacements, Landlord may, but shall not
be required to, make such repairs and replacements for Tenant's account, and the
expense shall constitute and be collectable as additional rent, together with
interest thereon as hereinafter provided.
Notwithstanding the Landlord's obligations elsewhere set forth in this
lease, under no circumstances shall Landlord be liable for damage to the
contents of the building or consequential damages to Tenant resulting from roof
or window leaks or failure, or leakage of any water pipe or gas pipe, failure of
any communications system or alarm, failure or leakage or discharge by any
sprinkler system or other fire suppression system, power surges, power shortages
or outage, sewer failure or sewage backup, or failure or malfunction of any
heating or cooling system. The term "contents" shall include, but shall not be
limited to, improvements made by Tenant, and data bases and other information
stored or contained to computers, hard or floppy disks, tapes, computer chips
and other memory or storage devices. The term "consequential damages" shall
include, but not be limited to, Tenant's inability to perform any contract on
which Tenant is bound, loss of sales, loss of profit, or loss of business
reputation or goodwill.
15. CONDITION UPON SURRENDER -- RETURN OF KEYS. Tenant shall vacate the
premises in the same condition as when received, ordinary wear and tear
excepted, and shall remove all of Tenant's property, so that Landlord can
repossess the premises not later than noon on the day upon which this lease or
any extension hereof ends, whether upon notice, holdover or otherwise. The
Landlord shall have the same rights to enforce this covenant by ejectment and
for damages or otherwise as for the breach of any other conditions or covenant
of this lease. Upon termination of the lease, Tenant shall deliver to Landlord
keys which operate all locks on the exterior or interior of the premises,
including, without limitation, keys to locks on cupboards and closets. Tenant
shall retrieve all keys to the premises which Tenant has delivered to employees
or others, and include same with the keys delivered to Landlord.
16. NO WASTE; NO NUISANCE; COMPLIANCE WITH LAWS; RULES AND REGULATIONS.
Tenant shall use the premises for offices and other uses appurtenant thereto.
Tenant shall conform to all present and future laws and ordinances of any
governmental authority having jurisdiction over the premises, and will make no
use in violation of same. No outside storage shall be allowed unless first
approved by Landlord in writing and then only in such areas as are designated as
storage areas by Landlord. Tenant shall not commit or suffer any waste on the
premises. Tenant shall not permit any nuisance to be maintained on the premises
9
<PAGE>
nor permit any disorderly conduct, noise or other activity having a tendency to
annoy or to disturb occupants of any other part of the property of which the
premises are a part and/or of any adjoining property.
It is further agreed that the following rules and regulations shall be
and are hereby made a part of this Lease and Tenant agrees that its employees
and agents, or any others permitted by Tenant to occupy or enter the premises,
will at all times abide by said rules and regulations and that a default in the
performance and observance thereof shall operate the same as any other default
herein:
(A) The sidewalks, entries, passages, corridors, stairways and
elevators (if the Building is so equipped) of the Building shall not be
obstructed by Tenant, or its agents or employees, or used for any purpose other
than ingress and egress to and from the premises.
(B) (i) Furniture, equipment or supplies shall be moved in or
out of the Building only using the doors designated by Landlord and then only
during such hours and in such manner as may be prescribed by Landlord.
(ii) No safe or article, the weight of which may, in the
opinion of the Landlord, constitute a hazard or danger to the Building or its
equipment, shall be moved into the premises.
(C) No furniture shall be placed in front of the Building or in
any lobby or corridor, without the prior written consent of Landlord. Landlord
shall have the right to remove all non-permitted signs and furniture, without
notice to Tenant, at the expanse of Tenant.
(D) Tenant shall not do or permit anything to be done in the
premises, or bring or keep anything therein, which will in any way increase the
rate of fire insurance on the Building, or on property kept therein, or obstruct
or interfere with the rights of other Tenants, or in any way injure or annoy
them, or conflict with the laws relating to fire, or with any regulations of the
fire department, or with any insurance policy upon the Building or any part
thereof, or conflict with any governmental rules, regulations and ordinances of
the City or its statutes.
(E) Landlord shall have the right to take all such reasonable
measures as it may deem advisable for the security of the Building or its
occupants, including without limitation (i) the requirements that persons
entering or leaving the Building whether or not during regular working hours,
identify themselves to security personnel, if any, by registration or otherwise,
(ii) establish their right to enter or leave the Building and allow reasonable
security inspection of themselves and their effects, (iii) that Tenant evacuate
itself temporarily from the Building for reasonable drill purposes, (iv) that
Landlord reasonably be permitted to temporarily deny Tenant and its employee,
representatives and invitees access to, and to temporarily close the Building,
(v) deny access to the Building offer regular working hours under such
reasonable rules and regulations as Landlord may prescribe from time to time.
(F) Water closets and other water fixtures shall not be used for
any purpose than that for which the same are intended, and any damage resulting
to the same from misuse on the part of Tenant, its agents or employees shall be
paid for by Tenant.
10
<PAGE>
(G) No animals shall be allowed in the Building. No person shall
disturb the occupants of this or adjoining building or premises by the use of
any radio or musical instrument or by the making of loud or improper noises.
(H) Bicycles or other vehicles shall not be permitted in the
Building, nor shall any obstruction of sidewalks or entrances of the Building by
such be permitted.
(I) Tenant shall not allow anything to be thrown by Tenant, its
agents, employees or those in the Building at the express or implied invitation
of Tenant, out of the windows or doors or ventilating ducts or shafts of the
Building. Tenant except in case of fire or other emergency, shall not open any
outside windows so as to interfere with the proper functioning of the Building
air conditioning system.
(J) No additional lock or locks shall be placed by Tenant on any
door in the Building unless written consent of Landlord shall first have been
obtained. A reasonable number of keys to the premises will be furnished by
Landlord, and neither Tenant, its agents or employees, shall have any duplicate
key made. At the termination of this tenancy, Tenant shall promptly return to
Landlord all keys to offices.
(K) No awning, shade, drape or covering shall be placed over the
exterior windows of the Building without the prior consent of Landlord, nor
shall any window of the Building be obstructed without the prior written consent
of Landlord.
(L) If Tenant desires telegraphic, telephonic or other electric
connections or plumbing or pipe connections beyond that service provided,
Landlord or its agents will direct the electricians or plumbers as to where and
how the wiring or plumbing connections may be introduced and without such
direction, no wiring or plumbing connections or boring or cutting for wiring or
plumbing connections will be permitted. Any such installation and connection
shall be made at Tenant's expense.
(M) Tenant shall not install or operate any steam or gas engine
or boiler, or carry on any mechanical business in the premises. The use of oil,
gas or inflammable liquids for heating, lighting or any other purpose is
expressly prohibited. Explosives or other articles deemed extra hazardous shall
not be brought into the Building.
(N) Any painting or decorating of the premises as may be agreed
to be done by and at the expense of Landlord shall be done during regular
working hours; should Tenant desire such work done on Sundays, holidays or
outside of regular working hours, Tenant shall pay for the extra cost thereof.
(O) Except as permitted by Landlord, Tenant shall not mark upon,
paint signs upon, cut, drill into, drive nails or screws into, or in any way
deface the walls, ceilings, partitions or floors of the premises or of the
Building, and any defacement, damage or injury caused by Tenant, its agents or
employees, shall be paid for by Tenant.
(P) Landlord shall at all times have the right by its officers
or agents, to enter the premises to inspect and examine the same, and to show
the same to persons wishing to lease them, and may at any time within 60 days
next preceding the termination of this tenancy place
11
<PAGE>
upon the doors and windows of the premises a notice "For Rent" which said notice
shall not be removed by Tenant.
(Q) Tenant shall, at Tenant's expense, use chair pads for all
areas of the premises with carpeting to protect such carpeting.
(R) Landlord reserves the right to make such other and further
reasonable rules and regulations as in its judgment may from time to time be
needful and desirable for the safety, care and cleanliness of the premises and
the Building and for the preservation of good order therein. Landlord's making
of such other rules and regulations shall not be deemed an amendment or
modification of this Lease.
17. LIABILITY FOR OVERLOAD. Tenant shall be liable for the cost of any
damage to the premises or the building or the sidewalks and pavements adjoining
the same which results from the movement of heavy articles or heavy vehicles or
utility cuts made by or on behalf of Tenant. Tenant shall not overload the
floors or any other part of the premises.
18. NO USE OF PREMISES IN VIOLATION OF INSURANCE POLICIES. Tenant shall
make no use of the premises which would void or make voidable any insurance upon
the premises.
19. INSURANCE. The Landlord shall keep the property insured throughout
the term of this lease against loss as covered by an "all risk" insurance policy
at the sole expense of the Landlord. To the extent, however, that any use of the
leased premises by Tenant, with or without Landlord's consent, would in any way
tend to increase premiums for such insurance, Tenant agrees to pay additional
monthly rent equal to such increase in insurance premiums paid by Landlord.
Tenant shall maintain, at the sole expense of the Tenant, the
following insurance throughout the term of this lease:
Claims for personal injury or property damage under a policy of
general public liability insurance, with such limits as may be reasonably
requested by the Landlord from time to time, but not less than
$300,000.00/$1,000,000.00 in respect of bodily injury; and $300,000.00 for
property damages.
Against such other hazards and in such amounts as the holder of
any mortgage or deed of host to which the lease is subordinate may require from
time to time.
If the Tenant requests Landlord to obtain the insurance required
by Tenant, as additional insurance under the Landlord's fire insurance policy,
and if Landlord consents to obtain such insurance, then Tenant shall reimburse
Landlord on a monthly basis for all insurance premiums paid by Landlord for such
insurance coverage required of Tenant.
19.1 WAIVER OF SUBROGATION. Landlord and Tenant grant to each
other on behalf of any insurer providing fire and extended insurance coverage to
either of them covering the premises, improvements thereon, and contents
thereof, a waiver of any right of subrogation or recovery of any payments of
loss under such insurance, such waiver to be effective so long as
12
<PAGE>
each is empowered to grant such waiver under the terms of its insurance policy,
and to give all necessary notice of such waiver to its insurance carriers.
19.2 OTHER PROVISIONS REGARDING TENANT'S INSURANCE. All
insurance required of Tenant in this lease shall be effected under enforceable
policies issued by insurers of recognized good financial condition licensed to
do business in this State. At least fifteen (15) days prior to the expiration
date of any such policy, a certificate evidencing a new or renewal policy shall
be delivered by Tenant to Landlord. Within fifteen (15) days after the premium
on any policy shall become due and payable, Landlord shall be furnished with
satisfactory evidence of its payment. To the extent obtainable, all policies
shall contain an agreement that notwithstanding any act or negligence of Tenant
which might otherwise result in forfeiture of such insurance, such policies
shall not be canceled except upon ten (10) days prior written notice to
Landlord, and that the coverage afforded thereby shall not be affected by the
performance of any work in or about the premises.
If Tenant provides any insurance required of Tenant,
by this lease in the form of a blanket policy, Tenant shall tarnish satisfactory
proof that such blanket policy compiles in all respects with the provisions of
this lease, and that the coverage thereunder is at least equal to the coverage
which would be provided under a separate policy covering only the premises.
19.3 CHANGES IN STANDARD POLICIES. If the definition of
insurance industry policy language relating to "all risk" insurance or other
term changes, the insurance requirements hereunder shall be modified to conform
to the existing insurance industry language; however, the dollar amount of the
coverages required under this lease shall not be less than those existing at the
time of the effective beginning date of this lease.
20. FIRE REGULATIONS -- TENANT RESPONSIBILITY. It shall be Tenant's sole
and exclusive responsibility to meet all fire regulations of any governmental
unit having jurisdiction over the premises to the extent such regulations affect
Tenants operations, at Tenant's sole expense.
21. REPLACEMENT OF BUILDING -- CASUALTY DAMAGES. If the premises are
damaged or destroyed by fire or other cause at any time after the date of
commencement of this lease, Landlord shall proceed with due diligence to repair
or restore the same to the same condition as existed before such damage or
destruction, and as soon as possible thereafter will give possession to the
Tenant of the premises without diminution or change of location. Provided,
however, that in case of total destruction of the premises by fire, or in case
the premises are so badly damaged that in the opinion of the Landlord, it is not
feasible to repair or rebuild the same, then, Landlord shall have the right to
terminate this lease instead of rebuilding the improvements; provided, however,
that Landlord shall give Tenant written notice of Landlord's intention to
terminate, said notice to be served not later than thirty (30) days after the
occurrence of the damage to the property. In the event the premises are rendered
temporarily untenantable because of fire or other casualty, base monthly rent
shall abate on the untenantable area until the premises are restored to their
former condition, abatement to be based on the square feet of building floor
space in the untenantable area compared to the total square feet of building
floor space on the premises. Provided, however, that to the extent the damage or
destruction results from the negligence or other action of Tenant or its
employees, agents,
13
<PAGE>
contractors, subcontractors, invitees, guests or licensees, Tenant shall pay for
the restoration or repair, to the extent the cost of same is not covered by
insurance.
22. ENVIRONMENTAL MATTERS
22.1 DEFINITIONS.
22.1.1 HAZARDOUS MATERIAL. Hazardous Material means
any substance:
(a) the presence of which requires investigation, notice
or remediation under any federal, state or local statute, regulation, ordinance,
order, action, policy or common law; or
(b) which is or becomes defined as a "hazardous
material," "hazardous waste," "hazardous substance," "regulated substance,"
"pollutant" or "contaminant" under any federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C.ss.9601 et seq.), Toxic Substances Control Act (15 U.S.C. 2601 et
seq.), the Colorado Underground Storage Tank Act (Colo. Rev. Stet.ss. 25-18-101
et seq.), and/or the Resource Conservation and Recovery Act (42 U.S.C. 6901 et
seq.); or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is
or becomes regulated by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States, the State of
Colorado or any political subdivision thereof; or
(d) the presence of which on the premises causes or
threatens to cause a nuisance upon the premises or to adjacent properties or
poses or threatens to pose a hazard to the health or, safety of persons on or
about the premises; or
(e) which contains gasoline, diesel fuel or other
petroleum hydrocarbons; or
(f) which contains polychlorinated biphenyls (PCBs),
asbestos or area formaldehyde foam insulation; or
(g) radon gas.
22.1.2 ENVIRONMENTAL REQUIREMENTS. Environmental
Requirements means all applicable present and future statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, plans,
authorizations, concessions, franchises, and similar items, of all governmental
agencies, departments, commissions, boards, bar instrumentalities of the United
States, states and political subdivisions thereof and all applicable judicial,
administrative, and regulatory decrees, judgments, and orders relating to the
protection of human health or the environment, including, without limitation:
(a) All requirements, including but not limited to those
pertaining to reporting, licensing, permitting, investigation, and remediation
of emissions, discharges,
14
<PAGE>
releases, or threatened releases of Hazardous Materials, chemical substances,
pollutants, contaminants, or hazardous or toxic substances, materials or wastes
whether solid, liquid, or gaseous in nature, into the air, surface water,
groundwater, or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature; and
(b) All requirements pertaining to the protection of the
health and safety of employees or the public.
22.1.3 ENVIRONMENTAL DAMAGES. Environmental Damages
means all claims, judgments, damages, losses, penalties, fines, liabilities
(including strict liability), encumbrances, liens, costs, and expenses of
investigation and defense of any claim, whether or not such claim is ultimately
defeated, and of any good faith settlement or judgment, of whatever kind or
nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including without limitation reasonable attorneys' fees and
disbursements and consultants' and witnesses' fees, any of which are incurred at
any time as a result of the existence of Hazardous Material upon, about, beneath
the premises or migrating or threatening to migrate to or from the premises, or
the existence of a violation of Environmental Requirements pertaining to the
premises, including without limitation:
(a) Damages for personal injury, or injury to property
or natural resources occurring upon or off of the premises, foreseeable or
unforeseeable, including, without limitation, lost profits, consequential
damages, the cost of demolition and rebuilding of any improvements on real
property, interest and penalties including but not limited to claims brought by
or on behalf of employees of Tenant;
(b) Fees incurred for the services of attorneys,
consultants, contractors, experts, laboratories and all other costs incurred in
connection with the investigation or remediation of such Hazardous Materials or
violation of Environmental Requirements including, but not limited to, the
preparation of any feasibility studies or reports or the performance of any
cleanup, remediation, removal, response, abatement, containment, closure,
restoration or monitoring work required by any federal, state or local
governmental agency or political subdivision or court, or reasonably necessary
to make full economic use of the premises and any other property in a manner
consistent with its current use or otherwise expended in connection with such
conditions, and including without limitation any attorneys' fees, costs and
expenses incurred in enforcing this agreement or collecting any sums due
hereunder;
(c) Liability to any third person or governmental agency
to indemnify such person or agency for costs expended in connection with the
items referenced herein; and
(d) Diminution in the value of the premises and
adjoining property, and damages for the loss of business and restriction on the
use of or adverse impact on the marketing of rentable or usable space or of any
amenity of the premises and adjoining property.
22.2 TENANT'S OBLIGATION TO INDEMNITY, DEFEND AND HOLD
HARMLESS. Tenant, its successors, assigns and guarantors, agree to indemnify,
defend, reimburse and hold
15
<PAGE>
harmless the following persons from and against any and all Environmental
Damages arising from activities of Tenant or its employees, agents, contractors,
subcontractors, or guests, licensees, or invitees which (1) result in the
presence of Hazardous Materials upon, about or beneath the premises or migrating
to or from the premises, or (2) result in the violation of any Environmental
Requirements pertaining to the premises and the activities thereon:
22.2.1 LANDLORD;
22.2.2 any other person who acquires an interest in the
premises in any manner, including but not limited to purchase at a foreclosure
sale or otherwise; and
22.2.3 the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts, licensees, affiliates,
lessees, mortgagees, trustees, heirs, devisees, successors, assigns, guests and
invitees of such persons.
This obligation shall include, but not be limited to,
the burden and expense of the indemnified parties in defending all claims, suits
and administrative proceedings, including attorneys' fees and expert witness and
consulting fees, even if such claims, suits or proceedings are groundless, false
or fraudulent, and conducting all negotiations of any description, and paying
and discharging, when and as the same become due, any and all judgments,
penalties or other sums due against such indemnified persons, and all such
expenses incurred in enforcing the obligation to indemnify. Tenant, at its sole
expense, may employ additional counsel of its choice to associate with counsel
representing the indemnified parties.
22.3 TENANT'S OBLIGATION TO REMEDIATE. Notwithstanding the
obligation of Tenant to indemnify Landlord pursuant to this agreement, Tenant
shall, upon demand of Landlord, and at its sole cost and expense, promptly take
all actions to remediate the premises which are reasonably necessary to mitigate
Environmental Damages or to allow full economic use of the premises, or are
required by Environmental Requirements, which remediation is necessitated by the
(1) introduction of a Hazardous Material upon, about or beneath the premises or
(2) a violation of Environmental Requirements, either of which is caused by the
actions of Tenant, its employees, agents, contractors, subcontractors, guests,
invitees or licensees. Such actions shall include, but not be limited to, the
investigation of the environmental condition of the premises, the preparation of
any feasibility studies, reports or remedial plans, and the performance of any
cleanup, remediation, containment, operation, maintenance, monitoring or
restoration work, whether on or off of the premises. Tenant shall take all
actions necessary to restore the premises to the condition existing prior to the
introduction of Hazardous Material upon, about or beneath the premises,
notwithstanding any lesser standard of remediation allowable under applicable
law or governmental policies. All such work shall be performed by one or more
contractors, selected by Tenant and approved in advance and in writing by
Landlord. Tenant shall proceed continuously and diligently with such
investigatory and remedial actions, provided that in all cases such actions
shall be in accordance with all applicable requirements of governmental
entities. Any such actions shall be performed in a good, safe and workmanlike
manner and shall minimize any impact on the business conducted at the premises.
Tenant shall pay all costs in connection with such investigatory and remedial
activities, including but not limited to all power and utility costs, and any
and all taxes or fees that may be applicable to such activities. Tenant shall
promptly provide to Landlord copies of testing results and reports
16
<PAGE>
that are generated in connection with the above activities, and copies of any
correspondence with any governmental entity related to such activities. Promptly
upon completion of such investigation and remediation, Tenant shall permanently
seal or cap all monitoring wells and test holes to industrial standards in
compliance with applicable federal, state and local laws and regulations, remove
all associated equipment, and restore the premises to the maximum extent
possible, which shall include, without limitation, the repair of any surface
damage, including paving, caused by such investigation or remediation hereunder.
Provided, however, that Tenant shall not be obligated to remediate environmental
damages which result from seepage of Hazardous Materials onto the premises from
adjacent property unless the presence on the adjacent properly was caused by
Tenant or its employees, agents, contractors, subcontractors, guests, invitees
or licensees.
22.4 NOTIFICATION. If Tenant shall become aware of or receive
notice or other communication concerning any actual, alleged, suspected or
threatened violation of Environmental Requirements, or liability of Tenant for
Environmental Damages in connection with the premises or past or present
activities of any person thereon, or that any representation set forth in this
agreement is not or is no longer accurate, including but not limited to notice
or other communication concerning any actual or threatened investigation,
inquiry, lawsuit, claim, citation, directive, summons, proceeding, complaint,
notice, order, writ, or injunction, relating to same, then Tenant shall deliver
to Landlord, within ten days of the receipt of such notice or communication by
Landlord, a written description of said violation, liability, correcting
information, or actual or threatened event or condition, together with copies of
any such notice or communication. Receipt of such notice shall not be deemed to
create any obligation on the part of Landlord to defend or otherwise respond to
any such notification or communication.
22.5 NEGATIVE COVENANTS.
22.5.1 NO HAZARDOUS MATERIAL ON PREMISES. Except in
strict compliance with all Environmental Requirements, Tenant shall not cause,
permit or suffer any Hazardous Material to be brought upon, treated, kept,
stored, disposed of, discharged, released, produced, manufactured, generated,
refined or used upon, about or beneath the premises by Tenant, its agents,
employees, contractors, subcontractors, guests, licensees or invitees, or any
other person. Tenant shall deliver to Landlord copies of all documents which
Tenant provides to any governmental body in connection with compliance with
Environmental Requirements with respect to the premises, such delivery to be
contemporaneous with provision of the documents to the governmental agency.
22.5.2 NO VIOLATIONS OF ENVIRONMENTAL REQUIREMENTS.
Tenant shall not cause, permit or suffer the existence or the commission by
Tenant, its agents, employees, contractors, subcontractors or guests, licensees
or invitees, or by any other person of a violation of any Environmental
Requirements upon, about or beneath the premises or any portion thereof.
22.5.3 NO ENVIRONMENTAL OR OTHER LIENS. Tenant shall not
create or suffer or permit to exist with respect to the premises, any lien,
security interest or other charge or encumbrance of any kind, including without
limitation, any lien imposed pursuant to section 107(f) of the Superfund
Amendments and Reauthorization Act of 1986 (42 U.S.C. section
17
<PAGE>
9607(1) or any similar state statute to the extent that such lien arises out of
the actions of Tenant, its agents, employees, contractors, subcontractors or
guests, licensees or invitees.
22.6 LANDLORD'S RIGHT TO INSPECT AND TO AUDIT TENANT'S RECORDS.
Landlord shall have the right in its sole and absolute discretion, but not the
duty, to enter and conduct an inspection of the premises and to inspect and
audit Tenant's records concerning Hazardous Materials at any reasonable time to
determine whether Tenant is complying with the terms of the lease, including but
not limited to the compliance of the premises and the activities thereon with
Environmental Requirements and the existence of Environmental Damages as a
result of the condition of the premises or surrounding properties and activities
thereon. If Landlord has reasonable cause to believe Tenant is in default with
respect to any of the previsions of this lease related to Hazardous Materials,
Environmental Requirements or Environmental Damages, then Landlord shall have
the right, but not the duty, to retain at the sole expense of Tenant an
independent professional consultant to enter the premises to conduct such an
inspection and to inspect and audit any records or reports prepared by or for
Tenant concerning such compliance. Tenant hereby grants to Landlord the right to
enter the premises and to perform such tests on the premises as are reasonably
necessary in the opinion of Landlord to assist in such audits and
investigations. Landlord shall use reasonable efforts to minimize interference
with the business of Tenant by such tests inspections and audits, but Landlord
shall not be liable for any interference caused thereby.
22.7 LANDLORD'S RIGHT TO REMEDIATE. Should Tenant fail to
perform or observe any of its obligations or agreements pertaining to Hazardous
Materials or Environmental Requirements, then Landlord shall have the right, but
not the duty, without limitation upon any of the rights of Landlord pursuant to
the agreement, to enter the premises personally or through its agents,
consultants or contractors and perform the same. Tenant agrees to indemnify
Landlord for the costs thereof and liabilities therefrom as set forth in
Paragraph 21.2.
22.8 LANDLORD'S OBLIGATION TO REMEDIATE. Landlord agrees to
remediate all Environmental Damages (1) caused by Landlord, its agents,
employees, contractors, subcontractors, guests, licensees or invitees, or (2)
not so caused but arising prior to Commencement Date hereof and not caused by
Tenant, its agents, employees, contractors, subcontractors, guests, licensees or
invitees.
22.9 LANDLORD'S OBLIGATION TO INDEMNITY, DEFEND AND HOLD
HARMLESS CONCERNING ENVIRONMENTAL MATTERS. Landlord, its successors, assigns and
guarantors, agree to indemnify, defend, reimburse and hold harmless the
following persons from and against any and all Environmental Damages arising
from activities of Landlord or its employees, agents, contractors,
subcontractors or guests, licensees, invitees; or which occurred prior to the
Commencement Date (and were not caused by Tenant, its agents, employees,
contractors, subcontractors, guests, licensees or invitees) which (1) result in
the presence of Hazardous Materials upon, about or beneath the premises or
migrating to or from the premises, or (2) result in the violation of any
Environmental Requirements pertaining to the premises and the activities
thereon:
18
<PAGE>
22.9.1 TENANT;
22.9.2 the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts, licensees, affiliates,
lessees, mortgagees, trustees, heirs, devisees, successors, assigns and invitees
of Tenant.
This obligation shall include, but not be limited to,
the burden and expense of the indemnified parties in defending all claims, suits
and administrative proceedings, including attorneys' fees and expert witness and
consulting fees, even if such claims, suits or proceedings are groundless, false
or fraudulent, and conducting all negotiations of any description, and paying
and discharging, when and as the same become due, any and all judgments,
penalties or other sums due against such indemnified persons, and all such
expenses incurred in enforcing the obligation to indemnify. Landlord, at its
sole expense, may employ additional counsel of its choice to associate with
counsel representing Tenant.
22.10 SURVIVAL OF ENVIRONMENTAL OBLIGATIONS. The obligations of
Landlord and Tenant as set forth in Paragraph 21 and all of its subparagraphs
shall survive termination of this lease.
23. ENTRY BY LANDLORD. Landlord, or its authorized representative,
and/or any lender or prospective lender, shall have the right to enter the
premises during the lease term at all reasonable times during usual business
hours for purposes of inspection, and/or the performance of any maintenance,
repairs or replacement therein. Landlord shall give Tenant such advance notice
of entry as is reasonable in light of the purpose for the entry.
24. DEFAULT - REMEDIES OF LANDLORD
24.1 DEFAULT DEFINED. Any one or more of the following events
(each of which is herein sometimes called "event of default") shall constitute a
default:
24.1.1 Tenant defaults in the due and punctual payment
of any rent, taxes, tax deposits, insurance premiums, maintenance fees or other
sums required to be paid by Tenant under this lease when and as the same shall
become due and payable;
24.1.2 Tenant abandons the premises;
24.1.3 Tenant defaults in the performance of or
compliance with any of the covenants, agreements, terms and conditions contained
in this lease other than those referred to in the foregoing Paragraph 24.1.1,
and such default shall continue for a period of 10 days after written notice
thereof from Landlord to Tenant, and shall not be cured as permitted by
Paragraph 24.9;
24.1.4 Tenant files a voluntary petition in bankruptcy
or is adjudicated a bankrupt or insolvent, or takes the benefit of any relevant
legislation that may be in force for bankrupt or insolvent debtors or files any
petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under any
present or future federal, state or other statute, law or regulation, or
proceedings are taken by Tenant under any relevant Bankruptcy Act in force in
any jurisdiction available to Tenant, or
19
<PAGE>
Tenant seeks or consents to or acquiesces in the appointment of any trustee,
receiver or liquidator of Tenant or of all or any substantial part of its
properties or of the premises, or makes any general assignment for the benefit
of creditors;
24.1.5 A petition is filed against Tenant seeking any
reorganization, arrangement, composition, readjustment liquidation, dissolution
or similar relief under any present or future federal, state or other statute,
law or regulation, and shall remain undismissed for an aggregate of 120 days, or
if any trustee, receiver or liquidator of Tenant or of all or any substantial
part of its properties or of the premises is appointed without the consent or
acquiescence of Tenant and such appointment remains unvacated for an aggregate
of 20 days.
24.2 LANDLORD'S REMEDIES IN THE EVENT OF DEFAULT. In the event
of any event of default, Landlord shall have the option, without further notice
to Tenant or further demand for performance exercise any one or more of the
following remedies (and any other remedy available at law or in equity):
24.2.1 If Tenant has been late in payment of rent or
other sums due on four or more occasions during any period of one year.
Landlord, without terminating this lease, may (1) require that all future
payments be made by bank cashier's check, and/or (2) require an additional
security deposit in the amount of the then-current base rent for two months,
and/or (3) require that rent for each month be paid on or before the 15th day of
the preceding month. Such requirement shall be imposed by Landlord's written
notice delivered to Tenant. The additional security deposit shall be paid within
10 days after delivery of the notice. The Landlord may or may not exercise the
remedies provided in this Paragraph 24.2.1, in its sole discretion. The exercise
of the remedies provided in this Paragraph 24.2.1 shall not be required prior to
the exercise of any other available remedy.
24.2.2 Without obligation to seek a new tenant, to
institute suit against Tenant to collect each installment of rent or other sum
as it becomes due or to enforce any other obligation under this lease even
though the premises be left vacant.
24.2.3 As a matter of right, to procure the appointment
of a receiver for the premises by any court of competent jurisdiction upon ex
parte application and without notice, notice being hereby expressly waived. All
rents, issues and profits, income and revenue from the premises shall be applied
by such receiver to the payment of the rent, together with any other obligations
of the Tenant under this lease.
24.2.4 To re-enter and take possession of the premises
and all personal property therein and to remove Tenant and Tenant's agents and
employees therefrom, and either:
1) terminate this lease and sue Tenant for
damages for breach of the obligations of Tenant to Landlord under this lease; or
2) without terminating this lease, relet, assign
or sublet the premises and personal property, as the agent and for the account
of Tenant in the name of Landlord or otherwise, upon the terms and conditions
Landlord deems fit with the new Tenant for such period (which may be greater or
less than the period which would otherwise have constituted the balance of the
term of this lease) as Landlord may deem best, and collect any rent
20
<PAGE>
due upon any such reletting. In this event, the rents received on any such,
reletting shall be applied first to the expenses of reletting and collecting,
including, without limitation, all repossession costs, reasonable attorneys'
fees, and real estate brokers' commissions, alteration costs and expenses of
preparing said premises for reletting, and thereafter toward payment of the
rental and of any other amounts payable by Tenant to Landlord. If the sum
realized shall not be sufficient to pay the rent and other charges due from
Tenant, then within five days after demand, Tenant will pay to Landlord any
deficiency as it accrues. Landlord may sue therefor as each deficiency shall
arise if Tenant shall fail to pay such deficiency within the time limited.
24.3 TENANT TO SURRENDER PEACEABLY. In the event Landlord elects
to re-enter or take possession of the premises, Tenant shall quit and peaceably
surrender the premises to Landlord, and Landlord may enter upon and re-enter the
premises and possess and repossess itself thereof, by force, summary
proceedings, ejectment or otherwise, and may dispossess and remove Tenant and
may have, hold and enjoy the premises and the right to receive all rental income
of and from the same.
24.4 NO TERMINATION BY RE-ENTRY. No re-entry or taking of
possession by Landlord shall be construed as an election on Landlord's part to
terminate or accept surrender of this lease unless Landlord's written notice of
such intention is delivered to Tenant.
24.5 INJUNCTION. In the event of any breach by Tenant of any of
the agreements, terms, conditions or covenants contained in this lease,
Landlord, in addition to any and all other rights, shall be entitled to enjoin
such breach and shall have the right to invoke any right and remedy allowed at
law or in equity or by statute or otherwise for such breach as though re-entry,
summary proceedings, and other remedies were not provided for in this lease.
24.6 REMEDIES LISTED ARE CUMULATIVE AND NON-EXCLUSIVE. The
enumeration of the foregoing remedies does not exclude any other remedy, but all
remedies are cumulative and shall be in addition to every other remedy now or
hereafter existing at law or in equity, including, but not limited to, the
remedies provided in Paragraph 25 concerning Landlord's security interest in
Tenant's personal property and Landlord's right to remove same.
24.7 INTEREST ON SUMS PAST DUE. In addition to the late charge
which is elsewhere established, all rent and all other amounts due from Tenant
hereunder shall bear interest at the rate of eighteen (18%) percent per annum
compounded quarter-annually from their respective due dates until paid, provided
that this shall in no way limit, lessen or affect any claim for damages by
Landlord for any breach or default by Tenant.
24.8 ATTORNEYS' FEES. Reasonable attorneys' fees, expert witness
fees, consulting fees and other expenses incurred by either party by reason of
the breach by either party in complying with any of the agreements, terms,
conditions or covenants of this lease shall constitute additional sums to be
paid to the prevailing party on demand.
24.9 TIME TO CURE CERTAIN NON-MONETARY DEFAULTS. In the event of
any default other than failure to pay a sum of money, for which notice has been
given as provided herein, which because of its nature can be cured but not
within the period of grace heretofore allowed, then such default shall be deemed
remedied, if the correction thereof shall have been
21
<PAGE>
commenced within said grace period or periods and shall, when commenced, be
diligently prosecuted to completion.
24.10 LANDLORD DEFAULT. If Landlord is in default under any of
its obligations and the default continues for thirty (30) days after written
notice from Tenant (subject to extension pursuant to 24.9, Tenant may pursue all
remedies at law or in equity. Tenant may, but shall not be required to, correct
such default for the Landlord's account , and the expense shall be promptly paid
within ten (10) days by Landlord; however, in no event shall Tenant have the
right to rental abatement, offset of expenses against rental, or the right to
terminate this lease, subject to Tenant's legal or equitable remedies.
Tenant may not offset any sum due or assertedly due from Landlord to
Tenant against any sum due from Tenant to Landlord.
Tenant agrees that if Tenant obtains a judgment against Landlord arising
out of Landlord's obligations under this lease, such judgment may be satisfied
only by execution and sale of Landlord's interest in the premises leased hereby.
Tenant may not seek execution against other property of Landlord, nor pursue any
judgment, execution or other remedy against the partners or other owners of
Landlord or any of their property. Immediately upon receipt of Landlord's
written, request, Tenant will release any property (other than the premises
leased hereby) from the lien of any judgment obtained by Tenant against Landlord
arising out of Landlord's obligations under this lease.
25. LANDLORD'S SECURITY INTEREST IN TENANT'S PERSONAL PROPERTY;
LANDLORD'S RIGHT TO REMOVE SAME. As security for its obligations under this
lease, Tenant grants to Landlord a security interest in all the personal
property and fixtures of Tenant now or subsequently located upon the premises
(the collateral). The security interest shall attach to the collateral at such
time (but not before) when Tenant fails to pay to Landlord any fixed sum of
money due to Landlord pursuant to this lease and only after Landlord has given
Tenant notice of the default and the default has remained uncured after the
period allowed for cure. Concurrently with signature hereof (or at such later
time when Landlord may demand same), Tenant will sign and deliver to landlord
financing statements properly evidencing the security interest, in customary
short form suitable for filing with the Secretary of State of the State of
Colorado and with the Boulder County Clerk and Recorder. The financing
statements shall not be filed prior to the date when the security interest
attaches to the collateral. In the event of default by Tenant, and after
attachment of the security interest to the collateral, Landlord may exercise all
rights and remedies available to the holders of security interests under the
Uniform Commercial Code as in effect in the State of Colorado.
Landlord shall not be obligated to exercise any such remedy, however,
and at Landlord's sole election, Landlord may forego exercise of its rights
under the security agreement and proceed to remove, or have the appropriate
governmental agencies remove, all of Tenant's property from the premises and
leave same on any public street or landfill at Tenant's sole risk. The cost of
any such removal shall be paid by Tenant to Landlord upon demand.
26. LEGAL PROCEEDINGS AGAINST TENANT BY THIRD PARTIES; TENANT TO PAY
LANDLORD'S FEES. In the event of any proceeding at law or in equity
22
<PAGE>
wherein Landlord, without being in default as to its covenants under the terms
hereof, shall be made a party to any litigation by reason of Tenant's interest
in the premises, or, in the event Landlord shall be required to commence any
legal proceedings relating to the premises and Tenant's occupancy thereof and
Tenant's relation thereto, Landlord shall be allowed and Tenant shall be liable
for and shall pay all costs and expenses incurred by Landlord, including
reasonable attorneys' fees, expert witness fees and consultant's fees.
27. INDEMNIFICATION BY TENANT AND BY LANDLORD. The Tenant shall
indemnify and save harmless Landlord of and from liability for damages or claims
against Landlord, including costs, attorneys' fees and expenses of Landlord in
defending against the same, on account of injuries to any person or property, if
the injuries are caused by the negligence or willful misconduct of Tenant, its
agents, servants or employees, or of any other person entering upon the premises
under express or implied invitation of Tenant or if such injuries are the result
of the violation by Tenant, its agents, servants, or employees, of laws,
ordinances, or of the terms of this lease.
The Landlord shall indemnify and save harmless Tenant of and from
liability for damages or claims against Tenant, including costs, attorneys' fees
and expenses of Tenant in defending against the same, on account of injuries to
any person or property, if the injuries are caused by the negligence or willful
misconduct of Landlord, its agents, servants or employees, or of any other
person entering upon the premises primarily under express or implied invitation
of Landlord or where such injuries are the result of the violation by Landlord,
its agents, servants or employees, of laws, ordinances, or other governmental
regulations.
28. ASSIGNMENT OR SUBLETTING. Tenant shall not assign, mortgage, or
encumber this lease, nor sublet or permit the premises or any part thereof to be
used by others, without the prior written consent of Landlord in each instance.
In connection with an assignment, sublease or encumbrance Landlord may
require the submittal of detailed financial information about the prospective
subtenant or assignee, to be reviewed by Landlord, and may require a guarantee
of the obligations of the prospective subtenant or assignee, and may require
detailed financial information about the guarantor, to be reviewed by Landlord;
and there may be alterations to this lease and alterations to the building which
are necessary to consummate the transaction. The Landlord may require Tenant or
the prospective assignee or sub-tenant to pay for the alterations to the
building, and may require that Landlord perform same. In addition, Landlord may
charge a fee of two percent of base rent for the first five years of the lease,
due in full upon Landlord's consent, as payment to Landlord for such
investigations, lease alterations and similar matters. No two percent fee will
be charged in connection with an assignment or sublease to an assignee or
subtenant who is "affiliated" with Tenant. "Affiliated" means under common
voting control, directly or indirectly.
A sale or transfer of control of a majority of the votes which may be
cast to elect Tenant's board of directors or other governing body shall be
deemed to be an assignment of this lease, requiring Landlord's consent if the
sale or transfer is essentially accomplished in a single transaction.
23
<PAGE>
If this lease is assigned, or if the premises or any part thereof is
sublet, or occupied by anyone other than Tenant, Landlord may, after default by
Tenant, collect rent from the assignee, subtenant, or occupant and apply the net
amount collected against all rent herein reserved. No such assignment,
subletting, occupancy, or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, sub-tenant, or occupant as tenant; or a
release of Tenant from further performance by Tenant of the covenants in this
lease. The consent by Landlord to an assignment or subletting shall not be
construed to relieve Tenant (or any subsequent tenant) from obtaining the
consent in writing of Landlord to any further assignment or subletting.
29. LANDLORD'S WARRANTY OF TITLE; QUIET ENJOYMENT. Landlord covenants it
has good right to lease the premises in the manner described herein and that
Tenant shall peaceably and quietly have, hold, occupy, and enjoy the premises
during the term of the lease; except as provided in Paragraph 32 concerning
subordination to mortgage lenders.
30. ADDITIONAL DEVELOPMENT OF PROPERTY RIGHTS OF LANDLORD. Landlord does
reserve, during the term of this lease, the right to go upon and deal with the
premises or part thereof for the purpose of implementing a common development
plan for the project of which the premises are a part, and to make any other
changes and/or improvements as Landlord shall deem advisable in the exercise of
its sole discretion; provided, however, any such action by Landlord shall not
unreasonably interfere with the rights of Tenant hereunder.
31. MENTAL ACQUISITION OF THE PREMISES. The parties agree that Landlord
shall have sole and exclusive authority to negotiate and settle all matters
pertaining to the acquisition of all or part of the premises by a governmental
agency by eminent domain or threat thereof (condemnation), and to convey all or
any part of the premises under threat of condemnation, and the lease shall
terminate as to any area so conveyed. It is agreed that any compensation for
land and/or buildings to be taken whether resulting from negotiation and
agreement or condemnation proceedings, shall be the exclusive property of
Landlord, and that there shall be no sharing whatsoever between Landlord and
Tenant of any such sum. Such taking of property shall not be considered as a
breach of this lease by Landlord, nor give rise to any claims in Tenant for
damages or compensation from Landlord. Tenant may separately claim and recover
from the condemning authority the value of any personal property owned by Tenant
which is taken, and any relocation expenses owed to Tenant by the condemning
authority. If the taken portion of the premises consists only of areas where no
building is constructed, and the land area of the premises is reduced by less
than ten percent, and the parking area available for use by Tenant is reduced by
less than five percent, and there is no material change in Tenant's access to
the premises, then there shall be no change in the terms of the lease. If no
building area is taken but the foregoing limits on parking area reductions are
exceeded, then Tenant may terminate the lease unless Landlord provides
sufficient reasonably adjacent parking area so that the total available parking
area is reduced by less than five percent. If any portion of the building or the
premises is taken, then Landlord, at its election, may replace the square
footage taken with space in the same building, or may provide land and building
area essentially the same as the premises in a reasonably adjacent location,
within 10 days after the conveyance or taking, under the same terms and
conditions as contained in this lease, and this lease shall be in full force and
effect as to the new premises. If Landlord does not so provide reasonable space,
then Tenant shall have two options. First, Tenant may terminate the lease by
written notice
24
<PAGE>
delivered to Landlord within 60 days after the conveyance or taking. Second,
Tenant may retain the remaining portion of the premises, under all the terms and
conditions hereof, but the base rental shall be reduced in proportion to the
number of square feet of building floor space taken compared to the number of
square feet of building floor space on the premises prior to the taking.
32. SUBORDINATION OF TAK LEASEHOLD TO MORTGAGES. This lease shall be,
subject and subordinate in priority at all times to the lien of any existing
and/or hereafter executed mortgages and host deeds encumbering the premises.
Although no instrument or act on the part of Tenant shall be necessary to
effectuate such subordination, Tenant will execute and deliver such further
instruments subordinating this lease to the lien of any such mortgages or trust
deeds as may be desired by the mortgagee or holder of such trust deeds. Tenant
hereby appoints Landlord as his attorney in fact, irrevocably, to execute and
deliver any such instrument for Tenant. Tenant further agrees at any time and
from time to lime upon not less than ten (10) days prior written request by
Landlord, to execute, acknowledge, and deliver to Landlord an estoppel affidavit
in form acceptable to Landlord and the holder of any existing or contemplated
mortgage or deed of trust encumbering the premises. Tenant's failure to deliver
such statement within such time shall be conclusive upon Tenant (1) that this
lease is in full force and affect, without modification except as maybe
represented by Landlord; (2) that there are no uncured defaults in Landlord's
performance; and (3) that not more than one (1) month's rent has been paid in
advance. Further, upon request, Tenant shall supply to Landlord a corporate
resolution certifying that the party signing this statement on behalf of Tenant
is properly authorized to do so, if Tenant is a corporation. Tenant agrees to
provide Landlord within ten business days of Landlord's request, Tenant's most
recently completed financial statements and such other financial information as
reasonably requested by Landlord in order to verify Tenant's financial condition
to satisfy requirements of Landlord's existing or contemplated lender or
mortgagee.
Tenant agrees with lender and Landlord that if there is a foreclosure of
any such mortgage or deed of trust and pursuant to such foreclosure, the Public
Trustee or other appropriate officer executes and delivers a deed conveying the
premises to the lender or its designee, or in the event Landlord conveys the
premises to the lender or its designee in lieu of foreclosure, Tenant will
attorn to such grantee of the premises, rather than to Landlord, to perform all
of Tenant's obligations under the lease, and Tenant shall have no right to
terminate the lease by reason of the foreclosure or deed given in lieu thereof.
Landlord will endeavor to include in the terms of any mortgage or deed
of trust an the premises a provision that if Tenant is not in default under the
terms of this lease and Tenant is then in possession of the premises, Tenant's
rights of quiet enjoyment arising out of the lease shall not be affected or
disturbed by lender in the event of a default by Landlord and any sale of the
premises through foreclosure of any deed of trust or otherwise.
33. TENANT'S GUARANTEE AND FINANCIAL STATEMENTS. This lease, and
Tenant's performance hereunder, shall be guaranteed by Quantum Consulting
Associates, by the execution of the Guarantee Agreement attached hereto. A
current financial statement of Tenant and of any parties so guaranteeing this
lease shall be provided to Landlord upon execution hereof and annually
thereafter if so requested by Landlord.
25
<PAGE>
34. MEMORANDUM OF LEASE -- RECORDING. This lease shall not be recorded
in the office of the County Clerk and Recorder of Boulder County, except by
Landlord as a financing statement. In order to effect public recordation, the
parties hereto may, at the time this lease is executed, agree to execute a
Memorandum of lease incorporating therein by reference the terms of this lease,
but deleting therefrom any expressed statement or mention of the amount of rent
herein reserved, which instrument may be recorded by either party in the office
of the Clerk and Recorder of Boulder County.
35. NO WAIVER OF BREACH; ACCEPTANCE OF PARTIAL PAYMENTS OF RENT. No
assent, or waiver expressed or implied, or failure to enforce, as to any breach
of any one or more of the covenants or agreements herein shall be deemed or
taken to be a waiver of any succeeding or additional breach.
Payment by Tenant or receipt by Landlord of an amount less than the rent
or other payment provided for herein shall not be deemed to be other than a
payment on account of the earliest rent then due, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment of rent
be deemed an accord and satisfaction, and Landlord may accept such check or
other payment without prejudice to Landlord's right to recover the balance of
all rent then due, and/or to pursue any or all other remedies provided for in
this lease, in law, and/or in equity including, but not limited to, eviction of
Tenant. Specifically, but not as a limitation, acceptance of a partial payment
of rent shall not be a wavier of any default by Tenant.
36. CONTROLLING LAW. The lease, and all terms hereunder shall be
governed by the laws of the State of Colorado, exclusive of its conflicts of
laws rules.
37. INUREMENTS. The covenants and agreements herein contained shall bind
and inure to the benefit of Landlord and Tenant and their respective successors.
This lease shall be signed by the parties in duplicate, each of which shall be a
complete and effective original lease.
38. TIME. Time is of the essence in this lease in each and all of its
provisions in which performance is a factor.
39. ADDRESSES EMPLOYER IDENTIFICATION NUMBERS; METHOD OF GIVING NOTICE.
The street address of Landlord is 1960 Industrial Circle, Longmont, CO 80501.
The mailing address of Landlord is P. O. Box 1937, Longmont, CO 80502-1937. All
payments, notices and communications which are sent to Landlord via United
States mail shall be addressed to the mailing address. Only payments, notices
and communications which are hand delivered or delivered by private courier
service shall be addressed to the street address.
Tenant's street address is Quantum Consulting Associates, 1375 Florida Avenue,
Suite 84, Longmont, CO 80501. Tenant's mailing address is Quantum Consulting
Associates, 1375 Honda Avenue, Suite 84, Longmont, CO 80501. Any notice to
Tenant may be delivered to the above addresses or to the premises.
Landlord's current fax number is (303) 776-4946. Tenant's current fax
number is _______________________. Any written notice required hereby may be
delivered by fax. U.S.
26
<PAGE>
mail, private courier service, or hand delivery. Notice shall be effective at
time of delivery to the address or fax number shown.
Either party may change its street or mailing address, or fax number,
for purposes hereof, by written notice delivered to the other. The federal
employer identification number of Landlord is 84 0954 078. The federal
identification number of Tenant is
40. PARAGRAPH HEADINGS; GRAMMAR. All paragraph headings are made for the
purposes of ease of location of terms and shall not affect or vary the terms
hereof. Throughout this lease, wherever the words, "Landlord" and "Tenant" are
used they shall include and imply to the singular, plural, persons both male and
female, and all sorts of entities and in reading said lease, the necessary
grammatical changes required to make the provisions hereof mean and apply as
aforesaid shall be made in the same manner as though originally included in said
lease.
IN WITNESS WHEREOF, the Parties have executed this lease as of the date
hereof.
LANDLORD: PRATT PARTNERSHIP,
a Colorado general partnership
By:
-----------------------------------
Susan Pratt, General Partner
TENANT: QUANTUM CONSULTING ASSOCIATES
By:
-----------------------------------
Title:
---------------------------------
ATTESTED BY
------------------------------------------
27
<PAGE>
ADDENDUM TO LEASE AGREEMENT
This Addendum is made this 6th day of November, 1996, by and between
Pratt Land, LLC, a Colorado limited liability company, (hereinafter referred to
as "Landlord") and Quantum Consulting Associates Inc., a Colorado subchapter "S"
Corporation, (hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, the parties hereto entered into that certain Lease Agreement
(hereinafter referred to as "Lease") dated the 13th day of December, 1993, for
property commonly known as: 1375 Ken Pratt Blvd, Suite 4, Longmont, CO.
WHEREAS, Pratt Partnership, a Colorado partnership, has assigned all
rights, duties, and interests to Pratt Land, LLC a Colorado limited liability
company.
NOW THEREFORE, in consideration of good and valuable consideration,
including the mutual covenants hereinafter set forth, the parties hereto agree
to amend the above-described Lease as follows:
1. EXTENSION OF TERM. The term of the Lease Agreement is hereby
extended from the 1st day of January 1997 to the 31st day of December, 2000.
2. ADJUSTMENT OF BASE RENT. Pursuant to Paragraph 4.2.1 of the
Lease, the Base Rent shall be increased, effective the first day of January
1997, to Four Thousand Three Hundred Thirty Four and 23/100ths U.S. Dollars
($4,334.23/month).
3. CONFIRMATION OF LEASE AGREEMENT. Except as amended herein,
the Lease shall remain in full force and effect as originally executed.
4. TENANT IMPROVEMENTS. Landlord, at Landlord's sole expense,
shall replace ten (10) stained vinyl panel boards. During replacement, Landlord
shall not be held responsible for Tenant's personal property and contents,
including computers. Tenant shall be responsible for moving all personal
property and contents necessary to complete tenant improvements. Landlord shall
use its best efforts to reasonably match the wall panels.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of
this date first written above.
LANDLORD: TENANT:
PRATT LAND LLC QUANTUM CONSULTING ASSOCIATES INC.
A Colorado limited liability company A Colorado subchapter S Corp.
By: By:
------------------------------------ ------------------------------
Martin W. McElwain, Manager Name:
-------------------------
Title:
-------------------------
<PAGE>
ADDENDUM TO LEASE AGREEMENT
This Addendum is made this ______ day of November, 1998, by and between
Pratt Land Limited Liability Company, (hereinafter referred to as "Landlord")
and Quantum Consulting Associates Inc., a Colorado subchapter " S" corporation
(hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, the parties hereto entered into that certain Lease Agreement
(hereinafter referred to as "Lease") dated the 13th day of December 1993, for
property commonly known as 1375 Ken Pratt Blvd. Suite 4, containing
approximately 5,047 square feet:
NOW THEREFORE, for good and valuable consideration, including the mutual
covenants hereinafter set forth, the parties hereto agree to amend the
above-described Lease as follows:
1. EXTENSION OF TERM: The term of the Lease Agreement is hereby
extended from the 31st day of December 2000 to the 31st day of December 2003.
2. PREMISES LEASED: DESCRIPTION: The Premises shall be amended
to include approximately 839 square feet, hereinafter referred to as "Expansion
Premises." The total Premises Leased shall be expanded to 5,886 square feet.
3. ADJUSTMENT OF BASE RENTAL: Pursuant to Paragraph 4.1 of the
Lease, the Base Rent shall be increased, effective December 1, 1998 to Five
Thousand Fifty-seven and 06/100ths U.S. Dollars ($5,057.06). Pursuant to
Paragraph 4.3.1, on December 1, 2000, the base rent payable by Tenant shall be
increased by five percent (5%).
4. TENANT IMPROVEMENTS: Landlord at Landlords sole expense,
shall construct the Tenant Improvements of installing one door as noted on
Exhibit A, otherwise Tenant accepts the Expansion Premises in "As Is" condition.
5. CONFIRMATION OF LEASE AGREEMENT: Except as amended herein,
the Lease shall remain in full force and effect as originally executed.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of
this date first written above.
LANDLORD: TENANT:
PRATT LAND LIMITED LIABILITY COMPANY QUANTUM CONSULTING ASSOCIATES INC.
By: Date: By: Date:
------------------------- ----- -------------------- ------
Martin W. McElwain, Manager James K. Wilson, President
<PAGE>
ADDENDUM TO LEASE AGREEMENT
This Addendum is made this 31st day of May, 1999, by and between Pratt
Land Limited Liability Company, ("Landlord") and Vastera, Inc. a Delaware
corporation ("Tenant").
WITNESSETH:
WHEREAS, the Landlord and Quantum Consulting Associates, Inc., a
Colorado "S" corporation ("Quantum") entered into that certain Lease Agreement
(the "Lease") dated the 13th day of December 1993, for property commonly known
as 1375 Ken Pratt Blvd. Suite 4, containing approximately 5,047 square feet; and
WHEREAS, Landlord and Quantum entered into a Lease Addendum dated
November 6, 1996, extending the lease term; and
WHEREAS, Landlord and Quantum entered into a Lease Addendum dated
November 18, 1998, extending the lease term and expanding the Premises; and
WHEREAS, on or about June 1, 1999, Quantum was purchased by Vastera,
Inc., a Delaware corporation, and the Colorado corporation known as Quantum
Consulting Associates, Inc. was dissolved; and
WHEREAS, Vastera is desirous of assuming the Lease, including the
Addenda described above.
NOW THEREFORE, for good and valuable consideration, including the mutual
covenants hereinafter set forth, the parties hereto agree to amend the
above-described Lease as follows:
1. ASSIGNMENT OF LEASE: The Lease, including the Addenda
described above, and including all the obligations and covenants under the
Lease, is hereby assigned from Quantum to Vastera.
2. CONFIRMATION OF LEASE AGREEMENT: Except as amended herein,
the Lease shall remain in full force and effect as originally executed.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of
this date first written above.
LANDLORD: TENANT:
PRATT LAND LIMITED LIABILITY COMPANY VASTERA, INC.
By: Date: By: Date:
--------------------- -------- ------------------- -----
Martin W. McElwain, Manager Philip Balsamo, VP of Finance
<PAGE>
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT dated as of ______________ ____, 2000 (the
"Agreement"), is entered into by and between Vastera, Inc., a Delaware
corporation (the "Company"), and _____________________ ("Indemnitee").
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors, officers or agents of corporations
unless they are protected by comprehensive liability insurance or
indemnification, due to increased exposure to litigation costs and risks
resulting from their service to such corporations, and due to the fact that the
exposure frequently bears no reasonable relationship to the compensation of such
directors, officers and other agents.
B. The statutes and judicial decisions regarding the duties of
directors and officers are often difficult to apply, ambiguous, or conflicting,
and therefore fail to provide such directors, officers and agents with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take.
C. Plaintiffs often seek damages in such large amounts and the costs
of litigation may be so enormous (regardless of whether the case is
meritorious), that the defense or settlement of such litigation is often beyond
the personal resources of directors, officers and other agents.
D. The Company believes that it is unfair for its directors, officers
and agents and the directors, officers and agents of its subsidiaries to assume
the risk of significant judgments and other expenses that may be awarded in
cases in which the director, officer or agent received no personal profit and in
cases where the director, officer or agent was not culpable.
E. The Company recognizes that the issues in controversy in litigation
against a director, officer or agent of a corporation such as the Company or its
subsidiaries are often related to the knowledge, motives and intent of such
director, officer or agent, that he is usually the only witness with knowledge
of the essential facts and exculpating circumstances regarding such matters, and
that the long period of time which usually elapses before the trial or other
disposition of such litigation often extends beyond the time that the director,
officer or agent can reasonably recall such matters; and may extend beyond the
normal time for retirement for such director, officer or agent with the result
that he, after retirement or in the event of his death, his spouse, heirs,
executors or administrators, may be faced with limited ability and undue
hardship in maintaining an adequate defense, which may discourage such a
director, officer or agent from serving in that position.
<PAGE>
F. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
talented and experienced individuals to serve as directors, officers and agents
of the Company and its subsidiaries and to encourage such individuals to take
the business risks necessary for the success of the Company and its
subsidiaries, it is necessary for the Company to contractually indemnify its
directors, officers and agents and the directors, officers and agents of its
subsidiaries, and to assume for itself maximum liability for expenses and
damages in connection with claims against such directors, officers and agents in
connection with their service to the Company and its subsidiaries, and has
further concluded that the failure to provide such contractual indemnification
could result in great harm to the Company and its subsidiaries and the Company's
stockholders.
G. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized ("Section 145"), empowers the Company to indemnify its
directors, officers, employees and agents by agreement and to indemnify persons
who serve, at the request of the Company, as the directors, officers, employees
or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive.
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director, officer or agent of the Company and/or one or
more subsidiaries of the Company free from undue concern for claims for damages
arising out of or related to such services to the Company and/or one or more
subsidiaries of the Company.
I. Indemnitee is willing to serve, or to continue to serve, the
Company and/or one or more subsidiaries of the Company, provided that he is
furnished the indemnity provided for herein.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS.
(a) AGENT. For the purposes of this Agreement, "agent" of the Company
means any person who is or was a director, officer, employee or other agent of
the Company or a subsidiary of the Company; or is or was serving at the request
of, for the convenience of, or to represent the interests of the Company or a
subsidiary of the Company as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise; or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director, officer, employee or agent of
another enterprise at the request of, for the convenience of, or to represent
the interests of such predecessor corporation.
(b) EXPENSES. For purposes of this Agreement, "expenses" include all
out-of-pocket costs of any type or nature whatsoever (including, without
limitation, all attorneys' fees and related disbursements), actually and
reasonably incurred by the Indemnitee in connection
2
<PAGE>
with either the investigation, defense or appeal of a proceeding or establishing
or enforcing a right to indemnification under this Agreement or Section 145 or
otherwise; provided, however, that "expenses" shall not include any judgments,
fines, ERISA excise taxes or penalties, or amounts paid in settlement of a
proceeding.
(c) PROCEEDING. For the purposes of this Agreement, "proceeding" means
any threatened, pending, or completed action, suit or other proceeding, whether
civil, criminal, administrative, or investigative.
(d) SUBSIDIARY. For purposes of this Agreement, "subsidiary" means any
corporation of which more than 50% of the outstanding voting securities is owned
directly or indirectly by the Company, by the Company and one or more other
subsidiaries, or by one or more other subsidiaries.
2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or continue to
serve as agent of the Company, at its will (or under separate agreement, if such
agreement exists), in the capacity Indemnitee currently serves as an agent of
the Company, so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the Company or any
subsidiary of the Company or until such time as he tenders his resignation in
writing; provided, however, that nothing contained in this Agreement is intended
to create any right to continued employment by Indemnitee.
3. LIABILITY INSURANCE.
(a) MAINTENANCE OF D&O INSURANCE. At such time as the Board of
Directors deems it appropriate to obtain such insurance but not before such
time, the Company hereby covenants and agrees that, so long as the Indemnitee
shall continue to serve as an agent of the Company and thereafter so long as the
Indemnitee shall be subject to any possible proceeding by reason of the fact
that the Indemnitee was an agent of the Company, the Company, subject to Section
3(c), shall promptly obtain and maintain in full force and effect directors' and
officers' liability insurance ("D&O Insurance") in reasonable amounts from
established and reputable insurers.
(b) RIGHTS AND BENEFITS. In all policies of D&O Insurance, the
Indemnitee shall be named as an insured in such a manner as to provide the
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if the Indemnitee is a director; or of the
Company's officers, if the Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if the Indemnitee is not a director
or officer but is a key employee.
(c) LIMITATION ON REQUIRED MAINTENANCE OF D&O INSURANCE.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain D&O Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or the Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company.
3
<PAGE>
4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the Company shall
indemnify the Indemnitee as follows:
(a) SUCCESSFUL DEFENSE. To the extent the Indemnitee has been
successful on the merits or otherwise in defense of any proceeding (including,
without limitation, an action by or in the right of the Company) to which the
Indemnitee was a party by reason of the fact that he is or was an Agent of the
Company at any time, against all expenses of any type whatsoever actually and
reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding.
(b) THIRD PARTY ACTIONS. If the Indemnitee is a person who was or is a
party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify the Indemnitee against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding, provided the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and its stockholders, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
(c) DERIVATIVE ACTIONS. If the Indemnitee is a person who was or is a
party or is threatened to be made a party to any proceeding by or in the right
of the Company by reason of the fact that he is or was an agent of the Company,
or by reason of anything done or not done by him in any such capacity, the
Company shall indemnify the Indemnitee against all expenses actually and
reasonably incurred by him in connection with the investigation, defense,
settlement, or appeal of such proceeding, provided the Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and its stockholders; except that no indemnification
under this subsection 4(c) shall be made in respect to any claim, issue or
matter as to which such person shall have been finally adjudged to be liable to
the Company by a court of competent jurisdiction unless and only to the extent
that the court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the court shall deem proper.
(d) ACTIONS WHERE INDEMNITEE IS DECEASED. If the Indemnitee is a
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that he is or was an agent of the Company, or
by reason of anything done or not done by him in any such capacity, and if prior
to, during the pendency of after completion of such proceeding Indemnitee
becomes deceased, the Company shall indemnify the Indemnitee's heirs, executors
and administrators against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) actually and reasonably incurred
to the extent Indemnitee would have been entitled to indemnification pursuant to
Sections 4(a), 4(b), or 4(c) above were Indemnitee still alive.
4
<PAGE>
(e) Notwithstanding the foregoing, the Company shall not be obligated
to indemnify the Indemnitee for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes and
penalties, and amounts paid in settlement) for which payment is actually made to
or on behalf of Indemnitee under a valid and collectible insurance policy of D&O
Insurance, or under a valid and enforceable indemnity clause, by-law or
agreement.
5. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding, but not entitled, however, to indemnification for all of
the total amount hereof, the Company shall nevertheless indemnify the Indemnitee
for such total amount except as to the portion hereof to which the Indemnitee is
not entitled.
6. MANDATORY ADVANCEMENT OF EXPENSES. Subject to Section 8(a) below, the
Company shall advance all expenses incurred by the Indemnitee in connection with
the investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall be determined ultimately that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within twenty (20) days
following delivery of a written request therefor by the Indemnitee to the
Company.
7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
(b) If, at the time of the receipt of a notice of the commencement of
a proceeding pursuant to Section 7(a) hereof, the Company has D&O Insurance in
effect, the Company shall give prompt notice of the commencement of such
proceeding 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 proceeding in accordance with the terms of
such policies.
(c) In the event the Company shall be obligated to pay the expenses of
any proceeding against the Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such proceeding, with counsel approved by the
Indemnitee, upon the delivery to the Indemnitee of written notice of its
election so to do. After delivery of such notice, approval of such counsel by
the Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to the Indemnitee under this Agreement for any fees of
counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (i) the Indemnitee
5
<PAGE>
shall have the right to employ his counsel in any such proceeding at the
Indemnitee's expense; and (ii) if (A) the employment of counsel by the
Indemnitee has been previously authorized by the Company, (B) the Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of any such defense, or (C) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
8. EXCEPTIONS. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board, (iii) such indemnification is provided by the Company,
in its sole discretion, pursuant to the powers vested in the Company under the
General Corporation Law of Delaware or (iv) the proceeding is brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 145.
(b) LACK OF GOOD FAITH. To indemnify the Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by the
Indemnitee to enforce or interpret this 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; or
(c) UNAUTHORIZED SETTLEMENTS. To indemnify the Indemnitee under this
Agreement for any amounts paid in settlement of a proceeding unless the Company
consents to such settlement, which consent shall not be unreasonably withheld.
9. NON-EXCLUSIVITY. The provisions for indemnification and advancement of
expenses set forth in this Agreement shall not be deemed exclusive of any other
rights which the Indemnitee may have under any provision of law, the Company's
Certificate of Incorporation or Bylaws, the vote of the Company's stockholders
or disinterested directors, other agreements, or otherwise, both as to action in
his official capacity and to action in another capacity while occupying his
position as an agent of the Company, and the Indemnitee's rights hereunder shall
continue after the Indemnitee has ceased acting as an agent of the Company and
shall inure to the benefit of the heirs, executors and administrators of the
Indemnitee.
10. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in
any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under this Agreement (other
than an action brought to enforce a claim for expenses pursuant to Section 6
hereof, provided that the required undertaking has been tendered to the Company)
that Indemnitee is not entitled to indemnification because of the
6
<PAGE>
limitations set forth in Sections 4 and 8 hereof. Neither the failure of the
Company (including its Board of Directors or its stockholders) to have made a
determination prior to the commencement of such enforcement action that
indemnification of Indemnitee is proper in the circumstances, nor an actual
determination by the Company (including its Board of Directors or its
stockholders) that such indemnification is improper, shall be a defense to the
action or create a presumption that Indemnitee is not entitled to
indemnification under this Agreement or otherwise.
11. 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.
12. SURVIVAL OF RIGHTS.
(a) All agreements and obligations of the Company contained herein
shall continue during the period Indemnitee is an agent of the Company and shall
continue thereafter so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the fact
that Indemnitee was serving in the capacity referred to herein.
(b) The Company shall require any successor(s) to the Company (whether
direct or indirect, by purchase, merger, consolidation or otherwise) or to all
or substantially all of the business or assets of the Company, 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.
13. INTERPRETATION OF AGREEMENT. It is understood that the parties hereto
intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent permitted by law
including those circumstances in which indemnification would otherwise be
discretionary.
14. SEVERABILITY. If any provision or provisions of this Agreement shall be
held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the
validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 13 hereof.
15. MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any
7
<PAGE>
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
16. 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 receipted for by the party addressee, on the date of
delivery, or (ii) if mailed by certified or registered mail with postage
prepaid, on the third business day after the mailing date. Addresses for notice
to either party are as shown on the signature page of this Agreement, or as
subsequently modified by written notice.
17. GOVERNING LAW. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware, without giving effect
to conflicts of law principles.
IN WITNESS WHEREOF, the parties hereto have entered into this
Indemnity Agreement effective as of the date first above written.
THE COMPANY:
VASTERA, INC.
By:___________________________________
Title:________________________________
Date:_________________________________
INDEMNITEE:
Name:_________________________________
Address:______________________________
8
<PAGE>
Exhibit 10.6
VASTERA
1996 Stock Option Plan
1. PURPOSE.
The purpose of this Stock Option Plan (the "Plan") is to secure for
Vastera (the "Company") and its stockholders the benefits arising from Capital
stock ownership by key employees, officers, and consultants of the Company who
are expected to contribute to the Company's future growth and success.
Notwithstanding anything to the contrary contained herein, stock options may be
granted only to employees (including officers and directors who are employees)
and consultants of the Company. Non-employee members of the Company' Board of
Directors are ineligible to receive an award of options under the Plan. Except
where the context otherwise requires, the term "Company" shall include the
parent and all subsidiaries of the Company as defined in Section 424(e) and
424(f) of the Internal revenue Code of 1986, as amended (the "Code").
2. TYPE OF OPTIONS AND ADMINISTRATION.
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan may be
either incentive stock options ("Incentive Stock Options") meeting
the requirements of Section 422 of the Code or non-statutory
options, which are not intended to meet the requirements of
Section 422 of the Code.
(b) ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors. The Committee
hall consist of not less than two (2) members. The Committee
shall, in its sole discretion, grant options of purchase shares of
the Company's common stock (the "Common Stock") as provided in the
Plan. The Board of Directors shall have authority, subject to the
express provisions of the Plan: (I) to amend the Plan and (II) to
prescribe, amend and rescind rules and regulations relating to the
Plan. The Committee shall have authority, subject the express
provisions of the Plan: (I) to amend and construe the respective
option agreements executed pursuant to the Plan, including the
authority to amend such option agreements executed pursuant of the
Plan, including the authority to amend such option agreement
executed prior to the adoption of the Plan; (II) to establish and
determine all of the terms and provisions of the respective option
agreements, which need not be identical; and (III) to make any
other determination in the judgement of the Committee necessary or
desirable for the administration of he Plan. The Committee may
correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner
and to the extant it shall deem expedient to carry the Plan into
effect and it shall be the sole and final judge of such
expediency. No member of the Committee or Director of the company
shall be liable for any action or determination made in good
faith.
3. ELIGIBILITY.
Options shall be granted only to persons who are, at the time of grant,
employees (including officers and directors who are employees) or consultants of
the Company. A person who has been granted an option may, if he or she is
otherwise eligible, be granted an additional option or options if the Committee
shall so determine.
<PAGE>
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock of the Company which may be issued under the
Plan is 400,000 shares. Such shares may be authorized and unissued shares or may
be shares issued and thereafter acquired by the Company. If an option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full, the unpurchased shares subject to such option shall again be
available for subsequent option grants under the Plan.
5. FORMS OF OPTION AGREEMENTS.
Each option granted under the Plan shall be evidenced by an option
agreement in such form not consistent with the Plan as shall be specified by the
Committee. Each option agreement shall state whether the options granted thereby
are intended to be Incentive Stock Options (to the maximum extent possible) or
non-statutory options.
6. PURCHASE PRICE.
(a) GENERAL. The purchase price per share of stock deliverable upon
the exercise of an option shall be determined by the Committee,
provided, however, that in the case of an Incentive Stock Option,
the purchase price shall not be less than 100% of the "fair market
value" in the case of options described in paragraph (b) of
Section 11. For purposes of this section 6 the "fair market value"
of the stock shall be either: (A) as determined by the committee,
or (B) in the event the Company's Common Stock is publicly traded,
the price of the Common Stock on the date of grant of such option
at the close of business of the principal stock exchange or market
upon which the Company's stock is listed.
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may
provide for the payment of the purchase price by any method that
the Committee may authorize.
7. OPTION PERIOD.
Each option an all rights thereunder shall expire on such a date that
the Committee shall determine, but, in the case of Incentive Stock Options, in
no event after the expiration of ten (10) years from the day on which the option
is granted (or five (5) years in the case of options described in paragraph (b)
of Section 11) and, in the case of non-statutory options, in no event after the
expiration of ten (10) years and one day from the day on which the option is
granted, and in either case, shall be subject to earlier termination as provided
in the relevant option agreement.
8. EXERCISE OF OPTIONS.
Each option granted under the Plan shall be exercisable either in full
or in installments at one such time or times, during such period and subject to
such conditions as shall be determined by the committee and set forth in the
agreement evidencing such option, subject to the provisions of Section 7 above.
2
<PAGE>
9. NONTRANSFERABILITY OF STOCK OPTIONS.
No Incentive Stock Option granted under the Plan shall be assignable or
transferable by the person to whom it is granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution. During
the life of the optionee, an Incentive Stock Option shall be exercisable only by
such person. A no-statutory stock option may be assigned or transferred in whole
or in part only if so provided in the relevant agreement or if permitted by the
Committee.
10. EFFECT OF TERMINATION OF EMPLOYMENT OR CONSULTING SERVICES.
No option may be exercised unless, at the time of such exercise, the
optionee is, and has been continuously since the date of grant of his or her
option, in the case of an optionee who is an employee of the Company, employed
by the Company, or in the case of an optionee who is a consultant to the
Company, rendering services to the Company, except that if an to the extent the
option agreement so provides.
(a) an Incentive Stock Option may be exercised within the period
ending on the earlier of the tenth anniversary of the date of
grant or three (3) months after the optionee ceases to be employed
by or in the service of the Company (or within such lesser period
as may be specified in the applicable option agreement);
(b) if the optionee dies while employed by or in the service of the
Company, the option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within
the period of one (1) year after the date the optionee ceases to
be employed by or in the service of the Company, the option may be
exercised within the period of one (1) year after the date of
death (or within such lesser period as may be specified in the
applicable option agreement); and
(c) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while
employed by or in the service of the Company, the option may be
exercised within the period of one (1) calendar year after the
date the optionee ceases to be employed by or in the service of
the Company because of such disability (or within such lesser
period as may be specified in the applicable option agreement);
provided, however, that in no event may any option be exercised
after the expiration date of the option.
11. INCENTIVE STOCK OPTIONS.
(a) Dollar Limitation. Incentive Stock Option granted to any employee
under the Plan (and any other incentive stock option plans of the
Company) shall not, in the aggregate, become exercisable for the
first time in any one (1) calendar year for shares of Common Stock
with an aggregate fair market value (determined as one of the
respective date or dates of grant) of more than $100,000. In the
event Section 422 (d) of the Code is amended to alter the
limitation set forth in this paragraph (a), the limitation of this
paragraph (a) shall be automatically adjusted accordingly.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock Option
is to be granted under the Plan is , at the time of the grant such
an option, the owner of stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company
(after taking into account the attribution of stock ownership
rules of section
3
<PAGE>
424(d) of the Code), then the following special provisions shall
be applicable to the Incentive Stock Option granted to such
individual:
1. The purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of
the fair market value of one (1) share of Common Stock at the
time of grant; and
2. The option exercise period shall not exceed five (5) years
from the date of grant.
12. ADDITIONAL PROVISIONS.
(a) ADDITIONAL OPTION PROVISIONS. The Committee may, in its sole
discretion include additional provisions in any option granted
under the Plan, including, without limitation, restrictions on
transfer, repurchase rights, reload options, commitments to pay
cash bonuses, make or arrange for loans or transfer other property
to optionees upon exercise of options, or such other provisions as
shall be determined by the Committee; PROVIDED THAT such
additional provisions shall not be inconsistent with any other
term or condition of the Plan and such additional provisions shall
not cause any Incentive Stock Option within the meaning of Section
422 of the Code.
(b) ACCELERATION AND WAIVER. The Committee may, in its sole discretion
accelerate the date or dates on which all or any particular option
or options granted under the Plan may be exercised or waive any
conditions with respect to any option.
13. GENERAL RESTRICTIONS.
(a) INVESTMENT RESTRICTIONS. The Company may require any person to
whom an option is granted, as a condition of exercising such
option, to give written assurances in substance and form
satisfactory to the Company to the effect that such person is
acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to
comply with federal and applicable state securities laws.
(b) COMPLIANCE WITH SECURITIES LAWS. Each option shall be subject to
the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the
shares subject to such option upon any securities exchange or
under any state or federal law, or the consent or the approval of
any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part,
unless such listing, registration, qualification, consent or
approval shall have been effected or obtained on conditions
acceptable to the Committee. Nothing herein shall be deemed to
require the Company to apply for or to obtain such listing,
registration or qualifications.
14. RIGHTS AS A SHAREHOLDER.
The holder of an option shall have no rights as a stockholder with
respect to any sharescovered by the option until the date if issue of stock
certificate to him or her for such shares. No adjustments shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
4
<PAGE>
15. ADJUSTMENTS.
(a) GENERAL. If, as a result of a merger, consolidation, sale of all
or substantially all of the assets of the Company,
reorganizations, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other distribution
or adjustment with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common Stock
are increased or decreased, or are exchanged for a different
number or kind of shares or other securities, or additional shares
or new or different shares or other securities, an appropriate and
proportionate adjustment may be made in (I) the maximum number and
kind of shares reserved for issuance under the Plan, (ii) the
number and kind of shares or other securities subject to then
outstanding options under the Plan, and (iii) the price for each
share subject to any then outstanding options under the Plan,
without changing the aggregate purchase price as to which such
options remain exercisable.
(b) COMMITTEE AUTHORITY TO MAKE ADJUSTMENTS. Adjustments under this
Section 15 will be made by the Committee, whose determination as
to what adjustments, if any, will be made and the extent thereof
will be final binding and conclusive. No fractional shares will be
issued under the Plan on account of any such adjustments.
16. REORGANIZATION.
(a) GENERAL. In the event of a consolidation or merger in which the
Company is not surviving corporation, or which results in the
acquisition of substantially all of the Company's outstanding
Common Stock by single person, entity or group of persons or
entities acting in concert, or in the event of a sale or transfer
of all or substantially all of the assets of the Company, or in
the event of a reorganization or liquidation of the Company, then
the vesting of each option granted and unexercised under the Plan
shall be accelerated to a date prior to the effective date of such
event or transaction, and such options may be exercised by the
option holder in accordance with the provisions set forth in the
Plan.
(b) SUBSTITUTE OPTIONS. The Committee may grant options under the Plan
in substitution for options held by employees of another
corporation who become employees of the Company, or a subsidiary
of the Company, as a result of a merger or consolidation of the
employing corporation with the Company or a subsidiary of the
Company, or as a result of the acquisition by the Company, or one
of its subsidiaries, of property or stock of the employing
corporation. Substitute options may be granted on such terms and
conditions as the Committee considers appropriate in the
circumstances.
17. CHANGE IN CONTROL.
Notwithstanding any other provision of the "Plan", in the event of a
"Change in Control of the Company" (as defined below), any restrictions on
exercising outstanding options issued pursuant to the Plan prior to any given
date shall terminate with respect to the number of whole shares constituting 50%
of the shares subject to any such restriction, unless otherwise provided in a
particular stock option agreement. For purposes of the Plan, a "Change in
Control of the Company" shall occur or be deemed to have occurred only if:
(a) any "person", as such term is used in Section 13(d) and 14(d) of
the Exchange Act (other than the Company, or any corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of stock of
the
5
<PAGE>
Company), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities;
(b) during any period of two consecutive years ending during the term
of the Plan (not including any period prior to the adoption of the
Plan), individuals who at the beginning of such period constitute
the Board of Directors of the Company, and any new Director (other
than the Director designated by a person who has entered into an
agreement with the Company to effect any transaction described in
clause (a), (c), or (d) of this Section 17) whose election by the
Board of Directors nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
Directors then still in office who were either Directors at the
beginning of the period or whose election or whose nomination for
election was previously so approved (collectively, the
"Disinterested Directors"), cease for any reason to constitute a
majority of the Board of Directors.
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) 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) more than 50% of
the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such a
merger or consolidation or (B) a merger or consolidation effected
to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as herein defined) acquires
more than 50% of the combined voting power of the Company's then
outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or the sale of all or substantially all
of the Company's assets which, in either case, has not previously
been approved by a majority of the Disinterested Directors.
18. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
or service to the Company or interfere in any way with the right of the Company
at any time to terminate employment or service or to increase or decrease the
compensation of the optionee.
19. AMENDMENT OF THE PLAN.
The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect. The termination or any modification or
amendment of the Plan shall not, without consent of an optionee, affect his or
her rights under an option previously granted to him or her. With the consent of
the optionee affected, the Committee may amend outstanding option agreements in
a manner not inconsistent with the Plan.
20. WITHHOLDING.
The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee and federal, state or local taxes of any kind
required by law to be withheld with respects to any
6
<PAGE>
shares issued upon exercise of options under the Plan. Subject to the prior
approval of the Company, which such approval may be withheld by the Company in
its sole discretion, such obligations may be satisfied, in whole or in part (I),
by withholding shares of Common Stock otherwise issuable pursuant to the
exercise of an option, (ii) by delivering to the Company shares of Common Stock
already owned by the optionee or, (iii) by such other means as the Company may
require or approve. The shares so delivered or withheld shall have a fair market
value equal to such withholding obligation. For purposes of this Section 20, the
"fair market value" of the stock issued upon the exercise of an option shall be
either: (A) as determined by the Committee or, (B) in the event the Company's
Common Stock is publicly traded, the price of the Common Stock on the date of
exercise of such option at the close of business of the principal stock exchange
or market upon which the Company's stock is listed.
21. CANCELLATION AND NEW GRANT OF OPTIONS.
The Committee shall have the authority to effect, at any time an from
time to time, with the consent of the affected optionees to the extent required,
the cancellation of any or all outstanding options under the Plan and the grant
substitution therefore of new options under the Plan covering the same or
different numbers of shares of common Stock, having an option purchase price per
share that may be lower or higher than the purchase price per share of the
canceled options and having such other terms as the committee may approve.
22. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by
the Board of Directors, but no Incentive Stock Option granted
under the Plan shall become exercisable unless and until the Plan
shall have been approved by the company's stockholders. If such
stockholder approval is not obtained within twelve (12) months
after the date of the Board's adoption of he Plan, any Incentive
Stock Options previously granted under the Plan shall terminate
and no further Incentive Stock Options shall be granted.
Amendments to the Plan shall become effective when adopted by the
Board of Directors; amendments requiring stockholder approval
under Section 422 of the Code shall, to the extent determined by
the Board of Directors, become effective when adopted by the Board
of Directors, but no Incentive Stock Option issued after the date
of such amendment shall become exercisable (to the extent that
such amendment to the Plan was required to enable the Company to
grant such Incentive Stock Option to a particular optionee) unless
and until such amendment shall have been approved by the Company's
stockholders. If such stockholder approval is not obtained within
twelve (12) months of the Board of Director's adoption such
amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a
particular optionee. Subject to this limitation, options may be
granted under the Plan at any time after the effective date and
before the date fixed for termination of the Plan.
(b) TERMINATION. The Plan shall terminate upon the earlier of (I) the
close of business on the day next preceding the tenth anniversary
of the date of its adoption by the Board of Directors, or (ii) the
date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise or cancellation of
options granted under the Plan. If the date of termination is
determined under (I) above, then options outstanding on such date
shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such options.
7
<PAGE>
Adopted by the Board of Directors
on July 26, 1996.
8
<PAGE>
AMENDMENT NO.1
TO
EXPORT SOFTWARE INTERNATIONAL, INC.
1996 STOCK OPTION PLAN
WHEREAS, the Board of Directors of Export Software International, Inc.,
(the "Company") has determined that it is in the best interests of the Company
to amend the 1996 Stock Option Plan to increase the number of shares of Common
Stock available for award under the Plan to 1,250,000.
NOW THEREFORE, the 1996 Stock Option Plan of the Company is hereby amended as
follows:
4. STOCK SUBJECT TO PLAN. The first paragraph shall be deleted in its
entirety and the following first paragraph shall be inserted in lieu thereof:
"Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock of the Company which may be issued
under the plan is 1,250,000. Such shares may be authorized and unissued
shares or may be shares issued and thereafter acquired by the Company.
If an option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares
subject to such options shall be available for subsequent option grants
under the Plan."
This Amendment No.1 to 1996 Stock Option Plan was adopted and approved by way of
Unanimous Written Consent of the Board of Directors on May 13, 1997.
<PAGE>
VASTERA, INC.
AMENDMENT NO. 2 TO
1996 STOCK OPTION PLAN
THIS AMENDMENT NO. 2 TO 1996 STOCK OPTION PLAN ("AMENDMENT NO. 2") is
made and effective this 10th day of August, 1998 by the Board of Directors of
Vastera, Inc. (the "COMPANY").
WHEREAS, the Board of Directors previously adopted the Company's 1996
Stock Option Plan (the "PLAN") on July 26, 1996 and subsequently amended the
Plan on May 13, 1997;
WHEREAS, as presently written 1,250,000 shares of Common Stock are
available for grant under the Plan (the "AUTHORIZED PLAN SHARES"); and
WHEREAS, immediately prior to the date hereof, the Board of Directors
granted options to purchase shares of Common Stock in excess of Authorized Plan
Shares;
WHEREAS, the Board of Directors deems it advisable and in the best
interests of the Company to ratify such options granted in excess of Authorized
Plan Shares and increase the aggregate number of shares of Common Stock
available for award under the Plan to 2,000,000 shares; and
WHEREAS, the Board of Directors deems it advisable and in the best
interests of the Company to delete Section 16(a) of the Plan.
NOW THEREFORE, BE IT RESOLVED, the Plan is amended as follows:
1. 4. STOCK SUBJECT TO PLAN. The first paragraph shall be deleted in
its entirety and the following first paragraph shall be inserted in lieu
thereof:
"Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock of the Company which may be issued
under the plan is 2,000,000. Such shares may be authorized and unissued
shares or may be shares issued and thereafter acquired by the Company.
If an option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares
subject to such options shall be available for subsequent option grants
under the Plan."
<PAGE>
2. Section 16: REORGANIZATION of the Plan is hereby amended by
deleting Section 16 in its entirety and inserting the following Section 16 in
lieu thereof:
"16. REORGANIZATION. The Committee may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation.
Substitute options may be granted on such terms and conditions as the Committee
considers appropriate in the circumstances."
-2-
<PAGE>
VASTERA, INC.
AMENDMENT NO. 3 TO
1996 STOCK OPTION PLAN
THIS AMENDMENT NO. 3 TO 1996 STOCK OPTION PLAN ("AMENDMENT NO. 3") is
made and effective this 12th day of May, 1999 by the Board of Directors of
Vastera, Inc. (the "COMPANY").
WHEREAS, the Board of Directors previously adopted the Company's 1996
Stock Option Plan (the "PLAN") on July 26, 1996 and subsequently amended the
Plan on May 13, 1997 and August 10, 1998;
WHEREAS, as presently in effect, 2,000,000 shares of Common Stock are
available for grant under the Plan (the "AUTHORIZED PLAN SHARES"); and
WHEREAS, the Board of Directors deems it advisable and in the best
interests of the Company to ratify such options granted in excess of Authorized
Plan Shares and increase the aggregate number of shares of Common Stock
available for award under the Plan to 2,750,000 shares.
NOW THEREFORE, BE IT RESOLVED, the Plan is amended as follows:
1. 4. STOCK SUBJECT TO PLAN. The first paragraph shall be deleted in
its entirety and the following first paragraph shall be inserted in lieu
thereof:
"Subject to adjustment as provided in Section 15 below, the maximum number of
shares of Common Stock of the Company which may be issued under the plan is
2,750,000. Such shares may be authorized and unissued shares or may be shares
issued and thereafter acquired by the Company. If an option granted under the
Plan shall expire or terminate for any reason without having been exercised in
full, the unpurchased shares subject to such options shall be available for
subsequent option grants under the Plan."
This Amendment No. 3 to this 1996 Stock Option Plan was approved by the
Shareholders of the Company on May ____, 1999.
<PAGE>
VASTERA, INC.
AMENDMENT NO. 4 TO
1996 STOCK OPTION PLAN
THIS AMENDMENT NO. 4 TO THE 1996 STOCK OPTION PLAN ("Amendment No. 4)
is made and effective this ___ day of November, 1999 by the Board of Directors
of Vastera, Inc. (the "Company").
WHEREAS, the Board of Directors previously adopted the Company's 1996
Stock Option Plan (the "Plan") on July 26, 1996 and subsequently amended the
Plan on May 13, 1997, August 10, 1998 and May 12, 1999;
WHEREAS, presently in effect, 2,750,000 shares of Common Stock are
available for grant under the Plan (the "Authorized Plan Shares"); and
WHEREAS, the Board of Directors deems it advisable and in the best
interest of the Company to increase the aggregate number of shares of Common
Stock available for award under the Plan from 2,750,000 shares to 4,000,000
shares.
NOW, THEREFORE, BE IT RESOLVED, that the Plan is amended as follows:
1. Section 4 shall be deleted in its entirety and the following
Section 4 shall be inserted in lieu thereof:
"4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock of the Company which may be issued under the
Plan is 4,000,000 shares. Such shares may be authorized and unissued shares or
may be shares issued and thereafter acquired by the Company. If an option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject to such options shall be
available for subsequent option grants under the Plan."
This Amendment No. 4 to this 1996 Stock Option Plan was approved the
Stockholders of the Company on November ____, 1999.
<PAGE>
VASTERA, INC.
AMENDMENT NO. 5 TO
1996 STOCK OPTION PLAN
THIS AMENDMENT NO. 5 TO THE 1996 STOCK OPTION PLAN ("Amendment No. 5")
is made and effective this 4th day of April, 2000 by the Board of Directors of
Vastera, Inc. (the "Company").
WHEREAS, the Board of Directors previously adopted the Company's 1996
Stock Option Plan (the "Plan") on July 26, 1996 and subsequently amended the
Plan on May 13, 1997, August 10, 1998, May 12, 1999 and November ___, 1999;
WHEREAS, presently in effect, 4,000,000 shares of Common Stock are
available for grant under the Plan (the "Authorized Plan Shares"); and
WHEREAS, the Board of Directors deems it advisable and in the best
interest of the Company to increase the aggregate number of shares of Common
Stock available for award under the Plan from 4,000,000 shares to 4,500,000
shares.
NOW, THEREFORE, BE IT RESOLVED, that the Plan is amended as follows:
1. Section 4 shall be deleted in its entirety and the following
Section 4 shall be inserted in lieu thereof:
"4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock of the Company which may be issued under the
Plan is 4,500,000 shares. Such shares may be authorized and unissued shares or
may be shares issued and thereafter acquired by the Company. If an option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject to such options shall be
available for subsequent option grants under the Plan."
This Amendment No. 5 to this 1996 Stock Option Plan was approved the
Stockholders of the Company on April __, 2000.
<PAGE>
Exhibit 10.7
VASTERA, INC.
INCENTIVE STOCK OPTION AGREEMENT
1. GRANT OF OPTION. Vastera, Inc., a Delaware corporation (the
"Company"), hereby grants to XX (the "Optionee") an option (the "Option"),
pursuant to the Company's 1996 Stock Option Plan (the "Plan"), to purchase an
aggregate of XXX (X,XXX) shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company at a price of $X.XX per share, purchasable as
set forth in, and subject to the terms and conditions of, this agreement (the
"Agreement") and the Plan. Except where the context otherwise requires, the term
"Company" shall include the parent and all subsidiaries of the Company as
defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as
amended (the "Code").
2. INCENTIVE STOCK OPTION. This Option is intended to qualify as an
incentive stock option ("Incentive Stock Option") within the meaning of Section
422 of the Code.
3. EXERCISE OF OPTION AND PROVISIONS FOR TERMINATION.
(a) VESTING SCHEDULE. Except as otherwise provided in this
Agreement, this Option may be exercised prior to the tenth anniversary of the
date of grant (hereinafter the "Expiration Date"). The Option granted hereby
shall vest as to XXX (XXX) shares effective as of XXX XX, XXXX thereafter the
Option shall vest on the last day of each month in equal installments of XXX
(XX) shares per month until XXX XX, XXXX, upon which time the Option shall be
fully vested. The right of exercise shall be cumulative so that if the Option is
not exercised to the maximum extent permissible during any exercise period it
shall be exercisable, in whole or in part, with respect to all shares not so
purchased at any time prior to the Expiration Date or the earlier termination of
this Option.
Notwithstanding anything to the contrary contained in the foregoing
paragraph, in the event of the death or disability of the Optionee, as set forth
herein, all shares of Common Stock that would have been vested during the
Exercise Period that would have next occurred had the Optionee not died or
become disabled shall vest and be exercisable immediately pursuant to the terms
of subsection 3(e) hereof.
This Option may not be exercised at any time on or after the Expiration
Date.
(b) EXERCISE PROCEDURE. Subject to the conditions set forth in
this Agreement, this Option shall be exercised by the Optionee's delivery of
written notice of exercise to the Treasurer of the Company specifying the number
of shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in full in accordance with Section 4. Such exercise shall
be effective upon receipt by the Treasurer of the Company of such written notice
together with the required payment. The Optionee may purchase fewer than the
total number of shares covered hereby, provided that no partial exercise of this
Option may be for any fractional share or for fewer than ten (10) whole shares.
(c) CONTINUOUS EMPLOYMENT REQUIRED. Except as otherwise
provided in this Section 3, this Option may not be exercised unless the
Optionee, at the time he or she exercises this Option, is, and has been at all
times since the date of grant of this Option, employed by the Company. For all
purposes of this Option, (I) "employment" shall be defined in accordance with
the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any
successor regulations), and (ii) if this Option shall be assumed or a new option
substituted therefor in a transaction to which Section 424(a) of the Code
applies, employment by such assuming or substituting corporation (hereinafter
called the "Successor Corporation") shall be considered for all purposes of this
Option to be employment with the Company.
(d) EXERCISE PERIOD UPON TERMINATION OF EMPLOYMENT. If the
Optionee ceases to be employed by the Company for any reason other than death or
disability or a discharge for "cause", as
<PAGE>
provided below, the right to exercise this Option shall terminate three (3)
months after such cessation (but in no event after the Expiration Date),
PROVIDED THAT this Option shall be exercisable only to the extent that the
Optionee was entitled to exercise this Option on the date of such cessation.
(e) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Optionee dies
or becomes disabled (within the meaning of Section 22(e)(3) of the Code or any
successor provision thereto) prior to the Expiration Date, this Option shall be
exercisable by the Optionee or by the person to whom this Option is transferred
by will or the laws of descent and distribution, PROVIDED THAT this Option shall
be exercisable only to the extent that this Option was exercisable by the
Optionee on the date of his or her death or disability. Except as otherwise
indicated by the context, the term "Optionee" shall be deemed to include the
estate of the Optionee or any person who acquires the right to exercise this
Option by bequest or inheritance or otherwise by reason of the death of the
Optionee.
(f) DISCHARGE FOR CAUSE. If the Optionee, prior to the Expiration
Date, ceases his or her employment or other relationship with the company
because he or she is discharged for "cause" (as defined below), the right to
exercise this Option will terminate immediately upon cessation of employment or
relationship. "Cause" shall mean willful misconduct in connection with the
Optionee's duties or willful failure to perform his or her responsibilities in
the best interests of the Company (including, without limitation, breach by the
Optionee of any provision of employment, non-disclosure, non-competition or
other similar agreement between the Optionee and the Company), as determined by
the Company, which determination shall be conclusive.
4. PAYMENT OF PURCHASE PRICE
(a) METHOD OF PAYMENT. Payment of the purchase price for shares
purchased upon exercise of this Option shall be made by delivery to the Company
of cash or a check to the order of the Company in an amount equal to the
purchase price of such shares, or, with the separate consent of the Company, by
delivery to the Company of shares of Common Stock of the Company, then owned by
the Optionee having a fair market value equal in amount to the purchase price of
such shares, or by any combination of such methods of payment.
(b) VALUATION OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE. For
the purposes hereof, the fair market value of any share of the Company's Common
Stock which may be delivered to the Company in exercise of this Option shall be
determined in good faith by the board of directors of the Company.
(c) DELIVERY OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE. If the
Company permits the Optionee to exercise options by delivery of shares of Common
Stock of the Company, the certificate or certificates representing the shares of
Common Stock of the Company to be delivered shall be duly executed in blank by
the Optionee or shall be accompanied by a stock power duly executed in blank
suitable for purposes of transferring such shares to the Company. Fractional
shares of Common Stock of the Company will not be accepted ion payment of
purchase price of shares acquired upon exercise of this Option.
(d) RESTRICTIONS UPON USE OF OPTION STOCK. Notwithstanding anything
to the contrary contained in the foregoing subsections 4(a) and 4(c), no shares
of Common Stock of the Company may be tendered in payment of the purchase price
of shares purchased upon exercise of this Option if the shares to be so tendered
were acquired within twelve (12) months before the date of such tender, through
the exercise of an option granted under the Plan or any other stock option or
restricted stock plan of the Company.
5. DELIVERY OF SHARES; COMPLIANCE WITH SECURITIES LAW, ETC.
<PAGE>
(a) GENERAL. The Company shall, upon receipt of the Optionee's
payment of the option price for the number of shares purchased and paid for,
make prompt delivery of such shares to the Optionee, provided that if any law or
regulation requires the Company to take any action with respect to such shares
before the issuance thereof, then the date of delivery of such shares shall be
extended for the period necessary to complete such action.
(b) LISTING, QUALIFICATION, ETC. This Option shall be subject
to the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject hereto
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares hereunder, this
Option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
6. NONTRANSFERABILITY OF OPTION. Except as provided in paragraph (e) of
Section 3, this Option is personal and no rights granted hereunder may be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this Option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this Option or such rights, this Option and such rights shall, at the
election of the Company, become null and void.
7. NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in the Plan or this
Agreement shall be construed or deemed by any person under any circumstances to
bind the Company top continue the employment of the Optionee for the period
within which this Option shall be exercised. However, during the period of the
Optionee's employment, the Optionee shall render diligently and faithfully the
services which are assigned to the Optionee from time to time by the Board of
Directors or by the executive officers of the Company and shall at no time take
any action which, directly or indirectly, would be inconsistent with the best
interests of the Company.
8. RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any shares which may be purchased by exercise of
this Option unless and until a certificate representing such shares is duly
issued and delivered to the Optionee. No adjustment shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is issued.
9. ADJUSTMENTS.
(a) GENERAL. If, as a result of a merger, consolidation, sale of all
or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common Stock are increased
or decreased, or are exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (I) the
number and kind of shares or other securities subject to this Option and (ii)
the price for each share subject to this Option, without changing the aggregate
purchase price as to which this Option remains exercisable.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Adjustments under this
Section 9 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under this Option on account
of any such adjustments.
<PAGE>
(c) LIMITS ON ADJUSTMENTS. No adjustment shall be made under this
Section 9 which would, within the meaning of any applicable provision of the
Code, constitute a modification, extension or renewal of this Option or a grant
of additional benefits to the Optionee.
10. MERGERS, ETC. In the event of a merger or consolidation in which
the company is not the surviving corporation, or which results in the
acquisition of substantially all of the Company's outstanding Common Stock by a
single person, entity or group of person or entities acting in concert, or in
the event of a reorganization or liquidation of the Company, prior to the
Expiration Date or termination of this Option, the Optionee shall, with respect
to this Option or any unexercised portion hereof, be entitled to the rights and
benefits, and be subject to the limitations, set forth in Section 15 and 16 of
the Plan.
11. WITHHOLDING TAXES. The Company's obligation to deliver shares upon
the exercise of this Option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
12. LIMITATION ON DISPOSITION OF INCENTIVE STOCK OPTION SHARES:
RESTRICTIONS ON TRANSFER OF OPTION SHARES.
(a) It is understood and intended that this Option shall qualify as
an "Incentive Stock Option" as defined in Section 422 of the Code. Accordingly,
the Optionee understands that in order to obtain the benefits of an Incentive
Stock Option under Section 421 of the Code, no sale or other disposition may be
made of any shares acquired upon exercise of this Option within one (1) year
after the day of transfer of such shares to him or her, nor within two (2) years
after the grant of the Option. If the Optionee intends to dispose, or does
dispose (whether by sale, exchange, gift, transfer or otherwise), of any such
shares within said periods, he or she will notify the Company in writing within
ten (10) days after such disposition.
(b) Optionee agrees that, concurrently with the full or partial
exercise of this Option, Optionee shall execute such standard form of the
Company's stock restriction agreement as the Company may require on the exercise
date. Optionee acknowledges that the Company shall have no obligation to issue
shares of its Common Stock pursuant to an exercise of this Option until such
time as Optionee has signed the required form of stock restriction agreement.
13. INVESTMENT REPRESENTATION: LEGEND .
(a) REPRESENTATIONS. The Optionee represents, warrants and
covenants that:
(1) Any shares purchased upon exercise of this Option shall be
acquired for the Optionees account for investment only and not with a view to,
or for sale in connection with, any distribution of the shares in violation of
the Securities Act of 1933 (the "Securities Act") or any rule or regulation
under the Securities Act.
(2) The Optionee has had such opportunity as he or she has
deemed adequate to obtain from representatives of the Company such information
as is necessary to permit Optionee to evaluate the merits and risks of his or
her investment in the Company.
(3) The Optionee is able to bear the economic risk of holding
shares acquired pursuant to the exercise of this Option for an indefinite
period.
(4) The Optionee understands that (A) the shares acquired
pursuant to the exercise of this Option will not be registered under the
Securities Act and are "restricted securities" within the meaning of Rule 144
under the Securities Act; (B) such shares cannot be sold, transferred or
otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (C) in any
event, the exemption from registration under Rule 144 will not be available for
at least two (2) years and even then will not be available unless a public
market then exists for the Common Stock, adequate information concerning the
Company is then available to the public and other
<PAGE>
conditions of Rule 144 art complied with; and (D) there is now no registration
statement on file with the Securities and Exchange Commission with respect to
any stock of the Company and the Company has no obligation or current intention
to register any shares acquired pursuant to the exercise of this Option under
the Securities Act.
By making payment upon exercise of this Option, the Optionee shall be
deemed to have reaffirmed, as of the date of such payment, the representations
made in this Section 13.
(b) LEGEND ON STOCK CERTIFICATES. All stock certificates
representing shares of Common Stock issued to the Optionee upon exercise of this
Option shall have affixed thereto a legend substantially in the following form,
in addition to any other legends required by applicable state law:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be transferred,
sold or otherwise disposed of in the absence of an effective registration
statement with respect to the shares evidenced by this certificate, filed and
made effective under the Securities Act of 1933, or an opinion of counsel
satisfactory to the Company to the effect that registration under such Act is
not required."
14. MISCELLANEOUS.
(a) Except as provided herein, this Option may not be amended
or otherwise modified unless evidenced in writing and signed by the Company and
the Optionee.
(b) All notices under this Option shall be mailed or delivered
by hand to the parties at their respective addresses set forth beneath their
names below or at such other address as may be designated in writing by either
of the partied to one another.
(c) This Option shall be governed by and construed in
accordance with the laws of the State of Delaware.
Date of Grant: _____________________
VASTERA, INC.
By:___________________________
Name:_________________________
Title:__________________________
<PAGE>
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing Option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of a
copy of the Company's 1996 Stock Option Plan.
OPTIONEE
-----------------------------------
Name:
------------------------------
Address:
---------------------------
<PAGE>
EXHIBIT 16.1
[LETTERHEAD]
April 5, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We have read the statements made by Vastera, Inc, (copy attached), which we
understand will be filed with the Commission as part of the Company's Form
S-1 on page 75 in the first paragraph under "Other Matters". We agree with
the statements concerning our Firm in said paragraph in such Form S-1.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
- --------------------------------
PricewaterhouseCoopers LLP
<PAGE>
Ex. 21.1
LIST OF SUBSIDIARIES
Vastera Ltd.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Vienna, Virginia
April 5, 2000
