<PAGE>
As filed with the Securities and Exchange Commission on March 24, 2000
Registration No. 333-95377
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
Amendment No. 2 to
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
NOOSH, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7379 77-0495080
(State or other
jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or
organization) Classification Code Number) Identification Number)
</TABLE>
--------------
3401 Hillview Avenue, Palo Alto, California, 94304
(650) 320-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Ofer Ben-Shachar
President, Chief Executive Officer and Chairman
3401 Hillview Avenue, Palo Alto, California 94304
(650) 320-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies To:
<TABLE>
<S> <C>
Laura A. Berezin, Esq. Steven B. Stokdyk, Esq.
Cooley Godward LLP Sullivan & Cromwell
Five Palo Alto Square 1888 Century Park East Blvd., 21st Floor
3000 El Camino Real Los Angeles, California 90067
Palo Alto, CA 94306-2155 (310) 712-6600
(650) 843-5000
</TABLE>
--------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), 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>
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<CAPTION>
Proposed
Maximum Proposed Maximum
Title of Each Case of Amount to be Offering Price Aggregate Amount of
Scurities to be Registerede Registered(1) Per Share(2) Offering Price(2) Registration Fee(3)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value........ 4,600,000 $13.00 $59,800,000 $15,788
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</TABLE>
(1) Includes 600,000 shares of common stock issuable upon exercise of the
underwriters' overallotment option, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a)
(3) $15,312 previously paid at the time the Registration Statement was
initially filed on January 25, 2000. An additional $476 is being paid in
connection with the filing of this Amendment No. 2 thereto.
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 that specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section
8(a), may determine.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. These +
+securities may not be sold until the registration statement filed with the +
+Securities and Exchange Commission is effective. This preliminary prospectus +
+is not an offer to sell nor does it seek an offer to buy these securities in +
+any jurisdiction where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated March 24, 2000.
4,000,000 Shares
[LOGO OF NOOSH, INC.]
NOOSH, Inc.
Common Stock
----------
This is an initial public offering of common stock of NOOSH, Inc. All of the
4,000,000 shares of common stock are being sold by NOOSH.
Prior to this offering, there has been no public market for our common stock.
We estimate the initial public offering price will be between $11.00 and $13.00
per share. We have applied to have our common stock listed for quotation on the
Nasdaq National Market under the symbol "NOOS".
See "Risk Factors" beginning on page 6 to read about factors you should
consider before buying shares of our common stock.
----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price.................................. $ $
Underwriting discount.......................................... $ $
Proceeds, before expenses, to NOOSH............................ $ $
</TABLE>
To the extent that the underwriters sell more than 4,000,000 shares of common
stock, the underwriters have the option to purchase up to an additional 600,000
shares from NOOSH at the initial public offering price less the underwriting
discount.
----------
The underwriters expect to deliver the shares in New York, New York on
, 2000.
Goldman, Sachs & Co. Robertson Stephens
Banc of America Securities LLC
PaineWebber Incorporated
E*OFFERING
----------
Prospectus dated , 2000
<PAGE>
[Description of Inside Front Cover Graphic: Graphic depicts the print job
work-flow and communication process before and after Noosh.com.
The graphic on the left-hand side of the page depicts the process before
Noosh.com and contains circles, squares and triangles, arranged in a circular
pattern, representing the parties involved in the print production process. In
the center of the circle is a square representing a print broker, a circle
representing the printing sales representative and a triangle representing the
print buyer. Connecting the three parties in the center of the circle with the
parties forming the outside of the circle are numerous lines representing the
multiple interactions among the multiple parties prior to deploying our
Noosh.com service.
The graphic on the right-hand side of the page depicts the process after
Noosh.com and also contains circles, squares and triangles, arranged in a
circular pattern, representing the parties involved in the print production
process. In the center of the circle is the Noosh logo. Lines connect the
Noosh logo with each of the parties forming the outside of the circle
representing the fact that Noosh acts as a central location enabling
collaboration among all the parties involved in the print production process.]
Top caption:
Noosh leverages the power of the Internet
to improve the process of managing the design,
procurement and production of print projects.
Caption above Caption above
left-hand graphic: right-hand graphic:
Noosh is a leading provider Traditional processes of designing,
of business-to-business procuring and producing print projects
e-commerce solutions for can be extremely inefficient and are
the printing industry. often plagued by miscommunication errors
Our Internet-based service, between print buyers, pring brokers,
noosh.com, is designed to prepress specialists, printers, and
address the complex, creative agencies. The noosh.com service
multi-step process of provides a central location where the
completing print projects. parties involved in a print job can
collaborate effectively in a secure
Internet environment.
Caption below Caption below
left-hand graphic: right-hand graphic:
The traditional process of Noosh.com improves the process of
managing print can be managing print by providing an
hindered by miscommunication environment where print job participants
errors--multiple faxes, returned can work together more efficiently with
emails and missed phone better information.
messages--throughout the job cycle.
Accuracy, costs and timeliness
are the biggest casualties.
<PAGE>
[Description of gatefold graphics: Graphic depicts Web site page views of our
Noosh.com service. In the center is a depiction of the first page of our Web
site. Underneath, in a semi-circle, are five additional graphics depicting other
Web site page views correlating to features available on Noosh.com. Features
highlighted are "Open Job", "Request/Accept Estimates", Collaborate", "Order
Management/Event Tracking", "Ship Completed Jobs" and "Management
Reporting." The gatefold also contains logos of our users.]
Top Left Caption: Noosh provides a business-to-business, Internet-based
service for managing the design, procurement and production
of print projects. With our service, everyone involved in the
print production and management process can communicate
effectively, manage print job deadlines and view information
regarding job status.
Top Right Caption: Print buyers can easily create job specifications and
collaborate with necessary parties throughout the design,
procurement and production stages of the print project. As
the project progresses, print buyers and printers can notify
each other and other team members of status changes, pose
specification questions, revise schedules, and collaborate on
other aspects of the project in real time.
Open Jobs: The Jobs page contains current job status, due date, and key
contact information. Any job, even archived jobs, can be
accessed quickly by sorting on due date, printer, client and
other criteria. Both print buyers and printers use a one-
click menu to easily update print job status.
Request/Accept
Estimates: Print jobs can be created and submitted by buyers, and quoted
online by print vendors, locally or anywhere in the world.
Job specifications and order revisions are managed
consistently, enabling buyers and print vendors to share
common order description formats.
Collaborate: Users build job teams consisting of participants from
multiple organizations. Each individual team member is
assigned specific access privileges for modifying and viewing
print projects. Team members can post messages as well as
upload, edit and approve files to the print job.
Order
Management/Event
Tracking: The noosh.com service provides online ordering, confirmation
and order status reports from design through delivery
enabling collaborative management and order tracking
throughout the entire print process. A complete online record
of the order history gives everyone involved in the print
project a comprehensive and up-to-the-minute status report.
Ship Completed
Jobs: Print buyers can choose to ship projects to one or multiple
locations. Noosh.com tracks the status of shipments and all
relevant information about each delivery is displayed in one
place.
Management
Reporting: Noosh.com provides instant access to real-time job-management
reports. Printers can keep track of each customer's account
history and a sales representative's performance. Print
buyers are able to track the costs of print projects and
budget spending in the future for similar projects.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding NOOSH, Inc., and our financial statements and the related
notes appearing elsewhere in this prospectus. Unless otherwise indicated, this
summary and all the information in this prospectus assumes the automatic
conversion of all outstanding shares of our preferred stock into shares of
common stock upon the closing of this offering, the reincorporation of NOOSH in
Delaware and no exercise of the underwriters' over-allotment option.
Our Business
We are a leading provider of business-to-business e-commerce solutions for
the printing industry. We have developed and operate noosh.com, an Internet-
based service for managing the design, procurement and production of print
orders. Our service can be used to manage print products as diverse as business
cards and stationery, promotional brochures and direct mail, customized
packaging and labels, and books and magazines. It leverages the benefits of the
Internet to enable print buyers, print vendors and other providers of related
services to communicate and collaborate efficiently through the complex, multi-
step process of a print job.
Through December 31, 1999, we did not generate any revenues. From our initial
testing of our noosh.com service in July 1999 through December 31, 1999, over
80 print buyers and print vendors have managed the design, procurement and
production of over 350 print orders using noosh.com. These print orders were
managed by companies using our service for evaluation purposes, and we received
no revenues from them. Our service is primarily targeted at large national
corporations and their print vendors. Print vendors who use our service
generally will pay us a transaction fee based on the size and volume of the
print order, and print buyers who use our service generally will pay us a
monthly fee. As of March 23, 2000 over 121 print buyers and print vendors have
signed agreements with us to use our service, including Bank of America Corp.
and Wells Fargo & Company. In addition, to promote the acceptance of our
service by large corporations, we have entered into agreements with national
print vendors in the print industry under which they have agreed to market our
service to their customers. To date, these vendors include Consolidated
Graphics, Inc., Moore North America, Inc., R.R. Donnelley & Sons Company and
Wallace Computer Services, Inc. These agreements do not obligate the print
buyers or print vendors to use our service.
We were incorporated in August 1998 and have a limited operating history.
Through December 31, 1999, we did not generate any revenues, and we have a
history of significant losses. We incurred a net loss of $17.6 million for the
year ended December 31, 1999 and, as of December 31, 1999, we had an
accumulated deficit of $18.0 million. We anticipate that we will continue to
incur operating losses and negative operating cash flow in the foreseeable
future. In addition, we operate in a competitive industry in which new
competitors can enter with little difficulty. Accordingly, we expect
competition in the market for print management services to intensify in the
future. See "Risk Factors" beginning on page 6 to read about these and other
factors you should consider before buying our shares.
Corporate Information
We were incorporated in California in August 1998 and reincorporated in
Delaware in March 2000. Our corporate offices are located at 3401 Hillview
Avenue, Palo Alto, California 94304. Our telephone number at that location is
(650) 320-6000. Information contained on our Web site does not constitute part
of this prospectus. We have filed for federal trademark registration for
NOOSHSM, the NOOSHSM logo and LiveJobsSM. Other trademarks and tradenames
appearing in this prospectus are the property of their holders.
3
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by NOOSH.............. 4,000,000 shares
Common stock to be outstanding after this
offering.................................. 36,455,058 shares
Use of proceeds............................ For working capital and general
corporate purposes. See "Use of
Proceeds".
Proposed Nasdaq National Market symbol..... "NOOS"
</TABLE>
The number of shares of common stock to be outstanding after this offering is
stated as of February 15, 2000 and includes:
. 4,000,000 shares of common stock to be issued upon completion of this
offering; and
. 35,000 shares of common stock issuable upon exercise of a portion of an
outstanding warrant at an exercise price of $7.45 per share prior to this
offering.
The number of shares of common stock to be outstanding after this offering
excludes:
. 14,950,000 shares of common stock authorized for issuance under our employee
stock option plans, non-employee directors' stock option plan and our
employee stock purchase plan, of which 4,147,575 shares, at a weighted
average exercise price of $1.31, were subject to outstanding options as of
February 15, 2000;
. warrants for 1,141,308 shares of common stock that are exercisable as of
February 15, 2000 at a weighted average exercise price of $10.67; and
. warrants for an additional 2,258,850 shares of common stock that may become
exercisable in the future based on the holders meeting stated volume targets
for business conducted over our service.
Upon completion of this offering, our executive officers, directors,
principal stockholders and their affiliates will beneficially own, in the
aggregate, approximately 66.1% of our outstanding common stock. In addition,
following this offering, our existing stockholders will own approximately 89.0%
of our stock. As a result, these stockholders may be able to control all
matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions, which could delay or prevent a
change of control of NOOSH.
4
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data are derived from our financial
statements included elsewhere in this prospectus. The pro forma balance sheet
data reflects the receipt of net proceeds of $15.6 million upon the issuance
and sale of 1,418,182 shares of series D preferred stock to R.R. Donnelley and
two other investors in January 2000. The pro forma as adjusted balance sheet
data reflects the receipt of net proceeds from the sale of 4,000,000 shares of
common stock offered by us at an assumed initial public offering price of
$12.00 per share after deducting an assumed underwriting discount and estimated
offering expenses payable by us and assumes the exercise of a portion of an
outstanding warrant for a total of 35,000 shares of common stock at an exercise
price of $7.45 per share prior to this offering.
<TABLE>
<CAPTION>
Period from Period from
August 3, August 3,
1998 (date 1998 (date
of of
inception) inception)
to Year Ended to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
(in thousands, except share and
per share data)
<S> <C> <C> <C>
Statements of Operations Data:
Costs and expenses:
Research and development (exclusive of
non-cash compensation expense of $771
in 1999 reported below).............. $ 111 $ 3,053 $ 3,164
Sales and marketing (exclusive of non-
cash compensation expense of $984 and
value of warrants granted of $1,249
in 1999 reported below).............. 96 9,412 9,508
Value of warrants granted in
connection with marketing
agreements........................... -- 1,468 1,468
General and administrative (exclusive
of non-cash compensation expense of
$813 in 1999 reported below)......... 107 1,795 1,902
Amortization of deferred stock
compensation......................... -- 2,568 2,568
--------- ---------- ---------
Total operating expenses............ 314 18,296 18,610
Interest income, net.................... -- (648) (648)
--------- ---------- ---------
Net loss................................ $ (314) $ (17,648) $ (17,962)
========= ========== =========
Net loss per share--basic and diluted... $ (0.12) $ (4.13) $ (4.77)
========= ========== =========
Shares used in per share calculation--
basic and diluted...................... 2,521,485 4,275,090 3,763,399
========= ========== =========
Pro forma net loss per share--basic and
diluted................................ $ (1.15)
==========
Shares used in pro forma net loss per
share--basic and diluted............... 15,356,918
==========
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- ---------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................ $48,349 $63,949 $107,650
Working capital.................................. 47,238 62,838 106,539
Total assets..................................... 53,029 68,629 112,330
Long-term debt................................... 79 79 79
Total stockholders' equity....................... 50,892 66,492 110,193
</TABLE>
5
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. The risks and
uncertainties described below are those we currently believe are material to
our business, our industry and this offering. If any of the following risks
actually occurs, our business, operating results and financial condition could
be seriously harmed. In addition, the trading price of our common stock could
decline due to the occurrence of any of these risks, and you may lose all or
part of your investment. Additional unknown or unanticipated risks and
uncertainties could also harm our business. See "Note Regarding Forward-Looking
Statements".
Risks Related to Our Business
We only incorporated in August 1998 and generated no revenue through December
31, 1999. Because our limited operating history makes it difficult to evaluate
our business, our future financial performance may disappoint investors and
result in a decline in our common stock price.
We were incorporated in August 1998 and have a limited operating history,
which makes an evaluation of our current business and prospects difficult.
Through December 31, 1999, we did not generate any revenues. In addition, the
revenue and income potential of our business are unproven. Due to our limited
operating history, it will be difficult to predict accurately our future
revenues or results of operations. This may result in one or more quarters
where our financial performance falls below expectations of investors. As a
result, the price of our common stock may decline.
The market for Internet-based print management services is at an early stage of
development and, if our noosh.com service does not achieve widespread
commercial acceptance, we will be unable to generate revenue.
Because the market for Internet-based print management services is at an
early stage of development, our noosh.com service may fail to achieve market
acceptance. The acceptance of our Internet-based service may be hindered by:
. the reluctance of prospective customers to change their existing print
purchasing habits and alter the nature of their direct print vendor
relationships;
. our failure to effectively communicate the value of our service to
prospective customers;
. the inability of national printers with whom we have a relationship to
effectively co-market our service to their customers; and
. the emergence of new technologies or industry standards that could cause our
service to be less competitive.
If our potential customers do not recognize the value of, or choose not to
adopt, our service, we will be unable to generate revenue.
Because print buyers and print vendors currently coordinate print orders
through a medium other than the Internet, they may not accept our Internet-
based print management service and our business could suffer.
Most print buyers and print vendors currently coordinate the procurement and
management of customized print orders through either a combination of
telephone, facsimile and paper or through proprietary software solutions.
Growth in the demand for our noosh.com service depends on the adoption of e-
commerce and Internet services by print buyers and print vendors, which
requires their
6
<PAGE>
acceptance of a new way of managing the design, procurement and production of
print orders. However, we may not be able to persuade print buyers or print
vendors to abandon their traditional print management processes because of
comfort with these processes and because of the existing direct relationships
between print buyers and their vendors. Our business could suffer if Internet-
based print management services are not accepted or not perceived to be
effective by print buyers and print vendors.
We expect to incur significant future operating losses and may never achieve
profitability.
We did not generate any revenue through December 31, 1999, and we have never
been profitable. We incurred a net loss of $11.7 million for the quarter ended
December 31, 1999 and a net loss of $17.6 million for the year ended December
31, 1999. We anticipate that we will continue to incur operating losses and net
losses for the foreseeable future. The extent of our future losses are
dependent, in part, on the amount of growth in our revenue relative to our
operating expenses. However, we currently expect to increase our operating
expenses significantly as we incur expenses related to the development,
operation and marketing of our service. In turn, our ability to generate
revenue depends on our ability to convert our current users to paying customers
and obtain new customers. If we fail to generate significant revenue, or if our
operating expenses increase without a corresponding increase in revenue, our
losses will continue to increase in future periods.
Converting our existing users to revenue-generating customers and attracting
new customers is a complex and time-consuming process which may take longer
than we expect.
As of December 31, 1999, all of the users of our service were using it for
evaluation purposes and were not paying for their usage of our service. In
addition, our user agreements do not obligate our users to use our service in
the future. We cannot assure you that we will be able to convert our existing
users to revenue-generating customers or what price these customers will be
willing to pay for our service. In addition, the comprehensive implementation
of our service by large print buyers or vendors can be complex and time
consuming because it may require us to perform a workflow analysis, input
contact lists and past documents as templates and train the individuals within
the print buyer's or print vendor's organization. Therefore, to sell our
service successfully, we must educate our potential customers on the uses and
benefits of our service, which can require significant time and resources on
our part. Consequently, we can not assure you that we will be able to attract
new customers. If we are unable to convert our existing users to revenue-
generating customers or attract new customers, our ability to expand our
business will be hindered.
Intense competition in our industry could substantially impair our business and
our operating results.
We expect competition in the market for Internet-based print management
services to intensify significantly in the future because new competitors can
enter the market with little difficulty and can launch new Internet-based
services for a relatively low cost. Competitors may offer Internet-based print
management services superior to our current or proposed offerings and achieve
greater market acceptance. In addition, because we have only recently
implemented a pricing structure for our service, we cannot be certain that
current users and future customers will be willing to pay the prices we have
set. If we do not achieve market acceptance before our competitors offer more
attractive services, we will lose customers and our market share will decline.
We currently or potentially will compete with a number of other companies,
including print vendors offering traditional methods of buying and managing
print orders, companies that offer business-to-business Internet-based services
for the printing industry, such as Collabria, Inc., printCafe, Inc. and
Impresse Corporation, and companies that provide proprietary management
software and who may develop alternative print procurement and management
services. In addition,
7
<PAGE>
existing print vendors, including some of our users, may develop competing
Internet-based services for the management of print orders. These vendors have
well-established relationships with our current print buyers and potential
customers, a large base of installed customers, extensive knowledge of our
industry and significantly greater financial and marketing resources than we
do. To the extent existing print vendors elect to offer their services over the
Internet, their relationships with their customers and industry knowledge may
provide them with a competitive advantage because print buyers may be unwilling
to adopt a new Internet-based system or may be more comfortable adopting the
Internet-based services offered by their current print vendors.
Because our quarterly operating results are difficult to predict and likely to
fluctuate in future periods, we may fail to meet the expectations of investors,
which may cause the market price of our common stock to decrease.
Operating results are difficult to predict and are likely to vary
significantly from quarter to quarter in the future. We compete in the general
printing market, which is characterized by individual orders from customers for
specific printing projects rather than long-term contracts. Continued
engagement for successive print orders depends on the customers' satisfaction
with our service. Therefore, the number, size and profitability of print orders
may fluctuate from quarter to quarter. As a result, our quarterly operating
results are difficult to predict and may fall below the expectations of current
or potential investors in some future quarters, which could lead to a
significant decline in the market price of our stock.
Because we have granted some of our print vendors and print buyers performance-
based warrants, we expect to incur substantial non-cash charges which will
reduce our operating results.
We expect to incur substantial non-cash charges associated with the grant of
warrants to four print vendors and two print buyers. For example, for the
quarter ended December 31, 1999, we recorded an expense of $1,468,000 in
connection with portions of warrants issued to two print vendors and we expect
to record an expense of $3,853,000 in the quarter ending March 31, 2000 in
connection with a portion of the warrant issued to a third print vendor. The
remaining portions of these warrants and the warrants to one of the print
vendors and to the print buyers are exercisable when the holders meet stated
volume targets for business conducted on or through our noosh.com service. The
magnitude of each additional charge will be measured and the charge will be
taken when it becomes probable that the applicable volume targets will be
achieved. Accordingly the magnitude of these potential charges cannot be
currently calculated. However we expect that the charges will be relatively
large, and our operating results will be reduced correspondingly.
If we are unable to expand our sales, marketing and customer support
infrastructure successfully, our ability to increase sales of our service will
be compromised.
Our ability to expand our business will depend in part on recruiting and
training additional direct sales, marketing and customer support personnel,
including additional personnel in new geographic markets as we expand.
Competition for qualified sales, marketing and customer support personnel is
intense. We may not be able to expand our direct sales force successfully,
which would limit our ability to expand our customer base. We may be unable to
hire highly trained customer support personnel, which would make it difficult
for us to meet customer demands. Any difficulties we may have in expanding our
sales, marketing or customer support organizations will have a negative impact
on our ability to attract new customers and retain existing users.
8
<PAGE>
If we are unable to retain our current management and product development
personnel, we may not be able to support the growth of our business.
In order for our business to be successful, we must be able to retain the
services of Ofer Ben-Shachar, our President and Chief Executive Officer, David
Hannebrink, our Vice President of Marketing and Business Development, Lawrence
Slotnick, our Vice President of Engineering and Robert Shaw, our Senior Vice
President of Sales. The loss of the services of any one of these members of
management could have a negative effect on our business. In particular, because
competition for senior management, experienced sales and marketing personnel,
software developers, qualified engineers and other employees is intense, we
cannot be certain that we will be successful in attracting and retaining such
personnel. If we fail to retain the services of our current management and
product development personnel, our business and future product development
could be severely harmed.
Because many of the members of our management team have been employed with us
for less than one year, we cannot be certain that they will be able to manage
our business successfully.
We are dependent on the successful integration of our management team in
order for our business to be successful. Because of our limited operating
history, many of our existing management personnel have been employed by us for
less than a year. Therefore, we cannot be certain that we will be able to
allocate responsibilities satisfactorily and that the new members of our
management team will succeed in their roles. Our inability to integrate members
of our current management team or any additional qualified personnel would make
it difficult for us to manage our business successfully and pursue our growth
strategy.
If we are unable to update the features and functionality for our service in
response to rapid changes in customer needs, competitive offerings, industry
standards and technology, our service may become obsolete and we will be unable
to compete.
For us to succeed, we must continue to enhance the features and functionality
of our current service and to develop and introduce new services in a timely
and cost-effective manner. We cannot be certain that the features and
functionality that we currently offer, or the features and functionality that
we may offer in the future, will be sufficient to encourage and facilitate the
use of our noosh.com service. If we are unable to accurately determine, design
or implement the appropriate features and functionality for our noosh.com
service, or if we are unable to adapt to changing conditions, including new
competitive service offerings, emerging industry standards and rapidly changing
technology, users may delay or decide against purchasing our service.
We may incur substantial expenses pursuing new or complementary business
objectives, which may harm our operating results.
Part of our strategy is to pursue new or complementary business opportunities
within and outside the printing industry and to expand internationally. We may
not be able to expand our service offerings and related operations in a cost-
effective or timely manner. Expansion of our business into other print-related
markets will require significant additional expenditures and strain our
personnel and resources. For example, we may need to incur significant
marketing expenses to develop relationships with new suppliers and customers.
In addition, we cannot be certain that we will be able to use our Live Jobs
technology to expand our service offerings outside the printing industry in a
timely and cost-effective manner. Even if we are successful in applying our
technology to non-print related markets, our new service offerings may not
achieve market acceptance, which could damage our reputation.
9
<PAGE>
Because we have recently granted stock options to our employees at exercise
prices significantly below the assumed initial public offering price, we will
recognize a significant deferred stock compensation expense which could harm
our operating results.
Since inception in August 1998 through January 2000, we have granted options
to employees at exercise prices which, based on the assumed initial public
offering price of $12.00, we determined are below the deemed fair market value
of our common stock for financial reporting purposes. As a result, we have
recorded deferred stock-based compensation of $17.9 million for the period
since inception through December 31, 1999. Of this $17.9 million, we recognized
deferred stock compensation of $2.6 million for the year ended December 31,
1999. The remainder will be amortized as stock-based compensation over the
vesting period of the options, or through 2003. In addition to these charges,
we expect to record an additional $12.7 million of deferred stock-based
compensation for options granted to employees from January 1, 2000 to February
15, 2000, which could harm our operating results.
Third parties may increase the fees they charge us for their technology or
refuse to license technology to us, which may increase our costs or harm our
service.
We rely on third parties to provide us with some software and hardware, for
which we pay fees. Although this technology is currently available, third
parties may increase their fees significantly or refuse to license their
software or provide their hardware to us. While other vendors may provide
similar technology, we cannot be certain that we would be able to obtain the
required technology on favorable terms or at all. If we cannot obtain the
required technology at a reasonable cost or this technology is inadequate, we
may incur additional expenses or experience delays or disruptions in our
service.
Our inability to protect our intellectual property rights from third-party
challenges may significantly impair our competitive position.
If we fail to protect our proprietary rights adequately, our competitors
could offer similar services, potentially harming our competitive position. We
rely on a combination of copyright, trademark and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. We have
filed for trademark protection for NOOSH, the NOOSH logo and LiveJobs. We also
have four U.S. patent applications pending in connection with the internally
developed software applications that comprise our LiveJobs technology. However,
we do not have any issued patents to date, and we can not be sure any patents
will issue. We cannot be certain that the steps we have taken to protect our
intellectual property rights will be adequate or that third parties will not
infringe or misappropriate our proprietary rights. We also cannot be sure that
competitors will not independently develop technologies that are substantially
equivalent or superior to the proprietary technologies employed in our
Internet-based service.
Our service may infringe on the intellectual property rights of third parties,
which may result in lawsuits and prevent us from selling our service.
In recent years, there has been significant litigation in the United States
concerning patents and other intellectual property rights involving companies
in the Internet industry. Our business activities may infringe on the
proprietary rights of others and other parties may assert infringement claims
against us. In February 2000, we received a letter from an individual advising
us that the individual's patent may cover certain aspects of our service and
requesting that we consider licensing the patent. We are currently evaluating
the patent. However, based upon our preliminary review, we do not believe that
we require a license under the patent to operate our current service. If this
matter, or any similar future matters or claims, cannot be resolved through a
license or similar arrangement, we could become a party to litigation.
Intellectual property claims and any resulting lawsuits, if successful, could
subject us to significant liability for damages and result in invalidation of
our proprietary rights. In addition, these claims, regardless of whether they
result in litigation and
10
<PAGE>
regardless of the outcome of the litigation, would be time-consuming and
expensive to resolve and divert management time and attention. Any intellectual
property dispute may cause us to do one or more of the following:
. stop selling or using our service;
. attempt to obtain from the owner of the infringed intellectual property
right a license to sell or use the relevant technology, which license may
not be available on reasonable terms or at all; or
. redesign the service.
If we are forced to take any of these actions, our business may be harmed.
Although we carry general liability insurance, our insurance may not cover
claims of this type or may not be adequate to indemnify us for all liability
that may be imposed.
Risks Related to the Internet Industry
We depend on the increasing use of the Internet and on the growth of electronic
commerce. If businesses do not accept Internet-based print management services,
our business will fail.
For us to succeed, the Internet must continue to be adopted as a significant
business-to-business tool for managing vital business functions such as
managing and producing printed business materials. To date, many businesses
have been deterred from using the Internet for a number of reasons, including:
. unavailability of cost-effective, high-speed Internet access;
. inconsistent quality of service;
. potentially inadequate development of the global Internet infrastructure;
and
. the difficulty of integrating existing business software applications with
online systems.
Although the Internet has been widely adopted for business transactions, it
may not achieve broad market acceptance for managing the design, procurement
and production of print orders. Companies that have already invested
substantial resources in traditional methods of managing and producing printed
business materials may be reluctant to adopt new Internet-based services.
Any damage to or failure of our service could disrupt our business and
undermine our reputation.
Our operations depend in part on our ability to protect our systems against
physical damage from fire, earthquakes, power loss, telecommunications
failures, computer viruses, hacker attacks, physical break-ins and similar
events. Any software or hardware damage or failure that causes interruption or
an increase in response time of our online service could reduce customer
satisfaction and decrease usage of our service.
We have entered into a colocation agreement with AboveNet, Inc. to provide
data center colocation, Internet connectivity, conditioned power and support
and maintenance of our hardware and software at AboveNet's San Jose, California
facility. Since our data warehousing and network facilities are located in
California, an earthquake, other natural disaster, or telecommunications
failure could affect our operations unexpectedly and prevent us from offering
our service. We cannot be certain, and AboveNet does not guarantee, that our
service will be uninterrupted, error-free or secure. From time to time, we have
experienced disruptions in service as a result of telecommunications failure.
Any future interruptions, errors or breaches of security could harm our
business and our reputation.
11
<PAGE>
Security risks and concerns may deter the use of the Internet for conducting e-
commerce, which may inhibit the use of our service and limit our growth.
Secure transmission of confidential information over public networks is
critical for conducting e-commerce. Advances in computer capabilities, new
discoveries in the field of cryptography or other events or developments could
result in compromises or breaches of our security systems. If any
well-publicized compromises of security were to occur, they could have the
effect of substantially reducing the use of the Internet for commerce and
communications, which could reduce usage of our service and harm our business.
Anyone who circumvents our security measures could misappropriate proprietary
information or cause interruptions in our service or operations. In the past,
computer viruses or software programs that disable or impair computers, have
been distributed and have rapidly spread over the Internet. Computer viruses
could be introduced into our systems or those of our users, which could disrupt
our network or make it inaccessible to users. We may be required to expend
significant capital and other resources to protect against the threat of
security breaches or to alleviate problems caused by breaches. To the extent
that our activities may involve the storage and transmission of proprietary
information, security breaches could expose us to a risk of loss or litigation
and possible liability. Our security measures may be inadequate to prevent
security breaches, and our business would be harmed if we do not prevent them.
Because the volume of data traffic over the Internet, in general, and our Web
site, in particular, has increased significantly over a short period of time,
users may experience performance problems with our service which may hinder the
adoption of our Internet-based print management service.
Our success in attracting and retaining customers and convincing them to
increase their reliance on our Internet-based print management service depends
on our ability to offer customers reliable and continuous service. This
requires us to ensure continuous and error-free operation of our systems. To
the extent that the volume of data traffic on our web site and other systems
increases, we must upgrade and enhance our technical infrastructure to
accommodate the increased demands placed on our systems. Our ability to
increase the speed and reliability of our service, however, is limited by and
depends upon both the infrastructure supporting the Internet and the internal
networks of our existing users and future customers. As a result, the success
of our service is dependent upon improvements in networking infrastructure. If
these improvements are not available or are not implemented in a timely fashion
by our current users and future customers, we will have difficulty in retaining
current users or attracting new customers, and our business would be harmed.
Increasing governmental regulation on electronic commerce and legal
uncertainties could limit our growth.
The adoption of new laws or the adaptation of existing laws to the Internet
may decrease the growth in the use of the Internet, which could in turn
decrease the demand for our services, increase our cost of doing business or
otherwise harm our business. Federal, state, local and foreign governments are
considering a number of legislative and regulatory proposals relating to
Internet commerce. As a result, a number of laws or regulations may be adopted
regarding Internet user privacy, security, taxation, pricing, quality of
products and services and intellectual property ownership which may also be
applicable to us. How existing laws will be applied to the Internet in areas
such as property ownership, copyright, trademark, trade secret, obscenity and
defamation is uncertain. The recent growth of Internet commerce has been
attributed by some to the lack of sales and value-added taxes on interstate
sales of goods and services over the Internet. Numerous state and local
authorities have expressed a desire to impose such taxes on sales to consumers
and businesses in their jurisdictions. The Internet Tax Freedom Act of 1998
prevents imposition of such taxes through October 2001. If the federal
moratorium on state and local taxes on Internet sales is not renewed, or if it
is terminated before its expiration, sales of goods and services over the
Internet could be subject to multiple overlapping tax schemes, which could
substantially hinder the growth of Internet-based commerce, including sales of
our service.
12
<PAGE>
Risks Related to this Offering
In the future, we may need to raise additional capital to fund our operations.
Any difficulty in obtaining additional financial resources could force us to
curtail our operations or prevent us from pursuing our growth strategy.
We believe that our existing cash and cash equivalents will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures
for at least the next twelve months. However, even with the proceeds of this
offering, we may need to raise additional capital in the future in order to
fund our planned expansion of operations, to pursue additional customer sales
and to pursue our growth strategy. Our future capital requirements will depend
on many factors that are difficult to predict, including our rate of revenue
growth, our operating losses, the cost of obtaining new customers, the cost of
upgrading and maintaining our infrastructure and other systems and the size,
timing and structure of any acquisition that we complete. As a result, we
cannot predict with certainty the timing or amount of our future capital needs.
We have no commitments for additional financing, and we may experience
difficulty in obtaining additional funding on favorable terms or at all. If
adequate funds are not available or not available on acceptable terms, we may
be unable to fund our expansion, promote our brand identity, take advantage of
unanticipated acquisition opportunities, develop or enhance services or respond
to competitive pressures. Any such inability could force us to curtail our
operations and would have a negative effect on our business.
Any future funding may dilute the ownership of our stockholders or impose
limitations on our operations. If we raise additional funding through the
issuance of equity, the percentage of our company owned by our then current
stockholders will be correspondingly reduced.
Our stock price may be volatile, and you may not be able to resell your shares
at or above the initial public offering price.
Prior to this offering, there has been no public market for our common stock.
The initial public offering price of our common stock will be determined
through negotiations between us and the representatives of the underwriters.
However, we cannot predict whether the market price of our common stock
following this offering will be below, at, or above the initial public offering
price. We also cannot be certain whether an active trading market in the common
stock will develop following this offering and how liquid that market will be.
As a result, if you decide to purchase our shares, you may not be able to
resell your shares at or above the initial public offering price.
The market price for our shares of common stock may be volatile. A number of
factors can contribute to volatility in our stock price, including:
. actual or anticipated variations in our quarterly operating results;
. changes in revenue;
. changes in market valuations of other Internet or online commerce companies;
. the gain or loss of significant relationships with national printers or
major print buyers;
. announcements of technological innovations or significant contracts by us or
our competitors;
. acquisitions, strategic partnerships, joint ventures or capital commitments;
. additions or departures of key personnel; and
. general conditions in the Internet commerce and printing industries.
13
<PAGE>
In addition, the stock market in general has experienced extreme price and
volume fluctuations that have been unrelated to the operating performance of
particular companies. This is particularly characteristic of many companies in
the technology and emerging growth sectors. These broad market fluctuations
could materially adversely affect the market price of our common stock.
Our existing stockholders will be able to exercise significant control over all
matters requiring stockholder approval.
On completion of this offering, our executive officers, directors and greater
than 5% stockholders, consisting of Accel Partners, Advanced Technology
Ventures, Meritech Capital and R.R. Donnelley and their affiliates, will
beneficially own, in the aggregate, approximately 66.1% of our outstanding
common stock. As a result, these stockholders, acting together, would be able
to exercise significant control over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions, which may have the effect of delaying or preventing a
third party from acquiring control over us.
Provisions of our charter documents and Delaware law contain provisions that
may discourage a takeover, which could limit the price investors might be
willing to pay in the future for our common stock.
Provisions of our certificate of incorporation and our bylaws may have the
effect of delaying or preventing an acquisition, a merger in which we are not
the surviving company or changes in our management. These provisions:
. establish a classified board of directors so that not all members of the
board may be elected at one time;
. authorize the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;
. limit who may call a special meeting of the stockholders;
. prohibit stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and
. establish advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted upon
by stockholders at stockholder meetings.
In addition, because we reincorporated in Delaware, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law. These
provisions may prohibit large stockholders, in particular those owning 15% or
more of the outstanding voting stock, from consummating a merger or combination
including us. These provisions could limit the price that investors might be
willing to pay in the future for our common stock.
14
<PAGE>
Future sales of our common stock may depress our stock price.
Sales of our common stock into the market could cause the market price of
our common stock to drop significantly, even if our business is doing well.
After this offering, we will have outstanding 36,455,058 shares of common stock
assuming no exercise of the underwriters' over-allotment option. All the
4,000,000 shares sold in this offering will be freely tradable at the date of
this prospectus. The remaining 32,455,058 shares of our common stock that will
be outstanding after this offering will be eligible for sale as follows:
<TABLE>
<CAPTION>
Number of Shares Date eligible for sale
---------------- ----------------------
<S> <C>
20,013,643 180 days after the date of this prospectus, if sales
meet the restrictions under federal securities laws
12,441,415 Beginning in November 2000, if sales meet the
restrictions under federal securities laws
</TABLE>
The table above gives effect to lockup agreements with the underwriters or
agreements with us under which our directors, officers, employees and other
stockholders have agreed not to sell, transfer or otherwise dispose of their
shares of common stock for 180 days after the date of this prospectus. Although
there is no agreement or understanding for the underwriters to waive the lock-
up agreements, Goldman, Sachs & Co. may, in its sole discretion and at any time
without prior notice, release all or any portion of the common stock subject to
lock-up agreements.
Additionally, of the 4,147,575 shares that may be issued upon the exercise of
outstanding options as of February 15, 2000, approximately 606,796 shares will
be vested and eligible for sale 180 days after the date of this prospectus. As
of February 15, 2000, warrants for 1,141,308 shares of common stock were
exercisable and warrants for an additional 2,258,850 shares of common stock may
become exercisable in the future based on the holders meeting stated volume
targets for business conducted over our service. If exercised, the earliest
that these shares will be eligible for sale under Rule 144 is December 2000.
For a further description of the eligibility of shares for sale into the public
market following this offering, see "Shares Eligible for Future Sale".
15
<PAGE>
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business" and elsewhere in this prospectus constitute forward-
looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different than any expressed or implied by these statements. In some cases, you
can identify statements by terminology such as "may", "will", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential", "continue" or the negative of these terms or other comparable
terminology.
Although we believe that the expectations reflected in the statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. We are under no duty to update any of the statements after the
date of this prospectus to conform these statements to actual results or events
except to the extent required under law.
16
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares being
offered will be $43.4 million, at an assumed initial public offering price of
$12.00 per share after deducting an assumed underwriting discount and estimated
offering expenses payable by us. If the underwriters exercise their over-
allotment option in full, then we estimate that the net proceeds to us from the
sale of the shares being offered will be $50.1 million.
We intend to use all of the proceeds for working capital and general
corporate purposes. However, we have not made a specific allocation of the
proceeds. The primary purposes of this offering are to fund our operations,
increase our visibility in the marketplace, create a public market for our
common stock and facilitate future access to public equity markets.
We may also use a portion of the net proceeds to acquire complementary
technologies or businesses. However, we currently have no commitments or
agreements and are not involved in any negotiations involving any of these
transactions. Pending use of the net proceeds of this offering, we intend to
invest the net proceeds in interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain any future earnings to finance the expansion of our business.
17
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999 on
an actual, pro forma and pro forma as adjusted basis. The pro forma column
reflects the receipt of net proceeds of $15.6 million upon the issuance and
sale of 1,418,182 shares of series D preferred stock to R.R. Donnelley and two
other investors in January 2000 and the automatic conversion of all shares of
outstanding preferred stock, including series D, into 21,000,745 shares of
common stock upon the closing of this offering. The pro forma as adjusted
column reflects our pro forma capitalization plus:
. our sale of 4,000,000 shares of common stock at an assumed initial public
offering price of $12.00 per share, after deducting an assumed underwriting
discount and estimated offering expenses payable by us; and
. 35,000 shares of common stock issuable upon exercise of a portion of an
outstanding warrant at an exercise price of $7.45 per share prior to this
offering.
None of the columns reflect:
. 14,950,000 shares of common stock authorized for issuance under our employee
stock option plans, non-employee directors' stock option plan and our
employee stock purchase plan of which 4,147,575 shares were subject to
outstanding options as of February 15, 2000;
. warrants for 1,141,308 shares of common stock that were exercisable as of
February 15, 2000 at a weighted average exercise price of $10.67;
. warrants for an additional 2,258,850 shares of common stock outstanding as
of February 15, 2000 that may become exercisable in the future based on the
holders meeting stated volume targets for business conducted over our
service;
. the issuance of 1,987,290 shares of common stock in connection with the
exercise of stock options from December 31, 1999 through February 15, 2000;
and
. the issuance of 17,350 shares of common stock in connection with services
rendered from December 31, 1999 through February 15, 2000.
You should read the table below along with our balance sheet as of December
31, 1999 and the related notes.
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
data)
<S> <C> <C> <C>
Cash and cash equivalents...................... $ 48,349 $ 63,949 $107,650
======== ======== ========
Long-term debt................................. $ 79 $ 79 $ 79
-------- -------- --------
Stockholders' equity:
Preferred stock, par value $0.001; 14,035,000
shares authorized, actual; 15,200,000 shares
authorized pro forma; 5,000,000 shares
authorized, pro forma as adjusted;
13,195,849 shares issued and outstanding,
actual; no shares issued and outstanding,
pro forma and pro forma, as adjusted ........ 13 -- --
Common stock, par value $0.001; 45,000,000
shares authorized, actual and pro forma;
75,000,000 shares authorized, pro forma as
adjusted; 9,414,673 shares outstanding,
actual; 30,415,418 shares outstanding pro
forma; 34,450,418 shares outstanding pro
forma as adjusted ........................... 9 30 34
Additional paid-in capital.................... 84,525 100,117 143,814
Deferred stock compensation................... (15,379) (15,379) (15,379)
Notes receivable from common stockholders..... (314) (314) (314)
Deficit accumulated during the development
stage........................................ (17,962) (17,962) (17,962)
-------- -------- --------
Total stockholders' equity ................. 50,892 66,492 110,193
-------- -------- --------
Total capitalization...................... $ 50,971 $ 66,571 $110,272
======== ======== ========
</TABLE>
18
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was $66.5
million, or $2.19 per share. Pro forma 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 total number of shares of common stock
outstanding after giving effect to the sale and issuance of 1,418,182 shares of
series D preferred stock in January 2000 and the automatic conversion of all
shares of outstanding preferred stock into 21,000,745 shares of common stock
upon the closing of this offering. Dilution in net tangible book value per
share represents the difference between the amount paid per share by purchasers
of shares of common stock in this offering and the net tangible book value per
share of common stock immediately after the completion of this offering. After
giving effect to the sale of the 4,000,000 shares of common stock offered by us
at an assumed initial public offering price of $12.00 per share, after
deducting an assumed underwriting discount and estimated offering expenses
payable by us and after giving effect to the issuance of 35,000 shares of
common stock upon the exercise of a portion of a warrant at an exercise price
of $7.45 per share prior to this offering, our pro forma net tangible book
value at December 31, 1999 would have been $110.2 million or $3.20 per share of
common stock. This represents an immediate increase in pro forma net tangible
book value of $1.01 per share to existing stockholders and an immediate
dilution of $8.80 per share to new investors purchasing shares at the assumed
initial offering price. The following table illustrates this dilution on a per
share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $12.00
Net tangible book value per share at December 31, 1999........ $2.19
Increase per share attributable to new investors.............. 1.01
-----
Net tangible book value per share after the offering............ 3.20
------
Dilution per share to new investors............................. $ 8.80
======
</TABLE>
The following table summarizes, as of December 31, 1999, after giving effect
to the series D preferred stock issued and the issuance of 35,000 shares of
common stock upon the exercise of a portion of a warrant, the differences
between the existing stockholders and new investors in this offering with
respect to the number of shares of common stock and preferred stock purchased
from us, the total consideration paid to us and the average price per share
paid:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 30,450,418 88% $80,011,000 63% $ 2.51
New investors.................. 4,000,000 12 48,000,000 37 12.00
---------- --- ----------- ---
Totals....................... 34,450,418 100% 128,011,000 100%
========== === =========== ===
</TABLE>
The preceding tables assume no issuance of shares of common stock under
warrants or our stock plans after December 31, 1999. As of February 15, 2000,
there were outstanding:
. 4,147,575 shares subject to outstanding options at a weighted average
exercise price of $1.31 per share;
. warrants for 1,141,308 shares of common stock that are exercisable at a
weighted average exercise price of $10.67; and
. warrants for an additional 2,258,850 shares of common stock that may become
exercisable in the future based on the holders meeting stated volume targets
for business conducted over our service.
If all of these options were exercised, then the total dilution per share to
new investors would be $8.31.
19
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read together 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. The statements of operations data and the balance sheet
data presented below have been derived from financial statements that have been
audited by PricewaterhouseCoopers, independent accountants, included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
Period from Period from
August 3, August 3,
1998 (date 1998 (date
of of
inception) inception)
to Year Ended to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
(in thousands, except share and
per share data)
<S> <C> <C> <C>
Statements of Operations Data:
Costs and expenses:
Research and development (exclusive of
non-cash compensation expense of $771
in 1999 reported below).............. $ 111 $ 3,053 $ 3,164
Sales and marketing (exclusive non-
cash compensation expenses of $984
and value of warrants granted of
$1,249 in 1999 reported below)....... 96 9,412 9,508
Value of warrants granted in
connection with marketing
agreements........................... -- 1,468 1,468
General and administrative (exclusive
of non-cash compensation expense of
$813 in 1999 reported below)......... 107 1,795 1,902
Amortization of deferred stock
compensation......................... -- 2,568 2,568
--------- ---------- ---------
Total operating expenses.............. 314 18,296 18,610
Interest income, net.................... -- (648) (648)
--------- ---------- ---------
Net loss................................ $ (314) $ (17,648) $ (17,962)
========= ========== =========
Net loss per share, basic and diluted... $ (0.12) $ (4.13) $ (4.77)
========= ========== =========
Shares used in per share calculation --
basic and diluted...................... 2,521,485 4,275,090 3,763,399
========= ========== =========
Pro forma net loss per share --
basic and diluted...................... $ (1.15)
==========
Shares used in pro forma net loss per
share --
basic and diluted...................... 15,356,918
==========
</TABLE>
<TABLE>
<CAPTION>
As of December
31,
--------------
1998 1999
------ -------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....................................... $1,117 $48,349
Working capital................................................. 902 47,238
Total assets.................................................... 1,239 53,029
Long-term debt.................................................. -- 79
Total liabilities............................................... 241 2,137
Total stockholders' equity...................................... 998 50,892
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our operations and should be read together
with our financial statements and related notes included elsewhere in this
prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of factors
including, but not limited to, those set forth under "Risk Factors" and
elsewhere in this prospectus.
We were incorporated in August 1998, and we initiated testing of our service
with users, whom we refer to as beta users, in July 1999. On October 1, 1999,
we made our service commercially available to users other than our beta users.
Since inception, our operating activities were related primarily to the design
and development of our noosh.com service, building our corporate
infrastructure, establishing relationships with print buyers and vendors and
raising capital. During this time, we have grown our organization by hiring
personnel in key areas, particularly sales and marketing and research and
development. From inception through December 31, 1999, we accumulated net
losses of $18.0 million.
Through December 31, 1999, we did not generate any revenues. We intend to
generate revenues by charging print vendors a transaction fee based on the size
of the print order and the aggregate volume of orders processed by the
particular user. Some large print vendors will receive discounts based on
aggregate volume and other services they provide. In addition, print buyers
generally will pay a monthly fee for using our service. As of December 31,
1999, over 80 print buyers and print vendors had successfully processed over
350 print orders using our service. The aggregate amount paid or payable by
print buyers to print vendors for these print orders was $3.36 million, with an
average order size in excess of $8,000. These print orders were processed by
companies using our service for evaluation purposes, and we received no
revenues from them.
As we seek to expand our business, we intend to continue to commit
significant resources to sales and marketing and research and development
activities. We expect that we will incur losses and generate negative cash flow
from operations for the foreseeable future. Our ability to achieve
profitability depends upon our ability to increase our sales substantially. In
view of the rapidly changing nature of our business and our limited operating
history, we believe that period-to-period comparisons of our operating results,
including our operating expenses, should not be relied upon as an indication of
our future performance.
In December 1999, we entered into agreements with two print vendors,
Consolidated Graphics and Wallace Computer Services, under which they will be
able to process print orders placed by their customers using our service. In
connection with these agreements, we issued a warrant to Wallace Computer
Services to purchase 270,000 shares of common stock and a warrant to
Consolidated Graphics to purchase 225,000 shares of common stock. A total of
140,000 shares subject to the Wallace warrant were immediately exercisable and
an additional 35,000 shares are exercisable on December 31, 2000 or earlier at
an exercise price of $7.45 per share, if certain targets of business conducted
over our service are met. The value of these portions of the warrant,
$1,095,000, was charged to operations for the year ended December 31, 1999
because there are no performance targets associated with its exercise. A total
of 75,000 shares subject to the Consolidated Graphics warrant were immediately
exercisable at an exercise price of $11.00 per share. The value of this portion
of the warrant, $373,000, was also charged to operations for the year ended
December 31, 1999. The remaining portions of these two warrants become
exercisable only when these print vendors meet stated volume targets for
business conducted over our service at exercise prices ranging from $7.45 per
share to the fair market value of our common stock on the date the volume
targets are met. The remaining shares under the warrants will be valued and a
charge will be taken in a similar manner when it becomes probable that the
volume targets will be met.
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In January 2000, we entered into an agreement with a print buyer, Bank of
America Technology and Operations, Inc., under which Bank of America will be
able to process its print orders using our service. In connection with that
agreement, we issued Bank of America a warrant to purchase 50,000 shares of
common stock. All of the shares are exercisable at an exercise price of $11.00
per share, but only if Bank of America meets a stated volume target for
business conducted over our service. A charge on these shares will be taken
using the Black-Scholes option pricing model, assuming a term of three years
and expected volatility of 60%. This charge will be taken when it becomes
probable that the volume target will be met.
In January 2000, we entered into an agreement with R.R. Donnelley to co-
market and make our noosh.com service available to R.R. Donnelley's customers.
In connection with the agreement, R.R. Donnelley purchased 1,272,727 shares of
series D preferred stock for a total of $14.0 million. In addition, we issued
two warrants to R.R. Donnelley to purchase an aggregate of 2,780,158 shares of
common stock at an exercise price of $11.00 per share. A total of 946,308
shares of common stock are issuable immediately upon the exercise of portions
of the warrants. The remaining portions of the warrants are exercisable when
R.R. Donnelley or, in the case of one of the warrants, a specific business unit
of R.R. Donnelley, meets stated volume targets for business conducted over our
service at an exercise price of $11.00 per share. Using the Black-Scholes
option pricing model and assuming a term of two years and expected volatility
of 60%, the fair value of the shares that are immediately exercisable under the
warrants approximated $3,853,000. Accordingly, we will record a charge of
$3,853,000 for the quarter ending March 31, 2000 in connection with these
warrants. The remaining shares under the warrants will be valued and a charge
will be taken in a similar manner when it becomes probable that the volume
targets will be met. We have also granted R.R. Donnelley the right to require
us to register the sales of the shares of common stock issuable to them upon
conversion of the warrants.
In February 2000, we entered into agreements with a print vendor,
ColorGraphics, Inc., and a print buyer, J.Crew Group Inc., under which they
will be able to process their customers' print orders using our service. In
connection with these agreements, we issued a warrant to ColorGraphics to
purchase 100,000 shares of common stock and a warrant to J.Crew to purchase
10,000 shares of common stock. The ColorGraphics warrant is exercisable on the
date following the first anniversary of the date of grant and only to the
extent ColorGraphics meets stated targets for business conducted over our
service. The exercise price of the ColorGraphics warrant ranges from the
initial public offering price to the fair market value of our common stock as
of the end of the calendar quarter during which the volume target is met. The
J. Crew warrant is exercisable on the date following the first anniversary of
the date of grant and only to the extent J. Crew meets a target for business
conducted over our service. The exercise price for the J. Crew warrant is
equivalent to the initial public offering price per share.
Options granted to our employees from our inception through December 31, 1999
have been granted at exercise prices which, based on the assumed initial public
offering price of $12.00 per share, we determined are below the deemed fair
market value for financial reporting purposes. Since inception through December
31, 1999, we had recorded aggregate deferred stock compensation for these
options of $17.9 million. The deferred stock compensation is being amortized
over the vesting periods of the stock options. We recognized no deferred stock
compensation expense during the period ended December 31, 1998 and $2.6 million
for the year ending December 31, 1999. Future amortization based on options
granted through December 31, 1999 is anticipated to be approximately:
<TABLE>
<CAPTION>
Year Ending December 31, Amount(s)
------------------------ ----------
<S> <C>
2000......................................................... $9,337,000
2001......................................................... 3,866,000
2002......................................................... 1,766,000
2003......................................................... 410,000
</TABLE>
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In addition to these charges, we expect to record an additional $12.7 million
of deferred stock compensation for similar options granted from January 1, 2000
to February 15, 2000.
Results of Operations for the Period Ended December 31, 1998 and Year Ended
December 31, 1999
Revenue
From inception through the period ended December 31, 1999, we were a
development stage company and had no revenue. We expect to generate revenue
primarily from transaction fees from print vendors and monthly service fees
from print buyers. Revenue from transaction fees will be recognized upon
completion of the associated print project. Revenue from monthly service fees
will be recognized ratably over the month. Cost of revenues will primarily
consist of all direct and indirect labor expenses related to the support
organization.
Operating Expenses
We categorize our operating expenses into research and development, sales and
marketing, general and administrative, value of warrants granted in connection
with marketing agreements and amortization of deferred stock compensation.
Research and Development. Research and development expenses consist of
personnel and other expenses associated with developing and enhancing software
in support of our noosh.com service. Research and development expenses
increased from $111,000 for the period ended December 31, 1998 to $3.1 million
for the year ended December 31, 1999. These expenses in 1998 were comprised
primarily of salaries for an initial development team. In 1999, these expenses
consisted principally of staffing and associated costs related to the design
and development and maintenance of our noosh.com service, and content and
design expenses. We believe that our success is dependent in large part on
continued enhancement of our noosh.com service. Accordingly, we expect research
and development expenses to increase in future periods.
Sales and Marketing. Sales and marketing expenses consist primarily of
participation in trade shows, advertisements, personnel and related costs for
our marketing staff and customer support groups. Sales and marketing expenses
increased from $96,000 for the period ended December 31, 1998 to $9.4 million
for the year ended December 31, 1999. These increases primarily resulted from
expenses related to increases in sales and marketing personnel and
participation in industry trade shows for a full fiscal year. We intend to
increase our sales and marketing expenses to develop relationships with print
buyers, print vendors and providers of related services and build brand
recognition.
General and Administrative. General and administrative expenses consist
primarily of salaries to employees and fees for professional services. General
and administrative expenses increased from $107,000 for the period ended
December 31, 1998 to $1.8 million for the year ended December 31, 1999
primarily as a result of operations for the full fiscal year and the addition
of finance and administrative personnel as well as expenses related to
increased professional service fees. We expect general and administrative
expenses to increase in future periods to the extent we continue to expand
operations and bear the increased expenses associated with being a public
company.
Value of Warrants Granted in Connection with Marketing Agreements. For the
year ended December 31, 1999, we recognized costs totaling $1,468,000 related
to the valuation of the portions of warrants exercisable without performance
obligations to two print vendors.
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Amortization of Deferred Stock Compensation. We recorded aggregate deferred
stock compensation of $17.9 million in connection with some of the stock
options we granted through December 31, 1999. We expensed $2.6 million of this
deferred stock compensation in the year ended December 31, 1999, related to
these stock options. The deferred compensation amounts are being amortized over
the vesting period of the stock options, generally four years.
Interest Income, Net
Interest income, net has been derived primarily from earnings on cash
investments. We had no interest income, net for the period ended December 31,
1998 and $648,000 for the year ended December 31, 1999, which resulted from
higher average cash balances for a full fiscal year in 1999. We expect our
interest income to increase in the short term as a result of our investing the
proceeds from our sale of series D preferred stock and this offering.
Income Taxes
We incurred operating losses and accordingly did not record a provision for
income taxes for any of the periods presented. On December 31, 1999, for
federal and state income tax purposes, we had net operating loss carryforwards
of $13.1 million and $150,000. These net operating losses will expire in the
years 2005 through 2019 if not utilized. Future changes in our share ownership,
as defined in the Tax Reform Act of 1986 and similar state provisions, may
restrict the utilization of carryforwards.
Liquidity and Capital Resources
Since our inception in August 1998 through December 31, 1999, we have funded
our operations primarily through the sale of $64.1 million of equity
securities. As of December 31, 1999, our principal sources of liquidity were
cash and cash equivalents of $48.3 million. In addition, in January 2000, we
raised an additional $15.6 million from the sale of our equity securities.
Net cash used in operating activities was $123,000 for the period ended
December 31, 1998 and $12.0 million for the year ended December 31, 1999. Net
cash used in operating activities for the period ended December 31, 1998
primarily resulted from operating losses of $314,000 incurred during the
period. Net cash used in operating activities for the year ended December 31,
1999 primarily resulted from operating losses of $17.4 million, partially
offset by $3.8 million of amortization of deferred stock compensation and the
value of warrants granted in connection with marketing agreements.
Net cash used in investing activities was $72,000 for the period ended
December 31, 1998, and $3.7 million for the year ended December 31, 1999. The
cash used in investing activities in both periods was related principally to
purchases of computer equipment and, to a lesser extent, software and office
furniture to support expansion of our operations.
Net cash provided by financing activities was $1.3 million for the period
ended December 31, 1998, and $62.9 million for the year ended December 31,
1999. Cash provided by financing activities was primarily from proceeds of the
sale of our preferred stock.
As of December 31,1999, we had operating lease obligations of $1.7 million
for 2000, $606,000 for 2001 and $102,000 for 2002.
In future periods, we anticipate significant increases in operating expenses
primarily as a result of planned investment to support increased sales and
marketing activities and ongoing research and development activities. We
believe that our current balances of cash and cash equivalents, will be
sufficient to meet our anticipated cash needs for working capital, operating
expenses and capital
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expenditures for at least the next twelve months. After twelve months, we may
need additional capital. However, we may need to raise additional funds sooner
to fund additional expansion, develop new or enhanced services, respond to
competitive pressures or make acquisitions. Although we have no current plans
to do so, we may seek to raise additional funds after this offering through
equity or debt financings. We cannot be certain that additional financing will
be available to us on favorable terms, if at all. If adequate funds are not
available on acceptable terms, our business will be harmed. If additional funds
were raised through the issuance of equity securities, the percentage ownership
of Noosh by our stockholders would be reduced. Furthermore, such equity
securities might have rights, preferences or privileges senior to our common
stock. See "Risk Factors--In the future, we may need to raise additional
capital to fund our operations. Any difficulty in obtaining additional
financial resources could force us to curtail our operations or prevent us from
pursuing our growth strategy."
Year 2000 Readiness Disclosure
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish dates before and after January 1, 2000. This could result in system
failures or miscalculations causing disruption of operations for any company
using computer programs or hardware. As a result, many companies' computer
systems may need to be upgraded or replaced in order to avoid year 2000 issues.
The majority of software and hardware we use to manage our business has been
purchased or developed by us within the last 24 months. While this does not
completely protect us against year 2000 exposure, we believe our exposure is
limited because the technology we use to manage our business is not based upon
hardware and software systems that were already developed or installed.
To date, we have not experienced any material interruptions in our operations
related to the year 2000 issue. We have not incurred material costs with
respect to our year 2000 remediation efforts and do not expect that future
costs will be material. However, if we, or third-party providers of hardware,
software and communications services fail to remedy any future year 2000
issues, the result could be lost revenues, increased operating expenses, the
loss of users and other business interruptions, any of which could harm our
business. The failure to adequately address year 2000 compliance issues in the
delivery of products and services to our users could result in claims against
us of misrepresentation or breach of contract and related litigation, any of
which could be costly and time consuming to defend.
We have not developed and do not plan to develop any specific contingency
plans for year 2000 issues. Our worst case scenario for year 2000 problems
would be our inability to operate our noosh.com service.
Quantitative and Qualitative Disclosures About Market Risk
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk of loss. Most of our cash equivalents and
short-term investments are at fixed interest rates. Therefore, the value of
these investments is subject to market risk. This means that a change in
prevailing interest rates causes the market value of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate
later rises, the market value of our investment will decline. To minimize this
risk in the future, we intend to maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including commercial paper,
money market funds, government and non-government debt securities.
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In general, money market funds are not subject to market risk because the
interest paid on such funds fluctuates with the prevailing interest rate. As of
December 31, 1999, we did not have any hedging instruments.
We operate solely in the United States and all expenses to date have been
made in United States dollars. Accordingly, we have not had any exposure to
foreign currency rate fluctuations or weak economic conditions in foreign
markets. However, in future periods, we expect to sell in foreign markets,
including Europe and Asia. As our sales are made in U.S. dollars, a
strengthening of the U.S. dollar could cause our service to be less attractive
in foreign markets.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards, requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 is effective for fiscal years
beginning after June 30, 2000. Because we do not currently hold any derivative
instruments and do not engage in hedging activities, we do not believe that the
adoption of SFAS No. 133 will have a material impact on our financial position
or results of operations.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP') No. 98-1, "Software for Internal Use" which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP No. 98-1 is effective for financial statements
for fiscal years beginning after December 15, 1998. The adoption of this SOP
did not have any significant effect on our financial statements.
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BUSINESS
Overview
We are a leading provider of business-to-business e-commerce solutions for
the printing industry. We have developed and operate noosh.com, an Internet-
based service for managing the design, procurement and production of print
orders. Our service is designed to address the complex, multi-step process of
completing a print order. It leverages the benefits of the Internet to enable
print buyers, print vendors and other providers of related services to
communicate and collaborate efficiently throughout the life cycle of a print
order. Our service is primarily targeted at national corporations which budget
at least $10 million annually for their print buying requirements and their
print vendors. Print vendors who use our service generally will pay us a
transaction fee based on the size and volume of the print order, and print
buyers who use our service generally will pay us a monthly fee. As of March 23,
2000, over 121 print buyers and print vendors have signed agreements with us
for the use of our service. Of these, Bank of America and Wells Fargo have
recommended that their print vendors also adopt our noosh.com service. In
addition, to promote the acceptance of our service by large corporations, we
have entered into co-marketing agreements with national vendors in the print
industry. To date, these vendors include Consolidated Graphics, R.R. Donnelley,
Moore and Wallace Computer Services.
Industry Background
Growth of Business-to-Business Commerce on the Internet
The Internet has emerged as one of the fastest growing communications mediums
in history and is fundamentally reshaping the way businesses interact with
other businesses. The Internet enables businesses to integrate complex business
processes, exchange information easily with multiple partners and provide
buyers and sellers with a consistent means of executing transactions. As a
result, companies of all sizes are adopting Internet strategies to conduct
business. According to Forrester Research, business-to-business e-commerce is
expected to grow from $43 billion in 1998 to $1.3 trillion in 2003.
The widespread adoption of business-to-business e-commerce is driving the
demand for industry-specific solutions that offer business environments that
can accommodate increasingly large numbers of users. These e-commerce solutions
provide businesses with opportunities to reduce the costs of accessing
information and to expand their ability to conduct transactions with multiple
parties. Business-to- business e-commerce solutions are being targeted at and
are most likely to be accepted by industries characterized by a large number of
buyers, sellers and intermediaries, a high degree of fragmentation, significant
dependence on information exchange, high transaction volumes and broad user
adoption of the Internet.
The U.S. Printing Industry
The U.S. printing industry is very large, with numerous print buyers, print
vendors and other providers of related services, interacting with one another
in the process of managing the design, procurement and production of printed
business materials. Total sales in the U.S. printing industry were $149 billion
in 1998, according to Printing Industries of America, an industry trade
association. Total worldwide sales in the printing industry were $365 billion
in 1999 according to TrendWatch, an independent market research firm. The
printing industry includes the following product categories:
. Basic business printing, which includes simple, standardized products such
as business cards, stationery and business forms;
. Promotional printing, which consists of customized products such as
brochures, direct mail and catalogs;
. Bill-of-material printing, which consists of customized packaging, labels
and other shipping materials;
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. Publications, which includes newspapers, magazines and books; and
. Specialty printing, such as T-shirts, calendars and souvenirs.
The traditional process of designing, procuring and producing a print order
can require extensive collaboration by multiple parties and can be highly
inefficient. CAP Ventures, Inc., an independent print research firm, estimates
that for every $1 paid by a print buyer to a print vendor, there are $5 to $8
of additional costs associated predominantly with late fees, reworks, obsolete
materials and shipping. These expenses result from the traditional labor-
intensive process of managing a print order, as well as delays from and
miscommunications among the many people from multiple organizations who must
collaborate through the various steps required to complete a print order. Key
processes that require the coordination of multiple parties include job design
and specification, submitting requests for estimates, vendor selection, job
revision, production, warehousing, shipment and payment.
The U.S. printing industry is highly fragmented, with an estimated 51,000
printing businesses, 60,000 related creative concerns such as advertising
agencies, graphic design firms, publishers and corporate design groups, 12,000
print brokers and thousands of print-buying organizations. Contributing to this
fragmentation is the capital-intensive nature of print production, which causes
print vendors to specialize in specific print products based on the type of
equipment they own. Therefore, print vendors generally offer a limited
selection of customizable products.
This high degree of industry fragmentation and specialization generally leads
print buyers, particularly large enterprises with a broad range of printing
needs, to establish relationships with multiple print vendors. According to CAP
Ventures, a large print buying company spends between 6% and 15% of its annual
revenues to design, develop, procure, produce, distribute and store printed and
electronic documents and business communications programs. Each individual
print order typically involves the collaboration of multiple parties across
such varied organizations as the print buyer, print vendor, advertising agency,
independent designer, prepress specialist, bindery specialist, direct mailer
and print broker. Further, most large print buyers lack standardized
procurement, print management and tracking tools, hindering the development of
their spending and operating controls. According to CAP Ventures, over 80% of
print buyers manage the print process inefficiently, resulting in up to a 40%
waste of investment in annual print spending.
Limitations of Existing Print Management Processes
The typical process of producing a customized print product involves multiple
interactions among many people within numerous organizations, or a "many-to-
many" workflow process. For example, a large print buyer may engage advertising
and creative agencies to design, specify and buy print on its behalf.
Alternatively, print buyers may coordinate these processes in-house or rely on
a print broker to act as a sales middleman or project manager. Once a print
order is completed, direct mail and fulfillment companies often coordinate the
receipt, packaging and mailing of print products from several printers
simultaneously. As a result of this complicated production chain, we believe
that a print order which costs several thousand to several hundred thousand
dollars may require the collaboration of 10 to 30 people across three to seven
organizations.
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Lacking a centralized system for coordinating these many-to-many workflow
processes, the production of customized print products traditionally has been
characterized by significant inefficiencies, including:
Print Buyer
. Numerous communications across multiple mediums, including telephone,
facsimile, email, voicemail and paper;
. Cumbersome, error-prone procurement cycle;
. Labor-intensive print vendor selection process;
. Inconsistent pricing from numerous print vendors;
. Difficulty managing, coordinating and accounting for numerous print orders
across multiple organizations and from numerous print vendors;
. Unreliable storage and delivery of content files; and
. Obsolete inventory, accounting for a significant percentage of annual print
spending.
Print Vendor
. High customer acquisition and retention costs;
. Costly sales order administration and customer service;
. Difficulty managing, coordinating and accounting for numerous print orders
across multiple organizations;
. Manual reconciliation of internal job specifications, changes, file and
production instructions;
. Rework resulting from poorly documented specifications and other errors; and
. Inefficient equipment utilization.
In addition, agencies and brokers who serve as intermediaries between print
buyers, print vendors and other providers of related services face many of
these same inefficiencies.
The most common method today for coordinating the procurement and management
of customized print orders remains a combination of telephone, facsimile and
paper. Using these "one-to-one" communication tools, print buyers and vendors
manually conduct the multiple steps required to manage the print order,
including project design, proofing, rework and delivery. More recently, some
print buyers and vendors have adopted software solutions designed to automate
different elements of the design, procurement and production processes. While
these proprietary software solutions improve on some of the inefficiencies of
traditional paper and phone-based methods, they too are largely inadequate
because they are based on one-to-one processes, while corporate print orders
generally require many-to-many communications. More specifically, one-to-one
methods are inadequate because:
. the production of a customized print product requires extensive interaction
and collaboration across many organizations and among numerous parties;
. the creative process of producing a customized print product is dynamic and
highly iterative, requiring all parties to have input throughout the
process; and
. full automation of any single print buyer/print vendor solution can require
a substantial investment in proprietary software and system integration that
often cannot be leveraged across multiple print buyer/print vendor
relationships.
Collectively, these shortcomings make one-to-one solutions difficult to scale
and thus limit their widespread adoption by the printing industry. We believe
that print buyers, print vendors and the numerous providers of related services
involved in the production of a print order desire a standardized,
collaborative environment where they can easily manage the entire print order
life
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cycle. We believe that these needs can be addressed with a comprehensive,
Internet-based communication and collaboration service for the management of
the design, procurement and production of print.
The noosh.com Service
We have developed and operate noosh.com, an Internet-based service for
managing the design, procurement and production of print orders. Our noosh.com
service is designed specifically to address the complex needs of the printing
industry and offers a set of features that are not generally available from
off-the-shelf software solutions. Key elements of our service include:
. providing a central location where all current information about a print
order is readily accessible through an Internet browser;
. enabling collaboration among all parties involved at each step of the print
order life cycle in an Internet environment in which additional parties can
be added rapidly and cost-effectively; and
. enabling parties to build project specific working groups consisting of
participants from multiple organizations.
We believe that the principal benefits to print buyers, print brokers and
advertising agencies using our noosh.com service are:
Increased Productivity. We provide online, real-time access to information
regarding the status of a print order. This capability reduces the time it
takes print buyers to determine the progress of their print job and to identify
the status of proposed changes. This capability can also substantially reduces
the manual communication methods involved in the traditional process of
producing a print order, enabling more efficient job management. As a result,
our service can be particularly helpful to users who manage multiple jobs from
several print vendors simultaneously.
Reduced Print Purchasing Costs. Our service can reduce print purchasing costs
by allowing print buyers to analyze purchasing trends and conduct a broader
request for quotes process. As a result, print buyers can reduce procurement
costs and benefit from better vendor management.
Shortened Job Lead Times. Noosh.com enables print buyers to design, procure
and produce print orders more efficiently by providing a centralized location
where the multiple parties involved in the print supply chain can collaborate
with each other in real time regarding the print order. This collaboration
capability can reduce miscommunications among the parties, which in turn
results in fewer errors and shorter job lead times.
Better Tracking and Communication. Our service maintains a detailed history
of changes to job specifications and tracks print budgets and usage. Our
service also allows users to send messages and assign tasks to one another
within a standard communication environment.
We believe that our service also offers significant benefits to print
vendors, related suppliers, print brokers and advertising agencies, including:
Enhanced Customer Relationships. By allowing print vendors to manage print
orders through our collaboration and messaging capabilities, noosh.com can
simplify the daily routine of the vendor's customer service personnel, thereby
allowing for improved responsiveness and higher quality customer service
relative to traditional methods of managing print.
Reduced Print Production Costs. Our service centralizes information regarding
a print project. This helps users to reduce paperwork and improve accuracy by
identifying job problems early in the print job life cycle that, if left
unattended, could result in costly reworks, document distributions and higher
administrative costs.
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Higher Sales Productivity. Because our service streamlines the procurement
process, print vendors are able to reduce their selling and marketing costs
while extending their reach. Print vendors, therefore, have the opportunity to
access new customers and markets through our service. In addition, because
noosh.com simplifies the process for managing print orders, printers can
allocate sales and marketing resources to developing new client relationships.
Minimal Initial Investment. Because noosh.com is an entirely Internet-based
service and, other than a browser, does not require the purchase of any
software, print buyers and print vendors are able to establish an Internet
presence easily and quickly with little or no initial investment.
Our Strategy
To grow our business and customer base and increase usage of our service, we
intend to:
Capitalize on Market Position. We believe that we are one of the first
companies to offer a completely Internet-based service for managing the design,
procurement and production of print orders. As of December 31, 1999, over 80
print buyers and print vendors have used our service to process print orders
for evaluation purposes. To increase the number of print buyers, print vendors
and other related parties using our service, we intend to build on the existing
print relationships of our current users with other companies in the print
supply chain. Our direct sales force, comprised of 50 professionals as of
December 31, 1999, targets primarily large print buyers and print vendors.
Build Brand Recognition. We intend to develop the most well-known and trusted
brand as the leading Internet-based service for managing the design,
procurement and production of print orders. We intend to pursue an aggressive
brand development strategy through targeted advertising and promotions, press
coverage and participation in trade association and industry events.
Additionally, we will also rely on our co-marketing relationships with national
print vendors in order to build our brand recognition.
Develop Relationships with National Printers. We intend to develop
relationships to increase our customer base, broaden our service offerings and
enhance our technology platform. Specifically, we are seeking co-marketing
relationships with national printers. We have already entered into these
agreements with Consolidated Graphics, R.R. Donnelley, Moore and Wallace
Computer Services under which they have agreed to co-market our service to
their customers. By aggressively pursuing these types of relationships, we
believe we can help strengthen our value proposition for both print buyers and
vendors and generate increased usage of our noosh.com service.
Maintain Technology Leadership. We intend to maintain our technology
leadership by continuously improving the functionality of our services to meet
the evolving needs of our current users and our future customers. For example,
we intend to develop business relationships with enterprise resource planning
and business-to-business e-commerce software vendors by using our technology to
integrate our noosh.com service with the enterprise resource planning or
management software systems of these vendors. This capability would enable our
current users and our future customers to use both our noosh.com service and
the products and services of these vendors to conduct e-commerce. Additionally,
we plan on developing links with the information systems of print vendors and
graphic file transfer and management services to improve production workflow,
reduce data entry at the print vendors' sites and provide complementary
services for print vendors.
Foster Our Commitment to Customer Service. We focus on serving the interests
of our users because we believe a loyal base of users will afford us a
significant competitive advantage. Throughout each phase of the design and
implementation of our service, we maintain an active
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dialogue with our users. At every stage of our design process, we seek user
feedback to develop new versions of and add enhancements to our system to
better serve the needs of our users. We also intend to enhance our customer
service capabilities by expanding our customer support and account management
teams and improving our online training tools.
Pursue Additional Revenue Opportunities. We intend to pursue additional
revenue opportunities by expanding our business and using our LiveJobs
technology in other print-related markets, such as creative design process
management and file and data storage. We also plan to expand internationally
into other markets that we believe would benefit from our service. Further, we
see applications for our technology in other non print-related markets.
Additionally, we intend to pursue selective acquisitions of, or investments in,
complementary products, services and businesses.
Products and Services
We provide a comprehensive, business-to-business, Internet-based service for
managing the design, procurement and production of print orders. Our service
uses our patent-pending LiveJobs technology to enable print buyers, print
vendors and other providers of related services involved in the print
production and management process to communicate and collaborate with each
other regarding any print order. Each user with a noosh.com password can access
the noosh.com web site with a standard Internet browser. Using their password-
protected account, each user can have access to the print jobs they are working
on, to lists of their customer and business contacts and to reports of
historical performance.
Print buyers can easily create job specifications, submit the specifications
to print vendors for bids, award the print order to the chosen print vendor,
post the resulting print order online and collaborate with necessary parties
throughout the design, procurement and production stages of the print order.
Print vendors have access to the print buyer's specifications after they have
been asked to quote on a print order through noosh.com. Print vendors may
submit quotes and subsequently manage print orders through our collaboration
and messaging capabilities. As the print order progresses, print buyers and
print vendors may notify each other of status changes, pose specification
questions, revise schedules, and collaborate on other aspects of the print
order in real time so that problems are resolved expeditiously.
Our service can be accessed through standard web browsers by corporations,
their print vendors and other participants in the print supply chain, such as
graphic design, advertising and marketing agencies. Other than the browser,
there is no special software required to use noosh.com.
With our service, we create a standardized environment which addresses the
printing industry's communications and procurement needs by:
. providing a central location where all current information about a print
order, including specifications, job status, estimates, change orders and
shipping instructions, is located;
. enabling collaboration among print buyers, print vendors and other providers
of related services involved in the print production and management process;
. enabling parties to build a team on a project and print order basis
consisting of participants from multiple organizations;
. assigning roles and privileges to individual team members, designating their
status and ability to view or make changes to a print order; and
. providing secure and selective access on print orders.
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Our service enables print buyers, print vendors and other providers of
related services to communicate and collaborate efficiently throughout the life
cycle of a print order. The key features of our service are:
Estimating, Quoting and Specifications Management. Print jobs can be created
and submitted by buyers, and quoted online by print vendors. The buyer decides
which and how many print vendors can bid on a job. Job specifications and order
revisions are managed consistently, enabling buyers and print vendors to share
common order description formats.
Order Management. Noosh.com provides online ordering, confirmation and order
status from design through delivery. This enables collaborative management and
tracking of orders by print buyers, print vendors, graphic designers and direct
mail and fulfillment companies. Online records of complete order history and
revisions give everyone involved in the order a comprehensive, relevant, up-to-
the-minute status.
Management Reporting. Noosh.com provides print buyers with access to a range
of detailed performance reports, including purchasing, client history and print
vendor activity. Noosh.com also provides print vendors with a variety of
detailed reports, including account history and sales performance.
Content Delivery and File Management. Noosh.com allows for text and graphic
file transfers, real-time proofing and job file archiving, which are key
features needed to develop an integrated and full-service online environment
for creating and producing complex print orders.
Integration with Other Systems. Our technology allows us to integrate our
noosh.com service with our users' information systems, including their
operating resource procurement, enterprise resource planning or print
management systems.
Industry Reference. Noosh.com provides profiles of print vendors registered
with our service for review by print buyers and advertising agencies. Our
service also contains reference information about the printing industry for all
visitors, regardless of whether they have an account with us.
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Users
We primarily target major corporations which budget at least $10 million
annually for their print buying requirements, together with their printers. In
addition, we also target print brokers which serve these large print buyers,
printers and advertising agencies.
Since we initiated testing of our noosh.com service in July 1999 through
December 31, 1999, over 80 print buyers and printers have used our service for
evaluation purposes to process print orders, for which we received no revenues.
As of March 23, 2000, the following is a list of print buyers, printers and
other providers of related services who have entered into agreements to pay us
for the use of our service if they decide to use our service:
<TABLE>
<S> <C>
Print Buyers Printers with Co-Marketing Agreements
Advantica ColorGraphics, Inc.
Aetna Services, Inc. Consolidated Graphics, Inc. and
American Leprosy Mission their 63 affiliated companies
Bank of America Corp. Moore North America, Inc.
Compact Air Products, Inc. R.R. Donnelley & Sons Company
Cornell Dubilier Wallace Computer Services, Inc.
Cran Barry, Inc.
Dunlop Corp.
E*TRADE Group, Inc.
I Was Framed, Inc.
Infusive Marketing Group
J.Crew Group Inc.
KNTV News Channel 11
La Bov & Beyond, Inc.
Levi Strauss & Co.
Merrill Lynch Asset Management
Miller Freeman, Inc.
Modus Media International, Inc.
Multiple Zones International
Publicis Technology
Stimuli Lab, LLC
The Timberland Company
Tribe Design
Upward Unlimited, Inc.
Wells Fargo & Company
Wizards of the Coast
</TABLE>
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<TABLE>
<S> <C>
Printers, Pre-Press Vendors and Print Brokers
ABC Synnyvale Iridio Digital Printing
Ace Printing Johnson & Quin Inc.
Action Printing Just Solutions
Advanced Color Graphics LAgraphico.com
Alphagraphics Litho Technical Services
American Lithographers, Inc. Mercury Signs & Display, Inc.
American Printing Co. Meredith-Webb Printing Co.
Applied Printing Technologies, L.P. MidAtlantic Printers, Ltd.
Assembly Services and Packaging Miller Promotional Graphics (MPG)
Automated Graphic Systems New Leaf Press
Babor Forms, Inc. Newport Printing Systems
Baucom Press Nova Graphics, Ltd.
Bayshore Press Pacific Communication Concepts, Inc.
Bofors Inc. Packaging Results, Inc.
Business Card Express Florida Patterson Printing Company
Carqueville Graphics, Inc. Penn Lithographics
Challenge Printing, Inc. PGI Web, Inc.
ColorMagic, Inc. Precision Direct, Inc.
Colson Printing Co. Print Craft, Inc.
Commercial Printing Co. Printers Unlimited, Inc.
Creative Retail Packaging Printing Control
CRT Color Printing, Inc. Printing Express, Inc.
Daily Printing, Inc. Prodigy Press, Inc.
Diversified Graphics Incorporated Rhodes Productions
Eastern Rainbow Inc. RW Nielsen Associates
Elements Santa Cruz Web Integration and Design
ESCO Sexton Printing Source, Inc.
F&T Graphics Inc. Shapco Printing, Inc.
Favorite Printing Source, Inc.
FBK Group Spencer & Worth, Ltd.
Fong Brothers Printing Stormm Graphicworks, Inc.
FoxIntegrity Graphics Inc. Systems Packaging
Franklin Press Tension Envelope Corporation
Gamma One, Inc. The Bureau of Engraving Inc.
General Printing The Horah Group
Gopher State Litho, Inc. The John Roberts Company
Graphic Finishers of America The Journeyman Press Inc.
Heinrich Envelope Corp. TN Printing
House of Printing Universal Printing
IC Group Waller Press
Imperial Company, Inc. Wicklander Printing Corporation
Impressions, Inc. Winchester Printers, Inc.
Infinity Direct Wintry Press
</TABLE>
Our agreements with printers, generally require them to pay us a transaction
fee on a monthly basis based upon applicable dollar volume of print jobs run on
noosh.com. The agreements generally have initial terms of one or two years. Our
agreements with print buyers typically require buyers to pay us a monthly
service fee based upon applicable dollar volumes.
The following are case studies of three users that have adopted our noosh.com
service:
Bank of America. Bank of America is one of the largest banking institutions
in the United States, providing its customers with a wide array of banking and
other financial services. Bank of America estimates that it spends between $50
million and $70 million annually on its print and print-related needs with 30
to 50 printers. Bank of America was looking for a way to increase the
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productivity of its new marketing and communications departments, generate
savings by reducing its number of print vendors and provide an internal,
nationwide communications service for managing the design, procurement and
production of its print needs. We worked with Bank of America's San Francisco
and Charlotte offices to analyze their current print procurement and production
process. We have since then developed a specific application for their
invoicing and procurement process and a front-end tracking system. As a result
of implementing our service in both offices, Bank of America believes that it
has been able to reduce the time required for it to obtain estimates from print
vendors and that it has experienced an increase in the number of bids it
receives for print orders. In addition, Bank of America believes that our
service enables its marketing department to make more revisions, more
frequently, to print projects, track the costs of print projects and budget
spending in the future for similar projects. Through December 31, 1999, Bank of
America processed over 115 orders with 11 print vendors using noosh.com. It is
currently in the process of deploying noosh.com on a nationwide basis. Through
December 31, 1999, we had not derived any revenue from this agreement, and Bank
of America is not obligated to use our service.
Aetna Services. Aetna Services is one of the largest healthcare insurers in
the United States. Aetna estimates that it buys over $120 million worth of
printed business materials annually from numerous print vendors. Aetna was
looking for a way to manage its multiple print vendors, quick production cycles
and complex print-buying requirements. In addition, Aetna needed a way to
identify trends in their buying practices and develop a community among their
in-house print buyers to improve print order tracking and scheduling. With
noosh.com, Aetna expects to increase the productivity of its print buyers and
shorten print order turn-around time. Specifically, our service provided a
central location for Aetna's print buyers to collaborate on print orders and
track the status of numerous orders across an assortment of product lines. In
addition, with noosh.com Aetna believes it has been able to significantly
reduce the time it takes to specify and order reprint work. Further, Aetna
believes that noosh.com's scheduling and messaging capabilities will
dramatically expedite its print procurement process that, prior to noosh.com,
had been manual and paper-intensive. As a result of implementing our service,
Aetna believes it will be able to significantly reduce the time required to
obtain estimates on its print orders. Aetna anticipates that our service will
also result in significant cost savings. For example, since deploying our
service, Aetna has found that it is easier to receive multiple bids on print
orders, thereby providing it with access to more competitive pricing. Further,
Aetna believes that the centralized tracking features of our service have given
them the ability to spot trends in their print buying that may result in cost
savings in the future. Through December 31, 1999, Aetna has processed over 37
orders with 12 print vendors using noosh.com. Through December 31, 1999, we had
not derived any revenue from this agreement, and Aetna is not obligated to use
our service.
ColorGraphics. ColorGraphics is one of the largest, privately owned
commercial printing companies in the western United States, with annual
revenues of approximately $120 million. ColorGraphics was asked by several of
their largest print-buying customers to investigate an Internet-based service
for improving the procurement and production of print orders. ColorGraphics
adopted our noosh.com because it offered them a tool through which
ColorGraphics could enhance its ability to communicate more effectively with
its clients as well as reduce the time required to provide estimates on its
print jobs. We worked with ColorGraphics' sales and customer service
representatives to uncover and resolve key customer service problems.
ColorGraphics believes that our service expedites the estimating and quoting of
print orders to its customers. In addition, after adoption of our service,
ColorGraphics has experienced an increase in the number of prospective clients
submitting requests for estimates. ColorGraphics also believes that our service
enables it to improve responsiveness and customer service by allowing its
customers to access all current information about their print orders from
remote locations on a 24-hour basis. Through December 31, 1999, ColorGraphics
processed over 66 orders with 20 print buyers using noosh.com. Through December
31, 1999, we had not derived any revenue from this agreement, and ColorGraphics
is not obligated to use our service.
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Sales, Marketing and Customer Service
We sell our service in the United States primarily through our direct sales
organization. As of December 31, 1999, our direct sales force consisted of 50
sales professionals located in twelve offices throughout the United States. We
believe that we have hired top sales professionals from leading printing,
graphic arts and enterprise software companies. Our sales force targets
executive level decision makers in large print-buying organizations across a
broad range of industries. We believe that these executives are also
influential in promoting the adoption of our service among print vendors. We
intend to expand our sales force into additional major markets across the
country in order to broaden our customer base.
Our marketing programs are designed to increase brand awareness, educate our
target market about our services and generate new sales opportunities. As of
December 31, 1999, our marketing team consisted of 27 marketing professionals.
We have engaged in marketing activities that include trade shows, seminars,
press relations, direct mailings, Web site marketing, trade association
relations and industry analyst relations. We also have co-marketing agreements
with national print vendors. To help increase our customer base, we also have
entered into agreements to conduct co-marketing activities with corporate
procurement system providers, including Commerce One, Inc. and, through a
memorandum of understanding, Ariba Technologies, Inc.
Our customer service organization assists users in planning, learning and
implementing our noosh.com service. As of December 31, 1999, we employed nine
professionals in our customer service organization. We have a technical support
team available to users by telephone, over the Internet or by electronic mail
in order to resolve their customer support requests. In addition, we offer
training to users of our noosh.com service through live classes.
We plan to expand the size of our sales and marketing and customer supports
organizations and to establish additional sales offices. Our ability to do so
will depend on recruiting and training additional direct sales, marketing and
customer support personnel. If we are unable to hire highly trained sales,
marketing and customer support personnel, we would be unable to either increase
our customer base or meet customer demands.
Relationships With National Printers
We are actively seeking to develop relationships with national printers in
which they would co-market our service to their customers. These relationships
are intended to help us rapidly gain adoption of our service. For example, we
have entered into agreements with R.R. Donnelley, Consolidated Graphics, Moore
and Wallace Computer Services.
In January 2000, we entered into a co-development and co-marketing agreement
with R.R. Donnelley, a leading North American commercial printer and
information services company, to develop a co-branded Web site utilizing the
noosh.com service for R.R. Donnelley's customers, particularly in the catalog,
magazine and book publishing markets. In the fiscal year ended December 31,
1998, R.R. Donnelley reported that revenues from these markets accounted for
over one-half of its consolidated net sales of $5.0 billion. Under the
agreements, we and R.R. Donnelley committed to actively promote and market the
noosh.com service to R.R. Donnelley's customers. In connection with the
agreements, R.R. Donnelley purchased approximately $14.0 million of our
series D preferred stock. We issued R.R. Donnelley warrants to purchase our
common stock. A portion of each warrant is exercisable only when R.R. Donnelley
meets stated volume targets for business conducted over our service. R.R.
Donnelley also agreed to pay to us a transaction fee based on the aggregate
volume of print orders processed by them. R.R. Donnelley is not committed to
any volume targets.
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We rely on these types of relationships to help generate increased usage of
noosh.com and strengthen our value proposition to our users. As a result, we
expect to continue to devote
engineering and marketing resources to develop these relationships. However, we
cannot be certain that we will be able to enter into additional co-marketing
relationships with national printers.
NOOSH Technology and System Architecture
Our noosh.com service is an Internet-based application that allows us to add
new users and support existing users and effectively control access to print
projects, worldwide, from a single location. It resides on our servers
colocated at AboveNet's San Jose, California facility. Our users access
noosh.com using standard Internet browsers, which eliminates the need to
install our software at the customer site and facilitates rapid integration of
any enhancements to our service.
Our principal technical assets are our internally developed software
applications that comprise noosh.com. Noosh.com is built on a multi-layer
system architecture, centered around our LiveJobs technology. By designing
these software layers to function independently of each other and by taking
advantage of multi-computer configurations at our AboveNet data center, we seek
to provide continuous access to noosh.com, even in the event that some element
of our system fails. Our service is designed to run on a variety of hardware
platforms and will allow us to add capacity as transaction volumes increase.
Communications Layer. The communications layer connects our service with our
customers' desktop computers. The ability to integrate these diverse systems
has enabled us to create a collaborative online environment supporting a wide
range of users. The NOOSH firewall filters the incoming data stream and
provides a first line of site security. Our communications architecture is
based on standard industry technologies and protocols.
Interface and Presentation Layer. The interface and presentation layer
provides the "look and feel" of noosh.com. Based upon user requests and access
rights, this layer retrieves information from the lower layers of the system
and transforms it into presentable content, which is delivered to the desktop
by the communications layer.
LiveJobs Technology. Our LiveJobs technology delivers the business logic
necessary to allow the user to access, manage and communicate information about
each print order. Each print order is modeled in our application as a sequence
of user-determined workflow steps. In order to facilitate communication between
users, we have developed event notification and messaging capabilities that
assist our users in completing each workflow step. This notification subsystem
also enables communication with customers' third-party print management tools.
Enterprise Services Layer. The enterprise services layer facilitates
information exchange with our data repository. Our databases are implemented
using industry-leading database software from Oracle and run on standard server
hardware.
We control access to our service through login, authentication and
authorization mechanisms and user role definitions, allowing the automated
enforcement of access privileges. Our LiveJobs technology helps assure that
users only see the information to which they are permitted access based on
their role in a job or project and their group manager's authorization.
Intellectual Property
We rely on a combination of copyright, trademark and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. We also
enter into confidentiality agreements with our employees and consultants and
other third parties and control access to software,
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documentation and other proprietary information. Currently we have four U.S.
patents pending relating to our noosh.com service. We do not have any issued
patents. We have also filed for federal trademark registration for "NOOSH" and
the "NOOSH" logo in the United States, Canada, Japan and Europe and for
"LiveJobs" in the United States. However, we cannot be certain that the steps
we have taken to protect our intellectual property rights will be adequate or
that third parties will not infringe or misappropriate our proprietary rights.
We also cannot be sure that competitors will not independently develop
technologies that are substantially equivalent or superior to the proprietary
technologies employed in our Internet-based services. If we fail to protect our
proprietary rights adequately, our competitors could offer similar services,
potentially harming our competitive position and decreasing our revenues in the
United States and other jurisdictions.
In addition, in recent years, there has been significant litigation in the
United States involving patents and other intellectual property rights,
including among companies in the Internet industry. We cannot be certain that
our business activities will not infringe on the proprietary rights of others,
or that other parties will not assert infringement claims against us. In
February 2000, we received a letter from an individual advising us that the
individual's patent may cover certain aspects of our service and requesting
that we consider licensing the patent. We are currently evaluating the patent.
However, based upon our preliminary review we do not believe that we require a
license under the patent to operate our current service. If this matter or any
other matters or claims that may be asserted against us in the future cannot be
resolved through a license or similar arrangement, we could become a party to
litigation. Any claim of infringement of proprietary rights of others, even if
ultimately decided in our favor, could result in substantial costs and
diversion of resources. In addition, we cannot be sure that licenses to third-
party technology will be available to us at a reasonable cost, or at all. If we
were unable to obtain a license on reasonable terms, we could be forced to
redesign our service or to cease selling or using it.
Competition
We primarily encounter competition with respect to different aspects of our
service from print vendors offering traditional methods of designing and
managing print orders, companies that offer business-to-business Internet-based
procurement services focused on the print industry such as Collabria, Inc.
printCafe, Inc., and Impresse Corporation, or traditional enterprise software
companies that offer proprietary management software and may develop
alternative print procurement and management services. In addition, some large
commercial print vendors have developed proprietary e-commerce services and
other print vendors may develop or acquire competing services. Because barriers
to entry in the market for Internet-based print management services are
relatively insubstantial, we expect additional competition from other
established and emerging companies as the market continues to develop and
expand.
We believe that the principal competitive factors affecting our market
include adoption by a significant number of print buyers and print vendors,
product quality and performance, industry-specific expertise, customer service
and support, core technology, breadth and depth of product features and value
of solution. Although we believe that our solution currently competes 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.
Some of our current and potential competitors may develop Internet-based
solutions that achieve greater market acceptance than our service. Many of our
existing and potential competitors have greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. Such competitors can undertake more extensive marketing
campaigns for their brands, products and services, adopt more aggressive
pricing policies and make more attractive offers to customers, potential
employees, distribution partners, and commercial print suppliers. In addition,
current and potential competitors have established or may establish
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cooperative relationships among themselves or with third parties to increase
the ability of their products to address customer needs. For example, other
Internet-based print management services may establish relationships with
business-to-business procurement system providers. Accordingly, it is possible
that new competitors or alliances among competitors may emerge and rapidly
achieve customer acceptance.
Employees
As of December 31, 1999, we had 147 full-time employees. Of these employees,
we have 97 in sales and marketing, 35 in research and development and 15 in
general and administrative services and operations. None of our employees is
represented by a labor union, and we consider our labor relations to be good.
Facilities
We are headquartered in Palo Alto, California, where we lease approximately
23,000 square feet pursuant to a term lease that expires on December 31, 2000
and 9,000 square feet pursuant to a term lease that expires on December 31,
2001. These facilities are used for executive office space, including sales and
marketing, finance and administration, research and design and customer
support. We also lease an aggregate of approximately 30,000 square feet in
Broomfield, Connecticut; Santa Monica and Irvine, California; Atlanta, Georgia;
Chicago, Illinois; Cincinnati, Ohio; Dallas, Texas; Indianapolis, Indiana;
Jacksonville, Florida; McLean, Virginia; Milwaukee, Wisconsin; Needham,
Massachusetts; New York, New York; Parsippany, New Jersey; Plymouth, Minnesota;
Portland, Oregon; and St. Louis, Missouri. These facilities are used for our
sales activities. The term lease for our facilities in Needham, Massachusetts
expires on October 21, 2002, the term lease for our facility in New York, New
York expires on November 15, 2000, the term lease for our facility in McLean,
Virginia expires on November 15, 2004 the term lease for our facilities in
Parsippany, New Jersey expires on July 30, 2003. The other facilities are
leased on a month-to-month basis. We believe that we will need to obtain
additional space for our headquarters and additional sales offices in the near
future and that this additional space can be obtained on commercially
reasonable terms.
Legal Proceedings
From time to time, we may be involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. Currently, we are
not a party to any material litigation or arbitration proceedings.
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MANAGEMENT
Executive Officers, Directors and Certain Key Employees
The following table sets forth information regarding our executive officers,
directors and certain key employees as of March 23, 2000:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- ----------
<S> <C> <C>
Ofer Ben-Shachar........ 39 President, Chief Executive Officer and Chairman of the Board
Kevin Akeroyd........... 31 Vice President of Sales
David Hannebrink........ 50 Vice President of Marketing and Business Development
Raymond Martinelli...... 41 Vice President of Human Resources
Timothy Moore........... 43 Vice President of Strategic Alliances, General Counsel and Secretary
Hagi Schwartz........... 38 Vice President of Finance and Chief Financial Officer
Robert Shaw............. 37 Senior Vice President of Sales
Lawrence Slotnick....... 48 Vice President of Engineering
Mathew Spolin........... 28 Chief Technology Officer
Steven Baloff........... 44 Director
Edward Barr............. 63 Director
Kathy Levinson.......... 44 Director
Arthur Patterson........ 56 Director
</TABLE>
Ofer Ben-Shachar founded NOOSH and has served as our President, Chief
Executive Officer and Chairman of the Board since August 1998. From December
1994 until February 1998, Mr. Ben-Shachar was the founder, Chairman and Chief
Technical Officer of NetDynamics, Inc., an Internet-based technology company
that was acquired by Sun Microsystems Inc. in summer 1998. Prior to
NetDynamics, Mr. Ben-Shachar founded Software Xcellence, a software consulting
company, and served as president until December 1994. From June 1987 to October
1990, Mr. Ben-Shachar served as a senior software engineer for Teknekron
Software Systems, now Tibco Software Inc. Mr. Ben-Shachar holds a B.S. degree,
cum laude, in Math and Computer Science from Hebrew University in Jerusalem and
an M.S. in Computer Science from Washington State University.
Kevin Akeroyd has served as our Vice President of Sales since August 1999.
From July 1990 to August 1999, Mr. Akeroyd worked at R.R. Donnelley & Sons
Company, a provider of printing and integrated services, in a variety of
positions, including National Sales Vice President for their PreMedia division.
Mr. Akeroyd holds a B.A. degree in Business Administration from the University
of Washington.
David Hannebrink has served as our Vice President of Marketing and Business
Development since January 1999. From May 1997 to December 1998, he was a
consultant providing general management and marketing services to small and
mid-sized companies. In November 1982 he founded Covalent Systems Corporation,
a supplier of enterprise software and data collection systems for the printing
and electronic publishing industries. Mr. Hannebrink was with Covalent, and
with Logic Associates, Inc. after it acquired Covalent, until April 1997. He
served in several senior executive positions at Covalent, including service as
President and Chief Executive Officer of Covalent from March 1991 to April
1995. Most recently, he served as Vice President Sales and Marketing of Logic.
Mr. Hannebrink holds a B.S. degree in Mechanical Engineering from Cornell
University, an S.M. degree in Mechanical Engineering from the Massachusetts
Institute of Technology and an M.B.A. degree from the Leavey School of Business
at Santa Clara University.
Raymond Martinelli has served as our Vice President of Human Resources since
September 1999. From July 1995 to September 1999, Mr. Martinelli was Vice
President of Human Resources for Computer Curriculum Corporation, a provider of
educational software and services for K-12 schools. From August 1988 to July
1995, Mr. Martinelli was Divisional Human Resources Manager at Apple
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Computer, Inc. Mr. Martinelli holds a B.A. degree in Organizational
Communications from California State University, Sacramento and an M.A. degree
in Organizational Development from Golden Gate University.
Timothy Moore has served as our Vice President of Strategic Alliances and
General Counsel since January 2000. Mr. Moore has also served as our Secretary
since inception. From October 1997 to January 2000, Mr. Moore was a partner in
the law firm of Cooley Godward LLP, where his practice focused on the
representation of emerging technology companies. Prior to joining Cooley
Godward, Mr. Moore served for two years as Vice President, Strategic
Investments and General Counsel of Verity, Inc. From 1986 to 1996, Mr. Moore
practiced law at Gray Cary Ware & Freidenrich, where he was elected partner in
1991 and was a member of the compensation committee. Mr. Moore holds a J.D.
degree from Stanford Law School and a B.A. degree in Economics, with
distinction, from Stanford University.
Hagi Schwartz has served as our Vice President of Finance and Chief Financial
Officer since October 1999. From January 1996 to October 1999, Mr. Schwartz
served as Chief Financial Officer and Vice President of Finance of Check Point
Software Technologies Ltd., a worldwide leader in securing the Internet. From
April 1991 to December 1995, Mr. Schwartz served as the acting Chief Financial
Officer and Controller of Mercury Interactive Corporation, a software testing
company. Mr. Schwartz holds a B.A. degree in Accounting and Economics from Bar
Ilan University, Israel.
Robert Shaw has served as our Senior Vice President of Sales since January
2000. From July 1985 to January 2000, Mr. Shaw worked at R.R. Donnelley & Sons
Company, a provider of printing and integrated services, in a variety of
capacities including Senior Vice President of Sales and Marketing for the
Merchandise Media Business and Senior Vice President of Business-to-Business.
Mr. Shaw holds a B.A. degree in Business Administration and a B.S. degree in
Economics from Geneva College in Western Pennsylvania.
Lawrence Slotnick has served as our Vice President of Engineering since April
1999. From April 1997 to April 1999, he served as Vice President of Internet
and Enterprise Products at Apple Computer, Inc. where he was responsible for
charting Apple's strategic course for networking, collaboration and
communications products. From August 1995 to April 1997 he served as Vice
President of Engineering for the Global Business Systems division of Octel
Communications Corp. From March 1991 to June 1995, Mr. Slotnick served as Vice
President of Product Development in Apple's Claris subsidiary. Mr. Slotnick
holds B.S. and M.S. degrees in Computer Science from the University of
California, Berkeley.
Mathew Spolin has served as our Chief Technology Officer since January 1999.
Prior to joining us, Mr. Spolin was professional services and product manager
at Pangea Systems, Inc., a Java Fund startup specializing in development and
maintenance of large enterprise systems for pharmaceutical research. From March
1993 to April 1997, he was the senior bioinformatics architect for Human Genome
Sciences, Inc., a genomics and pharmaceutical company. Mr. Spolin holds a B.S.
in Computer Information Systems from The American University in Washington D.C.
Steven Baloff has served as a member of our board of directors since April
1999. Since February 1996, Mr. Baloff has worked for Advanced Technology
Ventures, a venture capital firm, and currently serves as a General Partner.
Prior to joining Advanced Technology Ventures, Mr. Baloff was Chief Executive
Officer and founder of Worldview, a co-creator of Travelocity. Mr. Baloff has
also held a variety of executive positions with Covalent Systems. Mr. Baloff
serves on the boards of directors of several privately held companies. Mr.
Baloff holds an A.B. degree in Economics from Harvard University and an M.B.A.
degree from Stanford University.
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Edward E. Barr has served as a member of our board of directors since March
2000. Since 1998, Mr. Barr served as Chairman of Sun Chemical Group, B.V., the
holding company of Sun Chemical Corporation, a manufacturer of printing inks
and organic pigments. From 1987 to 1998, Mr. Barr served as President and Chief
Executive Officer of Sun Chemical. Mr. Barr also is Chairman of the Board of
Kodak Polychrome Graphics, Sun Chemical's joint-venture with Kodak Company and
a provider of printing supplies to the graphics art market. Mr. Barr also
serves on the boards of directors of Sun Chemical's parent company, Dainippon
Ink & Chemicals of Tokyo, Japan, United Water Resources, Inc., a provider of
water and waste water services and First Union Corporation, a financial
services company. Mr. Barr is a trustee of Northwestern Mutual Life Insurance
Company. Mr. Barr holds a B.S. degree in Business from New York University's
Stern School of Business and an M.S. degree in Economics from the University of
Michigan.
Kathy Levinson has served as a member of our board of directors since
November 1999. Since January 1999, Ms. Levinson has served as President and
Chief Operating Officer of E*TRADE Group, Inc., a global provider of electronic
personal financial services. Since January 1996, Ms. Levinson served as
President and Chief Operating Officer of E*TRADE Securities, Inc., a wholly
owned subsidiary of E*TRADE Group, Inc. From 1980 to 1994, Ms. Levinson worked
at Charles Schwab & Co., Inc., a securities brokerage firm, in a variety of
senior executive positions. Ms. Levinson holds a B.A. degree in Economics from
Stanford University.
Arthur Patterson has served as a member of our board of directors since April
1999. He is currently General Partner at Accel Partners, a venture capital firm
which he co-founded in 1983. He is currently on the board of directors of
Actuate Corp., an Internet reporting company, Weblink Wireless Inc., a wireless
managing company, and Portal Software Inc., an Internet customer management and
billing software company, as well as several privately held Internet services
companies. Mr. Patterson holds A.B. and M.B.A. degrees from Harvard University.
Board Composition
We currently have five directors. Upon the closing of this offering, the
terms of office of the board of directors will be divided into three classes.
As a result, a portion of our board of directors will be elected each year. The
division of the three classes, the initial directors and their respective
election dates are as follows:
. the class I directors will be Ofer Ben-Shachar and Arthur Patterson, and
their terms will expire at the annual meeting of stockholders to be held in
2001;
. the class II directors will be Steven Baloff and Edward Barr, and their
terms will expire at the annual meeting of stockholders to be held in 2002;
and
. the class III director will be Kathy Levinson, and her term will expire at
the annual meeting of stockholders to be held in 2003.
At each annual meeting of stockholders after the initial classification, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. In addition, our amended and restated certificate of
incorporation provides that the authorized number of directors may be changed
only by resolution of the board of directors. Any additional directorships
resulting from an increase in the number of directors will be distributed among
the three classes so that, as nearly as possible, each class will consist of
one-third of the directors. This classification of the board of directors may
have the effect of delaying or preventing changes in control or management of
NOOSH.
Board Committees
. Audit Committee. Our audit committee reviews our internal accounting
procedures and consults with, and reviews the services provided by, our
independent auditors. Current members of our audit committee are Steven
Baloff, Edward Barr and Kathy Levinson.
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. Compensation Committee. Our compensation committee reviews and recommends to
the board of directors the compensation and benefits of all our officers and
reviews general policy relating to compensation and benefits of our
employees. The compensation committee also administers the issuance of stock
options and other awards under our stock plans. Current members of the
compensation committee are Steven Baloff and Arthur Patterson.
Compensation Committee Interlocks and Insider Participation
Neither member of the compensation committee has at any time been an officer
or employee of NOOSH. No interlocking relationship exists between our board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has any interlocking relationship existed
in the past.
Director Compensation
We do not provide cash compensation to members of our board of directors for
their services as members of the board or for attendance at committee meetings.
Members of the board of directors are reimbursed for some expenses in
connection with attendance at board and committee meetings. Under our 1998
equity incentive plan and our 2000 equity incentive plan, non-employee
directors are eligible to receive stock option grants at the discretion of our
board of directors or other administrator of the plan. In May 1999, Arthur
Patterson, one of our non-employee directors, received an option to purchase
300,000 shares of common stock at an exercise price of $0.1375 per share. In
November 1999, Kathy Levinson, one of our non-employee directors, received an
option to purchase 100,000 shares of common stock at an exercise price of $1.50
per share. In January 2000, Steven Baloff, one of our non-employee directors,
received an option to purchase 25,000 shares of common stock at $2.50 per
share. In March 2000, Edward Barr, one of our non-employee directors, received
an option to purchase 25,000 shares of common stock at $9.50 per share. These
options vest over a three year period in equal monthly increments.
In January 2000, we adopted our 2000 non-employee directors' stock option
plan to provide for the automatic grant of options to purchase shares of our
common stock to our directors who are not employees of NOOSH or any of our
affiliates. Any non-employee director elected after the effective date of this
offering will automatically receive an option to purchase 25,000 shares of
common stock when elected to the board of directors. Starting at the annual
stockholder meeting in 2001, all non-employee directors will receive an annual
option to purchase 10,000 shares of common stock. See "--Stock Plans--2000 Non-
Employee Directors' Stock Option Plan" for a more detailed explanation of the
terms of these stock options.
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Executive Compensation
The following table sets forth information concerning the compensation
received for services rendered to us by our Chief Executive Officer and our
four other most highly compensated executive officers in 1999 who earned, or
would have earned on an annualized basis, more than $100,000 during the fiscal
year ended December 31, 1999.
Summary Annual Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual (Option
Compensation Awards)
---------------- ------------
Number of
Securities
Underlying
Name and Principal Position Salary Bonus Options
--------------------------- -------- ------- ------------
<S> <C> <C> <C>
Ofer Ben-Shachar................................. $163,333 -- --
President, Chief Executive Officer
and Chairman of the Board
Kevin Akeroyd(1)................................. 56,248 $25,004 100,000
Vice President of Sales
David Hannebrink(2).............................. 143,750 60,000 416,000
Vice President of Marketing
and Business Development
Hagi Schwartz(3)................................. 32,290 65,000 300,000
Vice President of Finance
and Chief Financial Officer
Lawrence Slotnick(4)............................. 107,116 15,000 450,000
Vice President of Engineering
</TABLE>
- --------
(1) Mr. Akeroyd joined NOOSH in August 1999. On an annualized basis, Mr.
Akeroyd's base salary would have been $150,000. Mr. Akeroyd is guaranteed a
minimum monthly commission of $6,250 until January 1, 2001. Until January
1, 2001, Mr. Akeroyd is also eligible to receive an additional monthly
commission of $6,250 for achieving sales commission goals.
(2) Mr. Hannebrink joined NOOSH in January 1999. On an annualized basis, Mr.
Hannebrink's base salary would have been $150,000. Mr. Hannebrink is also
eligible to receive a bonus of $30,000 for each fiscal year upon
achievement of quarterly performance milestones.
(3) Mr. Schwartz joined NOOSH in October 1999. On an annualized basis, Mr.
Schwartz's base salary would have been $154,992.
(4) Mr. Slotnick joined NOOSH in April 1999. On an annualized basis, Mr.
Slotnick's base salary would have been $160,008. Mr. Slotnick is also
eligible to receive a bonus of $30,000 for each fiscal year upon
achievement of quarterly performance milestones.
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<PAGE>
Option Grants
The following table sets forth information regarding stock options granted,
if any, to our Chief Executive Officer and our four other most highly
compensated executive officers during the fiscal year ended December 31, 1999.
The exercise price for each option was equal to the fair market value of our
common stock on the date of grant as determined by our board of directors.
Percentage of total options as set forth below was calculated based on an
aggregate of 5,294,990 shares of common stock granted under the 1998 equity
incentive plan in fiscal 1999. The potential realizable value as set forth
below was calculated based on the ten-year term of the option and assumed rates
of stock appreciation of 5% and 10%, compounded annually from the date the
options were granted to their expiration date based on the fair market value of
the common stock on the date of grant and an assumed initial public offering
price of $12.00 per share.
Option Grants During Fiscal 1999
<TABLE>
<CAPTION>
Percentage Potential Realizable
of Total Value At Assumed
Number of Options Annual Rates of Stock
Securities Granted Exercise Price Appreciation for
Underlying during Price Option Term
Options Fiscal Per Expiration ----------------------
Name Granted 1999 Share Date 5% 10%
---- ---------- ---------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ofer Ben-Shachar........ -- -- -- -- -- --
Kevin Akeroyd........... 100,000 1.9% $ 0.50 8/18/09 $1,811,594 $ 2,779,537
David Hannebrink........ 416,000 7.9% 0.0325 1/24/09 7,730,710 11,757,355
Hagi Schwartz........... 300,000 5.7% 1.00 10/7/09 5,284,782 8,188,612
Lawrence Slotnick....... 400,000 8.5% 0.1375 6/7/09 7,391,375 11,263,149
50,000 1.00 10/7/09 880,797 1,364,769
</TABLE>
The options listed in the table above are subject to vesting. The option
shares vest over a four-year period, with 25% of the option shares vesting
after one year and 2.08% vesting monthly thereafter. See "Stock Plans" for a
description of the material terms of these options.
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<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides summary information concerning the shares of
common stock represented by outstanding stock options held by our Chief
Executive Officer and our four other most highly compensated executive officers
as of December 31, 1999. Options granted to purchase shares of our common stock
under our 1998 equity incentive plan are immediately exercisable by certain
optionees at the discretion of the board, but are subject to a right of
repurchase pursuant to the vesting schedule of each specific grant. The
repurchase option generally lapses over a four year period, with 25% lapsing
after the first year and 2.08% lapsing monthly thereafter. In the event that an
employee ceases to provide service to us or our affiliates, we have the right
to repurchase any of that employee's unvested shares of common stock at the
original option price. Amounts shown in the value realized column were
calculated based on the difference between the option exercise price and the
fair market value of the common stock on the date of exercise, without taking
into account any taxes that may be payable in connection with the transaction,
multiplied by the number of shares of common stock underlying the option.
Exercise prices ranged from $0.0325 to $1.00. We have calculated the value of
unexercised in-the-money options based on the assumed initial public offering
price of $12.00 per share of common stock without taking into account any taxes
that may be payable in connection with the transaction, multiplied by the
number of shares underlying the option, less the aggregate exercise price
payable for these shares.
<TABLE>
<CAPTION>
Number of
Securities
Underlying
Unexercised
Options at Value of Unexercised
December 31, In-the-Money Options at
Shares 1999 December 31, 1999
Acquired on Value --------------- -------------------------
Name Exercise Realized Vested Unvested Exercisable Unexercisable
---- ----------- -------- ------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ofer Ben-Shachar........ -- -- -- -- -- --
Kevin Akeroyd........... -- -- -- 100,000 $1,150,000 --
David Hannebrink........ 416,000(1) $0.00 -- -- -- --
Hagi Schwartz........... 300,000(2) 0.00 -- -- -- --
Lawrence Slotnick....... -- -- -- 450,000 5,025,000 --
</TABLE>
- --------
(1) As of December 31, 1999, 416,000 shares held by Mr. Hannebrink were
unvested and subject to repurchase by us.
(2) As of December 31, 1999, 300,000 shares held by Mr. Schwartz were unvested
and subject to repurchase by us.
Employment Arrangements
At the time of commencement of employment, our employees generally sign offer
letters specifying the basic terms and conditions of employment. In October
1999, we entered into an employment offer letter with Hagi Schwartz, our Vice
President of Finance and Chief Financial Officer. Under his employment offer
letter, we granted Mr. Schwartz an option to purchase 300,000 shares of common
stock at an exercise price of $1.00 per share. This option will vest 25% on the
first anniversary of his date of hire with the remainder vesting monthly over
the following three years. In the event Mr. Schwartz voluntarily terminates his
employment or is involuntarily terminated without cause, he is entitled to six
months continued salary and benefits and our repurchase right with respect to
his option shares continues to lapse over the six-month period.
In January 2000, we entered into an employment offer letter with Timothy
Moore, our Vice President of Strategic Alliances, General Counsel and
Secretary. Under his employment offer letter, we granted Mr. Moore an option to
purchase 285,000 shares of common stock at an exercise price of $2.25 per
share. This option will vest 25% on the first anniversary of his date of hire
with the
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<PAGE>
remainder vesting monthly over the following three years. In the event Mr.
Moore is terminated without cause, he is entitled to six months continued
salary, benefits and vesting of stock options. In addition, in the event Mr.
Moore is terminated without cause before the first anniversary of his date of
hire, he is entitled to vesting for each month of employment.
In January 2000, we entered into an employment offer letter with Robert Shaw,
our Senior Vice President of Sales. Under his employment offer letter, we
granted Mr. Shaw an option to purchase 270,000 shares of common stock at an
exercise price of $2.50 per share. This option will vest 25% on the first
anniversary of his date of hire with the remainder vesting monthly over the
following three years. In the event Mr. Shaw is terminated without cause he is
entitled to twelve months continued salary and benefits. In addition, in the
event Mr. Shaw is terminated without cause before the first anniversary of his
date of hire, 25% of his option shares would become immediately vested.
Stock Plans
2000 Equity Incentive Plan
Our board of directors adopted our 2000 plan in January 2000, and our
stockholders approved the 2000 plan in March 2000. The 2000 plan will be
effective on the effective date of this offering. At that time, no further
option grants will be made under our 1998 plan described in more detail below.
Share Reserve. A total of 6,000,000 shares of our common stock have been
reserved for issuance under the 2000 plan. On the date of each annual
stockholders' meeting, beginning with the annual stockholders' meeting in 2001,
the share reserve will increase by the least of the following:
. 4.5% of our total outstanding common stock;
. 2,000,000 shares of our common stock; or
. a lesser amount as determined by our board of directors.
When a stock award expires or is terminated before it is exercised, the shares
not acquired pursuant to the stock awards shall again become available for
issuance under the 2000 plan.
Eligibility. The 2000 plan permits the grant of options to employees,
directors and consultants. Options may be either incentive stock options, or
ISOs, within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, or nonstatutory stock options, or NSOs. In addition, the 2000 plan
permits the grant of stock bonuses and rights to purchase restricted stock.
The 2000 plan is administered by our board of directors. Our board of
directors may delegate its authority to administer the 2000 plan to a committee
of two or more board members appointed by the board of directors. The
administrator has the authority to select the eligible persons to whom award
grants are to be made, to designate the number of shares to be covered by each
award, to determine whether an option is to be an ISO or NSO, to establish
vesting schedules, to specify the exercise price of options and the type of
consideration to be paid upon exercise and to specify other terms of awards.
In general, the term of the stock options granted under the 2000 plan may not
exceed ten years. An optionholder may not transfer a stock option other than by
will or the law of descent or distribution. The exercise price for an ISO
cannot be less than 100% of the fair market value of our common stock on the
date of grant. The exercise price for NSOs cannot be less than 85% of the fair
market value of our common stock on the date of grant. In the event the
optionholder is a 10% stockholder, then the exercise price per share of an ISO
cannot be less than 110% of the fair market value of our common stock on the
date of grant.
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<PAGE>
Unless the terms of an optionholder's stock option agreement provide for
earlier termination, in the event an optionholder's service relationship with
us ceases due to death, the optionholder's beneficiary may exercise any vested
options up to 18 months after the date the service relationship ends. In the
event an optionholder's service relationship with us ceases due to disability,
the optionholder may exercise any vested option up to twelve months after the
date the service relationship ends. If an optionholder's relationship with us
ceases for any reason other than disability or death, the optionholder may,
unless the terms of the stock option agreement provide for earlier termination,
exercise any vested options up to three months from the date the service
relationship ends.
ISOs may be granted only to our employees. The aggregate fair market value,
determined at the time of grant, of shares of our common stock with respect to
which ISOs are exercisable for the first time by an optionholder during any
calendar year under all of our stock plans may not exceed $100,000. No ISO may
be granted to any person who at the time of the grant owns or is deemed to own
stock possessing more than 10% of the total combined voting power of us or any
of our affiliates unless the term of the ISO award does not exceed five years
from the date of grant.
Effect on Options of a Change in Control. In the event of a change in control
in the beneficial ownership of NOOSH, all outstanding stock awards under the
2000 plan either will be assumed, continued or substituted for by any surviving
entity. If the surviving entity determines not to assume, continue or
substitute for these awards, the vesting provisions of such stock awards will
be accelerated and all outstanding awards will be immediately exercisable.
Awards not exercised prior to the effective date of the change of control shall
terminate and cease to be outstanding. In certain change in control
circumstances the vesting provisions of the outstanding stock awards will be
accelerated automatically. Furthermore, if a holder of a stock award is
terminated due to a constructive termination or involuntarily terminated
without cause within one month before or 13 months after a change in control,
the vesting of that holder's stock awards will be accelerated.
Other provisions. The terms of any stock bonuses or restricted stock purchase
awards granted under the 2000 plan will be determined by the administrator. The
administrator may award stock bonuses in consideration of past services without
a purchase payment. The purchase price of restricted stock under any restricted
stock purchase agreement will not be less than 85% of the fair market value of
our common stock on the date of grant. Shares sold or awarded under the 2000
plan may be subject to repurchase by us.
Our board of directors may amend or modify the 2000 plan at any time.
However, no amendment or modification shall adversely affect the rights and
obligations with respect to options or unvested awards unless the participant
consents to such an amendment or modification. In addition, the approval of our
stockholders is required for our board of directors to:
. increase the maximum number of shares issuable under the 2000 equity
incentive plan (except for permissible adjustments in the event of certain
changes in the company's capitalization);
. materially modify the eligibility requirements for participation; or
. materially increase the benefits accruing to participants.
1998 Equity Incentive Plan
Our board of directors adopted and our stockholders approved our 1998 equity
incentive plan in November 1998. The 1998 plan was amended in April 1999 and in
December 1999, and our stockholders approved both amendments. An aggregate of
8,000,000 shares of common stock currently are authorized for issuance under
the 1998 plan. Upon the effective date of this offering, no further option
grants will be made under the 1998 plan. The options granted under the 1998
plan have substantially the same terms as will be in effect for grants made
under the 2000 plan. With
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<PAGE>
respect to change in control provisions, all outstanding options under the 1998
plan either will be assumed or substituted by any surviving entity. If the
surviving entity determines not to assume or substitute such awards, the
vesting schedule of all outstanding awards shall accelerate and all outstanding
awards will be immediately exercisable. Awards not exercised prior to the
effective date of the change in control shall terminate and cease to be
outstanding on the effective date of a change in control.
As of February 15, 2000, options to purchase a total of 3,187,510 shares of
common stock had been exercised, none of which had been repurchased and
2,914,774 of which were subject to repurchase; options to purchase a total of
4,147,575 shares of common stock with a weighted average price of $1.31 per
share were outstanding; and 529,098 shares remained available for future
issuance under the 1998 plan. As of February 15, 2000, the board had not
granted any stock bonuses or stock appreciation rights under the 1998 plan.
2000 Employee Stock Purchase Plan
Our board of directors adopted the 2000 employee stock purchase plan in
January 2000, and our stockholders approved the 2000 stock purchase plan in
March 2000.
Share Reserve. A total of 600,000 shares of common stock have been authorized
for issuance under the 2000 purchase plan. On the date of each annual
stockholders' meeting, beginning with the annual stockholders' meeting in 2001,
the share reserve will increase by the least of the following:
. 1.5% of our total outstanding common stock;
. 600,000 shares of our common stock; or
. a lesser amount as determined by the board of directors.
The 2000 purchase plan is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended. Under the 2000 purchase plan, eligible employees will be able to
purchase common stock at a discount price in periodic offerings. The 2000
purchase plan will commence on the effective date of this offering.
Eligibility. All employees are eligible to participate in the 2000 purchase
plan so long as they are employed by us, or a subsidiary designated by the
board of directors, for at least 20 hours per week and are customarily employed
by us, or a subsidiary designated by the board of directors, for at least five
months per calendar year. Any employee who is a 5% stockholder is not eligible
to participate in the 2000 purchase plan.
Under the 2000 purchase plan, employees who participate in an offering
generally may have up to 15% of their earnings for the period of that offering
withheld. The amount withheld is used on each purchase date of the offering
period to purchase shares of common stock. The price paid for common stock on
the purchase dates will equal the lower of 85% of the fair market value of the
common stock on the first day of the offering period or 85% of the fair market
value of the common stock on the purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment.
Effect of a Change in Control. Upon a change in control of the beneficial
ownership of us, our board of directors has discretion to provide that each
right to purchase common stock will be assumed or an equivalent right
substituted by the successor entity or the board of directors may provide for
all sums collected by payroll deductions to be applied to purchase stock
immediately prior to the effective date of the change in control transaction.
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Other Provisions. Our board of directors has the authority to amend or
terminate the 2000 purchase plan; provided, however, that no amendment or
termination of the 2000 purchase plan may adversely affect any outstanding
rights to purchase common stock. Amendments generally will be submitted for
stockholder approval only to the extent required by law.
2000 Non-Employee Directors' Stock Option Plan
Our board of directors adopted the 2000 non-employee directors' stock option
plan in January 2000, and our stockholders approved the 2000 non-employee
directors' stock option plan in March 2000. The directors' plan will be
effective on the effective date of this offering.
Share Reserve. A total of 350,000 shares of our common stock have been
reserved for issuance under the 2000 directors' plan. When a stock option
expires or is terminated before it is exercised, the shares not acquired
pursuant to the stock option shall again become available for issuance under
the 2000 directors' plan.
Eligibility and Option Terms. The directors' plan permits the grant of NSOs
to non-employee directors. The 2000 directors' plan is administered by our
board of directors. However, the grant of stock options is automatic.
On the effective date of this offering, each non-employee director will
automatically be granted an option to purchase 25,000 shares of common stock,
unless that director has previously been granted an option. Any individual who
becomes a non-employee director after this offering will automatically receive
this initial grant upon being elected to the board of directors. On each annual
stockholders' meeting, beginning with the annual stockholders' meeting in 2001,
any person who is then a non-employee director will automatically be granted an
option to purchase 10,000 shares of common stock.
In general, the stock options granted under the directors' plan may not
exceed ten years. An optionholder may not transfer a stock option other than by
will or the law of descent or distribution. The exercise price for nonstatutory
stock options will be 100% of the fair market value of the common stock on the
date of grant.
Unless the terms of an optionholder's stock option agreement provide for
earlier termination, in the event an optionholder's service relationship with
us ceases due to death, the optionholder's beneficiary may exercise any vested
options up to 18 months after the date such service relationship ends. In the
event an optionholder's service relationship with us ceases due to disability,
the optionholder may exercise any vested option up to twelve months after the
cessation of service. If an optionholder's relationship with us ceases for any
reason other than disability or death, the optionholder may, unless the terms
of the stock option agreement provide for earlier termination, exercise any
vested options up to three months from the date the service relationship ends.
Effect on Options of a Change in Control. In the event of certain changes in
control in the beneficial ownership of us, the vesting provisions of all
outstanding stock options under the directors' plan will be accelerated and the
stock options will be terminated upon the change of control if not previously
exercised.
Other Provisions. Our board of directors may amend or modify the directors'
plan at any time. However, no such amendment or modification shall adversely
affect the rights and obligations with respect to options unless the
participant consents to such an amendment or modification.
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401(k) Plan
We sponsor a 401(k) plan, a defined contribution plan intended to qualify
under Section 401(a) of the Internal Revenue Code of 1986, as amended. All
employees are eligible to participate. Participants may make pre-tax
contributions to the 401(k) plan of up to 25% of their eligible earnings,
subject to a statutorily prescribed annual limit ($10,500 in 2000). Under the
401(k) plan, each employee is fully vested in his or her deferred salary
contributions. Employee contributions are held and invested by the 401(k)
plan's trustee.
Each participant's contributions, and the corresponding investment earnings,
are generally not taxable to the participants until withdrawn. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives.
Limitation of Liability of Directors and Indemnification Matters
Our amended and restated certificate of incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for:
. any breach of their duty of loyalty to the corporation or its stockholders;
. acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or redemptions;
or
. any transaction from which a director derives an improper personal benefit.
This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our amended and restated certificate of incorporation and bylaws provide that
we will indemnify our directors and officers, and may indemnify our other
employees and agents, to the fullest extent permitted by law. We believe that
indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions in that capacity and
certain other capacities, including serving as a director of another
corporation at the request of our board, regardless of whether the bylaws would
permit indemnification.
We intend to enter into agreements to indemnify our directors and executive
officers in addition to indemnification provided for in our certificate of
incorporation and our bylaws. These agreements, among other things, provide for
indemnification of our directors and executive 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.
At present, we are not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent in which
indemnification would be required or permitted.
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<PAGE>
Change of Control Arrangements
In August 1998 and September 1998, we entered into founder stock purchase
agreements with Ofer Ben-Shachar, our President, Chief Executive Officer and
Chairman of the Board. Under the terms of the agreements, as amended in April
1999, approximately 33% of his shares were immediately vested with
approximately 1.85% of his shares vesting monthly thereafter. Upon involuntary
termination prior to a change of control of us, approximately 11% of his shares
would become immediately vested. Upon involuntary termination following a
change of control of us, 100% of his remaining unvested shares would become
immediately vested.
In October 1999, we entered into an employment offer letter with Hagi
Schwartz, our Vice President of Finance and Chief Financial Officer, and in
January 2000, we entered into an employment offer letter with Timothy Moore,
our Vice President of Strategic Alliances, General Counsel and Secretary. Under
the terms of their employment offer letters, Mr. Schwartz and Mr. Moore are
entitled to full acceleration of the unvested portion of their option shares in
the event of a change of control.
According to the terms of the stock option grants to four of our directors,
Steven Baloff, Edward Barr, Kathy Levinson and Arthur Patterson, vesting of
their option shares will immediately accelerate upon a change of control
transaction.
For more information about the change of control provisions under our stock
plans, See "--Stock Plans."
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<PAGE>
RELATED PARTY TRANSACTIONS
The following executive officers, directors or holders of more than five
percent of our voting securities purchased securities in the amounts as of the
date shown below. For more detail on shares held by these purchasers see
"Principal Stockholders." Upon closing of this offering, all shares of our
outstanding Series A and Series B preferred stock will be automatically
converted into common stock on a two for one basis, and all outstanding shares
of our Series C and Series D preferred stock will be automatically converted
into common stock on a one for one basis. All preferred share amounts are
listed on an as-converted basis.
<TABLE>
<CAPTION>
Shares of Preferred Stock
--------------------------------------- Warrants for
Common Stock Series A Series B Series C Series D Common Stock
----------------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ofer Ben-Shachar................ 8,000,000 2,999,998 160,000 100,671 45,455 --
Kevin Akeroyd................... 100,000 -- -- -- -- --
David Hannebrink................ 436,706 -- -- -- -- --
Raymond Martinelli.............. 75,000 -- -- -- -- --
Timothy Moore................... 285,000 -- -- -- -- --
Hagi Schwartz................... 310,000 -- 14,546 -- -- --
Robert Shaw..................... 270,000 -- -- -- -- --
Lawrence Slotnick............... 400,000 -- -- -- -- --
Mathew Spolin................... 216,720 -- -- -- -- --
Steven Baloff................... 25,000 -- -- -- -- --
Kathy Levinson.................. 100,000 -- -- -- -- --
Accel Internet Fund II L.P.(1).. -- -- 605,090 139,597 -- --
Accel Investors '98 L.P.(1)..... -- -- 401,456 92,617 -- --
Accel Keiretsu VI L.P.(1)....... -- -- 75,636 17,450 -- --
Accel VI L.P.(1)................ -- -- 4,736,000 1,092,618 -- --
Advanced Technology Ventures V,
L.P.(2)........................ -- -- 2,106,582 560,913 -- --
ATV Entrepreneurs V, L.P.(2).... -- -- 75,236 20,033 -- --
MeriTech Capital Affiliates L.P.
............................... -- -- -- 32,215 -- --
MeriTech Capital Partners L.P.
............................... -- -- -- 1,981,208 -- --
R. R. Donnelley & Sons Company.. -- -- -- -- 1,272,727 2,780,158
Price Per Share................. $0.00125 to $6.50 $ 0.65 $ 2.75 $ 7.45 $ 11.00 $ 11.00
Date(s) of Purchase............. 8/98 to 2/00 11/98 4/99 11/99 1/00 1/00
</TABLE>
- --------
(1) Arthur Patterson, one of our directors, is a general partner of Accel
Partners.
(2) Steven Baloff, one of our directors, is a general partner of Advanced
Technology Ventures.
We have entered into the following agreements with our executive officers,
directors and holders of more than five percent of our voting securities.
Co-Marketing Agreement. In January 2000, we entered into a co-development and
co-marketing agreement with R.R. Donnelley, a beneficial holder of 6.7% of our
common stock. Under the agreement, we and R.R. Donnelley are committed to
actively promote and market the noosh.com service to R.R. Donnelley's
customers, particularly in the catalog, magazine and book publishing markets.
R.R. Donnelley also agreed to pay us a transaction fee based on the aggregate
volume of print orders processed by them. R.R. Donnelley is not committed to
any volume targets.
Amended and Restated Investor Rights Agreement. We, the preferred
stockholders described above and R.R. Donnelley have entered into an agreement,
under which they and other stockholders will have registration rights with
respect to their shares of common stock which we refer to as registrable
shares, following this offering. These registration rights include two demand
registration rights, an unlimited number of registration rights requiring us to
register sales of their shares when we undertake a public offering, or
piggyback registration rights, and an unlimited number of Form S-3 registration
rights. In order to exercise their demand registration rights,
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<PAGE>
stockholders holding at least 30% of the registrable shares must submit a
written request that we file a registration statement for a public offering of
the registrable shares having an anticipated aggregated offering price of at
least $15,000,000. In order to exercise their piggyback registration rights,
each holder of registrable shares must submit written notice to us within 15
days of receiving notice from us that we intend to file a registration
statement for the public offering of our common stock. In order to exercise
their Form S-3 registration rights, stockholders holding at least 20% of the
registrable shares must submit a written request that we effect a registration
on Form S-3. See "Description of Capital Stock--Registration Rights" for a
further description of the terms of this agreement.
E*TRADE Agreement. In December 1999, we entered into our standard form of
print buyer agreement with E*TRADE Group, Inc. Kathy Levinson, one of our
directors, serves as president and chief operating officer of E*TRADE. Under
the agreement, if E*TRADE uses our service, it has agreed to pay us a monthly
service fee based upon applicable dollar volumes.
Indebtedness of Management. From April 1999 to February 2000, we made loans
to the following officers:
<TABLE>
<CAPTION>
Name Amount Due Date
---- -------- ----------------
<S> <C> <C>
David Hannebrink................................... $ 13,520 April 15, 2000
Hagi Schwartz...................................... 300,000 October 8, 2004
David Hannebrink................................... 100,000 November 1, 2000
Kevin Akeroyd...................................... 49,900 January 3, 2005
Raymond Martinelli................................. 59,925 January 3, 2005
Timothy Moore...................................... 641,250 January 3, 2005
Steven Baloff...................................... 61,475 January 15, 2005
David Hannebrink................................... 100,000 January 15, 2001
Robert Shaw........................................ 674,730 January 15, 2005
Hagi Schwartz...................................... 64,990 February 4, 2005
</TABLE>
Each loan was made under a promissory note secured by a pledge of early
exercised shares. The notes bear interest at 6% per year.
Stock Options. Stock option grants to our executive officers and directors
are described in this prospectus under the captions "Management--Director
Compensation" and "--Executive Compensation."
Management Rights. In November 1999, we entered into a management rights
letter agreement with MeriTech Capital, a holder of 6.2% of our common stock.
Under the terms of the letter agreement, MeriTech is entitled to consult with
and advise us on significant business issues and to attend all board meetings
in a non-voting observer capacity.
Executive Employment Arrangements. In October 1999, we entered into an
employment offer letter with Hagi Schwartz, our Vice President of Finance and
Chief Financial Officer. In January 2000, we entered into employment offer
letters with Robert Shaw, our Senior Vice President of Sales, and Timothy
Moore, our Vice President of Strategic Alliances and General Counsel.
See "Management--Employment Arrangements."
Indemnification Agreements. We intend to enter into indemnification
agreements with our directors and executive officers for the indemnification of
these persons to the full extent permitted by law. We also intend to execute
these agreements with our future directors and officers.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our outstanding common stock as of February 15, 2000,
and as adjusted to reflect the sale of our common stock by this prospectus, by:
. our Chief Executive Officer and each of our four other most highly
compensated executive officers;
. each director;
. each stockholder who is known by us to own beneficially 5% or more of our
common stock; and
. all directors and executive officers as a group.
Percentage of ownership in the following table is calculated based on
32,455,058 shares of common stock outstanding as of February 15, 2000 and
36,455,058 shares of common stock outstanding after completion of this
offering.
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 held by that person that are
currently exercisable or exercisable within 60 days of February 15, 2000 are
deemed outstanding. Those shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of each other person. Except as
indicated in the footnotes to the table, the persons named in the table have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them, subject to community property laws where
applicable. Unless otherwise indicated, the address of each of the individuals
named above is: 3401 Hillview Avenue, Palo Alto, CA 94304.
<TABLE>
<CAPTION>
Beneficial Ownership
---------------------------------------------------------------
Number of
Options or Shares
warrants NOOSH may
Exercisable Repurchase
Within Within Percent
60 Days of 60 Days of -----------------
Name and Address of Number of February February Before After
Beneficial Owner Shares(1) 15, 2000 15, 2000(2) Total Offering Offering
- ------------------- ---------- ----------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ofer Ben-Shachar(3)..... 6,120,977 -- 1,185,147 7,306,124 22.5% 20.0%
Kevin Akeroyd........... -- -- 100,000 100,000 * *
David Hannebrink........ 142,039 -- 294,667 436,706 1.3 1.2
Hagi Schwartz........... 14,546 -- 310,000 324,546 * *
Lawrence Slotnick....... -- -- 400,000 400,000 1.2 1.1
Steven Baloff(4)........ 3,084,345 -- 17,361 3,095,456 9.5 8.5
Edward Barr(5).......... -- 694 -- 694 * *
Arthur Patterson(6)..... 7,160,464 91,667 -- 7,252,131 22.3 19.8
Kathy Levinson(7)....... 92,766 -- 86,111 178,877 * *
Accel Partners(6)....... 7,160,464 -- -- 7,160,464 22.1 19.6
Advanced Technology
Ventures(4)............ 3,070,456 -- -- 3,070,456 9.5 8.4
MeriTech Capital(8)..... 2,013,423 -- -- 2,013,423 6.2 5.5
R.R. Donnelley & Sons
Company................ 1,272,727 961,308 -- 2,234,035 6.7 6.0
All directors and
executive officers as a
group (13 persons)(9).. 16,678,040 92,361 3,163,251 19,941,254 61.3% 54.6
</TABLE>
56
<PAGE>
- --------
* Less than 1% of the outstanding shares of common stock.
(1) Excludes shares of common stock subject to a right of repurchase within 60
days of February 15, 2000.
(2) The unvested portion of the shares of common stock is subject to a right of
repurchase, at the original option price, in the event the holder ceases to
provide services to Noosh and its affiliates or upon a change of control of
NOOSH. The option exercise price ranges from $0.0325 to $2.50.
(3) Does not include 3,983,500 shares held by the Ben-Shachar Family Generation
Skipping Trust. Mr. Ben-Shachar has no voting or investment power with
respect to the shares and, therefore, does not have beneficial ownership of
the shares.
(4) Includes 2,975,187 shares held by Advanced Technology Ventures V, L.P., and
95,269 shares held by ATV Entrepreneurs V, L.P. Advanced Technology
Ventures is located at 485 Ramona Street, Suite 200, Palo Alto, CA 94301.
Mr. Baloff is a general partner of Advanced Technology Ventures and
disclaims beneficial ownership of these shares except to the extent of his
proportionate partnership interest in these shares.
(5) Mr. Barr has served as a member of our board of directors since March 2000.
Accordingly, Mr. Barr's beneficial ownership information is as of March 23,
2000.
(6) Includes 744,687 shares held by Accel Internet Fund II L.P., 494,073 shares
held by Accel Investors '98 L.P., 93,086 shares held by Accel Keiretsu VI
L.P. and 5,828,618 shares held by Accel VI L.P. Accel Partners are located
at 428 University Avenue, Palo Alto, CA 94303. Mr. Patterson is a general
partner of Accel Partners and disclaims beneficial ownership of these
shares except to the extent of his proportionate partnership interest in
these shares.
(7) Includes 78,877 shares held by Internet Experience, L.P. Internet
Experience is located at 4500 Bohannan Drive, Menlo Park, CA 94025. Ms.
Levinson is a general partner and a limited partner of Internet Experience
and disclaims beneficial ownership of these shares except to the extent of
her proportionate partnership interest in these shares.
(8) Includes, 32,215 shares held by MeriTech Capital Affiliates L.P. and
1,981,208 shares held by MeriTech Capital Partners L.P. MeriTech Capital is
located at 428 University Avenue, Palo Alto, CA 94303.
(9) Total number of shares includes 10,309,797 shares of common stock held by
entities affiliated with directors and executive officers. See footnotes 4
through 6 above.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, our authorized capital stock will consist
of 75,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
undesignated preferred stock, $0.001 par value. The following description of
our capital stock does not purport to be complete and is subject to, and
qualified in its entirety by, our amended and restated certificate of
incorporation and bylaws, which we have included as exhibits to the
registration statement of which this prospectus forms a part.
Common Stock
As of February 15, 2000, there were 32,455,058 shares of common stock and
preferred stock outstanding, held of record by 84 stockholders. These amounts
assume the conversion of all outstanding shares of preferred stock into common
stock, which is to occur upon the closing of this offering. In addition, as of
February 15, 2000, there were 4,147,575 shares of common stock subject to
outstanding options. Upon completion of this offering, there will be 36,455,055
shares of common stock outstanding, assuming no additional exercise of
outstanding stock options.
Each share of common stock entitles its holder to one vote on all matters to
be voted upon by stockholders. Subject to preferences that may apply to any
outstanding preferred stock, holders of common stock may receive ratably any
dividends that the board of directors may declare out of funds legally
available for that purpose. In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities and any liquidation preference of
preferred stock that may be outstanding. The common stock has no preemptive
rights, conversion rights or other subscription rights or redemption or sinking
fund provisions. All outstanding shares of common stock are fully paid and non-
assessable, and the shares of common stock that we will issue upon completion
of this offering will be fully paid and non-assessable.
Preferred Stock
According to our amended and restated certificate of incorporation, our board
of directors will have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series. Our board shall designate the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preference, sinking
fund terms and number of shares constituting any series or the designation of
any series. The issuance of preferred stock could have the effect of
restricting dividends on the common stock, diluting the voting power of the
common stock, impairing the liquidation rights of the common stock or delaying
or preventing a change in control without further action by the stockholders.
We have no present plans to issue any shares of preferred stock after the
completion of this offering.
Warrants
As of February 15, 2000, we had outstanding the following warrants:
. A warrant to purchase 270,000 shares of common stock. A total of 140,000
shares is immediately exercisable. Of these 140,000 shares, the right to
purchase 35,000 shares will terminate upon the closing of this offering. An
additional 35,000 shares are exercisable on December 31, 2000 or earlier if
certain targets of business conducted over our service are met. The
remaining portion of the warrant becomes exercisable in increments only upon
the holder meeting stated volume targets. The exercise price for the warrant
ranges from $7.45 per share to the fair market value of our common stock on
the date the volume targets are met. This warrant expires in December 2002.
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<PAGE>
. A warrant to purchase 225,000 shares of common stock. A total of 75,000
shares is immediately exercisable. The remaining portion of the warrant
becomes exercisable in increments upon the holder meeting stated volume
targets. The exercise price for the warrant ranges from $11.00 per share to
the fair market value of our common stock at the end of the calendar quarter
that the stated volume target is met. This warrant expires in December 2002.
. Two warrants to purchase a total of 2,780,158 shares of common stock at an
exercise price of $11.00 per share. A portion of the warrants, for a total
of 961,308 shares of common stock, is immediately exercisable. The remaining
portions of the warrants become exercisable in increments upon the holder
meeting stated volume targets. These warrants expire in January 2003.
. A warrant to purchase 50,000 shares of common stock at an exercise price of
$11.00. The entire warrant becomes exercisable upon the holder meeting
stated volume requirements. This warrant expires in January 2003.
. A warrant to purchase 100,000 shares of common stock. The warrant becomes
exercisable one year from the date of grant and only to the extent the
holder meets stated volume targets. The exercise price for the warrant
ranges from the initial public offering price per share to the fair market
value of our common stock as of the end of the calendar quarter during which
the stated volume targets are met. This warrant expires in February 2003.
. A warrant to purchase 10,000 shares of common stock. The warrant becomes
exercisable one year from the date of grant and only if the holder meets a
target for the conduct of business over our service. The exercise price will
be the initial public offering price per share. This warrant expires in
February 2003.
Each of the warrants contains provisions for the adjustment of the exercise
prices and the aggregate number of shares that may be issued upon exercise of
the warrants in the event of a stock split, stock dividend, reorganization,
reclassification or consolidation. In addition, each warrant allows for
cashless exercise.
Registration Rights
The holders of 21,000,745 shares of the common stock that will be outstanding
after this offering and R.R. Donnelley with respect to 2,780,158 shares of
common stock issuable upon conversion of the warrants issued to them, are
entitled to require us to register the sales of their shares under the
Securities Act, under the terms of an agreement between us and the holders of
these securities. Subject to limitations specified in the agreement, these
registration rights include the following:
. two demand registration rights that holders may exercise no sooner than 180
days after our initial public offering, which require us to register the
sale of a holder's shares, subject to the discretion of our board of
directors to delay the registration;
. an unlimited number of registration rights that require us to register sales
of a holder's shares when we undertake a public offering, subject to the
discretion of the managing underwriter of the offering to decrease the
amount that holders may register; and
. an unlimited number of rights to require us to register sales of shares on
Form S-3, a short form of registration statement permitted to be used by
some companies, which holders may exercise if they request registration of
the sale of more than $750,000 of common stock following the time we first
qualify for the use of this form of registration with the Securities and
Exchange Commission.
59
<PAGE>
In addition, the holders of 8,000,000 shares of the common stock that will be
outstanding after this offering are entitled to the same piggyback and Form S-3
registration rights listed above.
We will bear all registration expenses if these registration rights are
exercised, other than underwriting discounts and commissions. These
registration rights terminate as to a holder's shares when that holder may sell
those shares under Rule 144(k) of the Securities Act, which for most parties
means two years after the acquisition of the shares from us.
Anti-Takeover Provisions
Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law, which
regulates acquisitions of some Delaware corporations. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three years
following the date the person becomes an interested stockholder, unless:
. our board of directors approved the business combination or the transaction
in which the person became an interested stockholder prior to the date the
person attained this status;
. upon consummation of the transaction that resulted in the person becoming an
interested stockholder, the person owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction commenced, excluding
shares owned by persons who are directors and also officers; or
. on or subsequent to the date the person became an interested stockholder,
our board of directors approved the business combination and the
stockholders other than the interested stockholder authorized the
transaction at an annual or special meeting of stockholders.
Section 203 defines a "business combination" to include:
. any merger or consolidation involving the corporation and the interested
stockholder;
. any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
. in general, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder;
or
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any person
who, together with the person's affiliates and associates, owns, or within
three years prior to the determination of interested stockholder status did
own, 15% or more of a corporation's voting stock.
Certificate of Incorporation and Bylaw Provisions
Our amended and restated certificate of incorporation and bylaws, to be
effective upon the closing of this offering, divide our board into three
classes as nearly equal in size as possible, with each class serving a three-
year term. The terms are staggered, so that one-third of the board is to be
elected each year. The classification of our board could have the effect of
making it more difficult than otherwise for a third party to acquire control of
us, because it would typically take more than a year for our stockholders to
elect a majority of our board. In addition, our amended and restated
certificate of incorporation and bylaws will provide that any action required
or permitted to be taken by our stockholders at an annual or special meeting
may be taken only if it is properly brought before the meeting, and may not be
taken by written consent in lieu of a meeting. The bylaws will also
60
<PAGE>
provide that special meetings of the stockholders may be called only by our
board of directors, our Chairman of the Board or our Chief Executive Officer.
Under our bylaws, stockholders wishing to propose business to be brought before
a meeting of stockholders will be required to comply with various advance
notice requirements. Finally, our amended and restated certificate of
incorporation and bylaws will not permit stockholders to take any action
without a meeting.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company. The transfer agent's address is 40 Wall Street, 46th
Floor, New York, New York, 10005.
61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock. Future
sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices. Sales of substantial amounts of our
common stock in the public market after any restrictions on sale lapse could
adversely affect the prevailing market price of the common stock and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have 36,455,058 outstanding shares
of common stock, outstanding options to purchase 4,147,575 shares of common
stock and outstanding warrants to purchase 3,400,158 shares of common stock,
assuming no additional option or warrant grants or exercises after February 15,
2000. We expect that the 4,000,000 shares sold in this offering, plus any
shares issued upon exercise of the underwriters' over-allotment option, will be
freely tradable without restriction under the Securities Act, unless purchased
by our "affiliates" as that term is defined in Rule 144 under the Securities
Act. In general, affiliates include officers, directors and 10% or greater
stockholders.
The remaining 32,455,058 shares outstanding and 7,547,733 shares subject to
outstanding options and warrants are "restricted securities" within the meaning
of Rule 144. Restricted securities may be sold in the public market only if the
sale is registered or if it qualifies for an exemption from registration, such
as under Rule 144, 144(k) or 701 promulgated under the Securities Act, which
are summarized below. Sales of restricted securities in the public market, or
the availability of such shares for sale, could adversely affect the market
price of the common stock.
As a result of contractual restrictions described below and the provisions of
Rules 144, 144(k) and 701, the restricted shares will be available for sale in
the public market as follows:
. Beginning 180 days after the effective date, 20,013,643 shares will be
eligible for sale pursuant to Rule 144, Rule 144(k) and Rule 701.
. Beginning in November 2000, the remaining 12,441,415 shares will be eligible
for sale under Rule 144, Rule 144(k) or Rule 701 once they have been held
for the required period of time.
Additionally, of the 4,147,575 shares that may be issued upon the exercise of
outstanding options as of February 15, 2000, approximately 606,796 shares will
be vested and eligible for sale beginning 180 days after the effective date. As
of February 15, 2000, warrants for 1,141,308 shares of common stock were
exercisable and warrants for an additional 2,258,850 shares of common stock may
become exercisable in the future based on the holders meeting stated volume
targets for business conducted over our service. If exercised, the earliest
that these shares will be eligible for sale under Rule 144 is December 2000.
Lock-Up Agreements
Our directors, officers, employees and other stockholders, who together hold
all of our securities, have entered into lock-up agreements in connection with
this offering or are locked up under agreements with us. These lock-up
agreements generally provide that these holders will not offer, sell, contract
to sell, grant any option to purchase or otherwise dispose of our common stock
or any securities exercisable for or convertible into our common stock owned by
them for a period of 180 days after the date of this prospectus without the
prior written consent of Goldman, Sachs & Co. Notwithstanding possible earlier
eligibility for sale under the provisions of Rules 144, 144(k) and 701, shares
subject to lock-up agreements may not be sold until these agreements expire or
are waived by Goldman, Sachs & Co.
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<PAGE>
Rule 144
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any three-
month period a number of shares that does not exceed the greater of:
. one percent of the number of shares of common stock then outstanding, which
will equal approximately 364,550 shares immediately after this offering; and
. the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to manner
of sale, notice and the availability of current public information about us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, may sell these
shares without complying with the manner of sale, public information, volume
limitation or notice requirements of Rule 144.
Rule 701
Rule 701, as currently in effect, permits our employees, officers, directors
or consultants who purchased shares pursuant to a written compensatory plan or
contract to resell such shares in reliance upon Rule 144, but without
compliance with certain restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 90 days after effectiveness without
complying with the holding period requirement and that non-affiliates may sell
such shares in reliance on Rule 144 90 days after effectiveness without
complying with the holding period, public information, volume limitation or
notice requirements of Rule 144.
Registration Rights
On the date 180 days after the completion of this offering, the holders of
29,000,745 shares of our common stock will have rights to require us to
register their shares under the Securities Act. Upon the effectiveness of a
registration statement covering these shares, the shares would become freely
tradable.
Stock Options
We intend to file a registration statement under the Securities Act after the
effective date of this offering to register shares to be issued pursuant to our
employee benefit plans. As a result, any options or rights exercised under the
1998 equity incentive plan, the 2000 equity incentive plan, the 2000 employee
stock purchase plan and the 2000 non-employee directors' stock option plan will
also be freely tradable in the public market. However, shares held by
affiliates will still be subject to the volume limitation, manner of sale,
notice and public information requirements of Rule 144, unless otherwise
resalable under Rule 701. As of February 15, options to purchase 4,147,575
shares of common stock were outstanding, of which options to purchase 111,333
shares were vested and exercisable. In addition, as of that date we had
reserved 529,098 shares for possible future issuance under our 1998 equity
incentive plan, and an aggregate of 6,950,000 shares for possible future
issuance under our 2000 equity incentive plan, 2000 employee stock purchase
plan and 2000 non-employee directors' stock option plan.
63
<PAGE>
UNDERWRITING
NOOSH and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., FleetBoston
Robertson Stephens Inc., Banc of America Securities LLC, PaineWebber
Incorporated and E*OFFERING Corp. are the representatives of the underwriters.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co. ..............................................
FleetBoston Robertson Stephens Inc. ...............................
Banc of America Securities LLC.....................................
PaineWebber Incorporated...........................................
E*OFFERING Corp. ..................................................
-----
Total............................................................
=====
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 600,000
shares from NOOSH to cover such sales. They may exercise that option for 30
days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in the same proportion as set forth in the table
above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by NOOSH. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase 600,000 additional shares.
Paid by NOOSH
<TABLE>
<CAPTION>
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per Share.................................................. $ $
Total...................................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.
NOOSH and its directors, officers, employees and other stockholders have
agreed with the underwriters, except under limited circumstances, not to offer,
sell, contract to sell, grant any option to purchase or otherwise dispose of
our common stock or any securities exercisable for or convertible into our
common stock owned by them for a period of 180 days after the date of this
prospectus without the prior written consent of Goldman, Sachs & Co. See
"Shares Eligible for Future Sale" for a discussion of transfer restrictions.
64
<PAGE>
Prior to this offering, there has been no public market for the common stock.
The initial public offering price for the common stock has been negotiated
among NOOSH and the representatives of the underwriters. Among the factors
considered in determining the initial public offering price of the shares, in
addition to prevailing market conditions, were NOOSH's historical performance,
estimates of NOOSH's business potential and earnings prospects, an assessment
of Noosh's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
NOOSH has applied to have its common stock listed for quotation on the Nasdaq
National Market under the symbol "NOOS."
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.
The underwriters may also impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such underwriter in stabilizing or short-sale covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on The Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed five
percent of the total number of shares offered.
The underwriters have reserved for sale, at the initial public offering
price, up to 600,000 shares of the common stock offered hereby for certain
individuals designated by NOOSH who have expressed an interest in purchasing
such shares of common stock in the offering. The number of shares available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares not so purchased will be offered by
the underwriters to the general public on the same basis as other shares
offered hereby.
A prospectus in electronic format may be made available on the web sites
maintained by one or more underwriters or securities dealers. The
representatives of the underwriters may agree to allocate a number of shares to
underwriters for sale to their online brokerage account holders. Internet
distribution will be allocated by the representatives to underwriters that may
make Internet distributions on the same basis as other allocations. In
addition, shares may be sold by the underwriters to securities dealers who
resell shares to online brokerage account holders.
NOOSH estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $1,200,000.
NOOSH has agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
65
<PAGE>
VALIDITY OF COMMON STOCK
The validity of the common stock offered hereby will be passed upon for NOOSH
by Cooley Godward LLP, Palo Alto, California. Legal matters relating to this
offering will be passed upon for the underwriters by Sullivan & Cromwell, Los
Angeles, California. As of the date of this prospectus, Cooley Godward LLP,
together with certain investment funds affiliated with the firm, own an
aggregate of 120,834 shares of our common stock.
EXPERTS
The financial statements as of December 31, 1998 and 1999 included in this
prospectus have been audited by PricewaterhouseCoopers LLP, independent
accountants, as stated in their report appearing herein, and have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered in this offering. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedule thereto. For further information with respect to us and the common
stock offered in this offering, we refer you to the registration statement and
to the attached exhibits and schedules. Statements made in this prospectus
concerning the contents of any document referred to in this prospectus are not
necessarily complete. With respect to each such document filed as an exhibit to
the registration statement, we refer you to the exhibit for a more complete
description of the matter involved.
The reports and other information we file with the SEC can be inspected and
copied at the public reference facilities that the SEC maintains at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 140, Citicorp Center, 50 West Madison Street, Chicago, Illinois
60661. Copies of these materials can be obtained at prescribed rates from the
Public Reference Section of the SEC at the principal offices of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549. You may obtain information
regarding the operation of the public reference room by calling 1(800) SEC-
0330. The SEC also maintains a web site (http://www.sec.gov) that makes
available the reports and other information we have filed with the SEC.
66
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Balance Sheets as of December 31, 1998 and 1999.......................... F-3
Statements of Operations for the period from inception to December 31,
1998, Year ended December 31, 1999, and the period from inception to
December 31, 1999....................................................... F-4
Statements of Stockholders' Equity for the period from inception to
December 31, 1999....................................................... F-5
Statements of Cash Flows for the period from inception to December 31,
1998, Year ended December 31, 1999, and the period from inception to
December 31, 1999....................................................... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
NOOSH, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, changes in stockholders' equity and cash flow present fairly, in
all material respects, the financial position of NOOSH, Inc. at December 31,
1998 and 1999 and the results of its operations and cash flows for the period
from August 3, 1998 (date of inception) to December 31, 1998 and the year ended
December 31, 1999, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
January 21, 2000
F-2
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
Pro Forma at
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $1,117 $ 48,349 $63,949
Prepaid expenses and other current
assets............................... 26 947
------ --------
Total current assets................ 1,143 49,296
Property and equipment, net............. 69 3,339
Other assets............................ 27 394
------ --------
Total assets........................ $1,239 $ 53,029
====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 109 $ 634
Accrued liabilities................... 132 1,424
------ --------
Total current liabilities........... 241 2,058
Long-term debt.......................... -- 79
------ --------
Total liabilities................... 241 2,137
------ --------
Commitments (Note 4)
Stockholders' equity:
Convertible Preferred Stock: $0.001
par value;
Series A, Authorized: 2,023,077
shares
Issued and outstanding: 2,023,077
shares at December 31, 1998 and
December 31, 1999.................... 2 2 $ --
Series B, Authorized: 4,363,637 shares
Issued and outstanding: 4,363,637
shares at December 31, 1999.......... -- 4 --
Series C, Authorized: 7,648,286 shares
Issued and outstanding: 6,809,135
shares at December 31, 1999.......... -- 7 --
Common Stock: $0.001 par value;
Authorized: 45,000,000 shares actual
and pro forma;
Issued and outstanding: 9,414,673
shares actual; 30,415,418 shares pro
forma................................ 8 9 30
Additional paid-in capital............ 1,431 84,525 100,117
Deferred stock compensation........... (129) (15,379) (15,379)
Notes receivable from common
stockholders......................... -- (314) (314)
Deficit accumulated during the
development stage.................... (314) (17,962) (17,962)
------ -------- --------
Total Stockholders' equity.......... 998 50,892 $ 66,492
------ -------- ========
Total liabilities and
Stockholders' equity............. $1,239 $ 53,029
====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Period from Period from
August 3, August 3,
1998 (date 1998 (date
of of
inception) inception)
to Year Ended to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Costs and expenses:
Research and development (exclusive of
non-cash compensation expense of $771
in 1999 reported below) ............. $ 111 $ 3,053 $ 3,164
Sales and marketing (exclusive of non-
cash compensation expenses of $984
and value of warrants granted of
$1,249 in 1999 reported below)....... 96 9,412 9,508
Value of warrants granted in
connection with marketing
agreements........................... -- 1,468 1,468
General and administrative (exclusive
of non-cash compensation expense of
$813 in 1999 reported below) ........ 107 1,795 1,902
Amortization of deferred stock
compensation......................... -- 2,568 2,568
---------- ---------- ----------
Total operating expenses............ 314 18,296 18,610
---------- ---------- ----------
Interest income, net.................... -- (648) (648)
---------- ---------- ----------
Net loss................................ $ (314) $ (17,648) $ (17,962)
========== ========== ==========
Net loss per share--basic and diluted... $ (0.12) $ (4.13) $ (4.77)
========== ========== ==========
Shares used in per share calculation--
basic and diluted...................... 2,521,485 4,275,090 3,763,399
========== ========== ==========
Pro forma net loss per share--basic and
diluted................................ $ (1.15)
==========
Shares used in pro forma net loss per
share--basic and diluted............... 15,356,918
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Deficit
Convertible Notes Accumulated
Preferred Shares Common Stock Additional Receivable Deferred During the Total
----------------- ---------------- Paid-In from Common Stock Development Stockholders'
Shares Amount Shares Amount Capital Shareholders Compensation Stage Equity
---------- ------ --------- ------ ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to founders in
August 1998 at
$0.00125 per share,
net.................. -- $-- 8,040,000 $ 8 $ 1 $ -- $ -- $ -- $ 9
Issuance of Series A
Convertible Preferred
Stock at $0.65 per
share in November
1998, net of issuance
costs................ 2,023,077 2 -- -- 1,301 -- -- -- 1,303
Deferred stock
compensation......... -- -- -- -- 129 -- (129) -- --
Net loss............. -- -- -- -- -- -- -- (314) (314)
---------- --- --------- --- ------- ----- -------- -------- --------
Balances at December
31, 1998............. 2,023,077 2 8,040,000 8 1,431 -- (129) (314) 998
Issuance of common
stock................ -- -- 1,200,220 1 497 (314) -- -- 184
Issuance of common
stock in connection
with services
rendered............. -- -- 174,453 -- 700 -- -- -- 700
Issuance of Series B
Convertible Preferred
Stock at $2.75 per
share in April 1999,
net of issuance
costs................ 4,363,637 4 -- -- 11,955 -- -- -- 11,959
Issuance of Series C
Convertible Preferred
Stock at $7.45 per
share in November
1999, net of issuance
costs................ 6,809,135 7 -- -- 50,656 -- -- -- 50,663
Value of warrants
granted in connection
with marketing
agreements........... -- -- -- -- 1,468 -- -- -- 1,468
Deferred stock
compensation......... -- -- -- -- 17,818 -- (17,818) -- --
Amortization of
deferred stock
compensation......... -- -- -- -- -- -- 2,568 -- 2,568
Net loss............. -- -- -- -- -- -- -- (17,648) (17,648)
---------- --- --------- --- ------- ----- -------- -------- --------
Balances at December
31, 1999............. 13,195,849 $13 9,414,673 $ 9 $84,525 $(314) $(15,379) $(17,962) $ 50,892
========== === ========= === ======= ===== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Period from August Period from
3, 1998 August 3, 1998
(date of inception) Year Ended (date of inception)
to December 31, December 31, to December 31,
1998 1999 1999
------------------- ------------ -------------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss................ $ (314) $(17,648) $(17,962)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization.......... 3 455 458
Value of warrants
granted in connection
with marketing
agreements............ -- 1,468 1,468
Amortization of
deferred stock
compensation.......... -- 2,568 2,568
Issuance of common
stock in connection
with services
rendered.............. -- 667 667
Changes in assets and
liabilities:
Prepaid expenses and
other current
assets............... (26) (921) (947)
Accounts payable...... 109 525 634
Accrued liabilities... 132 1,292 1,424
Other long-term
assets............... (27) (367) (394)
------ -------- --------
Net cash used in
operating
activities.......... (123) (11,961) (12,084)
------ -------- --------
Cash flows from investing
activities:
Purchase of property and
equipment.............. (72) (3,725) (3,797)
------ -------- --------
Net cash used in
investing
activities.......... (72) (3,725) (3,797)
------ -------- --------
Cash flows from financing
activities:
Proceeds from issuance
of Convertible
Preferred Stock net.... 1,303 62,622 63,925
Proceeds from issuance
of Common Stock, net... 9 184 193
Proceeds from issuance
of Common Stock in
connection with
services rendered...... -- 33 33
Proceeds from long-term
debt................... -- 79 79
------ -------- --------
Net cash provided by
financing
activities.......... 1,312 62,918 64,230
------ -------- --------
Net increase in cash and
cash equivalents........ 1,117 47,232 48,349
Cash and cash equivalents
at beginning of period.. -- 1,117 --
------ -------- --------
Cash and cash equivalents
at end of period........ $1,117 $ 48,349 $ 48,349
====== ======== ========
Noncash activity:
Deferred stock
compensation........... $ 129 $ 17,818 $ 17,947
====== ======== ========
Issuance of Common Stock
for notes receivable
from shareholder....... $ -- $ 314 $ 314
====== ======== ========
Value of warrants
granted in connection
with marketing
agreements............. $ -- $ 1,468 $ 1,468
====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES:
NOOSH, Inc. (the "Company") was incorporated in the state of California and
commenced operations on August 3, 1998. NOOSH is a provider of business-to-
business e-commerce solutions for the printing industry. The Company has
developed and operates noosh.com, an Internet-based communication and
collaboration service for managing the design, procurement and production of
print orders. The service leverages the benefits of the Internet to enable
print buyers, print vendors and other providers of related services to
communicate and collaborate efficiently through the complex, multi-step process
of completing a print order. The Company is in the development stage and since
inception has devoted substantially all of its efforts to developing its
service and raising capital.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents and are stated at
amounts that approximate fair value, based on quoted market prices. Cash
equivalents consist primarily of deposits in money market funds.
Concentration of credit risk
The Company's cash and cash equivalents are maintained at a major U.S.
financial institution. Deposits in this institution may exceed the amount of
insurance provided on such deposits.
Fair value of financial instruments
The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts payable and accrued liabilities approximate fair
value due to their short maturities.
Property and equipment
Property and equipment are stated at cost and are depreciated on a straight-
line basis over their estimated useful lives of three to five years. Leasehold
improvements are amortized over the lesser of the useful life of the asset or
the period of the lease. Maintenance and repairs are charged to operations as
incurred.
Research and development
Research and development costs are charged to operations as incurred.
F-7
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
requires that certain software development costs be capitalized after
technological feasibility has been established. The Company defines
technological feasibility as the establishment of a working model. Costs
incurred subsequent to such point have been insignificant and have been
expensed.
Income taxes
The Company accounts for income taxes under the liability method whereby
deferred tax asset or liability account balances are calculated at the balance
sheet date using current tax laws and rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
Advertising
The Company expenses advertising costs as they are incurred. Advertising
expense for the period from August 3, 1998 to December 31, 1998 and the year
ended December 31, 1999 was $0 and $272,000.
Accounting for stock compensation
The Company's stock-based compensation plan are accounted for in accordance
with Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for
Stock Issued to Employees" and complies with the disclosure provisions of
Statement of Financial Accounting Standards 123 ("SFAS No. 123"), "Accounting
for Stock-Based Compensation." Under APB No. 25, compensation expense is based
on the difference, if any, on the date of the grant, between the estimated fair
value of the Company's stock and the exercise price of options to purchase that
stock.
Comprehensive income
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 requires that
all items recognized under accounting standards as components of comprehensive
income be reported in an annual financial statement that is displayed with the
same prominence as other annual financial statements. The Company has no
comprehensive income component other than net loss.
Net loss per share
Basic net loss per share is computed by dividing net loss available to common
stockholders by the weighted average number of vested common shares outstanding
for the period. Diluted net loss per share is computed giving effect to all
dilutive potential common stock, including options, non vested common stock,
preferred stock and common stock warrants. Options, non vested common stock,
preferred stock and common stock warrants were not included in the computation
of diluted net loss per share in the periods reported because the effect would
be antidilutive.
F-8
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Antidilutive securities not included in net loss per share calculation for
the periods:
<TABLE>
<CAPTION>
Period from Period from
August 3, August 3,
1998 1998 (date
(date of of
inception) inception)
to Year Ended to
December 31, December 31, December 31,
1998 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Non vested common stock............... 4,814,804 4,109,338 4,109,338
Common stock options.................. 496,720 4,521,490 4,521,490
Convertible Preferred Stock........... 2,023,077 13,195,849 13,195,849
Common stock warrants................. -- 215,000 215,000
--------- ---------- ----------
7,334,601 22,041,677 22,041,677
========= ========== ==========
</TABLE>
Pro forma net loss per share (unaudited)
Pro forma net loss per share for the year ended December 31, 1999 is computed
using the weighted average number of common stock outstanding, including the
pro forma effects of the automatic conversion of the Company's Series A, Series
B and Series C convertible preferred stock into shares of the Company's
common stock upon the closing of the Company's initial public offering
(see Note 8--Subsequent Events) as if such conversion occurred on January 1,
1999, or at the date of original issuance, if later. Pro forma common
equivalent shares, composed of unvested restricted common stock and incremental
common shares issuable upon the exercise of stock options, are not included in
pro forma diluted net loss per share because they would be anti-dilutive.
Pro forma (unaudited)
Upon the closing of the Company's initial public offering, it is contemplated
that the outstanding shares of Series A, Series B, Series C and Series D
convertible preferred stock will convert into 21,000,745 shares of common stock
(see Note 8--Subsequent Events). The pro forma column reflects the receipt of
net proceeds of $15.6 million upon the issuance and sale of 1,418,182 shares of
Series D preferred stock and the effect of the conversion of Series A, Series
B, Series C and Series D into common stock.
Recent accounting pronouncement
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities and will be adopted
in the year 2000. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The Company does not expect the adoption of SFAS 133 to have a
material impact on its financial statements.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-1, "Software for Internal Use," which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP No. 98-1 is effective for financial statements
for fiscal years beginning after December 15, 1998. The adoption of this SOP
did not have any significant effect on the Company's financial statements.
F-9
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment comprise (in thousands):
<TABLE>
<CAPTION>
December
31,
------------
1998 1999
---- ------
<S> <C> <C>
Computer equipment................................................ $31 $3,024
Communication equipment........................................... 11 63
Leasehold improvements............................................ -- 69
Furniture and fixtures............................................ 30 641
--- ------
72 3,797
Less: Accumulated depreciation and amortization................... (3) (458)
--- ------
$69 $3,339
=== ======
</TABLE>
NOTE 3--INCOME TAXES:
Deferred tax assets and liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
----- ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................... $ 24 $5,231
Accrued employee benefits...................................... 14 52
Start-up costs................................................. 95 --
Other.......................................................... 5 (35)
----- ------
Total deferred tax assets.................................... 138 5,248
Valuation allowance.............................................. (138) (5,248)
----- ------
$ -- $ --
===== ======
</TABLE>
At December 31, 1998 and 1999, the Company had approximately $150,000 and
$13,132,000 of California and federal net operating loss carryforwards which
expire between 2005 to 2019, if not utilized beforehand. Under the Tax Reform
Act of 1986, the amounts of and benefits from net operating loss carryforwards
may be impaired or limited in certain circumstances. Events which cause
limitations in the amount of net operating losses that the Company may utilize
in any one year include, but are not limited to, a cumulative ownership change
of more than 50%, as defined, in any three year period.
Due to uncertainty of realizing the benefits of the deferred tax assets, the
Company has provided a valuation allowance against the net deferred tax assets.
F-10
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The difference between the Company's effective income tax rate and the
federal statutory rate is as follows (in thousands):
<TABLE>
<CAPTION>
Period from Period from
August 13, August 13,
1998 (date of 1998 (date of
inception) to Year Ended inception) to
December 31, December 31, December 31,
1998 1999 1999
------------- ------------ -------------
<S> <C> <C> <C>
Statutory tax benefit................ $(110) $(6,177) $(6,287)
Permanent differences--non-deductible
expenses............................ -- 1,674 1,674
State taxes, net of federal tax
benefit............................. (18) (995) (1,013)
Change in valuation allowance........ 138 5,110 5,248
Other................................ (10) 388 378
----- ------- -------
Net tax provision.................... $ -- $ -- $ --
===== ======= =======
</TABLE>
NOTE 4--COMMITMENTS:
Operating lease
The Company leases its facilities under non-cancelable operating lease
agreements expiring through October 2002. Under the terms of the lease, the
Company is responsible for paying common area expenses, as incurred by the
lessor. Future minimum lease payments under the non-cancelable lease as of
December 31, 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
2000............................................................ $1,679
2001............................................................ 606
2002............................................................ 102
------
Total......................................................... $2,387
======
</TABLE>
Rent expense under the operating lease totaled $19,000 and $616,000 for the
period ending December 31, 1998 and the year ended December 31, 1999.
Patent Licensing
The Company received a letter from an individual advising that his patent may
cover certain aspects of the Company's service and requesting the Company to
consider licensing the patent. The Company is currently evaluating the patent.
However, based on the Company's preliminary review, management does not believe
that the Company requires a license under the patent to operate its service.
F-11
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 5--STOCKHOLDERS' EQUITY:
Convertible Preferred Stock
The convertible preferred stock at December 31, 1999 comprises:
<TABLE>
<CAPTION>
Number of
Number of Shares Liquidation
Shares Issued and Value
Authorized Outstanding Per Share
---------- ----------- -----------
<S> <C> <C> <C>
Series A..................................... 2,023,077 2,023,077 $0.65
Series B..................................... 4,363,637 4,363,637 $2.75
Series C..................................... 7,648,286 6,809,135 $7.45
---------- ----------
14,035,000 13,195,849
========== ==========
</TABLE>
The rights, preferences and privileges with respect to the Preferred Stock
are as follows:
Dividends
Holders of Series A, Series B and Series C Preferred Stock, in preference to
the holders of Common Stock of the Corporation, shall be entitled to receive,
when and as declared by the Board of Directors, but only out of funds that are
legally available therefor, cash dividends at the rate of eight percent (8%) of
the "Original Issue Price" per annum on each outstanding share of Series A,
Series B and Series C Preferred Stock (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares). Such dividends shall be payable only when, as and if declared by the
Board of Directors and shall be non-cumulative. No dividends have been declared
as of December 31, 1999.
Liquidation preference
Upon any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary, before any distribution or payment shall be made to
the holders of any Common Stock, the holders of Series A, Series B and Series C
Preferred Stock shall be entitled to receive an amount per share equal to the
Original Issue Price of $0.65, $2.75 and $7.45 plus all declared and unpaid
dividends. In the event funds are insufficient to make a complete distribution
to holders of Preferred Stock as described above, the remaining assets will be
distributed to the holders of Common Stock ratably among such holders of Common
Stock.
Voting rights
The holders of Preferred Stock have one vote for each share of Common Stock
into which such Preferred Stock may be converted.
Conversion
Each share of Preferred Stock is convertible at any time into shares of
Common Stock at the option of the holder, subject to adjustment for dilution.
Such conversion is automatic upon the earlier of the date specified by vote,
written consent or agreement of a majority of the holders of such series then
outstanding or immediately upon the closing date of a public offering of the
Company's Common Stock for which the aggregate net proceeds exceed $10,000,000.
The conversion ratio as of December 31, 1998 and 1999 is 2:1 for Series A and B
Preferred Stock after giving retroactive effect to the stock split effected in
1999. The conversion ratios as of December 31, 1999 is 1:1 for Series C
Preferred Stock. The conversion ratio of Series A, B and C Preferred Stock may
be adjusted under circumstances described in the Company's Restated Articles of
Incorporation.
F-12
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Common Stock
The Company is authorized to issue 45,000,000 shares of Common Stock as of
December 31, 1999. A portion of the outstanding shares of common stock are
subject to repurchase by the Company over a four year period. As of December
31, 1998 and 1999, there were 4,814,804 shares of nonvested stock issued
pursuant to a stock purchase agreement with the Company's founder and 4,109,338
shares of stock issued under early exercises of options all of which were
subject to repurchase by the Company. The repurchase rights with respect to the
Company's agreement with the founder lapse over 36 months and the repurchase
rights with respect to the early exercises of options lapse over the original
vesting period of the options.
Incentive stock plan
In November 1998, the Company adopted the 1998 Stock Option Plan (the "Plan")
under which the Company may grant stock options for Common Stock to employees,
consultants and outside investors. The Board of Directors has the authority to
determine to whom options will be granted, the number of shares, the term and
exercise price (which cannot be less than fair market value at date of grant
for incentive stock options). If an employee owns stock representing more than
10% of the outstanding shares, the price of each share shall be at least 110%
of fair market value, as determined by the Board of Directors. Options granted
generally vest over four years. The Company has reserved 8,000,000 shares of
Common Stock for issuance under the Plan.
A summary of activity under the Plan is as follows:
<TABLE>
<CAPTION>
Number of Weighted
Number of Shares Average
Shares Issued and Exercise Aggregate
Authorized Outstanding Price Price
---------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Shares reserved.................. 1,980,000 -- -- $ --
Options granted.................. (496,720) 496,720 $0.0325 16,143
---------- ---------- ------- ----------
Balances, December 31, 1998...... 1,483,280 496,720 $0.0325 16,143
Shares reserved.................. 6,020,000 -- --
Options granted.................. (5,294,990) 5,294,990 $0.6278 3,324,195
Options exercised................ (1,200,220) $0.4149 (497,971)
Options cancelled................ 70,000 (70,000) $0.0325 (2,275)
---------- ---------- ------- ----------
Balances, December 31, 1999...... 2,278,290 4,521,490 $0.6281 $2,840,092
</TABLE>
For financial reporting purposes, the Company has determined that the
estimated value of common stock, based on the expected price per share of the
common stock in the company's initial public offering, was in excess of the
exercise price, which was considered to be the fair market value as of the date
of grant for 496,720 options issued in 1998 and 5,294,990 options issued in the
year ended December 31, 1999. In connection with the grants of such options,
the Company has recorded deferred compensation of $129,000 in the period from
August 3, 1998 to December 31, 1998 and $17,818,000 during the year ended
December 31, 1999. Deferred stock compensation will be amortized over the
vesting period which is generally 48 months from the date of grant; $2,568,000
was expensed in the year ended December 31, 1999. Future amortization based on
options granted through December 31, 1999 is expected to be $9,337,000,
$3,866,000, $1,766,000 and $410,000 in the years 2000, 2001, 2002 and 2003.
F-13
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options
------------------------------------------- Currently
Exercisable
Weighted Average Weighted -----------
Number Remaining Average Number
Range of Exercise Price Outstanding Contractual Life Exercise Price Outstanding
- ----------------------- ----------- ---------------- -------------- -----------
<S> <C> <C> <C> <C>
$ 0.0325................ 837,500 9.13 $0.0325 51,041
$ 0.1375................ 1,477,980 9.44 $0.1375 66,666
$ 0.5000................ 258,000 9.63 $0.5000 --
$ 0.8000................ 447,750 9.71 $0.8000 --
$ 1.0000................ 625,850 9.77 $1.0000 --
$1.250 - $1.750......... 555,960 9.87 $1.4728 2,500
$2.000 - $2.250......... 318,450 9.98 $2.1288 6,250
--------- -------
4,521,490 126,457
========= =======
</TABLE>
Fair value disclosures
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation." Had compensation cost for the plan been determined based on the
fair value at grant date for all awards consistent with the provisions of SFAS
No. 123, the impact on the Company's financial statements would be as follows:
<TABLE>
<CAPTION>
Period from
August 13, Period from
1998 (date August 13,
of 1998 (date
inception) of
to Year Ended inception)
December 31, December 31, to December
1998 1999 31, 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net loss:
As reported......................... $(314,000) $(17,429,000) $(17,743,000)
Pro forma........................... $(314,000) $(17,489,000) $(17,803,000)
Basic and diluted net loss per share:
As reported......................... $ (0.12) $ (4.08) $ (4.71)
Pro forma........................... $ (0.12) $ (4.09) $ (4.73)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following weighted average assumptions:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Risk-free interest rate....................................... 4.38% 5.35%
Expected life 4 years 4 years
Expected dividends............................................ $ -- $ --
</TABLE>
The weighted average per share fair value of common stock options granted
during 1998 and 1999 was $0.02 and $3.55.
Options granted to consultants are valued using the Black-Scholes method and
this value is charged against income over the vesting period of the options.
F-14
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Warrants
In connection with long-term marketing agreements entered into in December
1999, the Company issued two warrants to purchase up to an aggregate of 495,000
shares of common stock. A total of 140,000 shares subject to one of the
warrants was immediately exercisable at an exercise price of $7.45 and a total
of 75,000 shares subject to the other warrant was immediately exercisable at an
exercise price of $11.00. An additional 35,000 shares subject to the first
warrant will become exercisable on December 31, 2000 or earlier if certain
volume targets are met. The remaining portions of the warrants will be
exercisable when the holders meet stated volume targets for business conducted
over the noosh.com service at exercise prices ranging from $7.45 per share to
the fair market value of the common stock at the date the volume targets are
met.
The Company valued the portions of the warrants which have no performance
requirements associated with their exercise on the date of issuance using the
Black-Scholes method with the following assumptions: dividend yield at 0%;
expected warrant term of 3 years; risk free interest rate of 6.29% and expected
volatility of 60%. The fair value of those portions was $1,468,000. The
remaining warrants will be valued and charged to expense when it is probable
that the performance targets will be met.
NOTE 6--UNAUDITED PRO FORMA LOSS PER SHARE AND PRO FORMA SHAREHOLDERS' EQUITY:
Pro forma basic net loss per share has been computed as described in Note 1
and also gives effect to common equivalent stock from preferred shares that
will convert upon the closing of the Company's initial public offering (using
the as-if-converted-method).
A reconciliation of the numerator and denominator used in the calculation of
pro forma basic and diluted net loss per share follow:
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Pro forma net loss per share, basic and diluted:
Net loss....................................................... $(17,429,000)
Shares used in computing net loss per share, basic and
diluted....................................................... 4,275,090
Adjustment to reflect the effect of the assumed conversion of
convertible preferred stock................................... (11,081,828)
------------
Shares used in computing pro forma net loss per share, basic
and diluted................................................... 15,356,918
Pro forma net loss per share, basic and diluted................ $ (1.13)
</TABLE>
If the offering contemplated by this Prospectus is consummated as
contemplated, all of the convertible preferred stock outstanding as of the
closing date will be converted into an aggregate of approximately 19,582,563
shares of common stock based on the shares of convertible preferred stock
outstanding at December 31, 1999. Unaudited pro forma shareholders' equity at
December 31, 1999, as adjusted for the conversion of preferred stock, is
disclosed on the balance sheet.
F-15
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 7--401(k) SAVINGS PLAN:
The Company established a 401(k) Savings Plan (the "Plan") that covers
substantially all employees. Under the Plan, employees are permitted to
contribute a portion of gross compensation not to exceed standard limitations
provided by the Internal Revenue Service. The Company maintains the right to
match employee contributions, but for the period from August 3, 1998 (date of
inception) to December 31, 1998, for the year ended December 31, 1999 and for
the period from August 3, 1998 (date of inception) to December 31, 1999, no
Company matching contributions were made.
NOTE 8--SUBSEQUENT EVENTS:
Initial public offering
In January 2000, the Company's Board of Directors authorized the Company to
file a registration statement with the Securities and Exchange Commission for
the purpose of an initial public offering of the Company's common stock. Upon
the completion of this offering, if the per share price in the offering is at
least $11.00 and the gross proceeds are at least $20,000,000, the Company's
preferred stock will automatically be converted into common stock.
Reincorporation
In January 2000, the Company's Board of Directors approved reincorporation of
the Company in Delaware. The stockholders approved the reincorporation in March
2000 and the Company reincorporated in Delaware in March 2000.
Warrants
In connection with a long-term marketing agreement entered into in January
2000, the Company has issued warrants to purchase up to an aggregate of
2,780,159 shares of common stock at an exercise price of $11.00 per share, of
which warrants to purchase 961,309 shares were immediately exercisable and the
remaining warrants will be exercisable in the future based on the holder
meeting stated volume targets for business conducted over the noosh.com
service.
In connection with a print buyer user agreement entered into in January 2000,
the Company has issued a warrant to purchase up to 50,000 shares of common
stock at an exercise price of $11.00 per share, all shares of which will be
exercisable in the future based on the holder meeting a stated volume target
for business conducted over the noosh.com service.
In connection with a print buyer agreement entered into in February 2000, the
Company has issued a warrant to purchase up to 10,000 shares of common stock at
an exercise price equivalent to the initial public offering price per share.
All shares subject to this warrant will be exercisable when the print buyer
meets a stated target for business conducted over the noosh.com service.
In connection with a print vendor agreement entered into in February 2000,
the Company has issued a warrant to purchase up to 100,000 shares of common
stock which will be exercisable in the future based on the holder meeting
stated volume targets for business conducted over the noosh.com service at
exercise prices ranging from the initial public offering price to the fair
market value of the common stock at the date the volume targets are met.
F-16
<PAGE>
NOOSH, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Amended and Restated Certificate of Incorporation
In January 2000, the Company amended and restated its Certificate of
Incorporation to increase the authorized number of shares of preferred stock to
15,200,000 shares, of which 6,809,135 were designated as Series C and 2,000,000
as Series D.
Series D Preferred Financing
In January 2000, the Company completed the closing of the Series D preferred
stock financing. The Company raised $15.6 million and issued 1,418,182 shares
of Series D preferred stock. The Series D preferred stock has substaintially
the same preferences as the Series A, B and C preferred stock with a
liquidation value of $11.00 per share plus all declared and unpaid dividends.
The Series D preferred stock is convertible into common stock at a conversion
ratio of 1:1.
Employee Stock Purchase Plan
In January 2000, the Company's Board of Directors adopted the 2000 Employee
Stock Purchase Plan under which eligible employees will be able to purchase
common stock at a discount price in periodic offerings. The purchase plan will
commence on the effective date of the offering.
A total of 600,000 shares of common stock have been authorized for issuance
under the 2000 purchase plan.
Non-Employee Directors' Stock Option Plan
In January 2000, the Company's Board of Directors adopted the 2000 Non-
Employee Directors' Stock Option Plan under which non-employee directors will
automatically be granted options to purchase shares of common stock on the
effective date of the offering and on each annual stockholders' meeting,
beginning with the annual stockholders meeting in 2001.
A total of 350,000 shares of common stock have been authorized for issuance
under the 2000 Non-Employee Directors' Stock Option Plan.
2000 Equity Incentive Plan
In January 2000, the Company's Board of Directors adopted the 2000 Equity
Incentive Plan under which 6,000,000 shares of common stock have been reserved
for issuance of options to employees, directors and consultants.
The 2000 Equity Incentive Plan will be effective on the effective date of the
offering at which time no further option grants will be made under the 1998
Equity Incentive Plan.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Note Regarding Forward-Looking Statements................................ 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations .......................................................... 21
Business................................................................. 27
Management............................................................... 41
Related Party Transactions............................................... 54
Principal Stockholders................................................... 56
Description of Capital Stock ............................................ 58
Shares Eligible for Future Sale.......................................... 62
Underwriting............................................................. 64
Validity of Common Stock................................................. 66
Experts.................................................................. 66
Additional Information................................................... 66
Index to Financial Statements............................................ F-1
</TABLE>
--------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or
subscription.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,000,000 Shares
NOOSH, Inc.
Common Stock
--------------
[NOOSH, INC. LOGO APPEARS HERE]
--------------
Goldman, Sachs & Co.
Robertson Stephens
Banc of America Securities LLC
PaineWebber Incorporated
E*OFFERING
Representatives of the Underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by us in connection with the sale of the
common stock being registered. All the amounts shown are estimates except for
the registration fee, the NASD filing fee and the Nasdaq National Market
application fee.
<TABLE>
<S> <C>
Registration fee................................................. $ 15,788
NASD filing fee.................................................. 6,480
Nasdaq National Market application fee........................... 95,000
Blue sky qualification fee and expenses.......................... 20,000
Printing and engraving expenses.................................. 250,000
Legal fees and expenses.......................................... 500,000
Accounting fees and expenses..................................... 250,000
Transfer agent and registrar fees................................ 15,000
Miscellaneous.................................................... 47,738
----------
Total............................................................ $1,200,000
==========
</TABLE>
Item 14. Indemnification of Officers and Directors.
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to
us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability for:
. any breach of duty of loyalty to us or to our stockholders;
. acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
. unlawful payment of dividends or unlawful stock repurchases or redemptions;
or
. any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and officers and may indemnify our other
employees and agents to the fullest extent permitted by Delaware law. We
believe that indemnification under our amended and restated certificate of
incorporation covers negligence and gross negligence on the part of
indemnified parties.
We intend to enter into indemnification agreements with each of our
directors and executive officers. These agreements, among other things,
require us to indemnify each director and executive officer for some expenses
including attorneys' fees, judgments, fines and settlement amounts incurred by
any of these persons in any action or proceeding, including any action by or
in the right of NOOSH, arising out of these persons' services as our director
or executive officer, any subsidiary of ours or any other company or
enterprise to which the person provides services at our request.
The underwriting agreement will provide for indemnification by the
underwriters of NOOSH, our directors, our officers who sign the registration
statement, and our controlling persons for some liabilities, including
liabilities arising under the securities act.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
Since inception, we have sold and issued the following unregistered
securities:
(1) From August 15, 1998 to February 15, 2000, we granted stock options
to purchase 7,408,185 shares of the our common stock to employees,
consultants and directors pursuant to our 1998 equity incentive plan. Of
these stock options, 73,100 shares have been cancelled without being
exercised, 3,187,510 shares have been exercised, 0 have been repurchased
and 4,147,575 shares remain outstanding.
(2) On August 15, 1998, we issued an aggregate of 40,000 shares of common
stock to Cooley Godward LLP at $0.00125 per share for an aggregate purchase
price of $50.
(3) In August 1998 through September 1999, we issued an aggregate of
8,000,000 shares of common stock to Ofer Ben-Shachar at $0.00125 per share
for an aggregate purchase price of $10,000.
(4) In November 1998, we issued an aggregate of 2,000,000 shares of
Series A preferred stock to one accredited trust, two accredited
partnerships and eight accredited individuals at $0.65 per share for an
aggregate purchase price of $1,300,000. Shares of Series A preferred stock
are convertible into shares of common stock at the rate of two shares of
common stock for each share of Series A preferred stock owned.
(5) In December 1998, we issued an aggregate of 23,077 shares of Series A
preferred stock to one accredited individual at $0.65 per share for an
aggregate purchase of $15,000. Shares of Series A preferred stock are
convertible into shares of common stock at the rate of two shares of common
stock for each share of Series A preferred stock owned.
(6) In January 1999 through March 1999, we issued an aggregate of 76,986
shares of common stock to four consultants at $0.325 per share for an
aggregate purchase price of $2,502.
(7) On April 26, 1999, we issued an aggregate of 4,363,637 shares of
Series B preferred stock to three accredited trusts, eleven accredited
partnerships and eight accredited individuals at $2.75 per share for an
aggregate purchase price of $12,000,002. Shares of Series B preferred stock
are convertible into shares of common stock at the rate of two shares of
common stock for each share of Series B preferred stock owned.
(8) On September 15, 1999, we issued an aggregate of 13,216 shares of
common stock to six consultants at $0.80 per share for an aggregate
purchase price of $10,573.
(9) On October 8, 1999, we issued an aggregate of 11,609 shares of common
stock to eight consultants at $1.00 per share for an aggregate purchase
price of $11,609.
(10) On October 15, 1999, we issued an aggregate of 19,000 shares of
common stock to one employee as consideration with an aggregate fair market
value of $19,000 under a technology transfer agreement.
(11) On November 1, 1999, we issued an aggregate of 5,727 shares of
common stock to two consultants at $1.25 per share for an aggregate
purchase price of $7,159.
(12) In November 1999, we issued an aggregate of 6,809,135 shares of
Series C preferred stock to two accredited trusts, twenty-one accredited
partnerships, one institutional investor and fifteen accredited individuals
at $7.45 per share for an aggregate purchase price of $50,728,056. Shares
of Series C preferred stock are convertible into shares of common stock at
the rate of one share of common stock for each share of Series C preferred
stock owned.
(13) On November 15, 1999, we issued an aggregate of 33,865 shares of
common stock to four consultants at $1.50 per share for an aggregate
purchase price of $50,798.
(14) On November 30, 1999, we issued an aggregate of 847 shares of common
stock to three consultants at $1.75 per share for an aggregate purchase
price of $1,482.
II-2
<PAGE>
(15) On December 30, 1999, we issued two warrants to two print vendors to
purchase an aggregate of 495,000 shares of common stock. A portion of the
first warrant, for a total of 140,000 shares, became immediately
exercisable upon issuance at an exercise price of $7.45. A portion of the
second warrant, for a total of 75,000 shares, became immediately
exercisable upon issuance at an exercise price of $11.00. The remaining
portions of the warrants are exercisable when the print vendors meet stated
volume targets for business conducted over our service at exercise prices
ranging from $7.45 per share to the fair market value of our common stock
on the date the volume targets are met.
(16) On December 31, 1999, we issued an aggregate of 13,203 shares of
common stock to seven consultants for an aggregate purchase price of
$29,707.
(17) On January 14, 2000, we issued one warrant to Bank of America
Technology and Operations, Inc. to purchase an aggregate of 50,000 shares
of common stock at an exercise price of $11.00 per share.
(18) On January 25, 2000 we issued an aggregate of 1,418,182 shares of
Series D preferred stock to R.R. Donnelley & Sons Company and two
accredited individuals at $11.00 per share for a total of $15,600,002.
Shares of Series D preferred stock are convertible into shares of common
stock at the rate of one share of common stock for each share of Series D
preferred stock owned. In addition, we issued two warrants to R.R.
Donnelley & Sons Company to purchase an aggregate of 2,780,159 shares of
common stock at an exercise price of $11.00 per share. A total of
961,309 shares of common stock are immediately exercisable under the
warrants. The remaining shares under the warrants are exercisable when the
holder meets stated volume targets for business conducted over our service.
(19) On February 4, 2000, we issued one warrant to ColorGraphics, a print
vendor, to purchase an aggregate of 100,000 shares of common stock. The
warrant is first exercisable on the one year anniversary of the date of
grant and only to the extent ColorGraphics meets stated volume targets for
business conducted over our service. The exercise price for the warrant
ranges from the initial public offering price to the fair market value of
our common stock as of the end of the calendar quarter during which the
stated volume targets are met.
(20) On February 4, 2000, we issued an aggregate of 17,350 shares of
common stock to two consultants for an aggregate purchase price of
$138,775.
(21) On February 14, 2000, we issued one warrant to J. Crew Group, Inc.,
a print buyer, to purchase an aggregate of 10,000 shares of common stock.
The warrant is first exercisable on the one year anniversary of the date of
grant and only to the extent J. Crew meets a target for business conducted
over our service. The exercise price for the warrant is equal to the
initial public offering price.
With respect to the grant of stock options described in paragraph (1), an
exemption from registration was unnecessary in that none of the transactions
involved a "sale" of securities as this term is used in Section 2(3) of the
Securities Act. The sale and issuance of securities and the exercise of
options described in paragraphs (1), (6), (8), (9), (11), (13), (14) and (16)
above were deemed to be exempt from registration under the Securities Act by
virtue of Rule 701 promulgated thereunder in that they were offered and sold
either pursuant to a written compensatory benefit plan or pursuant to a
written contract relating to compensation, as provided in Rule 701. The sale
and issuance of securities described in paragraphs (2), (3), (4), (5), (7),
(10), (12), (15), (17), (18), (19), (20) and (21) above were deemed to be
exempt from registration under the Securities Act by virtue of Rule 4(2) or
Regulation D promulgated thereunder.
II-3
<PAGE>
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with
any subsequent sales of any of these securities. All recipients either
received adequate information about NOOSH or had access, through employment or
other relationships, to such information.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1++ Restated Certificate of Incorporation of Registrant, as currently in
effect.
3.2** Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made pursuant
to this Registration Statement.
3.3** Bylaws of the Registrant as currently in effect.
4.1 Specimen Common Stock Certificate.
4.2++ Amended and Restated Investor Rights Agreement dated January 25, 2000
between Registrant and holders of the Registrant's Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock.
5.1 Opinion of Cooley Godward LLP.
10.1** Form of Indemnity Agreement.
10.2** 1998 Equity Incentive Plan and related documents.
10.3** 2000 Equity Incentive Plan and related documents.
10.4** 2000 Employee Stock Purchase Plan.
10.5** 2000 Non-Employee Directors Stock Option Plan and related documents.
10.6** Lease Agreement, dated April 1, 1999, between Registrant and Syntex
(U.S.A.) Inc.
10.7** Sublease Agreement, dated November 1, 1999, between the Registrant
and Xerox Corporation.
10.8** Promissory Note, dated April 15, 1999, between Registrant and David
Hannebrink.
10.9++ Promissory Note, dated October 8, 1999, between Registrant and Hagi
Schwartz.
10.10** Promissory Note, dated November 1, 1999, between Registrant and David
Hannebrink.
10.11 Promissory Note, dated January 3, 2000, between Registrant and Kevin
Akeroyd.
10.12 Promissory Note, dated January 3, 2000, between Registrant and Ray
Martinelli.
10.13 Promissory Note, dated January 3, 2000, between Registrant and
Timothy Moore.
10.14 Promissory Note, dated January 15, 2000, between Registrant and
Steven Baloff.
10.15 Promissory Note, dated January 15, 2000, between Registrant and David
Hannebrink.
10.16 Promissory Note, dated January 15, 2000 between Registrant and Robert
Shaw.
10.17 Promissory Note, dated February 4, 2000 between Registrant and Hagi
Schwartz.
10.18 Internet Services and Colocation Agreement, dated as of July 20,
1999, between the Registrant and Abovenet.
10.19**+ Co-Development and Marketing Agreement, dated as of January 25, 2000,
between the Registrant and R.R. Donnelley & Sons Company.
10.20**+ Warrant for the Purchase of 225,000 shares of Common Stock issued to
Consolidated Graphics, Inc. dated December 30, 1999.
10.21**+ Warrant for the Purchase of 270,000 shares of Common Stock issued to
Wallace Computer Services, Inc. dated December 30, 1999.
10.22**+ Warrant for the Purchase of 50,000 shares of Common Stock issued to
Bank of America Technology and Operations, Inc. dated January 14,
2000.
10.23 Warrant for the Purchase of 2,430,158 shares of Common Stock issued
to R.R. Donnelley & Sons Company dated January 25, 2000.
10.24 Warrant for the Purchase of 350,000 shares of Common Stock issued to
R.R. Donnelley & Sons Company dated January 25, 2000.
23.1 Consent of Independent Accountants.
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
24.1** Power of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment has been requested for a portion of this exhibit.
++ Replaces previously filed exhibit.
(b) Financial Statement Schedules.
Schedules are omitted because they are not applicable, or because the
information is included in the Financial Statements or the Notes thereto.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of this prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) That for purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 15
of this Registration Statement or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against these liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by a director, officer, or
controlling person in connection with the securities being registered, 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 of whether the indemnification by it is against
public policy as expressed in the Securities Act of 1933, and will be
governed by the final adjudication of this issue.
(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in the denomination and registered in
the names required by the Underwriters to permit prompt delivery to each
purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this Amendment No. 2 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of Santa
Clara, State of California, on the 24th day of March, 2000.
NOOSH, Inc.
*
By: _________________________________
Ofer Ben-Shachar
President, Chief Executive
Officer and Chairman
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
* President, Chief Executive March 24, 2000
______________________________________ Officer and Chairman of
Ofer Ben-Shachar the Board of Directors
(principal executive
officer)
/s/ Hagi Schwartz Vice President and Chief March 24, 2000
______________________________________ Financial Officer
Hagi Schwartz (principal financial and
accounting officer)
* Director March 24, 2000
______________________________________
Steven Baloff
* Director March 24, 2000
______________________________________
Edward Barr
* Director March 24, 2000
______________________________________
Arthur Patterson
* Director March 24, 2000
______________________________________
Kathy Levinson
</TABLE>
/s/ Hagi Schwartz
*By: ____________________________
Name:
Hagi Schwartz
Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1++ Restated Certificate of Incorporation of Registrant, as currently in
effect.
3.2** Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made pursuant
to this Registration Statement.
3.3** Bylaws of the Registrant as currently in effect.
4.1 Specimen Common Stock Certificate.
4.2++ Amended and Restated Investor Rights Agreement dated January 25, 2000
between Registrant and holders of the Registrant's Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock.
5.1 Opinion of Cooley Godward LLP.
10.1** Form of Indemnity Agreement.
10.2** 1998 Equity Incentive Plan and related documents.
10.3** 2000 Equity Incentive Plan and related documents.
10.4** 2000 Employee Stock Purchase Plan.
10.5** 2000 Non-Employee Directors Stock Option Plan and related documents.
10.6** Lease Agreement, dated April 1, 1999, between Registrant and Syntex
(U.S.A.) Inc.
10.7** Sublease Agreement, dated November 1, 1999, between the Registrant
and Xerox Corporation.
10.8** Promissory Note, dated April 15, 1999, between Registrant and David
Hannebrink.
10.9++ Promissory Note, dated October 8, 1999, between Registrant and Hagi
Schwartz.
10.10** Promissory Note, dated November 1, 1999, between Registrant and David
Hannebrink.
10.11 Promissory Note, dated January 3, 2000, between Registrant and Kevin
Akeroyd.
10.12 Promissory Note, dated January 3, 2000, between Registrant and Ray
Martinelli.
10.13 Promissory Note, dated January 3, 2000, between Registrant and
Timothy Moore.
10.14 Promissory Note, dated January 15, 2000, between Registrant and
Steven Baloff.
10.15 Promissory Note, dated January 15, 2000, between Registrant and David
Hannebrink.
10.16 Promissory Note, dated January 15, 2000 between Registrant and Robert
Shaw.
10.17 Promissory Note, dated February 4, 2000 between Registrant and Hagi
Schwartz.
10.18 Internet Services and Colocation Agreement, dated as of July 20,
1999, between the Registrant and Abovenet.
10.19**+ Co-Development and Marketing Agreement, dated as of January 25, 2000,
between the Registrant and R.R. Donnelley & Sons Company.
10.20**+ Warrant for the Purchase of 225,000 shares of Common Stock issued to
Consolidated Graphics, Inc. dated December 30, 1999.
10.21**+ Warrant for the Purchase of 270,000 shares of Common Stock issued to
Wallace Computer Services, Inc. dated December 30, 1999.
10.22**+ Warrant for the Purchase of 50,000 shares of Common Stock issued to
Bank of America Technology and Operations, Inc. dated January 14,
2000.
10.23 Warrant for the Purchase of 2,430,158 shares of Common Stock issued
to R.R. Donnelley & Sons Company dated January 25, 2000.
10.24 Warrant for the Purchase of 350,000 shares of Common Stock issued to
R.R. Donnelley & Sons Company dated January 25, 2000.
23.1 Consent of Independent Accountants.
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1** Power of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment has been requested for a portion of this exhibit.
++ Replaces previously filed exhibit.
<PAGE>
EXHIBIT 1.1
Noosh, Inc.
Common Stock
--------
Underwriting Agreement
----------------------
___________, 2000
Goldman, Sachs & Co.,
BancBoston Roberston Stephens Inc.
Banc of America Securities LLC
PaineWebber Incorporated
E*Offering Corp.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York, 10004.
Ladies and Gentlemen:
Noosh, 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 ("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").
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. 333-....) (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 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, to the
Company's knowledge, 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
<PAGE>
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 Goldman, Sachs & Co. 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 Goldman, Sachs & Co. 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 material 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, 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 or long-term debt of the
Company or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, other than option grants and
exercises under the Company's stock option plans and as set forth or
contemplated in the Prospectus;
(e) The Company and its subsidiaries own no 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 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
<PAGE>
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 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 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
material agreement or material 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 to
its knowledge 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 or by the National Association
of Securities Dealers, Inc. ("NASD") 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 material agreement or material 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" (other than
information furnished in writing to the Company by an Underwriter
<PAGE>
through Goldman, Sachs & Co. expressly for use therein), insofar as they purport
to describe the provisions of the documents referred to 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 on the current or future consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries; 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) PricewaterhouseCoopers 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;
(o) The Company has reviewed its operations and that of its subsidiaries
to evaluate the extent to which the business or operations of the Company or any
of its subsidiaries 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 on the
general affairs, management, the current or future consolidated financial
position, business prospects, stockholders' equity or results of operations of
the Company and its subsidiaries or has resulted or will result in any material
loss or interference with the Company's business or operations ("Material
Adverse Effect"). 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;
(p) Each of the Company and its subsidiaries owns, or possesses adequate
rights to use, all material trademarks, service marks, trade names, trademark
registrations, service mark registrations, domain names and copyrights necessary
for the conduct of its business as described in the Prospectus and has no reason
to believe that the conduct of its business as described in the Prospectus will
conflict with, and has not received any notice of any claim of conflict with any
such rights or others except as would not have a Material Adverse Effect; and,
to the best of the Company's knowledge, neither the Company nor any of its
subsidiaries has infringed or is infringing any trademarks, services marks,
trade names, trademark registrations, service mark registrations, domain names
or copyrights, which infringement could reasonably be expected to have a
Material Adverse Effect; and
(q) Each of the Company and its subsidiaries owns, or possesses adequate
rights to use, all material patents necessary for the conduct of its business as
described in the Prospectus; to the knowledge of the Company, no valid Unites
States patent is or would be infringed by the conduct of the business of the
Company and its subsidiaries by the Company and its subsidiaries as described in
the Prospectus, except as would not have a Material Adverse Effect; there are no
actions, suits or judicial proceedings pending relating to patents or
proprietary information to which the Company or
<PAGE>
any of its subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is subject, and, to the knowledge of the Company, no
actions, suits or judicial proceedings are threatened by governmental
authorities or, except as set forth in the Prospectus, others, in each case
except as would not have a Material Adverse Effect; except as set forth or
incorporated by reference in the Prospectus or as would not have a Material
Adverse Effect, the Company is not aware of any claim by others that the Company
or any of its subsidiaries is infringing or otherwise violating the patents or
other intellectual property of others and is not aware of any rights of third
parties to any of the Company's or its subsidiaries' intellectual property which
could adversely affect materially the use thereof by the Company or its
subsidiaries in the conduct of the Company's or its subsidiaries' business as
described in the Prospectus.
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 Goldman, Sachs & Co. may request upon at least forty-eight
hours' prior notice to the Company shall be delivered by or on behalf of
the Company to Goldman, Sachs & Co., 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 Goldman, Sachs & Co. 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
<PAGE>
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., New York City
time, on _______, 2000 or such other time and date as Goldman, Sachs & Co.
and the Company may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York time, on the date specified by
Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of
the Underwriters' election to purchase such Optional Shares, or such other
time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing. Such time and date for delivery of the Firm 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(j) hereof, will be delivered at the
offices of Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real,
Palo Alto, California 94306-2155 (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 3:00 p.m., Palo Alto time,
on the New York 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, "New York Business Day" shall mean each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York 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 reasonably 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
<PAGE>
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 2:00 P.M., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City 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 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 (i)
pursuant to employee stock option or stock purchase plans existing on, or
upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement and (ii) as consideration to
companies in connection with bona fide commercial strategic relationships
or acquisitions not primarily for equity financing purposes, provided that
all persons that are issued such securities shall enter into a lock-up
agreement for a period expiring on the date 180 days after the date of the
Prospectus in the form substantially to the effect set forth in this
Subsection 5(e) in form and substance satisfactory to you), without your
prior written consent;
(f) 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
<PAGE>
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;
(g) During a period of three 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 publicly available 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);
(h) 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";
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National
Market System ("NASDAQ");
(j) 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
(k) 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 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.
<PAGE>
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 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) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions, dated such Time of
Delivery, with respect to such 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) Cooley Godward 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 corporate power and authority 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 for "actual" under "Capitalization" and
"Description of Capital Stock", and all of the issued and
outstanding shares of capital stock of the Company (including the
Shares being delivered at such Time of Delivery) described
therein have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform in all
material respects to the description of the Stock contained in
the Prospectus;
(iii) The Company either has been duly qualified within the
United States 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 failure to be
so qualified in any such jurisdiction (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) To such counsel's knowledge and other than as set
forth in the Prospectus,, there are no legal (within the meaning
of Item 103 of Regulation S-K under the Act) or governmental
proceedings pending to which the Company is a
<PAGE>
party or of which any property of the Company 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 on the current or future consolidated
financial position, stockholders' equity or results of operations
of the Company; and, to such counsel's knowledge, no such
proceedings are overtly threatened by governmental authorities or
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 set forth 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 filed as an exhibit to the Registration
Statement, which such counsel believes constitutes the only such
agreements required to be filed as exhibits to the Registration
Statement, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any material violation of 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 their properties, except for the rules and regulations
of the NASD and state securities and blue sky laws, as to which
such counsel need express no opinion;
(ix) To such counsel's knowledge, 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 set forth in 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 or the
bylaws, rules and regulations of the NASD (as to which such
counsel need express no opinion) 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 summarize the
information called for with respect to such matters to the extent
required by the Act and the rules and regulations thereunder;
(xii) The Company is not an "investment company", as such
term is defined in the Investment Company Act; and
(xiii) 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, related schedules and other financial data 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; and such counsel does
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
<PAGE>
described in the Registration Statement or the Prospectus which
are not filed or described as required.
In addition, such counsel shall state the following: In
connection with the preparation of the Registration Statement and the
Prospectus, it has participated in conferences with officers and representatives
of the Company and with its certified public accountants, as well as with
representatives of the Underwriters and their counsel. At such conferences, the
contents of the Registration Statement and the Prospectus and related matters
were discussed. Such counsel has not independently verified, and accordingly,
except as set forth in subparagraphs (ii) and (x), is not confirming and assumes
responsibility for the accuracy or completeness of the statements contained in
the Registration Statement or the Prospectus. On the basis of the foregoing,
nothing has come to such counsel's attention that has caused it to believe (i)
that the Registration Statement (except as to the financial statements, related
schedules and other financial data therein, as to which such counsel need
express no belief) at the effective date 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 (ii) that the
Prospectus (except as to the financial statements, related schedules and other
financial data therein, as to which such counsel need express no opinion) as of
its date or at the Time of Delivery, contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(d) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City 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,
PricewaterhouseCoopers 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 1(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 1(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 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 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
<PAGE>
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities;
(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 or California 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
approved for quotation on NASDAQ;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from (i) each officer and director of the
Company and (ii) each stockholder of 1% or more of the outstanding capital
stock of the Company, 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 New York
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 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 Goldman, Sachs & Co. 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,
<PAGE>
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 Goldman, Sachs & Co. 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; the omission so to notify the indemnifying party shall
relieve it from liability which it may have to the indemnified party under such
subsection but 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) 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
<PAGE>
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 (d) 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 (d). 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 (d) 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 (d), 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 (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) 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 Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a 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
<PAGE>
"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 not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason (other than
the gross negligence or bad faith of the Underwriters), 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 Goldman, Sachs & Co. 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
<PAGE>
representatives in care of Goldman, Sachs & Co., 32 Old Slip, 21st Floor, New
York, New York 10005, Attention: Registration Department; 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: Chief Financial Officer; 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 New York.
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.
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel 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,
Noosh, Inc.
By: ____________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
BancBoston Robertson Stephens Inc.
Banc of America Securities LLC
PaineWebber Incorporated
E*Offering Corp.
By:
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Total Number Number of Optional
of Shares to be
Firm Shares Purchased if
to be Maximum Option
Underwriter Purchased Exercised
----------- ----------- ------------------
<S> <C> <C>
Goldman, Sachs & Co..................................
BancBoston Robertson Stephens Inc....................
Banc of America Securities LLC.......................
PaineWebber Incorporated.............................
E*Offering Corp......................................
---------- -----------------
Total..........................................
========== =================
</TABLE>
<PAGE>
ANNEX II
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
separately furnished to the representatives of the Underwriters (the
"Representatives");
(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 have been
separately furnished to the Representatives 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
A-1
<PAGE>
statements and other information referred to below, a reading of the latest
available interim 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
A-2
<PAGE>
(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
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.
A-3
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION OF
NOOSH MERGER CORPORATION
Ofer Ben-Shachar and Timothy J. Moore hereby certify that:
1. The original Certificate of Incorporation of this corporation was
filed with the Secretary of State of Delaware on January 28, 2000.
2. They are the duly elected and acting President and Secretary,
respectively, of NOOSH Merger Corporation, a Delaware corporation (the
"Corporation").
3. The Certificate of Incorporation of this corporation is hereby amended
and restated to read as follows:
I.
The name of this corporation is NOOSH Merger Corporation.
II.
The address of the registered office of the corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, and the name of the registered agent of the corporation in
the State of Delaware at such address is the CT Corporation System.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock."
B. The total number of shares which the Corporation is authorized to issue
is ninety million two hundred thousand (90,200,000) shares, seventy five million
(75,000,000) shares of which shall be Common Stock (the "Common Stock") and
fifteen million two hundred thousand (15,200,000) shares of which shall be
Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a par
value of one tenth of one cent ($0.001) per share, and the Common Stock shall
have a par value of one tenth of one cent ($0.001) per share.
C. Two million twenty three thousand seventy seven (2,023,077) of the
authorized shares of Preferred Stock are hereby designated "Series A Preferred
Stock" (the "Series A Preferred"). Four million three hundred sixty three
thousand six hundred thirty seven (4,363,637) of the authorized shares of
Preferred Stock are hereby designated "Series B Preferred Stock" (the "Series B
Preferred"). Six million eight hundred nine thousand one hundred thirty-five
(6,809,135) of the authorized shares of Preferred Stock are hereby designated
"Series C Preferred Stock" (the "Series C Preferred"). Two million (2,000,000)
of the authorized shares of Preferred Stock are hereby designated "Series D
Preferred Stock" (the "Series D Preferred").
1.
<PAGE>
D. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred (together, the "Series Preferred") are as follows:
1. Dividend Rights.
a. Holders of Series Preferred, in preference to the holders of
any other stock of the Corporation ("Junior Stock"), shall be entitled to
receive on a pro rata basis, when and as declared by the Board of Directors, but
only out of funds that are legally available therefor, cash dividends at the
rate of eight percent (8%) of the "Original Issue Price" per annum on each
outstanding share of Series Preferred (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares). The Original Issue Price of the Series A Preferred shall be Sixty-Five
Cents ($0.65) (the "Series A Original Issue Price"). The Original Issue Price of
the Series B Preferred shall be Two Dollars and Seventy-Five Cents ($2.75) (the
"Series B Original Issue Price"). The Original Issue Price of the Series C
Preferred shall be Seven Dollars and Forty-Five Cents ($7.45) (the "Series C
Original Issue Price"). The Original Issue Price of the Series D Preferred shall
be Eleven Dollars ($11.00) (the "Series D Original Issue Price"). Such dividends
shall be payable only when, as and if declared by the Board of Directors and
shall be non-cumulative.
b. So long as any shares of Series Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Corporation be purchased, redeemed,
or otherwise acquired for value by the Corporation (except for acquisitions of
Common Stock by the Corporation pursuant to agreements which permit the
Corporation to repurchase such shares upon termination of services to the
Corporation or in exercise of the Corporation's right of first refusal upon a
proposed transfer) until all dividends (set forth in Section 1a above) on the
Series Preferred shall have been paid or declared and set apart. In the event
dividends are paid on any share of Common Stock, an additional dividend shall be
paid with respect to all outstanding shares of Series Preferred in an amount
equal per share (on an as-if-converted to Common Stock basis) to the amount paid
or set aside for each share of Common Stock. The provisions of this Section 1b
shall not, however, apply to (i) a dividend payable in Common Stock, or (ii) the
acquisition of shares of any Junior Stock in exchange for shares of any other
Junior Stock.
2. Voting Rights.
a. General Rights. Except as otherwise provided herein or as
required by law, the Series Preferred shall be voted equally with the shares of
the Common Stock of the Corporation and not as a separate class, at any annual
or special meeting of stockholders of the Corporation, and may act by written
consent in the same manner as the Common Stock, in either case upon the
following basis: each holder of shares of Series Preferred shall be entitled to
such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Series Preferred
are convertible (pursuant to Section 5 hereof) immediately after the close of
business on the record date fixed for such meeting or the effective date of such
written consent.
2.
<PAGE>
b. Separate Vote of Series Preferred. For so long as at least
seven million (7,000,000) shares of Series Preferred (subject to adjustment for
any stock split, reverse stock split or other similar event affecting the Series
Preferred) remain outstanding, in addition to any other vote or consent required
herein or by law, the vote or written consent of the holders of at least
seventy-five percent of the outstanding Series Preferred (voting on an as-if-
converted basis as a single class) shall be necessary for effecting or
validating the following actions:
(i) Any amendment, alteration, or repeal of any provision
of the Certificate of Incorporation or the Bylaws of the Corporation (including
any filing of a Certificate of Determination) that affects adversely the voting
powers, preferences, or other special rights or privileges, qualifications,
limitations, or restrictions of any series of the Series Preferred;
(ii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Corporation ranking senior
to or on parity with any series of the Series Preferred in rights of redemption,
liquidation preference, voting or dividends or any increase in the authorized or
designated number of any such new class or series;
(iii) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Corporation pursuant to agreements which permit the
Corporation to repurchase such shares upon termination of services to the
Corporation or in exercise of the Corporation's right of first refusal upon a
proposed transfer);
(iv) Any action that results in the payment or declaration
of a dividend on any shares of Common Stock;
(v) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3c);
(vi) Any increase or decrease in the authorized number of
shares of the Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred; or
(vii) Any issuance of shares of Series D Preferred, whether
directly or indirectly, that would result in more than 1,500,000 shares of
Series D Preferred being outstanding unless such issuance of shares occurs in
connection with (a) a merger, consolidation, acquisition or similar business
combination approved by the Board of Directors, (b) any equipment leasing
arrangement, or debt financing from a bank or similar financial institution
approved by the Board of Directors, or (c) any strategic transactions involving
the Corporation and other entities, including joint ventures, manufacturing,
marketing or distribution arrangements, and technology transfer or development
arrangements approved by the Board of Directors.
c. Separate Vote of Series C Preferred. For so long as at least
three million five hundred thousand (3,500,000) shares of Series C Preferred
(subject to adjustment for any stock split, reverse stock split or other similar
event affecting the Series C Preferred) remain outstanding, in addition to any
other vote or consent required herein or by law, the vote or
3.
<PAGE>
written consent of the holders of at least a majority of the outstanding Series
C Preferred shall be necessary for effecting or validating the following
actions:
(i) Any amendment, alteration, or repeal of any provision
of the Certificate of Incorporation or the Bylaws of the Corporation (including
any filing of a Certificate of Determination) that alters or changes the voting
powers, preferences, or other special rights or privileges, qualifications,
limitations, or restrictions of the Series C Preferred;
(ii) Any increase or decrease in the authorized number of
shares of the Series C Preferred; or
(iii) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3c) in
which the value of the proceeds received by the Series C Preferred is an amount
per share of Series C Preferred less than the product obtained by multiplying
two by the Series C Original Issue Price (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares).
d. Election of Board of Directors. For so long as at least
three million (3,000,000) shares of Series A Preferred and Series B Preferred
remain outstanding (subject to adjustment for any stock split, reverse stock
split or similar event affecting the Series Preferred), (i) the holders of
Series A Preferred, voting as a separate class, shall be entitled to elect one
(1) member of the Company's Board of Directors at each meeting or pursuant to
each consent of the Company's stockholders for the election of directors, and to
remove from office such director and to fill any vacancy caused by the
resignation, death or removal of such director; (ii) the holders of Series B
Preferred, voting as a separate class, shall be entitled to elect one (1) member
of the Company's Board of Directors at each meeting or pursuant to each consent
of the Company's stockholders for the election of directors, and to remove from
office such director and to fill any vacancy caused by the resignation, death or
removal of such director; (iii) the holders of Common Stock, voting as a
separate class, shall be entitled to elect one (1) member of the Board of
Directors at each meeting or pursuant to each consent of the Company's
stockholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the resignation, death or removal of
such director; and (iv) the holders of Common Stock and Series Preferred, voting
together as a single class on an as-if-converted basis, shall be entitled to
elect all remaining members of the Board of Directors at each meeting or
pursuant to each consent of the Company's stockholders for the election of
directors, and to remove from office such directors and to fill any vacancy
caused by the resignation, death or removal of such directors.
3. Liquidation Rights.
a. Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock, (i) the holders of
Series A Preferred shall be entitled to be paid out of the assets of the
Corporation an amount per share of Series A Preferred equal to the Series A
Original Issue Price plus all declared and unpaid dividends on such shares of
Series A Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like
4.
<PAGE>
with respect to such shares) for each share of Series A Preferred held by them,
(ii) the holders of Series B Preferred shall be entitled to be paid out of the
assets of the Corporation an amount per share of Series B Preferred equal to the
Series B Original Issue Price plus all declared and unpaid dividends on such
shares of Series B Preferred (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares) for each
share of Series B Preferred held by them, (iii) the holders of Series C
Preferred shall be entitled to be paid out of the assets of the Corporation an
amount per share of Series C Preferred equal to the Series C Original Issue
Price plus all declared and unpaid dividends on such shares of Series C
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
Series C Preferred held by them and (iv) the holders of Series D Preferred shall
be entitled to be paid out of the assets of the Corporation an amount per share
of Series D Preferred equal to the Series D Original Issue Price plus all
declared and unpaid dividends on such shares of Series D Preferred (as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like
with respect to such shares) for each share of Series D Preferred held by them.
b. After the payment of the full liquidation preference of the
Series Preferred as set forth in Section 3a above, the assets of the Corporation
legally available for distribution, if any, shall be distributed ratably to the
holders of the Common Stock.
c. The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Corporation with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Corporation immediately prior
to such consolidation, merger or reorganization, as a result of their ownership
of the Corporation's securities own less than 50% of the surviving corporation's
voting power immediately after such consolidation, merger or reorganization (an
"Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Corporation (an "Asset Transfer").
d. If, upon any liquidation, distribution, or winding up, the
assets of the Corporation shall be insufficient to make payment in full to all
holders of Series Preferred of the liquidation preference set forth in Section
3a, then such assets shall be distributed among the holders of Series Preferred
at the time outstanding, ratably in proportion to the full amounts to which they
would otherwise be respectively entitled.
4. Redemption.
The Series Preferred shall not be redeemable by the Corporation.
5.
<PAGE>
5. Conversion Rights.
The holders of the Series Preferred shall have the following rights
with respect to the conversion of the Series Preferred into shares of Common
Stock (the "Conversion Rights"):
a. Optional Conversion. Subject to and in compliance with the
provisions of this Section 5, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series Preferred shall be entitled upon conversion shall be the product obtained
by multiplying the "Series A Preferred Conversion Rate", "Series B Preferred
Conversion Rate", "Series C Preferred Conversion Rate", or "Series D Preferred
Conversion Rate", as applicable, then in effect (determined as provided in
Section 5b) by the number of shares of Series A Preferred, Series B Preferred,
Series C Preferred or Series D Preferred, as applicable, being converted.
b. Series Preferred Conversion Rate. The conversion rate in
effect at any time for conversion of each of the Series A Preferred (the "Series
A Preferred Conversion Rate"), the Series B Preferred (the "Series B Preferred
Conversion Rate"), the Series C Preferred (the "Series C Preferred Conversion
Rate"), and the Series D Preferred (the "Series D Preferred Conversion Rate")
shall be the quotient obtained by dividing the Series A Original Issue Price,
the Series B Original Issue Price, the Series C Original Issue Price, and Series
D Original Issue Price of the Series A Preferred, the Series B Preferred, the
Series C Preferred and Series D Preferred, respectively, by the "Series A
Preferred Conversion Price", the "Series B Preferred Conversion Price," the
"Series C Preferred Conversion Price" and the "Series D Preferred Conversion
Price," respectively, calculated as provided in Section 5c.
c. Series Preferred Conversion Price. As of the date of filing
of this Certificate of Incorporation (the "Filing Date"), the conversion price
for the Series A Preferred shall be $0.325 (the "Series A Preferred Conversion
Price"), the conversion price for the Series B Preferred shall be $1.375 (the
"Series B Preferred Conversion Price"), the conversion price for the Series C
Preferred shall be the Series C Original Issue Price (the "Series C Preferred
Conversion Price") and the conversion price for the Series D Preferred shall be
the Series D Original Issue Price (the "Series D Preferred Conversion Price").
Such Series A Preferred Conversion Price, Series B Preferred Conversion Price,
Series C Preferred Conversion Price and Series D Preferred Conversion Price
shall be adjusted from time to time in accordance with this Section 5. All
references to the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price or Series D Preferred
Conversion Price herein shall mean the Series A Preferred Conversion Price,
Series B Preferred Conversion Price, Series C Preferred Conversion Price or
Series D Preferred Conversion Price, respectively, as so adjusted after the
Filing Date.
d. Mechanics of Conversion. Each holder of Series Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
5 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for the Series Preferred,
and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Series Preferred being converted. Thereupon, the Corporation shall promptly
issue and
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deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series Preferred being converted.
Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificates representing the shares of Series
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
e. Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Filing Date effect
a subdivision of the outstanding Common Stock without a corresponding
subdivision of the Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred, the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series C Preferred Conversion Price and Series D
Preferred Conversion Price in effect immediately before that subdivision shall
be proportionately decreased. Conversely, if the Corporation shall at any time
or from time to time after the Filing Date combine the outstanding shares of
Common Stock into a smaller number of shares without a corresponding combination
of the Series A Preferred, the Series B Preferred, the Series C Preferred, and
Series D Preferred, the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price, the Series C Preferred Conversion Price and Series D
Preferred Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5e shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
f. Adjustment for Common Stock Dividends and Distributions. If
the Corporation at any time or from time to time after the Filing Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, in each such event the Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series C Preferred Conversion Price and Series D
Preferred Conversion Price that is then in effect shall be decreased as of the
time of such issuance or, in the event such record date is fixed, as of the
close of business on such record date, by multiplying the Series A Preferred
Conversion Price, Series B Preferred Conversion Price, Series C Preferred
Conversion Price and Series D Preferred Conversion Price then in effect by a
fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (ii) the denominator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price and Series D Preferred
Conversion Price shall be recomputed accordingly as of the close of business on
such record date and thereafter the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price, the Series C Preferred Conversion Price and
Series D
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Preferred Conversion Price shall be adjusted pursuant to this Section 5f to
reflect the actual payment of such dividend or distribution.
g. Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time after the Filing Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Corporation which
they would have received had their Series Preferred been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 5 with
respect to the rights of the holders of the Series Preferred or with respect to
such other securities by their terms.
h. Adjustment for Reclassification, Exchange and Substitution.
If at any time or from time to time after the Filing Date, the Common Stock
issuable upon the conversion of the Series Preferred is changed into the same or
a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3c or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 5), in any such event each holder
of Series Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
i. Reorganizations, Mergers, Consolidations or Sales of Assets.
If at any time or from time to time after the Filing Date, there is a capital
reorganization of the Common Stock (other than an Acquisition or Asset Transfer
as defined in Section 3c or a recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 5), as a part of such capital reorganization, provision shall be
made so that the holders of the Series Preferred shall thereafter be entitled to
receive upon conversion of the Series Preferred the number of shares of stock or
other securities or property of the Corporation to which a holder of the number
of shares of Common Stock deliverable upon conversion would have been entitled
on such capital reorganization, subject to adjustment in respect of such stock
or securities by the terms thereof. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 5 with
respect to the rights of the holders of Series Preferred after the capital
reorganization to the end that the provisions of this Section 5 (including
adjustment of each Series Preferred Conversion Price then in effect and the
number of shares issuable upon conversion of the Series Preferred) shall be
applicable after that event and be as nearly equivalent as practicable.
8.
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j. Sale of Shares Below Series Preferred Conversion Price.
(i) If at any time or from time to time after the Filing
Date, the Company issues or sells, or is deemed by the express provisions of
this subsection 5j to have issued or sold, Additional Shares of Common Stock (as
defined in subsection 5j(iv) below), other than as a dividend or other
distribution on any class of stock as provided in Section 5f above, and other
than a subdivision or combination of shares of Common Stock as provided in
Section 5e above, for an Effective Price (as defined in subsection 5j(iv) below)
less than the then effective Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series C Preferred Conversion Price or Series D
Preferred Conversion Price, then and in each such case the then existing Series
A Preferred Conversion Price, Series B Preferred Conversion Price, Series C
Preferred Conversion Price or Series D Preferred Conversion Price, as the case
may be, shall be reduced, as of the opening of business on the date of such
issue or sale, to a price determined by multiplying the Series A Preferred
Conversion Price, Series B Preferred Conversion Price, Series C Preferred
Conversion Price or Series D Preferred Conversion Price, as applicable, by a
fraction (i) the numerator of which shall be (A) the number of shares of Common
Stock deemed outstanding (as defined below) immediately prior to such issue or
sale, plus (B) the number of shares of Common Stock which the aggregate
consideration received (as defined in subsection 5j(ii) by the Company for the
total number of Additional Shares of Common Stock so issued would purchase at
such Series A Preferred Conversion Price, Series B Preferred Conversion Price,
Series C Preferred Conversion Price or Series D Preferred Conversion Price, as
the case may be, and (ii) the denominator of which shall be the number of shares
of Common Stock deemed outstanding (as defined below) immediately prior to such
issue or sale plus the total number of Additional Shares of Common Stock so
issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock actually outstanding, (B) the number of
shares of Common Stock into which the then outstanding shares of Series
Preferred could be converted if fully converted as of the time of such issuance,
and (C) the number of shares of Common Stock which could be obtained through the
exercise or conversion of all other rights, options and convertible securities
outstanding as of the time of such issuance.
(ii) For the purpose of making any adjustment required
under this Section 5j, the consideration received by the Company for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
as the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company, (B) to the extent it consists of property
other than cash, be computed as the fair value of that property as determined in
good faith by the Board of Directors, and (C) if Additional Shares of Common
Stock, Convertible Securities (as defined in subsection 5j(iii)) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.
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(iii) For the purpose of the adjustment required under this
Section 5j, if the Company issues or sells (i) stock or other securities
convertible into, Additional Shares of Common Stock (such convertible stock or
securities being herein referred to as "Convertible Securities") or (ii) rights
or options for the purchase of Additional Shares of Common Stock or Convertible
Securities and if the Effective Price of such Additional Shares of Common Stock
is less than the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price or Series D Preferred
Conversion Price, as the case may be, in each case the Company shall be deemed
to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities, plus, in the case of such
rights or options, the minimum amounts of consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof; provided that if in
the case of Convertible Securities the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further that if the
minimum amount of consideration payable to the Company upon the exercise or
conversion of rights, options or Convertible Securities is reduced over time or
on the occurrence or non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; provided
further that if the minimum amount of consideration payable to the Company upon
the exercise or conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Company upon the
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the Series A Preferred Conversion Price, Series B
Preferred Conversion Price, Series C Preferred Conversion Price or Series D
Preferred Conversion Price, as adjusted upon the issuance of such rights,
options or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such rights
or options or the conversion of any such Convertible Securities. If any such
rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series A
Preferred Conversion Price, Series B Preferred Conversion Price, Series C
Preferred Conversion Price or Series D Preferred Conversion Price as adjusted
upon the issuance of such rights, options or Convertible Securities shall be
readjusted to the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price or Series D Preferred
Conversion Price, as the case may be, which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by the
Company for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
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Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities, provided that such readjustment shall not apply to prior
conversions of Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred.
(iv) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this Section 5j, whether or not subsequently reacquired or retired by the
Company other than (A) shares of Common Stock issued or issuable upon conversion
of the Series Preferred; (B) shares of Common Stock and/or options, warrants or
other Common Stock purchase rights, and the Common Stock issued or issuable
pursuant to such options, warrants or other rights (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like) after the
Filing Date to employees, officers or directors of, or consultants or advisors
to the Company or any subsidiary pursuant to stock purchase or stock option
plans or other arrangements that are approved by the Board of Directors; (C)
shares of Common Stock issued or issuable pursuant to the exercise of options,
warrants or convertible securities outstanding as of the Filing Date, (D) shares
of Common Stock and/or options, warrants or other Common Stock purchase rights,
and the Common Stock issued or issuable pursuant to such options, warrants or
other rights issued for consideration other than cash pursuant to a merger,
consolidation, acquisition or similar business combination approved by the Board
of Directors, (E) shares of Common Stock issued or issuable pursuant to any
equipment leasing arrangement, or debt financing from a bank or similar
financial institution approved by the Board of Directors, and (F) shares of
Common Stock issued or issuable in connection with strategic transactions
involving the Corporation and other entities, including joint ventures,
manufacturing, marketing or distribution arrangements, and technology transfer
or development arrangements approved by the Board of Directors. References to
Common Stock in the subsections of this clause (iv) above shall mean all shares
of Common Stock issued by the Company or deemed to be issued pursuant to this
Section 5j. The "Effective Price" of Additional Shares of Common Stock shall
mean the quotient determined by dividing the total number of Additional Shares
of Common Stock issued or sold, or deemed to have been issued or sold by the
Company under this Section 5j, into the aggregate consideration received, or
deemed to have been received by the Company for such issue under this Section
5j, for such Additional Shares of Common Stock.
k. Certificate of Adjustment. In each case of an adjustment or
readjustment of the Series A Preferred Conversion Price, Series B Preferred
Conversion Price, Series C Preferred Conversion Price or Series D Preferred
Conversion Price for the number of shares of Common Stock or other securities
issuable upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred or Series D Preferred, if the Series A Preferred, Series B Preferred,
Series C Preferred or Series D Preferred is then convertible pursuant to this
Section 5, the Corporation, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred at the
holder's address as shown in the Corporation's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the
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Corporation for any Additional Shares of Common Stock issued or sold or deemed
to have been issued or sold, (ii) the Series A Preferred Conversion Price,
Series B Preferred Conversion Price, Series C Preferred Conversion Price or
Series D Preferred Conversion Price at the time in effect, (iii) the number of
Additional Shares of Common Stock and (iv) the type and amount, if any, of other
property which at the time would be received upon conversion of the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred.
l. Notices of Record Date. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition (as defined in Section
3c) or other capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, or any
Asset Transfer (as defined in Section 3c), or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series Preferred at least twenty (20) days prior to the
record date specified therein a notice specifying (A) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up.
m. Automatic Conversion.
(i) Each share of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred shall automatically be converted into
shares of Common Stock, based on the then-effective Series A Preferred
Conversion Price, Series B Preferred Conversion Price, Series C Preferred
Conversion Price or Series D Preferred Conversion Price, as the case may be, (a)
at any time upon the affirmative vote of the holders of at least seventy-five
percent of the outstanding shares of the Series Preferred (voting on an as-if-
converted basis as a single class), or (b) immediately upon the closing of a
firmly underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation in which (A) the per
share price is at least $11.00 (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like), and (B) the gross cash
proceeds to the Corporation (before underwriting discounts, commissions and
fees) are at least $20,000,000. Upon such automatic conversion, any declared and
unpaid dividends shall be paid in accordance with the provisions of Section 5d.
(ii) Upon the occurrence of the event specified in
subsection (i) above, the outstanding shares of Series Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Corporation or its transfer agent; provided, however, that the Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock
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issuable upon such conversion unless the certificates evidencing such shares of
Series Preferred are either delivered to the Corporation or its transfer agent
as provided below, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. Upon the occurrence of
such automatic conversion of the Series Preferred, the holders of Series
Preferred shall surrender the certificates representing such shares at the
office of the Corporation or any transfer agent for the Series Preferred.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the shares of Series Preferred surrendered were convertible on the date on
which such automatic conversion occurred, and any declared and unpaid dividends
shall be paid in accordance with the provisions of Section 5d.
n. Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
o. Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
p. Notices. Any notice required by the provisions of this
Section 5 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 notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.
q. Payment of Taxes. The Corporation will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Series Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue
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and delivery of shares of Common Stock in a name other than that in which the
shares of Series Preferred so converted were registered.
r. No Dilution or Impairment. Without the consent of the
holders of the then outstanding Series Preferred, as required under Section 2b,
the Corporation shall not amend its Certificate of Incorporation or participate
in any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or take any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Corporation, but shall at all
times in good faith assist in carrying out all such action as may be reasonably
necessary or appropriate in order to protect the conversion rights of the
holders of the Series Preferred against dilution or other impairment.
6. No Reissuance of Series Preferred. No share or shares of Series
Preferred acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued; and in addition, the Certificate of
Incorporation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized stock.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. Management. 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
exclusively by one or more resolutions adopted by the Board of Directors.
B. Board of Directors.
1. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1993
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be
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elected for a full term of three years to succeed the directors of the class
whose terms expire at such annual meeting. During such time or times that the
corporation is subject to Section 2115(b) of the California General Corporation
Law ("CGCL"), this Section A.2.a of this Article V shall become effective and be
applicable only when the corporation is a "listed" corporation within the
meaning of Section 301.5 of the CGCL.
2. In the event that the corporation is unable to have a
classified board under applicable law, Section 301.5 of the CGCL, Section A. 2.
a. of this Article V shall not apply and all directors shall be elected at each
annual meeting of stockholders to hold office until the next annual meeting.
3. No stockholder entitled to vote at an election for
directors may cumulate votes to which such stockholder is entitled, unless, at
the time of such election, the corporation (i) is subject to Section 2115(b) of
the CGCL and (ii) is not or ceases to be a "listed" corporation under Section
301.5 of the CGCL. During this time, every stockholder entitled to vote at an
election for directors may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit. No stockholder,
however, shall be entitled to so cumulate such stockholder's votes unless (i)
the names of such candidate or candidates have been placed in nomination prior
to the voting and (ii) the stockholder has given notice at the meeting, prior to
the voting, of such stockholder's intention to cumulate such stockholder's
votes. If any stockholder has given proper notice to cumulate votes, all
stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. Under cumulative voting, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
C. Removal of Directors
1. During such time or times that the corporation is subject
to Section 2115(b) of the CGCL, the Board of Directors or any individual
director may be removed from office at any time without cause by the affirmative
vote of the holders of at least a majority of the outstanding shares entitled to
vote on such removal; provided, however, that unless the entire Board is
removed, no individual director may be removed when the votes cast against such
director's removal, or not consenting in writing to such removal, would be
sufficient to elect that director if voted cumulatively at an election which the
same total number of votes were cast (or, if such action is taken by written
consent, all shares entitled to vote were voted) and the entire number of
directors authorized at the time of such director's most recent election were
then being elected.
15.
<PAGE>
2. At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section A. 3. a. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
D. Vacancies.
1. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
2. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
3. At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy by the
directors then in office who have been elected by stockholders shall constitute
less than a majority of the directors then in office, then
a. Any holder or holders of an aggregate of five percent
(5%) or more of the total number of shares at the time outstanding having the
right to vote for those directors may call a special meeting of stockholders; or
b. The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
E. Bylaw Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
F. Ballots. The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
16.
<PAGE>
G. Action By Stockholders. No action shall be taken by the
stockholders of the corporation except at an annual or special meeting of
stockholders called in accordance with the Bylaws or by written consent of
stockholders in accordance with the Bylaws prior to the closing of the Initial
Public Offering and following the closing of the Initial Public Offering no
action shall be taken by the stockholders by written consent.
H. Advance Notice. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the CGCL) for breach of duty to the
corporation and its stockholders through bylaw provisions or through agreements
with the agents, or through shareholder resolutions, or otherwise, in excess of
the indemnification otherwise permitted by Section 317 of the CGCL, subject, at
any time or times the corporation is subject to Section 2115(b) to the limits on
such excess indemnification set forth in Section 204 of the CGCL.
C. Any repeal or modification of this Article VI shall be
prospective and shall not affect the rights under this Article VI in effect at
the time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in paragraph
B. of this Article VII, and all rights conferred upon the stockholders herein
are granted subject to this reservation.
B. 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 any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
17.
<PAGE>
4. This Restated Certificate of Incorporation has been duly approved by
the Board of Directors of this Corporation.
5. This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Corporation. The total number of outstanding shares entitled
to vote or act by written consent was 100 shares of Common Stock. A majority of
the outstanding shares of Common Stock approved this Restated Certificate of
Incorporation by written consent in accordance with Section 228 of the General
Corporation Law of the State of Delaware and written notice of such was given
by the Corporation in accordance with the said Section 228.
In Witness Whereof, NOOSH Merger Corporation has caused this Restated
Certificate of Incorporation to be signed by the President and the Secretary in
Palo Alto, California this 25/th/ day of February, 2000.
NOOSH Merger Corporation
By: /s/ Ofer Ben-Shachar
---------------------------------
President
Ofer Ben-Shachar
Attest:
By: /s/ Timothy J. Moore
-------------------------
Secretary
Timothy J. Moore
18.
<PAGE>
EXHIBIT 4.1
Number [LOGO] Shares
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE CUSIP 655382 10 9
This Certifies that
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $.001, OF
NOOSH, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Timothy J. Moore [Seal] /s/ Ofer Ben-Shachar
____________________________ _________________________________
SECRETARY AND VICE PRESIDENT PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
NOOSH INC.
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights. Such requests shall be made to the Corporation's Secretary at the
principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as
tenants
UNIF GIFT MIN ACT - ____________ Custodian _________________________________
(Cust) (Minor)
Under Uniform Gifts To Minors
Act ____________________________________________________
(State)
UNIF TRF MIN ACT - ___________ Custodian (until age) ______________________
(Cust) (Minor)
________________________________ under Uniform Transfers
(Minor)
to Minors Act __________________________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
__________________________________________________________Shares of the common
stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________________________________________________
_______________________ Attorney to transfer the said stock on the books of the
within named Corporation with full power of substitution in the premises.
Dated _______________________
X _______________________________________
X _______________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By: ________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO THE S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 4.2
NOOSH, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
January 25, 2000
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
Page
<C> <S> <C>
Section 1. General.......................................................... 2
1.1 Definitions...................................................... 2
Section 2. Registration; Restrictions On Transfer........................... 3
2.1 Restrictions on Transfer......................................... 3
2.2 Demand Registration.............................................. 4
2.3 Piggyback Registrations.......................................... 6
2.4 Form S-3 Registration............................................ 7
2.5 Expenses of Registration......................................... 8
2.6 Obligations of the Company....................................... 8
2.7 Termination of Registration Rights............................... 9
2.8 Delay of Registration; Furnishing Information.................... 9
2.9 Indemnification.................................................. 10
2.10 Assignment of Registration Rights................................ 12
2.11 Amendment of Registration Rights................................. 12
2.12 Limitation on Subsequent Registration Rights..................... 12
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information... 12
2.14 Rule 144 Reporting............................................... 13
Section 3. Covenants Of The Company.......................................... 14
3.1 Basic Financial Information and Reporting......................... 14
3.2 Inspection Rights................................................ 14
3.3 Confidentiality of Records....................................... 15
3.4 Reservation of Common Stock...................................... 15
3.5 Employee Proprietary Information and Inventions Agreement........ 15
3.6 Key Man Insurance................................................ 15
3.7 Stock Vesting.................................................... 15
3.8 Observer Rights.................................................. 15
3.9 Qualified Small Business Stock................................... 16
3.10 Termination of Covenants......................................... 16
Section 4. Rights Of First Refusal......................................... 16
4.1 Subsequent Offerings............................................. 16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
Page
<C> <S> <C>
4.2 Exercise of Rights............................................... 17
4.3 Issuance of Equity Securities to Other Persons................... 17
4.4 Termination and Waiver of Rights of First Refusal................ 17
4.5 Transfer of Rights of First Refusal.............................. 17
4.6 Excluded Securities.............................................. 17
Section 5. Miscellaneous.................................................... 18
5.1 Governing Law.................................................... 18
5.2 Survival......................................................... 18
5.3 Successors and Assigns........................................... 19
5.4 Entire Agreement................................................. 19
5.5 Severability..................................................... 19
5.6 Amendment and Waiver............................................. 19
5.7 Delays or Omissions.............................................. 19
5.8 Notices.......................................................... 20
5.9 Attorneys' Fees.................................................. 20
5.10 Titles and Subtitles............................................. 20
5.11 Prior Agreement.................................................. 20
5.12 Aggregation of Stock............................................. 20
5.13 Counterparts..................................................... 20
</TABLE>
ii
<PAGE>
NOOSH, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement") is
entered into as of the 24th day of January, 2000, by and among NOOSH, Inc., a
California corporation (the "Company"), the holders of the Company's Series A
Preferred Stock (the "Series A Stock"), the holders of the Company's Series B
Preferred Stock (the "Series B Stock"), the holders of the Company's Series C
Preferred Stock (the "Series C Stock"), and the purchasers of the Company's
Series D Preferred Stock ("Series D Stock") set forth on Exhibit A of that
certain Series D Preferred Stock Purchase Agreement of even date herewith (the
"Purchase Agreement"). The purchasers of the Series D Stock shall be referred
to hereinafter as the "Purchasers" and each individually as a "Purchaser", and
the holders of the Series A Stock (the "Series A Holders"), the holders of the
Series B Stock (the "Series B Holders"), the holders of the Series C Stock (the
"Series C Holders"), and the Purchasers shall be referred to hereinafter
together as the "Investors" and each individually as an "Investor."
RECITALS
WHEREAS, the Company proposes to sell and issue up to one million five
hundred thousand (1,500,000) shares of its Series D Stock to the Purchasers
pursuant to the Purchase Agreement;
WHEREAS, the Company, the Series A Holders, the Series B Holders, and the
Series C Holders previously entered into that certain Amended and Restated
Investor Rights Agreement, dated as of November 3, 1999 (the "Prior Agreement");
WHEREAS, as a condition of entering into the Purchase Agreement, the
Investors have requested that the Company, the Series A Holders, the Series B
Holders, and the Series C Holders agree to amend and restate the Prior Agreement
to extend to them registration rights, information rights and other rights as
set forth below; and
WHEREAs, pursuant to Section 5.6 of the Prior Agreement, at least seventy-
five (75%) of the holders of Registrable Securities (as defined therein) has
agreed to amend and restate the Prior Agreement and supersede said Prior
Agreement in its entirety with this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree that the Prior Agreement shall be
amended and restated to read in its entirety as follows:
1
<PAGE>
Section 1. General
1.1 Definitions. As used in this Agreement the following terms shall have
the following respective meanings:
"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 successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"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 of the Company issued
or issuable upon conversion of the Shares; (b) any Common Stock issued to Ofer
Ben-Shachar, including Common Stock transferred by Ofer Ben-Shachar to the Ben-
Shachar Family Generation Skipping Trust, dated November 6, 1998, on or before
the date of this Agreement (the "Founder Shares"); (c) Common Stock of the
Company issuable upon the exercise of warrants issued to R.R. Donnelley and Sons
Company ("RRD") as of the date hereof; and (d) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall 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).
2
<PAGE>
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the Company's Series A Stock issued pursuant to
the Company's Series A Preferred Stock Purchase Agreement, dated November 20,
1998, and held by the Investors listed on Exhibit A thereto and their permitted
assigns, the Company's Series B Stock issued pursuant to the Series B Preferred
Stock Purchase Agreement, dated April 26, 1999, and held by the Investors listed
on Exhibit A thereto and their permitted assigns, the Company's Series C Stock
issued pursuant to the Series C Preferred Stock Purchase Agreement, dated
November 3, 1999, and held by the Investors listed on Exhibit A thereto and
their permitted assigns, and the Company's Series D Stock issued pursuant to the
Purchase Agreement and held by the Investors listed on Exhibit A thereto and
their permitted assigns.
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 the shares of Common Stock issuable upon conversion of
the Shares ("Conversion Shares") unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement if such disposition occurs prior to the Initial
Offering, (B) such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if he were an original Holder hereunder.
3
<PAGE>
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of thirty percent (30%) or more
of the Registrable Securities (other than the Founder Shares) then outstanding
(the "Initiating Holders") that the Company file a registration statement under
the Securities Act covering the registration of Registrable Securities having an
anticipated aggregate offering price of at least $15,000,000, then the Company
shall, within thirty (30) days of 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
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. 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 such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter
4
<PAGE>
or underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and 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 held by all such Holders
(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 Sectio n 2.2:
(i) prior to the earlier of April 26, 2004, or one hundred eighty
(180) days following the effective date of the registration statement pertaining
to the Initial Offering;
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective;
(iii) during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective date of
the registration statement pertaining to the Initial Offering; provided that the
Company makes reasonable good faith efforts to cause such registration statement
to become effective;
(iv) if within thirty (30) days of receipt of a written request
from the 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;
(v) if the Company shall furnish to the Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board or the Chief Executive Officer stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be effected at such time, in which event 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 right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period; or
(vi) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 2.4 below.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) 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)
5
<PAGE>
and will afford each such Holder 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.
(a) Underwriting. 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 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, 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 held by the Holders
(provided, that, only 2,000,000 of the Founder's Shares (as adjusted for splits,
combinations, and the like) shall be included as Registrable Securities for the
purposes of this allocation); third, to the Holders of the portion of the
Founders Shares not considered for the purposes of the previous allocation; and,
fourth, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall (i) reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) 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 shareholders, 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 will
shares of any other selling shareholder 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 seventy five percent (75%) of the
Registrable Securities proposed to be sold in the offering. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefits of any of the
foregoing person shall be deemed to be a single "Holder", and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
6
<PAGE>
(b) 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. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of at least twenty percent (20%) of the Registrable Securities
then outstanding 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 Holders, or
(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 seven hundred fifty thousand dollars
($750,000), or
(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 a firm commitment underwritten
public offering of its Common Stock within ninety (90) days;
(iv) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
registration to be effected at such time, in which event the Company shall have
the 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; provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period, or
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(v) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or
(vi) 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 shall 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. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively. All such Registration
Expenses incurred in connection with registrations requested pursuant to this
Section 2.4 shall be paid by the Company.
2.5 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,
qualification, or compliance under Section 2.3 or 2.4 herein shall be borne by
the Company. All Selling Expenses incurred in connection with any registrations,
qualifications, or compliances 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 Holders
under Section 2.4 unless (a) the withdrawal is based upon material adverse
information concerning the Company of which the Initiating Holders or the
Holders under Section 2.4 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 2.4, in which event such
right shall be forfeited by all the 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 2.4 to a demand registration.
2.6 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 Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
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(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect three
(3) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if and when all Registrable Securities
held by and issuable to such Holder (and its affiliates, partners, former
partners, members and former members) may be sold under Rule 144 during any
ninety (90) day period.
2.8 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 Section 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 reasonably required to effect the registration of
their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
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2.9 Indemnification. 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 will indemnify and hold
harmless each Holder, the partners, officers and directors 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 they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable 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 will, 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 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 officers 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 in reliance upon and
in conformity with 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 will pay as incurred 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
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investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party 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 2.9, 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 2.9.
(d) If the indemnification provided for in this Section 2.9 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 proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9
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
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the giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member of a Holder, (b) is a Holder's family member or trust for the
benefit of an individual Holder, or (c) acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) 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 (ii) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
2.11 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 Company and the Holders of at least seventy-five percent
(75%) of the Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this Section 2.11 shall be binding upon each Holder
and the Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of at least seventy-five percent (75%) of the Registrable Securities
then outstanding, enter into any agreement with any holder or prospective holder
of any securities of the Company that would grant such holder registration
rights senior to those granted to the Holders hereunder.
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information. Each
Holder hereby agrees that such Holder shall not sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Holder (other than those included in the registration) for a period specified by
the representative of the underwriters of Common Stock (or other securities) of
the Company 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 (a) the obligations described in this Section 2.13 shall apply
only to the Company's Initial Offering; (b) all officers and directors of the
Company and holders of at least one percent (1%) of the Company's securities
enter into similar agreements; (c) such agreements shall not apply to securities
purchased by the Holder in the public market or in a registered offering; and
(d) any discretionary waiver or termination of the restrictions contained in
such agreement (or any similar lock up provision to which the Company is a
party) for the benefit of any officer, director, or holder of at least one
percent (1%) of the Company's securities shall apply to all the Holders on a
pro-rata basis (according to the total number of Registrable Securities owned by
each Holder).
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or
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the representative of the underwriters of Common Stock (or other securities) of
the Company, each Holder shall provide, within ten (10) days of such request,
such information as may be reasonably required by the Company or such
representative in connection with the completion of any public offering of the
Company's securities pursuant to a registration statement filed under the
Securities Act. The obligations described in this Section 2.13 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.
2.14 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 after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(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 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 required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company will
furnish each Investor owning not less than 1,000,000 shares of Registrable
Securities (other than Founder Shares and as adjusted for stock splits and
combinations) (a "Major Investor") a balance sheet of the Company, as at the end
of such fiscal year, and a statement of income and a statement of cash flows 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
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figures for the previous fiscal year, 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.
(c) The Company will furnish each Major 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 balance sheet of the Company as of the end of each such
quarterly period, and a statement of income and a statement of cash flows 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.
(d) The Company will furnish each Major 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 twenty (20) days thereafter, a balance sheet of the
Company as of the end of each such month, and a statement of income and a
statement of cash flows 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 Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested 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
best efforts to insure 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 is advised of and bound by the confidentiality
provisions of this Section 3.3. RRD further covenants that it will use all
information obtained pursuant to this Agreement only for the purpose of
evaluating its investment in the Company and not in connection with its business
activities.
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 the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
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3.5 Employee Proprietary Information and Inventions Agreement. The Company
shall require all employees and consultants to execute and deliver an Employee
Proprietary Information and Inventions Agreement in the form provided to Gray
Cary Ware & Freidenrich LLP.
3.6 Key Man Insurance. The Company will use its best efforts to maintain in
full force and effect term life insurance in the amount of one million
($1,000,000) dollars on each of the lives of Ofer Ben-Shachar and David
Hannebrink, naming the Company as beneficiary.
3.7 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 as follows: twenty five percent (25%) of such stock
shall vest at the end of the first year following the date of such person's
services commencement date with the Company and seventy five percent (75%) of
such stock shall vest no more rapidly than monthly over the next three years.
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.
3.8 Observer Rights . Each of MeriTech Capital Partners, Bowman Capital
Management, Technology Crossover Ventures, (so long as the Series C Preferred
does not have a separate representative on the Company's Board of Directors) and
RRD, for so long as each is a Major Investor, shall be entitled to have a
representative reasonably acceptable to the Company attend all meetings of its
Board of Directors in a non-voting observer capacity and, in this respect, the
Company shall provide such representative copies of all notices, minutes,
consents and other material that it provides to its directors at the same time
that such notices, minutes, consents and other materials are provided to its
directors; provided, however, that the Company reserves the right to exclude
such representative from access to any material or meeting or portion thereof if
the Company believes that such exclusion is reasonably necessary to preserve the
attorney-client privilege, to protect highly confidential proprietary
information or for other similar reasons.
3.9 Qualified Small Business Stock . In the event that the Company proposes
to act or engage in a transaction that would be reasonably expected to result in
the termination or impairment of the status of the Series A Stock or Series B
Stock (or the Common Stock issuable upon conversion thereof) as "qualified small
business stock" as set forth in Section1202(c) of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall use reasonable efforts to
notify the Major Investors who are Major Investors as of the date hereof and
consult in good faith to attempt to devise, if commercially practicable, a
mutually agreeable and reasonable alternative transaction structure that would
preserve such status. In addition, the Company shall use reasonable efforts to
submit to the Major Investors and with the Internal Revenue Service any reports
that may be required under Section 1202(d)(1)(C) of the Code and any related
Treasury Regulations. In addition, within twenty (20) days after any Major
Investor has delivered to the Company a written request therefor, the Company
shall deliver to such Major Investor a written statement informing the Major
Investor whether to the Company's knowledge
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such Major Investor's interest in the Company should constitute "qualified small
business stock" as defined in Section 1202(c) of the Code. The Company's
obligation to furnish a written statement pursuant to this Section 3.9 shall
continue notwithstanding the fact that a class of the Company's stock may be
traded on an established securities market. The Company's obligations under this
Section 3.9 shall continue irrespective of the number of shares any such Major
Investor may hold subsequent to the date of this Agreement.
3.10 Termination of Covenants. All covenants, except Section 3.9, of the
Company contained in Section 3 of this Agreement shall expire and terminate as
to each Investor upon the earlier of (i) the effective date of the registration
statement pertaining to the Initial Offering or (ii) upon (a) the acquisition of
all or substantially all of the assets of the Company or (b) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction (a "Change in Control").
Section 4. Rights Of First Refusal
4.1 Subsequent Offerings. Each Major Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
4.6 hereof. Each Major Investor's pro rata share is equal to the ratio of (a)
the number of shares of the Company's Common Stock (including all shares of
Common Stock issued or issuable upon conversion of the Shares) which such Major
Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security 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 each Major Investor 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. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of 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 Major Investor who 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 not all of the Major
Investors elect to purchase their pro rata share of the Equity Securities, then
the Company shall
16
<PAGE>
promptly notify in writing the Major Investors who do so elect and shall offer
such Major Investors the right to acquire such unsubscribed shares on a pro rata
basis. The Major Investors shall have five (5) days after receipt of such notice
to notify the Company of its election to purchase all or a portion thereof of
the unsubscribed shares. If the Major Investors fail 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 Major 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 Major Investors pursuant to Section 4.2 hereof. If the Company has not
sold such Equity Securities within ninety (90) days of the notice provided
pursuant to Section 4.2, the Company shall not thereafter issue or sell any
Equity Securities, without first offering such securities to the Major Investors
in the manner provided above.
4.4 Termination and Waiver of Rights of First Refusal. The rights of first
refusal established by this Section 4 shall not apply to, and shall terminate
upon the earlier of (i) immediately upon the closing of a firmly underwritten
public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale of Common Stock for the account of
the Company in which the per share price is at least $11.00 (as adjusted for
stock splits, combinations, and the like) and the gross cash proceeds to the
Company (before underwriting discounts, commissions and fees) are at least
$20,000,000 (a "Qualifying IPO") or (ii) a Change in Control. The rights of
first refusal established by this Section 4 may be amended, or any provision
waived with the written consent of Major Investors with rights under this
Section 4 holding at least seventy-five percent (75%) of the Registrable
Securities held by all such Major Investors, or as permitted by Section 5.6.
4.5 Transfer of Rights of First Refusal. The rights of first refusal of
each Major Investor having rights 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 2.10.
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) 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 agreements or other 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 Section 4 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
approved by the Board of Directors;
17
<PAGE>
(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 any equipment leasing
arrangement, or debt financing from a bank or similar financial institution
approved by the Board of Directors;
(g) any Equity Securities that are issued by the Company pursuant to a
registration statement filed under the Securities Act in connection with a
Qualifying IPO;
(h) shares of the Company's Common Stock or Preferred Stock issued in
connection with strategic transactions involving the Company and other entities,
including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, have been
approved by the Company's Board of Directors; and
(i) shares of Series D Stock (including shares of Common Stock issuable
upon conversion of such Series D Stock) issued or issuable pursuant to the
Purchase Agreement.
Section 5. Miscellaneous
5.1 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
5.2 Survival. The representations, warranties, 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. 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 shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto, the
Purchase Agreement and the other documents delivered pursuant thereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no
18
<PAGE>
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
5.5 Severability. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least seventy-five percent (75%) of the Registrable Securities.
(b) Except as otherwise expressly provided, 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 seventy-five percent (75%)
of the Registrable Securities.
(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.
5.7 Delays or Omissions. It is agreed that no delay or omission to exercise
any right, power, or remedy accruing 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.
5.8 Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party
to be notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient; if not, then on the next business day,
(c) five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to 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.
5.9 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.
19
<PAGE>
5.10 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.
5.11 Prior Agreement. The Prior Agreement is hereby superseded in its
entirety and shall be of no further force or effect.
5.12 Aggregation of Stock. All Shares held or acquired by affiliated
entities or person shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
5.13 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
20
<PAGE>
In Witness Whereof, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Company:
NOOSH, Inc.
By: /s/ Ofer Ben-Shachar
-------------------------------------------
Ofer Ben-Shachar
President and Chief Executive Officer
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF COOLEY GODWARD]
March 1, 2000
NOOSH, Inc.
3401 Hillview Avenue
Palo Alto, CA 94304
Dear Ladies & Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by NOOSH, Inc. (the "Company") of a Registration Statement on
Form S-1 (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission"), covering an underwritten public offering of up to
4,600,000 shares of Common Stock (the "Common Stock").
In connection with this opinion, we have (i) examined and relied upon the
Registration Statement and related Prospectus, the Company's Certificate of
Incorporation and Bylaws, as amended, and the originals or copies certified to
our satisfaction of such records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below, and (ii) assumed that the shares of Common
Stock will be sold by the Underwriters at a price established by the Pricing
Committee of the Board of Directors of the Company.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Common Stock, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included on the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
Cooley Godward LLP
By: _______________________
Laura A. Berezin
<PAGE>
EXHIBIT 10.9
PROMISSORY NOTE
$300,000.00 Palo Alto, CA
October 8, 1999
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 3401
Hillview Avenue, Building B, Palo Alto, CA, or at such other place as the holder
hereof may designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of Three Hundred Thousand
Dollars ($300,000.00) together with interest accrued from the date hereof on the
unpaid principal at the rate of 6% per annum, or the maximum rate permissible by
law (which under the laws of the State of California shall be deemed to be the
laws relating to permissible rates of interest on commercial loans), whichever
is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on October 8, 2004.
Interest Payments. Interest shall be payable annually in arrears on
the Principal Repayment Date and shall be calculated on the basis of a 360-
day year for the actual number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company or its Affiliate is terminated for any reason prior
to payment in full of this Note, this Note shall be accelerated and all
remaining unpaid principal and interest shall become due and payable immediately
after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid toward
the satisfaction of this Note shall be applied first to the payment of interest
as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and Stock Pledge Agreement of even date
herewith between the undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
1.
<PAGE>
EXHIBIT 10.11
PROMISSORY NOTE
$49,900.00 Palo Alto, CA
January 3, 2000
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 3401
Hillview Avenue, Building B, Palo Alto, CA, or at such other place as the holder
hereof may designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of Forty Nine Thousand
Nine Hundred Dollars ($49,900.00) together with interest accrued from the date
hereof on the unpaid principal at the rate of 6% per annum, or the maximum rate
permissible by law (which under the laws of the State of California shall be
deemed to be the laws relating to permissible rates of interest on commercial
loans), whichever is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on January 3, 2005.
Interest Payments. Interest shall be payable annually in arrears on
the Principal Repayment Date and shall be calculated on the basis of a 360-
day year for the actual number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company or its Affiliate is terminated for any reason prior
to payment in full of this Note, this Note shall be accelerated and all
remaining unpaid principal and interest shall become due and payable immediately
after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and Stock Pledge Agreement of even date
herewith between the undersigned and the Company.
1.
<PAGE>
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ Kevin Akeroyd
-----------------
Kevin Akeroyd
2.
<PAGE>
EXHIBIT 10.12
PROMISSORY NOTE
$59,925.00 Palo Alto, CA
January 3, 2000
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 3401
Hillview Avenue, Building B, Palo Alto, CA, or at such other place as the holder
hereof may designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of Fifty nine thousand
nine hundred twenty five Dollars ($59,925.00) together with interest accrued
from the date hereof on the unpaid principal at the rate of 6% per annum, or the
maximum rate permissible by law (which under the laws of the State of California
shall be deemed to be the laws relating to permissible rates of interest on
commercial loans), whichever is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on December 20, 2004.
Interest Payments. Interest shall be payable annually in arrears on
the Principal Repayment Date and shall be calculated on the basis of a 360-
day year for the actual number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company or its Affiliate is terminated for any reason prior
to payment in full of this Note, this Note shall be accelerated and all
remaining unpaid principal and interest shall become due and payable immediately
after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid toward
the satisfaction of this Note shall be applied first to the payment of interest
as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and Stock Pledge Agreement of even date
herewith between the undersigned and the Company.
1.
<PAGE>
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ Ray Martinelli
----------------------
Ray Martinelli
2.
<PAGE>
EXHIBIT 10.13
PROMISSORY NOTE
$641,250.00 Palo Alto, CA
January 3, 2000
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 3401
Hillview Avenue, Building B, Palo Alto, CA, or at such other place as the holder
hereof may designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of Six Hundred Forty-One
Thousand Two Hundred Fifty Dollars ($641,250.00) together with interest accrued
from the date hereof on the unpaid principal at the rate of 6% per annum, or the
maximum rate permissible by law (which under the laws of the State of California
shall be deemed to be the laws relating to permissible rates of interest on
commercial loans), whichever is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on January 3, 2005.
Interest Payments. Interest shall be payable annually in arrears on
the Principal Repayment Date and shall be calculated on the basis of a 360-day
year for the actual number of days elapsed; provided, however, that in the event
that the undersigned's employment by or association with the Company or its
Affiliate is terminated for any reason prior to payment in full of this Note,
this Note shall be accelerated and all remaining unpaid principal and interest
shall become due and payable immediately after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid toward
the satisfaction of this Note shall be applied first to the payment of interest
as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and Stock Pledge Agreement of even date
herewith between the undersigned and the Company.
-1-
<PAGE>
The undersigned hereby represents and agrees that the mounts due under this
Note are not consumer debt, and are not incurred primarily for personal, family
or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ Timothy J. Mooore
----------------------
TIMOTHY J. MOORE
-2-
<PAGE>
EXHIBIT 10.14
PROMISSORY NOTE
$62,475.00 Palo Alto, CA
January 15, 2000
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 3401
Hillview Avenue, Building B, Palo Alto, CA, or at such other place as the holder
hereof may designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of sixty two thousand four
hundred seventy five dollars ($62,475.00) together with interest accrued from
the date hereof on the unpaid principal at the rate of 6% per annum, or the
maximum rate permissible by law (which under the laws of the State of California
shall be deemed to be the laws relating to permissible rates of interest on
commercial loans), whichever is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on January 15, 2005.
Interest Payments. Interest shall be payable annually in arrears on
the Principal Repayment Date and shall be calculated on the basis of a 360-
day year for the actual number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company or its Affiliate is terminated for any reason prior
to payment in full of this Note, this Note shall be accelerated and all
remaining unpaid principal and interest shall become due and payable immediately
after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and Stock Pledge Agreement of even date
herewith between the undersigned and the Company.
-1-
<PAGE>
EXHIBIT 10.14
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ Steven Baloff
-------------------------
Steven Baloff
-2-
<PAGE>
EXHIBIT 10.15
PROMISSORY NOTE
$100,000.00 Palo Alto, CA
January 15, 2000
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 3401
Hillview Avenue, Palo Alto, CA 94304 or at such other place as the holder hereof
may designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of One Hundred Thousand Dollars
($100,000.00) together with interest accrued from the date hereof on the unpaid
principal at the rate of 6.20% per annum, or the maximum rate permissible by law
(which under the laws of the State of California shall be deemed to be the laws
relating to permissible rates of interest on commercial loans), whichever is
less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on January 15, 2002.
Interest Payments. Interest shall be payable on the Principal
Repayment Date and shall be calculated on the basis of a 360-day year for
the actual number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company is terminated for any reason prior to payment in
full of this Note, this Note shall be accelerated and all remaining unpaid
principal and interest shall become due and payable immediately after such
termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Stock Pledge Agreement and Joint Escrow Instructions of even date herewith
between the undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
<PAGE>
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ David Hannebrink
-------------------------
David Hannebrink
<PAGE>
EXHIBIT 10.16
PROMISSORY NOTE
$674,730.00 Palo Alto, CA
January 15, 2000
For Value Received, the undersigned hereby unconditionally promises to pay
to the order of NOOSH, Inc., a California corporation (the "Company"), at 3401
Hillview Avenue, Building B, Palo Alto, CA, or at such other place as the holder
hereof may designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of six hundred seventy
four thousand seven hundred thirty dollars ($674,730.00) together with interest
accrued from the date hereof on the unpaid principal at the rate of 6% per
annum, or the maximum rate permissible by law (which under the laws of the State
of California shall be deemed to be the laws relating to permissible rates of
interest on commercial loans), whichever is less, as follows:
Principal Repayment. The outstanding principal amount hereunder shall
be due and payable in full on January 15, 2005.
Interest Payments. Interest shall be payable annually in arrears on
the Principal Repayment Date and shall be calculated on the basis of a 360-
day year for the actual number of days elapsed;
provided, however, that in the event that the undersigned's employment by or
association with the Company or its Affiliate is terminated for any reason prior
to payment in full of this Note, this Note shall be accelerated and all
remaining unpaid principal and interest shall become due and payable immediately
after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and Stock Pledge Agreement of even date
herewith between the undersigned and the Company.
1.
<PAGE>
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ Robert Shaw
-------------------------
Robert Shaw
2.
<PAGE>
EXHIBIT 10.17
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
CO-DEVELOPMENT AND MARKETING AGREEMENT
This Co-Development and Marketing Agreement is made effective as of January
25, 2000 (the "Effective Date") by Noosh, Inc., a California corporation having
a place of business at 3401 Hillview Avenue, Palo Alto, California 94303
("Noosh"), and R.R. Donnelley & Sons Company, a Delaware corporation having a
place of business at 77 West Wacker Drive, Chicago, IL 60601 ("RRD").
Recitals
A. Noosh is engaged in the business of, among other things, designing,
developing, and providing an Internet-based service known as "Noosh.com," which
is designed to help improve the process of buying, selling and managing print
jobs by providing a web site where corporate print buyers, printers and creative
agencies can work collaboratively on print jobs.
B. RRD is engaged in the business of, among other things, providing
print-related products and services to its customers.
C. Noosh and RRD desire to enter into a relationship whereby the parties
will work together to actively promote and market the usage of the Noosh Service
(as defined below), particularly by RRD, RRD's customers and others for print
jobs within certain segments of the print industry. Initially, pursuant to a
User Agreement to be entered into between the parties as of the Effective Date,
RRD will be entitled to access and use of the standard Noosh Service for the
processing of print jobs. Promptly following the Effective Date, the parties
also intend to create rrd.noosh.com, a private web site which will link users of
RRD's web site to the Noosh Service and feature RRD as the only print vendor
permitted to interact with print buyers through rrd.noosh.com. Subsequently,
the parties intend to extend the functionality of rrd.noosh.com by integrating
the Noosh Service with up to four RRD Portals (as defined below).
D. The parties also wish to undertake co-marketing activities for their
mutual benefit as further specified in this Agreement.
Agreement
Accordingly, in consideration for their respective covenants set forth
below, the parties agree as follows:
1. Definitions. As used in this Agreement:
1.1 "Affiliate" of a party means any person, corporation or other
entity (i) which own more than 50% of the voting securities or ownership
interest of such party ("Parent"); (ii) in which such party, directly or
indirectly, owns more than 50% of the voting securities or ownership interest;
or (iii) in which such party's Parent, directly or indirectly, owns more than
50% of the voting securities or ownership interest.
1.2 "API" means an application's programmer's interface.
1.3 "Integration Code" means the software, programming code, API's
and other software-based technology used or developed by the parties, whether
alone, jointly or with
1.
<PAGE>
others, in object code form only, for use in integrating the Noosh Service with
the RRD Portals pursuant to Section 3 below.
1.4 "Integration SC" means the Integration Code, excluding third-
party source code for which Noosh does not have rights to sublicense, in human-
readable source code format and any programmer's notes or other related
materials, licensed to RRD pursuant to Section 3.5 below.
1.5 "Intellectual Property Rights" means all current and future
worldwide copyrights, trade secrets, patents and other patent rights, utility
models, mask work rights, moral rights, trademarks, trade names, service marks,
and all other intellectual property rights, including all applications and
registrations with respect thereto.
1.6 "Noosh Competitor" means [*] together with any of their
respective Affiliates or successors in interest, together with any other persons
or entities which market the products, services or technologies of [*] under
license from [*]
1.7 "Noosh Marks" means the trademarks, service marks, trade names,
and logos of Noosh listed in Exhibit A, as such list may be updated from time to
---------
time by Noosh.
1.8 "Noosh Service" means Noosh's proprietary Internet-based service
as described in Recital A above, provided by Noosh through www.noosh.com or any
successor web site, as such service may be revised, augmented, superseded,
enhanced, modified or supplemented from time to time. For the purposes of this
Agreement, the Noosh Service will include [*] The Noosh Service shall not
include [*]
1.9 "Noosh Technology" means the software, programming code, API's,
and other technology used or developed by Noosh, (whether alone or with others)
or licensed by Noosh from third parties, to develop and provide the Noosh
Service and rrd.noosh.com, together with any modifications, improvements,
enhancements and derivative works made to or from any of the foregoing by either
party in connection with this Agreement. Without limiting any rights of RRD in
the RRD Marks, Noosh Technology will include all such technology used to create
the RRD GUI as displayed within the Noosh Service (as integrated with the RRD
Portals) or rrd.noosh.com.
1.10 "Print Vendor" means, with respect to any print job run on the
Noosh Service (whether directly on the Noosh Service or through rrd.noosh.com or
an RRD Portal), the corporation or other entity which, by itself or through
subcontractors, is responsible for or performs the actual printing of materials
which are the subject of such print job.
1.11 "RRD Competitor" means [*] together with any of their respective
Affiliates or successors in interest, together with any other persons or
entities which market the products, services or technologies of [*] under
license from [*]
[] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2.
<PAGE>
EXHIBIT 10.18
[LOGO] Internet Services and Co-Location Agreement
Please read this Internet Services and Co-Location Agreement (this "Agreement")
carefully before signing, since by signing this Agreement, you consent to all of
its terms and conditions. This Agreement is made by and between AboveNet
Communications, Inc. ("AboveNet") and Customer. This Agreement is effective
upon AboveNet's acceptance as indicated by its signature below on the date below
(the "Effective Date"). This Agreement may De executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
<TABLE>
<CAPTION>
<S> <C>
Customer Signature: /s/ Larry Slotnick Customer ID #:
-------------------------------- -----------------------------------------
Print Name: Larry Slotnick Contract No.:
---------------------------------------- -----------------------------------------
Title: Vice President Effective Date:
--------------------------------------------- ---------------------------------------
Date: 7/20/99 AboveNet Signature:
--------------------------------------------- ------------------------------------
Company Name: NOOSH, Inc. Print Name:
------------------------------------- --------------------------------------------
Address: 3401 Hillview Ave.
------------------------------------------
Palo Alto, CA 94304
- --------------------------------------------------
Phone: (650) 858-8300 x333
--------------------------------------------
Fax: (650) 858-1015
--------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Thank you for choosing AboveNet to provide your Internet co-location services.
As used in this Agreement, the term "you" and "customer" refers to the above-
named corporation, partnership or other business entity that enters into this
Agreement, and "service" means the transmission of data to and from the Internet
through the network of routers, switches and communication channels owned and
controlled by AboveNet ("Network") together with co-location services including
24x7 connectivity to the Internet and Co-location Space, as further defined in
this Agreement and in your Order for AboveNet Services Form (the "Order Form").
The initial Order Form is attached to this Agreement as Exhibit A. AboveNet and
---------
Customer may enter into subsequent Order Forms, which may supercede or
complement prior Order Forms. As used in this Agreement, the term "Customer
Equipment" refers to any and all computer equipment, software, networking
hardware or other materials placed by or for Customer in the Co-location Space,
other than AboveNet Equipment.
AboveNet will begin installation, initiation and Service after it receives and
accepts: (1) your Order Form; (2) a copy of this Agreement signed by your
authorized representative and (3) payment of amounts due under Section 1.1
below, detailed on your Order Form.
- --------------------------------------------------------------------------------
1. Service Fees And Billing. Customer agrees to pay the Service Activation
Charges, Monthly Service Fees, and other fees indicated on the Order Form
(collectively, "Service Fees").
1.1 Activation Charges. AboveNet will bill Customer for all Service
Activation Charges and first and last month Service Fees (the
"Activation Charges') upon AboveNet's acceptance of this Agreement and
the Order Form, AboveNet will not commence installation, Initiation
and Service unless and until it either has received payment in full of
all Activation Charges or has agreed, at its sole option, to extend
credit to Customer.
1.2 Recurring Fees. AboveNet will begin billing for recurring Service Fees
on the date that is the earlier of: (a) the Installation Date
specified in the Order Form; and (b) the date that Customer places
Customer Equipment in AboveNet's premises. If, however, Customer is
unable to use the Services commencing on the installation Date solely
as a result of delays caused by AboveNet, then the installation Date
specified in the Order Form shall be extended one day for each day of
delay caused by AboveNet. On or about the first day of each month,
AboveNet will bill Customer
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for Network services provided during the previous month, and for co-
location service to be provided in the current month. Recurring
Service Fees do not include monthly telephone company charges which
are billed separately by the local telephone company(s).
1.3 Payment. All Fees and charges will be due, in U.S. dollars, within
twenty (20) days of the date of each AboveNet invoice. Late payments
will accrue interest at a rate of one and one-half percent (1 1/2%)
per month, or the highest rate allowed by applicable law, whichever is
lower. If in its judgment AboveNet determines that Customer lacks
financial resources, AboveNet may, upon written notice to Customer,
modify the payment terms to secure Customer's payment obligations
before providing Services.
1.4 Taxes. All payments required by this Agreement are exclusive of
applicable taxes and shipping charges. Customer will be liable for and
will pay in full all such amounts, other than taxes based on AboveNet
net income.
2. Co-Location.
2.1 Installation. AboveNet grants you the right to operate Customer
Equipment at the Co-location Space, as specified on your Order Form.
The Co-location Space is provided on an "AS-IS" basis and you may use
the Co-location Space only for the purposes of maintaining and
operating Customer Equipment as necessary to support local access
communications facilities and links to AboveNet and to third parties.
Customer will install Customer Equipment in the Co-location Space
after obtaining the appropriate authorization from AboveNet to access
AboveNet promises. Customer will remove and be solely responsible for
all packaging for Customer Equipment.
2.2 Access. You may access the Co-location Space only in accordance with
the AboveNet Co-Location Access Policies located at
http://www.above.net/html/security.html as updated from time to time.
---------------------------------------
Customer not provide or make available to any third party any portion
of the Co-location Space without AboveNet's prior written consent,
which consent AboveNet may withhold in its sole discretion.
2.3 Removal of Customer Equipment. Customer will provide AboveNet with
written notification two (2) days before Customer wishes to remove any
Customer Equipment. Before authorizing the removal of any Customer
Equipment, AboveNet's accounting department will verify that Customer
has no payments due to AboveNet. Once AboveNet authorizes removal of
Customer Equipment, Customer will remove such Customer Equipment, and
will be solely responsible to bring appropriate packaging and moving
materials. Should Customer use an agent or other third party (for
example, but without limitation, a common carrier such as U.P.S.) to
remove Customer Equipment, Customer will be solely responsible for the
acts of such party, and any damages caused by such party to Customer
Equipment or otherwise. At Customer's option, AboveNet will remove and
package Customer Equipment, and place such Customer Equipment in a
designated area for pick-up, on the condition that Customer either
provides all packaging needed or pays AboveNet to package Customer
Equipment, Customer may thereafter remove Customer Equipment from the
designated area, or may arrange for a carrier to remove and ship such
equipment with any necessary insurance to be paid by Customer.
3. Security. AboveNet does not guarantee security of Customer Equipment, the
Co-Location Space or of the Network. AboveNet requires that you and your
employees comply with all Co-Location Security Procedures, as modified from
time to time, in order to maximize the security of the Network and AboveNet
premises. AboveNet's current Co-Location Security Procedures are located at
http://www.above.net/html/security.html, In particular, you must establish
---------------------------------------
a password with AboveNet for purposes of requesting any support services
with respect to Customer Equipment or your Network connection, either by
telephone or e-mail. Information detailing password requirements is
available on the World Wide Web at http://www.above.net /html/sug.html.
-----------------------------------
Only individuals whom you have identified as "Customer Representatives" in
writing to AboveNet will be permitted to enter the Co-location Space, to
request Services on your behalf, or to request any support services with
respect to Customer Equipment or your Network connection, either by
telephone or email (for example, but without limitation, instructing
AboveNet to modify or reconfigure its Services or to remove Customer
Equipment). For good cause, AboveNet may suspend the right of any Customer
Representative or other person to visit the AboveNet premises and/or the
Co-location Space. AboveNet will assist in Network security breach
detection or identification, but shall not be liable for any inability,
failure or mistake in doing so.
2
<PAGE>
4. Local and Long Distance Carriers. AboveNet will provide Customer with a
list of approved third party carriers for data communications and
telecommunications. Customer is responsible for ordering all local and
long-distance lines from such third party carriers and ordering any and all
necessary cross-connects from AboveNet. AboveNet Service Fees for such
cross-connects are as indicated on the Order Form. The carriers will
install such circuits in Customer's name. Customer will be solely
responsible for such circuits and for all payments due to the carriers.
Customer will notify the carrier directly when Customer wishes to terminate
or modify such circuit.
5. Domain Information and Registration Application. If Customer has not
registered the domain name that it wishes to use, Customer may complete the
applicable sections of the Order Form to request registration or a change
in domain name,
6. Other Networks; Approval and Usage. Services include the ability to
transmit data beyond AboveNet's Network, through other networks, public and
private. Use of or presence on other networks may require approval of the
respective network authorities and will be subject to any acceptable usage
policies such networks may establish. Customer will not hold AboveNet
responsible for, and AboveNet will not be liable for, such approval or for
violation of such policies. Customer understands that AboveNet does not own
or control other networks outside of its Network, and AboveNet is not
responsible or liable for performance (or non-performance) within such
networks or within interconnection points between the Service and other
networks that are operated by third pages.
7. Resale. Customer may resell the Service after receiving AboveNet's prior
written approval as to the nature and scope of such resale as set forth In
Section 2.2. Should Customer resell any portion of the Service to any other
party, Customer assumes all liabilities arising out of or related to such
third party sites and communications. Customer agrees to enter into written
agreements with any and all parties to which it resells any portion of the
Services with terms and conditions at least as restrictive and as
protective of AboveNet's rights as the terms and conditions of this
Agreement, including, without limitation, Sections 2.3, 3, 6, 8, 9.6-9.8,
10, 11, 12, 14 and 16, and naming AboveNet as a third party beneficiary.
8. Acceptable Use Guidelines. Customer must at all times conform its use of
the Service to AboveNet's Acceptable Use Guidelines and Anti-SPAM Policy,
as AboveNet may update such Guidelines and Policy from time to time. The
current version of AboveNet's Acceptable Use Guidelines can be found at
http.//www.above.net/html/aug.html. AboveNet's Anti-SPAM Policy is located
----------------------------------
at http://www.above.net/html/anti-spam.html. If AboveNet Is informed by
----------------------------------------
government authorities or other parties of inappropriate or illegal use of
AboveNet's facilities (including but not limited to the Network) or other
networks accessed through AboveNet, or AboveNet otherwise learns of such
use or has reason to believe such use may be occurring, then Customer will
cooperate in any resulting investigation by AboveNet or government
authorities. Any government determinations will be binding on Customer. If
Customer fails to cooperate with any such investigation or determination,
or fails to immediately rectify any illegal use, AboveNet may immediately
suspend Customer's Service. Further, upon notice to Customer, AboveNet may
modify or suspend Customer's Service as necessary to comply with any law or
regulation as reasonably determined by AboveNet. This includes, without
limitation, any use contrary to the Digital Millennium Copyright Act of
1998, 17 U.S.C. 512.
9. Limited Service Level Warrant. AboveNet warrants that it will use its
commercially reasonable efforts to minimize Excess Packet Loss and Latency,
and to avoid Downtime, and that AboveNet will provide the following
remedies to customer; (Excess Packet Loss, Latency and Downtime are defined
below).
9.1 Packet Loss and Latency. AboveNet does not proactively monitor the
packet loss or transmission latency of specific customers. AboveNet
does, however, proactively monitor the aggregate packet loss and
transmission latency within its LAN and WAN. In the event that
AboveNet discovers (either from its own efforts or either being
notified by Customer) that Customer is experiencing packet loss in
excess of five percent (.5%) ("Excess Packet Loss") or transmission
latency In excess of 120 milliseconds round-trip time based on
AboveNet's measurements ("Latency") between any two routers within the
continental United States portion of the Network on average for each
hour, and Customer notifies AboveNet (or AboveNet has notified
Customer), then AboveNet will use its commercially reasonable actions
to determine the source of the Excess Packet Loss or Latency and
correct the problem.
9.2 Remedy for Failure. If either Excess Packet Loss or Latency occurs and
it stems from a source within the Network and not from the Customer or
beyond the Network, and if AboveNet fails to
3
<PAGE>
correct the Excess Packet Loss or Latency after using its commercially
reasonable efforts for a period of twenty-four (24) hours after the
onset of such Excess Packet Loss or Latency, then AboveNet will credit
Customer's account the pro-rata Bandwidth Fees (as set forth in the
applicable Order Form) for the continuous duration of such Excess
Packet Loss or Latency; provided that all such credits will not exceed
an aggregate maximum credit of Bandwidth Fees otherwise due from
Customer for one (1) calendar month for failures in any one (1)
calendar month.
9.3 Inability to Access the Internet (Downtime). AboveNet will use its
commercially reasonable efforts to avoid Downtime for 99.9% of the
hours as an average calculated over each calendar year. If Customer is
unable to transmit and receive information from the Network to other
portions of the Internet because AboveNet failed to provide Network
access Services ("Downtime") for more than four (4) continuous hours,
then AboveNet will credit Customer's account the pro-rata Bandwidth
Fees (as set forth In the applicable Order Form) for the continuous
duration of such Excess Packet Loss or Latency; provided that all such
credits will not exceed an aggregate maximum credit of Bandwidth Fees
otherwise due from Customer for one (1) calendar month for failures in
any one (1) calendar month. For purposes of the foregoing, "unable to
transmit and receive" shall mean sustained packet loss in excess of
fifty percent (50%) based on AboveNet measurements.
9.4 Year 2000. AboveNet hereby incorporates its Year 2000 Compliance
Disclosure found at http://www.above.net/html/y2k/html into this
----------------------------------
Agreement. If Customer experiences any Excess Packet Loss, Latency or
Downtime due to AboveNet's failure to be Year 2000 compliant (as
defined in the Year 2000 Compliance Disclosure), Customer will have
the remedies set forth in this Section 9, and the limitations sat
forth in this Section 9, Section 11 and the Year 2000 Compliance
Disclosure. The Year 2000 Compliance Disclosure, as incorporated into
this Agreement, is provided as a "Year 2000 Readiness Disclosure" as
defined in the Year 2000 Information and Readiness Disclosure Act of
1998 (Public Law 105-Z71, 112 Stat. 2386) enacted on October 19, 1998.
9.5 Customer Must Request Credit. Customer must notify AboveNet within
three (3) business days from the time Customer becomes eligible to
receive a credit under this Section 9 to receive such credit. Failure
to comply with this requirement will forfeit Customer's right to
receive a credit.
9.6 Limitation on Remedies. If Customer is entitled to multiple credits
under this Section 9, such credits shall not be cumulative beyond a
total of credits for one (1) calendar month of Bandwidth Fees in any
one (1) calendar month in any event. AboveNet will not apply a credit
under Section 9.2 for any Excess Packet Loss or Latency for which
Customer received a credit under Section 9.3. AboveNet will only apply
a credit to the month in which the Incident occurred. Further,
AboveNet will not apply a credit for any period in which Customer
received any bandwidth Services free of charge. Sections 9.2 and 9.3
above state Customer's sole and exclusive remedy for any failure by
AboveNet to provide services or adequate service levels, including,
but not limited to any outages or Network congestion. AboveNet's
blocking of data communications in contravention of its Anti-SPAM
Policy or Acceptable Use Guidelines shall not be deemed to be a
failure of AboveNet to provide adequate Service levels under this
Agreement.
9.7 No Other Warranty. Except for the express, warranty set out in this
Section 9 above, the Services are provided on an "As Is" basis, and
Customer's use of the Services is at its own risk. AboveNet does not
make, and hereby disclaims, any and all other express and implied
warranties, including, but not limited to, warranties of
merchantability, fitness for a particular purpose, noninfringement and
title, and any warranties arising from a course of dealing, usage, or
trade practice. AboveNet does not warrant that the Services will be
uninterrupted, error-free, or completely secure.
9.8 Disclaimer Of Third Party Actions and Control. AboveNet does not and
cannot control the flow of data to or from the Network and other
portions of the Internet. Such flow depends in large part on the
performance of Internet services provided or controlled by third
parties. At times, actions or inactions caused by these third parties
can produce situations in which AboveNet customers' connections to the
Internet (or portions thereof) may be impaired or disrupted. Although
AboveNet will use commercially reasonable efforts to take actions it
deems appropriate to remedy end avoid such events, AboveNet cannot
guarantee that they will not occur. Accordingly, AboveNet disclaims
any and all liability resulting from or related to such events.
4
<PAGE>
10. Insurance. Customer will keep in full force and effect during the term
of this Agreement: (i) business loss and interruption insurance in an
amount not less than that necessary to compensate Customer and its
customers for complete failure of Service; (ii) comprehensive general
liability insurance in an amount not less than one (1) million dollars
per occurrence for bodily injury and property damage; (ii) employer's
liability insurance in an amount not less than one (1) million dollars
per occurrence; and (iii) workers' compensation insurance in an amount
not less than that required by applicable law. Customer also agrees
that it will be solely responsible for ensuring that its agents
(including contractors end subcontractors) maintain other insurance at
levels no less than those required by applicable law and Customary in
Customer's end its agents' industries. Prior to installation of any
Customer Equipment in the Co-location Space or otherwise as AboveNet
may request, Customer will furnish AboveNet with certificates of
Insurance which evidence the minimum levels of Insurance set forth
above. Customer agrees that prior to the installation of any Customer
Equipment at AboveNet premises or the Co-location Space, Customer will
cause its insurance provider(s) to name both AboveNet and the AboveNet
landlord indicated on the applicable Order Form as additional insured
and notify AboveNet in writing of the effective data of such coverage.
Customer agrees that Customer and its agents and representatives shall
not pursue any claims against AboveNet for any liability AboveNet may
have under or relating to this Agreement unless and until Customer or
Customer's employee, as applicable, first makes claims against
Customer's insurance provider(s) and such insurance provider(s)
finally resolve(s) such claims. Any inability by Customer to furnish
the proof the insurance required under this Section 10 or failure to
obtain such insurance shall be a materiel breach of this Section 10
and of this Agreement.
11. Limitations of Liability.
11.1 Personal Injury. Each Customer Representative and any other
persons visiting AboveNet facilities does so at his or her own
risk and AboveNet shall not be liable for any harm to such
persons resulting from any cause other than AboveNet's gross
negligence or willful misconduct resulting in personal injury to
such persons during such a visit.
11.2 Damage to Customer Business. Except as expressly set forth In
Section 9 including the limited remedy and other limitations set
forth under Section 9, in no event will AboveNet be liable to
Customer, any Customer Representative, or any third party for
any claims arising out of or related to Customer's business,
Customer's customers or clients, Customer Representative's
activities at AboveNet or otherwise, or for any lost revenue,
lost profits, replacement goods, loss of technology, rights or
services, incidental, punitive, indirect or consequential
damages, loss of data, or interruption or loss of use of Service
or of any Customer's business, even if advised of the
possibility of such damages, whether under theory of contract,
tort (including negligence), strict liability or otherwise.
11.3 Damage to Customer Equipment. AboveNet assumes no liability for
any damage to, or loss of, any Customer Equipment resulting from
any cause other than AboveNet's gross negligence or willful
misconduct. To the extent AboveNet is liable for any damage to,
or loss of, the Customer Equipment for any reason, such
liability will be limited solely to the then-current value of
the Customer Equipment and further subject to the limitations
set forth in this Section 11.3 and in Section 11.4 below. In no
event will AboveNet be liable to Customer, any Customer
Representative, or any third party for any claims arising out of
or related to Customer Equipment for any lost revenue, lost
profits, replacement goods, loss of technology, rights or
services, incidental, punitive, indirect or consequential
damages, loss of data, or interruption or Ioss of use of any
Customer Equipment even if advised of the possibility of such
damages, whether under theory of contract, tort (including
negligence), strict liability or otherwise.
11.4 Maximum Liability. Notwithstanding anything to the contrary in
this Agreement, AboveNet's maximum aggregate liability to
Customer related to or in connection with this Agreement will be
limited to the total amount paid by Customer to AboveNet
hereunder for the Twelve (12) month period prior to the event or
events giving rise to such liability.
12. Defense of third party claims and Indemnification.
12.1 Defense. Customer will defend AboveNet, its directors, officers,
employees, affiliates and customers (collectively, the "Covered
Entities") from and against any end all claims, actions or
demands brought by or against AboveNet and/or any of the Covered
Entities alleging: (a) with respect to the Customer's business:
(i) infringement or misappropriation of any intellectual
property
5
<PAGE>
rights; (ii) defamation, libel, slander, obscenity, pornography,
or violation of the rights of privacy or publicity; or (iii)
spamming, or any other offensive, harassing or illegal conduct
or violation of the Acceptable Use Guidelines or Anti-Spam
Policy; (b) any damage or destruction to the co-location Space,
the Network, AboveNet premises, AboveNet Equipment or to any
other AboveNet customer which damage is caused by or otherwise
results from acts or omissions by Customer, Customer
Representative(s) or Customer's designees; (c) any personal
injury or property damage to any Customer employee, Customer
Representative or other Customer designee arising out of such
individual's activities related to the Services, unless such
injury or property damage is caused solely by AboveNet's gross
negligence or willful misconduct; or (d) any other damage
arising from the Customer Equipment or Customer's business
(collectively, the "Covered Claims").
12.2 Indemnification. Customer hereby agrees to indemnify AboveNet
and each covered Entity from and against all damages, costs, and
fees awarded in favor of third parties in each Covered Claim,
and Customer will indemnify and hold harmless AboveNet and each
Covered Entity from and against any and all claims, demands,
liabilities, losses, damages, expenses and costs (including
reasonable attorneys fees) (collectively, "Losses") suffered by
AboveNet and each Covered Entity which Losses result from or
arise out of a Covered Claim.
12.3 Notification. Customer will provide AboveNet with prompt written
notice of each Covered Claim of which Customer becomes aware,
and, at AboveNet's sole option, AboveNet may elect to
participate in the defense and settlement of any Covered Claim,
provided that such participation shall not relieve Customer of
any of its obligations under this Section 12.
13. Reliance on Disclaimer, Liability Limitations and Indemnification
Obligations. Customer acknowledges that AboveNet has set its prices
and entered into this Agreement in reliance upon the limitations and
exclusions of liability, the disclaimers of warranties and damages and
Customer's indemnity obligations set forth herein, and that the same
form an essential basis of the bargain between the parties. The
parties agree that the limitations and exclusions of liability and
disclaimers specified in this Agreement will survive and apply even if
this Agreement is found to have failed of their essential purpose.
14. Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party
concerning the other party's business, plans, customers, technology,
and products, including the terms and conditions of this Agreement
("Confidential Information"). Confidential Information will Include,
but not be limited to, each party's proprietary software and customer
information. Each party agrees that it will not use in any way, for
its own account or the account of any third party, except as expressly
permitted by this Agreement, nor disclose to any third party (except
as required by law or to that party's attorneys, accountants end other
advisors as reasonably necessary), any of the other party's
Confidential Information and will take reasonable precautions to
protect the confidentiality of such information. Information will not
be deemed Confidential Information hereunder if such information: (i)
is known to the receiving party prior to receipt from the disclosing
party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (ii) becomes
known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one
having an obligation of confidentiality to the disclosing party; (iii)
becomes publicly known or otherwise ceases to be secret or
confidential, except through a breach of this Agreement by the
receiving party; (iv) is independently developed by the receiving
party; or (vi) is required to be released by law or regulation,
provided that the receiving party provide prompt written notice to the
disclosing party of such impending release, and the releasing party
cooperate fully with the disclosing party to minimize such release.
15. Term. This Agreement will be effective beginning on the Effective Date
and ending at the end of the last "Term" specified in any Order Form
accepted by AboveNet, unless terminated as provided in Section 10
below. Use of any Service after the date specified on the Order Form
under which such Service was provided will constitute Customer's
acceptance of AboveNet's then current standard Agreement and the fee
rates then in effect, but be terminable by AboveNet upon notice.
16. Termination.
16.1 For Nonpayment. After fifteen (15) days of non-payment from the
due date, or such longer period as AboveNet's Billing Terms &
Conditions may provide, AboveNet may disable Service. To re-
enable Service, AboveNet will require a reconnection fee. After
thirty (30) days of nonpayment from the AboveNet invoice due
date, or such longer period as AboveNet's Billing Terms &
6
<PAGE>
Conditions may provide, AboveNet may terminate the Service
permanently. Termination does not remove Customer's obligations
under this Agreement, including the obligation to pay ail fees
for Service until termination or due for a committed, initial
Term.
16.2 Unacceptable Use; Bankruptcy. AboveNet may terminate this
Agreement upon written notice to Customer for Violation of the
Acceptable Use Guidelines or Anti-SPAM Policy or if Customer
becomes the subject of a voluntary petition in bankruptcy or any
voluntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors or
becomes the subject of an involuntary petition in bankruptcy or
any involuntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors, if
such petition or proceeding is not dismissed within sixty (60)
days of filing.
16.3 For Cause. Either party may terminate this Agreement if the
other party materially breaches any term or condition of this
Agreement and fails to cure such breach within thirty (30) days
after receipt of written notice of the same, except in the case
of failure to pay fees which failure is subject to Section 16.1
above or for failure to comply with AboveNet's Acceptable Use
Guidelines or Anti-SPAM Policy as set forth in Section 16.2.
16.4 No Liability for Termination. Neither party will be liable to
the other for any termination or expiration of this Agreement in
accordance with its terms. However, expiration or termination
will not extinguish claims or liability (including, without
limitation, for payments due) arising prior to such expiration
or termination.
16.5 Effect of Termination. Upon the effective date of expiration or
termination of this Agreement: (a) AboveNet will immediately
cease providing the Services; (b) any and all payment
obligations of Customer under this Agreement will become due
immediately, including but not limited to Recurring Service Fees
through the end of the term indicated on the Order Form adjusted
for the net present value of the prospective payments except in
the case of termination per Section 16.2 above; (c) within
thirty (30) days after such expiration or termination, each
party will return all Confidential information of the other
party in its possession at the time of expiration or termination
and will not make or retain any copies of such Confidential
Information except as required to comply with any applicable
legal or accounting record keeping requirement; and (d) Customer
will remove from AboveNet's premises all Customer Equipment and
any of its other property on AboveNet premises within ten (10)
days of AboveNet's request (and only after Customer receives
authorization from AboveNet as provided in Section 2.3) and
return the Co-location Space to AboveNet In the same condition
as it was prior to Customer's installation. If Customer does not
remove such property (or cannot remove such property because of
payments due to AboveNet) within such ten (10) day period, then
AboveNet may move any and all such property to storage and
charge Customer for the cost of such removal and storage,
without being liable for related damages. If Customer does not
pay all amounts due to AboveNet and remove such property from
AboveNet premises or storage within thirty (30) days of such
AboveNet request, AboveNet may liquidate the property in any
reasonable manner, without being liable for related damages.
16.6 Survival. The following provisions will survive any expiration
or termination of the Agreement: Sections 1.3, 1,4, 2 (until all
Customer Equipment is removed from the Co-location Space), 3, 4,
6, 8, 9.5-9.8, 10-13, 14 (for a period of three (3) years),
16.4-16.6, and 17.
17. Miscellaneous Provisions.
17.1 Force Majeure. Except for the obligation to pay money, neither
party will be liable for any failure or delay in its performance
under this Agreement, or for credits under Section 9, due to any
cause beyond its reasonable control, including act of war, acts
of God, earthquake, flood, embargo, riot, sabotage, labor
shortage or dispute, governmental act or failure of the
Internet, provided that the delayed party: (a) gives the other
party prompt notice of such cause, and (b) uses its reasonable
commercial efforts to correct promptly such failure or delay in
performance.
17.2 No Lease. This Agreement is a services agreement and is not
intended to and will not constitute a lease of any real or
personal property. In particular, Customer acknowledges and
agrees that Customer has not been granted any real property
interest in the Co-location Space or other AboveNet premises,
and Customer has no rights as a tenant or otherwise under any
real property or landlord/tenant laws, regulations, or
ordinances,
7
<PAGE>
17.3 Marketing. Customer agrees that AboveNet may refer to Customer
by trade name and trademark, and may briefly describe Customer's
Business, in AboveNet marketing materials and web site. Customer
hereby grants AboveNet a limited license to use any Customer
trade names and trademarks solely in connection with the rights
granted to AboveNet pursuant to this Section 17.3. All goodwill
associated with Customer's trade name and trademarks will inure
solely to Customer. Customer may display the slogan "Powered by
AboveNet" together with the AboveNet logo, or any other AboveNet
trademark or service mark or logo, on Customer's web sites or
marketing literature only after obtaining AboveNet's written
approval on a case-by-case basis, and provided that Customer
abide by the AboveNet trademark guidelines and such other
guidelines as AboveNet may provide Customer. All goodwill
associated with AboveNet's trade name, trademarks, slogans and
Iogos will inure solely to AboveNet.
17.4 Government Regulations. Customer will not export, re-export,
transfer, or make available, whether directly or indirectly, any
regulated item or information to anyone outside the U.S. in
connection with this Agreement without first complying with all
export control laws and regulations which may be imposed by the
U.S. Government and any country or organization of nations
within whose Jurisdiction Customer operates or does business.
17.5 Assignment. Neither party may assign its rights or delegate its
duties under this Agreement either in whole or in part without
the prior written consent of the other party, except to a party
that acquires substantially all of the assigning party's assets
or a majority of its Stock as part of a corporate merger or
acquisition. Any attempted assignment or delegation without such
consent will be void. This Agreement will bind and inure to the
benefit of each party's successors and permitted assigns.
17.6 Notices. Any notice or communication required or permitted to be
given hereunder may be delivered personally, deposited with an
overnight courier, sent by confirmed facsimile, or mailed by
registered or certified mail, return receipt requested, postage
prepaid, in each case to the address of the receiving party
first indicated above, or at such other address as either party
may provide to the other by written notice. Such notice will be
deemed to have been given as of the date it is delivered, or
five (5) days after mailed or sent, whichever is earlier.
17.7 Relationship of Parties. AboveNet and Customer are independent
contractors and this Agreement will not establish any
relationship of partnership, joint venture, employment,
franchise or agency between AboveNet and Customer. Neither
AboveNet nor Customer will have the power to bind the other or
incur obligations on the other's behalf without the other's
prior written consent, except as otherwise expressly provided
herein.
17.8 Choice of Law and Arbitration. This Agreement will be governed
by and construed in accordance with the laws of the State of
California, excluding its conflict of laws principles. Each
party agrees to submit any and all disputes concerning this
Agreement, if not resolved between the parties, to binding
arbitration under one (1) neutral, independent end impartial
arbitrator in accordance with the Commercial Rules of the
American Arbitration Association ("AAA"); provided, however, the
arbitrator may not vary, modify or disregard any of the
provisions contained in this Section 17.8. The decision and any
award resulting from such arbitration shall be final and
binding. The place of arbitration will be at AboveNet's offices.
The arbitrator is not empowered to award damages in excess of
compensatory damages and each party hereby irrevocably waives
any right to recover such damages with respect to any dispute
resolved by arbitration. Both parties shall equally share the
fees of the arbitrator. The language of arbitration will be
English; provided, however that an interpreter may be provided
for any witness that requires an interpreter. The cost of such
interpretation will be borne by the party requesting the
interpreter. Any final decision or award from arbitration under
this Section 17.8 will be in writing and reasoned. The
arbitrator may award attorney's fees to the prevailing party as
determined by the arbitrator with wide discretion considering
both (i) which party bettered its position most by the outcome
of the Arbitration, and (ii) that the parties intended that all
limitations on liability would be enforced by the arbitrator.
Except for attorney's fees as the arbitrator may award as
provided in the previous sentence, each will bear their own
costs and expenses that are reasonable and necessary for
participating in arbitration under this Section 17.8. As part of
any arbitration conducted under this Section 17.8, each party
may: (i) request from the other party documents and other
materials relevant to the dispute and likely to bear on the
issues in such dispute, (ii) conduct no more than five (5) oral
depositions each of which will be limited to a maximum of seven
hours in testimony, and (iii) propound to the other
8
<PAGE>
party no more than thirty (30) written interrogatories, answers
to which the other party will give under oath. All the dispute
resolution proceedings contemplated in this Section 17.8 will be
as confidential and private as permitted by law. The parties
will not disclose the existence, content or results of any
proceedings conducted in accordance with this Section 17.8, and
materials submitted in connection with such proceedings will not
be admissible in any other proceeding, provided however, that
this confidentiality provision will not prevent a petition to
vacate or enforce an arbitration award, and shall not bar
disclosures required by law. The parties agree that any decision
or award resulting from proceedings in accordance with this
Section 17.8 shall have no preclusive effect in any other matter
involving third parties. All applicable statutes of limitation
and defenses based upon the passage of time will be tolled while
the procedures specified in this Section 17.8 are pending. The
parties will take such action, if any, required to effectuate
such tolling. The arbitration shall be governed by the United
States Arbitration Act and judgement upon the award rendered by
the arbitrator may be entered by any court having jurisdiction.
17.9 Entire Agreement. This Agreement, together with the Order Form
and AboveNet policies referred to in this Agreement represents
the complete agreement and understanding of the parties with
respect to the subject matter herein, and supersedes any other
agreement or understanding, written or oral. This Agreement may
be modified only through a written instrument signed by both
parties. Both parties represent end warrant that they have full
corporate power and authority to execute and deliver this
Agreement end to perform their obligations under this Agreement
and that the person whose signature appears above is duly
authorized to enter into this Agreement on behalf of the
respective party. Should any terms of this Agreement be declared
void or unenforceable by any arbitrator or court of competent
jurisdiction, such terms will be amended to achieve as nearly as
possible the same economic effect as the original terms and the
remainder of this Agreement will remain in full force and
effect. If a conflict arises between Customer's purchase order
terms and this Agreement, this Agreement shall take precedence.
In the area of International, federal, state or local government
orders, Customer's purchase order must contain the following
language: "Notwithstanding any provisions to the contrary on the
face of this purchase order, attachments to this purchase order,
or on the reverse side of this purchase order, this purchase
order is being used for administrative purposes only, and this
purchase order is placed under and subject solely to the terms
and conditions of the AboveNet Network Agreement executed
between Customer and AboveNet."
9
<PAGE>
EXHIBIT 10.23
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
NOOSH, Inc.
Warrant for the Purchase of Shares of Common Stock
No. W-C4 2,430,158 Shares
FOR VALUE RECEIVED, NOOSH, Inc., a California corporation (the "Company"),
with its principal office at 3401 Hillview Avenue, Palo Alto, CA 94304, hereby
certifies that R.R. Donnelley and Sons Company (the "Holder") is entitled,
subject to the provisions of this Warrant, to purchase from the Company, at such
times and in such increments as set forth below in Section 1 commencing on
January 25, 2000 (the "Effective Date") and prior to the Expiration Date (as
defined in Section 10 below) two million four hundred thirty thousand one
hundred fifty eight (2,430,158) fully paid and nonassessable shares of Common
Stock of the Company, subject to adjustment as hereinafter provided.
The Holder may purchase such shares of Common Stock at the price per share
of eleven dollars ($11.00) (as appropriately adjusted pursuant to Section 7
hereof) on an increment by increment basis as set forth below in Section 1 (the
"Exercise Price"). The term "Common Stock" shall mean the aforementioned Common
Stock of the Company, together with any other equity securities that may be
issued by the Company in addition thereto or in substitution therefor as
provided herein.
The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid per share upon such exercise are subject
to adjustment from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares."
Section 1. Exercise of Warrant. This Warrant may only be exercised prior
to the Expiration Date according to the following schedule and provided that
each increment of Warrant Shares may only be exercised in whole or in part
during the one year period
1.
<PAGE>
commencing upon the date of achievement of the milestone (or from the Effective
Date with respect to the First Increment) relating to such increment ("Milestone
Date"):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Number of Warrant
Shares That Are Exercise Price Per Milestone
Exercisable Share
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First Increment 911,308 $11.00 Effective Date
- -----------------------------------------------------------------------------------------------------
Second Increment 759,425 $11.00 RRD Orders on Service
total $150,000,000 or
more in any
consecutive three
calendar months period
ending before February
28, 2001
- -----------------------------------------------------------------------------------------------------
Third Increment 759,425 $11.00 RRD Orders on Service
total $1,500,000,000
prior to December 31,
2001
- -----------------------------------------------------------------------------------------------------
Total: 2,430,158
- -----------------------------------------------------------------------------------------------------
</TABLE>
For the purposes of the table above, "RRD Orders" shall mean the aggregate
dollar value of orders run by RRD and its wholly-owned subsidiaries, but not
including its ePrint Solutions business unit, on the Service (as defined below)
after January 25, 2000 as such amount is determined in good faith by the Company
within thirty (30) days following each calendar month through December 31, 2001.
For the purposes of this Warrant, the term "Service" means the Company's
proprietary Internet-based service as offered by the Company through
www.noosh.com or any successor web site, as such service may be revised,
- -------------
augmented, superseded, enhanced, modified or supplemented from time to time.
To exercise, Holder shall surrender to the Company at its principal office at
the address set forth in the initial paragraph hereof the Warrant (or at such
other address as the Company may hereafter notify the Holder in writing) with
the Purchase Form annexed hereto duly executed and accompanied by proper payment
of the Exercise Price in lawful money of the United States of America in the
form of a check, subject to collection, for the number of Warrant Shares
specified in the Purchase Form. Upon receipt by the Company of this Warrant and
such Purchase Form, together with proper payment of the Exercise Price, at such
office, and subject to compliance with applicable law, including any waiting
period applicable under Hart-Scott-Rodino regulations, the Holder shall be
deemed to be the holder of record of the Warrant Shares, notwithstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such Warrant Shares shall not then be actually
delivered to the Holder.
2.
<PAGE>
Section 2. Right to Convert Warrant into Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Common Stock as provided in this Section 2 pursuant to the
exercise schedule, increments, and exercise price set forth in Section 1 above.
Upon exercise of the Conversion Right with respect to a particular number of
shares subject to this Warrant (the "Converted Warrant Shares"), the Company
shall deliver to the holder (without payment by the holder of any exercise price
or any cash or other consideration) (X) that number of shares of fully paid and
nonassessable Common Stock equal to the quotient obtained by dividing the value
of this Warrant (or the specified portion hereof) on the Conversion Date (as
defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Exercise Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (Y) the fair market value of one (1) share of Common Stock on the
Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B - A
----------------
Y
Where: X = the number of shares of Common Stock to be issued to
holder
Y = the fair market value (FMV) of one (1) share of Common
Stock
A = the aggregate Exercise Price (i.e., Converted Warrant
Shares x Exercise Price)
B = the aggregate FMV (i.e. FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 2 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the
holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in subsection (a) hereof
as the Conversion Warrant Shares) in exercise of the Conversion Right. Subject
to
3.
<PAGE>
compliance with applicable law, including any waiting period applicable under
Hart-Scott-Rodino regulations, such conversion shall be effective upon receipt
by the Company of this Warrant together with the aforesaid written statement, or
on such later date as is specified therein (the "Conversion Date"), and, at the
election of the holder hereof, may be made contingent upon an IPO (as defined in
Section 10 below) or a Change in Control (which for the purposes of this Warrant
shall mean (i) the sale of all or substantially all of the assets of the
Company, or (ii) the closing date of a merger or consolidation of the Company
with or into any other entity, including a reverse triangular merger involving
the Company (other than a merger or consolidation in which the holders of the
voting power of the Company immediately prior to such consolidation or merger
hold a majority of the surviving or resulting entity immediately following such
consolidation or merger)). Certificates for the shares issuable upon exercise
of the Conversion Right and, if applicable, a new warrant evidencing the balance
of the shares remaining subject to this warrant, shall be issued as of the
Conversion Date and shall be delivered to the holder as soon as possible.
(c) Determination of Fair Market Value. For purposes of this Section 11,
"fair market value" of a share of Common Stock as of a particular date (the
"Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with, and
contingent upon, an IPO, and if the Company's registration statement relating to
such IPO ("Registration Statement") has been declared effective by the SEC, then
the initial "Price to Public" specified in the final prospectus with respect to
such offering.
(ii) If the Conversion Right is exercised in connection with, and
contingent upon, a Change in Control, then the portion of the purchase price
paid by the acquirer that such share would be entitled to in such transaction.
(iii) If the Conversion Right is not exercised in connection with,
and contingent upon, an IPO or a Change in Control, then as follows:
(1) If traded on a securities exchange, the fair market value
of the Common Stock shall be deemed to be the closing price of the Common Stock
on the Determination Date; and
(2) If traded over-the-counter, the fair market value of the
Common Stock shall be deemed to be the closing bid price of the Common Stock on
the Determination Date; an d
(3) If there is no public market for the Common Stock, then
fair market value shall be determined in good faith by the Board of Directors of
the Company.
Section 3. Reservation of Shares. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant all shares of its Common Stock or other shares of capital stock of the
Company from time to time issuable upon exercise of this Warrant. All such
shares shall be duly authorized and, when issued upon such
4.
<PAGE>
exercise in accordance with the terms of this Warrant, shall be validly issued,
fully paid and nonassessable.
Section 4. Fractional Interest. The Company will not issue a fractional
share of Common Stock upon exercise of this Warrant. Instead, the Company will
deliver its check for the current fair market value of the fractional share, as
determined in good faith by the Board of Directors of the Company.
Section 5. Assignment or Loss of Warrant.
(a) The Holder of this Warrant shall not be entitled, without
obtaining the consent of the Company, to assign, by operation of law or
otherwise, its interest in this Warrant in whole or in part to any person or
persons.
(b) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of indemnification satisfactory to the Company, and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
Section 6. Rights of the Holder. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in this
Warrant and that certain Amended and Restated Investor Rights Agreement, dated
January 25, 2000 (the "Investor Rights Agreement"), of which Holder is a party.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
stockholder of the Company on any matters or with respect to any rights
whatsoever as a stockholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented hereby
or the Warrant Shares purchasable hereunder until, and only to the extent that,
this Warrant shall have been exercised in accordance with its terms.
Section 7. Adjustment of Exercise Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of the Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Reclassification of Outstanding Securities. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), the Company shall execute a new Warrant (in form and substance
reasonably satisfactory to the Holder of this Warrant) providing that the Holder
of this Warrant shall have the right to exercise such new Warrant and upon such
exercise to receive, in lieu of each share of Common Stock theretofore issuable
upon exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification or change
by a holder of one share of Common Stock. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be
5.
<PAGE>
practicable to the adjustments provided for in this Section 7. The provisions of
this subsection (a) shall similarly apply to successive reclassification or
changes.
(b) Subdivisions or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Exercise Price and the number of Warrant Shares issuable
upon exercise hereof shall be proportionately adjusted.
(c) Merger. If at any time prior to the Expiration Date there shall be
a merger or consolidation of the Company with or into another corporation when
the Company is not the surviving corporation, then, as part of such merger or
consolidation, lawful provision shall be made so that the Holder of the Warrant
evidenced hereby shall thereafter be entitled to receive upon exercise of rights
granted herein, during the period specified herein and upon payment of the
Exercise Price, the number of shares of stock or other securities or property of
the successor corporation resulting from such merger or consolidation, to which
a holder of the stock deliverable upon exercise of the rights granted in this
Warrant would have been entitled in such merger or consolidation if such rights
had been exercised immediately before such merger or consolidation. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Warrant with respect to the rights and interests of the Holder after the
merger or consolidation.
(d) Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend payable in shares of Common Stock
(except any distribution specifically provided for in the foregoing subsections
(a) and (b)), then the Exercise Price shall be adjusted, from and after the date
of determination of stockholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (a) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution and the number of
Warrant Shares subject to this Warrant shall be proportionately adjusted.
(e) Minimum Adjustment. No adjustment in the Exercise Price of this
Section 7 shall be required unless such adjustment would require an increase or
decrease of at least $.05 in such Exercise Price; provided, however, that any
adjustments which by reason of this subsection are not required to be made,
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 7 shall be made to the nearest cent or to
the nearest share, as the case may be.
(f) Notice of Record Date. In the event of any taking by the Company
of a record of its stockholders for the purpose of determining stockholders who
are entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property, or to receive any
other right, or for the purpose of determining stockholders who are entitled to
vote in connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance of all
or substantially all of the assets of
6.
<PAGE>
the Company, or any proposed liquidation, dissolution or winding up of the
Company, the Company shall mail to the Holder of this Warrant, at least twenty
(20) days prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(g) No Adjustment Upon Exercise of Warrants. No adjustments shall
be made under any Section herein in connection with the issuance of Warrant
Shares upon exercise of the Warrants.
Section 8. Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 7, the Company shall deliver
an officer's certificate showing the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officer's
certificate shall be signed by the chairman, president or chief financial
officer of the Company.
Section 9. Transfer to Comply with the Securities Act of 1933. This
Warrant may not be sold, assigned, pledged, hypothecated, encumbered or in any
other manner transferred or disposed of, in whole or in part. The Warrant
Shares, nor any interest in them, may be sold, assigned, pledged, hypothecated,
encumbered or in any other manner transferred or disposed of, in whole or in
part, except in compliance with applicable United States federal and state
securities or Blue Sky laws and the terms and conditions hereof. Each Warrant
shall bear a legend in substantially the same form as the legend set forth on
the first page of this Warrant. Each certificate for Warrant Shares issued upon
exercise of this Warrant, unless at the time of exercise such Warrant Shares are
acquired pursuant to a registration statement that has been declared effective
under the Act, shall bear a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
Any certificate for any Warrant Shares issued at any time in exchange or
substitution for any certificate for any Warrant Shares bearing such legend
(except a new certificate for any Warrant Shares issued after the acquisition of
such Warrant Shares pursuant to a registration statement that has been declared
effective under the Act) shall also bear such legend unless, in the opinion of
counsel for the Company, the Warrant Shares represented thereby need no longer
be subject to the
7.
<PAGE>
restriction contained herein. The provision of this Section 9 shall be binding
upon all subsequent Holders of certificates for Warrant Shares bearing the above
legend and all subsequent Holders of this Warrant, if any. In addition in
connection with the issuance of this Warrant, the Holder specifically represents
to the Company by acceptance of this Warrant as follows:
(a) The Holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company sufficient
to reach an informed and knowledgeable decision to acquire this Warrant. The
Holder is acquiring this Warrant for its own account for investment purposes
only and not with a view to, or for the resale in connection with, any
"distribution" thereof in violation of the Act.
(b) The Holder understands that this Warrant has not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the Holder's
investment intent as expressed herein.
(c) The Holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. Moreover, the Holder understands that the
Company is under no obligation to register and qualify this Warrant.
(d) The Holder is aware of the provisions of Rule 144 promulgated
under the Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one year after the party has purchased and paid
for the securities to be sold (unless the securities have been acquired pursuant
to the net issuance provisions of Section 2 in which case the securities may
generally be sold one year from the date of this Warrant); the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein.
(e) The Holder further understands that at the time it wishes to sell
this Warrant there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, the Holder may be precluded from selling this Warrant under Rule 144
even if the one year minimum holding period had been satisfied.
(f) The Holder further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
staff of the Securities and Exchange Commission (the "SEC") has expressed its
opinion that persons proposing to sell private placement securities other than
in a registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that
8.
<PAGE>
an exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.
Section 10. Expiration Date. This Warrant shall expire and shall be wholly
void and have no effect after 5:00 p.m. on January 25, 2003 (the "Expiration
Date").
Section 11. Market Standoff. The holder of this Warrant, by acceptance
hereof, agrees that such holder will not, without the prior written consent of
the lead underwriter of the initial public offering of the Common Stock of the
Company pursuant to a registration statement filed under the Act (the "IPO"),
directly or indirectly offer to sell, contract to sell (including, without
limitation, any short sale), grant any option for the sale of, acquire any
option to dispose of, or otherwise dispose of any Warrant Shares, or securities
into which such Warrant Shares are converted, for a period of 180 days following
the day on which the registration statement filed on behalf of the Company in
connection with the IPO shall become effective by order of the SEC; provided,
however, that the foregoing market standoff shall apply only to the extent that
holders of the Company's Series C Preferred Stock are subject to the same
restrictions.
Section 12. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the right of the parties shall be governed by, the laws of
State of California, excluding its rules governing conflicts of laws.
Section 13. Modification and Waiver. Neither this Warrant nor any term
hereof may be amended, waived, discharged or terminated other than by an
instrument in writing signed by the Company and by the Holder hereof.
Section 14. Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
Holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant.
Section 15. Descriptive Headings. The description headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do
not constitute a part of this Warrant.
Section 16. Entire Agreement. This Warrant and the Investor Rights
Agreement constitute the entire agreement between the parties pertaining to the
subject matter herein and supersedes all prior and contemporaneous agreements,
representation and undertakings of the parties.
9.
<PAGE>
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed
by a duly authorized officer this 25th day of January, 2000.
NOOSH, Inc.
By:_______________________________
Name:_____________________________
Title:____________________________
ACCEPTED AND AGREED TO:
R.R. Donnelley and Sons Company
By:__________________________________
Name:________________________________
Title:_______________________________
10.
<PAGE>
NOOSH, Inc.
PURCHASE FORM
Dated ______________ ____, ____
[_] The undersigned hereby irrevocably elects to exercise the Warrant issued to
it to purchase ___________ shares of Common Stock of NOOSH, Inc. and hereby
makes payment of ___________________ in payment of the exercise price
thereof.
[_] The undersigned hereby elects to convert ________ shares of the Warrant
pursuant to the provisions of Section 2 of the Warrant.
Name of Warrant Holder:
__________________________________________________
Address of Warrant Holder:
__________________________________________________
__________________________________________________
Tax identification Number or Social Security
Number of Warrant Holder:
__________________________________________________
Signature:________________________________________
NOTE: The above signature should correspond
exactly with the name on the first page of the
Warrant or with the name of the assignee appearing
on a duly executed assignment form.
Dated:____________________________________________
<PAGE>
EXHIBIT 10.24
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
NOOSH, Inc.
Warrant for the Purchase of Shares of Common Stock
No. W-C5 350,000 Shares
FOR VALUE RECEIVED, NOOSH, Inc., a California corporation (the "Company"),
with its principal office at 3401 Hillview Avenue, Palo Alto, CA 94304, hereby
certifies that R.R. Donnelley and Sons Company (the "Holder") is entitled,
subject to the provisions of this Warrant, to purchase from the Company, at such
times and in such increments as set forth below in Section 1 commencing on
January 25, 2000 (the "Effective Date") and prior to the Expiration Date (as
defined in Section 10 below) three hundred fifty thousand (350,000) fully paid
and nonassessable shares of Common Stock of the Company, subject to adjustment
as hereinafter provided.
The Holder may purchase such shares of Common Stock at the price per share
of eleven dollars ($11.00) (as appropriately adjusted pursuant to Section 7
hereof) on an increment by increment basis as set forth below in Section 1 (the
"Exercise Price"). The term "Common Stock" shall mean the aforementioned Common
Stock of the Company, together with any other equity securities that may be
issued by the Company in addition thereto or in substitution therefor as
provided herein.
The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid per share upon such exercise are subject
to adjustment from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares."
Section 1. Exercise of Warrant. This Warrant may only be exercised prior
to the Expiration Date according to the following schedule (but in no event for
more than 350,000 shares) and provided that each increment of Warrant Shares may
only be exercised in whole or in part during the one year period commencing upon
the date of achievement of the milestone (or
1.
<PAGE>
from the Effective Date with respect to the initial increment of 50,000 shares)
relating to such increment ("Milestone Date"):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Number of Warrant Exercise Price Per Milestone
Shares That Are Share
Exercisable
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Initial Increment 50,000 $11.00 Effective Date
- --------------------------------------------------------------------------------------------------
First Year 50,000 $11.00 For each $50,000,000
Increment(s) in ePrint Solutions
Orders on the Service
prior to December 31,
2000
- ---------------------------------------------------------------------------------------------------
Second Year 100,000 $11.00 For each $200,000,000
Increments(s) in ePrint Solutions
Orders on the Service
from January 1, 2001
to December 31, 2001
- --------------------------------------------------------------------------------------------------
Total: up to a maximum of
350,000
- --------------------------------------------------------------------------------------------------
</TABLE>
For the purposes of the table above, "ePrint Solutions Orders" shall mean the
aggregate dollar value of orders run by ePrint Solutions on the Service (as
defined below) after January 25, 2000, as such amount is determined in good
faith by the Company within thirty (30) days following each calendar month
through December 31, 2001. For the purposes of this Warrant, the term "Service"
means the Company's proprietary Internet-based service as offered by the Company
through www.noosh.com or any successor web site, as such service may be revised,
-------------
augmented, superseded, enhanced, modified or supplemented from time to time.
To exercise, Holder shall surrender to the Company at its principal office at
the address set forth in the initial paragraph hereof the Warrant (or at such
other address as the Company may hereafter notify the Holder in writing) with
the Purchase Form annexed hereto duly executed and accompanied by proper payment
of the Exercise Price in lawful money of the United States of America in the
form of a check, subject to collection, for the number of Warrant Shares
specified in the Purchase Form. Upon receipt by the Company of this Warrant and
such Purchase Form, together with proper payment of the Exercise Price, at such
office, and subject to compliance with applicable law, including any waiting
period applicable under Hart-Scott-Rodino regulations, the Holder shall be
deemed to be the holder of record of the Warrant Shares, notwithstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such Warrant Shares shall not then be actually
delivered to the Holder.
Section 2. Right to Convert Warrant into Stock: Net Issuance.
2.
<PAGE>
(a) Right to Convert. In addition to and without limiting the rights
of the holder under the terms of this Warrant, the holder shall have the right
to convert this Warrant or any portion thereof (the "Conversion Right") into
shares of Common Stock as provided in this Section 2 pursuant to the exercise
schedule, increments, and exercise price set forth in Section 1 above. Upon
exercise of the Conversion Right with respect to a particular number of shares
subject to this Warrant (the "Converted Warrant Shares"), the Company shall
deliver to the holder (without payment by the holder of any exercise price or
any cash or other consideration) (X) that number of shares of fully paid and
nonassessable Common Stock equal to the quotient obtained by dividing the value
of this Warrant (or the specified portion hereof) on the Conversion Date (as
defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Exercise Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (Y) the fair market value of one (1) share of Common Stock on the
Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B - A
--------------------
Y
Where: X = the number of shares of Common Stock to be issued to
holder
Y = the fair market value (FMV) of one (1) share of Common
Stock
A = the aggregate Exercise Price (i.e., Converted Warrant
Shares x Exercise Price)
B = the aggregate FMV (i.e. FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 2 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the
holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in subsection (a) hereof
as the Conversion Warrant Shares) in exercise of the Conversion Right. Subject
to compliance with applicable law, including any waiting period applicable under
Hart-Scott-Rodino regulations, such conversion shall be effective upon receipt
by the Company of this
3.
<PAGE>
Warrant together with the aforesaid written statement, or on such later date as
is specified therein (the "Conversion Date"), and, at the election of the holder
hereof, may be made contingent upon an IPO (as defined in Section 10 below) or a
Change in Control (which for the purposes of this Warrant shall mean (i) the
sale of all or substantially all of the assets of the Company, or (ii) the
closing date of a merger or consolidation of the Company with or into any other
entity, including a reverse triangular merger involving the Company (other than
a merger or consolidation in which the holders of the voting power of the
Company immediately prior to such consolidation or merger hold a majority of the
surviving or resulting entity immediately following such consolidation or
merger)). Certificates for the shares issuable upon exercise of the Conversion
Right and, if applicable, a new warrant evidencing the balance of the shares
remaining subject to this warrant, shall be issued as of the Conversion Date and
shall be delivered to the holder as soon as possible.
(c) Determination of Fair Market Value. For purposes of this Section 11,
"fair market value" of a share of Common Stock as of a particular date (the
"Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with, and
contingent upon, an IPO, and if the Company's registration statement relating to
such IPO ("Registration Statement") has been declared effective by the SEC, then
the initial "Price to Public" specified in the final prospectus with respect to
such offering.
(ii) If the Conversion Right is exercised in connection with, and
contingent upon, a Change in Control, then the portion of the purchase price
paid by the acquirer that such share would be entitled to in such transaction.
(iii) If the Conversion Right is not exercised in connection with,
and contingent upon, an IPO or a Change in Control, then as follows:
(1) If traded on a securities exchange, the fair market value
of the Common Stock shall be deemed to be the closing price of the Common Stock
on the Determination Date; and
(2) If traded over-the-counter, the fair market value of the
Common Stock shall be deemed to be the closing bid price of the Common Stock on
the Determination Date; and
(3) If there is no public market for the Common Stock, then
fair market value shall be determined in good faith by the Board of Directors of
the Company.
Section 3. Reservation of Shares. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant all shares of its Common Stock or other shares of capital stock of the
Company from time to time issuable upon exercise of this Warrant. All such
shares shall be duly authorized and, when issued upon such exercise in
accordance with the terms of this Warrant, shall be validly issued, fully paid
and nonassessable.
4.
<PAGE>
Section 4. Fractional Interest. The Company will not issue a fractional
share of Common Stock upon exercise of this Warrant. Instead, the Company will
deliver its check for the current fair market value of the fractional share, as
determined in good faith by the Board of Directors of the Company.
Section 5. Assignment or Loss of Warrant.
(a) The Holder of this Warrant shall not be entitled, without
obtaining the consent of the Company, to assign, by operation of law or
otherwise, its interest in this Warrant in whole or in part to any person or
persons.
(b) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of indemnification satisfactory to the Company, and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
Section 6. Rights of the Holder. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in this
Warrant and that certain Amended and Restated Investor Rights Agreement, dated
January 25, 2000 (the "Investor Rights Agreement"), of which Holder is a party.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
stockholder of the Company on any matters or with respect to any rights
whatsoever as a stockholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented hereby
or the Warrant Shares purchasable hereunder until, and only to the extent that,
this Warrant shall have been exercised in accordance with its terms.
Section 7. Adjustment of Exercise Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of the Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Reclassification of Outstanding Securities. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), the Company shall execute a new Warrant (in form and substance
reasonably satisfactory to the Holder of this Warrant) providing that the Holder
of this Warrant shall have the right to exercise such new Warrant and upon such
exercise to receive, in lieu of each share of Common Stock theretofore issuable
upon exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification or change
by a holder of one share of Common Stock. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. The provisions of this subsection
(a) shall similarly apply to successive reclassification or changes.
5.
<PAGE>
(b) Subdivisions or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Exercise Price and the number of Warrant Shares issuable
upon exercise hereof shall be proportionately adjusted.
(c) Merger. If at any time prior to the Expiration Date there shall
be a merger or consolidation of the Company with or into another corporation
when the Company is not the surviving corporation, then, as part of such merger
or consolidation, lawful provision shall be made so that the Holder of the
Warrant evidenced hereby shall thereafter be entitled to receive upon exercise
of rights granted herein, during the period specified herein and upon payment of
the Exercise Price, the number of shares of stock or other securities or
property of the successor corporation resulting from such merger or
consolidation, to which a holder of the stock deliverable upon exercise of the
rights granted in this Warrant would have been entitled in such merger or
consolidation if such rights had been exercised immediately before such merger
or consolidation. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the Holder after the merger or consolidation.
(d) Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend payable in shares of Common Stock
(except any distribution specifically provided for in the foregoing subsections
(a) and (b)), then the Exercise Price shall be adjusted, from and after the date
of determination of stockholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (a) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution and the number of
Warrant Shares subject to this Warrant shall be proportionately adjusted.
(e) Minimum Adjustment. No adjustment in the Exercise Price of this
Section 7 shall be required unless such adjustment would require an increase or
decrease of at least $.05 in such Exercise Price; provided, however, that any
adjustments which by reason of this subsection are not required to be made,
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 7 shall be made to the nearest cent or to
the nearest share, as the case may be.
(f) Notice of Record Date. In the event of any taking by the Company
of a record of its stockholders for the purpose of determining stockholders who
are entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property, or to receive any
other right, or for the purpose of determining stockholders who are entitled to
vote in connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance of all
or substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail to the Holder
of this Warrant, at least twenty (20) days prior to the date
6.
<PAGE>
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
(g) No Adjustment Upon Exercise of Warrants. No adjustments shall
be made under any Section herein in connection with the issuance of Warrant
Shares upon exercise of the Warrants.
Section 8. Officer's Certificate. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 7, the Company shall deliver
an officer's certificate showing the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officer's
certificate shall be signed by the chairman, president or chief financial
officer of the Company.
Section 9. Transfer to Comply with the Securities Act of 1933. This
Warrant may not be sold, assigned, pledged, hypothecated, encumbered or in any
other manner transferred or disposed of, in whole or in part. The Warrant
Shares, nor any interest in them, may be sold, assigned, pledged, hypothecated,
encumbered or in any other manner transferred or disposed of, in whole or in
part, except in compliance with applicable United States federal and state
securities or Blue Sky laws and the terms and conditions hereof. Each Warrant
shall bear a legend in substantially the same form as the legend set forth on
the first page of this Warrant. Each certificate for Warrant Shares issued upon
exercise of this Warrant, unless at the time of exercise such Warrant Shares are
acquired pursuant to a registration statement that has been declared effective
under the Act, shall bear a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
Any certificate for any Warrant Shares issued at any time in exchange or
substitution for any certificate for any Warrant Shares bearing such legend
(except a new certificate for any Warrant Shares issued after the acquisition of
such Warrant Shares pursuant to a registration statement that has been declared
effective under the Act) shall also bear such legend unless, in the opinion of
counsel for the Company, the Warrant Shares represented thereby need no longer
be subject to the restriction contained herein. The provision of this Section 9
shall be binding upon all subsequent Holders of certificates for Warrant Shares
bearing the above legend and all subsequent Holders of
7.
<PAGE>
this Warrant, if any. In addition in connection with the issuance of
this Warrant, the Holder specifically represents to the Company by
acceptance of this Warrant as follows:
(a) The Holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company sufficient
to reach an informed and knowledgeable decision to acquire this Warrant. The
Holder is acquiring this Warrant for its own account for investment purposes
only and not with a view to, or for the resale in connection with, any
"distribution" thereof in violation of the Act.
(b) The Holder understands that this Warrant has not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the Holder's
investment intent as expressed herein.
(c) The Holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. Moreover, the Holder understands that the
Company is under no obligation to register and qualify this Warrant.
(d) The Holder is aware of the provisions of Rule 144 promulgated
under the Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one year after the party has purchased and paid
for the securities to be sold (unless the securities have been acquired pursuant
to the net issuance provisions of Section 2 in which case the securities may
generally be sold one year from the date of this Warrant); the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein.
(e) The Holder further understands that at the time it wishes to sell
this Warrant there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, the Holder may be precluded from selling this Warrant under Rule 144
even if the one year minimum holding period had been satisfied.
(f) The Holder further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
staff of the Securities and Exchange Commission (the "SEC") has expressed its
opinion that persons proposing to sell private placement securities other than
in a registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
8.
<PAGE>
Section 10. Expiration Date. This Warrant shall expire and shall be wholly
void and have no effect after 5:00 p.m. on January 25, 2003 (the "Expiration
Date").
Section 11. Market Standoff. The holder of this Warrant, by acceptance
hereof, agrees that such holder will not, without the prior written consent of
the lead underwriter of the initial public offering of the Common Stock of the
Company pursuant to a registration statement filed under the Act (the "IPO"),
directly or indirectly offer to sell, contract to sell (including, without
limitation, any short sale), grant any option for the sale of, acquire any
option to dispose of, or otherwise dispose of any Warrant Shares, or securities
into which such Warrant Shares are converted, for a period of 180 days following
the day on which the registration statement filed on behalf of the Company in
connection with the IPO shall become effective by order of the SEC; provided,
however, that the foregoing market standoff shall apply only to the extent that
holders of the Company's Series C Preferred Stock are subject to the same
restrictions.
Section 12. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the right of the parties shall be governed by, the laws of
State of California, excluding its rules governing conflicts of laws.
Section 13. Modification and Waiver. Neither this Warrant nor any term
hereof may be amended, waived, discharged or terminated other than by an
instrument in writing signed by the Company and by the Holder hereof.
Section 14. Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
Holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant.
Section 15. Descriptive Headings. The description headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do
not constitute a part of this Warrant.
Section 16. Entire Agreement. This Warrant and the Investor Rights
Agreement constitute the entire agreement between the parties pertaining to the
subject matter herein and supersedes all prior and contemporaneous agreements,
representation and undertakings of the parties.
9.
<PAGE>
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed
by a duly authorized officer this 25th day of January, 2000.
NOOSH, Inc.
By:________________________________
Name:______________________________
Title:_____________________________
ACCEPTED AND AGREED TO:
R.R. Donnelley and Sons Company
By:____________________________________
Name:__________________________________
Title:_________________________________
10.
<PAGE>
NOOSH, Inc.
PURCHASE FORM
Dated ______________ ____, ____
[_] The undersigned hereby irrevocably elects to exercise the Warrant issued
to it to purchase ___________ shares of Common Stock of NOOSH, Inc. and
hereby makes payment of ___________________ in payment of the exercise
price thereof.
[_] The undersigned hereby elects to convert ________ shares of the Warrant
pursuant to the provisions of Section 2 of the Warrant.
Name of Warrant Holder:
_____________________________________
Address of Warrant Holder:
__________________________________________
__________________________________________
Tax identification Number or Social Security
Number of Warrant Holder:
__________________________________________
Signature:________________________________
NOTE: The above signature should correspond
exactly with the name on the first page of
the Warrant or with the name of the assignee
appearing on a duly executed assignment form.
Dated:____________________________________
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 2 to Registration
Statement on Form S-1 of our report dated January 21, 2000 relating to the
financial statements of Noosh, Inc., which appear in such Registration
Statement. We also consent to the reference to us under the headings "Experts"
in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Jose, California
March 23, 2000
