UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
AMENDMENT NO. 1
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
VERTICA SOFTWARE, INC.
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(Name of Small Business Issuer in its Charter)
Colorado
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(State or Other Jurisdiction of Incorporation or Organization)
93-1192725
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(I.R.S. Employer Identification Number)
5801 Christie Avenue, Suite 390
Emeryville, California 94608
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(Address of Principal Executive Offices, including Zip Code)
(510) 595-3333
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act: None.
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value
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(Title of class)
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS 3
SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS 3
OUR COMPANY 3
ITEM 2. PLAN OF OPERATION 15
ITEM 3. DESCRIPTION OF PROPERTY 17
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 17
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS 18
ITEM 6. EXECUTIVE COMPENSATION 19
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 20
ITEM 8. DESCRIPTION OF SECURITIES 21
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS 21
ITEM 2. LEGAL PROCEEDINGS 23
ITEM 3. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED 23
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES 23
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS 24
PART F/S 25
PART III
ITEM 1. INDEX TO EXHIBITS 25
ITEM 2. DESCRIPTION OF EXHIBITS 26
SIGNATURES 27
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ITEM 1. BUSINESS
SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain information in this Registration Statement includes
forward-looking statements within the meaning of applicable securities laws that
involve substantial risks and uncertainties including, but not limited to,
market acceptance of our products and new technologies, the sufficiency of
financial resources available to us, economic, competitive, governmental and
technological factors affecting our operations, markets, services, and prices,
and other factors described in this Registration Statement. Our actual results
could differ materially from those suggested or implied by any forward-looking
statements as a result of such risks. See "Our Company -- Risk Factors" below.
All trademarks and trade names appearing in this document are the
property of their respective holders.
OUR COMPANY
We are a development-stage company that is developing Internet and
intranet software products intended to serve industries that are impacted by
government regulation of hazardous materials and other environmental laws and
regulations. We are developing software products designed to provide information
about environmental regulations and a software management system to assist
companies with their environmental regulation compliance and related activities
for common industrial applications. We are developing software systems in the
form of modules within a software management system called "VEMS." We are also
developing a web site called Vertica.com. The VEMS system's applications will
include chemical inventory listing and tracking, transportation manifests,
emergency compliance, permit applications and occupational training.
VEMS is intended to be a set of computer software modules that are
being designed to streamline environmental regulation compliance and related
activities with the use of compliance wizards, for common industrial
applications. Vertica.com is our proposed web site under construction that we
are designing to provide updated information on environmental regulations and
serve as an e-commerce web portal in which vendors and clients in the hazardous
materials industry will be able to buy and sell products and services. VEMS is
intended to link to Vertica.com for additional content information, on-line
regulations compliance and on-demand training and services.
We were organized as a Colorado corporation in April 1997 under the
name Perfection Development Corporation. We were originally formed for the
purpose of developing and constructing real estate properties. On September 29,
1998, we acquired all of the outstanding capital stock of Vertica Software,
Inc., a California corporation ("Vertica California"). At that time, we were
inactive and had no significant assets. Vertica California was in the business
of developing Internet and intranet software products serving the hazardous
materials industry. We have continued this business since the acquisition. On
December 31, 1998, Vertica
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California, which we then held as a subsidiary, merged with and into us. We were
the surviving corporation in the merger and the separate corporate existence of
Vertica California ceased. Concurrently with the merger, we changed our name to
Vertica Software, Inc. Our stock trades on the NASD OTC Bulletin Board under the
symbol "VERI."
Our headquarters are located in Emeryville, California.
Current Status of Development
We completed the development of two modules included in the VEMS
system, the VEMS Communicator module and the Inventory module, on February 1,
2000. These two modules are currently in use and are being evaluated on a test
basis by The Chevron Companies, Equiva Services, LLC (Shell, Texaco and Saudi
Aramco working together), Sybron Chemicals, Inc. and Olympian Oil Company. It is
our current plan to complete the development of the other VEMS System Modules,
comprised of the Transporter, Permitter, HazOSHA, and Processor modules, during
the next 12 months. We cannot assure you, however, that the development will
occur in accordance with this timetable as a result of delays that may be
encountered because of financing, personnel or other unanticipated reasons or
that all modules will be developed successfully.
As a development-stage Company, we have had no revenues and had not
made any sales of products or services to any customer. Our expenses to date
have been incurred in connection with the development of the software products
and the Vertica.com web site and other administrative expenses. We have not
formalized our pricing models, which we intend to develop as we seek to
negotiate licenses with our initial customers.
Industry Overview
Companies that transport, store, or handle hazardous materials are
required by federal, state and local laws to meet current regulations. These
regulations require training of personnel, proper handling and storing of
hazardous materials, filing of appropriate government forms, production of
required shipping papers and labeling and placarding of hazardous materials.
These government regulations are complex and difficult to interpret and are
updated and revised from time to time. Failure to comply with current
environmental regulations can result in significant criminal and civil
penalties, including fines, damages and injunctions. See "Government
Regulation."
The growth of the environmental regulation compliance market is driven
primarily by the maintenance and expansion of environmental regulations in the
United States, including federal, state and local regulatory schemes. We believe
that continued public pressure for environmental protection in the United States
will likely result in continued and increased environmental regulation of many
industries.
We believe our products can serve companies in the following industries
and the following government agencies:
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Transportation, including railroad, highway, marine and air;
Manufacturing, including petroleum refining and related industries,
chemical and allied products, rubber and miscellaneous plastics,
primary metal industries, fabricated metal products, industrial and
commercial machinery, electronic, electrical equipment and components,
transportation equipment, measuring and analyzing and controlling
instruments, and other manufacturing industries;
Engineering and research services, including petroleum, chemical,
industrial, sanitary, biological, non-commercial biological and testing
laboratories;
Utilities, including electric, gas and sanitary;
Other industries, including mining, agricultural, construction,
insurance, industry wholesale trade, training agencies and industry
consulting agencies; and
Government agencies, including the Environmental Protection Agency, the
Department of Transportation and the Occupational Health and Safety
Administration.
We cannot assure you, however, that we will be able to successfully
market our products to participants in these potential markets.
The Vertica Solution
We believe that many companies hire consultants to insure environmental
compliance and that other companies spend substantial amounts to hire in-house
information technology groups to design and maintain environmental compliance
systems. We seek to offer a solution based on a combination of a Web browser and
Microsoft SQL Servers, and bring together a software management system with an
on-line community. This solution is intended to allow our proposed software
products and Internet web site, discussed below, to function in concert.
We are designing our proposed environmental software management system,
VEMS, to assist our customers by reducing the time and costs required by
consultants, internal information technology and environmental management staff
for regulatory compliance with environmental regulations. Our products would
not, however, provide any check for compliance with applicable regulations of a
customer's internal systems.
We are also designing an Internet web site, Vertica.com for an
environmental web portal serving the hazardous materials community. We plan for
Vertica.com to contain extensive and continuously updated information relating
to current environmental regulations, and to enable clients and vendors in the
hazardous materials industry to interact on-line. We are also constructing
Vertica.com as an on-line activities hub for hazardous materials professionals
and clients.
Once we complete the development of these systems and the web site, we
believe that a customer will be able to use our systems to reduce the labor time
and resources needed to comply with hazardous waste and environmental
regulations. A customer will be asked by the software to respond to a list of
relevant questions, the responses to which will be linked to forms
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and other documentation used for reporting and compliance purposes. We call
these lists of questions and links "wizards." The data accumulated in the
modules can be retrieved for a variety of purposes through the software, thus
enabling the user to reduce the amount of manual calculations, hard paper
information gathering and storage and other clerical functions needed to
complete required reports and notices.
Our Strategy
We intend to derive revenues from three diversified products and
services: Licensing of VEMS modules, transaction fees for filing activities, and
advertising and e-commerce referral and transaction fees on the Vertica.com web
site. We believe that our pricing for the licensing and training will be lower
than the costs a customer would incur in developing an in-house system due to
the distribution of our costs of development and maintenance across our entire
client base. We also believe that VEMS modules will attract clients by lowering
their capital and labor costs associated with environmental compliance. We
anticipate that some activities such as plain text searches of government
regulations will be offered for free, in order to generate initial traffic to
our web site. Finally, we intend to set our advertising, referral and
transaction fees on Vertica.com at the then current market rates for such fees.
We believe that our Vertica.com web site will be a hub for a client's
environmental compliance transaction activity, as well as the entry point for
research queries into our proposed database. We believe that eventually a steady
traffic flow through our site will result in vendors connecting with clients in
these industries.
Products and Services
VEMS. On February 1, 2000, we released two modules, the VEMS
Communicator module and the Inventory module. We plan to complete the
development and release of the other modules, including the VEMS Transport,
Permitter and Processor during the next twelve months. VEMS is intended to be an
automated environmental management system that will provide up-to-date
government regulations and guides the user to track, review, interpret, share
and comply with those regulations.
VEMS Features
We are designing our proposed VEMS software products , comprised of
separate Internet accessible software modules as described below, to assist
clients in industries subject to environment and hazardous materials regulations
in environmental compliance, reduce regulatory paper trails and streamline the
administrative efforts associated with hazardous materials management and crisis
communications, thus reducing costs to those industries.
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VEMS Modules
Inventory Module
The Inventory module, as part of each of the other VEMS modules discussed below,
provides assistance to customers and data to other VEMS modules by managing
chemical and waste information for each customer site. The module is designed to
link material safety data sheets ("MSDS") and waste profile information directly
to a customer's facility inventory. The module provides customers with a site
map feature and the capability to track inventory down to the individual
building level. A customer will be able to use the inventory and regulated
chemical lists to facilitate chemical control, emergency compliance and
environmental reporting. Inventory can be updated manually by the customer or
automatically by VEMS modules as products are received, manufactured,
transported or released. The Inventory module is complete and is currently being
evaluated on a test basis by Olympian Oil Company, a regional petroleum
distribution company, and at a local refinery of The Chevron Companies, a
national petroleum company.
Communicator Module
The Communicator module is designed to manage a facility's crisis
communications, emergency compliance, and environmental reporting information.
The module includes plan builders, compliance wizards and automated document
submission. Electronic forms and checklists are designed to streamline response
efforts and minimize reporting errors. The Communicator module is also designed
to facilitate internal as well as external communications allowing continuous
control of a customer's facility image. This module also supports compliance
with EPCRA (Emergency Planning and Community Right to Know) and related
environmental regulations. The Communicator module was released on February 1,
2000 and is currently being evaluated on a test basis by The Chevron Companies,
Equiva Services, LLC (including Shell, Texaco and Saudi Aramco working
together), Olympian Oil Company and Sybron Chemicals, Inc.
Transporter Module
The Transporter module is being designed to serve the hazardous
material and waste transportation needs of a customer's facility. The module
will include automated Department of Transportation registration form, bill of
lading and waste manifest software "wizards," document tracking and incident and
exception report capability. The module will perform automatic updates to
chemical and waste inventories, will allow access to material information and
will provide labeling and placard information essential to the shipment of
hazardous materials. This module supports compliance with Department of
Transportation regulations. The Transporter module planned completion date is
March 31, 2000, and a test module is currently being reviewed, or beta-tested,
by Olympian Oil Company.
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Processor Module
The Processor module will be designed to serve each VEMS customer
site's production floor process mapping, inventory, hazardous materials and
waste stream needs. It will support compliance with TSCA (Toxic Substance
Control Act) and related regulations. The first release of this module is
planned for September 30, 2000.
HazOSHA Module
The HazOSHA module will be designed to serve each VEMS customer site's
hazardous materials employee safety policies, procedures and training
communication needs, including on-line training. This module will support
compliance with hazardous materials related sections of 29 CFR OSHA (Code of
Federal Regulations for Occupational Safety and Health Administration). The
first release of this module is planned for September 30, 2000.
Permitter Module
The Permitter module will be designed to serve each VEMS customer
site's permit monitoring and compliance needs, and will include air, liquid
discharge and hazardous waste permit application software "wizards." This module
will support compliance with CAA (Clean Air Act), EPA (Environmental Protection
Agency), RCRA (Resource Conservation and Recovery Act), CWA (Clean Water Act),
AQMD (Air Quality Management District) and related regulations. Programming of
permit processors for this module has begun, and the first release of this
module is planned for June 30, 2000.
Vertica.com
Vertica.com is our proposed web site that will be designed to provide
updated information on environmental regulations and serve as an e-commerce web
portal in which vendors and clients in the hazardous materials industry will be
able to buy and sell products and services. We anticipate that the costs for
launching this web site will be approximately $500,000. The features of this
proposed system are:
News & Analysis It is intended that Vertica.com will provide
current industry news for the hazardous
materials community including stories from
business, government, energy, environment
and finance. Our web site will feature
informational articles written by experts in
the hazardous materials industry and will
offer an internet posting site for industry
related press releases and publications. We
anticipate acquiring industry news from
ScreamingMedia.com, Inc. and Stockpoint,
Inc. at an approximate annual cost of
$80,000 to $100,000.
E-Business Vertica.com will also offer an industry
specific marketplace for the purchase, sale
and exchange of hazardous materials related
goods
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and services. It is intended to include an
up-to-date directory of products, services
and suppliers and feature an online auction
site for interactive bidding and sales. We
intend to provide ongoing maintenance and
updating of products and services internally
through research as well as gathering
information on industrial companies' needs
by attending industry conferences and trade
shows.
Community It is intended that Vertica.com will serve
the multifaceted information needs of the
hazardous materials community. It will
feature industry specific glossaries, a
public contacts database, codified
regulations, online MSDS access, discussion
groups, event calendars and an
industry-related resume posting and career
center.
Customer Support
Vertica's environmental and computer science support staff will be
available to assist Vertica.com and VEMS
users during regular business hours.
Training
We intend to offer fee-based seminars and training on the use of our
proposed Vertica.com web site and VEMS modules.
Sales and Marketing
We intend to use marketing tools including focus groups, public
relations, direct mail, channel distributions, advertisement and telemarketing.
Based on the evolving markets for each product line, we will modify the
marketing program to utilize all appropriate marketing resources. In general,
the marketing for each product line will follow the following format:
1. Introductory product announcements, public relations and media
coverage.
2. Promotion via trade shows, conferences and the Internet.
3. Direct sales using our sales personnel.
4. Expansion of sales channels through distributors and business
partnerships.
5. Ongoing advertising through targeted media and the Internet.
6. Product demonstration and information at Vertica.com (web-site),
www.vertica.com.
We also intend to promote our product lines and web site through
affiliates, individual seminars, trade shows, and in trade publications. Direct
sales using our subject-expert sales personnel will also be a high priority,
including direct calls to our customers. In addition, we intend to seek
marketing and distribution partnerships with other firms that would stand to
benefit from bringing our target industries on-line. This could include such
partners in the on-line infrastructure field such as computer network equipment
manufacturers, software database providers and other business solutions
providers. Additionally, we will promote
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Vertica.com's ability to provide data for research and crisis preparedness, make
available information that helps companies dealing with the industry's
fragmented environment and "information overload ," and to minimize the
paperwork associated with hazardous materials regulations compliance.
We intend to develop marketing relationships with the following
organizations:
California Trucking Association
American Petroleum Institute
Petroleum Marketers Association of America
Western States Petroleum Association
American Electronics Association
Other associations and marketing companies
Competition
While we are not aware of any other company that currently offers a
suite of software products similar to our proposed products, several
environmental management firms, with substantially greater financial and
marketing resources than us, have existing products and services that will
compete with one or more of our proposed VEMS modules, as described below. In
addition, several firms have established their own Internet web sites that could
compete with our proposed Vertica.com web site.
For example, GreenSuites, a subsidiary of Levine-Fricke, offers an
environmental management system based on SAP, a database software application
system that performs logistics, finance, sales, human resources and related
business functions. Amoco Corporation offers a system based on Lotus Domino, an
integrated messaging and applications software platform. While these competing
systems will appeal to companies that already use the SAP or Domino
applications, the SAP and Domino applications are based on an in-house or
intra-company paradigm. We believe, however, that our system will permit the
integration of regulatory compliance work flow among suppliers, carriers,
receivers and governmental agencies, all of which input or receive data
regarding hazardous chemical activities.
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One central aspect of our proposed VEMS Transport module is producing
hazardous materials shipping papers that are filed with the Environmental
Protection Agency. We have approached the California EPA to accept electronic
filing of these papers and we believe that Sterling Software has a similar
initiative in Illinois based on their electronic data interchange, or EDI,
technology. Industrial facilities rely on CAD/CAM software that includes process
models. Process models typically track raw materials through the initial
production process to shipment of the product. These models can be extended to
serve environmental process applications, and in these situations these
"in-house" models will compete with our proposed VEMS Process module. Most
industrial facilities rely on a variety of consultants and training classes to
comply with OSHA regulations and such services will compete with the services to
be offered by our proposed VEMS HazOSHA module. Similarly, most industrial
companies rely on environmental engineering firms to prepare and obtain permits
and such firms will, therefore, offer services in competition with the services
offered by our proposed VEMS Permitter Module.
We will also face competition in connection with our proposed Internet
web site. For example, Verticalnet is an existing web portal with an
environmental community that offers environmental industry news and electronic
commerce, but does not provide the additional resources, including a glossary,
access to regulations, industry contacts or MSDS repositories, or the software
applications that our proposed Vertica.com web site will provide. While other
Internet sites provide similar resources for free, we are designing our site to
offer them in combination with industry news and environmental management
applications. Also, the Environmental Protection Agency itself offers an
assortment of on-line access to regulations and form completion software, but
the software is not integrated with the customer's environmental information
database and the applications are maintained at the customer's site, away from
access to the regulations. In addition, the University of Vermont offers an
extensive MSDS repository, however, we intend that the proposed Vertica.com MSDS
repository will be capable of being linked to a customer's chemical inventory,
which will facilitate access to MSDS scientific data used in regulatory
compliance calculations.
Patent and Intellectual Property Rights
We are in the process of preparing a patent application regarding the
combination of the management system with an on-line community. We also intend
to file a patent application for our Internet/Intranet safety back-up for crisis
communications and emergency notification.
Employees
As of February 21, 2000, we have 13 full-time employees and
on__part-time employee.
Government Regulation
We intend to offer software products and services through our proposed
Internet web site that will assist customers to comply with a variety of federal
and state environmental statutes and administrative regulations. Consequently,
our business will be affected to a substantial degree
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by the existing and future government regulatory environment. While not
anticipated, our business would be adversely affected to the extent regulatory
requirements are reduced or eliminated, thereby reducing the demand for our
proposed products and services. We will need to continuously monitor and respond
to changes in environmental statutes and regulations in order to provide our
customers with current information regarding reporting and compliance
requirements. Our business would be adversely affected if we are unable to
respond to such changes in a timely manner. We do not believe that products and
services we intend to offer will be subject to governmental agency approval. We
believe, however, that compliance with regulations regarding the submission of
reports and data electronically to governmental agencies may be required at a
future date.
Risk Factors
Our business and results of operations could be seriously harmed by any
of the following risks. The trading price of our common stock could decline due
to any of these risks, and you may lose all or part of your investment.
We are a development-stage company that has had no revenues to date.
We were formed in 1996 and have been a development stage company that
has had no revenues to date. Our revenue model is evolving and we have had no
customers to date. Potential customers have only begun to evaluate our products.
We will encounter risks and difficulties frequently encountered by
development-stage companies in new and rapidly evolving markets. Many of these
risks are described in more detail in this section. We may not successfully
address any of these risks. If we do not successfully address these risks, our
business would be seriously harmed.
We have not yet developed a sales or marketing force, and if we are
unable to effectively develop adequate sales and marketing capabilities, we may
be unsuccessful in commercializing our products and services.
We intend to market and sell our products and services through a direct
sales and marketing force and on-line marketing capabilities. In order to do
this, we will have to develop a sales and marketing force with technical
expertise and establish a supporting distribution capability. Developing a sales
and marketing force is expensive and time-consuming and could delay sales of our
products and services. If we are unable to establish our sales and marketing
capability, we may fail to realize our full sales potential.
We anticipate we will incur continued losses for the foreseeable
future.
We expect to incur significant losses for the foreseeable future. To
date, we have not generated revenues and have not been profitable. Once we begin
to make sales of our products and services, our revenues may not grow. We may
never be profitable or, if we become profitable, we may be unable to sustain
profitability.
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The anticipated losses may result from our plan to increase our operating
expenses to:
launch additional VEMS modules and the Vertica.com web site;
increase our sales and marketing operations;
broaden our customer support and software capabilities; and
pursue strategic marketing and distribution alliances.
Continued losses may result in our inability to develop and market our
products, which is important to our plan to generate and grow future revenues.
We may have difficulty obtaining future funding sources, if needed, and
we might have to accept terms that would adversely affect shareholders.
If revenues from our operations are less than anticipated in 2000, we
may need to raise funds from additional financings. We have no commitments for
any financing and any financing commitments may result in dilution to our
existing stockholders.
We may have difficulty obtaining additional funding, and we may have to
accept terms that would adversely affect our stockholders. For example, the
terms of any future financings may impose restrictions on our right to declare
dividends or on the manner in which we conduct our business. Also, lending
institutions or private investors may impose restrictions on a future decision
by us to make capital expenditures, acquisitions or significant asset sales. We
may not be able to locate additional funding sources at all.
If we cannot raise funds on acceptable terms, if and when needed, we
may not be able to develop or enhance our services to customers, launch new
products, grow our business or respond to competitive pressures or unanticipated
requirements, which could seriously harm our business.
We may not be able to compete effectively with other providers of
hazardous materials and environmental management products.
We believe that the strongest potential competition does not come from
traditional service groups but rather the evolution of the Internet and the
types of hazardous materials and environmental management service providers that
evolution will create. As applications for hazardous materials and environmental
management providers begin to proliferate and mature, we will compete with other
technology companies and traditional service providers such as environmental
management firms that seek to integrate on-line hazardous materials and
environmental management technologies with their traditional service mix.
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Competition for Internet products and services is intense. We expect
that competition will continue to intensify. Barriers to entry are minimal, and
competitors can launch new web sites at a relatively low cost. We expect that
additional companies will establish competing environmental management systems.
Hazardous materials and environmental management applications are in
the early stages of development. As these applications evolve, however, we
expect that other entrepreneurs and large, well known leaders of the hazardous
materials and environmental compliance industries will create other niche
environmental services that may compete with our services. These large industry
leaders would have better name recognition in the market that we may target.
Several environmental management firms have existing products and
services that will compete with one or more of our proposed VEMS modules. In
addition, several environmental management firms have established their own
Internet web sites that could compete with our proposed Vertica.com web site.
These firms have substantially greater financial and marketing resources than we
do.
Our common stock price is likely to be highly volatile.
The market price of Vertica Software common stock is likely to be
highly volatile as the stock market in general, and the market for
Internet-related and technology companies in particular, has been highly
volatile. Our shareholders may not be able to resell their shares of Vertica
Software common stock following periods of volatility because of the market's
adverse reaction to this volatility. The trading prices of many technology and
Internet-related companies' stocks have reached historical highs within the past
18 months and have reflected relative valuations substantially above historical
levels. During the same period, these companies' stocks have also been highly
volatile and have recorded lows well below those historical highs. We cannot
assure you that our stock will trade at the same levels of other Internet stocks
or that Internet stocks in general will sustain their current market prices.
Factors that could cause this volatility may include, among other
things:
actual or anticipated variations in quarterly operating
results;
announcements of technological innovations;
new products or services;
changes in financial estimates by securities analysts;
conditions or trends in the hazardous materials and
environmental management industries, including regulatory
changes;
conditions or trends in the Internet industry;
changes in the market valuations of other Internet companies;
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announcements by us or our competitors of significant
acquisitions, strategic partnerships or joint ventures;
changes in capital commitments;
additions or departures of key personnel; and
sales of Vertica Software common stock.
Many of these factors are beyond our control. These factors may
materially adversely affect the market price of our common stock, regardless of
our operating performance.
ITEM 2. PLAN OF OPERATION
Certain statements contained in the following Plan of Operation,
including, without limitation, statements containing the words "believe,"
"anticipate," "estimate," "expect" and words of similar meaning, constitute
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward looking
statements as a result of certain factors set forth in other parts of this
document.
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Liquidity and Capital Resources
To date our activities have been financed primarily through the sale of
our common stock and promissory notes convertible into our common stock. We
currently estimate that we will need approximately $3,000,000 in funds, in
addition to our present cash reserves of approximately $170,000 and estimated
revenues of $300,000 from the sale of our initial products, in order to satisfy
our estimated cash requirements over the next twelve months. We cannot assure
you however, that we will be able to reach this revenue amount. Operating
revenues are expected to be generated following the release of VEMS Communicator
but such revenues may not be substantial or in the amounts we expect. We
anticipate that we will need these additional funds to complete the development
of the remainder of our initial product line and our proposed Internet web site
and to establish strategic alliances with other companies. We intend to raise
such funds primarily through the sale of our equity or debt securities. There
can be no assurance that we will be able to obtain such additional financing, or
whether the terms of such financing will be favorable to us. Failure to obtain
such financing or our failure to generate sufficient operating revenues from the
sale of our initial products would have a material adverse affect on our
business, financial condition and results of operations.
In the event that future equity capital cannot be raised in a timely
manner to fund Vertica Software's products development to completion,
development will be halted at that time for all modules and services excluding
the Communicator and Transporter modules. We would be forced to reduce the
current staff level to five and pursue additional bridge financing to fund the
Company until such time as permanent equity funding could be obtained. The
Transporter module would continue to be developed to its original specifications
and efforts would focus on the marketing and sales of the Communicator and
Transporter modules.
Research and Development
We have completed the development of the following products, which are
available for licensing to potential customers:
VEMS Communicator (released for licensing February 1, 2000)
VEMS Inventory (released for licensing February 1, 2000)
Over the next 12 months, we plan to complete development of the
remainder of our core products and our Internet web site. Provided that we
obtain the required funding, release of our remaining core products is projected
to be as follows:
By March 31, 2000:
VEMS Transport
By June 30, 2000:
VEMS Permitter
By September 30, 2000:
VEMS HazOSHA
VEMS Processor
16
<PAGE>
While completing the core products above, we also intend to develop our
Internet web site and web community strategic alliances within our industry
through target marketing opportunities, advertising and other related
E-business. Product and initial web site development expenses for the next
twelve months are expected to be approximately $1,700,000.
Purchase of Significant Equipment
Depending on the number of new employees we hire over the next twelve
months, we intend to purchase twenty-five to thirty additional desktop
computers, two servers, and related peripheral equipment. The total cost for the
acquisition of this equipment is estimated at approximately $86,500. We entered
into an office lease agreement in December 1999 for new office space totaling
approximately 4,350 square feet. In connection with this lease, we acquired the
predecessor tenant's workstation modules, telephone system and other related
telephone and network equipment. The total purchase price for the furniture and
equipment was $3,000. Office lease payments for the next twelve months will be
approximately $98,000.
Significant Change in Number of Employees
If we are successful in obtaining additional funding, we intend to hire
over the next twelve months between twelve to seventeen software and Web content
engineers, and approximately ten additional sales, marketing and administrative
employees. We anticipate that such additional employees will be required in
order to meet the projected release dates of our initial products described
above. Total projected personnel costs for the next twelve months are estimated
to be approximately $2,100,000, of which approximately $1,700,000 of this
projected amount is included above under projected research and development
costs.
ITEM 3. DESCRIPTION OF PROPERTY
We presently occupy approximately 4,350 square feet of office space at
5801 Christie Avenue, Suite 390, Emeryville, California, pursuant to a lease
that expires at the end of December 2004. The lease provides for rent of $9,774
per month, commencing on December 1, 1999, fully serviced.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information with respect to beneficial
ownership of our common stock by:
each person who beneficially owns more than 5% of each class of stock;
each of our executive officers;
each of our directors;
and all executive officers and directors as a group.
17
<PAGE>
The address of each stockholder listed in the table is c/o Vertica
Software, Inc., 5801 Christie Avenue, Suite 390, Emeryville, California 94608.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power with
respect to shares. To our knowledge, except under applicable community property
laws, the persons named in the table have sole voting and sole investment
control with respect to all shares beneficially owned. The applicable percentage
of ownership for each stockholder is based on 12,077,941 shares of common stock
outstanding on December 31, 1999.
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount and nature of Percent of
beneficial ownership class
<S> <C> <C> <C>
Common Stock Hans Nehme 10,271,000(1) 85.1%
Common Stock Erick K. F. Ahrens 1,990 *
Common Stock John C. Leutwyler -0- -0-
Common Stock Susan N. Hastings 10,271,000(1) 85.1%
Common Stock All officers and directors 10,272,990(1) 85.1%
as a group (4 persons)
- -------------------------
<FN>
* Represents less than 1%
(1) Includes 9,680,000 shares owned of record by Mr. Nehme and 591,000 shares owned of
record by Ms. Hastings. Mr. Nehme and Ms. Hastings are husband and wife.
</FN>
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth certain information with respect to the
executive officers and directors as of December 31, 1999:
Name Age Positions and Offices Held
Hans Nehme 36 President, Chief Executive Officer,
Chief Financial Officer,
Secretary and Director
Erick K. F. Ahrens 50 Vice President, Research and Development
John C. Leutwyler 66 Director
Susan N. Hastings 38 Director
The following sets forth biographical information as to the business
experience of each of our executive officers and directors:
18
<PAGE>
Hans Nehme has served as our President, Chief Executive Officer, Chief
Financial Officer, Secretary and a director since December 1998, when we merged
into our predecessor corporation, Vertica California. Mr. Nehme served in
similar capacities with Vertica California from December 1995 to December 1998.
From December 1994 to December 1995, Mr. Nehme served as the President of
InterLink Trade Management, a consulting and export firm specializing in
computer hardware and peripherals, and from July 1995 to December 1995 he was
Chairman of Knowledge Direct, Inc., a company that produced training software
products.
Erick K. F. Ahrens has served as our Vice President, Research and
Development, since December 1998. From August 1996 until December 1998, Mr.
Ahrens was Research and Development Manager of QRS, Inc., an electronic data
interchange company. Mr. Ahrens served as Vice President, Research and
Development, of Vertica California from December 1995 until August 1996.
John C. Leutwyler has served as a Director since November 1999. From
December 1994 until his retirement in April 1996, Mr. Leutwyler served as Vice
President and General Manager of Tanker Operations (Vessel and Commercial) for
Chevron Shipping Company, Chevron Corporation's marine transportation
subsidiary. He is currently the President of Canyon Consulting Company, which is
involved in worldwide marine and marine finance consulting.
Susan N. Hastings has served as a director since December 1998 and
served as a director of Vertica California from January 1996 until December
1998. From August 1995 to October 1998, she was Senior Trial Counsel for TIG
Insurance Company. From October 1995 to August 1995 she was Trial Counsel for
Home Insurance Company. Ms. Hastings is the wife of Mr. Nehme.
Number of Directors and Directors' Terms of Office
We currently have three directors. There are no committees of the
Board. All directors hold office until the next annual meeting of shareholders.
Ms. Hastings, one of our directors, is the wife of Mr. Nehme, our Chief
Executive Officer and a director. No other family relationships exist among our
officers and directors.
Director Compensation
Our directors do not receive any compensation for their services as
directors. It is anticipated that each non-employee director will be eligible to
participate in our proposed stock option plan.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth compensation for services rendered in
all capacities during the fiscal year ended December 31, 1999 for our Chief
Executive Officer. No other executive officer received compensation in excess of
$100,000 during such fiscal year.
19
<PAGE>
<TABLE>
<CAPTION>
Long-term compensation
-------------------------------------------
Annual Compensation Awards Payouts
-------------------------------- ------------------- ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities
All Other Restricted Underlying LTIP
</TABLE>
<TABLE>
<CAPTION>
Name and Principal Other Annual Stock Options Payouts
Position Year Salary Bonus Compensation Awards (#) ($) Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hans Nehme, Chief 1999 $112,800 -0- -0- -0- -0- -0- -0-
Executive Officer
</TABLE>
No options to purchase shares of our common stock or other securities
and no stock appreciation rights have been granted to Mr. Nehme. We maintain a
group term life insurance policy for the benefit of our employees. Such policy
insures the life of each employee, including Mr. Nehme, in the amount of
$50,000, the beneficiaries of which are designated by the employee.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On September 29, 1998, we entered into a Stock Purchase and Exchange
Agreement ("Purchase Agreement") with Vertica Software, Inc., a California
corporation ("Vertica California"), Hans Nehme and Scott M. Thornock and C.
Edward Venerable who at that time owned approximately 80% of our outstanding
common stock in the aggregate. Vertica California was in the business of
developing Internet and intranet software products serving the hazardous
materials industry. Pursuant to the Purchase Agreement, we issued to Mr. Nehme
an aggregate of 9,200,000 shares of our common stock in exchange for 4,930,000
shares of the common stock of Vertica California owned by Mr. Nehme. In
addition, Mr. Nehme purchased from the two shareholders 480,000 shares of our
common stock for a price of $25,000. As a result of this transaction, Mr. Nehme
acquired a controlling interest in us and Vertica California became our
wholly-owned subsidiary.
On December 31, 1998, Vertica California merged with and into us. We
were the surviving corporation in the merger and the separate corporate
existence of Vertica California ceased. As a result of the above describe
acquisition and the merger, we acquired and have continued the business
originally commenced and operated by Vertica California.
In connection with the merger effective as of December 31, 1998, we
advanced $25,000 to Mr. Nehme for payment to the shareholders of Perfection
Development Corporation. Mr. Nehme repaid this advance to us on January 15,
2000.
20
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
Our articles of incorporation authorize the issuance of up to
30,000,000 shares of common stock, par value $0.0001 per share, and 3,000,000
shares of preferred stock, par value $0.001 per share. As of December 31, 1999,
12,077,941 shares of common stock were outstanding, and no shares of preferred
stock were outstanding.
Each holder of common stock is entitled to one vote for each share on
all matters to be voted upon by the stockholders. Our Colorado articles of
incorporation provide that shareholders shall not have cumulative voting rights
in the election of directors. Nevertheless, we may be a "quasi-California
corporation" within the meaning of Chapter 21 of the California Corporations
Code. This would be the case if the average of our "property factor", "payroll
factor" and "sales factor" (as defined in the California Revenue and Taxation
Code) is more than fifty percent (50%), and more than one-half of our
outstanding voting securities are held of record by persons having addresses in
California. If a corporation is a quasi-California corporation, California law
provides that certain portions of the California Corporations Code, including
those pertaining to cumulative voting for directors, shall govern it, to the
exclusion of the law of the true jurisdiction of incorporation. Under Section
708 of the California Corporations Code, if any shareholder gives notice at a
meeting, prior to voting for directors, of his intention to cumulate his votes,
all shareholders may cumulate their votes in the election for directors; i.e.,
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of votes to which the shareholder's shares are
normally entitled, or distribute the shareholder's votes on the same principle
among as many candidates as the shareholder thinks fit. The candidates receiving
the highest number of affirmative votes, up to the number of directors to be
elected, are elected to the Board of Directors.
Subject to preferences to which holders of any future series of
preferred stock may be entitled, holders of common stock will be entitled to
receive ratably any dividends that may be declared from time to time by the
Board of Directors out of funds legally available for that purpose. In the event
of our liquidation, dissolution or winding up, holders of common stock will be
entitled to share in our assets remaining after the payment of liabilities and
the satisfaction of any liquidation preference granted to the holders of any
outstanding shares of preferred stock. Holders of common stock have no
preemptive or conversion rights or other subscription rights and there are no
redemption or sinking fund provisions applicable to our common stock. The
rights, preferences and privileges of the holders of common stock are subject
to, and may be adversely affected by the rights of the holders of shares of any
series of preferred stock that we may designate in the future.
We have never declared or paid any dividends on our common stock. We do
not anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and the
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of the Board of Directors and will depend upon our
financial condition operating results, capital requirements and other factors
the Board of Directors deems relevant.
The Board of Directors presently has the authority by resolution to
issue up to 3,000,000 shares of preferred stock, par value $0.001 per share, and
without further action by the stockholders, to divide any and all shares of the
preferred stock into series and to fix and determine the relative rights and
preferences of the preferred stock, such as the designation of series and the
number of shares constituting such series, dividend rights, redemption and
sinking fund provisions, liquidation and dissolution preferences, conversion or
exchange rights and voting rights, if any. With respect to voting rights, if the
preferred stock were permitted to vote in the election of directors or on other
matters, each such share would be entitled to one vote, and such shares may vote
with the shares of common stock or may vote as a separate class. Issuances of
preferred stock by the Board of Directors could result in such shares having
dividend and/or liquidation preferences senior to the rights of the holders of
common stock and could dilute the voting rights of the holders of common stock.
21
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS.
Our common stock is traded on the over-the-counter market and is quoted
on the NASD OTC Bulletin Board under the symbol "VERI". The following table sets
forth the closing high and low bid prices of our common stock in each quarter
from the inception of trading through February 22, 2000. These prices are
believed to be representative inter-dealer quotations, without retail markup,
markdown or commissions, and may not represent prices at which actual
transactions occurred.
Bid
1998 High Low
---- ---- ---
4th Quarter $1.00 $0.75
1999
1st Quarter $4.625 $0.7500
2nd Quarter $0.875 $0.100
3rd Quarter $0.875 $0.3125
4th Quarter $1.875 $0.375
2000
1st Quarter $3.125 $1.03125
(through February 22, 2000)
The number of holders of record of our $0.0001 par value Common stock
at February 15, 1999 was approximately 350. We have never declared or paid any
dividends on our common stock and we do not anticipate paying any cash dividends
in the foreseeable future.
22
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings .
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The following is a description of securities that we have sold since
our inception on April 21, 1997 without registering the securities under the
Securities Act of 1933, as amended (the "1933 Act"). We claimed an exemption
from registration for all such sales under Section 4(2) of the 1933 Act or
Regulation D promulgated thereunder.
In connection with our organization in April 1997, we issued an
aggregate of 1,040,000 shares of our common stock to our two founding
shareholders in consideration for services rendered. We claimed an exemption
from registration for such issuance under Section 4(2) of the 1933 Act.
On October 8, 1997, we issued 260,000 shares of our common stock to
approximately 30 investors at a price of $0.25 per share pursuant to Rule 504 of
Regulation D.
On September 29, 1998, we issued an aggregate of 9,200,000 shares of
our common stock to Hans Nehme in exchange for 4,930,000 shares of the
outstanding common stock of Vertica California owned by Mr. Nehme. We claimed an
exemption from registration for such issuance under Section 4(2) of the 1933
Act. See Part I, Item 7 above.
On December 4, 1998, we issued 50,000 shares of our common stock at a
price of $1.00 per share to a single investor, pursuant to Rule 504 of
Regulation D.
On December 21, 1998, we issued 50,000 shares of our common stock at a
price of $1.00 per share to a single investor pursuant to Rule 504 of Regulation
D.
On February 11, 1999, we issued 41,433 shares of our common stock
pursuant to the conversion of a convertible promissory note in the principal
amount of $25,000 and dated September 30, 1998. The note was converted at the
rate of $0.618 per share. We claimed an exemption from registration for such
issuance under Section 4(2) of the 1933 Act.
On February 11, 1999, February 24, 1999 and March 2, 1999, we issued an
aggregate of 701,500 shares of our common stock at a price of $1.00 per share in
a private placement pursuant to Rule 504 of Regulation D.
23
<PAGE>
On February 24, 1999, we issued an aggregate of 32,885 shares of our
common stock pursuant to the conversion of three convertible promissory notes in
the principal amounts of $12,000, $10,000 and $10,000, respectively, and dated
August 1, 1998, August 2, 1998 and August 14, 1998, respectively. The notes were
converted at the rate of $1.00 per share. We claimed an exemption from
registration for such issuance under Section 4(2) of the 1933 Act.
On March 25, 1999, we issued 80,802 shares of our common stock pursuant
to the conversion of a convertible promissory note in the principal amount of
$50,000 and dated September 24, 1998. The note was converted at the rate of
$0.618 per share. We claimed an exemption from registration for such issuance
under Section 4(2) of the 1933 Act.
On March 26, 1999, we issued an aggregate of 571,321 shares of our
common stock pursuant to the conversion of four convertible promissory notes in
the principal amounts of $3,000, $28,811, $10,000 and $10,000, respectively.
These notes were originally issued by Vertica California on February 27, 1997,
March 1, 1996, October 31, 1996 and September 1, 1996, respectively. The notes
were converted at the rate of $0.10 per share. We claimed an exemption from
registration for such issuance under Section 4(2) of the 1933 Act.
On March 1, 1999, we issued 40,000 shares of our common stock to a
single investor in consideration for consulting services rendered. We claimed an
exemption from registration for such issuance under Section 4(2) of the 1933
Act.
On March 24, 1999, we issued 10,000 shares of our common stock pursuant
to the conversion of a convertible promissory note in the principal amount of
$10,000. The note was converted at the rate of $1.00 per share. We claimed an
exemption from registration for such issuance under Section 4(2) of the 1933
Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our articles of incorporation provide in relevant part that we shall
indemnify any person who was or is a party or is threatened to be made a party,
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than a derivative action
by or in the right of the corporation), by reason of the fact that he is or was
a director, officer, employee or agent of us, or is or was serving at our
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonable incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonable believed to
be in, or not opposed to, our best interests and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. With respect to derivative actions, our articles provide in relevant
part that we shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor (by reason of
his service in one of the capacities specified in the preceding sentence)
against expenses (including attorneys' fees) actually and reasonable incurred by
him in connection with the defense or settlement of such
24
<PAGE>
action or suit if he acted in good faith and in a manner he reasonable believed
to be in or not opposed to our best interests, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to us for negligence or misconduct unless
and only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonable entitled to indemnification for such expenses which such court shall
deem proper.
Our articles of incorporation also provide that no director shall be
personally liable to us or any shareholder for monetary damages for breach of
fiduciary duty as a director, except for (i) any breach of the director's duty
of loyalty to us or our shareholders, (ii) acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law, (iii)
unlawful payments of dividends or unlawful stock repurchases or redemptions, or
(iv) any transaction from which the director derived an improper personal
benefit. Such 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.
We maintain insurance on behalf of any person who is a director or
officer against any loss arising from any claim asserted against him and
incurred by him in any such capacity, subject to certain exclusions.
PART F/S
The financial statements required by Part F/S and filed as part of this
registration statement are identified in the Index to Financial Statements on
Page F-1.
PART III
ITEM 1. INDEX TO EXHIBITS
3.1 Articles of Incorporation of the Registrant
3.2 Articles of Amendment to the Articles of Incorporation of the
Registrant
3.3 Bylaws of the Registrant
10.1 Convertible Promissory Note of Vertica California dated April 10, 1997
in the principal amount of $50,000
10.2 Convertible Promissory Note of Vertica California dated April 11, 1997
in the principal amount of $50,000
10.3 Note Purchase Agreement dated April 9, 1997 between Vertica California
and Arthur A. Gingell
25
<PAGE>
10.4 Stock Purchase and Exchange Agreement dated September 29, 1998 by and
among the Registrant, Scott M. Thornock, Edward C. Venerable, Vertica
California and Hans Nehme
10.5 Custom Content Agreement dated January 19, 2000 between the Registrant
and ScreamingMedia.com, Inc.
10.6 License Agreement dated February 1, 2000 by and between the Registrant
and Stockpoint, Inc.
10.7 Lease Agreement dated as of December 1, 1999 between the Registrant and
Spieker Properties, L.P.
10.8 Letter of Agreement dated January 7, 2000 between the Registrant and
Pfeiffer Public Relations, Inc.
ITEM 2. DESCRIPTION OF EXHIBITS
The Exhibits filed herewith are identified in the Index to Exhibits set
forth in Item I of Part III of this registration statement.
26
<PAGE>
SIGNATURES
In accordance with the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
VERTICA SOFTWARE, INC.
Dated: February 25, 2000 By:/s/ Hans Nehme
----------------- -----------------------------------
Hans Nehme, President and
Chief Executive Officer
27
<PAGE>
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT.................................................F-1
FINANCIAL STATEMENTS
Balance Sheets..........................................................F-2
Statements of Operations................................................F-3
Statement of Changes in Stockholders' Equity............................F-4
Statements of Cash Flows................................................F-6
NOTES TO FINANCIAL STATEMENTS................................................F-7
<PAGE>
Board of Directors
Vertica Software, Inc.
Emeryville, California
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of Vertica Software, Inc., a
Colorado corporation (the "Company"), formerly Perfection Development
Corporation, (a development stage company) as of December 31, 1999, 1998, 1997,
and 1996 and the related statements of operations, stockholders' equity, and
cash flows for the period January 1, 1996 (inception) through December 31, 1999.
On December 31, 1998, the Company acquired all of the outstanding capital stock
of Vertica Software, Inc., a California corporation ("Vertica California") in a
reverse acquisition merger. The merger has been accounted for as a capital
acquisition as further described in the notes to the financial statements. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 1999, 1998, 1997, and 1996 and the results of its operations and
its cash flows for the period January 1, 1996 (inception) through December 31,
1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has incurred significant development stage losses and
has a limited supply of cash, which raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Randolph Scott & Company
San Anselmo, California
February 14, 2000
F-1
<PAGE>
<TABLE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<CAPTION>
December 31, December 31, December 31, December 31,
1999 1998 1997 1996
ASSETS (Audited) (Audited) (Audited) (Audited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents (Note 3) $ 36,490 $ 59,389 $ 9,646 $ 3,574
Advance to Stockholder (Note 5) 25,000 25,000 -- --
Prepaid Expenses 2,724 3,124 4,437 4,487
----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS 64,214 87,513 14,083 8,061
EQUIPMENT, less accumulated depreciation of $23,337,
$7,937, $4,551 and $0, respectively (Notes 3 and 6) 27,288 25,673 12,382 12,558
DEPOSITS 10,000 5,815 3,510 3,510
----------- ----------- ----------- -----------
TOTAL ASSETS $ 101,502 $ 119,001 $ 29,975 $ 24,129
=========== =========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of Credit (Note 7) $ -- $ 25,067 $ 12,500 $ --
Current Portion of Capital Lease Obligations (Note 10) 6,189 5,008 4,407 4,506
Notes Payable (Note 8) -- 20,700 10,000 10,000
Stock Subscription (Note 9) -- 50,000 -- --
Accounts Payable and Other Accrued Expenses 66,364 62,407 19,342 2,788
Payroll Taxes Payable -- 6,133 1,298 --
----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES 72,553 169,315 47,547 17,294
CAPITAL LEASE OBLIGATIONS (Note 10) 4,057 -- 4,407 5,209
CONVERTIBLE PROMISSORY NOTES (Note 11) 200,000 303,061 196,061 43,061
----------- ----------- ----------- -----------
TOTAL LIABILITIES 276,610 472,376 248,015 65,564
----------- ----------- ----------- -----------
COMMITMENTS (Note 13)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, $.001 par value, 3,000,000 shares authorized,
-0- shares issued and outstanding -- -- -- --
Common Stock, $.0001 par value, 30,000,000 shares authorized;
12,077,941 shares issued and outstanding at December 31, 1999,
and 10,600,000, 9,200,000, and 9,200,000 shares issued and
outstanding at December 31, 1998, 1997, and 1996 respectively 1,207 1,060 920 920
Paid in Capital 1,030,459 99,790 (70) (70)
Deficit accumulated during development stage (1,206,774) (454,225) (218,890) (42,285)
----------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY (175,108) (353,375) (218,040) (41,435)
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 101,502 $ 119,001 $ 29,975 $ 24,129
=========== =========== =========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F-2
<PAGE>
<TABLE>
VERTICA SOFTWARE, INC
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<CAPTION>
Cumulative
From
January 1,
1996
(Date of
For the For the For the For the Inception)
Year Ended Year Ended Year Ended Year Ended to
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1999
(Audited) (Audited) (Audited) (Audited) (Audited)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total Revenue $ -- $ -- $ -- $ -- $ --
Operating expenses:
Product development 239,396 40,622 115,957 -- 395,975
General and administrative 492,266 165,520 38,652 37,100 733,538
------------ ------------ ------------ ------------ ------------
Total operating expenses 731,662 206,142 154,609 37,100 1,129,513
------------ ------------ ------------ ------------ ------------
Loss from operations (731,662) (206,142) (154,609) (37,100) (1,129,513)
Interest income 1,199 131 1,209 -- 2,539
Interest expense (21,379) (28,323) (24,049) (4,385) (78,136)
Other income 93 1,644 -- 1,737
Bad debt expense -- (201) -- -- (201)
------------ ------------ ------------ ------------ ------------
Loss before income taxes (751,749) (234,535) (175,805) (41,485) (1,203,574)
Provision for income taxes (Note 12) (800) (800) (800) (800) (3,200)
------------ ------------ ------------ ------------ ------------
Net loss $ (752,549) $ (235,335) $ (176,605) $ (42,285) $ (1,206,774)
============ ============ ============ ============ ============
Net loss applicable to common stockholders $ (752,549) $ (235,335) $ (176,605) $ (42,285) $ (1,206,774)
============ ============ ============ ============ ============
Net loss per share---basic $ (0.0643) $ (0.0256) $ (0.0192) $ (0.0046) $ (0.0992)
============ ============ ============ ============ ============
Weighted average shares used in per share
calculation---basic 11,696,678 9,200,000 9,200,000 9,200,000 12,167,941
============ ============ ============ ============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
Statement of Changes in Stockholders' Equity
From January 1, 1996 (Inception) to December 31, 1999
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock During
----------------- ----------------------- Paid-in Development
Shares Amount Shares Amount Capital Stage Total
------- ------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 -- $ -- -- $ -- $ -- $ -- $ --
January 1, 1996 (inception), shares issued at
incorporation (Note 4) -- -- 9,200,000 920 (70) -- 850
Net loss for the year ended December 31, 1996 -- -- -- -- -- (42,285) (42,285)
------- ------- ---------- ---------- ---------- ---------- ----------
BALANCE DECEMBER 31, 1996 -- $ -- 9,200,000 $ 920 $ (70) $ (42,285) $ (41,435)
------- ------- ---------- ---------- ---------- ---------- ----------
Net loss for the year ended December 31, 1997 -- -- -- -- -- (176,605) (176,605)
------- ------- ---------- ---------- ---------- ---------- ----------
BALANCE DECEMBER 31, 1997 -- $ -- 9,200,000 $ 920 $ (70) $ (218,890) $ (218,040)
------- ------- ---------- ---------- ---------- ---------- ----------
December 31, 1998, Issuance of common stock
pursuant to a reverse merger acquistion -- -- 1,300,000 130 (130) -- --
December 31, 1998, sale of common stock
pursuant to a confidential subscription
agreement (Note 9) -- -- 50,000 5 49,995 -- 50,000
December 31, 1998, sale of common stock
pursuant to a confidential subscription
agreement (Note 9) -- -- 50,000 5 49,995 -- 50,000
Net loss for the year ended December 31, 1998 -- -- -- -- -- (235,335) (235,335)
------- ------- ---------- ---------- ---------- ---------- ----------
BALANCE DECEMBER 31, 1998 -- $ -- 10,600,000 $ 1,060 $ 99,790 $ (454,225) $ (353,375)
------- ------- ---------- ---------- ---------- ---------- ----------
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
Statement of Changes in Stockholders' Equity
From January 1, 1996 (Inception) to December 31, 1999
<CAPTION>
Preferred Stock Common Stock During
---------------- ------------------ Paid-in Development
Shares Amount Shares Amount Capital Stage Total
------ ------ ------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
February 11, 1999, sale of common stock
pursuant to a confidential subscription
agreement (Note 9) -- -- 40,000 4 39,996 -- 40,000
February 11, 1999, sale of common stock
in Private Placement Transactions, net of
Offering costs of $ 1,876 (Note 9) -- -- 584,500 58 584,442 -- 584,500
February 11, 1999, conversion of convertible
promissory note to common stock (Note 9) -- -- 41,433 5 42,653 -- 42,658
February 24, 1999, sale of common stock
in Private Placement Transactions, net of
Offering costs of $ 75 (Note 9) -- -- 62,000 6 61,994 -- 62,000
February 24, 1999, conversion of convertible
promissory notes to common stock (Note 9) -- -- 32,885 3 34,693 -- 34,696
March 2, 1999, sale of common stock
in Private Placement Transactions, net of
Offering costs of $ 15 (Note 9) -- -- 15,000 1 14,999 -- 15,000
March 25, 1999, conversion of convertible
promissory note to common stock (Note 9) -- -- 80,802 8 55,045 -- 55,053
March 26, 1999, conversion of convertible
promissory notes to common stock (Note 9) -- -- 571,321 57 86,852 -- 86,909
September 23, 1999, issuance of common
stock for services (Note 9) -- -- 40,000 4 (4) -- --
October 29, 1999, conversion of convertible
promissory note to common stock (Note 9) 10,000 1 9,999 -- 10,000
Net loss for the year ended December 31, 1999 -- -- -- -- -- (752,549) (752,549)
------ ------ --------- ------- --------- --------- -------
BALANCE, DECEMBER 31, 1999 -- $ -- 2,077,941 $ 1,207 $1,030,459 $(1,206,774) $(175,108)
====== ====== ========= ======= ========= ========= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F-5
<PAGE>
<TABLE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<CAPTION>
From
January 1,
1996
Date of
For the For the For the For the Inception)
Year Ended Year Ended Year Ended Year Ended to
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1999
(Audited) (Audited) (Audited) (Audited) (Audited)
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (752,549) $ (235,335) $ (176,605) $ (42,285) $(1,206,774)
Transactions not requiring cash:
Depreciation 15,400 3,386 1,411 3,140 23,337
Noncash consulting services -- -- -- -- --
Changes in operating assets and liabilities:
(Increase) decrease in advance to stockholder -- (25,000) -- -- (25,000)
(Increase) decrease in prepaid expenses 400 1,313 50 (4,487) (2,724)
(Increase) decrease in deposits (4,185) (2,305) -- (3,510) (10,000)
Increase (decrease) in accounts payable
and other accrued expenses 3,957 40,065 16,554 2,788 63,364
Increase (decrease) in payroll taxes payable (6,133) 4,835 1,298 -- --
----------- ----------- ----------- ----------- ----------
NET CASH (USED IN) OPERATING ACTIVITIES (743,110) (213,041) (157,292) (44,354) (1,157,797)
----------- ----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase/acquisition of equipment (17,015) (16,677) (1,235) (15,698) (50,625)
----------- ----------- ----------- ----------- ----------
NET CASH (USED IN) INVESTING ACTIVITIES (17,015) (16,677) (1,235) (15,698) (50,625)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings/assumption on line of credit -- 13,800 12,500 -- 26,300
Net payments on line of credit (25,067) (1,233) -- -- (26,300)
Proceeds/assumption of unsecured notes -- 10,700 -- 10,000 20,700
Net payments on unsecured notes (20,700) -- -- -- (20,700)
Proceeds, assumption on convertible debt 50,000 110,000 153,000 43,061 356,061
Reduction of convertible promissory notes (153,061) -- -- -- (153,061)
Conversion of convertible promissory notes
into common stock (includes $ 66,255
of accrued interest) 229,316 150,000 -- -- 379,316
Redemption of stock subscriptions (50,000) (100,000) -- -- (150,000)
Issuance of common stock 701,500 100,000 -- 850 802,350
Assumption of capital lease obligation 12,566 -- -- 13,795 26,361
Net payments on capital lease obligation (7,328) (3,806) (901) (4,080) (16,115)
----------- ----------- ----------- ----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 737,226 279,461 164,599 63,626 1,244,912
----------- ----------- ----------- ----------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS (22,899) 49,743 6,072 3,574 36,490
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 59,389 9,646 3,574 -- --
----------- ----------- ----------- ----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 36,490 $ 59,389 $ 9,646 $ 3,574 $ 36,490
=========== =========== =========== =========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 3,623 $ 9,410 $ 5,015 $ 1,440 $ 18,048
Taxes $ 800 $ 800 $ 800 $ 800 $ 2,400
NONCASH INVESTING AND FINANCING TRANSACTIONS:
Common stock issued for consulting services $ 40,000 $ -- $ -- $ -- $ 40,000
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F-6
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 1 - LOSSES DURING THE DEVELOPMENT STAGE
Development Stage Company
The Company is in the development stage in accordance with Statement of
Financial Accounting Standard (SFAS) No. 7. All of the costs incurred to date
have been related to the development of its products, development of its
proposed Internet website, and the raising of capital to finance such
activities.
The Company, as discussed in Notes 2, 3, and 4 below, have incurred operating
losses since inception, totaling $1,206,774 through December 31, 1999.
Management plans to raise additional capital, primarily through the issuance of
common stock and convertible promissory debt until successful operations are
obtained, and the Company is no longer in the development stage.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon the Company's ability to meet its
financing requirements, and the success of its future operations. Management
believes that actions presently being taken to underwrite the Company's
development stage through completion will provide the necessary financial
requirements, which in turn will provide the opportunity for the Company to
continue as a going concern.
NOTE 2 - ORGANIZATION AND NATURE OF BUSINESS
Background
Vertica Software, Inc., (the "Company"), formerly "Perfection Development
Corporation", was incorporated in Colorado on April 18, 1997. As further
discussed in Notes 3 and 4, on September 29, 1998, Perfection Development
Corporation entered into an agreement pursuant to which it would acquire all of
the outstanding capital stock of Vertica Software, Inc., a California
corporation ("Vertica California"). On December 31, 1998, Vertica California
merged with and into the Company. The Company was the surviving corporation in
the merger and the separate corporate existence of Vertica California ceased.
Concurrently with the merger, the Company changed its name from Perfection
Development Corporation to Vertica Software, Inc. The Company is developing
Internet/Intranet software products and services and an Internet web site for
the hazardous material and environmental industries.
Products
The Company's current product development includes an environmental management
computer software system called VEMS, and development of a Internet web site
called VERTICA.COM. VEMS is intended to link to VERTICA.COM for additional
content information, on-line regulations compliance and on-demand training and
services. VEMS is intended to be a set of computer software modules that are
being designed to automate environmental regulation compliance and related
activities, for common industrial applications. This will encompass activities
such as chemical inventory, transportation manifests, emergency response, permit
applications, waste streams, and occupational training. Vertica.com will be an
on-line web site that will serve the hazardous materials community and
environmental concerns of industry.
F-7
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 2 - ORGANIZATION AND NATURE OF BUSINESS - Continued
Liquidity
The Company has recurring operating losses since inception that have continued
subsequent to December 31, 1999. The losses are primarily due to product
development costs, and administrative infrastructure costs related to the
financing and development of the Company's business.
In November 1999, the Company entered into a memo of understanding with an
investment firm to obtain the necessary financing to accelerate the completion
of its products, and to assist management in the development of the Company.
In conjunction with the memo of understanding, in December 1999, the Company
received $ 50,000 in bridge financing.
In conjunction with the memo of understanding, in January 2000, the Company
received an additional $ 250,000 in bridge financing.
The Company believes that the proceeds from these transactions will provide
adequate funding to sustain the Company's operations until permanent equity
funding can be raised. However, there is no assurance that the funding will be
raised, or that it will be sufficient to sustain operations until the Company
begins generating positive cash flows.
The Company's plan to continue the development of its core products through the
year ending December 31, 2000 is solely dependent on additional funding through
the sale of equitable securities or convertible promissory notes.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
As further discussed in Note 4, the acquisition of Vertica California was
accounted for as a "reverse merger acquisition" whereby, for accounting
purposes, Perfection Development Corporation acquired the Company under the
purchase method of accounting and, due to the lack of significant prior
operations of Perfection Development Corporation, was substantially recorded as
a "recapitalization". Accordingly, the historical financial statements have been
restated after giving effect to the December 31, 1998 acquisition of the
Company. The financial statements have been prepared to give retroactive effect
to January 1, 1996 of the reverse merger acquisition completed on December 31,
1998 and represent the operations of Vertica California. Consistent with reverse
acquisition accounting: ( i ) all of Vertica California's assets, liabilities
and accumulated deficit are reflected at their combined historical cost ( as the
accounting acquirer ) and ( ii ) the preexisting outstanding shares of the
Company ( the accounting acquiree ) are reflected at their net asset value as if
issued on December 31, 1998.
Management 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, liabilities, retained earnings, income
and expenses, and related disclosures for the reporting period. Actual results
could differ from those estimates and such differences could be material.
F-8
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Cash and Cash Equivalents
Cash is defined as cash in demand deposit accounts as well as cash on hand. Cash
equivalents are short term, highly liquid investments that are readily
convertible to known amounts of cash and investments so near their maturity that
the risk of changes in value due to changes in interest rates is negligible.
These are generally investments with maturity dates within three months of their
acquisition date. Not included as cash equivalents are funds restricted as to
their use, regardless of liquidity or the maturity dates of investments.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of uninsured cash balances. The Company places
its cash deposits with high-credit quality financial institutions. At times,
balances in the Company's cash accounts may exceed the Federal Deposit Insurance
Company (FDIC) limit of $100,000. There were no uninsured balances at December
31, 1999, 1998, 1997, and 1996.
Prepaid Expenses
Prepaid expenses are charged to the statement of operations in the period for
which the benefit is incurred.
Equipment
As further discussed in Note 6, equipment is carried at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of the
related assets, which is five years. Capitalized equipment leases are
depreciated over lesser of their estimated useful life or lease term.
Product Development
Product development expenditures are charged to operations as incurred.
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," requires
the capitalization of certain software development costs subsequent to the
establishment of technological feasibility. The Company has determined that
technological feasibility for its products is generally achieved upon completion
of a working model. Since software development costs have not been significant,
and the working model(s) are not yet completed, all such costs have been charged
to expense for the years ended December 31, 1999, 1998 and 1997. There were no
costs incurred for the period ended December 31, 1996.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
F-9
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Net Loss Per Share
The Company reports its net loss per share using a dual presentation of basic
and diluted loss per share. Basic loss per share excludes the impact of common
stock equivalents, and is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding for the period. Diluted
loss per share includes the dilutive effect from the potential exercise or
conversion of convertible debt. For the years ended December 31, 1999, 1998,
1997, and 1996 the impact of convertible debt was not considered as their effect
on Net Loss Per Share would be anti-dilutive.
Fair Value of Financial Instruments
Cash, advances, prepaid expenses, accounts payable and accrued expenses are
reflected in the accompanying financial statements at fair value due to the
short-term nature of those instruments. The carrying amount of long term debt
obligations approximate fair value at the balance sheet date.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income". SFAS No. 130 is effective for fiscal years
beginning after December 31, 1997. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income in a set of financial statements.
Comprehensive income is defined as the change in net assets of a business
enterprise during a period from transactions generated from non-owner sources.
It includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. The Company had no
comprehensive income items, therefore, the adoption of SFAS No. 130 had no
impact on the financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". SFAS No.
131 applies to all public companies and is effective for fiscal years beginning
after December 15, 1997. SFAS No. 131 requires that business segment financial
information be reported in the financial statements utilizing the management
approach. The management approach is defined as the manner in which management
organizes the segments within the enterprise for making operating decisions and
assessing performance. The Company operates in one business segment; therefore,
the adoption of SFAS No. 131 had no impact on the financial statements.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." The Company adopted SOP 98-1
in January 1999.
On April 3, 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued a new SOP (Statement of
Position) 98-5 entitled "Reporting on the Costs of Start-Up Activities."
Start-up costs have been broadly defined as: "those one-time activities related
to opening a new facility, introducing a new product or service, conducting
business in a new territory, commencing business with a new class of customer or
beneficiary, initiating a new process in an existing facility, or commencing
some new operation."
F-10
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Recent Accounting Pronouncements - continued
The SOP applies to all non-governmental entities that prepare their financial
statements in conformity with generally accepted accounting principles. The SOP
is effective for financial statements for fiscal years beginning after December
15, 1998, with earlier application encouraged in fiscal years for which
financial statements previously have not been issued. Since this is the first
set of issued financial statements of the Company, application of this SOP was
made January 1, 1996.
Year 2000 Compliance
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot distinguish
twenty-first century dates from twentieth century dates. To function properly,
these date-code fields must distinguish twenty-first century dates from
twentieth century dates and, as a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with such "Year
2000" requirements.
The Company is dependent on the operation of numerous systems that may be
adversely affected by the Year 2000 problem, including equipment, software, and
content supplied to the Company by third-party vendors that may not be Year 2000
compliant, including outside providers of Web-hosting services on which the
Company is currently dependent. In addition, the Company's future business
depends on the successful operation of the Internet following the commencement
of the year 2000. If the Internet is inaccessible for an appreciable period of
time, or if customers and users are unable to access the Company's site, the
Company's business and revenues could be adversely affected. The Company is also
subject to external forces that might generally affect industry and commerce,
such as telecommunications, utility or transportation company Year 2000
compliance failures, related service interruptions and the economic impact that
such failures have on the Company customers Year 2000 Compliance Assessment
Plans.
The Company has not incurred material costs to date in their assessment process,
and currently does not believe that the cost of additional actions will have a
material effect on its results of operations or financial condition.
NOTE 4 - ACQUISITION
The Company's current business is a continuation of the business formerly
conducted by Vertica Software, Inc., a California corporation ("Vertica
California"). On December 31, 1998, the Company acquired 100% of the outstanding
capital stock of Vertica California in a "reverse merger acquisition." The
purchase price was solely comprised of the issuance of 9,200,000 shares of the
Company's common stock, par value $ .0001, to the shareholders of Vertica
California in exchange for all 4,930,000 shares of Vertica California's common
stock, no par value. The Company was the surviving corporation in the merger and
the separate corporate existence of Vertica California ceased. Concurrently with
the merger, the Company changed its name from Perfection Development Corporation
to Vertica Software, Inc. The merger constituted a tax-free reorganization. The
acquisition of Vertica California was accounted for using the purchase method of
accounting, and due to the lack of significant prior Company operations, was
substantially recorded as a "recapitalization."
F-11
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 5 - ADVANCE TI STOCKHOLDER
At December 31, 1999 and 1998, advance to stockholder consisted of an advance to
acquire stock in the Successor Company. In the original merger documents, the
stockholder was supposed to pay the Perfection Development Corporation
Shareholders $25,000 out of his own funds. The corporation made the $25,000
payment. There were no advances at December 31, 1997 and 1996. The stockholder
paid off the advance on January 15, 2000.
<TABLE>
NOTE 6 - EQUIPMENT
Equipment consisted of the following:
<CAPTION>
At December 31: 1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computer and peripheral equipment $ 50,625 $ 33,610 $ 16,933 $ 15,698
Less accumulated depreciation 23,337 7,937 4,551 3,140
------------- ------------- ------------- -------------
$ 27,288 $ 25,673 $ 12,382 $ 12,558
============= ============= ============= =============
</TABLE>
Total depreciation expense for the years ended December 31, 1999, 1998, 1997 and
1996 respectively was $15,400, $3,386, $1,411, and $3,140.
<TABLE>
NOTE 7 - LINE OF CREDIT
The Company has a bank line of credit for $ 25,000, which is guaranteed by the
President of the Company. The line of credit has an automatic rollover feature
with no termination date.
<CAPTION>
At December 31: 1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Amount outstanding at year end $ 0 $ 25,067 $ 12,500 $ 0
============= ============= ============= =============
Weighted average interest rate at year end 10.25% 10.75% 11.25% 0
Weighted average borrowings during the year $ 23,635 $ 12,800 $ 4,166 $ 0
============= ============= ============= =============
Maximum amount outstanding during the year $ 25,067 $ 25,100 $ 12,500 $ 0
============= ============= ============= =============
</TABLE>
F-12
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
<TABLE>
NOTE 8 - NOTES PAYABLE
Notes payable consisted of the following:
<CAPTION>
At December 31: 1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Note payable to individual, unsecured, bearing
compound interest at 10%, and payable upon
demand $ 0 $ 10,700 $ 0 $ 0
Note payable to individual, unsecured, bearing
compound interest at 10%, and payable upon
demand 0 10,000 10,000 10,000
------------- ------------- ------------- -------------
$ 0 $ 20,700 $ 10,000 $ 10,000
============= ============= ============= =============
</TABLE>
NOTE 9 - SALE AND ISSUANCE OF COMMON STOCK AND SUBSCRIPTIONS
Sale and Issuance of Common Stock
During the period ended December 31, 1997, the Company sold 260,000 shares of
its $ .0001 par value common stock at $ .25 per share pursuant to Rule 504 of
Regulation D of the Securities Act of 1933, as amended (the "Act"). The Company
received net proceeds of $ 60,500 after deducting offering costs of $ 4,500.
An additional 1,040,000 shares of $ .0001 par value common stock were issued to
officers for services on April 21, 1997. These shares are "restricted
securities" and may be sold only in compliance with Rule 144 of the Act.
During the year ended December 31, 1998, the Company issued 100,000 shares of
its $ .0001 par value common stock at $ 1.00 per share pursuant to Rule 504 of
Regulation D of the Act for net proceeds of $ 100,000.
During the year ended December 31, 1998, the Company issued 9,200,000 shares of
its $ .0001 par value common stock at $ .0001 per share to its principal
stockholders.
During the year ended December 31, 1999, the Company issued 40,000 shares of its
$ .0001 par value common stock at $ 1.00 per share pursuant to Rule 504 of
Regulation D of the Act for net proceeds of $ 40,000.
During the year ended December 31, 1999, the Company issued 661,500 shares of
its $ .0001 par value common stock at $ 1.00 per share pursuant to Rule 504 of
Regulation D of the Act for net proceeds of $ 661,500.
During the year ended December 31, 1999, the Company converted convertible
promissory notes totaling $ 229,316 (including accrued interest of $ 66,255) for
736,441 shares of its $ .0001 par value common stock at an average price of $
.31 per share.
During the year ended December 31, 1999, the Company issued 40,000 shares of its
$ .0001 par value common stock at $ 1.00 per share for outside consulting
services.
F-13
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 9 - SALE AND ISSUANCE OF COMMON STOCK AND SUBSCRIPTIONS - (Continued)
Subscriptions
At December 31, 1998, subscriptions consisted of one remaining out of three $
50,000 subscriptions issued under Rule 504 of the Securities Act of 1933 in
November and December 1998. The final subscription was converted during the year
ended December 31, 1999. The subscription funds are held in escrow until the
holder approves release and acquires the stipulated number of common shares.
There were no subscriptions outstanding at December 31, 1997 and 1996.
<TABLE>
NOTE 10 - CAPITAL LEASE OBLIGATIONS
Capital lease obligations consisted of the following :
<CAPTION>
At December 31: 1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Capital lease obligation, secured by equipment,
with an effective interest rate of 16% and
approximate monthly payments of $ 460 $ 0 $ 5,008 $ 8,814 $ 9,715
Capital lease obligation, secured by equipment,
with an effective interest rate of 14.9% and
approximate monthly payments of $ 360 6,102 0 0 0
Capital lease obligation, secured by equipment,
with an effective interest rate of 14.9% and
approximate monthly payments of $ 250 4,144 0 0 0
------------- ------------- ------------- -------------
10,246 5,008 8,814 9,715
Less current portion 6,189 5,008 4,407 4,506
------------- ------------- ------------- -------------
$ 4,057 $ 0 $ 4,407 $ 5,209
============= ============= ============= =============
</TABLE>
F-14
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
<TABLE>
NOTE 11 - CONVERTIBLE PROMISSORY NOTES
Convertible promissory notes consisted of the following:
<CAPTION>
At December 31: 1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Convertible promissory note, unsecured
with interest at 10%. A separate
agreement stipulates the conversion rate
of $ .618 cents per share of common
stock. The principal note balance along
with all accrued interest became due on
December 31, 1998 $ 0 $ 25,000 $ 0 $ 0
Convertible promissory note, unsecured
with interest at 10%. A separate
agreement stipulates the conversion rate
of $ .618 cents per share of common
stock. The principal note balance along
with all accrued interest is payable on
demand 0 50,000 0 0
Convertible promissory note, unsecured
with interest at 10%. A separate
agreement stipulates the conversion rate
of $ 1.00 per share of common stock. The
principal note balance along with all
accrued interest matures on August 14,
2001 0 12,000 0 0
Convertible promissory note, unsecured
with interest at 10%. A separate
agreement stipulates the conversion rate
of $ 1.00 per share of common stock. The
principal note balance along with all
accrued interest matures on August 1,
2000 0 10,000 0 0
Convertible promissory note, unsecured
with interest at 10%. A separate
agreement stipulates the conversion rate
of $ 1.00 per share of common stock. The
principal note balance along with all
accrued interest matures on August 1,
2001 0 10,000 0 0
F-15
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 11 - CONVERTIBLE PROMISSORY NOTES - (Continued)
At December 31: 1999 1998 1997 1996
---- ---- ---- ----
Convertible promissory note, unsecured
with interest at 10%. The agreement
stipulates the conversion rate of $ 1.60
per share of common stock. The principal
note balance along with all accrued
interest is payable upon demand 50,000 50,000 50,000 0
Convertible promissory note, unsecured
with interest at 10%. The agreement
stipulates the conversion rate of $ 1.60
per share of common stock. The principal
note balance along with all accrued
interest is payable upon demand 50,000 50,000 50,000 0
Convertible promissory note, unsecured
with interest at 10%. A separate
agreement stipulates the conversion rate
of $ .10 cents per share of common stock.
The principal note balance along with all
accrued interest mature on February 27,
1999 0 3,000 3,000 0
Convertible promissory note, unsecured
with interest at 10%. A separate
agreement stipulates the conversion rate
of $ .10 cents per share of common stock.
The principal note balance along with all
accrued interest matured on October 1,
1999 0 10,000 10,000 10,000
Convertible promissory note, unsecured
with interest at 10%. A separate
agreement stipulates the conversion rate
of $ .10 cents per share of common stock.
The principal note balance along with all
accrued interest matured on October 1,
1999 0 4,250 4,250 4,250
Convertible promissory note, unsecured
with interest at 10%. The agreement
stipulates the conversion rate of $ 1.60
per share of common stock. The principal
note balance along with all accrued
interest is payable upon demand 50,000 50,000 50,000 0
F-16
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 11 - CONVERTIBLE PROMISSORY NOTES - (Continued)
At December 31: 1999 1998 1997 1996
---- ---- ---- ----
Convertible promissory note, unsecured
with interest at 10%. A separate
agreement stipulates the conversion rate
of $ .10 cents per share of common stock.
The principal note balance along with all
accrued interest matured on March 1, 1999 0 28,811 28,811 28,811
Convertible promissory note, unsecured
with interest at 12%. The principal plus
accrued interest converts to common stock
at a conversion price equal to 55% of the
closing sale price of the common stock as
reported on the OTCBB on the date of the
election to convert. The principal note
balance along with all accrued interest
matures on June 28, 2000 50,000 0 0 0
------------- ------------- ------------- -------------
$ 200,000 $ 303,061 $ 196,061 $ 43,061
============= ============= ============= =============
NOTE 12 - INCOME TAXES
A reconciliation of the U.S. statutory federal income tax rate to the effective tax rate is as follows:
At December 31: 1999 1998 1997 1996
---- ---- ---- ----
U.S. federal statutory graduated rate 34.00% 39.00% 39.00% 15.00%
State income tax rates net of federal
benefits:
Colorado 3.26% 3.04% 2.98% 4.25%
California 6.20% 5.80% 5.70% 8.20%
Net operating loss for which no tax
benefit is currently available (43.46%) (47.84%) (47.68%) (27.45%)
------------- ------------- ------------- -------------
0% 0% 0% 0%
============= ============= ============= =============
</TABLE>
The Company conducts its operations in California, which has a minimum tax of
$800.
F-17
<PAGE>
VERTICA SOFTWARE, INC.
(FORMERLY PERFECTION DEVELOPMENT CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 1996 (Inception) THROUGH DECEMBER 31, 1999
NOTE 12 - INCOME TAXES - (Continued)
At December 31, 1999, 1998, 1997 and 1996, deferred taxes consisted of a net tax
asset due to operating loss carryforwards of $752,549, $235,335, $176,605, and
$42,285, respectively, which was fully allowed for, in the valuation allowance
of $752,549, $235,335, $176,605, and $42,285, respectively. The valuation
allowance offsets the net deferred tax asset for which there is no assurance of
recovery. The change in valuation allowance for the years ended December 31,
1999, 1998, 1997, and 1996 were $228,937, $28,679, $57,963, and $10,201,
respectively. Net operating loss carryforwards will expire in 2011, 2012, 2013,
and 2014.
NOTE 13 - Commitments
The Company has operating leases on its office space and some of its equipment.
Future minimum lease payments under such noncancelable operating leases are
summarized as follows:
Office
Space Equipment
----------------- -----------------
Year ending
December 31,
2000 $ 98,033 $ 7,304
2001 121,106 4,261
2002 124,739 0
2003 128,481 0
2004 121,011 0
----------------- -----------------
$ 593,370 $ 11,565
================= =================
Total rent expense for the years ended December 31, 1999, 1998, 1997, and 1996
was $29,845, $14,731, $13,940, and $8,605, respectively.
The Company also made two non-cancelable commitments to an investor relations
firm and media content firm. Future minimum payments are $ 66,600 for year ended
December 31, 2000, and $ 7,320 for the year ended December 31, 2001
F-18
ARTICLES OF INCORPORATION
OF
PERFECTION DEVELOPMENT CORPORATION
KNOW ALL MEN BY THESE PRESENTS:
That I, Scott M. Thornock, desiring to establish a corporation under
the name of PERFECTION DEVELOPMENT CORPORATION, for the purpose of becoming a
body corporate under and by virtue of the laws of the State of Colorado and, in
accordance with the provisions of the laws of said State, do hereby make,
execute and acknowledge this certificate in writing of my intention to become a
body corporate, under and by virtue of said laws.
ARTICLE I
The name of the corporation shall be:
PERFECTION DEVELOPMENT CORPORATION.
ARTICLE II
The nature of the business and the objects and purposes to be
transacted, promoted and carried on are to do any or all of the things herein
mentioned as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz:
(a) To transact all lawful business for which corporations may
be incorporated pursuant to the Colorado Corporation Code.
(b) To manufacture, purchase or otherwise acquire and to hold,
own, mortgage or otherwise lien, pledge, lease, sell, assign, exchange,
transfer or in any manner dispose of, and to invest, deal and trade in
and with goods, wares, merchandise and personal property of any and
every class and description, within or without the State of Colorado.
(c) To acquire the goodwill, rights and property and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation; to pay for the same in cash,
the stock of the corporation, bonds or otherwise; to hold or in any
manner dispose of the whole or any part of the property so purchased;
to conduct in any lawful manner the whole or any part of any business
so acquired and to exercise all the powers necessary or convenient in
and about the conduct and management of such business.
(d) To guarantee, purchase or otherwise acquire, hold, sell,
assign, transfer, mortgage, pledge or otherwise dispose of shares of
the capital stock, bonds or other evidences of indebtedness created by
other corporations and, while the holder of such stock, to exercise all
the rights and privileges of ownership, including the right to vote
thereon, to the same extent as natural persons might or could do.
(e) To purchase or otherwise acquire, apply for, register,
hold, use, sell or in any manner dispose of and to grant licenses or
other rights in and in any
<PAGE>
manner deal with patents, inventions, improvements, processes,
formulas, trademarks, trade names, rights and licenses secured under
letters patent, copyright or otherwise.
(f) To enter into, make and perform contracts of every kind
for any lawful purpose, with any person, firm, association or
corporation, town, city, county, body politic, state, territory,
government, colony or dependency thereof.
(g) To borrow money for any of the purposes of the corporation
and to draw, make, accept, endorse, discount, execute, issue, sell,
pledge or otherwise dispose of promissory notes, drafts, bills of
exchange, warrants, bonds, debentures and other negotiable or
non-negotiable, transferable or nontransferable instruments and
evidences of indebtedness, and to secure the payment thereof and the
interest thereon by mortgage or pledge, conveyance or assignment in
trust of the whole or any part of the property of the corporation at
the time owned or thereafter acquired.
(h) To lend money to, or guarantee the obligations of, or to
otherwise assist the directors of the corporation or of any other
corporation the majority of whose voting capital stock is owned by the
corporation, upon the affirmative vote of at least a majority of the
outstanding shares entitled to vote for directors.
(i) To purchase, take, own, hold, deal in, mortgage or
otherwise pledge, and to lease, sell, exchange, convey, transfer or in
any manner whatever dispose of real property, within or without the
State of Colorado.
(j) To purchase, hold, sell and transfer the shares of its
capital stock.
(k) To have one or more offices and to conduct any and all
operations and business and to promote its objects, within or without
the State of Colorado, without restrictions as to place or amount.
0) To do any or all of the things herein set forth as
principal, agent, contractor, trustee, partner or otherwise, alone or
in company with others.
(m) The objects and purposes specified herein shall be
regarded as independent objects and purposes and, except where
otherwise expressed, shall be in no way limited or restricted by
reference to or inference from the terms of any other clauses or
paragraph of these Articles of Incorporation.
(n) The foregoing shall be constructed both as objects and
powers and the enumeration thereof shall not be held to limit or
restrict in any manner the general powers conferred on this corporation
by the laws of the State of Colorado.
ARTICLE III
The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is 11,000,000 of which 1,000,000 shall
be shares of preferred stock, $.001 par value per share, and 10,000,000 shall be
shares of common stock, $.0001 par value per share, and
<PAGE>
the designations, preferences, limitations and relative rights of the shares of
each class shall be as follows:
(a) Shares of Preferred Stock. The corporation may divide and
issue the shares of preferred stock in series. Shares of preferred
stock of each series, when issued, shall be designated to distinguish
them from the shares of an other series. The Board of Directors is
hereby vested with authority to divide the class of shares of preferred
stock into series and to fix and determine the relative rights and
preferences of the shares of any such series so established to the full
extent permitted by these Articles of Incorporation and the Colorado
Corporation Code in respect of the following:
(i) The number of shares to constitute such series,
and the distinctive designations thereof;
(ii) The rate and preference of dividends, if any,
the time of payment of dividends, whether dividends are
cumulative and the date from which any dividends shall accrue;
(iii) Whether shares may be redeemed and, if so, the
redemption price and the terms and conditions of redemption;
(iv) The amount payable upon shares in event of
involuntary liquidation;
(v) The amount payable upon shares in event of
voluntary liquidation;
(vi) Sinking fund or other provisions, if any, for
the redemption or purchase of shares;
(vii) The terms and conditions upon which shares may
be converted, if the shares of any series are issued with the
privilege of conversion;
(viii) Voting powers, if any; and
(ix) Any other relative rights and preferences of
shares of such series, including, without limitation, any
restriction on an increase in the number of shares of any
series theretofore authorized and any limitation or
restriction of rights or powers to which shares of any future
series shall be subject.
(b) Shares of Common Stock. The rights of holders of shares of common
stock to receive dividends or share in the distribution of assets in the event
of liquidation, dissolution or winding up of the affairs of the corporation
shall be subject to the preferences, limitations and relative rights of the
shares of preferred stock fixed in the resolution or resolutions which may be
adopted from time to time by the Board of Directors of the corporation providing
for the issuance of one or more series of shares of preferred stock.
<PAGE>
The capital stock, after the subscription price has been paid in, shall
not be subject to assessment to pay the debts of the corporation. Any stock of
the corporation may be issued for money, property, services rendered, labor
done, cash advances for the corporation or for any other assets of value in
accordance with the action of the Board of Directors, whose judgment as to value
received in return therefor shall be conclusive and said stock when issued shall
be fully-paid and nonassessable.
ARTICLE IV
The corporation shall have perpetual existence.
ARTICLE V
The governing board of this corporation shall be known as the Board of
Directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the Bylaws of this corporation.
The name and post office address of the incorporator is as follows:
Scott M. Thornock 1422 Delgany Street
Denver, Colorado 80202
The name and post office address of the director comprising the
original Board of Directors of the corporation is as follows:
Scott M. Thornock 1422 Delgany Street
Denver, Colorado 80202
C. Edward Venerable 1422 Delgany Street
Denver, Colorado 80202
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
(a) To manage and govern the corporation by majority vote of
members present at any regular or special meeting at which a quorum
shall be present unless the act of a greater number is required by the
laws of the state of incorporation, these Articles of Incorporation or
the Bylaws of the Corporation.
(b) To make, alter, or amend the Bylaws of the corporation at
any regular or special meeting.
To fix the amount to be reserved as working capital over and
above its capital stock paid in.
(d) To authorize and cause to be executed mortgages and liens
upon the real and personal property of this corporation.
(e) To designate one or more committees, each committee to
consist of two or more of the directors of the corporation, which, to
the extent provided by
<PAGE>
resolution or in the Bylaws of the corporation, shall have and may
exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation. Such committee or committees
shall have such name or names as may be stated in the Bylaws of the
corporation or as may be determined from time to time by resolution
adopted by the Board of Directors.
The Board of Directors shall have power and authority to sell, lease,
exchange or otherwise dispose of all or substantially all of the property and
assets of the corporation, if in the usual and regular course of its business,
upon such terms and conditions as the Board of Directors may determine without
vote or consent of its shareholders.
The Board of Directors shall have power and authority to sell, lease,
exchange or otherwise dispose of all or substantially all the property or assets
of the corporation, including its goodwill, if not in the usual and regular
course of its business, upon such terms and conditions as the Board of Directors
may determine, provided that such sale shall be authorized or ratified by the
affirmative vote of the shareholders of at least a majority of the shares
entitled to vote thereon at a shareholders' meeting called for that purpose, or
when authorized or ratified by the written consent of all the shareholders of
the shares entitled to vote thereon.
The Board of Directors shall have the power and authority to merge or
consolidate the corporation upon such terms and conditions as the Board of
Directors may authorize, provided that such merger or consolidation is approved
or ratified by the affirmative vote of the shareholders of at least a majority
of the shares entitled to vote thereon at a shareholders meeting called for that
purpose, or when authorized or ratified by the written consent of all the
shareholders of the shares entitled to vote thereon.
The corporation shall be dissolved upon the affirmative vote of the
shareholders of at least a majority of the shares entitled to vote thereon at a
meeting called for that purpose, or when authorized or ratified by the written
consent of all the shareholders of the shares entitled to vote thereon.
The corporation shall revoke voluntary dissolution proceedings upon the
affirmative vote of the shareholders of at least a majority of the shares
entitled to vote at a meeting called for that purpose, or when authorized or
ratified by the written consent of all the shareholders of the shares entitled
to vote thereon.
ARTICLE VI
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and the same are
in furtherance of and not in limitation of the powers conferred by law.
No contract or other transactions of the corporation with any other
person, firm or corporation, or in which this corporation is interested, shall
be affected or invalidated by (a) the fact that any one or more of the directors
or officers of this corporation is interested in or is a director or officer of
such other firm or corporation; or (b) the fact that any director or officer of
this corporation, individually or jointly with others, may be a party to or may
be interested in any
<PAGE>
such contract or transaction, so long as the contract or transaction is
authorized, approved or ratified at a meeting of the Board of Directors by
sufficient vote thereon by directors not interested therein, to whom such fact
or relationship or interest has been disclosed, or so long as the contract or
transaction is fair and reasonable to the corporation. Each person who may
become a director or officer of the corporation is hereby relieved from any
liability that might otherwise arise by reason of his contracting with the
corporation for the benefit of himself or any firm or corporation in which he
may be in any way interested.
The officers, directors and other members of management of this
corporation shall be subject to the doctrine of corporate opportunities only
insofar as it applies to business opportunities in which this corporation has
expressed an interest as determined from time to time by the corporation's Board
of Directors as evidenced by resolutions appearing in the corporation's minutes.
When such areas of interest are delineated, all such business opportunities
within such areas of interest which come to the attention of the officers,
directors and other members of management of this corporation shall be disclosed
promptly to this corporation and made available to it. The Board of Directors
may reject any business opportunity presented to it and thereafter any officer,
director or other member of management may avail himself of such opportunity.
Until such time as this corporation, through its Board of Directors, has
designated an area of interest, the officers, directors and other members of
management of this corporation shall be free to engage in such areas of interest
on their own and the provisions hereof shall not limit the rights of any
officer, director or other member of management of this corporation to continue
a business existing prior to the time that such area of interest is designated
by this corporation. This provision shall not be construed to release any
employee of the corporation (other than an officer, director or member of
management) from any duties which he may have to the corporation.
ARTICLE VII
Each director and officer of the corporation shall be indemnified by
the corporation as follows:
(a) The corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the person
did not act in good faith and in a
<PAGE>
manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending
or completed action or suit by or in the right of the corporation, to
procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit, if he acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in
the performance of his duty to the corporation, unless, and only to the
extent that, the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability,
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnification for such expenses which such
court deems proper.
(c) To the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections (a)
and (b) of this Article, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this
Article (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the officer, director and employee or agent is
proper in the circumstances, because he has met the applicable standard
of conduct set forth in Section (a) or (b) of this Article. Such
determination shall be made (i) by the Board of Directors by a majority
vote of a quorum, consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable
or, even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by
the affirmative vote of the holders of a majority of the shares of
stock entitled to vote and represented at a meeting called for such
purpose.
(e) Expenses (including attorneys' fees) incurred in defending
a civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding, as authorized in Section (d) of this Article, upon receipt
of an undertaking by or on behalf of the director, officer,
<PAGE>
employee or agent to repay such amount, unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation as
authorized in this Article.
(f) The Board of Directors may exercise the corporation's
power to purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted
against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power
to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under these Articles of Incorporation,
the Bylaws, agreements, vote of the shareholders or disinterested
directors, or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs and
personal representatives of such a person.
ARTICLE VIII
The initial registered and principal office of said corporation shall
be located at 1422 Delgany Street,, Denver, Colorado 80202, and the initial
registered agent of the corporation at such address shall be Scott M. Thornock
Part or all of the business of said corporation may be carried on in
the County of Denver, or any other place in the State of Colorado or beyond the
limits of the State of Colorado, in other states or territories of the United
States and in foreign countries.
ARTICLE IX
Whenever a compromise or arrangement is proposed by the corporation
between it and its creditors or any class of them, and/or between said
corporation and its shareholders or any class of them, any court of equitable
jurisdiction may, on the application in a summary way by said corporation, or by
a majority of its stock, or on the application of any receiver or receivers
appointed for said corporation, or on the application of trustees in
dissolution, order a meeting of the creditors or class of creditors and/or of
the shareholders or class of shareholders of said corporation, as the case may
be, to be notified in such manner as the said court decides. If a majority in
number, representing at least three-fourths in amount of the creditors or class
of creditors, and/or the holders of a majority of the stock or class of stock of
said corporation, as the case may be, agree to any compromise or arrangement
and/or to any reorganization of said corporation, as a consequence of such
compromise or arrangement, the said compromise or arrangement and/or the said
reorganization shall, if sanctioned by the court to which the said
<PAGE>
application has been made, be binding upon all the creditors or class of
creditors, and/or on all the shareholders or class of shareholders of said
corporation, as the case may be, and also on said corporation.
ARTICLE X
No shareholder in the corporation shall have the preemptive right to
subscribe to any or all additional issues of stock and/or other securities of
any or all classes of this corporation or securities convertible into stock or
carrying stock purchase warrants, options or privileges.
ARTICLE XI
Meetings of shareholders may be held at any time and place as the Bylaws shall
provide. At all meetings of the shareholders, one-third of all shares entitled
to vote shall constitute a quorum.
ARTICLE XII
Cumulative voting shall not be allowed.
ARTICLE XIII
These Articles of Incorporation may be amended by resolution of the
Board of Directors if no shares have been issued, and if shares have been
issued, by affirmative vote of the shareholders of at least a majority of the
shares entitled to vote thereon at a meeting called for that purpose, or, when
authorized, when such action is ratified by the written consent of all the
shareholders of the shares entitled to vote thereon.
ARTICLE XIV
Any action for which the laws of the State of Colorado require the
approval of two-thirds of the shares of any class or series entitled to vote
with respect thereto, unless otherwise provided in the Articles of
Incorporation, shall require for approval the affirmative vote of a majority of
the shares of any class or series outstanding and entitled to vote thereon.
ARTICLE XV
No director shall be personally liable to the corporation or any
shareholder for monetary damages for breach of fiduciary duty as a director,
except for any matter in respect of which such director shall be liable under
Section 7-5-114 of the Colorado Revised Statutes, or any amendment thereto or
successor provision thereto and except for any matter in respect of which such
director shall be liable by reason that he (i) has breached his duty of loyalty
to the corporation or its shareholders, (ii) has not acted in good faith or, in
failing to act, has not acted in good faith, (iii) has acted in a manner
involving intentional misconduct or a knowing violation of law or, in failing
<PAGE>
to act, has acted in a manner involving intentional misconduct or a knowing
violation of law, or (iv) has derived an improper personal benefit. Neither the
amendment nor repeal of this Article XV, nor the adoption of any provision of
the Articles of Incorporation inconsistent with this Article XV, shall eliminate
or reduce the effect of this Article XV in respect of any matter occurring, or
any cause of action, suite or claim that, but for this Article XV would accrue
or arise prior to such amendment, repeal or adoption of an inconsistent
provision.
IN TESTIMONY WHEREOF, I have hereunto set my hand on this 2nd day of
April, 1997, and, by my signature below, I hereby further consent to my
appointment as the initial registered agent of the corporation.
/s/ Scott M. Thornock
---------------------------------
Scott M. Thornock
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I Christa Addington, a Notary Public, in and for the said county and
state, hereby certify that there personally appeared before me, Scott M.
Thornock, who being first duly sworn, declared that he is the person who
executed the foregoing document as the incorporator and the initial registered
agent of the corporation, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 2nd day
of April, 1997.
My commission expires: 12/17/97 /s/ Christa Addington
---------------------------------
Notary Public
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
PERFECTION DEVELOPMENT CORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is Perfection Development
Corporation.
SECOND: The following amendment to the Articles of Incorporation was
adopted on September 16, 1998, as prescribed by the Colorado Business
Corporation Act, in the manner marked with an X below:
________ No shares have been issued or Directors Elected - Action by
Incorporators
________ No shares have been issued but Directors Elected - Action by
Directors
________ Such amendment was adopted by the board of directors where
shares have been issued.
___X____ Such amendment was adopted by a vote of the shareholders. The
number of shares voted for the amendment was sufficient for approval.
The first paragraph of Article III of the Corporation's Articles of
Incorporation shall be amended so that, as amended, the first paragraph of
Article III will read in its entirety as set forth below and, except as amended
in the manner provided below, the remainder of Article III of the Articles of
Incorporation will remain in fall force and effect.
ARTICLE III
The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is 33,000,000 of which 3,000,000 shall
be shares of preferred stock, $.001 par value per share, and 30,000,000 shall be
shares of common stock, $.0001 par value per share, and the designations,
preferences, limitations and relative rights of the shares of each class shall
be as follows:
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares-provided for in the
amendment shall be effected, is as follows: None.
If these amendments are to have a delayed effective date, please list
that date: Not applicable.
(Not to exceed ninety (90) days from the date of filing)
PERFECTION DEVELOPMENT
CORPORATION
Dated: October 1, 1998 By: /s/ Scott M. Thornock
------------------------------------
Scott M. Thornock, President
BYLAWS
OF
PERFECTION DEVELOPMENT CORPORATION
ARTICLE I
OFFICES
The registered office of Perfection Development Corporation (the
"Corporation") shall be located in the State of Colorado. The Corporation may
have its principal office and such other offices either within or without the
State of Colorado as the Board of Directors of the Corporation (the "Board") may
designate or as the business of the Corporation may require.
The registered office of the Corporation in the Articles of
Incorporation (the "Articles") need not be identical with the principal office.
ARTICLE II
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held each year on a date and at a time and place to be determined by
resolution of the Board, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the
election of directors shall not be held on the day designated for the annual
meeting of the shareholders, or at any adjournment thereof, the Board shall
cause the election to be held at a special meeting of the shareholders.
Section 2. Special Meetings. Special meetings of the shareholders for
any purpose, unless otherwise provided for by statute, may be called by the
president, the Board or by the president at the request of the holders of not
less than one-tenth of all the shares of the Corporation entitled to vote at the
meeting.
Section 3. Place of Meeting. The Board may designate any place, either
within or without the State of Colorado, as the place of meeting for any annual
or special meeting. If no designation is made, the place of meeting shall be the
registered office of the Corporation in the State of Colorado.
Section 4. Notice of Meeting. Written notice, stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered as the laws of the
State of Colorado shall provide.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board may fix in advance a date (the "Record Date") for any
such determination of shareholders, which date shall be not more than 50 days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If no Record Date is fixed by the Board, the Record
Date for any such purpose shall be ten days before the date of such meeting or
action. The Record Date determined for the purpose of ascertaining the number of
shareholders entitled to notice of or to vote at a meeting may not be
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less than ten days prior to the meeting. When a Record Date has been determined
for the purpose of a meeting, the determination shall apply to any adjournment
thereof.
Section 6. Quorum. If less than a quorum of the outstanding shares as
provided for in the Articles are represented at a meeting, such meeting may be
adjourned without further notice for a period which shall not exceed 60 days. At
such adjourned meeting, at which a quorum shall be present, any business may be
transacted which might have been transacted at the original meeting. Once a
quorum is present at a duly organized meeting, the shareholders present may
continue to transact business until adjournment, notwithstanding any departures
of shareholders during the meeting which leave less than a quorum.
Section 7. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of shareholders.
Section 8. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
11 months from the date of its execution, unless otherwise provided in the
proxy. Proxies shall be in such form as shall be required by the Board of
Directors and as set forth in the notice of meeting and/or proxy or information
statement concerning such meeting.
Section 9. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by agent or proxy as the bylaws of such
corporation may prescribe or, in the absence of such provision, as the Board of
Directors of such corporation may determine as evidenced by a duly certified
copy of either the bylaws or corporate resolution.
Neither treasury shares nor shares held by another corporation, if the
majority of the shares entitled to vote for the election of directors of such
other corporation is held by the Corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares at any given time.
Shares held by an administrator, executor, guardian or conservator may
be voted by such fiduciary, either in person or by proxy, without a transfer of
such shares into the name of such fiduciary. Shares standing in the name of a
trustee may be voted by such trustee, either in person or by proxy, but no
trustee shall be entitled to vote shares held by a trustee without a transfer of
the shares into such trust.
Shares standing in the name of a receiver may be voted by such receiver
and shares held by or under the control of a receiver may be voted by such
receiver, without the transfer thereof into the name of such receiver if
authority so to do is contained in an appropriate order of the court by which
the receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred on the books of the Corporation
into the name of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
Section 10. Action by Consent of all Shareholders. Any action required
to be taken, or which may be taken at a meeting of the shareholders may be taken
without a meeting, if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such written consent or consents shall be filed with the
minutes of the Corporation. Such action by written consent of all entitled to
vote shall have the same force and effect as a unanimous vote of such
shareholders.
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Section 11. Inspectors. The Board may, in advance of any meeting of
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the chairman of the
meeting or any shareholder entitled to vote thereat, the inspectors shall make a
report in writing of any challenge, request or matter determined by them and
shall execute a certificate of any fact found by them.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The Board shall have the power to manage the
business and affairs of the Corporation in such manner as it sees fit. In
addition to the powers and authorities expressly conferred upon it, the Board
may do all lawful acts which are not directed to be done by the shareholders by
statute, by the Articles or by these Bylaws.
Section 2. Number, Tenure and Qualifications. The number of directors
of the Corporation shall not be less than one. Each director shall hold office
until the next annual meeting of shareholders and until a successor director has
been elected and qualified, or until the death, resignation or removal of such
director. Directors need not be residents of the State of Nevada or shareholders
of the Corporation.
Section 3. Regular Meetings. A regular meeting of the Board shall be
held, without other notice than this Bylaw, immediately after and at the same
place as the annual meeting of shareholders. The Board may provide, by
resolution, the time and place, either within or without the State of Colorado,
for the holding of additional regular meetings, without other notice than such
resolution.
Section 4. Special Meetings. Special meetings of the Board may be
called by or at the request of the Chairman of the Board, the Chief Executive
Officer or any two directors. The person or persons authorized to call special
meetings of the Board may fix any place, either within or without the State of
Colorado, as the place for holding any special meeting of the Board called by
them.
Section 5. Telephonic Meetings. Members of the Board and committees
thereof may participate and be deemed present at a meeting by means of
conference telephone or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time.
Section 6. Notice. Notice of any special meeting of the Board shall be
given by telephone, telegraph or written notice sent by mail. Notice shall be
delivered at least one day prior to the meeting (five days before the meeting if
the meeting is held outside the State of Colorado) if given by telephone or
telegram or if delivered personally. If notice is given by
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telegram, such notice shall be deemed to be delivered when the telegram is
delivered by the telegraph company. Written notice may be delivered by mail to
each director at such director's business or home address and, if mailed, shall
be delivered at least five days prior to the meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed with postage thereon prepaid. Any director may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
need be specified in the notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the total membership of the Board
shall constitute a quorum for the transaction of business at any meeting of the
Board, but if a quorum shall not be present at any meeting or adjournment
thereof, a majority of the directors present may adjourn the meeting without
further notice.
Section 8. Action by Consent of All Directors. Any action required to
be taken, or which may be taken at a meeting of the Board may be taken without a
meeting, if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof. Such written consent or consents shall be filed with the minutes
of the Corporation. Such action by written consent of all entitled to vote shall
have the same force and effect as a unanimous vote of such directors at a
meeting of directors at which a quorum is present.
Section 9. Manner of Acting. The act of a majority of the directors
present at a meeting at which a quorum is present shall be an act of the Board.
The order of business at any regular or special meeting of the Board
shall be:
1. Record of those present.
2. Secretary's proof of notice of meeting, if notice is not waived.
3. Reading and disposal of unapproved minutes, if any.
4. Reports of officers, if any.
5. Unfinished business, if any.
6. New business.
7. Adjournment.
Section 10. Vacancies. Any vacancy occurring in the Board by reason of
an increase in the number specified in these Bylaws, or for any other reason,
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board may remain at the time such meeting
considering filling such vacancies is held.
Section 11. Compensation. By resolution of the Board, the directors may
be paid their expenses, if any, for attendance at each meeting of the Board and
may be paid a fixed sum for attendance at each meeting of the Board and a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor or from
receiving compensation for any extraordinary or unusual services as a director.
Section 12. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board at which action on any corporate matter is
taken shall be presumed to have
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<PAGE>
assented to the action taken unless the dissent of such director shall be
entered in the minutes of the meeting, filed in writing with the person acting
as the secretary of the meeting before the adjournment thereof or forwarded by
registered mail to the Secretary of the Corporation immediately after the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
Section 13. Executive or Other Committees. The Board, by resolution
adopted by a majority of the entire Board, may designate among its members an
executive committee and one or more other committees, each of which, to the
extent provided in the resolution, shall have all of the authority of the Board,
but no such committee shall have the authority of the Board in reference to
amending the Articles, adopting a plan of merger or consolidation, recommending
to the shareholders the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation otherwise than
in the usual and regular course of its business, recommending to the
shareholders a voluntary dissolution of the Corporation or a revocation thereof,
or amending the Bylaws. The designation of such committees and the delegation
thereto of authority shall not operate to relieve the Board, or any member
thereof, of any responsibility imposed by law.
Any action required to be taken, or which may be taken at a meeting of
a committee designated in accordance with this Section of the Bylaws, may be
taken without a meeting, if a consent in writing setting forth the action so
taken shall be signed by all those entitled to vote with respect to the subject
matter thereof. Such written consent or consents shall be filed with the minutes
of the Corporation. Such action by written consent of all entitled to vote shall
have the same force and effect as a unanimous vote of such persons.
Section 14. Resignation of Officers or Directors. Any director or
officer may resign at any time by submitting a resignation in writing. Such
resignation takes effect from the time of its receipt by the Corporation unless
a date or time is fixed in the resignation, in which case it will take effect
from that time. Acceptance of the resignation shall not be required to make it
effective.
Section 15. Notice Requirements for Director Nominations. Any
nomination for election to the Board of Directors by the stockholders otherwise
than pursuant to Board resolution must be submitted to the Corporation's
secretary no later than 25 days and no more than 60 days prior to the meeting of
stockholders at which such nominations are to be submitted. In the event notice
of the meeting at which such nomination is desired to be submitted is not mailed
or otherwise sent to the stockholders of the Corporation at least 30 days prior
to the meeting, the Corporation must receive the notice of intent to nominate no
later than seven days after notice of the meeting is mailed or sent to the
stockholders by the Corporation. Notices to the Corporation's Secretary of
intent to nominate a candidate for election as a director must give the name,
age, business address and principal occupation of such nominee and the number of
shares of stock of the Corporation held by such nominee Within seven days after
filing of the notice, a signed and completed questionnaire relating to the
proposed nominee (which questionnaire will be supplied by the Corporation to the
person submitting the notice) must be filed with the Secretary of the
Corporation. Unless this notice procedure is followed, the chairman of a
stockholders' meeting may declare the nomination defective and it may be
disregarded.
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ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be a
president, a secretary and a treasurer, all of whom shall be executive officers
and each of whom shall be elected by the Board, and such other officers as the
Board may designate from time to time. A Chairman of the Board, Vice Chairman of
the Board and one or more Vice Presidents shall be executive officers if the
Board so determines by resolution. Such other officers and assistant officers,
as may be deemed necessary, shall be designated administrative assistant
officers and may be appointed and removed as the Chief Executive Officer
decides. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
Section 2. Election and Term of Office. The executive officers of the
Corporation, to be elected by the Board, shall be elected annually by the Board
at its first meeting held after each annual meeting of the shareholders or at a
convenient time soon thereafter. Each executive officer shall hold office until
the resignation of such officer or until a successor shall be duly elected and
qualified, until the death of such executive officer, or until removal of such
officer in the manner herein provided.
Section 3. Removal. Any officer or agent elected or appointed by the
Board may be removed by the Board whenever, in its judgment, the best interests
of the Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any executive office because of
death, resignation, removal, disqualification or otherwise may be filled by the
Board for the unexpired portion of the term.
Section 5. The Chairman of the Board. If a Chairman of the Board (the
"Chairman") shall be elected by the Board, the Chairman shall preside at all
meetings of the shareholders and of the Board. The Chairman may sign, with the
officers authorized by the Chief Executive Officer or the Board, certificates
for the shares of the Corporation and shall perform such other duties as from
time to time are assigned by the Chief Executive Officer or the Board. The
Chairman of the Board may be elected as the Chief Executive Officer, in which
case the Chairman shall perform the duties hereinafter set forth in Article IV,
Section 7, of these Bylaws.
Section 6. The President. The President may sign, with the officers
authorized by the Chief Executive Officer or the Board, certificates for shares
of the Corporation and shall perform such other duties as from time to time are
assigned by the Chief Executive Officer or the Board. The President may be
elected as the Chief Executive Officer of the Corporation, in which case, the
President shall perform the duties hereinafter set forth in Article IV, Section
7, of these Bylaws.
Section 7. The Chief Executive Officer. If no Chairman shall be elected
by the Board, the President shall be the Chief Executive Officer of the
Corporation. If a Chairman is elected by the Board, the Board shall designate,
as between the Chairman and the President, who shall be the Chief Executive
Officer. The Chief Executive Officer shall be, subject to the control of the
Board, in general charge of the affairs of the Corporation. The Chief Executive
Officer may sign, with the other officers of the Corporation authorized by the
Board, deeds, mortgages, bonds, contracts or other instruments whose execution
the Board has authorized, except in cases where the signing and execution
thereof shall be expressly delegated by the Board or these Bylaws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed.
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Section 8. The Vice Chairman of the Board. If a Chairman shall be
elected by the Board, the Board bay also elect a Vice Chairman of the Board (the
"Vice Chairman"). In the absence of the Chairman or in the event of the death or
inability or refusal to act of the Chairman, the Vice Chairman shall perform the
duties of the Chairman and when so acting shall have all of the powers of and be
subject to all of the restrictions upon the Chairman. The Vice Chairman may
sign, with the other officers authorized by the Chief Executive Officer or the
Board, certificates for shares of the Corporation and shall perform such other
duties as from time to time may be assigned by the Chief Executive Officer or
the Board.
Section 9. The Vice President. In the absence of the President or in
the event of the death or inability or refusal to act of the President, the Vice
President shall perform the duties of the President, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President. In the event there is more than one Vice President, the Vice
Presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election, shall perform
the duties of the President and, when so acting, shall have all the powers of
and shall be subject to all the restrictions upon the President. Any Vice
President may sign, with the other officers authorized by the Chief Executive
Officer or the Board, certificates for shares of the Corporation and shall
perform such other duties as from time to time may be assigned by the Chief
Executive Officer or the Board.
Section 10. The Secretary. Unless the Board otherwise directs, the
Secretary shall keep the minutes of the shareholders' and directors' meetings in
one or more books provided for that purpose. The Secretary shall also see that
all notices are duly given in accordance with the law and the provisions of the
Bylaws; be custodian of the corporate records and the seal of the Corporation;
affix the seal or direct its affixation to all documents, the execution of which
on behalf of the Corporation is duly authorized; keep a list of the address of
each shareholder; sign, with the other officers authorized by the Chief
Executive Officer or the Board, certificates for shares of the Corporation; have
charge of the stock transfer books of the Corporation and perform all duties
incident to the office of Secretary and such other duties as may be assigned by
the Chief Executive Officer or by the Board.
Section 11. The Treasurer. If required by the Board, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board shall determine. He shall have charge and
custody of and be responsible for all funds and securities of the Corporation,
receive and give receipts for monies due and payable to the Corporation from any
source whatsoever and deposit all such monies in the name of the Corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of the Bylaws. The Treasurer may sign, with the
other officers authorized by the Chief Executive Officer or the Board,
certificates for shares of the Corporation and shall perform all duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned by the Chief Executive Officer or the Board.
Section 12. Assistant Officers. The Chief Executive Officer may appoint
such other officers and agents as may be necessary or desirable for the business
of the Corporation. Such other officers shall include one or more assistant
secretaries and treasurers who shall have the power and authority to act in
place of the officer for whom they are elected or appointed as an assistant in
the event of the officer's inability or unavailability to act in his official
capacity. The assistant secretary or secretaries or assistant treasurer or
treasurers may sign, with the other officers authorized by the Chief Executive
Officer or the Board, certificates for shares of the Corporation. The assistant
treasurer or treasurers shall, if required by the Board, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board shall determine. The assistant secretaries and assistant treasurers, in
general, shall perform such duties
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as shall be assigned to them by the Secretary or the Treasurer, respectively, or
by the Chief Executive Officer or the Board.
Section 13. Salaries. The salaries of the executive officers shall be
fixed by the Board and no officer shall be prevented from receiving such salary
by reason of the fact that such officer is also a director of the Corporation.
The salaries of the administrative assistant officers shall be fixed by the
Chief Executive Officer.
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ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board may authorize any officer or officers,
agent or agents, to enter into any contract on behalf of the Corporation and
such authority may be general or confined to specific instances.
Section 2. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidence of indebtedness, issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents, of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board.
Section 3. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select.
ARTICLE VI
CERTIFICATES FOR SECURITIES AND THEIR TRANSFER
Section 1. Certificates for Securities. Certificates representing
securities of the Corporation (the "Securities") shall be in such form as shall
be determined by the Board. To be effective, such certificates for Securities
(the "Certificates") shall be signed by (i) the Chairman or Vice Chairman or by
the President or a Vice President; and (ii) the Secretary or an assistant
Secretary or by the Treasurer or an assistant treasurer of the Corporation. Any
of all of the signatures may be facsimiles if the Certificate is either
countersigned by the transfer agent, or countersigned by the facsimile signature
of the transfer agent and registered by the written signature of an officer of
any company designated by the Board as registrar of transfers so long as that
officer is not an employee of the Corporation.
A Certificate signed or impressed with the facsimile signature of an
officer, who ceases by death, resignation or otherwise to be an officer of the
Corporation before the Certificate is delivered by the Corporation, is valid
though signed by a duly elected, qualified and authorized officer, provided that
such Certificate is countersigned by the signature of the transfer agent or
facsimile signature of the transfer agent of the Corporation and registered as
aforesaid.
All Certificates shall be consecutively numbered or otherwise
identified. Certificates shall state the jurisdiction in which the Corporation
is organized, the name of the person to whom the Securities are issued, the
designation of the series, if any, and the par value of each share represented
by the Certificate, or a statement that the shares are without par value. The
name and address of the person to whom the Securities represented hereby are
issued, the number of Securities, and date of issue, shall be entered on the
Security transfer books of the Corporation. All Certificates surrendered to the
Corporation for transfer shall be cancelled and no new Certificate shall be
issued until the former Certificate for a like number of shares shall have been
surrendered and cancelled, except that, in case of a lost, destroyed or
mutilated Certificate, a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board may prescribe.
Section 2. Transfer of Securities. Transfers of Securities shall be
made only on the security transfer books of the Corporation by the holder of
record thereof, by the legal representative of the holder who shall furnish
proper evidence of authority to transfer, or by an attorney authorized by a
power of attorney which was duly executed and filed with the Secretary
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of the Corporation and a surrender for cancellation of the certificate for such
shares. The person in whose name Securities stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for all
purposes.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by resolution of
the Board.
ARTICLE VIII
DIVIDENDS
The Board may declare, and the Corporation may pay in cash, stock or
other property, dividends on its outstanding shares in the manner and upon the
terms and conditions provided by law and its Articles.
ARTICLE IX
SEAL
The Board shall provide a corporate seal, circular in form, having
inscribed thereon the corporate name, the state of incorporation and the word
"Seal." The seal on Securities, any corporate obligation to pay money or any
other document may be facsimile, or engraved, embossed or printed.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or
director of the Corporation under the provisions of these Bylaws or under the
provisions of the Articles or under the provisions of the applicable laws of the
State of Colorado, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before, at or after the time stated therein,
shall be deemed equivalent to the giving of such notice.
-10-
<PAGE>
ARTICLE XI
INDEMNIFICATION
The Corporation shall have the power to indemnify any director,
officer, employee or agent of the Corporation or any person serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise to the
fullest extent permitted by the laws of the State of Colorado.
ARTICLE XII
AMENDMENTS
These Bylaws may be altered, amended, repealed or replaced by new
Bylaws by the Board at any regular or special meeting of the Board.
ARTICLE XIII
UNIFORMITY OF INTERPRETATION AND SEVERABILITY
These Bylaws shall be so interpreted and construed as to conform to the
Articles and the statutes of the State of Colorado or of any other state in
which conformity may become necessary by reason of the qualification of the
Corporation to do business in such foreign state, and where conflict between
these Bylaws and the Articles or a statute has arisen or shall arise, the Bylaws
shall be considered to be modified to the extent, but only to the extent,
conformity shall require. If any Bylaw provision or its application shall be
deemed invalid by reason of the said nonconformity, the remainder of the Bylaws
shall remain operable in that the provisions set forth in the Bylaws are
severable.
-11-
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED
EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY
TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT
OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
CONVERTIBLE PROMISSORY NOTE
$50,000.00 April 10, 1997
Emeryville, California
For value received VERTICA SOFTWARE, INC., a California corporation
("Company") promises to pay to Art Gingell, an individual ("Holder") the
principal sum of Fifty Thousand Dollars ($50,000.00) with interest on the
outstanding principal amount at the rate of ten percent (10%) 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. Interest shall commence on the date hereof
and shall continue on the outstanding principal until paid in full or converted
subject to the provisions herein.
1. This note (the "Note") is issued pursuant to that certain Note
Purchase Agreement between the Company and the Holder dated as of April 9, 1997
("Agreement"), which shall govern the rights and obligations of the Company and
the terms and conditions with respect to all obligations hereunder.
2. All payments of interest and principal shall be in lawful money of
the United States of America and shall be applied first to accrued interest, and
thereafter to principal.
3. In the event that the Company issues and sells shares of its capital
stock (the "Securities") to investors ("Investors") prior to April 9, 1998 (the
"Maturity Date"), with aggregate cash proceeds to the Company equal to or in
excess of Three Hundred Thousand Dollars ($300,000), then the outstanding
principal balance and unpaid accrued interest of this Note shall automatically
convert into shares of the Company's Securities purchased by the Investors at a
conversion price equal to the lower of (i) One Dollar and Sixty Cents ($1.60)
per share, or (ii) eighty percent (80%) of the price per share paid by the
Investors purchasing the Securities.
4. Unless this Note has been converted in accordance with the terms of
Section 3 above, the entire outstanding principal balance and all unpaid accrued
interest on this Note shall automatically convert into shares of the Company's
Series A Preferred Stock at a conversion price equal to One Dollar and Sixty
Cents ($1.60) per share.
5. BORROWER AND LENDER HEREBY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. This Note shall be deemed to be made under, and shall be
construed in accordance with and governed by the laws of the State of
California, excluding conflicts of laws principles.
VERTICA SOFTWARE, INC.
By: /s/ Hans Nehme
----------------------------------
Hans Nehme
President and Chief Executive Officer
11289143
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED
EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY
TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT
OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
CONVERTIBLE PROMISSORY NOTE
$50,000.00 April 11, 1997
Emeryville, California
For value received VERTICA SOFTWARE, INC., a California corporation
("Company") promises to pay to Art Gingell, an individual ("Holder") the
principal sum of Fifty Thousand Dollars ($50,000.00) with interest on the
outstanding principal amount at the rate of ten percent (10%) 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. Interest shall commence on the date hereof
and shall continue on the outstanding principal until paid in full or converted
subject to the provisions herein.
1. This note (the "Note") is issued pursuant to that certain Note
Purchase Agreement between the Company and the Holder dated as of April 9, 1997
("Agreement"), which shall govern the rights and obligations of the Company and
the terms and conditions with respect to all obligations hereunder.
2. All payments of interest and principal shall be in lawful money of
the United States of America and shall be applied first to accrued interest, and
thereafter to principal.
3. In the event that the Company issues and sells shares of its capital
stock (the "Securities") to investors ("Investors") prior to April 9, 1998 (the
"Maturity Date"), with aggregate cash proceeds to the Company equal to or in
excess of Three Hundred Thousand Dollars ($300,000), then the outstanding
principal balance and unpaid accrued interest of this Note shall automatically
convert into shares of the Company's Securities purchased by the Investors at a
conversion price equal to the lower of (i) One Dollar and Sixty Cents ($1.60)
per share, or (ii) eighty percent (80%) of the price per share paid by the
Investors purchasing the Securities.
4. Unless this Note has been converted in accordance with the terms of
Section 3 above, the entire outstanding principal balance and all unpaid accrued
interest on this Note shall automatically convert into shares of the Company's
Series A Preferred Stock at a conversion price equal to One Dollar and Sixty
Cents ($1.60) per share.
5. BORROWER AND LENDER HEREBY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. This Note shall be deemed to be made under, and shall be
construed in accordance with and governed by the laws of the State of
California, excluding conflicts of laws principles.
VERTICA SOFTWARE, INC.
By: /s/ Hans Nehme
---------------------------------------
Hans Nehme
President and Chief Executive Officer
21289143
VERTICA SOFTWARE, INC.
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT ("Agreement") is made as of the 9th day of
April 1997 by and between VERTICA SOFTWARE, INC. a California corporation (the
"Company"), and Arthur A. Gingell, an individual (the "Purchaser").
In consideration of the mutual promises hereinafter set forth the
parties hereby agree as follows:
SECTION 1. AMOUNT AND TERMS OF THE LOAN
1.1 The Loan. Subject to the terms of this Agreement, the Company
agrees to sell and Purchaser agrees to loan to the Company, One Hundred Thousand
Dollars ($100,000.00) (the "Loan Amount") pursuant to two (2) convertible
promissory notes (the "First Note" and "Second Note", collectively, the
"Notes"), each in the form attached hereto as Exhibit A. Upon the closing of the
Company's Stock Financing (as defined below) the outstanding principal balance
and unpaid accrued interest of the Notes shall automatically convert into shares
of Company's Securities pursuant to the terms of Section 1.3. In the event the
Stock Financing has not closed within one year from the date of this Agreement,
the principal balance and unpaid accrued interest of the Notes shall be
automatically converted into shares of the Company's Series A Preferred Stock.
1.2 Stock Financing. For purposes of this Agreement, "Stock Financing"
shall mean the sale by the Company of shares of its capital stock ("Securities")
to investors ("Investors") with aggregate cash proceeds to the Company equal to
or in excess of Three Hundred Thousand Dollars ($300,000).
1.3 Conversion Upon Stock Financing. Immediately prior to or upon the
closing of a Stock Financing as defined in Section 1.2, the principal amount and
any accrued and unpaid interest on the Notes shall automatically convert into
shares of the Company's Securities purchased by the Investors at a conversion
price equal to the lower of (i) One Dollar and Sixty Cents ($1.60) per share, or
(ii) eighty percent (80%) of the price per share paid by the Investors
purchasing the Securities.
1.4 Other Conversion. In the event the Stock Financing has not closed
within one year from the date of this Agreement, the principal amount and any
accrued and unpaid interest on the Notes shall automatically convert into shares
of the Company's Series A Preferred Stock at a conversion price equal to One
Dollar and Sixty Cents ($1.60) per share.
SECTION 2. THE CLOSING
2.1 Closings.
(a) First Closing. The closing of the purchase and sale of the
First Note (the
<PAGE>
"First Closing") shall be held on April 10, 1997, at the offices of Cooley
Godward LLP, Five Palo Alto Square, 3000 El Camino Real, Palo Alto, California
94306, or at such other time as the Company and the Purchaser shall agree (the
"First Closing Date").
(b) Second Closing. The closing of the purchase and sale of
the Second Note (the "Second Closing") shall be held on April 11, 1997, at the
offices of Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real, Palo
Alto, California 94306, or at such other time as the Company and the Purchaser
shall agree (the "Second Closing Date").
2.2 Deliveries.
(a) At the First Closing (i) Purchaser will deliver to the
Company a check or wire transfer funds in the amount of Fifty Thousand Dollars
($50,000); and (ii) the Company shall deliver to Purchaser a Note representing
such Purchaser's Loan Amount.
(b) At the Second Closing (i) Purchaser will deliver to the
Company a checkor wire transfer funds in the amount of Fifty Thousand Dollars
($50,000); and (ii) the Company shall deliver to Purchaser a Note representing
such Purchaser's Loan Amount.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Purchaser as follows:
3.1 Corporate Power. The Company will have at the Closing Date all
requisite corporate power to execute and deliver this Agreement and to carry out
and perform its obligations under the terms of this Agreement.
3.2 Authorization. All corporate action on the part of the Company, its
directors and its shareholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company and the performance of
the Company's obligations hereunder, including the issuance and delivery of the
Notes has been taken or will be taken prior to the Closing. This Agreement and
the Notes when executed and delivered by the Company, shall constitute valid and
binding obligations of the Company enforceable in accordance with their terms,
subject to laws of general application relating to bankruptcy, insolvency, the
relief of debtors and, with respect to rights to indemnity, subject to federal
and state securities laws. The Series A Preferred Stock or other equity
securities of the Company, when issued in compliance with the provisions of this
Agreement, or the Notes, will be validly issued, fully paid and nonassessable
and free of any liens or encumbrances.
3.3 Governmental Consents. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of the Company
in connection with the valid execution and delivery of this Agreement, the
offer, sale or issuance of the Notes and the equity securities issuable upon
conversion of the Notes or the consummation of any other transaction
contemplated hereby shall have been obtained and will be effective at the
Closing, except for notices required or permitted to be filed with certain state
and federal securities commissions,
<PAGE>
which notices will be filed on a timely basis.
3.4 Offering. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4 hereof, the offer, issue,
and sale of the Notes are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
" 1933 Act"), and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit, or qualification
requirements of all applicable state securities laws.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
4.1 Purchase for Own Account. Purchaser represents that it is acquiring
the Notes and the equity securities issuable upon conversion of the Notes
(collectively, the "Notes and Underlying Securities") solely for its own account
and beneficial interest for investment and not for sale or with a view to
distribution of the Notes and Underlying Securities or any part thereof, has no
present intention of selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the same, and does not
presently have reason to anticipate a change in such intention.
4.2 Information and Sophistication. Purchaser acknowledges that it has
received all the information it has requested from the Company and considers
necessary or appropriate for deciding whether to acquire the Notes. Purchaser
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the Notes
and to obtain any additional information necessary to verify the accuracy of the
information given the Purchaser. Purchaser further represents that it has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risk of this investment.
4.3 Ability to Bear Economic Risk. Purchaser acknowledges that
investment in the Notes involves a high degree of risk, and represents that it
is able, without materially impairing its financial condition, to hold the
Securities for an indefinite period of time and to suffer a complete loss of its
investment.
4.4 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a Registration Statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) The Purchaser 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 (ii) if
reasonably requested by the Company, such Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration under the 1933 Act.
<PAGE>
4.5 Experience. Purchaser is an "accredited investor" as such term is
defined in Rule 501 under the Securities Act.
SECTION 5. MISCELLANEOUS
5.1 Binding Agreement. The terms and conditions of this Agreement shall
inure to. the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
5.2 Governing Law Venue. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California. Each of Company and Purchaser hereby submits to the exclusive
jurisdiction of the State and Federal courts located in the County of Santa
Clara, State of California.
5.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.5 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile, (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.
5.6 Modification; Waiver. No modification or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and approved by the Company and the Purchaser.
5.7 Entire Agreement. This Agreement and the Exhibits hereto constitute
the full and entire understanding and agreement between the par-ties with regard
to the subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Notes Purchase
Agreement as of the date set forth in the first paragraph hereof.
COMPANY:
VERTICA SOFTWARE, INC.
5801 Christie Avenue, Suite 240
Emeryville, CA 94608
By:
---------------------------------------
Hans Nehme
President and Chief Executive Officer
PURCHASER:
Arthur A. Gingell
157 Camino Arroyo North
Palm Desert, CA 92260
/s/ Arthur A. Gingell
------------------------------------------
Arthur A. Gingell
21275299
040997
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Notes Purchase
Agreement as of the date set forth in the first paragraph hereof.
COMPANY:
VERTICA SOFTWARE, INC.
5801 Christie Avenue, Suite 240
Emeryville, CA 94608
By: /s/ Hans Nehme
---------------------------------------
Hans Nehme
President and Chief Executive Officer
PURCHASER:
Arthur A. Gingell
157 Camino Arroyo North
Palm Desert, CA 92260
--------------------------------------
Arthur A. Gingell
21275299
040997
STOCK PURCHASE AND EXCHANGE AGREEMENT
THIS STOCK PURCHASE AND EXCHANGE AGREEMENT (hereinafter referred to as
the "Agreement") is made and entered into this 29th day of September, 1998, by
and among Perfection Development Corporation, a Colorado corporation
(hereinafter referred to as the "Company"), and Scott M. Thornock and C. Edward
Venerable (hereinafter referred to, individually, as a "Guarantor" and,
collectively, as the "Guarantors"), on the one hand, and Vertica Software, Inc.,
a California corporation (hereinafter referred to as "Vertica"), and Hans Nehme
(hereinafter referred to as the "Purchaser"), on the other hand.
RECITALS:
WHEREAS, the Company desires to issue, sell and deliver to the
Purchaser, and the Purchaser desires to purchase, acquire and receive from the
Company, an aggregate of 9,200,000 authorized and unissued shares (hereinafter
referred to as the "Shares") of common stock, $.0001 par value per share
(hereinafter referred to as the "Perfection Common Stock"), of the Company in
consideration of the exchange therefor of all 4,930,000 issued and outstanding
shares of common stock, no par value per share (hereinafter referred to as the
"Vertica Common Shares"), of Vertica which are owned by the Purchaser, on the
terms and subject to the conditions set forth herein;
WHEREAS, the Guarantors, who own an aggregate of 1,040,000 shares of
Perfection Common Stock, desire to sell, assign, transfer, convey and deliver to
the Purchaser, and the Purchaser desire to purchase, acquire and receive from
the Guarantors, a total of 480,000 restricted shares of Perfection Common Stock
which are owned by the Guarantors, in consideration of the sum of $25,000 in
cash paid therefor by the Purchaser to the Guarantors, on the terms and subject
to the conditions set forth herein;
WHEREAS, the Purchaser desires to pay finder's fees in the total amount
of $50,000 to Summit Financial Relations, Inc., and Columbine Financial
Solutions, Inc. (hereinafter referred to, individually, as a "Finder" and,
collectively, as the "Finders") in connection with the transactions contemplated
by this Agreement;
WHEREAS, the Guarantors, who own an aggregate of 1,040,000 shares of
Perfection Common Stock, constituting approximately 80% of the issued and
outstanding shares of Perfection Common Stock as of the date hereof, and who
constitute both of the current officers and directors of the Company, desire
that the transactions contemplated hereby be consummated; and
WHEREAS, the parties hereto intend that the issuance and sale of the
Shares of Perfection Common Stock in exchange for all of the Vertica Common
Shares shall qualify as a "tax-free" reorganization as contemplated by the
provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants, agreements, representations and warranties contained herein,
the parties hereto agree as follows:
-1-
<PAGE>
ARTICLE 1
ISSUANCE AND/OR SALE AND PURCHASE OF SHARES
1.1 Issuance and Sale of Shares of Perfection Common Stock by Company
to Purchaser in Exchange for Vertica Common Shares. At the Closing, as defined
and to be held in accordance with the provisions of Article 2 below, the Company
agrees to issue, sell and deliver a total of 9,200,000 Shares of Perfection
Common Stock to the Purchaser and the Purchaser agrees to purchase, acquire and
receive said aggregate number of Shares of Perfection Common Stock from the
Company. In consideration for the issuance and sale of said 9,200,000 Shares of
Perfection Common Stock to the Purchaser pursuant to the provisions of this
Agreement, and as payment in full of the purchase price for the said Shares of
Perfection Common Stock to be issued and sold to, and purchased and acquired by,
him pursuant to the provisions of this Agreement, at the Closing the Purchaser
shall sell, assign, transfer, convey and deliver to the Company the stock
certificate, duly executed, endorsed and/or authenticated for transfer to the
Company, evidencing 4,930,000 Vertica Common Shares owned of record and
beneficially by him.
1.2 Sale of Shares of Perfection Common Stock by Guarantors to
Purchaser for $25,000 in Cash. At the Closing, the Guarantors, severally and not
jointly, agree to sell, assign, transfer, convey and deliver a total of 480,000
restricted shares of Perfection Common Stock owned of record and beneficially by
them to the Purchaser and the Purchaser agrees to purchase, acquire and receive
said aggregate number of restricted shares of Perfection Common Stock from the
Guarantors. In consideration for the sale, assignment, transfer and conveyance
of said 480,000 restricted shares of Perfection Common Stock owned of record and
beneficially by the Guarantors to the Purchaser pursuant to the provisions of
this Agreement, and as payment in full of the purchase price for the said
restricted shares of Perfection Common Stock owned of record and beneficially by
the Guarantors to be sold, assigned, transferred and conveyed to, and purchased
and acquired by, the Purchaser pursuant to the provisions of this Agreement, at
the Closing the Purchaser shall pay the total sum of $25,000 in cash to the
Guarantors.
ARTICLE 2
CLOSING
The consummation of the issuance and sale to and purchase and
acquisition by the Purchaser of 9,200,000 Shares of Perfection Common Stock and
the sale, assignment, transfer and conveyance to and purchase and acquisition by
the Purchaser of 480,000 restricted shares of Perfection Common Stock owned of
record and beneficially by the Guarantors (hereinafter referred to as the
"Closing") shall occur at the offices of Cudd & Associates, 1120 Lincoln Street,
Suite #1310, Denver, Colorado 80203, at 2:00 p.m., Mountain Daylight Time, on
October 2, 1998, or at such other place and/or on such other date not later than
October 30, 1998, as the parties may agree upon in writing (hereinafter referred
to as the "Closing Date"). If the Closing fails to occur by October 2, 1998, or
by such later date to which the Closing may be extended as provided hereinabove,
then this Agreement shall automatically terminate, all parties shall pay their
own expenses incurred in connection herewith and no party hereto shall have any
further obligations hereunder; provided, however, that no such termination shall
constitute a waiver by any party or parties which is not in default of any of
his, its or their respective representations, warranties or covenants herein, of
any rights or remedies he, it or they might have at law if any other party or
parties are in default of any of his, its or their respective representations,
warranties or covenants under this Agreement.
At or prior to the Closing, as conditions thereto,
(a) The Company shall deliver, or cause to be delivered, to the
Purchaser:
-2-
<PAGE>
(i) A newly-issued stock certificate representing 9,200,000
Shares of Perfection Common Stock which are being purchased and acquired for the
account of the Purchaser, in form and substance reasonably satisfactory to the
Purchaser and his counsel.
(ii) The certified resolutions of the Company's Board of
Directors specified in Section 7.3 (a) below.
(iii) The certificate of the Company and the Guarantors
specified in Section 7.3 (b) and (c) below.
(iv) The opinion letter of the Company's counsel specified in
Section 7.3 (d) below substantially in the form attached hereto as Exhibit B and
incorporated herein by this reference.
(v) The letters of resignation of the current directors of the
Company specified in Section 7.3 (e) below.
(b) The Purchaser shall deliver to the Company:
(i) The stock certificate(s) evidencing 4,930,000 Vertica
Common Shares owned of record and beneficially by the Purchaser which are being
sold, assigned, transferred and conveyed to the Company, duly executed, endorsed
and/or authenticated for transfer to the Company.
(ii) The certificate(s) of Vertica and the Purchasers
specified in Section 7.4 (a) and (b) below.
(iii) The opinion letter of counsel to the Purchaser specified
in Section 7.4 (c) below substantially in the form attached hereto as Exhibit C
and incorporated herein by this reference.
(c) The Purchaser shall deliver, or cause to be delivered, to the
Guarantors a cashier's check in the amount of $75,000 payable to the order of
Patricia Cudd, Attorney at Law, COLTAF Trust Account.
(d) The Guarantors shall deliver, or cause to be delivered, to the
Purchaser stock certificates evidencing such number of restricted shares of
Perfection Common Stock owned of record and beneficially by each Guarantor as
set forth opposite his respective name on Exhibit D which are being sold,
assigned, transferred and conveyed to the Purchaser, duly executed, endorsed
and/or authenticated for transfer to the Purchaser.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS
The Company and the individual Guarantors hereby jointly and severally
represent and warrant to Vertica and the Purchaser as follows (it being
acknowledged that Vertica and the Purchaser are entering into this Agreement in
material reliance upon each of the following representations and warranties, and
that the truth and accuracy of each of which constitutes a condition precedent
to the obligations of Vertica and the Purchaser hereunder):
-3-
<PAGE>
3.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which such qualification is required and
where the failure to be so qualified would have a materially adverse effect upon
the Company. The Company has all requisite corporate power and authority to
conduct its business as now being conducted and to own the personal property
which it now owns. The Articles of Incorporation of the Company, as amended to
date, certified by the Secretary of State of Colorado, and the Bylaws of the
Company, certified by the President and the Secretary of the Company, which have
been delivered to the Purchaser prior to the execution hereof, are true and
complete copies thereof as in effect as of the date of this Agreement.
3.2 Authorization.
(a) The Company has full power, legal capacity and authority
to enter into this Agreement and all attendant documents and instruments
necessary to consummate the transactions herein contemplated; to issue, sell and
deliver the Shares of Perfection Common Stock to the Purchaser; and to perform
all of the obligations to be performed by the Company hereunder. This Agreement
and all other agreements, documents and instruments to be executed in connection
herewith by the Company have been effectively authorized by all necessary
action, corporate or otherwise, on the part of the Company, which authorizations
remain in full force and effect and have been duly executed and delivered by the
Company and/or each of the Guarantors, and no other corporate proceedings on the
part of the Company are required to authorize the execution and delivery of this
Agreement, such other agreements, documents and instruments and the transactions
contemplated hereby. This Agreement and such other agreements, documents and
instruments have been duly executed and delivered by the Company and/or each of
the Guarantors; constitute the legal, valid and binding obligation of the
Company and each of the Guarantors; and are enforceable with respect to the
Company and each of the Guarantors in accordance with their respective terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, priority or other laws or court decisions relating to or
affecting generally the enforcement of creditors' rights or affecting generally
the availability of equitable remedies. Neither the execution and delivery of
this Agreement, the consummation by the Company of any of the transactions
contemplated hereby nor the compliance by the Company with any of the provisions
hereof will (i) conflict with or result in a breach of, violation of or default
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, lease, credit agreement or other agreement, document,
instrument or obligation (including, without limitation, any of the Company's
charter documents) to which the Company is a party or by which the Company or
any of the assets or properties of the Company may be bound or (ii) violate any
judgment, order, injunction, decree, statute, rule or regulation applicable to
the Company or any of the assets or properties of the Company. To the best
knowledge of the Company and the Guarantors, no authorization, consent or
approval of any public body or authority is necessary for the consummation by
the Company of the transactions contemplated by this Agreement.
(b) Each of the Guarantors has full power, legal capacity and authority
to enter into this Agreement and all attendant documents and instruments
necessary to consummate the transactions herein contemplated; to sell, assign,
transfer, convey and deliver a total of 480,000 restricted shares of Perfection
Common Stock owned of record and beneficially by them to the Purchaser; and to
perform all of the obligations to be performed by them hereunder. All
agreements, documents and instruments to be executed in connection herewith by
the Guarantors have been duly executed and delivered by the Guarantors. This
Agreement has been duly executed and delivered by each of the Guarantors,
constitutes the legal, valid and binding obligation of each of the Guarantors
and is enforceable with respect to each of the Guarantors in accordance with its
terms, except as enforcement hereof may be limited by bankruptcy,
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insolvency, reorganization, priority or other laws or court decisions relating
to or affecting generally the enforcement of creditors' rights or affecting
generally the availability of equitable remedies. Neither the execution and
delivery of this Agreement nor the consummation by the Guarantors of any of the
transactions contemplated hereby, or compliance by the Guarantors with any of
the provisions hereof, will (i) conflict with or result in a breach of,
violation of or default under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, lease, credit agreement or other
agreement, document, instrument or obligation (including, without limitation,
any of the Company's charter documents) to which either of the Guarantors are
parties or by which either of the Guarantors or any of the assets or properties
of the Guarantors may be bound or (ii) violate any judgment, order, injunction,
decree, statute, rule or regulation applicable to either of the Guarantors or
any of the assets or properties of either of the Guarantors. To the best
knowledge of the Guarantors, no authorization, consent or approval of any public
body or authority is necessary for the consummation by the Guarantors of the
transactions contemplated by this Agreement.
3.3 Ownership of the Company. The Guarantors together own 1,040,000
shares of Perfection Common Stock, constituting 80% of the issued and
outstanding shares of capital stock of the Company, free and clear of (i) any
lien, charge, mortgage, pledge, conditional sale agreement or other encumbrance
of any kind or nature whatsoever and (ii) any claim as to ownership thereof or
any rights, powers or interest therein by any third party, whether legal or
beneficial, and whether based on contract, proxy or other document or otherwise.
3.4 Capitalization.
(a) The authorized capital stock of the Company consists of 30,000,000
shares of common stock, $.0001 par value per share (defined above as the
"Perfection Common Stock"), and 3,000,000 shares of preferred stock, $.001 par
value per share (hereinafter referred to as the "Perfection Preferred Stock").
At the date hereof, there are 1,300,000 shares of Perfection Common Stock issued
and outstanding, with no shares of Perfection Common Stock held in the Company's
treasury and no shares of Perfection Preferred Stock outstanding or held in the
Company's treasury. All of the outstanding shares of Perfection Common Stock
have been duly authorized and validly issued and are fully-paid and
nonassessable.
(b) There are no warrants, options, calls, commitments or other rights
to subscribe for or to purchase from the Company any capital stock of the
Company or any securities convertible into or exchangeable for any shares of
capital stock the Company, or any other securities or agreement pursuant to
which the Company is or may become obligated to issue any shares of its capital
stock, nor is there outstanding any commitment, obligation or agreement on the
part of the Company to repurchase, redeem or otherwise acquire any of the
outstanding shares of Perfection Common Stock.
(c) There currently are no rights, agreements or commitments of any
character obligating the Company, contingently or otherwise, to register any
shares of its capital stock under any applicable Federal or state securities
laws.
3.4 Financial Statements. Attached hereto as Exhibit E are true and
complete copies of the audited financial statements of the Company as of October
31, 1997, including the Balance Sheet as of October 31, 1997 (hereinafter
referred to as the "Perfection Balance Sheet"), the related Statements of
Operations, Shareholders' Equity and Cash Flows for the period from April 18,
1997 (inception) through October 31, 1997, and the related Summary of
Significant Accounting Policies and Notes to Financial Statements, reported upon
by Cordovano and Harvey, P.C. (formerly Cordovano and Company, P.C.), certified
public accountants. Such financial statements (and the notes related thereto)
are herein sometimes collectively referred to as the "Perfection Financial
Statements." The Perfection Financial Statements (i) are derived
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from the books and records of the Company, which books and records have been
consistently maintained in a manner which reflects, and such books and records
do fairly and accurately reflect, the assets and liabilities of the Company,
(ii) fairly and accurately present the financial condition of the Company on the
respective dates of such statements and the results of its operations for the
periods indicated, except as may be disclosed in the notes thereto, and (iii)
have been prepared in all material respects in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved (except as otherwise disclosed in the notes thereto).
3.5 Subsidiaries. The Company has no subsidiaries and no investments,
directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever.
3.6 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the Perfection Balance Sheet, the Company has
no liability(s) or obligation(s) (whether accrued, to become due, contingent or
otherwise) which individually or in the aggregate could have a materially
adverse effect on its business, assets, properties, condition (financial or
otherwise) or prospects.
3.7 Absence of Certain Developments. Except as described on Exhibit F
attached hereto and incorporated herein by this reference, since the date of the
Perfection Balance Sheet, there has been (i) no materially adverse change in the
condition (financial or otherwise) of the Company or in the assets, liabilities,
properties, business, operations or prospects of the Company; (ii) no
declaration, setting aside or payment of any dividend or other distribution with
respect to the Perfection Common Stock or redemption, purchase or other
acquisition of any Perfection Common Stock or any split-up or other
recapitalization relative to any Perfection Common Stock or any action
authorizing or obligating the Company to do any of the foregoing; (iii) no loss,
destruction or damage to any material property or asset of the Company, whether
or not insured; (iv) no acquisition or disposition of assets (or any contract or
arrangement therefor), or any other transaction by the Company otherwise than
for fair value and in the ordinary course of business; (v) no discharge or
satisfaction by the Company of any lien or encumbrance or payment of any
obligation or liability (absolute or contingent) other than current liabilities
shown on the Perfection Balance Sheet, or current liabilities incurred since the
date thereof in the ordinary course of business; (vi) no sale, assignment or
transfer by the Company of any of the tangible or intangible assets of the
Company, cancellation by the Company of any debts, claims or obligations,
mortgage, pledge or satisfaction by the Company of any assets to any lien,
charge, security interest or other encumbrance or waiver by the Company of any
rights of value which, in any such case, is material to the business of the
Company (whether or not in the ordinary course of business); (vii) no payment of
any bonus to or change in the compensation of any director, officer or employee
of the Company, whether directly or by means of any bonus, pension plan,
contract or commitment; (viii) no write-off or material reduction in the
carrying value of any asset which is material to the business of the Company;
(ix) no disposition or lapse of rights as to any intangible property which is
material to the business of the Company; (x) except for ordinary travel
advances, no loans or extensions of credit to shareholders, officers, directors
or employees of the Company; (xi) no entry into any commitment or transaction by
the Company (including, without limitation, any borrowing or capital
expenditure) involving an amount in excess of $1,000.00; (xii) no issuance of
any capital stock, or of any other security convertible into any of the capital
stock, of the Company; and (xiii) no agreement to do any of the things described
in this Section 3.7.
3.8 Tangible Personal Property. Exhibit F sets forth a complete list of
all items of tangible personal property owned and used by the Company in the
current conduct of its business where the original cost was in excess of
$1,000.00. The Company has and at the Closing will have, good and marketable
title to, and be in possession of, all such items of personal property
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owned by the Company, free and clear of all title defects, mortgages, pledges,
security interests, conditional sales agreements, liens, restrictions or
encumbrances whatsoever.
3.9 Tax Matters. The Company has, since its inception, duly filed all
Federal, state, county and local tax returns required to have been filed by it
in those jurisdictions where the nature or conduct of its business requires such
filing and where the failure to so file would be materially adverse to the
Company. Copies of all such tax returns have been furnished to the Purchaser
prior to the execution hereof. All Federal, state, county and local taxes,
including but not limited to those taxes due with respect to the Company's
property, income, gross receipts, excise, occupation, franchise, permit,
licenses, sales, payroll and inventory due and payable as of the Closing by the
Company have been paid. No amount is required to be reflected in the Perfection
Balance Sheet as a liability or reserve for taxes which are due but not yet
payable and, to the best knowledge of the Company and the Guarantors, the
Company has no accrued and unpaid taxes of the types referred to hereinabove.
3.10 Contracts and Commitments. The Company has no contract, agreement,
obligation or commitment, written or verbal, express or implied, which involves
a commitment or liability in excess of $1,000.00 or for a term of more than six
months, and no union contracts, employee or consulting contracts, financing
agreements, debtor or creditor arrangements, licenses, franchise, manufacturing,
distributorship or dealership agreements, leases or bonus, health or stock
option plans, except as described on Exhibit F. True and complete copies of all
such contracts and other agreements listed on Exhibit F have been made available
to the Purchaser prior to the execution hereof. The Guarantors have no knowledge
of any circumstances which would affect the validity or enforceability of any of
such contracts and other agreements in accordance with their respective terms.
The Company has performed and complied in all material respects with all
obligations required to be performed by it to date under, and is not in default
(without giving effect to any required notice or grace period) under, or in
breach of, the terms, conditions or provisions of any of such contracts and
other agreements. The validity and enforceability of any contract or other
agreement described herein shall not in any manner be affected by the execution
and delivery of this Agreement without any further action.
3.11 Patents, Trade Secrets and Customer Lists. The Company has no
patents, applications for patents, trademarks, applications for trademarks,
trade names, licenses or service marks relating to the business of the Company
except as set forth on Exhibit F hereto, nor does any present or former officer,
director or employee of the Company own any patent rights relating to any
products manufactured, rented or sold by the Company. Except as disclosed on
Exhibit F, the Company has the unrestricted right to use, free and clear of any
claims or rights of others, all trade secrets, customer lists and manufacturing
and secret processes reasonably necessary to the manufacture and marketing of
all products made or proposed to be made by the Company, and the continued use
thereof after the Closing by the Company will not conflict with, infringe upon
or otherwise violate any rights of others. Except as set forth on Exhibit F, the
Company has not used and is not making use of any confidential information or
trade secrets of any present or past employee of the Company.
3.12 No Pending Material Litigation or Proceedings. Except as disclosed
on Exhibit F, there are no actions, suits or proceedings pending, threatened
against or affecting the Company (including actions, suits or proceedings where
liabilities may be adequately covered by insurance) at law or in equity or
before or by any Federal, state, municipal or other governmental department,
commission, court, board, bureau, agency or instrumentality, domestic or
foreign, or affecting any of the officers or directors of the Company in
connection with the business, operations or affairs of the Company, which might
result in any adverse change in the business, properties or assets, or in the
condition (financial or otherwise) of the Company, or which might prevent the
sale of the Perfection Common Stock pursuant to this Agreement. The Company has
not, since its inception on April 18, 1997, been threatened with any action,
suit, proceeding or
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claim (including actions, suits, proceedings or claims where its liabilities may
be adequately covered by insurance) for personal injuries allegedly attributable
to products sold or services performed by the Company asserting a particular
defect or hazardous property in any of the Company's respective products,
services or business practices or methods, nor has the Company been a party to
or threatened with proceedings brought by or before any Federal or state agency;
and the Company has no knowledge of any defect or hazardous property claimed or
actual in any such product, service or business practice or method. The Company
is not subject to any voluntary or involuntary proceeding under the United
States Bankruptcy Code and has not made an assignment for the benefit of
creditors.
3.13 Arrangements with Personnel. Except as set forth on Exhibit F
hereto, no stockholder, director, officer or employee of the Company is a party
to any transaction with the Company, including without limitation any contract,
loan or other agreement or arrangement providing for the furnishing of services
by, the rental of real or personal property from or to or otherwise requiring
loans or payments to, any such stockholder, director, officer or employee, or to
any member of the family of any of the foregoing, or to any corporation,
partnership, trust or other entity in which any stockholder, director, officer
or employee of the Company or any member of the family of any of them has a
substantial interest or is an officer, director, trustee, partner or employee.
There is set forth on Exhibit F a list showing (i) the name, title, date and
amount of last compensation increase, and aggregate compensation, including
amounts paid or accrued pursuant to any bonus, pension, profit sharing,
commission, deferred compensation or other plans or arrangements in effect as of
the date of this Agreement, of each officer, employee, agent or contractor of
the Company who received salary and/or other compensation from the Company, as
well as any employment agreements relating to any such persons; (ii) all powers
of attorney from the Company to any person or entity; (iii) the name of each
person or entity authorized to borrow money or incur or guarantee indebtedness
on behalf of the Company; (iv) all safes, vaults and safe deposit boxes
maintained by or on behalf of the Company and the names of all persons
authorized to have access thereto; and (v) all bank and savings accounts of the
Company and the names of all persons who are authorized signatories with respect
to such accounts, the capacities in which they are authorized and the terms of
their authorizations.
3.14 Labor Relations. The Company has no obligations under any
collective bargaining agreement or other contract with a labor union, under any
employment contract or consulting agreement or under any executive's
compensation plan, agreement or arrangement, nor is any union or labor
organization presently seeking the right to enter into collective bargaining
with the Company. The Company has furnished to the Purchaser a copy of all
written personnel policies, including without limitation vacation, severance,
bonus, pension, profit sharing and commissions policies.
3.15 Compliance with Laws. To the best knowledge of the Company and the
Guarantors, the Company holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business as presently
conducted, and has complied with all applicable statutes, laws, ordinances,
rules and regulations of all governmental bodies, agencies and subdivisions
having, asserting or claiming jurisdiction over it, with respect to any part of
the conduct of its business and corporate affairs.
3.16 Relationships with Customers and Suppliers. No present customer or
substantial supplier to the Company has indicated an intention to terminate or
materially and adversely alter its existing business relationship with the
Company and the Company has no reason to believe that any of its present
customers or substantial suppliers intends to do so.
3.17 Brokerage. Neither the Company nor the Guarantors have any
obligation to any person or entity for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement, and the Guarantors, jointly and severally,
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shall indemnify and hold the Purchaser and the Company harmless against any
liability or expenses arising out of any such claim asserted against either the
Purchaser or the Company by any party except Summit Financial Relations, Inc.,
and Columbine Financial Solutions, Inc., to which companies the Purchaser has
agreed to pay finders' fees aggregating the sum of $50,000 as provided in
Section 4.19 below.
3.18 Investment Representation. The Company, through the Guarantors,
has the knowledge and experience in business and financial matters to
meaningfully evaluate the merits and risks of the issuance and sale of the
Shares of Perfection Common Stock in exchange and consideration for the Vertica
Common Shares as contemplated hereby. The Company shall conduct an independent
review of the business, assets, properties, books and records of Vertica for the
purpose of satisfying itself as to the truth, accuracy and completeness of the
representations and warranties made by the Purchaser. The Company understands
and acknowledges that the Vertica Common Shares were originally issued to the
Purchaser and will be sold and transferred to the Company in the transactions
contemplated hereby without registration or qualification or other filings being
made under the U.S. Securities Act of 1933, as amended, or any applicable state
securities or "Blue Sky" law, in reliance upon specific exemptions therefrom,
and in furtherance thereof the Company represents that the Vertica Common Shares
will be taken and received by the Company for its account for investment, with
no present intention of a distribution or disposition thereof to others. The
Company further acknowledges and agrees that the certificates representing the
Vertica Common Shares transferred to the Company shall be subject to a
stop-transfer order and shall bear a restrictive legend, in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), ARE "RESTRICTED SECURITIES," AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY, IS NOT REQUIRED TO BE REGISTERED UNDER THE ACT."
3.19 Disclosure. Neither this Agreement, nor any certificate, exhibit
or other written document or statement, furnished to the Purchaser by the
Company or the Guarantors in connection with the transactions contemplated by
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to be stated in order
to make the statements contained herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF VERTICA AND THE PURCHASER
Vertica and the Purchaser hereby jointly and severally represent and
warrant to the Company, the Guarantors and each of them as follows (it being
acknowledged that the Company and the Guarantors are entering into this
Agreement in material reliance upon each of the following representations and
warranties, and that the truth and accuracy of each of which constitutes a
condition precedent to the obligations of the Company and the Guarantors
hereunder):
4.1 Authorization.
(a) Vertica has full power, legal capacity and authority to
enter into this Agreement and all attendant documents and instruments necessary
to consummate the
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transactions herein contemplated; and to perform all of the obligations to be
performed by Vertica hereunder. This Agreement and all other agreements,
documents and instruments to be executed in connection herewith by Vertica have
been effectively authorized by all necessary action, corporate or otherwise, on
the part of Vertica, which authorizations remain in full force and effect and
have been duly executed and delivered by Vertica and/or the Purchaser, and no
other corporate proceedings on the part of Vertica are required to authorize the
execution and delivery of this Agreement, such other agreements, documents and
instruments and the transactions contemplated hereby. This Agreement and such
other agreements, documents and instruments have been duly executed and
delivered by Vertica and the Purchaser; constitute the legal, valid and binding
obligation of Vertica and the Purchaser; and are enforceable with respect to
Vertica and the Purchaser in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
priority or other laws or court decisions relating to or affecting generally the
enforcement of creditors' rights or affecting generally the availability of
equitable remedies. Neither the execution and delivery of this Agreement, the
consummation by Vertica of any of the transactions contemplated hereby nor the
compliance by Vertica with any of the provisions hereof will (i) conflict with
or result in a breach of, violation of or default under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, lease,
credit agreement or other agreement, document, instrument or obligation
(including, without limitation, any of Vertica's charter documents) to which
Vertica is a party or by which Vertica or any of the assets or properties of
Vertica may be bound or (ii) violate any judgment, order, injunction, decree,
statute, rule or regulation applicable to Vertica or any of the assets or
properties of Vertica. To the best knowledge of Vertica and the Purchaser, no
authorization, consent or approval of any public body or authority is necessary
for the consummation by Vertica of the transactions contemplated by this
Agreement.
(b) The Purchaser has full power, legal capacity and authority
to enter into this Agreement and all attendant documents and instruments
necessary to consummate the transactions herein contemplated; to sell, assign,
transfer, convey and deliver the Vertica Common Shares to the Company; to pay
the total sum of $25,000 in cash to the Gurarantors for the purchase,
acquisition and receipt of a total of 480,000 restricted shares of Perfection
Common Stock owned of record and beneficially by the Guarantors; and to perform
all of the obligations to be performed by them hereunder. All agreements,
documents and instruments to be executed in connection herewith by Vertica have
been effectively authorized by all necessary action, corporate or otherwise, on
the part of Vertica, which authorizations remain in full force and effect and
have been duly executed and delivered by Vertica, and no other corporate
proceedings on the part of Vertica are required to authorize the execution and
delivery of such agreements, documents and instruments. This Agreement has been
duly executed and delivered by the Purchaser, constitutes the legal, valid and
binding obligation of the Purchaser and is enforceable with respect to the
Purchaser in accordance with its terms, except as enforcement hereof may be
limited by bankruptcy, insolvency, reorganization, priority or other laws or
court decisions relating to or affecting generally the enforcement of creditors'
rights or affecting generally the availability of equitable remedies. Neither
the execution and delivery of this Agreement nor the consummation by the
Purchaser and Vertica of any of the transactions contemplated hereby, or
compliance by the Purchaser and Vertica with any of the provisions hereof, will
(i) conflict with or result in a breach of, violation of or default under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, credit agreement or other agreement, document, instrument or
obligation (including, without limitation, any of Vertica's charter documents)
to which either the Purchaser or Vertica are parties or by which either the
Purchaser or Vertica or any of the assets or properties of either the Purchaser
or Vertica may be bound or (ii) violate any judgment, order, injunction, decree,
statute, rule or regulation applicable to either the Purchaser or Vertica or any
of the assets or properties of either the Purchaser or Vertica. To the best
knowledge of the Purchaser and Vertica, no authorization, consent or approval of
any public body or authority is necessary for the consummation by the Purchaser
and Vertica of the transactions contemplated by this Agreement.
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4.2 Ownership of Vertica. The Purchaser owns 4,930,000 Vertica Common
Shares, constituting all of the issued and outstanding shares of capital stock
of Vertica, free and clear of (i) any lien, charge, mortgage, pledge,
conditional sale agreement or other encumbrance of any kind or nature whatsoever
and (ii) any claim as to ownership thereof or any rights, powers or interest
therein by any third party, whether legal or beneficial, and whether based on
contract, proxy or other document or otherwise. All of the Vertica Common Shares
have been duly authorized and validly issued and are fully-paid and
nonassessable. Except as set forth in this Section 4.2, there are no warrants,
options, calls, commitments or other rights to subscribe for or to purchase from
Vertica any capital stock of Vertica or any securities convertible into or
exchangeable for any shares of capital stock of Vertica, or any other securities
or agreement pursuant to which Vertica is or may become obligated to issue any
shares of its capital stock, nor is there outstanding any commitment, obligation
or agreement on the part of Vertica to repurchase, redeem or otherwise acquire
any of the outstanding shares of Vertica.
4.3 Organization and Corporate Power. Vertica is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction in which such qualification is required
and where the failure to be so qualified would have a materially adverse effect
upon Vertica. Vertica has all requisite corporate power and authority to conduct
its business as now being conducted and to own and lease the properties which it
now owns and leases. The Articles of Incorporation of Vertica, as amended to
date, certified by the Secretary of State of California, and the Bylaws of
Vertica, as amended to date, certified by the President and the Secretary of
Vertica, which have been delivered to the Company prior to the execution hereof,
are true and complete copies thereof as in effect as of the date of this
Agreement.
4.4 Financial Statements. Attached hereto as Exhibit G is a true and
complete copy of the unaudited balance sheet of Vertica as of August 10, 1998
(the "Vertica Balance Sheet"), the related unaudited statement of profit or loss
for the period then ended and the related notes thereto, which have been
certified to by the chief executive officer and the chief financial officer of
Vertica. Such financial statements (and the notes related thereto) are herein
sometimes collectively referred to as the "Vertica Financial Statements." The
Vertica Financial Statements (i) are derived from the books and records of
Vertica, which books and records have been consistently maintained in a manner
which reflects, and such books and records do fairly and accurately reflect, the
assets and liabilities of Vertica, (ii) fairly and accurately present the
financial condition of Vertica on the respective dates of such statements and
the results of its operations for the periods indicated, except as may be
disclosed in the notes thereto, and (iii) have been prepared in all material
respects in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise
disclosed in the notes thereto).
4.5 Subsidiaries. Verttica has no subsidiaries and no investments,
directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever.
4.6 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the Vertica Balance Sheet, and as to matters
arising in the ordinary course of the business of Vertica since the date of the
Vertica Balance Sheet which are disclosed on Exhibit G hereto, Vertica has no
liability(s) or obligation(s) (whether accrued, to become due, contingent or
otherwise) which individually or in the aggregate could have a materially
adverse effect on the business, assets, properties, condition (financial or
otherwise) or prospects of Vertica.
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4.7 Absence of Certain Developments. Except as described on Exhibit G,
since the date of the Vertica Balance Sheet, there has been (i) no materially
adverse change in the condition (financial or otherwise) of Vertica or in the
assets, liabilities, properties, business, operations or prospects of either
corporation; (ii) no declaration, setting aside or payment of any dividend or
other distribution with respect to the Vertica Common Shares or redemption,
purchase or other acquisition of any Vertica Common Shares or any split-up or
other recapitalization relative to any Vertica Common Shares or any action
authorizing or obligating Vertica to do any of the foregoing; (iii) no loss,
destruction or damage to any material property or asset of Vertica, whether or
not insured; (iv) no acquisition or disposition of assets (or any contract or
arrangement therefor), or any other transaction by Vertica otherwise than for
fair value and in the ordinary course of business; (v) no discharge or
satisfaction by Vertica of any lien or encumbrance or payment of any obligation
or liability (absolute or contingent) other than current liabilities shown on
the Vertica Balance Sheet, or current liabilities incurred since the date
thereof in the ordinary course of business; (vi) no sale, assignment or transfer
by Vertica of any of the tangible or intangible assets of either corporation,
cancellation by Vertica of any debts, claims or obligations, or mortgage,
pledge, satisfaction of any assets to any lien, charge, security interest or
other encumbrance or waiver by Vertica of any rights of value which, in any such
case, is material to the business of Vertica (whether or not in the ordinary
course of business); (vii) no payment of any bonus to or change in the
compensation of any director, officer or employee of Vertica, whether directly
or by means of any bonus, pension plan, contract or commitment and no change in
employee compensation, whether directly or by means of any bonus, pension plan,
contract or commitment; (viii) no write-off or material reduction in the
carrying value of any asset which is material to the business of Vertica; (ix)
no disposition or lapse of rights as to any intangible property which is
material to the business of Vertica; (x) except for ordinary travel advances, no
loans or extensions of credit to shareholders, officers, directors or employees
of Vertica; (xi) no entry into any commitment or transaction by Vertica
(including, without limitation, any borrowing or capital expenditure) involving
an amount in excess of $5,000.00; (xii) no issuance of any capital stock, or of
any other security convertible into any of the capital stock, of Vertica; or
(xiii) any agreement to do any of the things described in this Section 4.7.
4.8 Real Property. Exhibit G attached hereto contains a complete and
accurate legal description of each parcel of real property owned by, leased to
and/or occupied by Vertica, and Vertica neither owns, leases nor occupies any
other real property. The buildings and all fixtures and improvements located on
such real property are in good operating condition, ordinary wear and tear
excepted. Vertica is not in violation of any zoning, building or safety
ordinance, regulation or requirement or other law or regulation applicable to
the operation of owned or leased properties, and Vertica has not received any
notice of violation with which it has not complied. Vertica has, and on the
Closing Date will have, good and marketable title to all such real property
owned by Vertica, free and clear of all liens, mortgages, encumbrances,
easements, leases, restrictions and claims of any kin whatsoever except for (i)
those matters shown on Exhibit G, (ii) liens for taxes for the current year and
tax assessments not yet due and payable and (iii) mechanics' or similar liens
for materials or services furnished or to be furnished after the date hereof.
All leases of real property to which Vertica is a party and which are material
to the business of Vertica are fully effective in accordance with their
respective terms and afford Vertica peaceful and undisturbed possession of the
subject matter of the lease, and there exists no default on the part of Vertica
or termination thereof, except as may be set forth on Exhibit G.
4.9 Tangible Personal Property. Exhibit G sets forth a complete list of
all items of tangible personal property owned or leased and used by Vertica in
the current conduct of its business where the original cost was in excess of
$5,000.00. Except as set forth on Exhibit G, Vertica has, and at the Closing
will have, good and marketable title to, and be in possession of, all such items
of personal property owned by it, free and clear of all title defects,
mortgages, pledges, security interests, conditional sales agreements, liens,
restrictions or encumbrances
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whatsoever. Included on Exhibit G is a list of all outstanding equipment leases
and maintenance agreements to which Vertica is a party as lessee and which
individually provide for future lease payments in excess of $5,000.00, with the
identities of the other parties to all such leases and agreements shown thereon.
All leases of tangible personal property to which Vertica is a party and which
are material to the business of Vertica are fully effective in accordance with
their respective terms, and there exists no default on the part of Vertica or
termination thereof, except as may be set forth on Exhibit G. Each item of
capital equipment which is used in the current conduct of Vertica's business is,
and on the Closing Date will be, in good operating and usable condition and
repair, ordinary wear and tear excepted, and is and will be suitable for use in
the ordinary course of Vertica's business and fit for its intended purposes,
except as may be set forth on Exhibit G.
4.10 Tax Matters. Vertica has, since its inception, duly filed all
Federal, state, county and local tax returns required to have been filed by it
in those jurisdictions where the nature or conduct of its business requires such
filing and where the failure to so file would be materially adverse to Vertica.
Copies of all such tax returns have been furnished to the Company prior to the
execution hereof. All Federal, state, county and local taxes, including but not
limited to those taxes due with respect to Vertica's properties, income, gross
receipts, excise, occupation, franchise, permit, licenses, sales, payroll and
inventory due and payable as of the Closing by Vertica have been paid. No amount
is required to be reflected in the Vertica Balance Sheet as a liability or
reserve for taxes which are due but not yet payable are sufficient for the
payment of all accrued and unpaid taxes of the types referred to hereinabove.
4.11 Contracts and Commitments. Vertica has no contract, agreement,
obligation or commitment, written or verbal, express or implied, which involves
a commitment or liability in excess of $5,000.00 or for a term of more than six
months, and no union contracts, employee or consulting contracts, financing
agreements, debtor or creditor arrangements, licenses, franchise, manufacturing,
distributorship or dealership agreements, leases or bonus, health or stock
option plans, except as described on Exhibit G. True and complete copies of all
such contracts and other agreements listed on Exhibit G have been made available
to the Company prior to the execution hereof. Neither Vertica nor the Purchaser
has any knowledge of any circumstances which would affect the validity or
enforceability of any of such contracts and other agreements in accordance with
their respective terms. Vertica and the Purchaser have performed and complied in
all material respects with all obligations required to be performed by them to
date under, and are not in default (without giving effect to any required notice
or grace period) under, or in breach of, the terms, conditions or provisions of
any of such contracts and other agreements. The validity and enforceability of
any contract or other agreement described herein shall not in any manner be
affected by the execution and delivery of this Agreement without any further
action.
4.12 Patents, Trade Secrets and Customer Lists. Vertica does not have
any patents, applications for patents, trademarks, applications for trademarks,
trade names, licenses or service marks relating to the business of Vertica
except as set forth on Exhibit G hereto, nor does any present or former officer,
director or employee of Vertica own any patent rights relating to any products
manufactured, rented or sold by Vertica. Except as disclosed on Exhibit G,
Vertica has the unrestricted right to use, free and clear of any claims or
rights of others, all trade secrets, customer lists and manufacturing and secret
processes reasonably necessary to the manufacture and marketing of all products
made or proposed to be made by Vertica, and the continued use thereof after the
Closing by Vertica and will not conflict with, infringe upon or otherwise
violate any rights of others. Except as set forth on Exhibit G, Vertica has not
used and is not making use of any confidential information or trade secrets of
any present or past employee of Vertica.
4.13 No Pending Material Litigation or Proceedings. Except as disclosed
on Exhibit G, there are no actions, suits or proceedings pending or threatened
against or affecting Vertica (including actions, suits or proceedings where
liabilities may be adequately covered by
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insurance) at law or in equity or before or by any Federal, state, municipal or
other governmental department, commission, court, board, bureau, agency or
instrumentality, domestic or foreign, or affecting any of the officers or
directors of Vertica in connection with the business, operations or affairs of
Vertica, which might result in any adverse change in the business, properties or
assets, or in the condition (financial or otherwise) of Vertica, or which might
prevent the sale of the Vertica Common Shares pursuant to this Agreement. Except
as disclosed on Exhibit G, Vertica has not, during the three (3) years prior to
the Closing Date, been threatened with any action, suit, proceeding or claim
(including actions, suits, proceedings or claims where its liabilities may be
adequately covered by insurance) for personal injuries allegedly attributable to
products sold or services performed by Vertica asserting a particular defect or
hazardous property in any of Vertica's respective products, services or business
practices or methods, nor has Vertica been a party to or threatened with
proceedings brought by or before any Federal or state agency; and the Company
has no knowledge of any defect or hazardous property claimed or actual in any
such product, service or business practice or method. Vertica is not subject to
any voluntary or involuntary proceeding under the United States Bankruptcy Code
and has not made an assignment for the benefit of creditors.
4.14 Insurance. Vertica maintains insurance with reputable insurance
companies on such of Vertica's equipment, tools, machinery, inventory and
properties as are usually insured by companies similarly situated and to the
extent customarily insured, and maintain products and personal liability
insurance, workers' compensation insurance and such other insurance against
hazards, risks and liability to persons and property as is customary for
companies similarly situated. A true and complete listing and general
description of each of Vertica's insurance policies as currently in force is set
forth on Exhibit G hereto. All such insurance policies are, and at the Closing
shall be, in full force and effect.
4.15 Arrangements with Personnel. Except as set forth on Exhibit G
hereto, no stockholder, director, officer or employee is presently a party to
any transaction with Vertica, including without limitation any contract, loan or
other agreement or arrangement providing for the furnishing of services by, the
rental of real or personal property from or to, or otherwise requiring loans or
payments to, any such stockholder, director, officer or employee, or to any
member of the family of any of the foregoing, or to any corporation,
partnership, trust or other entity in which any stockholder, director, officer
or employee or any member of the family of any of them has a substantial
interest or is an officer, director, trustee, partner or employee. There is set
forth on Exhibit G a list showing (i) the name, title, date and amount of last
compensation increase, and aggregate compensation, including amounts paid or
accrued pursuant to any bonus, pension, profit sharing, commission, deferred
compensation or other plans or arrangements in effect as of the date of this
Agreement, of each officer, employee, agent or contractor of Vertica whose
salary and other compensation, in the aggregate, received from Vertica or
accrued is at an annual rate (or aggregated for the most recently completed
fiscal year) in excess of $1,000.00, as well as any employment agreements
relating to any such persons; (ii) all powers of attorney from Vertica to any
person or entity; (iii) the name of each person or entity authorized to borrow
money or incur or guarantee indebtedness on behalf of Vertica; (iv) all safes,
vaults and safe deposit boxes maintained by or on behalf of Vertica and the
names of all persons authorized to have access thereto; and (v) all bank and
savings accounts of Vertica and the names of all persons who are authorized
signatories with respect to such accounts, the capacities in which they are
authorized and the terms of their authorizations.
4.16 Labor Relations. Vertica has no obligations under any collective
bargaining agreement or other contract with a labor union, under any employment
contract or consulting agreement or under any executive's compensation plan,
agreement or arrangement, nor is any union, labor organization or group of
employees of Vertica presently seeking the right to enter into collective
bargaining with Vertica on behalf of any of the employees of either corporation,
except as set forth on Exhibit G. Vertica has furnished to the Company a copy of
all written
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personnel policies, including without limitation vacation, severance, bonus,
pension, profit sharing and commissions policies, applicable to any of Vertica's
employees.
4.17 Compliance with Laws. To the best knowledge of Vertica and the
Purchaser, Vertica holds all licenses, franchises, permits and authorizations
necessary for the lawful conduct of its business as presently conducted, and has
complied with all applicable statutes, laws, ordinances, rules and regulations
of all governmental bodies, agencies and subdivisions having, asserting or
claiming jurisdiction over said corporations, with respect to any part of the
conduct of its businesses and corporate affairs.
4.18 Relationships with Customers and Suppliers. No present customer or
substantial supplier to Vertica has indicated an intention to terminate or
materially and adversely alter its existing business relationship with Vertica,
and the Purchaser has no reason to believe that any of Vertica's present
customers or substantial suppliers intends to do so.
4.19 Brokerage. At the Closing, the Purchaser agrees to pay to each of
Summit Financial Relations, Inc., and Columbine Financial Solutions, Inc., the
amount of $25,000 (an aggregate of $50,000), as finders' fees in connection with
the transactions contemplated by this Agreement, and, except as aforesaid,
neither the Purchaser nor Vertica has any obligation to any person or entity for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement. The Purchaser shall indemnify
and hold the Guarantors, or either of them, harmless against any liability or
expenses arising out of any such claim asserted against the Guarantors, or
either of them, by any party.
4.20 Investment Representation. The Purchaser and Vertica, through the
Purchaser, have the knowledge and experience in business and financial matters
to meaningfully evaluate the merits and risks of the purchase and acquisition of
the Shares of Perfection Common Stock in exchange and consideration for the
issuance and sale of the Vertica Common Shares as contemplated hereby. Further,
the Purchaser has the knowledge and experience in business and financial matters
to meaningfully evaluate the merits and risks of the purchase and acquisition of
480,000 restricted shares of Perfection Common Stock owned of record and
beneficially by the Guarantors in consideration for the payment therefor of cash
in the total amount of $25,000. The Purchaser and Vertica shall conduct an
independent review of the business, assets, properties, books and records of the
Company for the purpose of satisfying themselves as to the truth, accuracy and
completeness of the representations and warranties made by the Company and the
Guarantors. The Purchaser understands and acknowledges that the Perfection
Common Stock to be issued, sold, assigned, transferred, conveyed and/or
delivered to him in the transactions contemplated hereby will be issued, sold,
assigned, transferred, conveyed and/or delivered by the Company and the
Guarantors without registration or qualification or other filings being made
under the U.S. Securities Act of 1933, as amended, or any applicable state
securities or "Blue Sky" law, in reliance upon specific exemptions therefrom,
and in furtherance thereof the Purchaser represents that the shares of
Perfection Common Stock will be taken and received by him for his own account
for investment, with no present intention of a distribution or disposition
thereof to others. The Purchaser further acknowledges and agrees that the
certificate(s) representing the shares of Perfection Common Stock issued and
sold to him shall be subject to a stop-transfer order and shall bear a
restrictive legend, in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), ARE "RESTRICTED SECURITIES," AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL SATISFACTORY
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TO THE COMPANY, IS NOT REQUIRED TO BE REGISTERED UNDER THE ACT."
4.21 Disclosure. Neither this Agreement, nor any certificate, exhibit
or other written document or statement, furnished to the Company or the
Guarantors by the Purchaser or Vertica in connection with the transactions
contemplated by this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to be
stated in order to make the statements contained herein or therein not
misleading.
ARTICLE 5
OBLIGATIONS OF THE COMPANY AND THE GUARANTORS PRIOR TO CLOSING
The Company and the Guarantors hereby jointly and severally covenant to
and agree with Vertica and the Purchaser that between the date hereof and the
Closing:
5.1 Access to Properties and Records.
(a) The Guarantors shall cause the Company to give to Vertica, the
Purchaser and their authorized representatives full access, during reasonable
business hours, in such a manner as not unduly to disrupt normal business
activities, to any and all of the premises, properties, contracts, books,
records and affairs of the Company, and will cause the officers of the Company
to furnish any and all data and information pertaining to the business of the
Company that Vertica, the Purchaser and their authorized representatives may
from time to time reasonably require.
(b) Unless and until the transactions contemplated by this Agreement
have been consummated, the Purchaser, Vertica and their representatives shall
hold in confidence all information so obtained and if the transactions
contemplated hereby are not consummated will return all documents hereinabove
referred to and obtained from the Company or its officers. Such obligation of
confidentiality shall not extend to any information which is shown to have been
previously (i) known to the Purchaser or Vertica; (ii) generally known to others
engaged in the trade or business of the Company; (iii) part of public knowledge
or literature; or (iv) lawfully received by the Purchaser, Vertica or their
authorized representatives from a third party.
5.2 Corporate Existence, Rights and Franchises. The Guarantors shall
take all necessary actions to cause the Company to maintain in full force and
effect the corporate existence, rights, franchises and good standing of the
Company. No change shall be made in the Articles of Incorporation, as amended,
or Bylaws of the Company.
5.3 Conduct of Business in the Ordinary Course. The Guarantors shall
not permit to be done any act which would result in the breach of any of the
covenants of the Company or the Guarantors contained herein or which would cause
the representations and warranties of the Company and the Guarantors contained
herein to become untrue or inaccurate as of any date subsequent to the date
hereof. Without limiting the generality of the foregoing, the Guarantors shall
take all necessary actions to cause the Company to (i) operate its business
diligently in the ordinary course of business as an ongoing concern and will use
their best efforts to preserve intact the Company's organization and operations
at current levels, to retain the services of the Company's present employees and
to preserve the Company's relationships with its suppliers and customers and
others having business relationships with the Company; (ii) maintain in good
operating condition, ordinary wear and tear excepted, all of the Company's
assets and properties which are in such condition as of the date hereof; (iii)
maintain the books, accounts and records of the Company in the usual, regular
and ordinary manner on a basis consistent with past practice in recent periods;
(iv) refrain from entering into any contract, agreement, sales order, lease,
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capital expenditure or other commitment of a value in excess of $1,000.00 (other
than purchases of raw materials and sales of inventory in the ordinary course of
business), or from modifying, amending, canceling or terminating any of such
contracts, agreements, leases or other commitments presently in force, except as
expressly contemplated by this Agreement, without the prior approval of Vertica
and the Purchaser (which approval shall not be unreasonably withheld and which
may be verbal to be followed by written confirmation); (v) refrain from paying
any bonus to any employee, officer or director and from declaring or paying any
dividend, or making any other distribution in respect of, or from redeeming, the
Perfection Common Stock; and (vi) refrain from issuing any capital stock of the
Company or any other securities convertible into such capital stock.
ARTICLE 6
OBLIGATIONS OF VERTICA AND THE PURCHASER PRIOR TO CLOSING
Vertica and the Purchaser hereby jointly and severally covenant to and
agree with the Company and the Guarantors that between the date hereof and the
Closing:
6.1 Access to Properties and Records.
(a) The Purchaser shall cause Vertica to give to the Company, the
Guarantors and their authorized representatives full access, during reasonable
business hours, in such a manner as not unduly to disrupt normal business
activities, to any and all of the premises, properties, contracts, books,
records and affairs of Vertica, and will cause the officers of Vertica to
furnish any and all data and information pertaining to the business of Vertica
that the Company, the Guarantors and their authorized representatives may from
time to time reasonably require.
(b) Unless and until the transactions contemplated by this Agreement
have been consummated, the Company, the Guarantors and their representatives
shall hold in confidence all information so obtained and if the transactions
contemplated hereby are not consummated will return all documents hereinabove
referred to and obtained from Vertica or the officers of Vertica. Such
obligation of confidentiality shall not extend to any information which is shown
to have been previously (i) known to the Company or the Guarantors; (ii)
generally known to others engaged in the trade or business of Vertica; (iii)
part of public knowledge or literature; or (iv) lawfully received by the
Company, the Guarantors or their authorized representatives from a third party.
6.2 Corporate Existence, Rights and Franchises. The Purchaser shall
take all necessary actions to cause Vertica to maintain in full force and effect
the corporate existence, rights, franchises and good standing of Vertica. No
change shall be made in the Articles of Incorporation, as amended, or Bylaws, as
amended, of Vertica.
6.3 Insurance. The Purchaser shall take all necessary actions to cause
Vertica to maintain in force all of its existing insurance policies, subject
only to variations in amounts required by the ordinary operation of Vertica's
business.
6.4 Conduct of Business in the Ordinary Course. The Purchaser shall not
permit to be done any act which would result in the breach of any of the
covenants of the Purchaser or Vertica contained herein or which would cause the
representations and warranties of the Purchaser or Vertica contained herein to
become untrue or inaccurate as of any date subsequent to the date hereof.
Without limiting the generality of the foregoing, the Purchaser shall take all
necessary actions to cause Vertica to (i) operate its business diligently in the
ordinary course of business as an ongoing concern and will use his best efforts
to preserve intact Vertica's organization and operations at current levels, to
retain the services of Vertica's present
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employees and to preserve Vertica's relationships with its suppliers and
customers and others having business relationships with Vertica; (ii) maintain
in good operating condition, ordinary wear and tear excepted, all of Vertica's
assets and properties which are in such condition as of the date hereof; (iii)
maintain the books, accounts and records of Vertica in the usual, regular and
ordinary manner on a basis consistent with past practice in recent periods; (iv)
refrain from entering into any contract, agreement, sales order, lease, capital
expenditure or other commitment of a value in excess of $5,000.00 (other than
purchases of raw materials and sales of inventory in the ordinary course of
business), or from modifying, amending, canceling or terminating any of such
contracts, agreements, leases or other commitments presently in force, except as
expressly contemplated by this Agreement, without the prior approval of the
Company and the Guarantors (which approval shall not be unreasonably withheld
and which may be verbal to be followed by written confirmation); (v) refrain
from paying any bonus to any employee, officer or director and from declaring or
paying any dividend, or making any other distribution in respect of, or from
redeeming, the Vertica Common Shares; and (vi) refrain from issuing any capital
stock of Vertica or any other securities convertible into such capital stock.
6.5 Consent of the California Commissioner of Corporations. Vertica and
the Purchaser shall execute such documents and take such further actions as in
the opinion of counsel to the Purchaser shall be reasonably necessary to obtain
the consent of the California Commissioner of Corporations to the transfer of
the Vertica Common Shares from the Purchaser to the Company.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
The respective obligations of the parties hereto to consummate the
transactions contemplated hereby shall be subject to the fulfillment, at or
prior to the Closing, of the following conditions:
7.1 Regulatory Approvals. There shall have been obtained any and all
permits, approvals and qualifications of, and there shall have been made or
completed all filings, proceedings and waiting periods required by, any
governmental body, agency or regulatory authority which, in the reasonable
opinion of counsel to the Company, the Guarantors, Vertica and the Purchaser,
are required for the consummation of the transactions contemplated hereby.
7.2 No Action or Proceeding. No claim, action, suit, investigation or
other proceeding shall be pending or threatened before any court or governmental
agency which presents a substantial risk of the restraint or prohibition of the
transactions contemplated by this Agreement or the obtaining of material damages
or other relief in connection therewith.
7.3 Obligations of Vertica and the Purchaser. The obligations of
Vertica and the Purchaser hereunder to consummate the transactions contemplated
by this Agreement are expressly subject to the satisfaction of each of the
further conditions set forth below, any or all of which may be waived by Vertica
and the Purchaser, jointly and not severally, in whole or in part without prior
notice; provided, however, that no such waiver of a condition shall constitute a
waiver by Vertica or the Purchaser of any other condition or of any of their
rights or remedies, at law or in equity, if the Company or the Guarantors shall
be in default or breach of any of their representations, warranties or covenants
under this Agreement:
(a) Vertica and the Purchaser, severally and not jointly, shall have
received copies of resolutions (certified as of the date of the Closing as being
in full force and effect by an appropriate officer of the Company) duly adopted
by the Board of Directors of the Company
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adopting and approving this Agreement, which shall be in form and substance
reasonably satisfactory to Vertica and the Purchaser and their counsel.
(b) The Company and the Guarantors shall have performed the agreements
and covenants required to be performed by them under this Agreement prior to the
Closing, and there shall have been no material adverse change in the condition
(financial or otherwise), assets, liabilities, earnings or business of the
Company since the date hereof, and the representations and warranties of the
Company and the Guarantors contained herein shall, except as contemplated or
permitted by this Agreement or as qualified in a writing dated as of the Closing
Date delivered by the Company to Vertica and the Purchaser, with the approval of
Vertica and the Purchaser indicated thereon (which writing is to be attached
hereto as Exhibit H), be true in all material respects on and as of the Closing
Date as if made on and as of such date, and Vertica and the Purchaser, severally
and not jointly, shall have received a certificate, dated as of the Closing
Date, signed by the chief executive officer and the chief financial officer of
the Company, reasonably satisfactory to Vertica and the Purchaser, to such
effect.
(c) Vertica and the Purchaser shall have received a certificate of the
Guarantors, reasonably satisfactory to Vertica and the Purchaser, to the effect
that the Company and the Guarantors have performed the agreements and covenants
required to be performed by them under this Agreement prior to the Closing, that
there has been no material adverse change in the condition (financial or
otherwise), assets, liabilities, earnings or business of the Company since the
date hereof, and that the representations and warranties of the Company and the
Guarantors contained herein continue to be true in all material respects on and
as of the Closing Date as if made on and as of such date, except as contemplated
or permitted by this Agreement or as qualified in Exhibit H.
(d) The opinion letter of counsel to the Company substantially in the
form attached hereto as Exhibit B.
(e) The directors of the Company shall have resigned their positions as
Company directors effective as of the Closing Date after one or more of said
directors has caused the election of the slate of directors proposed by Vertica
and the Purchaser.
7.4 Obligations of the Company and the Guarantors. The obligations of
the Company and the Guarantors hereunder to consummate the transactions
contemplated by this Agreement are expressly subject to the satisfaction of each
of the further conditions set forth below, any or all of which may be waived by
the Company and the Guarantors, jointly and not severally, in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by the Company or the Guarantors of any other
condition or of any of their rights or remedies, at law or in equity, if the
Purchaser or Vertica shall be in default or breach of any of their
representations, warranties or covenants under this Agreement:
(a) The Company and the Guarantors, severally and not jointly, shall
have received copies of resolutions (certified as of the date of the Closing as
being in full force and effect by an appropriate officer of the Company) duly
adopted by the Board of Directors of Vertica adopting and approving this
Agreement, which shall be in form and substance reasonably satisfactory to the
Company and the Guarantors and their counsel.
(b) The Purchaser and Vertica shall have performed the agreements and
covenants required to be performed by them under this Agreement prior to the
Closing, and there shall have been no material adverse change in the condition
(financial or otherwise), assets, liabilities, earnings or business of Vertica
since the date hereof, and the representations and warranties of the Purchaser
and Vertica contained herein shall, except as contemplated or permitted by this
Agreement or as qualified in a writing dated as of the Closing Date delivered by
the Purchaser
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and Vertica to the Company and the Guarantors, with the approval of the Company
and the Guarantors indicated thereon (which writing is to be attached hereto as
Exhibit I), be true in all material respects on and as of the Closing Date as if
made on and as of such date, and the Company and the Guarantors, severally and
not jointly, shall have received a certificate, dated as of the Closing Date,
signed by the chief executive officer and the chief financial officer of Vertica
and by the Purchaser, reasonably satisfactory to the Company and the Guarantors,
to such effect.
(c) The Company and the Guarantors, severally and not jointly, shall
have received a certificate of Vertica and the Purchaser, reasonably
satisfactory to the Company and the Guarantors, to the effect that the Purchaser
and Vertica have performed the agreements and covenants required to be performed
by them under this Agreement prior to the Closing, that there has been no
material adverse change in the condition (financial or otherwise), assets,
liabilities, earnings or business of Vertica since the date hereof, and that the
representations and warranties of the Purchaser and Vertica contained herein
continue to be true in all material respects on and as of the Closing Date as if
made on and as of such date, except as contemplated or permitted by this
Agreement or as qualified in Exhibit I.
(d) The opinion letter of counsel to the Purchaser substantially in the
form attached hereto as Exhibit C.
ARTICLE 8
ADDITIONAL AGREEMENTS OF THE PARTIES
8.1 Taxes and Expenses.
(a) Except as otherwise expressly provided in subsection (b)
immediately below, the Company and the Guarantors, on the one hand, and Vertica
and the Purchaser, on the other hand, shall each pay all of their own respective
taxes, attorneys' fees and other costs and expenses payable in connection with
or as a result of the transactions contemplated hereby and the performance and
compliance with all agreements and conditions contained in this Agreement
respectively to be performed or observed by each of them.
(b) The Company shall pay any and all Colorado and California taxes, if
any, which become due on account of the issuance, sale and delivery of the
Shares of Perfection Common Stock to the Purchaser.
8.2 Expiration of Representations and Warranties.
(a) The representations and warranties of the Company and the
Guarantors contained herein and in any other document or instrument delivered by
or on behalf of them, as such may be qualified in Exhibit F, shall survive the
Closing and any investigations made by or on behalf of Vertica or the Purchaser
prior thereto, and shall remain in full force and effect for a period of three
(3) years after the date of Closing (the "Warranty Period") and thereupon
expire.
(b) The representations and warranties of the Purchaser and Vertica
contained herein and in any other document or instrument delivered by or on
behalf of them, as such may be qualified in Exhibit G, shall survive the Closing
and any investigations made by or on behalf of the Company or the Guarantors
prior thereto, and shall remain in full force and effect for a period of three
(3) years after the date of Closing (the "Purchaser' Warranty Period") and
thereupon expire.
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8.3 Indemnification.
(a) The Guarantors, jointly and severally, hereby agree to indemnify
and hold the Purchaser harmless with respect to any and all claims, losses,
damages, obligations, liabilities and expenses, including, without limitation,
reasonable legal and other costs and expenses of investigating and defending any
actions or threatened actions, which the Purchaser may incur or suffer following
the Closing by reason of any breach of any of the representations and warranties
of the Company or the Guarantors contained herein, during the Warranty Period
following the Closing during which any such representation and warranty shall
survive as provided herein, provided that the Purchaser complies with the
following indemnification procedure:
(i) The Purchaser shall give written notice to the
Guarantors of a claim for indemnification within the
Warranty Period; which notice shall set forth the
amount involved in the claim for indemnification and
contain a reasonably thorough description of the
facts constituting the basis of such claim.
(ii) The Guarantors shall have a period of thirty (30)
days from the receipt of the notice referred to above
to respond to the indemnity claim to the mutual
satisfaction of the Purchaser and the Guarantors.
(iii) If a third party claim is asserted which might result
in a claim for indemnification hereunder, all
information within the Purchaser's or the Company's
knowledge or control relevant and material to the
defense of any such claim shall promptly be made
available to the Guarantors and their authorized
representatives, and the Purchaser and the Company
shall otherwise cooperate with the Guarantors in the
defense of the claim. The Purchaser shall not settle
or compromise any such claim without the prior
written consent of the Guarantors unless suit shall
have been instituted against the Purchaser or the
Company and the Guarantors shall have failed, after
reasonable notice of institution of the suit, to take
control of such suit as provided below. If the
Guarantors admit in writing that they will be liable
to the Purchaser with respect to the full amount and
as to all material elements of a third party claim
alleging damages, should the third party prevail in
such suit, the Guarantors shall have the right to
assume full control of the defense of such claim.
Otherwise, the Purchaser shall have and retain the
right to control the defense of such claim, and the
Guarantors shall be entitled to participate in the
defense of such claim only with the consent of the
Purchaser.
(b) The Purchaser hereby agrees to indemnify and hold the Company and
the Guarantors, and each of them, harmless with respect to any and all claims,
losses, damages, obligations, liabilities and expenses, including, without
limitation, reasonable legal and other costs and expenses of investigating and
defending any actions or threatened actions, which the Company, the Guarantors
or any of them may incur or suffer following the Closing by reason of any breach
of any of the representations and warranties of the Purchaser or Vertica
contained herein, during the Purchaser's Warranty Period following the Closing
during which any such representation and warranty shall survive as provided
herein, provided that the Company and the Guarantors comply with the following
indemnification procedure:
(i) One or more of the Company and the Guarantors shall
give written notice to the Purchaser of a claim for
indemnification within the Purchaser's Warranty
Period; which notice shall set forth the amount
involved in the claim for indemnification and contain
a reasonably thorough description of the facts
constituting the basis of such claim.
-21-
<PAGE>
(ii) The Purchaser shall have a period of thirty (30) days
from the receipt of the notice referred to above to respond to the
indemnity claim to the mutual satisfaction of the Company, the
Guarantors and the Purchaser.
(iii) If a third party claim is asserted which might result in
a claim for indemnification hereunder, all information within the
Company's or the Guarantors' knowledge or control relevant and material
to the defense of any such claim shall promptly be made available to
the Purchaser and their authorized representatives, and the Company and
the Guarantors shall otherwise cooperate with the Purchaser in the
defense of the claim. Neither the Company nor the Guarantors shall
settle or compromise any such claim without the prior written consent
of the Purchaser unless suit shall have been instituted against the
Company or the Guarantors and the Purchaser shall have failed, after
reasonable notice of institution of the suit, to take control of such
suit as provided below. If the Purchaser admit in writing that they
will be liable to the Company and the Guarantors with respect to the
full amount and as to all material elements of a third party claim
alleging damages, should the third party prevail in such suit, the
Purchaser shall have the right to assume full control of the defense of
such claim. Otherwise, the Guarantors shall have and retain the right
to control the defense of such claim, and the Purchaser shall be
entitled to participate in the defense of such claim only with the
consent of the Guarantors.
ARTICLE 9
MISCELLANEOUS
9.1 Other Documents. Each of the parties hereto shall execute and
deliver such other and further documents and instruments, and take such other
and further actions, as may be reasonably requested of him or it for the
implementation and consummation of this Agreement and the transactions herein
contemplated.
9.2 Parties in Interest. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, and the heirs, personal representatives,
successors and assigns of all of them, but shall not confer, expressly or by
implication, any rights or remedies upon any other party.
9.3 Governing Law. This Agreement is made and shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Colorado.
9.4 Notices. All notices, requests or demands and other communications
hereunder must be in writing and shall be deemed to have been duly made if
personally delivered or mailed, postage prepaid, to the parties as follows:
(a) If to the Company or either of the Guarantors, to:
Perfection Development Corporation
1422 Delgany Street
Denver, Colorado 80202
Attention: Mr. Scott M. Thornock
-22-
<PAGE>
With copies to:
Patricia Cudd, Esq.
Cudd & Associates
1120 Lincoln Street, Suite #1310
Denver, Colorado 80203
(b) If to Vertica or the Purchaser, to:
Vertica Software, Inc.
5801 Christie Avenue, Suite #240
Emeryville, California 94608
Attention: Mr. Hans Nehme, President
With copies to:
Thomas C. Armstrong, Esq.
Venture Counsel Associates, LLP
Lake Merritt Plaza Building
1999 Harrison Street, Suite #1300
Oakland, California 94612
Any party hereto may change his or its address by written notice to the other
parties given in accordance with this Section 9.4.
9.5 Entire Agreement. This Agreement and the exhibits attached hereto
contain the entire agreement between and among the parties and supersede all
prior agreements, understandings and writings between or among the parties with
respect to the subject matter hereof and thereof. Each party hereto acknowledges
that no representations, inducements, promises or agreements, verbal or
otherwise, have been made by any party, or anyone acting with authority on
behalf of any party, which are not embodied herein or in an exhibit hereto, and
that no other agreement, statement or promise may be relied upon or shall be
valid or binding. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated verbally. This Agreement may be amended or any
term hereof may be changed, waived, discharged or terminated by an agreement in
writing signed by all parties hereto.
9.6 No Equitable Conversion. Prior to the Closing, neither the
execution of this Agreement nor the performance of any provision contained
herein shall cause any party hereto to be or become liable in any respect for
the operations of the business of any other party, or the condition of property
owned by any other party, for compliance with any applicable laws, requirements
or regulations of, or taxes, assessments or other charges now or hereafter due
to, any governmental authority or for any other charges or expenses whatsoever
pertaining to the conduct of the business or the ownership, title, possession,
use or occupancy of any other party.
9.7 Headings. The captions and headings used herein are for convenience
only and shall not be construed as part of this Agreement.
9.8 Attorneys' Fees. In the event of any litigation between or among
the parties hereto, the non-prevailing party or parties shall pay the reasonable
expenses, including but not limited to the attorneys' fees, of the prevailing
party or parties in connection therewith.
9.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which taken together shall
constitute but one and the same document.
-23-
<PAGE>
<TABLE>
IN WITNESS THEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
<CAPTION>
THE COMPANY:
<S> <C>
ATTEST: PERFECTION DEVELOPMENT CORPORATION
By:___________________________________ By:_____________________________________
C. Edward Venerable, Secretary Scott M. Thornock, President
THE GUARANTORS:
______________________________________ ________________________________________
C. Edward Venerable, Individually Scott M. Thornock, Individually
THE PURCHASER:
______________________________________
Hans Nehme, Individually
VERTICA:
ATTEST: VERTICA SOFTWARE, INC.
By: __________________________________ By: ________________________________
(Title) Hans Nehme, President
</TABLE>
-24-
[GRAPHIC OMITTED]
CUSTOM CONTENT AGREEMENT
- --------------------------------------------------------------------------------
AGREEMENT TO PURCHASE. This Agreement is entered into as of January 19, 2000 by
ScreamingMedia.com, Inc. ("Company" or "we") and The ("Client" or "you"). We
hereby agree to sell and you agree to purchase the custom-tailored news and
information identified on Schedule A attached hereto ("Custom Content"). Client
agrees to pay Company the fees and Company agrees to deliver the Custom Content
to the Client's web site (the "web site") as set forth in Schedule A hereto.
Client may order additional Custom Content from time to time by executing one or
more supplemental purchase agreements that will reference this Master Agreement.
LIMITED SOFTWARE LICENSE. We hereby grant you a non-exclusive, non-transferable
license during the term of this Agreement to use the Company's SiteWare(R)
software for the purposes set forth herein. Client's use of SiteWare(R) shall be
limited to internal use in connection with the publication and display of the
Custom Content on Client's Web Site.
COMPANY'S OBLIGATIONS. We will design and build one or more custom filters and
deliver a copy of SiteWare(R) to you within seven (7) business days of receiving
your completed technical questionnaire. Company warrants that it maintains the
necessary licenses, rights, and powers to distribute the Custom Content as set
forth in this agreement. We will correct any interruption to the Custom Content
service within one business day of receiving notification from you of such
interruption, unless such interruption is precipitated by a Force Majeure as set
forth herein. We will promptly notify you of any known material errors,
inaccuracies, or omissions in the Custom Content and provide you with
appropriate corrections thereto as promptly as possible.
CLIENT'S OBLIGATIONS. You will use best efforts to fulfill each of the
obligations outlined in Schedule A hereto. You will promptly notify us of any
known material errors, inaccuracies, or omissions in the Custom Content that
come to your attention and upon your receipt from us of any corrections to the
Custom Content, promptly implement such corrections on your Web Site.
TERM. The initial term of this Agreement (the "Initial Term") shall commence on
the date set forth above and extend for twelve (12) months from the first day of
the calendar month immediately following the date on which the Custom Content
service is scheduled to begin, as set forth in Schedule A (the "Start-Up Date").
The Initial Term (and any subsequent terms) shall automatically renew for
additional terms of one year unless either party gives the other written notice
of termination not less than thirty (30) days prior to the end of the
then-current term.
TERMINATION. This Master Agreement and any supplemental purchase agreements
(collectively, the "Agreement") shall remain in force until terminated. You may
terminate the Agreement during the Initial Term at any time after ninety (90)
days beyond the Start-Up Date by providing us with ninety (90) days prior
written notice.
OWNERSHIP AND COPYRIGHT. You may only display the Custom Content to which you
have subscribed and you may only display such Custom Content on your Web Site.
You may not edit or alter the Custom Content in any manner or create any
derivative works therefrom. You acknowledge that the Custom Content contains
material that is protected by copyright, trademark, or other proprietary rights
of and owned by our third party content providers (the "Content Providers"). You
acknowledge that ScreamingMedia and the Content Providers retain all right,
title and interest, including copyright in all material included in the Custom
Content. You agree to comply with all copyright notices, information or
restrictions contained in any Custom Content. You may not copy, license, sell,
resell, transfer, make available or otherwise distribute the Custom Content. You
will use best efforts to stop any unauthorized copying or distribution of the
Custom Content.
ARCHIVE RIGHTS. You may archive any item of Custom Content on the Web Site
and/or database system for thirty (30) days after delivery of such item, at
which time (i) your archive rights to such item will terminate and (ii) you
shall delete such item from your Web Site and/or database system, including
Internet, extranet and/or intranet locations.
WARRANTY. Company warrants that it maintains the necessary licenses, rights and
powers to distribute the custom content as set forth herein. The delivery of the
custom content is on an "as is" basis. ScreamingMedia and its content providers
disclaim any and all warranties, including but not limited to the implied
warranties of fitness and merchantability for a particular purpose, relating to
this agreement, the service, the Custom Content or performance under this
agreement.
LIMITATION OF LIABILITY. Neither ScreamingMedia nor its Content Providers shall
be liable for any indirect, incidental, special or consequential damages,
including lost profits, whether or not foreseeable, arising under this Agreement
or performance under this Agreement, whether or not the company or the content
providers had any knowledge, actual or constructive, that such damages might be
incurred, based on breach of warranty, contract, negligence or strict liability,
except that ScreamingMedia and the Content Providers will indemnify, defend, and
hold harmless Client against any and all claims made against Client which have a
basis in allegations of violation of copyright or intellectual property laws
arising from Client's use of the custom content as herein described.
INDEMNIFICATION. We shall defend, indemnify and hold you harmless from and
against any and all third party claims or actions resulting in liabilities and
arising out of the licenses granted hereunder, including but not limited to
claims against you for violation of intellectual property rights including
trademark or copyright misappropriation or infringement. The foregoing indemnity
shall not be applicable for any claim or action that arises from your negligence
or misconduct.
<TABLE>
MISCELLANEOUS. Neither party shall be liable for any delay or failure to perform
under this Agreement if caused by conditions beyond its control ("Force
Majeure") but no such event shall relieve you of your obligations to make
payment to ScreamingMedia. The affected performing party shall promptly notify
the other party of the nature and anticipated length of continuance of such
Force Majeure. If such failure continues for more than one month, either party
may terminate this agreement. This Agreement is governed by the laws of the
State of New York without regard to principles of conflicts of laws. The parties
agree to submit to the jurisdiction of the United States District Court for the
Southern District of New York in respect of litigation arising out of this
agreement, waiving all affirmative and legal defenses in respect of
jurisdiction, forum and venue. All notices under this Agreement must be made in
writing and sent via first class mail, facsimile or e-mail as listed below.
<CAPTION>
[Client] [Company] ScreamingMedia.com, Inc.
<S> <C> <C>
Signature: /s/ Hans Nehme Signature: /s/ Alan Ellman
--------------------------------------------------- ------------------------------------------------
Name/Title: President Name/Title: Alan Ellman / President
--------------------------------------------------- ------------------------------------------------
Address: 5810 Christie Ave. Ste. 390 Address: 601 W. 26th Street, 13th Floor
Emeryville, CA 94608 New York, NY 10001 USA
--------------------------------------------------- ------------------------------------------------
Fax: Fax: 212.691.1483
--------------------------------------------------- ------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ScreamingMedia.com, Inc. o 601 W. 26th Street, 13th Floor o New York, NY 10001 USA o 212.691.7900 o Fax 212.691.1483
<PAGE>
[GRAPHIC OMITTED]
CUSTOM CONTENT AGREEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
Email: [email protected] Email: [email protected]
--------------------------------------------------- ------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ScreamingMedia.com, Inc. o 601 W. 26th Street, 13th Floor o New York, NY 10001 USA o 212.691.7900 o Fax 212.691.1483
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[GRAPHIC OMITTED]
SCHEDULE A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLIENT INFORMATION
Company: Vertica Software
--------------------------------------------------------
Division:
--------------------------------------------------------
Web Site URL that will
receive the Custom Content:
--------------------------------------------------------
Full Billing Address:
--------------------------------------------------------
--------------------------------------------------------
CONTACT INFORMATION
Primary Contact Billing Contact (if different) Technical Contact (if different)
Name: Hans Nehme Same Erick Ahrens
--------------------------------- ---------------------------------- ----------------------------------
Title: President VP of R & D
--------------------------------- ---------------------------------- ----------------------------------
Phone: 510-595-3333
--------------------------------- ---------------------------------- ----------------------------------
Fax:
--------------------------------- ---------------------------------- ----------------------------------
Email: [email protected]
--------------------------------- ---------------------------------- ----------------------------------
SERVICE SET-UP
Number of Filters: 6 (2 FREE)
Custom Filter Set-Up Fee ($250/Filter): $ 1000 one-time fee
Client Set-Up Fee ($2,750 one-time fee): $ 2500 one-time fee
-----------------------------------------------------------------------
Total Set-Up Fee: $ 3500 one-time fee
CUSTOM CONTENT SERVICE
Monthly article limit: 1050
Monthly Fee: $3660
Price/article if monthly article limit is exceeded 3.85
13Th Month FREE. The client will be billed from former pricing models, if client chooses to publish 60
stories per day, client will have rights to 1550 stories at $4600 per month.
Special Notes: The Terms in this Schedule A will expire 5 calendar days after January 19, 2000.
--------------------------------------------------------------------------------------------------------
</TABLE>
DATES AND OBLIGATIONS; BILLING SCHEDULE
1. You will be invoiced for the amount of the Total Set-Up Fee upon our receipt
from you of an executed copy of the Master Agreement with this Schedule A
attached. The invoice for the Total Set-Up Fee is payable in US Dollars upon
receipt. Delivery of the Custom Content will be withheld until payment of the
Total Set-Up Fee is received in full.
2. You agree to make your Technical Contact (designated above) available for a
phone call with one of our sales engineers for purposes of completing our
technical questionnaire within three (3) business days after the date set forth
in Section 1 of the Master Agreement.
3. We will deliver to you a copy of SiteWare(R) software within seven (7)
business days of your completion of the technical questionnaire.
4. Your Start-Up Date is__3/1/00____. Billing for Custom Content Service Monthly
Fee will begin on the earlier to occur of (i) the Start-Up Date and (ii) the
date on which Custom Content is first delivered to the Web Site. You will be
billed on this date on a pro-rated basis for any time remaining in the first
month, and you will be billed for each subsequent month at the beginning of such
month. Each invoice for the Custom Content Monthly Fee is payable in US Dollars
within fifteen (15) days of the date on the invoice.
5. The Terms in this Schedule A will expire 5 calendar days after January 19,
2000.
- --------------------------------------------------------------------------------
ScreamingMedia.com, Inc. o 601 W. 26th Street, 13th Floor
New York, NY 10001 USA o 212.691.7900 o Fax 212.691.1483
Stockpoint License Agreement
THIS LICENSE AGREEMENT ("Agreement") is entered into this 1st day of February,
2000 ("Effective Date") by and between Stockpoint, Inc., a Delaware corporation,
having its principal place of business at 2600 Crosspark Rd., Coralville, Iowa
52241 ("Stockpoint") and, Vertica Software, Inc., having its principal place of
business at 5801 Christie Avenue, Suite 390, Emeryville, CA 94608 ("Licensee").
WHEREAS, Stockpoint is in the business of providing services for the
customization of, aggregating content for, and hosting of web sites for use over
Internet-based communications networks.
WHEREAS, Licensee desires to obtain from a license to use certain services and
information Stockpoint provides.
THEREFORE, in consideration of the mutual covenants herein exchanged, the
Licensee and Stockpoint agree:
1. Services. During the term of this Agreement Stockpoint shall provide
those services and make available the data more particularly described
in Exhibit A "Content."
2. License.
2.1 Subject to the terms and conditions of this Agreement,
Stockpoint grants, and Licensee accepts, a non-exclusive,
non-transferable, limited license, without right of sublicense, to
access and display Internet web pages created and hosted by Stockpoint,
including the Content that may be displayed through the applications
available thereon, through the Licensee's web site accessed through the
Uniform Resource Locator www.vertica.com. Pursuant to the foregoing
license, Licensee may include transparent links from the Licensee's web
site to the web pages hosted by Stockpoint in order to make the same
available to end users.
2.2 Licensee shall not modify the hosted web pages in any
manner. No Content shall be duplicated, re-transmitted, resold or
redistributed by Licensee separate from the hosted web pages. No
Content may be decompiled, rearranged or otherwise used by Licensee
hereunder, and no products may be created by the Licensee using the
Content, or any portion thereof, without the prior written permission
of Stockpoint.
- 1 -
License Agreement
Vertica Software, Inc. / Stockpoint Inc.
<PAGE>
3. Proprietary Rights.
3.1 Content. Licensee acknowledges that the Content is
compiled from the records of Stockpoint and its third party providers.
All rights to the Content remain exclusively the property of Stockpoint
and its third party providers. In the event of any breach of this
agreement Stockpoint or its third party providers shall be entitled to
injunctive relief for the protection and preservation of those rights.
3.2 Marks. Stockpoint is the registered service mark of
Stockpoint, Inc. Each party acknowledges that neither party by reason
of this Agreement obtains any rights in the Marks of the other. Neither
shall take any action that might adversely affect the validity or
enforceability of the Mark(s) of the other.
4. Fees.
4.1 Payment. As consideration for the license granted and all
other services provided under this Agreement the Licensee agrees to pay
Stockpoint the fees and other charges set forth in Exhibit B "Fees".
4.2 Delayed Payment. All fees are due within 30 days of the
date invoiced. All fees not paid when due shall be subject to a service
charge of 1 1/2% per month until paid in full.
5. Term and Termination.
5.1 Term. The term of this Agreement shall commence with the
Effective Date and, unless sooner terminated hereunder, remain in force
for a period of 2 years from the date Content is first distributed to
Licensee. Thereafter, the Agreement shall be automatically renew for
additional one year periods upon like terms and conditions unless a
party elects not to renew the same by giving written notice thereof no
less than 60 days prior to the expiration of the then current term.
5.2 Material Breach. Either party may terminate this Agreement
in the event of a material breach by the other upon written notice
stating i) the breach upon which the notice is based and ii) that
unless cured within 30 days of receipt of the notice the Agreement will
terminate.
5.3. Other Termination. This Agreement may be terminated by
either party immediately upon the occurrence of any of the following:
5.3.1 If the other ceases to do business, or
otherwise terminates its business operations;
5.3.2 If the other shall fail to promptly secure or
renew any license, registration, permit, authorization or
approval for the conduct of its business in the manner
contemplated by this Agreement or if any such license,
registration, permit, authorization or approval is revoked or
suspended and not reinstated within sixty (60) days;
- 2 -
License Agreement
Vertica Software, Inc. / Stockpoint Inc.
<PAGE>
5.3.3 If the other becomes insolvent or seeks
protection under any bankruptcy, receivership, trust deed,
creditors arrangement, composition or comparable proceeding,
or if any such proceeding is instituted against the other (and
not dismissed within 90 days).
5.4 Pro ration of fees upon termination. Should this Agreement
be terminated for any reason other than at the end of any term, the
fees due shall be pro rated to the date Services cease to be provided
under this Agreement. Any fees paid in excess of those due shall be
refunded to Licensee.
6.0 Attribution, Marketing.
6.1 Attribution. Licensee shall display and link the
Stockpoint registered servicemark, logo and/or textual attribution, and
that of its third party providers when required, on all pages
displaying Stockpoint Information Content.
6.2 Confidentiality, Promotion. Each party shall treat this
Agreement as confidential and shall not disclose to any third parties
any of its specific terms nor any other confidential or proprietary
information related to the technology or business of the other. This
prohibition shall not apply to information (i) rightfully known to or
independently acquired by the receiving party, without access to or use
of the other party's confidential information, (ii) disclosed in
published materials, (iii) generally known to the public, (iv) lawfully
obtained from any third party, or (v) required to be disclosed by law.
7.0 Limited Warranties; Disclaimers.
7.1. Infringement. Stockpoint represents and warrants that it
is the owner of or has the right to license the Content to be provided
under this Agreement, and that to the best of its knowledge, this
Agreement does not infringe upon the copyrights, intellectual or other
proprietary rights of any third party.
7.2 Accuracy. Stockpoint represents that it makes every
reasonable commercial effort to provide prompt service and accurate
Content. Upon notification by Licensee of any inaccuracy in the
Content, Stockpoint shall promptly make corrections to the Content over
which it has editorial control.
7.3 Year 2000 Compliance. Stockpoint represents and warrants
that the Content over which it has control and those services it
provides under this Agreement are Year 2000 Compliant. For the purposes
of this Agreement, the term "Year 2000 Compliant" shall mean i) that
the data which uses, references or relies upon any date, or any
reference to a time period, which occurs or extends before, during or
after the calendar years of 1900-1999 shall be correctly processed in
any use of the Content or any other data contained therein and ii) that
the Content and any services provided will perform properly without
interruption, delay or human intervention prior to, during and after
the year 2000 without error relating to the use, reference or reliance
upon any date.
- 3 -
License Agreement
Vertica Software, Inc. / Stockpoint Inc.
<PAGE>
7.4. Exclusion From Warranties. STOCKPOINT MAKES NO WARRANTY,
EXPRESS OR IMPLIED, (i) AS TO THE TIMELINESS, ACCURACY AND/OR THE
COMPLETENESS OF THE CONTENT OR ANY OTHER DATA CONTAINED THEREIN, (ii)
AS TO RESULTS TO BE OBTAINED BY ANY PERSON OR ENTITY FROM THE USE OF
THE CONTENT OR ANY OTHER DATA CONTAINED THEREIN (iii) AS TO THE
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OF THE
CONTENT OR ANY OTHER DATA THEREIN INCLUDED.
7.5 Limitation of Liability, Remedies. STOCKPOINT SHALL NOT BE
LIABLE TO LICENSEE, ITS USERS OR ANY OTHER PERSON REGARDLESS OF THE
CAUSE OR DURATION ( UNLESS FROM THE GROSS NEGLIGENCE OR WILFULL
MISCONDUCT OF STOCKPOINT) FOR THE RESULTS OF ANY USE OF THE CONTENT OR
ANY OTHER DATA CONTAINED THEREIN, FOR ANY USER'S INABILITY OR FAILURE
TO CONDUCT THEIR BUSINESS, LOST PROFITS, INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES. LICENSEE SPECIFICALLY AGREES THAT IN NO EVENT
WILL THE TOTAL LIABILITY OF STOCKPOINT FOR ANY CLAIMS, LOSSES, OR
DAMAGES ARISING UNDER THIS AGREEMENT, REGARDLESS OF THE REMEDIES,
EXCEED THE TOTAL AMOUNT PAID BY LICENSEE TO STOCKPOINT DURING THE TERM
OF THIS AGREEMENT.
7.6. Force Majeure. Neither Stockpoint nor Licensee shall have
any liability for any losses arising from the delay in or interruption
in the performance of their obligations under this Agreement due to any
act of God, governmental authority, public enemy or due to war, riot,
fire, flood, civil commotion, insurrection, labor difficulty
(including, without limitation, any strike or other work stoppage or
slowdown) unauthorized third party intervention or intruders, any
internet outage or slow downs beyond their control , severe or adverse
weather condition or other causes beyond their reasonable control.
7.7. Survival. The provisions of this Section 7 shall survive
the termination of this Agreement.
8. Indemnification.
8.1 Mutual Indemnification. Excluding the provisions of
subsection 8.2 hereof, each party ("Provider") will defend and
indemnify and hold harmless the other party ("Recipient") against
losses related to, resulting from, or arising out of any claim that any
information, design, specification, instruction, software, data, or
material furnished by the Provider ("Material") and used by the
Recipient infringes any copyright or patent provided that: (i) the
Recipient notifies the Provider in writing within thirty (30) days of
the claim; (ii) the Provider has sole control of the defense and all
related settlement negotiations, except that the Recipient may retain
control to the extent necessary to protect itself in any matter
involving unindemnified claims; (iii) the Recipient provides the
Provider with the assistance, information, and authority reasonably
necessary to perform the above; and (iv) the Provider reimburses the
Recipient for all reasonable and necessary out-of-pocket expenses
Recipient incurs in providing said assistance.
- 4 -
License Agreement
Vertica Software, Inc. / Stockpoint Inc.
<PAGE>
8.2 Limitations; Exclusions. The Provider shall have no
liability for any claim of infringement resulting from: (i) the
Recipient's use of a superseded or altered release of some or all of
the Material if infringement would have been avoided by the use of a
subsequent unaltered release of the Material which is provided to the
Recipient; or (ii) any information, design, specification, instruction,
software, data, or material originating from a third party.
9. Miscellaneous.
9.1 Relationship. Stockpoint is an independent contractor.
Nothing in this Agreement shall be construed to create a partnership,
joint venture, agency or other legal relationship between the parties.
9.2 Entire Agreement. This Agreement, including exhibits
hereto, constitutes the entire Agreement of the parties and supercedes
all prior written or oral agreements. This Agreement may not be
modified, amended, rescinded, canceled or waived, in whole or on part,
except by written amendments signed by both parties hereto.
9.3 Rules, Regulations, Obligations To Third Party Providers.
Licensee acknowledges that agreements of Stockpoint with certain
financial exchanges and third party data providers may require, among
other obligations (i) that data and information be formatted or
presented differently, (ii) that certain agreements and/or disclaimers
be in place with end users, and (iii) that they may cancel or withdraw
certain information or data in their sole discretion.
9.4 Financial Exchange Agreements. If applicable, Licensee shall
provide Stockpoint with the written acknowledgement of any principal
stock exchange whose data is to be included in the Content that
Stockpoint has the authority to distribute its data to Licensee.
9.5 Substitution of Third Party Providers. Stockpoint may, at
its sole discretion, substitute any third party data provider for one
of comparable quality and content during the Term of this Agreement.
9.6 Assignment. Stockpoint may assign or otherwise transfer its
rights under this Agreement, without the prior written consent of
Client.
9.7 Notices. Notices permitted or required to be given under the
terms of this Agreement shall be deemed given when delivered by (a)
registered or certified mail, postage prepaid, return receipt requested
or (b) private courier service, addressed to the respective parties at
the addresses shown below, or such other addresses as they may from
time to time designate. Notices shall be effective upon receipt by the
party to which notice is given:
To Stockpoint: To Licensee:
Tim Yamauchi TBD
Stockpoint, Inc. Vertica Software, Inc.
2600 Crosspark Road Suite 200 5801 Christie Avenue, Suite 390
Coralville, Iowa 52241 Emeryville, California 94608
- 5 -
License Agreement
Vertica Software, Inc. / Stockpoint Inc.
<PAGE>
9.8 Arbitration. Any claim, dispute, controversy or other matter
in question with regard to this Agreement shall exclusively be subject
to final binding arbitration in accordance with the commercial
arbitration rules and regulations of the American Arbitration
Association (AAA).
9.9 Attorney's Fees. The unsuccessful party in any action or
proceeding shall pay for all costs, expenses and reasonable attorneys'
fees ("Legal Fees") incurred by the prevailing party or its agents or
both in enforcing the terms and conditions of the Agreement. The term
"prevailing party" as used herein shall include without limitation (i)
a party who utilizes legal counsel and brings an action against the
other party by reason of the other party's breach or default and
obtains substantially the relief sought by judgment from AAA
arbitrator(s) or a relevant court having jurisdiction over the action
or proceeding in question, and (ii) a party against whom an action is
brought by the other arty when such other party does not obtain
substantially the relief sought by judgment from the AAA arbitrator(s)
or a relevant court having jurisdiction over the action or proceeding
in question.
9.10 Severability. If one or more provisions of this Agreement
are found invalid or unenforceable, the remainder of this Agreement
shall remain in full force and effect unless the business purpose of
this Agreement is substantially frustrated thereby.
9.11 Counterparts. This Agreement may be executed in two or more
counterparts, and each such counterpart shall be deemed an original
thereof.
9.12 Waiver. The failure of either party to take any action or
assert any right hereunder shall not be deemed to be a waiver of such
right in the event of the continuation or repetition of the
circumstances giving rise to such rights.
9.13 Governing Law. This Agreement shall be governed by the
laws of the State of California.
AGREED AND ACCEPTED: AGREED AND ACCEPTED:
STOCKPOINT, INC. Licensee
Signature: ________________________ Signature: __________________________
Name:______________________________ Name:_______________________________
Title:__________________________ Title:___________________________
Date:__________________________ Date:___________________________
- 6 -
License Agreement
Vertica Software, Inc. / Stockpoint Inc.
<PAGE>
EXHIBIT A
"Content and Delivery"
1. Stockpoint Content & Deliverables
Stock Quotes - North America (Delayed)
This custom-tailored Stock Quote service displays delayed stock quote
information. The detailed information includes 20 minute delayed price quote
information including, open, change, high, low, earnings per share, volume,
shares outstanding, market capitalization, P/E ratio, and industry sector. A
ticker look-up feature is also included. North American quote information is
available for companies listed on the NYSE, NASDAQ-Amex and Canadian exchanges.
Major U.S. Market Indices
The Major Market Indices component displays a monitor of the major U.S. indices,
including Dow Jones, NASDAQ-Amex, S&P 500, and the Russell 2000. Additional U.S.
market indices may also be included as part of the market update.
Most Active Stocks
Top 10 most active US stocks from each exchange, including NYSE, NASDAQ-Amex,
and OTCBB. Most active stocks are displayed in five categories including: Most
Actives, Biggest Gainers, Biggest Losers, Percent Gainers and Percent Losers.
The stocks are updated intra-day on a 15 minute delayed basis.
Watch List Generator
The GIF generator is most often used to display dynamic data on a homepage when
the homepage is not in a framed or hosted environment, such as hosting a
thumbnail GIF chart on a homepage. The GIF Generator can be incorporated into
any web page, and this application will generate a GIF image of a watchlist
table based on the criteria provided.
- 7 -
License Agreement
Vertica Software, Inc. / Stockpoint Inc.
<PAGE>
2. Hosting Services
o Stockpoint will host and serve the financial content for Client
o Stockpoint will provide a 1-800 # for off hours customer support
o Stockpoint will provide 3 points of contacts for during business hours
operation
o Stockpoint will provide all necessary hardware, bandwidth, and
infrastructure administration
o Stockpoint will notify Client of planned, off-hours maintenance at least 48
hours in advance
3. Delivery Schedule
Stockpoint's delivery schedule and production commences upon receipt of the
following deliverables:
Signed contract
HTML Layout
Page Design
After receiving the above deliverables, Stockpoint will commence production and
provide a detailed delivery schedule.
Any major changes to the scope of work after beta review may affect budgets,
timelines and delivery dates.
- 8 -
License Agreement
Vertica Software, Inc. / Stockpoint Inc.
<PAGE>
EXHIBIT B
"Fees"
1. Fees
All Content is provided on an annual licensing fee. The fees below include the
complete customization, integration, hosting and maintenance of the Content
pages.
A. Set-up Fee
One Time Customization Fee: $ 3,500
B. Content and Annual Fees
Content
Stock Quotes - N. America (Delayed)
Major U.S. Market Indices
Most Active Stocks
Competitive Tracker
Annual License Fee: $36,125
C. Maintenance Fees
The Annual License fee includes up to 150,000 page views per month of Stockpoint
hosted pages. Each page view over that amount per month will be charged 1/2
penny ($.005) per page.
2. Payment Schedule
Payments are due as follows: $3010.42 plus the set-up fee ($3,500) is due upon
contract execution. The remaining portion of the contract amount will be due in
monthly payments as follows:
Payment Amount Due Date Payment Amount Due Date
- -------------- -------- -------------- --------
$6,510.42 02/01/00 $3,010.42 02/01/01
$3,010.42 03/01/00 $3,010.42 03/01/01
$3,010.42 04/01/00 $3,010.42 04/01/01
$3,010.42 05/01/00 $3,010.42 05/01/01
$3,010.42 06/01/00 $3,010.42 06/01/01
$3,010.42 07/01/00 $3,010.42 07/01/01
$3,010.42 08/01/00 $3,010.42 08/01/01
$3,010.42 09/01/00 $3,010.42 09/01/01
$3,010.42 10/01/00 $3,010.42 10/01/01
$3,010.42 11/01/00 $3,010.42 11/01/01
$3,010.42 12/01/00 $3,010.42 12/01/01
$3,010.42 01/01/01 $3,010.42 01/01/02
- 9-
License Agreement
Vertica Software, Inc. / Stockpoint Inc.
OFFICE LEASE
THIS OFFICE LEASE ("Lease") is made between SPIEKER PROPERTIES, L.P., a
California limited partnership ("Landlord") and VERTICA SOFTWARE, INC., a
Colorado Corporation ("Tenant"), as of December 1, 1999 (the "date of this
Lease").
BASIC LEASE INFORMATION
PROJECT: Baybridge Office Plaza
BUILDING: 5801 Christie Avenue, Emeryville, CA 94608
DESCRIPTION OF PREMISES: Suite 390 (the Premises is as outlined on Exhibit B)
RENTABLE AREA OF PREMISES: approximately 4,344 square feet
PERMITTED USE: General Office
SCHEDULED TERM COMMENCEMENT DATE: December 1, 1999
SCHEDULED INITIAL TERM : 60 months SCHEDULED EXPIRATION DATE: 11/30/04
BASE RENT
12/01/99 - 11/30/00 $ 9,774.00 per month
12/01/00 - 11/30/01 $10,067.22 per month
12/01/01 - 11/30/02 $10,369.24 per month
12/01/02 - 11/30/03 $10,680.32 per month
12/01/03 - 11/30/04 $11,000.73 per month
(Subject to provision in Paragraph 22)
SECURITY DEPOSIT: $10,000.00
BASE YEAR FOR OPERATING EXPENSES: Calendar Year 1999
<TABLE>
<CAPTION>
<S> <C>
TENANT'S PROPORTIONATE SHARE OF BUILDING: 5.57% OF PROJECT: N/A
PARKING DENSITY: Three (3) spaces per 1,000 useable square OCCUPANCY DENSITY: 1 person per 150 useable
feet of the Premises square feet of the Premises
TENANT'S NAICS CODE: 541511
TENANT CONTACT: Name: Hans Nehme
Telephone Number: (510) 595-3333
FAX: (510) 595-3398
ADDRESSES FOR NOTICES: To: Tenant To Landlord:
5801 Christie Avenue, Suite 390 2200 Powell Street, Suite 200
Emeryville, CA 94608 Emeryville, CA 94608
Attn: Hans Nehme Attn: Project Manager
FAX: (510) 595-3398 FAX: (510) 594-5608
TENANT'S BILLING ADDRESS (If different from Notice Address): N/A
LANDLORD'S REMITTANCE ADDRESS: Spieker Properties, P.O. Box 45587, Department 11474, San Francisco, CA 94145
</TABLE>
IN WITNESS WHEREOF the parties hereto have executed the Lease
consisting of the Foregoing Basic Lease information, the following Standard
Lease Provisions consisting of Paragraphs 1 through 22 (the "Standard Lease
Provision") and Exhibits A, B, C, D and E, all of which are incorporated herein
by this reference (collectively, this "Lease"). In the event of any conflict
between the provisions of the Basic Lease information and the provisions of the
Standard Lease Provision, the Standard Lease Provisions shall control.
"Landlord" "Tenant"
SPIEKER PROPERTIES, L.P. VERTICA SOFTWARE, INC.
a California limited partnership a Colorado corporation
By: Spieker Properties, Inc.
a Maryland corporation, its general partner
By: /s/ John R. Winther By: /s/ Hans Nehme
--------------------------- ------------------------
Its: Its:
-------------------------- ------------------------
Senior Vice President President
Date: 12/22/99 Date: 12/2/99
------------------------- ----------------------
PFEIFFER PUBLIC RELATIONS, INC.
INVESTOR RELATIONS AND CORPORATE COMMUNICATIONS CONSULTANTS
LETTER OF AGREEMENT
Hans Nehme January 7, 2000
President
Vertica Software Inc.
Dear Hans:
This is to confirm our understanding regarding the retention of Pfeiffer Public
Relations, Inc. (PPR) as investor relations consultants for Vertica Software
Inc. (VERT).
As public relations consultants, PPR will work, subject to your direction and
that of other representatives of the leadership and management, on investor
relations activities for VERI. For providing services, PPR will be paid a $2,500
per month retainer fee. Additional fees for special projects, such as analyst
tours and collateral materials production should VERI commission PPR for such
work, will be billed on a case-by-case basis at a mutually agreed upon rate. PPR
will be reimbursed for all approved out-of-pocket expenses, including postage,
long distance, travel, printing and similar expenses, some of which may be
payable in advance. Invoices will be submitted on the first business day of each
month and are payable upon receipt.
In providing services, PPR will use and rely upon information, representations,
reports and/or data furnished by yourself. PPR will have no responsibility to
determine the accuracy of any such information. VERI agrees to exempt PPR from
responsibility for, and protect, defend and indemnify PPR against, all losses,
claims, damages and/or liabilities which arise out of PPR's reliance upon and
use of such information, representations, reports and/or data.
This agreement shall commence January 15, 2000, and will continue in force for a
one-year period, after which time it will continue on a monthly basis and may be
canceled by either party upon 30 days' written notice.
If this agreement meets with your approval please sign one copy and return to
PPR along with payment on the enclosed invoice.
PPR: By: /s/Jay Pfeiffer
------------------------
Jay Pfeiffer, President
VERI: By: /s/ Hans Nehme
------------------------
Hans Nehme
600 SOUTH CHERRY STREET SUITE 515 DENVER, COLORADO 60246
PHONE 303-393-7044 FAX 303-393-7122
